UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2022

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

For the transition period from _____ to _____

		I.R.S. Employer
Commission File Number	Exact name of registrant as specified in its charter	Identification Number
001-3375	DOMINION ENERGY SOUTH CAROLINA, INC.	57-0248695
	south carolina
	(State or other jurisdiction of incorporation or organization)
	400 OTARRE PARKWAY
	CAYCE, South Carolina	29033
	(Address of principal executive offices)	(Zip Code)
	(803) 217-9000
	(Registrants’ telephone number)

Securities registered pursuant to Section 12(b) of the Act:

None

Indicate by check mark whether the registrant: (1) has 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐	Emerging growth company	☐
Non-accelerated filer	☒	Smaller reporting company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. At October 28, 2022, Dominion Energy South Carolina, Inc. had outstanding 40,296,147 shares of common stock, all of which were held by SCANA Corporation, a wholly-owned subsidiary of Dominion Energy, Inc.

Dominion Energy South Carolina, Inc. meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is filing this Form 10-Q under the reduced disclosure format.

TABLE OF CONTENTS 

		Page
	Glossary of Terms	3
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 4.	Controls and Procedures	30
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 6.	Exhibits	32

2

GLOSSARY OF TERMS

The following abbreviations or acronyms used in this Form 10-Q are defined below:

Abbreviation or Acronym	Definition
2017 Tax Reform Act	An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (previously known as The Tax Cuts and Jobs Act) enacted on December 22, 2017
ACE Rule	Affordable Clean Energy Rule
AOCI	Accumulated other comprehensive income (loss)
ARO	Asset retirement obligation
BACT	Best available control technology
CAA	Clean Air Act
CCR	Coal combustion residual
CEO	Chief Executive Officer
CERCLA	Comprehensive Environmental Response, Compensation and Liability Act of 1980, also known as Superfund
CFO	Chief Financial Officer
CO2	Carbon dioxide
CUA	Capacity Use Area
CWA	Clean Water Act
DES	Dominion Energy Services, Inc.
DESC	The legal entity, Dominion Energy South Carolina, Inc., one or more of its consolidated entities or operating segment, or the entirety of Dominion Energy South Carolina, Inc. and its consolidated entities
Dominion Energy	The legal entity, Dominion Energy, Inc., one or more of its consolidated subsidiaries (other than DESC) or operating segments, or the entirety of Dominion Energy, Inc. and its consolidated subsidiaries
Dominion Energy South Carolina	Dominion Energy South Carolina operating segment
DSM	Demand-side management
ELG Rule	Effluent limitations guidelines for the steam electric power generating category
EPA	U.S. Environmental Protection Agency
FERC	Federal Energy Regulatory Commission
FILOT	Fee in lieu of taxes
Fuel Company	South Carolina Fuel Company, Inc.
GAAP	U.S. generally accepted accounting principles
GENCO	South Carolina Generating Company, Inc.
GHG	Greenhouse gas
MD&A	Management's Discussion and Analysis of Financial Condition and Results of Operations
MGD	Million gallons per day
MWh	Megawatt hour
NND Project	V. C. Summer Units 2 and 3 nuclear development project under which DESC and Santee Cooper undertook to construct two Westinghouse AP1000 Advanced Passive Safety nuclear units in Jenkinsville, South Carolina
NOx	Nitrogen oxide
NRC	U.S. Nuclear Regulatory Commission
Order 1000	Order issued by FERC adopting requirements for electric transmission planning, cost allocation and development
PSD	Prevention of significant deterioration
Questar Gas	Questar Gas Company, a wholly-owned subsidiary of Dominion Energy
Santee Cooper	South Carolina Public Service Authority
SCANA	The legal entity, SCANA Corporation, one or more of its consolidated subsidiaries (other than DESC) or the entirety of SCANA Corporation and its consolidated subsidiaries
SCANA Combination	Dominion Energy's acquisition of SCANA completed on January 1, 2019 pursuant to the terms of the SCANA Merger Agreement

3

Abbreviation or Acronym	Definition
SCANA Merger Agreement	Agreement and plan of merger entered on January 2, 2018 between Dominion Energy and SCANA
SCANA Merger Approval Order	Final order issued by the South Carolina Commission on December 21, 2018 setting forth its approval of the SCANA Combination
SCDHEC	South Carolina Department of Health and Environmental Control
SCDOR	South Carolina Department of Revenue
SEC	U.S. Securities and Exchange Commission
SO2	Sulfur dioxide
South Carolina Commission	Public Service Commission of South Carolina
Summer	V. C. Summer nuclear power station
Toshiba	Toshiba Corporation, parent company of Westinghouse
Toshiba Settlement	Settlement Agreement dated as of July 27, 2017, by and among Toshiba, DESC and Santee Cooper
VIE	Variable interest entity
Virginia Power	The legal entity, Virginia Electric and Power Company, a wholly-owned subsidiary of Dominion Energy, one or more of its consolidated subsidiaries or operating segment, or the entirety of Virginia Electric and Power Company and its consolidated subsidiaries
Westinghouse	Westinghouse Electric Company LLC

4

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Dominion Energy South Carolina, Inc.

Consolidated Balance Sheets

(Unaudited)

(millions)	September 30, 2022			December 31, 2021
ASSETS
Utility plant in service	$	14,561		$	14,200
Accumulated depreciation and amortization		(5,307	)		(5,192	)
Construction work in progress		519			481
Nuclear fuel, net of accumulated amortization		194			216
Utility plant, net ($703 and $729 related to VIEs)		9,967			9,705
Nonutility Property and Investments:
Nonutility property, net of accumulated depreciation		21			42
Assets held in trust, nuclear decommissioning		216			256
Nonutility property and investments, net		237			298
Current Assets:
Cash and cash equivalents		6			30
Receivables:
Customer, net of allowance for uncollectible accounts of $6 and $5		391			358
Affiliated and related party		2			16
Other		125			152
Inventories (at average cost):
Fuel		70			60
Gas stored		43			25
Materials and supplies		217			186
Prepayments		94			70
Regulatory assets		619			361
Other current assets(1)		71			57
Current assets held for sale		16			—
Total current assets ($68 and $77 related to VIEs)		1,654			1,315
Deferred Debits and Other Assets:
Regulatory assets		3,283			3,323
Affiliated receivables		81			66
Other(1)		300			220
Total deferred debits and other assets ($24 and $31 related to VIEs)		3,664			3,609
Total assets	$	15,522		$	14,927

(1) See Note 12 for amounts attributable to affiliates.

See Notes to Consolidated Financial Statements.

5

Dominion Energy South Carolina, Inc.

Consolidated Balance Sheets—(Continued)

(Unaudited)

(millions)	September 30, 2022			December 31, 2021
CAPITALIZATION AND LIABILITIES
Common Stock - no par value, 40.3 million shares outstanding	$	4,088		$	4,016
Retained earnings		410			335
Accumulated other comprehensive loss		(1	)		(1	)
Total common equity		4,497			4,350
Noncontrolling interest		158			175
Total equity		4,655			4,525
Long-term debt, net		3,725			3,724
Affiliated long-term debt		230			230
Finance leases		7			10
Total long-term debt		3,962			3,964
Total capitalization		8,617			8,489
Current Liabilities:
Short-term borrowings		250			—
Securities due within one year		4			5
Accounts payable		225			232
Affiliated and related party payables		753			458
Customer deposits and customer prepayments		73			73
Taxes accrued		185			222
Interest accrued		68			73
Regulatory liabilities		283			245
Reserves for litigation and regulatory proceedings		96			211
Other		117			144
Total current liabilities		2,054			1,663
Deferred Credits and Other Liabilities:
Deferred income taxes and investment tax credits		1,176			975
Asset retirement obligations		623			599
Pension and other postretirement benefits		160			164
Regulatory liabilities		2,813			2,936
Other		79			101
Total deferred credits and other liabilities		4,851			4,775
Commitments and Contingencies (see Note 10)
Total capitalization and liabilities	$	15,522		$	14,927

See Notes to Consolidated Financial Statements.

6

Dominion Energy South Carolina, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
(millions)	2022		2021		2022		2021
Operating Revenue(1)	$	1,083	$	863	$	2,841	$	2,299
Operating Expenses:
Fuel used in electric generation		342		200		770		452
Purchased power(1)		28		24		86		67
Gas purchased for resale		102		57		296		188
Other operations and maintenance		117		116		343		332
Other operations and maintenance - affiliated suppliers		40		45		122		145
Impairment of assets and other charges		2		1		6		320
Depreciation and amortization		127		122		378		362
Other taxes(1)		72		64		216		191
Total operating expenses		830		629		2,217		2,057
Operating income		253		234		624		242
Other income, net		22		6		46		—
Interest charges, net of allowance for borrowed funds used during    construction of $1, $1, $3 and $3(1)		57		50		162		159
Income before income tax expense		218		190		508		83
Income tax expense		45		42		102		6
Net Income and Other Comprehensive Income		173		148		406		77
Comprehensive Income Attributable to Noncontrolling Interest		5		4		16		13
Comprehensive Income Available to Common    Shareholder	$	168	$	144	$	390	$	64

(1) See Note 12 for amounts attributable to affiliates.

See Notes to Consolidated Financial Statements.

