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Scana Utility Agrees to Defer Gas Cost Recovery for 12 Months

As part of a settlement with state regulatory staff and industrial customers, Scana subsidiary South Carolina Electric & Gas (SCE&G) has agreed to defer for one year $14 million in under collected natural gas commodity purchase costs and base its winter commodity charges on recovery spread over a 24-month period, which will further increase under recoveries by $7 million during the next 12-months.

The plan was reached as part of a settlement with the Office of Regulatory Staff and the South Carolina Energy Users Committee, a consortium of large industrial customers, relating to the annual review of the purchased gas adjustment (PGA) component of the company's retail natural gas rates. The Public Service Commission of South Carolina (PSC) held a hearing Thursday on the company's PGA request and the proposed settlement agreement. A final decision by the PSC is expected by the end of October.

In September the utility company filed for a 55.5% increase in the PGA component of its rates to offset the recent record increases in the price of wholesale natural gas, due to supply disruptions caused by Hurricanes Katrina and Rita this summer. SCE&G had asked the PSC to raise the PGA component of residential rates from $0.90 per therm to about $1.40 per therm, effective in November. The settlement, which is subject to review and approval by the PSC, reduces the requested increase in the PGA component of residential rates by 21%, or 11 cents per therm.

SCE&G also has agreed not to accrue interest on the undercollected amounts through October 2006. After than interest will accrue monthly until the $21 million in under collections are fully recovered. The deal also allows the utility to adjust its cost of gas factor monthly to ensure that under collections don't exceed the $21 million by next October.

"Given the extreme volatility we continue to experience in wholesale natural gas markets, we believe this settlement agreement fairly balances the interests of both the company and its natural gas customers," said SCE&G CFO Kevin Marsh. "Deferring the collection of a portion of our total natural gas costs will help our customers deal with significantly higher bills that are likely during the coming winter months."

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