South Carolina Electric & Gas Co. (SCE&G), principal subsidiary of SCANA
Corporation (NYSE: SCG), today filed with the South Carolina Public
Service Commission (PSC) for an adjustment to the fuel cost portion of
its electric rates. If approved, the monthly electric bill of a
1,000-kwh residential customer will increase $4.52 or 3.96 percent –
going from $114.20 to $118.72 beginning in May.
The PSC and the South Carolina Office of Regulatory Staff annually
review the costs SCE&G incurs in purchasing fuel to operate its electric
generation facilities. The company is then directed to adjust base rates
either upward or downward to reflect those costs. Fuel costs are a
direct pass-through to customers; SCE&G cannot, and does not, earn a
profit on that portion of its rates. Fuel costs currently represent
about 32 percent of what a residential customer pays for a kilowatt hour
of electricity.
SCE&G President and COO Kevin Marsh explained whatever the company pays
for fuel to run its generating plants is what is passed on to customers;
there is no markup or profit on fuel costs. There are two principal
drivers behind the requested increase.
"Our contract with the railroad company that delivers coal to our power
plants expired in December 2008,” Marsh said. "The rates charged by our
rail supplier in our new contract almost doubled. Transportation costs
are included in the price of fuel.
"Also, when the price of coal jumped from $55 to $60 per ton to about
$150 per ton during the second half of 2008, we had a number of coal
suppliers that did not meet their contractual obligations,” he said. "We
were forced to go into the market and purchase coal at significantly
higher rates instead of our contracted price. I want customers to know
that we are aggressively pursuing legal remedies against those suppliers
who failed to meet their contractual obligations. Any money we recover
from those suppliers will be used to offset fuel costs to the benefit of
our customers.”
Because of the current economic situation, Marsh said SCE&G has taken
the unusual step of requesting that the PSC allow for the fuel cost
adjustment to be spread over two years instead of the usual one-year
term.
"It was a case of either having a larger, one-year increase or funding
this over two years,” Marsh said. " Because many of our customers are
already facing economic challenges with their family budgets, we felt
the best approach was to spread the increase in fuel costs over a longer
period of time.”
Marsh said SCE&G has also taken other steps to try to minimize the cost
of providing power, such as using more of the company’s natural
gas-fired turbines while natural gas prices are close to a seven-year
low and relying less on coal-fired plants.
"The cost of natural gas has been declining for the past several months,
so we have changed the mix of plants we are using to reduce our costs of
providing power,” Marsh said. "Several of our plants are fueled by
natural gas, and we have increased the generation from those plants
while reducing our reliance on coal-fired plants for power. As our
natural gas customers already know, we have been able to significantly
reduce bills to residential natural gas customers by 32 percent over the
past seven months as wholesale natural gas prices have declined.”
South Carolina Electric & Gas Company is a regulated public utility
engaged in the generation, transmission, distribution and sale of
electricity to approximately 650,000 customers in 26 counties in the
central, southern and southwestern portions of South Carolina. The
company also provides natural gas service to approximately 307,000
customers in 34 counties in the state. More information about SCE&G is
available at www.sceg.com.