7

Dominion Energy South Carolina, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended September 30,
(millions)	2022			2021
Operating Activities
Net income	$	406		$	77
Adjustments to reconcile net income to net cash provided by operating activities:
Impairment of assets and other charges		4			320
Deferred income taxes, net		201			42
Depreciation and amortization		378			362
Amortization of nuclear fuel		29			30
Other adjustments		(34	)		8
Changes in certain assets and liabilities:
Receivables		(23	)		35
Receivables - affiliated and related party		14			(31	)
Inventories		(59	)		(10	)
Prepayments		(14	)		(33	)
Regulatory assets		(356	)		(86	)
Regulatory liabilities		(35	)		(133	)
Accounts payable		(5	)		34
Accounts payable - affiliated and related party		56			(65	)
Taxes accrued		(37	)		(42	)
Interest accrued		(5	)		—
Pension and other postretirement benefits		(4	)		5
Other assets and liabilities		(192	)		24
Net cash provided by operating activities		324			537
Investing Activities
Property additions and construction expenditures		(514	)		(584	)
Net proceeds from investments and sales or disposals of assets		(7	)		7
Purchase of investments		(1	)		(7	)
Purchase of investments - affiliated		—			(2	)
Short-term investments - affiliated		—			15
Other		12			1
Net cash used in investing activities		(510	)		(570	)
Financing Activities
Repayment of long-term debt		—			(34	)
Dividend to parent		(348	)		(180	)
Short-term borrowings, net		250			—
Short-term borrowings - affiliated, net		239			268
Other		(3	)		(4	)
Net cash provided by financing activities		138			50
Net increase (decrease) in cash, restricted cash and equivalents		(48	)		17
Cash, restricted cash and equivalents at beginning of period(1)		54			5
Cash, restricted cash and equivalents at end of period(1)	$	6		$	22
Supplemental Cash Flow Information
Significant noncash investing and financing activities:(2)
Accrued construction expenditures	$	106		$	38
Operating leases		6			—

(1) Includes $24 million of restricted cash at December 31, 2021, recorded within other current assets on the Consolidated Balance Sheets. At September 30, 2022, September 30, 2021 and December 31, 2020 there were no restricted cash and equivalent balances.

(2) See Note 10 for noncash investing activities related to the transfer of property associated with the settlement of litigation and Note 4 for noncash financing activities related to capital contributions associated with the settlement of litigation.

See Notes to Consolidated Financial Statements.

8

Dominion Energy South Carolina, Inc.

Consolidated Statements of Changes in Common Equity

(Unaudited)

Quarter-To-Date

	Common Stock
(millions)	Shares		Amount		Retained Earnings			AOCI			Noncontrolling Interest			Total Equity
June 30, 2021		40	$	4,017	$	122		$	(2	)	$	171		$	4,308
Total comprehensive income available to common    shareholder						144						4			148
Capital contribution from parent			149												149
Dividend to parent						(75	)								(75	)
September 30, 2021		40	$	4,166	$	191		$	(2	)	$	175		$	4,530
June 30, 2022		40	$	4,088	$	357		$	(1	)	$	168		$	4,612
Total comprehensive income available to common    shareholder						168						5			173
Dividend to parent						(115	)					(15	)		(130	)
September 30, 2022		40	$	4,088	$	410		$	(1	)	$	158		$	4,655

Year-To-Date

	Common Stock
(millions)	Shares		Amount		Retained Earnings			AOCI			Noncontrolling Interest			Total Equity
December 31, 2020		40	$	4,017	$	277		$	(2	)	$	192		$	4,484
Total comprehensive income available to common    shareholder						64						13			77
Capital contribution from parent			149												149
Dividend to parent						(150	)					(30	)		(180	)
September 30, 2021		40	$	4,166	$	191		$	(2	)	$	175		$	4,530
December 31, 2021		40	$	4,016	$	335		$	(1	)	$	175		$	4,525
Total comprehensive income available to common    shareholder						390						16			406
Capital contribution from parent			72												72
Dividend to parent						(315	)					(33	)		(348	)
September 30, 2022		40	$	4,088	$	410		$	(1	)	$	158		$	4,655

See Notes to Consolidated Financial Statements.

9

Dominion Energy South Carolina, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

The following notes should be read in conjunction with the Notes to Consolidated Financial Statements appearing in DESC's Annual Report on Form 10-K for the year ended December 31, 2021.

These are interim financial statements and, due to the seasonality of DESC's business and matters that may occur during the rest of the year, the amounts reported in the Consolidated Statements of Comprehensive Income are not necessarily indicative of amounts expected for the full year. In the opinion of management, the information furnished herein reflects all adjustments which are necessary for a fair statement of the results for the interim periods reported, and such adjustments are of a normal recurring nature unless otherwise noted. In addition, the preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Certain amounts in DESC's 2021 Consolidated Financial Statements and Notes have been reclassified to conform to the 2022 presentation for comparative purposes; however, such reclassifications did not affect DESC's net income and other comprehensive income, total assets, liabilities, equity or cash flows.

DESC is a wholly-owned subsidiary of SCANA, which is a wholly-owned subsidiary of Dominion Energy.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation and Variable Interest Entities

DESC has determined that it has a controlling financial interest in each of GENCO and Fuel Company (which are considered to be VIEs) and, accordingly, DESC's Consolidated Financial Statements include, after eliminating intercompany balances and transactions, the accounts of DESC, GENCO and Fuel Company. See Note 2 to the Consolidated Financial Statements included in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021 for a description of GENCO and Fuel Company.

DESC purchases shared services from DES, an affiliated VIE that provides accounting, legal, finance and certain administrative and technical services to all Dominion Energy subsidiaries, including DESC. DESC has determined that it is not the primary beneficiary of DES as it does not have either the power to direct the activities that most significantly impact its economic performance or an obligation to absorb losses and benefits which could be significant to it. See Note 12 for amounts attributable to affiliates.

Significant Accounting Policies

There have been no significant changes from Note 2 to the Consolidated Financial Statements in DESC's Annual Report on Form 10-K for the year ended December 31, 2021.

2. RATE AND OTHER REGULATORY MATTERS

Regulatory Matters Involving Potential Loss Contingencies

As a result of issues generated in the ordinary course of business, DESC is involved in various regulatory matters. Certain regulatory matters may ultimately result in a loss; however, as such matters are in an initial procedural phase, involve uncertainty as to the outcome of pending reviews or orders, and/or involve significant factual issues that need to be resolved, it is not possible for DESC to estimate a range of possible loss. For regulatory matters that DESC cannot estimate, a statement to this effect is made in the description of the matter. Other matters may have progressed sufficiently through the regulatory process such that DESC is able to estimate a range of possible loss. For regulatory matters that DESC is able to reasonably estimate a range of possible losses, an estimated range of possible loss is provided, in excess of the accrued liability (if any) for such matters. Any estimated range is based on currently available information, involves elements of judgment and significant uncertainties and may not represent DESC’s maximum possible loss exposure. The circumstances of such regulatory matters will change from time to time and actual results may vary significantly from the current estimate. For current matters not specifically reported below, management does not anticipate that the outcome from such matters would have a material effect on DESC’s financial position, liquidity or results of operations.

Other Regulatory Matters

Other than the following matters, there have been no significant developments regarding the pending regulatory matters disclosed in Note 3 to the Consolidated Financial Statements in DESC's Annual Report on Form 10-K for the year ended December 31, 2021.

10

Electric – Cost of Fuel

DESC’s retail electric rates include a cost of fuel component approved by the South Carolina Commission which may be adjusted periodically to reflect changes in the price of fuel purchased by DESC. In April 2022, the South Carolina Commission approved DESC’s request to increase the total fuel cost component of retail electric rates, effective with the first billing cycle of May 2022. The South Carolina Commission also approved DESC’s request to apply approximately $66 million representing the net balance of funds associated with the monetization of the bankruptcy settlement with Toshiba following the satisfaction of liens against NND Project property previously recorded in regulatory liabilities, as a reduction to its under-collected base fuel cost balance, along with a requested increase to DESC’s variable environmental and avoided capacity cost component. The net effect is an annual increase of $143 million.

In August 2022, DESC filed an application with the South Carolina Commission seeking a mid-period adjustment to increase the base fuel component of retail electric rates for the recovery of electric fuel costs. If approved, the increase of the base fuel cost component is expected to be effective with the first billing cycle of January 2023. The estimated annual increase is $399 million. This matter is pending.

Electric – Other

DESC has approval for a DSM rider through which it recovers expenditures related to its DSM programs. In January 2022, DESC filed an application with the South Carolina Commission seeking approval to recover $60 million of costs and net lost revenues associated with these programs, along with an incentive to invest in such programs. In April 2022, the South Carolina Commission approved the request, effective with the first billing cycle of May 2022.

DESC utilizes a pension costs rider approved by the South Carolina Commission which is designed to allow recovery of projected pension costs, including under-collected balances or net of over-collected balances, as applicable. The rider is typically reviewed for adjustment every 12 months with any resulting increase or decrease going into effect beginning with the first billing cycle in May. In April 2022, the South Carolina Commission approved DESC’s requested adjustment to this rider to decrease annual revenue by $12 million.

Natural Gas Rates

In June 2022, DESC filed with the South Carolina Commission its monitoring report for the 12-month period ended March 31, 2022 with a total revenue requirement of $553 million. This represents a $129 million overall annual increase to its natural gas rates including a $16 million base rate increase under the terms of the Natural Gas Rate Stabilization Act effective with the first billing cycle of November 2022. In October 2022, the South Carolina Commission issued an order approving a total revenue requirement of $549 million effective with the first billing cycle of November 2022. This represents a $125 million overall annual increase to DESC’s natural gas rates including a $12 million base rate increase under the terms of the Natural Gas Rate Stabilization Act.

In November 2021, DESC filed an application with the South Carolina Commission seeking approval to create DSM programs for DESC's residential and commercial natural gas customers and a new rider to retail gas rates for the recovery of the associated program costs and a shared savings incentive of 9.9%. The application also includes a notice of intent that DESC would seek to recover the net lost revenues resulting from the proposed DSM programs through the annual Natural Gas Rate Stabilization Act proceeding. In June 2022, the South Carolina Commission voted to approve the proposed DSM programs with a shared savings incentive of 8.14% with a final order issued in September 2022.

11

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, DESC has recorded regulatory assets and regulatory liabilities which are summarized in the following table. Except for NND Project costs and certain other unrecovered costs referenced herein, 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.

