10-K - SCANA Corporation

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Table of Contents Changes to Unrecognized Tax Benefits Millions of dollars 2011 2010 Unrecognized tax benefits, January 1 $ 36 — Gross increases—tax positions in prior period 5 — Gross decreases—tax positions in prior period (8) — Gross increases—current period tax positions 5 $ 36 Settlements — — Lapse of statute of limitations — — Unrecognized tax benefits, December 31 $ 38 $ 36 In connection with the change in method of accounting for certain repair costs for tax purposes referred to above, the Company identified approximately $38 million of unrecognized tax benefit. Because this method change is primarily a temporary difference, this additional benefit, if recognized, would not have a significant effect on the effective tax rate. By December 31, 2012, it is reasonably possible that this unrecognized tax benefit could increase by as much as $12 million or decrease by as much as $38 million. The events that could cause these changes are direct settlements with taxing authorities, legal or administrative guidance by relevant taxing authorities, or the lapse of an applicable statute of limitation. The Company recognizes interest accrued related to unrecognized tax benefits within interest expense and recognizes tax penalties within other expenses. The Company has not accrued any significant amount of interest expense related to unrecognized tax benefits or tax penalties in 2010 or 2009. The Company has accrued $2 million of interest expense related to unrecognized tax benefits in 2011. 6. DERIVATIVE FINANCIAL INSTRUMENTS The Company recognizes all derivative instruments as either assets or liabilities in the statement of financial position and measures those instruments at fair value. The Company recognizes changes in the fair value of derivative instruments either in earnings as a component of other comprehensive income (loss) or, for regulated subsidiaries, 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 the Company. 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. The Risk Management Committee, which is comprised of certain officers, including the Company’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 The Company 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. Instruments designated as fair value hedges are used to mitigate exposure to fluctuating market prices created by fixed prices of stored natural gas. 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 statement of cash flows. The Company’s regulated gas operations (SCE&G and PSNC Energy) hedge natural gas purchasing activities using over-thecounter options and swaps and NYMEX futures and options. 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 SCE&G’s 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. PSNC Energy’s tariffs also include a provision for the recovery of actual gas costs incurred. PSNC Energy records premiums, transaction fees, margin requirements and any realized gains or 72
Table of Contents losses from its hedging program in deferred accounts as a regulatory asset or liability for the over- or under-recovery of gas costs. These derivative financial instruments are not designated as hedges for accounting purposes. The unrealized gains and losses on qualifying cash flow hedges of nonregulated operations are deferred in other comprehensive income. When the hedged transactions affect earnings, the previously recorded gains and losses are reclassified from other comprehensive income to cost of gas. The effects of gains or losses resulting from these hedging activities are either offset by the recording of the related hedged transactions or are included in gas sales pricing decisions made by the business unit. As an accommodation to certain customers, SEMI, as part of its energy management services, offers fixed price supply contracts which are accounted for as derivatives. These sales contracts are offset by the purchase of supply futures and swaps which are also accounted for as derivatives. Interest Rate Swaps The Company uses interest rate swaps to manage interest rate risk and exposure to changes in the fair value attributable to changes in interest rate on certain debt issuances. These swaps are designated as either fair value hedges or cash flow hedges. The Company uses swaps to synthetically convert fixed rate debt to variable rate debt. These swaps are designated as fair value hedges. Periodic payments to or receipts from swap counterparties are recorded within interest expense and are classified as an operating activity in the condensed consolidated statements of cash flows. In addition, gains on certain swaps that were terminated prior to maturity of the underlying debt instruments are being amortized to interest expense over the life of the debt they hedged. The Company 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, the Company 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 for regulated subsidiaries are recorded in regulatory assets or regulatory liabilities, and for the holding company or nonregulated subsidiaries, are recorded in other comprehensive income. 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. Quantitative Disclosures Related to Derivatives The Company was party to natural gas derivative contracts outstanding in the following quantities: Gas Distribution Commodity and Other Energy Management Contracts (in DT) Retail Gas Marketing Energy Marketing Total Hedge designation As of December 31, 2011 Cash flow — 6,566,000 29,861,763 36,427,763 Not designated(a) 9,080,000 — 31,943,563 41,023,563 Total(a) 9,080,000 6,566,000 61,805,326 77,451,326 As of December 31, 2010 Cash flow — 5,715,000 17,190,351 22,905,351 Not designated(b) 10,677,000 — 20,588,581 31,265,581 Total(b) 10,677,000 5,715,000 37,778,932 54,170,932 (a) (b) Includes an aggregate 9,626,000 DT related to basis swap contracts in Energy Marketing. Includes an aggregate 6,485,536 DT related to basis swap contracts in Retail Gas Marketing and Energy Marketing. 73
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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
Page 21 and 22: Table of Contents • Uncertainties
Page 23 and 24: Table of Contents ELECTRIC PROPERTI
Page 25 and 26: Table of Contents Litigation In May
Page 27 and 28: Table of Contents PART II ITEM 5. M
Page 29 and 30: Table of Contents SCANA CORPORATION
Page 31 and 32: Table of Contents Key Earnings Driv
Page 33 and 34: Table of Contents Retail Gas Market
Page 35 and 36: Table of Contents • 2010 vs 2009
Page 39 and 40: Table of Contents The Company’s c
Page 41 and 42: Table of Contents With respect to h
Page 43 and 44: Table of Contents Air Quality With
Page 45 and 46: Table of Contents Electric Operatio
Page 47 and 48: Table of Contents the effects of di
Page 49 and 50: Table of Contents substantial compl
Page 51 and 52: Table of Contents ITEM 7A. QUANTITA
Page 53 and 54: Table of Contents ITEM 8. FINANCIAL
Page 55 and 56: Table of Contents See Notes to Cons
Page 59 and 60: Table of Contents NOTES TO CONSOLID
Page 61 and 62: Table of Contents costs for turbine
Page 63 and 64: Table of Contents Fuel costs, emiss
Page 65 and 66: Table of Contents In May 2009, two
Page 67 and 68: Table of Contents Accumulated defer
Page 69 and 70: Table of Contents SCANA issued comm
Page 71: Table of Contents The difference be
Page 75 and 76: Table of Contents The effect of der
Page 77 and 78: Table of Contents 8. EMPLOYEE BENEF
Page 79 and 80: Table of Contents The Company’s p
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 97 and 98: Table of Contents regulations, will
Page 99 and 100: Table of Contents on its draws, whi
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 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
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Table of Contents 4. LONG-TERM AND
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Table of Contents The tax effects o
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Table of Contents The fair value of
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Table of Contents 8. EMPLOYEE BENEF
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Table of Contents The pension plan
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Table of Contents Net Periodic Bene
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Table of Contents Nonvested shares
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Table of Contents Claims and Litiga
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Table of Contents Disclosure of Rep
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Table of Contents ITEM 9. CHANGES I
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Table of Contents SCE&G: Evaluation
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Table of Contents ITEM 14. PRINCIPA
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Table of Contents Schedule II—Val
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Table of Contents SIGNATURES Pursua
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Table of Contents Applicable to Exh
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Exhibit 12.01 SCANA CORPORATION CAL
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Exhibit 23.01 CONSENT OF INDEPENDEN
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Exhibit 24.01 POWER OF ATTORNEY KNO
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Exhibit 31.01 CERTIFICATION I, Kevi
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Exhibit 31.03 CERTIFICATION I, Kevi
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Exhibit 32.01 SCANA CORPORATION CER
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Exhibit 32.03 SOUTH CAROLINA ELECTR
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10-K - SCANA Corporation

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