South Carolina Electric & Gas Co. (SCE&G), which provides natural gas to about 294,000 customers, on Thursday requested an overall 3.26% increase to its gas base rates from the Public Service Commission of South Carolina (PSC). The filing is the SCANA Corp. subsidiary’s first under a 2005 state law designed to reduce the volatility of customer rates by allowing for recovery of costs associated with maintaining and expanding infrastructure.

The statute requires South Carolina’s regulated gas utilities to make quarterly filings with the PSC and the South Carolina Office of Regulatory Staff (ORS) showing actual investments, revenues and expenses. Each year, the ORS will review SCE&G’s financials for the 12-month period ending March 31. If the company’s actual return on equity (ROE) for that period was more than 0.50% above or below the 10.25% return authorized by the PSC, SCE&G is required to file for a rate adjustment to bring earnings back to that authorized rate of return.

In the filing for a rate increase, SCE&G declared an ROE of 4.38% for the 12-month period ending March 31. The information supporting SCE&G’s filing will be reviewed by the ORS, which will issue an audit report by Sept. 1. The PSC will then review SCE&G’s filing and the ORS audit report and will issue an order in October. The rate adjustment would be implemented with the first billing cycle of November 2006.

The adjustment represents about $7/month on the average winter heating bill for residential customers, who would see a 4.24% rate hike. Small and medium commercial customers’ bills would rise 2.83%, and large commercial/industrial customers would see a 1.96% rate hike.

“We are continually investing in our system to better meet the needs of our customers,” said Marty Phalen, SCE&G’s vice president of natural gas operations. “Along with allowing for more timely recovery of those costs, reviewing rates on an annual basis allows for modest adjustments to customer rates as opposed to the more drastic adjustments that often accompany less frequent reviews.”

The requested increase relates to three issues, Phalen said, including the utility’s pending acquisition of two liquefied natural gas (LNG) facilities from South Carolina Pipeline Corp. Phalen said the LNG facilities would give SCE&G “about 18 days of supply” instead of its current three days of peaking supply. SCE&G also is expecting to take ownership of additional upstream gas storage capacity to improve supply availability during the winter months. And customer growth was cited as a factor in the rate request.

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