	September 30,		December 31,
(millions)	2022		2021
Regulatory assets:
NND Project costs(1)	$	138	$	138
Deferred employee benefit plan costs(2)		4		8
Other unrecovered plant(3)		17		16
DSM programs(4)		21		23
Cost of fuel and purchased gas under-collections(5)		389		126
Other		50		50
Regulatory assets - current		619		361
NND Project costs(1)		2,122		2,226
AROs(6)		391		311
Deferred employee benefit plan costs(2)		108		106
Deferred losses on interest rate derivatives(7)		277		295
Other unrecovered plant(3)		60		57
DSM programs(4)		40		45
Environmental remediation costs(8)		37		30
Deferred storm damage costs(9)		39		38
Deferred transmission operating costs(10)		76		77
Other(11)		133		138
Regulatory assets - noncurrent		3,283		3,323
Total regulatory assets	$	3,902	$	3,684
Regulatory liabilities:
Monetization of guaranty settlement(12)	$	67	$	67
Income taxes refundable through future rates(13)		36		42
Reserve for refunds to electric utility customers(14)		102		113
Derivatives(15)		68		18
Other		10		5
Regulatory liabilities - current		283		245
Monetization of guaranty settlement(12)		719		831
Income taxes refundable through future rates(13)		877		903
Asset removal costs(16)		587		570
Deferred gains on interest rate derivatives(7)		69		67
Reserve for refunds to electric utility customers(14)		352		425
Derivatives(15)		199		131
Other		10		9
Regulatory liabilities - noncurrent		2,813		2,936
Total regulatory liabilities	$	3,096	$	3,181

(1) Reflects expenditures associated with the NND Project, which pursuant to the SCANA Merger Approval Order, will be recovered from electric service customers over a 20-year period ending in 2039. See Note 12 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information.

(2) Employee benefit plan costs 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 South Carolina Commission regulatory orders. DESC expects to recover deferred pension costs through utility rates over periods through 2044. DESC expects to recover other deferred benefit costs through utility rates, primarily over average service periods of participating employees up to 11 years.

(3) Represents the carrying value of coal-fired generating units, including related materials and supplies inventory, retired from service prior to being fully depreciated. DESC is amortizing these amounts through cost of service rates following deprecation amounts that were designed to recover the retired units’ cost over their previous estimated remaining useful lives, which has been estimated to be through 2025. Based on current projections of remaining decommissioning costs, projected recovery is expected to extend to 2029. In addition, amounts include unrecovered costs of existing meters and equipment retired from service prior to being fully depreciated as part of the Advance Metering Infrastructure project, which are being recovered through rates through 2028. This amount also includes certain inventory and preliminary survey and investigation charges being amortized over five years related to the transition or conversion from coal to gas fired generation at certain facilities. In addition, reflects an increase of approximately $7 million related to the abandonment of certain peaking gas generation

12

facilities, such amounts having been reclassified from property, plant and equipment to noncurrent other unrecovered plant. Unamortized amounts are included in rate base and are earning a current return.  

(4) Represents deferred costs associated with electric demand reduction programs, and such deferred costs are currently being recovered over three years through an approved rate rider.

(5) Represents amounts under- or over-collected from customers pursuant to the cost of fuel and purchased gas components approved by the South Carolina Commission. Reflects a $66 million reduction recorded in the first quarter of 2022 from the application of a portion of the monetization of guarantee settlement previously reflected as regulatory liabilities associated with the approval of DESC’s cost of fuel proceedings. See above for additional information.

(6)   Represents deferred depreciation and accretion expense related to legal obligations associated with the future retirement of generation, transmission and distribution properties. The AROs primarily relate to DESC’s electric generating facilities, including Summer, and are expected to be recovered over the related property lives and periods of decommissioning which may range up to approximately 105 years.

(7) Represents (i) the 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.

(8) Reflects amounts associated with the assessment and clean-up of sites currently or formerly owned by DESC. Such remediation costs are expected to be recovered over periods of up to 26 years. See Note 10 for additional information.

(9) Represents storm restoration costs which DESC expects to recover through customer rates over approximately 10 years pursuant to the settlement agreement approved in DESC’s retail electric base rate case. Unamortized amounts are included in rate base and are earning a current return.

(10) Includes deferred depreciation and property taxes associated with certain transmission assets which DESC expects to recover from customers through 2063, pursuant to the settlement agreement approved in DESC’s retail electric base rate case. Unamortized amounts are included in rate base and are earning a current return.

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

(12) Represents proceeds related to the monetization of the Toshiba Settlement. In accordance with the SCANA Merger Approval Order, this balance, net of amounts that may be required to satisfy liens, will be refunded to electric customers over a 20-year period ending in 2039. See Note 12 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information.

(13) Includes (i) excess deferred income taxes arising from the remeasurement of deferred income taxes in connection with the enactment of the 2017 Tax Reform Act (certain of which are protected under normalization rules and will be amortized over the remaining lives of related property, and certain of which will be amortized to the benefit of customers over prescribed periods 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 85 years). See Note 7 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information.

(14) Reflects amounts previously collected from retail electric customers of DESC for the NND Project to be credited to customers over an estimated 11-year period effective February 2019 in connection with the SCANA Merger Approval Order. See Note 12 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information.

(15) Represents changes in the fair value of derivatives, excluding separately presented deferred gains on interest rate derivatives, that following settlement are expected to be recovered from or refunded to customers.

(16) Represents estimated net collections through depreciation rates of amounts to be expended for the removal of assets in the future.

Regulatory assets have been recorded based on the probability of their recovery. All regulatory assets represent incurred costs that may be deferred under GAAP for regulated operations. The South Carolina Commission or 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. While such costs are not currently being recovered, management believes they would be allowable under existing rate-making concepts embodied in rate orders or applicable state law and expects to recover these costs through rates in future periods.

3. REVENUE RECOGNITION

DESC has disaggregated operating revenues by customer class as follows:

	Three Months Ended				Three Months Ended				Nine Months Ended				Nine Months Ended
	September 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021
(millions)	Electric		Gas		Electric		Gas		Electric		Gas		Electric		Gas
Customer class:
Residential	$	433	$	39	$	366	$	34	$	1,065	$	193	$	912	$	170
Commercial		294		41		244		26		740		124		618		91
Industrial		153		54		112		27		396		128		295		67
Other		56		4		46		4		156		16		117		16
Revenues from contracts with customers		936		138		768		91		2,357		461		1,942		344
Other revenues		8		1		4		—		22		1		12		1
Total Operating Revenues	$	944	$	139	$	772	$	91	$	2,379	$	462	$	1,954	$	345

Contract liabilities represent the obligation to transfer goods or services to a customer for which consideration has already been received from the customer. DESC had contract liability balances of $9 million and $8 million at September 30, 2022 and December 31, 2021, respectively. During the nine months ended September 30, 2022 and 2021, DESC recognized revenue of $6 million and $4 million, respectively, from the beginning contract liability balances as DESC fulfilled its obligations to provide service to its customers. Contract liabilities are recorded in customer deposits and customer prepayments in the Consolidated Balance Sheets.

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Balances and activity related to contract costs deferred as regulatory assets were as follows:

	Regulatory Assets
(millions)	September 30, 2022			December 31, 2021
Beginning balance	$	11		$	12
Amortization		(1	)		(1	)
Ending balance	$	10		$	11

4. EQUITY

For all periods presented, DESC's authorized shares of common stock, no par value, were 50 million, of which 40.3 million were issued and outstanding, and DESC's authorized shares of preferred stock, no par value, were 20 million, of which 1,000 shares were issued and outstanding. All outstanding shares of common and preferred stock are held by SCANA.

In May 2022, Dominion Energy issued $72 million of shares of Dominion Energy common stock to partially satisfy DESC’s remaining obligation under a settlement agreement with the SCDOR discussed in Note 10. In connection with this transaction, DESC recorded an equity contribution from Dominion Energy in the second quarter of 2022.

In July 2021, Dominion Energy issued $104 million of shares of Dominion Energy common stock to satisfy DESC’s obligation under a settlement agreement for the FILOT litigation discussed in Note 12 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021. In August 2021, Dominion Energy issued $45 million of shares of Dominion Energy common stock to satisfy DESC’s obligation for the initial payment under a settlement agreement with the SCDOR discussed in Note 10. In connection with these transactions, DESC recorded equity contributions from Dominion Energy in the third quarter of 2021.

There have been no material changes to the dividend restrictions affecting DESC described in Note 5 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021.

5. LONG-TERM AND SHORT-TERM DEBT

DESC’s short-term financing is supported through its access as co-borrower to Dominion Energy’s $6.0 billion joint revolving credit facility, which can be used for working capital, as support for the combined commercial paper programs of DESC, Dominion Energy, Virginia Power and Questar Gas, and for other general corporate purposes. Other than the items discussed below, there have been no significant changes from Note 6 to the Consolidated Financial Statements in DESC's Annual Report on Form 10-K for the year ended December 31, 2021.

At September 30, 2022, DESC's share of commercial paper and letters of credit outstanding under its joint credit facility with Dominion Energy, was as follows:

(millions)	Facility Limit		Outstanding Commercial Paper		Outstanding Letters of Credit
Joint revolving credit facility(1)	$	1,000	$	250	$	—

(1) A maximum of $1.0 billion of the facility is available to DESC, assuming adequate capacity is available after giving effect to uses by co-borrowers Dominion Energy, Virginia Power and Questar Gas. A sub-limit for DESC is set within the facility limit but can be changed at the option of the co-borrowers multiple times per year. At September 30, 2022, the sub-limit for DESC was $500 million. If DESC has liquidity needs in excess of its sub-limit, the sub-limit may be changed or such needs may be satisfied through short-term intercompany borrowings from DESC's parent or from Dominion Energy. This credit facility matures in June 2026, with the potential to be extended by the borrowers to June 2028. The credit facility can be used to support bank borrowings and the issuance of commercial paper, as well as to support up to $1.0 billion (or the sub-limit, whichever is less) of letters of credit.

DESC is obligated with respect to an aggregate of $68 million of industrial revenue bonds which are secured by letters of credit. These letters of credit expire, subject to renewal, in the fourth quarter of 2023.

DESC has FERC approval to enter into an inter-company credit agreement with Dominion Energy under which DESC may have short-term borrowings outstanding up to $900 million. At September 30, 2022 and December 31, 2021, DESC had borrowings outstanding under this credit agreement totaling $654 million and $415 million, respectively, which are recorded in affiliated and related party payables in DESC’s Consolidated Balance Sheets. For the three and nine months ended September 30, 2022, DESC

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recorded interest charges of $4 million and $9 million, respectively. For the three and nine months ended September 30, 2021, DESC recorded interest charges of $2 million and $6 million, respectively.

