10-K - SCANA Corporation

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Table of Contents 6. DERIVATIVE FINANCIAL INSTRUMENTS Consolidated SCE&G recognizes all derivative instruments as either assets or liabilities in the statement of financial position and measures those instruments at fair value. Consolidated SCE&G recognizes changes in the fair value of derivative instruments either in earnings or within regulatory assets or regulatory liabilities, depending upon the intended use of the derivative and the resulting designation. The fair value of derivative instruments is determined by reference to quoted market prices of listed contracts, published quotations or, for interest rate swaps, discounted cash flow models with independently sourced data. Policies and procedures and risk limits are established to control the level of market, credit, liquidity and operational and administrative risks assumed by Consolidated SCE&G. SCANA’s Board of Directors has delegated to a Risk Management Committee the authority to set risk limits, establish policies and procedures for risk management and measurement, and oversee and review the risk management process and infrastructure for SCANA and each of its subsidiaries, including Consolidated SCE&G. The Risk Management Committee, which is comprised of certain officers, including the Consolidated SCE&G’s Risk Management Officer and senior officers, apprises the Board of Directors with regard to the management of risk and brings to the Board’s attention any areas of concern. Written policies define the physical and financial transactions that are approved, as well as the authorization requirements and limits for transactions. Commodity Derivatives SCE&G uses derivative instruments to hedge forward purchases and sales of natural gas, which create market risks of different types. Instruments designated as cash flow hedges are used to hedge risks associated with fixed price obligations in a volatile market and risks associated with price differentials at different delivery locations. The basic types of financial instruments utilized are exchange-traded instruments, such as NYMEX futures contracts or options, and over-the-counter instruments such as options and swaps, which are typically offered by energy and financial institutions. Cash settlement of commodity derivatives are classified as an operating activity in the consolidated statements of cash flows. SCE&G’s tariffs include a PGA that provides for the recovery of actual gas costs incurred. The SCPSC has ruled that the results of these hedging activities are to be included in the PGA. As such, the cost of derivatives and gains and losses on such derivatives utilized to hedge gas purchasing activities are recoverable through the weighted average cost of gas calculation. The offset to the change in fair value of these derivatives is recorded as a regulatory asset or liability. These derivative financial instruments are not designated as hedges for accounting purposes. Interest Rate Swaps Consolidated SCE&G synthetically converts variable rate debt to fixed rate debt using swaps that are designated as cash flow hedges. Periodic payments to or receipts from swap counterparties related to these derivatives are recorded within interest expense and are classified as an operating activity for cash flow purposes. In anticipation of the issuance of debt, Consolidated SCE&G may use treasury rate lock or forward starting swap agreements that are designated as cash flow hedges. The effective portions of changes in fair value and payments made or received upon termination of such agreements are recorded in regulatory assets or regulatory liabilities. Such amounts are amortized to interest expense over the term of the underlying debt. Ineffective portions are recognized in income. Cash payments made or received upon termination of these financial instruments are classified as an investing activity in the consolidated statements of cash flows. The effective portion of settlement payments made or received upon termination are amortized to interest expense over the term of the underlying debt and are classified as a financing activity in the consolidated statements of cash flows. Quantitative Disclosures Related to Derivatives SCE&G was party to natural gas derivative contracts for 2,490,000 DT and 2,460,000 DT at December 31, 2011 and 2010, respectively. Consolidated SCE&G was a party to interest rate swaps designated as cash flow hedges with aggregate notional amounts of $471.4 million and $421.4 million at December 31, 2011 and 2010, respectively. 126
Table of Contents The fair value of energy-related derivatives and interest rate derivatives was reflected in the balance sheet as follows: Fair Values of Derivative Instruments Asset Derivatives Liability Derivatives Fair Balance Sheet Value Location(a) Balance Sheet Location(a) Millions of dollars As of December 31, 2011 Derivatives designated as hedging instruments Interest rate contracts Other current assets $ 1 Other current liabilities $ 2 Other deferred credits 75 Total $ 1 $ 77 As of December 31, 2010 Derivatives designated as hedging instruments Interest rate contracts Other deferred debits $ 4 Other current liabilities $ 34 Other deferred credits 1 Total $ 4 $ 35 Derivatives not designated as hedging instruments Commodity contracts Prepayments and other $ 1 Fair Value (a) Asset derivatives represent unrealized gains to Consolidated SCE&G, and liability derivatives represent unrealized losses. In Consolidated SCE&G’s consolidated balance sheet, unrealized gain and loss positions on commodity contracts with the same counterparty are reported as either a net asset or liability, and for purposes of the above disclosure they are reported on a gross basis. The effect of derivative instruments on the statement of income is as follows: Gain or (Loss) Reclassified from Gain or (Loss) Deferred Deferred Accounts into Income Derivatives in Cash Flow Hedging Relationships in Regulatory Accounts (Effective Portion) Millions of dollars (Effective Portion) Location Amount Year Ended December 31, 2011 Interest rate contracts $ (76) Interest expense $ (3) Year Ended December 31, 2010 Interest rate contracts $ (36) Interest expense $ (2) Year Ended December 31, 2009 Interest rate contracts $ 42 Interest expense $ (3) Derivatives Not Designated as Hedging Instruments Gain or (Loss) Recognized in Income Millions of dollars Location Amount Year Ended December 31, 2011 Commodity contracts Gas purchased for resale $ (2) Year Ended December 31, 2010 Commodity contracts Gas purchased for resale $ (3) Year Ended December 31, 2009 Commodity contracts Gas purchased for resale $ (16) Hedge Ineffectiveness Other gains (losses) recognized in income representing interest rate hedge ineffectiveness were $(1.1) million, net of tax, in 2011 and were insignificant in 2010. These amounts are recorded within interest expense on the statement of income. 127
