10-K - SCANA Corporation

Table of Contents
the effects of different rate schedules, changes in weather and, where applicable, the impact of weather normalization or other
regulatory provisions of rate structures. The accrual of unbilled revenues in this manner properly matches revenues and related costs.
Accounts receivable included unbilled revenues of $169.1 million at December 31, 2011 and $221.1 million at December 31, 2010,
compared to total revenues of $4.4 billion and $4.6 billion for the years 2011 and 2010, respectively.
Nuclear Decommissioning
Accounting for decommissioning costs for nuclear power plants involves significant estimates related to costs to be incurred
many years in the future. Among the factors that could change SCE&G’s accounting estimates related to decommissioning costs are
changes in technology, changes in regulatory and environmental remediation requirements, and changes in financial assumptions such
as discount rates and timing of cash flows. Changes in any of these estimates could significantly impact the Company’s financial
position and cash flows (although changes in such estimates should be earnings-neutral, because these costs are expected to be
collected from ratepayers).
SCE&G’s two-thirds share of estimated site-specific nuclear decommissioning costs for Summer Station Unit 1, including
both the cost of decommissioning plant components that are and are not subject to radioactive contamination, totals $451.0 million,
stated in 2006 dollars. Santee Cooper is responsible for decommissioning costs related to its one-third ownership interest in Summer
Station Unit 1. The cost estimate assumes that the site would be maintained over a period of 60 years in such a manner as to allow for
subsequent decontamination that would permit release for unrestricted use.
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
The Company 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. The Company’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 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. The Company believes that these assumptions were, and that
the resulting pension cost amount was, reasonable. For purposes of comparison, using a discount rate of 5.31% in 2011 would have
increased the Company’s pension cost by $1.3 million. Had the assumed long-term rate of return on assets been 8.00%, the
Company’s pension cost for 2011 would have increased by $1.9 million.
The following information with respect to pension assets (and returns thereon) should also be noted.
The Company determines the fair value of a majority of its pension assets utilizing market quotes or derives them from
modeling techniques that incorporate market data. Only a small portion of assets are valued using less transparent (so-called
“Level 3”) methods.
In developing the expected long-term rate of return assumptions, the Company evaluates historical performance, targeted
allocation amounts and expected payment terms. As of the beginning of 2011, the plan’s historical 10, 15, 20 and 25 year cumulative
performance showed actual returns of 4.2%, 8.1%, 9.8% and 10.2%, respectively. The 2011 expected long-term rate of return of
8.25% was based on a target asset allocation of 65% with equity managers and 35% with fixed income managers. Management
regularly reviews such allocations and periodically rebalances the portfolio when considered appropriate. As of the beginning of 2012,
the plan’s historical 10, 15, 20 and 25 year cumulative performance showed actual returns of 4.2%, 6.8%, 8.6% and 9.3%,
respectively. For 2012, the expected rate of return is 8.25%.
Due to turmoil in the financial markets and the resultant declines in plan asset values in the fourth quarter of 2008, the
Company 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 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,
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