Fuel Company and GENCO participated in a SCANA utility money pool until January 2021, when that utility money pool was closed. Money pool borrowings and investments bore interest at short-term market rates. For the nine months ended September 30, 2021, DESC recorded both interest income and interest expense from money pool transactions of less than $1 million.

6. INCOME TAXES

DESC’s effective tax rate for the nine months ended September 30, 2022 is 20.1% compared to 7.2% for the nine months ended September 30, 2021. DESC’s effective tax rate for the nine months ended September 30, 2021 is primarily attributable to nominal year-to-date pre-tax income resulting from charges associated with the settlement of the South Carolina electric base rate case.   

As of September 30, 2022, there have been no material changes in DESC’s unrecognized tax benefits.  It is reasonably possible that recent case law and interactions with the taxing authority could result in a decrease in unrecognized tax benefits by up to $26 million during the next twelve months. If such changes were to occur, other than revisions of the accrual for interest on tax underpayments and overpayments, earnings could increase by up to $26 million. See Note 7 to the Consolidated Financial Statements in DESC's Annual Report on Form 10-K for the year ended December 31, 2021 for a discussion of these unrecognized tax benefits.  

7. DERIVATIVE FINANCIAL INSTRUMENTS

DESC’s accounting policies, objectives, and strategies for using derivative instruments are discussed in Note 2 in the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021. See Note 8 for further information about fair value measurements and associated valuation methods for derivatives.

Derivative assets and liabilities are presented gross on the Consolidated Balance Sheets. DESC’s derivative contracts include over-the-counter transactions. Over-the-counter contracts are bilateral contracts that are transacted directly with a third party. Certain over-the-counter contracts contain contractual rights of setoff through master netting arrangements and contract default provisions. In addition, the contracts are subject to conditional rights of setoff through counterparty nonperformance, insolvency or other conditions.

In general, most over-the-counter transactions are subject to collateral requirements. Types of collateral for over-the-counter contracts include cash, letters of credit and, in some cases, other forms of security, none of which are subject to restrictions. Cash collateral, as presented in the table below, is used to offset derivative assets and liabilities.

Certain of DESC’s derivative instruments contain credit-related contingent provisions. These provisions require DESC to provide collateral upon the occurrence of specific events, primarily a credit rating downgrade. If the credit-related contingent features underlying the instruments that are in a liability position and not fully collateralized with cash were fully triggered as of December 31, 2021, DESC would have been required to post $8 million of additional collateral to its counterparties. No additional collateral would have been required to be posted to DESC’s counterparties at September 30, 2022. The collateral that would be required to be posted includes the impacts of any offsetting asset positions and any amounts already posted for derivatives, non-derivative contracts and derivatives elected under the normal purchases and normal sales exception, per contractual terms. DESC had posted $3 million and $11 million, respectively, of collateral at September 30, 2022 and December 31, 2021 related to derivatives with credit-related contingent provisions that are in a liability position and not fully collateralized with cash. The aggregate fair value of all derivative instruments with credit-related contingent provisions that are in a liability position and not fully collateralized with cash as of September 30, 2022 and December 31, 2021 was $3 million and $19 million, respectively, which does not include the impact of any offsetting asset positions.

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The table below presents derivative balances by type of financial instrument, if the gross amounts recognized in the Consolidated Balance Sheets were netted with derivative instruments and cash collateral received or paid. DESC’s commodity derivative assets are not subject to a master netting agreement or similar arrangement. There were $4 million in gross assets presented in the Consolidated Balance Sheets for over-the-counter interest rate contracts that are subject to master netting or similar agreements at September 30, 2022 and no such amounts at December 31, 2021. There were no financial instruments or cash collateral received to offset the gross position at either date.   

	September 30, 2022								December 31, 2021
	Gross Amounts Not Offset in the Consolidated Balance Sheet								Gross Amounts Not Offset in the Consolidated Balance Sheet
(millions)	Gross Liabilities Presented in the Consolidated Balance Sheet(1)		Financial Instruments		Cash Collateral Paid		Net Amounts		Gross Liabilities Presented in the Consolidated Balance Sheet(1)		Financial Instruments		Cash Collateral Paid		Net Amounts
Interest rate contracts:
Over-the-counter	$	3	$	—	$	3	$	—	$	19	$	—	$	11	$	8
Total derivatives	$	3	$	—	$	3	$	—	$	19	$	—	$	11	$	8

(1) There were no derivative liabilities that are not subject to master netting or similar arrangements at September 30, 2022 or December 31, 2021.    

Volumes

The following table presents the volume of derivative activity at September 30, 2022. These volumes are based on open derivative positions and represent the combined absolute value of their long and short positions.

	Current		Noncurrent
Electricity (MWh in millions):
Fixed price		2		24
Interest rate(1) (in millions)	$	—	$	71

(1) Maturity is determined based on final settlement period. 

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Fair Value and Gains and Losses on Derivative Instruments

The following tables present the fair values of derivatives and where they are presented in the Consolidated Balance Sheets:

(millions)	Fair Value - Derivatives under Hedge Accounting		Fair Value - Derivatives not under Hedge Accounting		Total Fair Value
At September 30, 2022
ASSETS
Current Assets
Commodity	$	—	$	68	$	68
Total current derivative assets(1)		—		68		68
Noncurrent Assets
Commodity		—		199		199
Interest rate		—		4		4
Total noncurrent derivative assets(2)		—		203		203
Total derivative assets	$	—	$	271	$	271
LIABILITIES
Current Liabilities
Interest rate	$	—	$	—	$	—
Total current derivative liabilities(3)		—		—		—
Noncurrent Liabilities
Interest rate		3		—		3
Total noncurrent derivative liabilities(4)		3		—		3
Total derivative liabilities	$	3	$	—	$	3
At December 31, 2021
ASSETS
Current Assets
Commodity	$	—	$	18	$	18
Total current derivative assets(1)		—		18		18
Noncurrent Assets
Commodity		—		130		130
Total noncurrent derivative assets(2)		—		130		130
Total derivative assets	$	—	$	148	$	148
LIABILITIES
Current Liabilities
Interest rate	$	1	$	1	$	2
Total current derivative liabilities(3)		1		1		2
Noncurrent Liabilities
Interest rate		11		6		17
Total noncurrent derivative liabilities(4)		11		6		17
Total derivative liabilities	$	12	$	7	$	19

(1) Current derivative assets are presented in other current assets in DESC’s Consolidated Balance Sheets.

(2) Noncurrent derivative assets are presented in other deferred debits and other assets in DESC’s Consolidated Balance Sheets.

(3) Current derivative liabilities are presented in other current liabilities in DESC’s Consolidated Balance Sheets.

(4) Noncurrent derivative liabilities are presented in other deferred credits and other liabilities in DESC’s Consolidated Balance Sheets.

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The following tables present the gains and losses on derivatives, as well as where the associated activity is presented in the Consolidated Balance Sheets and Statements of Comprehensive Income:

Derivatives in Cash Flow Hedging Relationships

(millions)	Increase (Decrease) in Derivatives Subject to Regulatory Treatment(1)
Three Months Ended September 30, 2022
Derivative type and location of gains (losses):
Interest rate	$	2
Total	$	2
Three Months Ended September 30, 2021
Derivative type and location of gains (losses):
Interest rate	$	1
Total	$	1
Nine Months Ended September 30, 2022
Derivative type and location of gains (losses):
Interest rate	$	10
Total	$	10
Nine Months Ended September 30, 2021
Derivative type and location of gains (losses):
Interest rate	$	7
Total	$	7

(1) Represents net derivative activity deferred into and amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/ liabilities have no associated effect in the Consolidated Statements of Comprehensive Income.

Derivatives Not Designated as Hedging Instrument    

(millions)	Amount of Gain (Loss) Recognized in Income on Derivatives(1)
Three Months Ended September 30,	2022			2021
Derivative type and location of gains (losses):
Commodity contracts:
Purchased power	$	48		$	3
Interest rate contracts:
Interest charges		(1	)		—
Total	$	47		$	3
Nine Months Ended September 30,
Derivative type and location of gains (losses):
Commodity contracts:
Purchased power	$	66		$	3
Interest rate contracts:
Interest charges		(2	)		(1	)
Total	$	64		$	2

(1) Includes derivative activity amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/liabilities have no associated effect in the Consolidated Statements of Comprehensive Income.

8. FAIR VALUE MEASUREMENTS, INCLUDING DERIVATIVES

DESC’s fair value measurements are made in accordance with the policies discussed in Note 9 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021. See Note 7 in this report for further information about DESC’s derivatives and hedge accounting activities. DESC applies fair value measurements to certain assets and liabilities including commodity and interest rate derivative instruments.

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The following table presents DESC’s quantitative information about Level 3 fair value measurements at September 30, 2022. The range and weighted average are presented in dollars for market price inputs.

	Fair Value (millions)		Valuation Techniques	Unobservable Input		Range	Weighted Average(1)
Assets
Physical forwards:
Electricity	$	267	Discounted cash flow	Market price (per MWh)	(2)	28-160	52
Total assets	$	267
(1)   Averages weighted by volume.
(2)   Represents market prices beyond defined terms for Levels 1 and 2.

Sensitivity of the fair value measurements to changes in the significant unobservable inputs is as follows:

Significant Unobservable Inputs	Position	Change to Input	Impact on Fair Value Measurement
Market price	Buy	Increase (decrease)	Gain (loss)
Market price	Sell	Increase (decrease)	Loss (gain)

Recurring Fair Value Measurements

The following table presents DESC’s assets and liabilities that are measured at fair value on a recurring basis for each hierarchy level, including both current and noncurrent portions:

(millions)	Level 1		Level 2		Level 3		Total
At September 30, 2022
Assets
Commodity	$	—	$	—	$	267	$	267
Interest rate		—		4		—		4
Total assets	$	—	$	4	$	267	$	271
Liabilities
Interest rate	$	—	$	3	$	—	$	3
Total liabilities	$	—	$	3	$	—	$	3
At December 31, 2021
Assets
Commodity	$	—	$	—	$	148	$	148
Total assets	$	—	$	—	$	148	$	148
Liabilities
Interest rate	$	—	$	19	$	—	$	19
Total liabilities	$	—	$	19	$	—	$	19

The following table presents the net change in DESC's assets and liabilities measured at fair value on a recurring basis and included in the Level 3 fair value category.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
(millions)
Beginning balance	$	295		$	(13	)	$	148		$	—
Total realized and unrealized gains (losses):
Included in earnings:
Purchased power		48			3			66			3
Included in regulatory assets/liabilities		(28	)		59			119			46
Settlements		(48	)		(3	)		(66	)		(3	)
Ending balance	$	267		$	46		$	267		$	46

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There are no unrealized gains and losses included in earnings in the Level 3 fair value category related to assets/liabilities still held at the reporting date for the three and nine months ended September 30, 2022 and 2021.

