Company Quick10K Filing
Quick10K
Scana
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-02-19 Other Events, Exhibits
8-K 2019-02-05 Leave Agreement, Amend Bylaw, Exhibits
8-K 2019-01-01 M&A, Shareholder Rights, Control, Amend Bylaw, Exhibits
8-K 2018-12-31 Suspend Trading, Exhibits
8-K 2018-12-12 Enter Agreement, Exhibits
8-K 2018-11-24 Enter Agreement
8-K 2018-11-13 Suspend Trading, Exhibits
8-K 2018-10-25 Earnings, Exhibits
8-K 2018-09-12 Shareholder Vote
8-K 2018-08-14 Other Events
8-K 2018-08-10 Other Events
8-K 2018-08-06 Leave Agreement
8-K 2018-07-31 Shareholder Vote, Other Events, Exhibits
8-K 2018-07-16 Other Events
8-K 2018-07-13 Officers
8-K 2018-04-26 Earnings, Exhibits
8-K 2018-02-22 Earnings, Exhibits
8-K 2018-01-26 Other Events, Exhibits
8-K 2018-01-02 Enter Agreement, Exhibits
GDDY Godaddy 13,880
AIZ Assurant 5,870
CPE Callon Petroleum 1,830
TLND Talend 1,550
RST Rosetta Stone 545
BWFG Bankwell Financial 234
ASG All Soft Gels 214
MELR Melrose Bancorp 44
VXRT Vaxart 7
BBOX Black Box 0
SCG 2018-12-31
Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
EX-10.08 a12312018-ex1008.htm
EX-31.01 a12312018-ex3101.htm
EX-31.02 a12312018-ex3102.htm
EX-31.03 a12312018-ex3103.htm
EX-31.04 a12312018-ex3104.htm
EX-32.01 a12312018-ex3201.htm
EX-32.02 a12312018-ex3202.htm

Scana Earnings 2018-12-31

SCG 10K Annual Report

Balance SheetIncome StatementCash Flow

10-K 1 a12312018-10k.htm 10-K Document
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
    
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2018

Commission
File Number
Registrant, State of Incorporation,
Address and Telephone Number
I.R.S. Employer
Identification No.
1-8809
1-3375
SCANA Corporation (a South Carolina corporation)
South Carolina Electric & Gas Company (a South Carolina corporation)
100 SCANA Parkway, Cayce, South Carolina 29033
(803) 217-9000
57-0784499
57-0248695
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act:
SCANA Corporation:
South Carolina Electric & Gas Company:
Common stock, without par value
Series A Nonvoting Preferred Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
SCANA Corporation x         South Carolina Electric & Gas Company x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
SCANA Corporation o         South Carolina Electric & Gas Company o

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.
        SCANA Corporation Yes x No o     South Carolina Electric & Gas Company Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months.
SCANA Corporation Yes x No o     South Carolina Electric & Gas Company Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
    SCANA Corporation x         South Carolina Electric & Gas Company x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
SCANA Corporation
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
Emerging growth company o
South Carolina Electric & Gas Company
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller reporting company o
Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
         SCANA Corporation o         South Carolina Electric & Gas Company o

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).
SCANA Corporation Yes o No x      South Carolina Electric & Gas Company Yes o No x
     
Effective January 1, 2019, Dominion Energy, Inc. became the sole holder of SCANA Corporation common stock. The aggregate market value of SCANA Corporation common stock held by non-affiliates was approximately $5.5 billion based on the closing price of SCANA Corporation's common stock as reported on the New York Stock Exchange as of the last day of SCANA Corporation's most recently completed second fiscal quarter. SCANA Corporation is the sole holder of South Carolina Electric & Gas Company common stock. At February 15, 2019, SCANA Corporation had 100 shares of common stock outstanding and South Carolina Electric & Gas Company had 40,296,147 shares of common stock outstanding.

This combined Form 10-K represents separate filings by SCANA Corporation and South Carolina Electric & Gas Company. Information contained herein relating to an individual registrant is filed by that registrant on its own behalf. South Carolina Electric & Gas Company makes no representation as to information relating to SCANA Corporation or its subsidiaries (other than South Carolina Electric & Gas Company and its consolidated affiliates).

SCANA CORPORATION AND SOUTH CAROLINA ELECTRIC & GAS COMPANY MEET THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND (b) OF FORM 10-K AND ARE FILING THIS FORM 10-K UNDER THE REDUCED DISCLOSURE FORMAT.



