10-K - SCANA Corporation

Table of Contents
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.
The Company 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. The
Company used a discount rate of 5.72%, derived using a cash flow matching technique, and recorded a net cost of $18.6 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 $0.5 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
The Company 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 the Company’s regulated utility
operations, their recording has no significant impact on results of operations. As of December 31, 2011, the Company has recorded an
ARO of $124 million for nuclear plant decommissioning (as discussed above) and an ARO of $349 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 the 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 site of Summer
Station, with SCE&G responsible for 55 percent of the cost and receiving 55 percent of the output, and Santee Cooper responsible for
and receiving the remaining 45 percent. Under these agreements, SCE&G will have the primary responsibility for oversight of the
construction of the New Units and will be responsible for the operation of the New Units as they come online.
SCE&G, on behalf of itself and as agent for Santee Cooper, has entered into the EPC Contract with the Consortium for the
design and construction of the New Units. SCE&G’s share of the estimated cash outlays (future value, excluding AFC) totals
approximately $6 billion for plant costs and related transmission infrastructure costs, which costs are projected based on historical
one-year and five-year escalation rates as required by the SCPSC.
As previously reported, SCE&G has been advised by Santee Cooper that it is reviewing certain aspects of its capital
improvement program and long-term power supply plan, including the level of its participation in the New Units. Santee Cooper has
entered into a letter of intent with Duke that may result in Duke acquiring a portion of Santee Cooper’s ownership interest in the New
Units. SCE&G is unable to predict whether any change in Santee Cooper’s ownership interest or the addition of new joint owners will
increase project costs or delay the commercial operation dates of the New Units. Any such project cost increase or delay could be
material.
The Consortium has recently performed an impact study, at SCE&G’s request, related to various cost and timing alternatives
arising from the delay in the issuance date of the COL from mid-2011, which was the date assumed when the EPC Contract was
signed in 2008, to the early-2012 issuance date currently anticipated by SCE&G. The impact study analyzed three scenarios, including
(1) compressing the construction schedule for the first New Unit but retaining the original substantial completion dates set forth in the
EPC Contract, (2) extending the substantial completion date for the first New Unit to accommodate the COL delay, or (3) delaying the
substantial completion date of the first New Unit and accelerating the
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