Fair Value of Financial Instruments

Substantially all of DESC’s financial instruments are recorded at fair value, with the exception of the instruments described below, which are reported at historical cost. Estimated fair values have been determined using available market information and valuation methodologies considered appropriate by management. The carrying amount of financial instruments classified within current assets and current liabilities are representative of fair value because of the short-term nature of these instruments. For financial instruments that are not recorded at fair value, the carrying amounts and estimated fair values are as follows:

	September 30, 2022				December 31, 2021
(millions)	Carrying Amount		Estimated Fair Value(1)		Carrying Amount		Estimated Fair Value(1)
Long-term debt(2)	$	3,725	$	3,554	$	3,724	$	4,831
Affiliated long-term debt		230		230		230		230

(1) Fair value is estimated using market prices, where available, and interest rates currently available for issuance of debt with similar terms and remaining maturities. All fair value measurements are classified as Level 2. The carrying amount of debt issuances with short-term maturities and variable rates refinanced at current market rates is a reasonable estimate of their fair value.

(2) Carrying amount includes current portions included in securities due within one year and amounts which represent the unamortized debt issuance costs and discount or premium.

9. EMPLOYEE BENEFIT PLANS

Components of net periodic benefit cost (credit) recorded by DESC were as follows:

(millions)	Pension Benefits						Other Postretirement Benefits
Three Months Ended September 30,	2022			2021			2022		2021
Service cost	$	2		$	3		$	—	$	—
Interest cost		5			5			1		1
Expected return on assets		(12	)		(12	)		—		—
Amortization of actuarial losses		1			1			—		—
Net periodic benefit cost (credit)	$	(4	)	$	(3	)	$	1	$	1
Nine Months Ended September 30,
Service cost	$	6		$	7		$	1	$	1
Interest cost		16			15			4		4
Expected return on assets		(37	)		(36	)		—		—
Amortization of actuarial losses		1			4			—		—
Net periodic benefit cost (credit)	$	(14	)	$	(10	)	$	5	$	5

During the three and nine months ended September 30, 2022, DESC made no contributions to its pension trust and does not expect to make any such contributions in 2022. DESC recovers current pension costs through either a rate rider that may be adjusted annually for retail electric operations or through cost of service rates for gas operations.

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10. COMMITMENTS AND CONTINGENCIES

As a result of issues generated in the ordinary course of business, DESC is involved in legal proceedings before various courts and is periodically subject to governmental examinations (including by regulatory authorities), inquiries and investigations. Certain legal proceedings and governmental examinations involve demands for unspecified amounts of damages, are in an initial procedural phase, involve uncertainty as to the outcome of pending appeals or motions, or involve significant factual issues that need to be resolved, such that it is not possible for DESC to estimate a range of possible loss. For such matters that DESC cannot estimate, a statement to this effect is made in the description of the matter. Other matters may have progressed sufficiently through the litigation or investigative processes such that DESC is able to estimate a range of possible loss. For legal proceedings and governmental examinations that DESC is able to reasonably estimate a range of possible losses, an estimated range of possible loss is provided, in excess of the accrued liability (if any) for such matters. DESC maintains various insurance programs, including general liability insurance coverage which provides coverage for personal injury or wrongful death cases. Any accrued liability is recorded on a gross basis with a receivable also recorded for any probable insurance recoveries. Estimated ranges of loss are inclusive of legal fees and net of any anticipated insurance recoveries. Any estimated range is based on currently available information and involves elements of judgment and significant uncertainties. Any estimated range of possible loss may not represent DESC’s maximum possible loss exposure. The circumstances of such legal proceedings and governmental examinations will change from time to time and actual results may vary significantly from the current estimate. For current proceedings not specifically reported below, management does not anticipate that the liabilities, if any, arising from such proceedings would have a material effect on DESC’s financial position, liquidity or results of operations.

Environmental Matters

DESC is subject to costs resulting from a number of federal, state and local laws and regulations designed to protect human health and the environment. These laws and regulations affect future planning and existing operations. They can result in increased capital, operating and other costs as a result of compliance, remediation, containment and monitoring obligations.

From a regulatory perspective, DESC continually monitors and evaluates its current and projected emission levels and strives to comply with all state and federal regulations regarding those emissions. DESC participates in the SO₂ and NO_X emission allowance programs with respect to coal plant emissions and also has constructed additional pollution control equipment at its coal-fired electric generating plants. These actions are expected to address many of the rules and regulations discussed herein.

Air

The CAA, as amended, is a comprehensive program utilizing a broad range of regulatory tools to protect and preserve the nation's air quality. At a minimum, states are required to establish regulatory programs to meet applicable requirements of the CAA. However, states may choose to develop regulatory programs that are more restrictive. Many of DESC’s facilities are subject to the CAA’s permitting and other requirements.

ACE Rule

In July 2019, the EPA published the final rule informally referred to as the ACE Rule, as a replacement for the Clean Power Plan. The ACE Rule regulated GHG emissions from existing coal-fired power plants pursuant to Section 111(d) of the CAA and required states to develop plans by July 2022 establishing unit-specific performance standards for existing coal-fired power plants. In January 2021, the U.S. Court of Appeals for the D.C. Circuit vacated the ACE Rule and remanded it to the EPA. This decision would take effect upon issuance of the court’s mandate. In March 2021, the court issued a partial mandate vacating and remanding all parts of the ACE Rule except for the portion of the ACE Rule that repealed the Clean Power Plan. In October 2021, the U.S. Supreme Court agreed to hear a challenge of the U.S. Court of Appeals for the D.C. Circuit’s decision on the ACE Rule. In June 2022, the U.S. Supreme Court reversed the D.C. Circuit’s decision on the ACE Rule and remanded the case back to the D.C. Circuit. Until the case is resolved by the D.C. Circuit and/or the EPA issues new rulemaking, DESC cannot predict an impact to its operations, financial condition and/or cash flows.

Carbon Regulations

In August 2016, the EPA issued a draft rule proposing to reaffirm that a source’s obligation to obtain a PSD or Title V permit for GHGs is triggered only if such permitting requirements are first triggered by non-GHG, or conventional, pollutants that are regulated by the New Source Review program, and exceed a significant emissions rate of 75,000 tons per year of CO₂ equivalent emissions. Until the EPA ultimately takes final action on this rulemaking, DESC cannot predict the impact to its results of operations, financial condition and/or cash flows.

In December 2018, the EPA proposed revised Standards of Performance for Greenhouse Gas Emissions from New, Modified, and Reconstructed Stationary Sources. The proposed rule would amend the previous determination that the best system of emission reduction for newly constructed coal-fired steam generating units is no longer partial carbon capture and storage. Instead, the proposed revised best system of emission reduction for this source category is the most efficient demonstrated steam cycle (e.g., supercritical steam conditions for large units and subcritical steam conditions for small units) in combination with best operating practices. The

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proposed revision to the performance standards for coal-fired steam generating units remains pending. Until the EPA ultimately takes final action on this rulemaking, DESC cannot predict the impact to its results of operations, financial condition and/or cash flows.

Water

The CWA, as amended, is a comprehensive program requiring a broad range of regulatory tools including a permit program to authorize and regulate discharges to surface waters with strong enforcement mechanisms. DESC must comply with applicable aspects of the CWA programs at its operating facilities.

Regulation 316(b)

In October 2014, the final regulations under Section 316(b) of the CWA that govern existing facilities and new units at existing facilities that employ a cooling water intake structure and that have flow levels exceeding a minimum threshold became effective. The rule establishes a national standard for impingement based on seven compliance options, but forgoes the creation of a single technology standard for entrainment. Instead, the EPA has delegated entrainment technology decisions to state regulators. State regulators are to make case-by-case entrainment technology determinations after an examination of five mandatory facility-specific factors, including a social cost-benefit test, and six optional facility-specific factors. The rule governs all electric generating stations with water withdrawals above two MGD, with a heightened entrainment analysis for those facilities over 125 MGD. DESC has five facilities that are subject to the final regulations. DESC is also working with the EPA and state regulatory agencies to assess the applicability of Section 316(b) to five hydroelectric facilities. DESC anticipates that it may have to install impingement control technologies at certain of these stations that have once-through cooling systems. DESC is currently evaluating the need or potential for entrainment controls under the final rule as these decisions will be made on a case-by-case basis after a thorough review of detailed biological, technological, and cost benefit studies. DESC is conducting studies and implementing plans as required by the rule to determine appropriate intake structure modifications at certain facilities to ensure compliance with this rule. While the impacts of this rule could be material to DESC’s results of operations, financial condition and/or cash flows, the existing regulatory framework in South Carolina provides rate recovery mechanisms that could substantially mitigate any such impacts for DESC.

Effluent Limitations Guidelines

In September 2015, the EPA released a final rule to revise the ELG Rule. The final rule established updated standards for wastewater discharges that apply primarily at coal and oil steam generating stations. Affected facilities are required to convert from wet to dry or closed cycle coal ash management, improve existing wastewater treatment systems and/or install new wastewater treatment technologies in order to meet the new discharge limits. In April 2017, the EPA granted two separate petitions for reconsideration of the final ELG Rule and stayed future compliance dates in the rule. Also in April 2017, the U.S. Court of Appeals for the Fifth Circuit granted the EPA’s request for a stay of the pending consolidated litigation challenging the rule while the EPA addresses the petitions for reconsideration. In September 2017, the EPA signed a rule to postpone the earliest compliance dates for certain waste streams regulations in the final ELG Rule from November 2018 to November 2020; however, the latest date for compliance for these regulations was December 2023. In October 2020, the EPA released the final rule that extends the latest dates for compliance. Individual facilities’ compliance dates will vary based on circumstances and the determination by state regulators and may range from 2021 to 2028. While the impacts of this rule could be material to DESC’s results of operations, financial condition and/or cash flows, as DESC expects that wastewater treatment technology retrofits and modifications at the Williams and Wateree generating stations will be required, the existing regulatory framework in South Carolina provides rate recovery mechanisms that could substantially mitigate any such impacts for DESC.