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Table of Contents UNITED STATES SEC
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Table of Contents CAUTIONARY STATEM
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Table of Contents TERM MEANING MGP
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Table of Contents Regulated Utiliti
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Table of Contents Electric Intercon
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Table of Contents Gas Cost, Supply
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Table of Contents SCE&G holds licen
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Table of Contents PSNC Energy’s r
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Table of Contents Furthermore, rece
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Table of Contents One rating agency
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Table of Contents • Uncertainties
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Table of Contents ELECTRIC PROPERTI
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Table of Contents Litigation In May
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Table of Contents PART II ITEM 5. M
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Table of Contents SCANA CORPORATION
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Table of Contents Key Earnings Driv
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Table of Contents Retail Gas Market
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Table of Contents • 2010 vs 2009
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Table of Contents • 2011 vs 2010
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Table of Contents The Company’s c
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Table of Contents With respect to h
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Table of Contents Air Quality With
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Table of Contents Electric Operatio
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Table of Contents the effects of di
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Table of Contents substantial compl
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Table of Contents ITEM 7A. QUANTITA
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Table of Contents ITEM 8. FINANCIAL
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Table of Contents See Notes to Cons
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Table of Contents See Notes to Cons
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Table of Contents NOTES TO CONSOLID
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Table of Contents costs for turbine
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Table of Contents Fuel costs, emiss
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Table of Contents In May 2009, two
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Table of Contents Accumulated defer
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Table of Contents SCANA issued comm
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Table of Contents The difference be
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Table of Contents losses from its h
Page 75 and 76: Table of Contents The effect of der
Page 77 and 78: Table of Contents 8. EMPLOYEE BENEF
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Page 81 and 82: Table of Contents Net Periodic Bene
Page 83 and 84: Table of Contents Equity Awards In
Page 85 and 86: Table of Contents SCE&G maintains a
Page 87 and 88: Table of Contents 11. AFFILIATED TR
Page 89 and 90: Table of Contents 13. QUARTERLY FIN
Page 91 and 92: Table of Contents ITEM 7. MANAGEMEN
Page 93 and 94: Table of Contents retain large comm
Page 95 and 96: Table of Contents • 2011 vs 2010
Page 97 and 98: Table of Contents regulations, will
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Page 101 and 102: Table of Contents To help mitigate
Page 103 and 104: Table of Contents The RSA allows na
Page 105 and 106: Table of Contents site of Summer St
Page 107 and 108: Table of Contents ITEM 7A. QUANTITA
Page 109 and 110: Table of Contents ITEM 8. FINANCIAL
Page 111 and 112: Table of Contents December 31, (Mil
Page 113 and 114: Table of Contents See Notes to Cons
Page 115 and 116: Table of Contents NOTES TO CONSOLID
Page 117 and 118: Table of Contents $32.7 million, of
Page 119 and 120: Table of Contents 2. RATE AND OTHER
Page 121 and 122: Table of Contents Regulatory Assets
Page 123 and 124: Table of Contents 4. LONG-TERM AND
Page 125: Table of Contents The tax effects o
Page 129 and 130: Table of Contents 8. EMPLOYEE BENEF
Page 131 and 132: Table of Contents The pension plan
Page 133 and 134: Table of Contents Net Periodic Bene
Page 135 and 136: Table of Contents Nonvested shares
Page 137 and 138: Table of Contents Claims and Litiga
Page 139 and 140: Table of Contents Disclosure of Rep
Page 141 and 142: Table of Contents ITEM 9. CHANGES I
Page 143 and 144: Table of Contents SCE&G: Evaluation
Page 145 and 146: Table of Contents ITEM 14. PRINCIPA
Page 147 and 148: Table of Contents Schedule II—Val
Page 149 and 150: Table of Contents SIGNATURES Pursua
Page 151 and 152: Table of Contents Applicable to Exh
Page 153 and 154: Exhibit 12.01 SCANA CORPORATION CAL
Page 155 and 156: Exhibit 23.01 CONSENT OF INDEPENDEN
Page 157 and 158: Exhibit 24.01 POWER OF ATTORNEY KNO
Page 159 and 160: Exhibit 31.01 CERTIFICATION I, Kevi
Page 161 and 162: Exhibit 31.03 CERTIFICATION I, Kevi
Page 163 and 164: Exhibit 32.01 SCANA CORPORATION CER
Page 165 and 166: Exhibit 32.03 SOUTH CAROLINA ELECTR
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10-K - SCANA Corporation

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