 
 
Page
Cautionary Statement Regarding Forward-Looking Information
Definitions
 
 
 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
 
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
 
SCANA Corporation and Subsidiaries
 
 
Report of Independent Registered Public Accounting Firm
 
 
 
Consolidated Balance Sheets
 
 
 
Consolidated Statements of Operations
 
 
 
Consolidated Statements of Comprehensive Income (Loss)
 
 
 
Consolidated Statements of Cash Flows
 
 
 
Consolidated Statements of Changes in Common Equity
 
 
South Carolina Electric & Gas Company and Affiliates
 
 
Report of Independent Registered Public Accounting Firm
 
 
 
Consolidated Balance Sheets
 
 
 
Consolidated Statements of Comprehensive Income (Loss)
 
 
 
Consolidated Statements of Cash Flows
 
 
 
Consolidated Statements of Changes in Common Equity
 
 
Notes to Consolidated Financial Statements
 
 
 
 
Item 9.
Item 9A.
Item 9B.
Other Information
 
 
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
 
 
Item 15.
Item 16.
 
 
 
 
Signatures
 
 




CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
 
Statements included in this Annual Report on Form 10-K which are not statements of historical fact are intended to be, and are hereby identified as, “forward-looking statements” for purposes of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Forward-looking statements include, but are not limited to, statements concerning the recovery of Nuclear Project abandonment costs, customer growth, environmental regulations and expenditures, projections for pension fund contributions, financing activities, access to sources of capital, impacts of the adoption of new accounting rules and estimated capital and other expenditures.  In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “expects,” “forecasts,” “plans,” “targets,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” or “continue” or the negative of these terms or other similar terminology.  Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, and that actual results could differ materially from those indicated by such forward-looking statements due to the information being of a preliminary nature and subject to further and/or continuing review and adjustment. Other important factors that could cause such material differences include, but are not limited to, the following:

(1) the ability of SCE&G to recover through rates the costs expended on the Nuclear Project, and a reasonable return on those costs, under the Merger Approval Order and the abandonment provisions of the BLRA or through other means; (2) uncertainties relating to the bankruptcy filing by WEC and WECTEC; (3) further changes in tax laws and realization of tax benefits and credits, and the ability to realize or maintain tax credits and deductions, particularly in light of the abandonment of the Nuclear Project; (4) legislative and regulatory actions, particularly changes related to electric and gas services, rate regulation, regulations governing electric grid reliability and pipeline integrity, environmental regulations including any imposition of fees or taxes on carbon emitting generating facilities, the BLRA, and any actions involving or arising from the abandonment of the Nuclear Project; (5) current and future litigation, including particularly litigation or government investigations or any actions involving or arising from the construction or abandonment of the Nuclear Project, including the possible impacts on liquidity and other financial impacts therefrom; (6) the results of short- and long-term financing efforts, including prospects for obtaining access to capital markets and other sources of liquidity and the effect of rating agency actions on the cost of and access to capital and sources of liquidity of SCANA, SCE&G and Dominion Energy; (7) the ability of suppliers, both domestic and international, to timely provide the labor, secure processes, components, parts, tools, equipment and other supplies needed which may be highly specialized or in short supply, at agreed upon quality and prices, for our construction program, operations and maintenance; (8) the results of efforts to ensure the physical and cyber security of key assets and processes; (9) changes in the economy, especially in areas served by subsidiaries of SCANA; (10) the impact of competition from other energy suppliers, including competition from alternate fuels in industrial markets; (11) the impact of conservation and demand side management efforts and/or technological advances on customer usage; (12) the loss of electricity sales to distributed generation, such as solar photovoltaic systems or energy storage systems; (13) growth opportunities for the Company; (14) the effects of weather, especially in areas where the generation and transmission facilities of the Company are located and in areas served by SCANA’s subsidiaries; (15) changes in SCANA’s or its subsidiaries’ accounting rules and accounting policies; (16) payment and performance by counterparties and customers as contracted and when due; (17) the results of efforts to license, site, construct and finance facilities, and to receive related rate recovery, for generation and transmission; (18) the results of efforts to operate the Company's electric and gas systems and assets in accordance with acceptable performance standards, including the impact of additional distributed generation; (19) the availability of fuels such as coal, natural gas and enriched uranium used to produce electricity; the availability of purchased power and natural gas for distribution; the level and volatility of future market prices for such fuels and purchased power; and the ability to recover the costs for such fuels and purchased power; (20) the availability and retention of skilled, licensed and experienced human resources to properly manage, operate, and grow the Company’s businesses, particularly in light of uncertainties with respect to legislative and regulatory actions surrounding recovery of Nuclear Project costs and integration within the combined companies of Dominion Energy; (21) labor disputes; (22) performance of SCANA’s pension plan assets and the effect(s) of associated discount rates; (23) inflation or deflation; (24) changes in interest rates; (25) compliance with regulations; (26) natural disasters, man-made mishaps and acts of terrorism that directly affect our operations or the regulations governing them; and (27) the other risks and uncertainties described from time to time in the reports filed by SCANA or SCE&G with the SEC.