Capacity Use Area

In November 2019, a new CUA was established in the counties surrounding the Cope Generating Station (Western Capacity Use Area) under the South Carolina Groundwater Use and Reporting Regulation. Under the regulation any groundwater well in a CUA that withdraws above three million gallons per month must be permitted. The Cope Generating Station is located within this new Western Capacity Use Area. Cope has been using four deep groundwater wells for cooling water and other house loads since 1996. Prior to designation of the new Western Capacity Use Area, the wells at Cope Station were only required to be registered not permitted. As a result of this designation, Cope will need to restore the surface water equipment to operable status to reduce reliance on groundwater wells. This includes completion of 316(b) requirements, (including SCDHEC BACT determination and modification of the station national pollutant discharge elimination system permit) and extensive inspection, repair and/or replacement of the associated surface water withdrawal equipment which has been idle since 1996. While the impacts of this rule change are potentially material to DESC’s results of operations, financial condition and/or cash flows, the existing regulatory framework in South Carolina provides rate recovery mechanisms that could substantially mitigate any such impacts for DESC.

Waste Management and Remediation

The operations of DESC are subject to a variety of state and federal laws and regulations governing the management and disposal of solid and hazardous waste, and release of hazardous substances associated with current and/or historical operations. The CERCLA, as

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amended, and similar state laws, may impose joint, several and strict liability for cleanup on potentially responsible parties who owned, operated or arranged for disposal at facilities affected by a release of hazardous substances. In addition, many states have created programs to incentivize voluntary remediation of sites where historical releases of hazardous substances are identified and property owners or responsible parties decide to initiate cleanups.

From time to time, DESC may be identified as a potentially responsible party in connection with the alleged release of hazardous substances or wastes at a site. Under applicable federal and state laws, DESC could be responsible for costs associated with the investigation or remediation of impacted sites, or subject to contribution claims by other responsible parties for their costs incurred at such sites. DESC also may identify, evaluate and remediate other potentially impacted sites under voluntary state programs. Remediation costs may be subject to reimbursement under DESC’s insurance policies, rate recovery mechanisms, or both. Except as described below, DESC does not believe these matters will have a material effect on results of operations, financial condition and/or cash flows.

DESC has four decommissioned manufactured gas plant sites in South Carolina that are in various states of investigation, remediation and monitoring under work plans approved by, or under review by, the SCDHEC or the EPA. DESC anticipates that activities at these sites will continue through 2025 with a remaining estimated cost of $21 million. DESC expects to recover costs arising from the remediation work at all four sites through rate recovery mechanisms and as of September 30, 2022, deferred amounts, net of amounts previously recovered through rates and insurance settlements, totaled $38 million and are included in regulatory assets.

Ash Pond and Landfill Closure Costs

In April 2015, the EPA enacted a final rule regulating CCR landfills, existing ash ponds that still receive and manage CCRs, and inactive ash ponds that do not receive, but still store, CCRs. DESC currently has inactive and existing CCR ponds and CCR landfills subject to the final rule at three different facilities. This rule created a legal obligation for DESC to retrofit or close all of its inactive and existing ash ponds over a certain period of time, as well as perform required monitoring, corrective action, and post-closure care activities as necessary.

In December 2016, legislation was enacted that creates a framework for EPA-approved state CCR permit programs. In August 2017, the EPA issued interim guidance outlining the framework for state CCR program approval. The EPA has enforcement authority until state programs are approved. The EPA and states with approved programs both will have authority to enforce CCR requirements under their respective rules and programs. In September 2017, the EPA agreed to reconsider portions of the CCR rule in response to two petitions for reconsideration. In March 2018, the EPA proposed certain changes to the CCR rule related to issues remanded as part of the pending litigation and other issues the EPA is reconsidering. Several of the proposed changes would allow states with approved CCR permit programs additional flexibility in implementing their programs. In July 2018, the EPA promulgated the first phase of changes to the CCR rule. In August 2018, the U.S. Court of Appeals for the D.C. Circuit issued its decision in the pending challenges of the CCR rule, vacating and remanding to the EPA three provisions of the rule. Until this matter is resolved and all phases of the CCR rule are promulgated, DESC is unable to precisely estimate potential incremental impacts or costs related to existing coal ash sites in connection with future implementation of the final CCR rule. While such amounts may be material to DESC’s results of operations, financial condition and/or cash flows, the existing regulatory framework in South Carolina provides rate recovery mechanisms that could substantially mitigate any such impacts.

Claims and Litigation

The following describes certain legal proceedings involving DESC relating primarily to events occurring before closing of the SCANA Combination. In addition, certain legal matters which have been resolved are discussed in Note 12 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021. No reference to, or disclosure of, any proceeding, item or matter described below shall be construed as an admission or indication that such proceeding, item or matter is material. For certain of these matters, and unless otherwise noted therein, DESC is unable to estimate a reasonable range of possible loss and the related financial statement impacts, but for any such matter there could be a material impact to its results of operations, financial condition and/or cash flows. For the matters for which DESC is able to reasonably estimate a probable loss, the Consolidated Balance Sheets at September 30, 2022 and December 31, 2021 include reserves of $96 million and $211 million, respectively, and insurance receivables of $68 million and $85 million, respectively, included within other receivables. These balances at September 30, 2022 and December 31, 2021 include $68 million and $85 million, respectively, of offsetting reserves and insurance receivables related to personal injury or wrongful death cases which are currently pending. During both the three and nine months ended September 30, 2022, charges included in DESC’s Consolidated Statements of Comprehensive Income were inconsequential. During the nine months ended September 30, 2021, DESC’s Consolidated Statements of Comprehensive Income includes charges of $70 million ($53 million after-tax), included within impairment of assets and other charges.

SCANA Shareholder Litigation

In February 2018, a purported class action was filed against Dominion Energy and certain former directors of SCANA and DESC in the State Court of Common Pleas in Richland County, South Carolina (the Metzler Lawsuit). The plaintiff alleges, among other things, that defendants violated their fiduciary duties to shareholders by executing a merger agreement that would unfairly deprive plaintiffs of the true value of their SCANA stock, and that Dominion Energy aided and abetted these actions. Among other remedies,

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the plaintiff seeks to enjoin and/or rescind the merger. In February 2018, Dominion Energy removed the case to the U.S. District Court for the District of South Carolina and filed a Motion to Dismiss in March 2018. In September 2019, the U.S. District Court for the District of South Carolina granted the plaintiffs’ motion to consolidate the Metzler Lawsuit with another lawsuit regarding the SCANA Merger Agreement to which DESC is not a party. In October 2019, the plaintiffs filed an amended complaint against certain former directors and executive officers of SCANA and DESC, which stated substantially similar allegations to those in the initial lawsuits as well as an inseparable fraud claim. In November 2019, the defendants filed a motion to dismiss. In April 2020, the U.S. District Court for the District of South Carolina denied the motion to dismiss. In May 2020, SCANA filed a motion to intervene, which was denied in August 2020. In September 2020, SCANA filed a notice of appeal with the U.S. Court of Appeals for the Fourth Circuit. In June 2021, the parties reached an agreement in principle to settle this case, along with a related case to which DESC was not a party, subject to court approval, with no financial impact to DESC. In June 2022, this case was dismissed in connection with court approval of the related case to which DESC was not a party.

Employment Class Actions and Indemnification

In August 2017, a case was filed in the U.S. District Court for the District of South Carolina on behalf of persons who were formerly employed at the NND Project. In July 2018, the court certified this case as a class action. In February 2019, certain of these plaintiffs filed an additional case, which case has been dismissed and the plaintiffs have joined the case filed August 2017. The plaintiffs allege, among other things, that SCANA, DESC, Fluor Corporation and Fluor Enterprises, Inc. violated the Worker Adjustment and Retraining Notification Act in connection with the decision to stop construction at the NND Project. The plaintiffs allege that the defendants failed to provide adequate advance written notice of their terminations of employment and are seeking damages, which could be as much as $100 million for 100% of the NND Project. In January 2021, the U.S. District Court for the District of South Carolina granted summary judgment in favor of SCANA, DESC, Fluor Corporation and Fluor Enterprises, Inc. In February 2021, the plaintiffs filed a notice of appeal with the U.S. Court of Appeals for the Fourth Circuit. In November 2021, the U.S Court of Appeals for the Fourth Circuit affirmed the lower court ruling. In March 2022, the deadline to file an appeal to the Supreme Court of the United States expired.

In September 2018, a case was filed in the State Court of Common Pleas in Fairfield County, South Carolina by Fluor Enterprises, Inc. and Fluor Daniel Maintenance Services, Inc. against DESC and Santee Cooper. The plaintiffs make claims for indemnification, breach of contract and promissory estoppel arising from, among other things, the defendants' alleged failure and refusal to defend and indemnify the Fluor defendants in the aforementioned case. As a result of the ruling in favor of the defendants in the aforementioned case, DESC was able to resolve Fluor’s claims for an inconsequential amount.

