10-K - SCANA Corporation

Table of Contents
Under SCE&G’s method of funding decommissioning costs, amounts collected through rates are invested in insurance
policies on the lives of certain Company personnel. SCE&G transfers to an external trust fund the amounts collected through electric
rates, insurance proceeds and interest thereon, less expenses. The trusteed asset balance reflects the net cash surrender value of the
insurance policies and cash held by the trust. Management intends for the fund, including earnings thereon, to provide for all eventual
decommissioning expenditures on an after-tax basis.
Accounting for Pensions and Other Postretirement Benefits
SCANA recognizes the overfunded or underfunded status of its defined benefit pension plan as an asset or liability in its
balance sheet and changes in funded status as a component of net periodic benefit cost or other comprehensive income, net of tax, or
as a regulatory asset as required by accounting guidance. SCANA’s plan is adequately funded under current regulations. Accounting
guidance requires the use of several assumptions, the selection of which may have a large impact on the resulting pension cost or
income recorded. Among the more sensitive assumptions are those surrounding discount rates and expected returns on assets. Net
pension cost of $17.3 million ($13.9 million attributable to SCE&G) recorded in 2011 reflects the use of a 5.56% discount rate,
derived using a cash flow matching technique, and an assumed 8.25% long-term rate of return on plan assets. SCANA believes that
these assumptions were, and that the resulting pension income amount was, reasonable. For purposes of comparison, using a discount
rate of 5.31% in 2011 would have increased SCANA’s pension cost by $1.3 million. Had the assumed long-term rate of return on
assets been 8.00%, SCANA’s pension cost for 2011 would have increased by $1.9 million.
Due to turmoil in the financial markets and the resultant declines in plan asset values in the fourth quarter of 2008, SCE&G
recorded significant amounts of pension cost in 2009, 2010 and 2011 compared to the pension income recorded previously. However,
in February 2009, SCE&G was granted accounting orders by the SCPSC which allowed it to mitigate a significant portion of this
increased pension cost by deferring as a regulatory asset the amount of pension expense above the level that was included in then
current cost of service rates for its retail electric and gas distribution regulated operations. In July 2010, upon the new retail electric
base rates becoming effective, SCE&G began deferring as a regulatory asset all pension cost related to its regulated retail electric
operations that otherwise would have been charged to expense. In November 2010, upon the updated gas rates becoming effective
under the RSA, SCE&G began deferring as a regulatory asset, all pension cost related to its regulated natural gas operations that
otherwise would have been charged to expense.
The pension trust is adequately funded under current regulations, and no contributions have been required since 1997.
Management does not anticipate the need to make significant pension contributions until after 2012.
SCANA accounts for the cost of its postretirement medical and life insurance benefit plans in a similar manner to that used
for its defined benefit pension plan. This plan is unfunded, so no assumptions related to rate of return on assets impact the net expense
recorded; however, the selection of discount rates can significantly impact the actuarial determination of net expense. SCANA used a
discount rate of 5.72%, derived using a cash flow matching technique, and recorded a net cost to SCE&G of $14.0 million for 2011.
Had the selected discount rate been 5.47% (25 basis points lower than the discount rate referenced above), the expense for 2011 would
have been $0.4 million higher. Because the plan provisions include “caps” on company per capita costs, healthcare cost inflation rate
assumptions do not materially impact the net expense recorded.
Asset Retirement Obligations
Consolidated SCE&G accrues for the legal obligation associated with the retirement of long-lived tangible assets that result
from their acquisition, construction, development and normal operation in accordance with applicable accounting guidance. The
obligations are recognized at fair value in the period in which they are incurred and associated asset retirement costs are capitalized as
a part of the carrying amount of the related long-lived assets. Because such obligations relate primarily to Consolidated SCE&G’s
regulated utility operations, their recording has no significant impact on results of operations. As of December 31, 2011, Consolidated
SCE&G has recorded AROs of $124 million for nuclear plant decommissioning (as discussed above) and $326 million for other
conditional obligations related to generation, transmission and distribution properties, including gas pipelines. All of the amounts
recorded in accordance with the relevant accounting guidance are based upon estimates which are subject to varying degrees of
imprecision, particularly since such payments may be made many years in the future. Changes in these estimates will be recorded over
time; however, these changes in estimates are not expected to materially impact results of operations so long as the regulatory
framework for utilities remains in place.
OTHER MATTERS
Nuclear Generation
SCE&G and Santee Cooper are parties to construction and operating agreements in which they agreed to be joint owners, and
share operating costs and generation output, of two 1,117-MW nuclear generation units to be constructed at the
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