SCANA and SCE&G disclaim any obligation to update any forward-looking statements.

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DEFINITIONS
Abbreviations used in this Form 10-K have the meanings set forth below unless the context requires otherwise:
TERM
 
MEANING
ACE
 
Affordable Clean Energy
Act 258
 
A law adopted in 2018 by the South Carolina General Assembly that required a temporary reduction in the amount SCE&G could collect from customers under the BLRA.
AFC
 
Allowance for Funds Used During Construction
ANI
 
American Nuclear Insurers
AOCI
 
Accumulated Other Comprehensive Income (Loss)
ARO
 
Asset Retirement Obligation
Bankruptcy Court
 
U.S. Bankruptcy Court for the Southern District of New York
bcf
 
billion cubic feet
BLRA
 
Base Load Review Act
CAA
 
Clean Air Act, as amended
CAIR
 
Clean Air Interstate Rule
CC
 
Combined Cycle
CCR
 
Coal Combustion Residuals
CEC
 
Columbia Energy Center
CEO
 
Chief Executive Officer
CERCLA
 
Comprehensive Environmental Response, Compensation and Liability Act
CFO
 
Chief Financial Officer
CFTC
 
Commodity Futures Trading Commission
Citibank
 
Citibank, N.A.
CO2
 
Carbon Dioxide
Company
 
SCANA, together with its consolidated subsidiaries
Concurrent Dockets
 
Separate dockets that were before the SCPSC related to the Nuclear Project which were handled concurrently. The Concurrent Dockets included the Joint Petition, the Request for Rate Relief filed by the ORS on September 26, 2017, as subsequently amended on October 17, 2017, and a June 2017 complaint filed by the Friends of the Earth and the Sierra Club.
Consolidated SCE&G
 
SCE&G and its consolidated affiliates
Consortium
 
A consortium consisting of WEC and WECTEC
Court of Appeals
 
United States Court of Appeals for the Fourth Circuit
CPP
 
Clean Power Plan
CSAPR
 
Cross-State Air Pollution Rule
CT
 
Combustion Turbine
CUT
 
Customer Usage Tracker (decoupling mechanism)
CWA
 
Clean Water Act
DER
 
Distributed Energy Resource
Derivative Litigation
 
Claims asserted against former officers and directors of SCANA in derivative shareholder actions and related actions
DHEC
 
South Carolina Department of Health and Environmental Control
District Court
 
United States District Court for the District of South Carolina
Dodd-Frank
 
Dodd-Frank Wall Street Reform and Consumer Protection Act
DOE
 
United States Department of Energy
Dominion Energy
 
Dominion Energy, Inc., the parent company of SCANA effective January 1, 2019
DOR
 
South Carolina Department of Revenue
DOT
 
United States Department of Transportation
DSM Programs
 
Electric Demand Side Management Programs
ELG Rule
 
Federal effluent limitation guidelines for steam electric generating units
EMANI
 
European Mutual Association for Nuclear Insurance
EPA
 
United States Environmental Protection Agency
EPC Contract
 
Engineering, Procurement and Construction Agreement dated May 23, 2008, as amended by the October 2015 Amendment
Exchange Act
 
Securities Exchange Act of 1934, as amended
FASB
 
Financial Accounting Standards Board
FERC
 
United States Federal Energy Regulatory Commission
FILOT
 
Fee in lieu of taxes
Fluor
 
Fluor Corporation
Fluor Defendants
 
Fluor Enterprises, Inc. and Fluor Daniel Maintenance Services, Inc.
Fuel Company
 
South Carolina Fuel Company, Inc.
GAAP
 
Accounting principles generally accepted in the United States of America
GENCO
 
South Carolina Generating Company, Inc.
GHG
 
Greenhouse Gas
GPSC
 
Georgia Public Service Commission
GWh
 
Gigawatt hour
IAA
 
Interim Assessment Agreement dated March 28, 2017, as amended, among SCE&G, Santee Cooper, WEC and WECTEC
IRC
 
Internal Revenue Code of 1986, as amended
IRS
 
Internal Revenue Service
Joint Petition
 
Joint application and petition of SCE&G and Dominion Energy for review and approval of a proposed business combination as set forth in the Merger Agreement and for a prudency determination regarding the abandonment of the Nuclear Project and associated merger benefits and cost recovery plans, filed with the SCPSC on January 12, 2018
Level 1
 