Governmental Proceedings and Investigations

In June 2018, DESC received a notice of proposed assessment of approximately $410 million, excluding interest, from the SCDOR following its audit of DESC’s sales and use tax returns for the periods September 1, 2008 through December 31, 2017. The proposed assessment, which includes 100% of the NND Project, is based on the SCDOR’s position that DESC’s sales and use tax exemption for the NND Project does not apply because the facility will not become operational. In December 2020, the parties reached an agreement in principle in the amount of $165 million to resolve this matter. In June 2021, the parties executed a settlement agreement which allows DESC to fund the settlement amount through a combination of cash, shares of Dominion Energy common stock or real estate with an initial payment of at least $43 million in shares of Dominion Energy common stock. In August 2021, Dominion Energy issued 0.6 million shares of its common stock to satisfy DESC’s obligation for the initial payment under the settlement agreement. In May 2022, Dominion Energy issued an additional 0.9 million shares of its common stock to partially satisfy DESC’s remaining obligation under the settlement agreement. In June 2022, DESC requested approval from the South Carolina Commission to transfer certain real estate with a total settlement value of $51 million to satisfy its remaining obligation under the settlement agreement. In July 2022, the South Carolina Commission voted to approve the request and issued its final order in August 2022. In September 2022, DESC transferred certain non-utility property with a fair value of $28 million to the SCDOR under the settlement agreement, resulting in a gain of $19 million ($14 million after-tax) recorded in other income, net in DESC’s Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022. Certain additional utility property representing $3 million of the value to be conveyed is expected to transfer by the end of 2022. The transfer of the remaining real estate remains subject to the approval of FERC. In October 2022, DESC filed for such approval with FERC. If such approval is received, the transfer of such utility and non-utility properties is expected to result in a gain of approximately $20 million upon completion.

Nuclear Operations

Nuclear Insurance

Other than the items discussed below, there have been no significant changes regarding DESC’s nuclear insurance as described in Note 12 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021.

During the second quarter of 2022, Dominion Energy reduced the levels of nuclear property insurance coverage for the reactor site at Summer from $2.75 billion to the NRC minimum requirement of $1.06 billion. As a result of this reduction in nuclear property

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insurance coverage, DESC’s maximum retrospective premium assessment for the current annual policy period was reduced to $11 million. Additionally, DESC maintains an excess property insurance policy with the European Mutual Association for Nuclear Insurance which provides coverage to Summer for property damage and outage costs resulting from an event of a non-nuclear origin. Dominion Energy reduced the levels of coverage from $415 million to $1 million.

During the third quarter of 2022, the total liability protection per nuclear incident available to all participants in the Secondary Financial Protection Program increased from $13.5 billion to $13.7 billion. This increase does not impact DESC’s responsibility per active unit under the Price-Anderson Amendments Act of 1988.

11. OPERATING SEGMENTS

The Corporate and Other segment includes specific items attributable to DESC’s operating segment that are not included in profit measures evaluated by executive management in assessing the segment’s performance or in allocating resources.

In the nine months ended September 30, 2022, DESC reported an insignificant amount of specific items in the Corporate and Other segment. In the nine months ended September 30, 2021, DESC reported after-tax net expense of $261 million for specific items in the Corporate and Other segment, all of which was attributable to its operating segment.

The net expense for specific items attributable to DESC’s operating segment in 2021 primarily related to the impact of the following items:

• $266 million ($199 million after-tax) of charges associated with the settlement of the South Carolina electric base rate case; and

• A $70 million ($53 million after-tax) charge associated with litigation.

(millions)	External Revenue		Comprehensive Income (Loss) Available (Attributable) to Common Shareholder
Three Months Ended September 30, 2022
Dominion Energy South Carolina	$	1,083	$	169
Corporate and Other		—		(1	)
Consolidated Total	$	1,083	$	168
Three Months Ended September 30, 2021
Dominion Energy South Carolina	$	863	$	149
Corporate and Other		—		(5	)
Consolidated Total	$	863	$	144
Nine Months Ended September 30, 2022
Dominion Energy South Carolina	$	2,841	$	392
Corporate and Other		—		(2	)
Consolidated total	$	2,841	$	390
Nine Months Ended September 30, 2021
Dominion Energy South Carolina	$	2,299	$	325
Corporate and Other		—		(261	)
Consolidated total	$	2,299	$	64

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12. AFFILIATED AND RELATED PARTY TRANSACTIONS

DES, on behalf of itself and its parent company, provides the following services to DESC, which are rendered at direct or allocated cost: information systems, telecommunications, customer support, marketing and sales, human resources, corporate compliance, purchasing, financial, risk management, public affairs, legal, investor relations, gas supply and capacity management, strategic planning, general administrative and retirement benefits. Costs for these services include amounts capitalized. Amounts expensed are primarily recorded in other operations and maintenance - affiliated suppliers and other income, net in the Consolidated Statements of Comprehensive Income.

DESC transacts with affiliates for certain quantities of electricity in the ordinary course of business. DESC also enters into certain commodity derivative contracts with affiliates. DESC uses these contracts, which are principally comprised of forward commodity purchases, to manage commodity price risks associated with purchases of electricity. See Note 7 for additional information.

	Three Months Ended September 30,				Nine Months Ended September 30,
(millions)	2022		2021		2022		2021
Direct and allocated costs from DES(1)	$	52	$	53	$	158	$	168
Operating Revenues - Electric from sales to affiliate		1		—		3		2
Operating Revenues - Gas from sales to affiliate		1		—		1		—
Operating Expenses - Other taxes from affiliate		1		2		6		6
Purchases of electricity from solar affiliates		5		5		12		12

(1) Includes capitalized expenditures of $12 million and $8 million for the three months ended September 30, 2022 and 2021, respectively, and $36 million and $23 million for the nine months ended September 30, 2022 and 2021, respectively.

(millions)	September 30, 2022		December 31, 2021
Payable to Dominion Energy	$	48	$	1
Receivable from Dominion Energy		2		—
Payable to DES		23		30
Payable to SCANA Corporation		7		—
Payable to Public Service Company of North Carolina, Incorporated		9		—
Receivable from Public Service Company of North Carolina, Incorporated		—		60
Payable to solar affiliates		1		1
Receivable from nuclear affiliates		—		1
Derivative assets with affiliates(1)		56		28

(1)    Includes amounts recorded in other current assets of $14 million and $4 million as of September 30, 2022 and December 31, 2021, respectively, and amounts recorded in other deferred debits and other assets of $42 million and $24 million as of September 30, 2022 and December 31, 2021, respectively.

Borrowings from an affiliate are described in Note 5.

13. OTHER INCOME, NET

Components of other income, net are as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
(millions)	2022			2021		2022		2021
Other income	$	2		$	3	$	5	$	10
Other expense		(1	)		1		—		(15	)
Gains on sales of assets(1)		20			—		37		—
Allowance for equity funds used during construction		1			2		4		5
Other income, net	$	22		$	6	$	46	$	—

(1)     Includes amounts recognized in connection with the transfer of property to satisfy litigation.  See Note 10 for additional information.

Non-service cost components of pension and other postretirement benefits are included in other income.

In June 2022, DESC completed the sale of certain utility property in South Carolina, as approved by the South Carolina Commission in May 2022, for total cash consideration of $16 million. In connection with the sale, DESC recognized a gain of $16 million ($12 million after-tax) for the nine months ended September 30, 2022.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MD&A provides management’s narrative analysis of its consolidated results of operations. MD&A should be read in conjunction with DESC's Consolidated Financial Statements. DESC meets the conditions to file under the reduced disclosure format, and therefore has omitted certain sections of MD&A.

Forward-Looking Statements

This report contains statements concerning DESC’s expectations, plans, objectives, future financial performance and other statements that are not historical facts. These statements are “forward-looking statements.” In most cases, the reader can identify these forward-looking statements by such words as “anticipate,” “estimate,” “forecast,” “expect,” “believe,” “should,” “could,” “plan,” “may,” “continue,” “target” or other similar words.

DESC makes forward-looking statements with full knowledge that risks and uncertainties exist that may cause actual results to differ materially from predicted results. Factors that may cause actual results to differ are often presented with the forward-looking statements themselves. Additionally, other factors may cause actual results to differ materially from those indicated in any forward-looking statement. These factors include but are not limited to:

• Unusual weather conditions and their effect on energy sales to customers and energy commodity prices;

• Extreme weather events and other natural disasters, including, but not limited to, hurricanes, high winds, severe storms, earthquakes, flooding, climate changes and changes in water temperatures and availability that can cause outages and property damage to facilities;

• The impact of extraordinary external events, such as the current pandemic health event resulting from COVID-19, and their collateral consequences, including extended disruption of economic activity in our markets and global supply chains;

• Federal, state and local legislative and regulatory developments, including changes in or interpretations of federal and state tax laws and regulations;

• Risks of operating businesses in regulated industries that are subject to changing regulatory structures;

• Changes to regulated rates collected;

• Changes in future levels of domestic and international natural gas production, supply or consumption;

• Timing and receipt of regulatory approvals necessary for planned construction or growth projects and compliance with conditions associated with such regulatory approvals;

• The inability to complete planned construction, conversion or growth projects at all, or with the outcomes or within the terms and time frames initially anticipated, including as a result of increased public involvement, intervention or litigation in such projects;

• Changes to federal, state and local environmental laws and regulations, including those related to climate change, the tightening of emission or discharge limits for GHGs and other substances, more extensive permitting requirements and the regulation of additional substances;

• Cost of environmental strategy and compliance, including those costs related to climate change;

• Changes in implementation and enforcement practices of regulators relating to environmental standards and litigation exposure for remedial activities;

• Difficulty in anticipating mitigation requirements associated with environmental and other regulatory approvals or related appeals;

• The impact of operational hazards, including adverse developments with respect to pipeline and plant safety or integrity, equipment loss, malfunction or failure, operator error and other catastrophic events;

• Risks associated with the operation of nuclear facilities, including costs associated with the disposal of spent nuclear fuel, decommissioning, plant maintenance and changes in existing regulations governing such facilities;

• Changes in operating, maintenance and construction costs;

• Domestic terrorism and other threats to DESC’s physical and intangible assets, as well as threats to cybersecurity;

• Additional competition from the development and deployment of alternative energy sources, such as self-generation and distributed generation technologies;

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• Competition in the development, construction and ownership of certain electric transmission facilities in connection with Order 1000;

• Changes in technology, particularly with respect to new, developing or alternative sources of generation and smart grid technologies;

• Changes in demand for services, including industrial, commercial and residential growth or decline in service areas, changes in supplies of natural gas delivered, changes in customer growth or usage patterns, including as a result of energy conservation programs, the availability of energy efficient devices and the use of distributed generation methods;

• Adverse outcomes in litigation matters or regulatory proceedings, including matters related to the NND Project;

• Counterparty credit and performance risk;

• Fluctuations in the value of investments held in nuclear decommissioning and benefit plan trusts;

• Fluctuations in energy-related commodity prices and the effect these could have on DESC’s liquidity position and the underlying value of its assets;

• Fluctuations in interest rates;

• Changes in rating agency requirements or credit ratings and their effect on availability and cost of capital;

• Global capital market conditions, including the availability of credit and the ability to obtain financing on reasonable terms;

• Political and economic conditions, including inflation and deflation;

• Employee workforce factors including collective bargaining agreements and labor negotiations with union employees; and

• Changes in financial or regulatory accounting principles or policies imposed by governing bodies.

Additionally, other risks that could cause actual results to differ from predicted results are set forth in Part I. Item 1A. Risk Factors in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021.

DESC’s forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. DESC cautions the reader not to place undue reliance on its forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from actual results. DESC undertakes no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.

Results of Operations

Presented below is a summary of DESC’s consolidated results:

	Third Quarter						Year-To-Date
(millions)	2022		2021		$ Change		2022		2021		$ Change
Net income	$	173	$	148	$	25	$	406	$	77	$	329

Overview

Third Quarter 2022 vs. 2021

Net income increased 17%, primarily due to increased electric customer usage, including growth, at increased rates.

Year-To-Date 2022 vs. 2021

Net income increased $329 million, primarily due to the absence of charges associated with the settlement of the South Carolina electric base rate case and the absence of charges associated with litigation.

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Analysis of Consolidated Operations

Presented below are selected amounts related to DESC’s results of operations:

	Third Quarter							Year-To-Date
(millions)	2022		2021		$ Change			2022		2021		$ Change
Operating revenues	$	1,083	$	863	$	220		$	2,841	$	2,299	$	542
Fuel used in electric generation		342		200		142			770		452		318
Purchased power		28		24		4			86		67		19
Gas purchased for resale		102		57		45			296		188		108
Other operations and maintenance		157		161		(4	)		465		477		(12	)
Impairment of assets and other charges (benefit)		2		1		1			6		320		(314	)
Depreciation and amortization		127		122		5			378		362		16
Other taxes		72		64		8			216		191		25
Other income, net		22		6		16			46		—		46
Interest charges		57		50		7			162		159		3
Income tax expense		45		42		3			102		6		96

An analysis of DESC’s results of operations follows:

Third Quarter 2022 vs. 2021

Operating revenues increased 25%, primarily reflecting:

• A $191 million increase in fuel-related revenue as a result of an increase in commodity costs and purchased power costs associated with sales to electric utility retail customers ($146 million) and gas utility customers ($45 million);

• A $7 million increase from electric utility customers who previously elected to pay market based or other negotiated rates;

• A $7 million increase in sales to electric utility retail customers from an increase in cooling degree days during the cooling season;

• A $6 million increase in sales to electric utility retail customers associated with growth; and

• A $5 million increase in non-fuel base rates associated with the settlement in 2021 of the South Carolina electric base rate case.

Fuel used in electric generation increased 71%, primarily due to increased fuel costs associated with electric utility retail customers, which are offset in operating revenue and do not impact net income.

Purchased power increased 17%, primarily due to an increase in costs associated with electric utility customers, which are offset in operating revenue and do not impact net income.

Gas purchased for resale increased 79%, primarily due to an increase in costs associated with gas utility customers, which are offset in operating revenue and do not impact net income.

Other operations and maintenance remained substantially unchanged, primarily reflecting a decrease in outside services ($10 million), substantially offset by an increase in the materials and supplies expense primarily as a result of higher prices ($13 million).

Other taxes increased 13%, primarily due to higher property taxes.

Other income, net increased $16 million, primarily due to a gain on the transfer of certain non-utility property.

Interest charges increased 14%, primarily due to increased interest on intercompany borrowings and commercial paper borrowings due to higher interest rates.

Year-To-Date 2022 vs. 2021

Operating revenues increased 24%, primarily reflecting:

• A $436 million increase in fuel-related revenue as a result of an increase in commodity costs and purchased power costs associated with sales to electric utility retail customers ($328 million) and gas utility customers ($108 million);

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• A $24 million increase in sales to electric utility retail customers from an increase in cooling degree days during the cooling season ($23 million) and an increase in heating degree days during the heating season ($1 million);

• A $20 million increase in non-fuel base rates associated with the settlement in 2021 of the South Carolina electric base rate case;

• A $20 million increase from electric utility customers who previously elected to pay market based or other negotiated rates;

• A $17 million increase in sales to electric utility retail customers associated with growth;

• A $15 million increase in sales to electric utility retail customers associated with economic and other usage factors;

• A $12 million increase in the fuel cost component of off-system sales;

• A $6 million increase in sales to gas utility customers associated with growth; and

• A $5 million increase associated with increased infrastructure cost recovery under the Natural Gas Rate Stabilization Act; partially offset by

• A $10 million decrease in sales to electric retail customers from the capital cost rider.

Fuel used in electric generation increased 70%, primarily due to increased fuel costs associated with electric utility retail customers ($306 million) and an increase in fuel costs associated with off-system sales ($12 million), which are offset in operating revenue and do not impact net income.

Purchased power increased 28%, primarily due to an increase in costs associated with electric utility customers, which are offset in operating revenue and do not impact net income.

Gas purchased for resale increased 57%, primarily due to an increase in costs associated with gas utility customers, which are offset in operating revenue and do not impact net income.

Other operations and maintenance decreased 3%, primarily due to a decrease in charges from DES ($15 million) and a decrease in outside services ($13 million), partially offset by an increase in salaries, wages and benefits ($10 million) and an increase in the materials and supplies expense primarily as a result of higher prices ($9 million).

Impairment of assets and other charges decreased 98%, primarily due to the absence of charges associated with the settlement of the South Carolina electric base rate case ($249 million) and the absence of charges associated with litigation ($70 million).

Other taxes increased 13%, primarily due to higher property taxes.

Other income, net increased $46 million, primarily due to a gain on the transfer of certain non-utility property ($19 million), the absence of charges associated with the settlement of the South Carolina electric base rate case ($18 million) and a gain on the sale of certain utility property ($16 million).

Interest charges increased 2%, primarily due to increased interest on intercompany borrowings and commercial paper borrowings due to higher interest rates ($7 million) and higher interest from net debt issuances in 2021 ($6 million), partially offset by the absence of amortization on losses of reacquired debt associated with the settlement of the South Carolina electric base rate case ($11 million).

Income tax expense increased $96 million, primarily due to higher pre-tax income.

ITEM 4. CONTROLS AND PROCEDURES

Senior management of DESC, including DESC’s CEO and CFO, evaluated the effectiveness of DESC’s disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation process, DESC’s CEO and CFO have concluded that DESC’s disclosure controls and procedures are effective.

There were no changes that occurred during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, DESC’s internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, DESC is party to various legal, environmental or other regulatory proceedings, including in the ordinary course of business. SEC regulations require disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that DESC reasonably believes will exceed a specified threshold. Pursuant to the SEC regulations, DESC uses a threshold of $1 million for such proceedings.

See the following for discussions on various legal, environmental and other regulatory proceedings to which DESC is a party, which information is incorporated herein by reference:

• Notes 3 and 12 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021.

• Notes 2 and 10 to the Consolidated Financial Statements in this report.

ITEM 1A. RISK FACTORS

DESC’s business is influenced by many factors that are difficult to predict, involve uncertainties that may materially affect actual results and are often beyond its control. A number of these risk factors have been identified in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021, which should be taken into consideration when reviewing the information contained in this report. There have been no material changes with regard to the risk factors previously disclosed in DESC's Annual Report on Form 10-K for the year ended December 31, 2021. For other factors that may cause actual results to differ materially from those indicated in any forward-looking statement or projection contained in this report, see Forward-Looking Statements in MD&A in this report.

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ITEM 6. EXHIBITS

Exhibit No.	Description
3.1	Amended and Restated Articles of Incorporation, effective April 29, 2019 (Exhibit 3.1, Form 8-K filed April 29, 2019, File No. 1-3375).
3.2	Amended and Restated Bylaws, effective April 29, 2019 (Exhibit 3.2, Form 8-K filed April 29, 2019, File No. 1-3375).
4.1	Dominion Energy South Carolina, Inc. agrees to furnish to the U.S. Securities and Exchange Commission upon request any instrument with respect to long-term debt as to which the total amount of securities authorized does not exceed 10% of its total consolidated assets.
10.1	$6,000,000,000 Fifth Amended and Restated Revolving Credit Agreement, dated June 9, 2021, among Dominion Energy, Inc., Virginia Electric and Power Company, Questar Gas Company, Dominion Energy South Carolina, Inc., JP Morgan Chase Bank, N.A., as Administrative Agent, Mizuho Bank, Ltd., Bank of America, N.A., The Bank of Nova Scotia and Wells Fargo Bank, N.A., as Syndication Agents, J.P. Morgan Securities, LLC and Mizuho Bank, Ltd., as Co-Sustainability Structuring Agent, and other lenders named therein (Exhibit 10.1, Form 8-K filed June 10, 2021, File No. 1-3375); as amended by the First Amendment, dated September 28, 2022, to the Fifth Amended and Restated Revolving Credit Agreement (Exhibit 10.1, Form 8-K filed September 30, 2022, File No. 1-3375).
31.a	Certification by Chief Executive Officer of Dominion Energy South Carolina, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.b	Certification by Chief Financial Officer of Dominion Energy South Carolina, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.a	Certification to the Securities and Exchange Commission by Chief Executive Officer and Chief Financial Officer of Dominion Energy South Carolina, Inc. as required by Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
101	The following financial statements from Dominion Energy South Carolina, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, filed on November 4, 2022, formatted in iXBRL (Inline eXtensible Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Changes in Common Equity, and (v) the Notes to Consolidated Financial Statements.
104	Cover Page Interactive Data File (formatted in iXBRL (Inline eXtensible Reporting Language) and contained in Exhibit 101).

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SIGNATURE

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.

	DOMINION ENERGY SOUTH CAROLINA, INC.
		(Registrant)
	By:	/s/ Michele L. Cardiff
Date: November 4, 2022		Michele L. Cardiff
		Senior Vice President, Controller and Chief Accounting Officer

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