A fair value measurement using unadjusted quoted prices in active markets for identical assets or liabilities
Level 2
 
A fair value measurement using observable inputs other than those for Level 1, including quoted prices for similar (not identical) assets or liabilities or inputs that are derived from observable market data by correlation or other means
Level 3
 
A fair value measurement using unobservable inputs, including situations where there is little, if any, market activity for the asset or liability
LNG
 
Liquefied Natural Gas
LOC
 
Lines of Credit
LTECP
 
SCANA Long-Term Equity Compensation Plan
MATS
 
Mercury and Air Toxics Standards
Merger Agreement
 
Agreement and Plan of Merger, dated as of January 2, 2018, by and among Dominion Energy, Sedona Corp. and SCANA
Merger Approval Order
 
The December 21, 2018, order by the SCPSC related to the Concurrent Dockets and setting forth its approval of the SCANA Combination
MGP
 
Manufactured Gas Plant
MMBTU
 
Million British Thermal Units
MRA
 
Modified Removal Action
MW or MWh
 
Megawatt or Megawatt-hour
NASDAQ
 
The NASDAQ Stock Market, Inc.
NAV
 
Net Asset Value
NCUC
 
North Carolina Utilities Commission
NEIL
 
Nuclear Electric Insurance Limited
NERC
 
North American Electric Reliability Corporation
NOL
 
Net Operating Loss
NOX
 
Nitrogen Oxide
NPDES
 
National Pollutant Discharge Elimination System
NRC
 
United States Nuclear Regulatory Commission
NSPS
 
New Source Performance Standards
NSR
 
New Source Review
Nuclear Project
 
Project to construct Unit 2 and Unit 3 under the EPC Contract
Nuclear Waste Act
 
Nuclear Waste Policy Act of 1982
NYMEX
 
New York Mercantile Exchange
NYSE
 
The New York Stock Exchange
OCI
 
Other Comprehensive Income
October 2015 Amendment
 
Amendment, dated October 27, 2015, to the EPC Contract
ORS
 
South Carolina Office of Regulatory Staff
PGA
 
Purchased Gas Adjustment
PHMSA
 
United States Pipeline Hazardous Materials Safety Administration
PLR
 
Private Letter Ruling
PPA
 
Purchase Power Agreement
Price-Anderson
 
Price-Anderson Indemnification Act
PSNC Energy
 
Public Service Company of North Carolina, Incorporated
RICO
 
The Racketeer Influenced and Corrupt Organizations Act
ROE
 
Return on Equity
RSA
 
Natural Gas Rate Stabilization Act
RTO/ISO
 
Regional Transmission Organization/Independent System Operator
Santee Cooper
 
South Carolina Public Service Authority
SCANA
 
SCANA Corporation, the parent company of SCE&G
SCANA Combination
 
Dominion Energy's acquisition of SCANA and its subsidiaries effective January 1, 2019 pursuant to the terms of the Merger Agreement
SCANA Energy
 
SCANA Energy Marketing, Inc.
SCANA Services
 
SCANA Services, Inc.
SCE&G
 
South Carolina Electric & Gas Company
SCE&G Ratepayer Case
 
A consolidated complaint styled Richard Lightsey, LeBrian Cleckley, Phillip Cooper et al. on behalf of themselves and all others similarly situated v. SCE&G, SCANA, and the State of South Carolina filed in the State Court of Common Pleas in Hampton County
SCEUC
 
South Carolina Energy Users Committee
SCPSC
 
Public Service Commission of South Carolina
SEC
 
United States Securities and Exchange Commission
SIP
 
State Implementation Plan
SLED
 
South Carolina Law Enforcement Division
SO2
 
Sulfur Dioxide
Summer Station
 
V.C. Summer Nuclear Station
Supreme Court
 
United States Supreme Court
Tax Act
 
An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (previously known as The Tax Cuts and Jobs Act) enacted on December 22, 2017
Toshiba
 
Toshiba Corporation, parent company of WEC
Toshiba Settlement
 
Settlement Agreement dated as of July 27, 2017, by and among Toshiba, SCE&G and Santee Cooper
Transco
 
Transcontinental Gas Pipe Line Company, LLC
TSR
 
Total Shareholder Return
Unit 1
 
Nuclear Unit 1 at Summer Station
Unit 2
 
Nuclear Unit 2 at Summer Station (abandoned prior to construction completion)
Unit 3
 
Nuclear Unit 3 at Summer Station (abandoned prior to construction completion)
USACE
 
United States Army Corps of Engineers
VIE
 
Variable Interest Entity
WARN Act
 
Worker Adjustment and Retraining Notification Act
WEC
 
Westinghouse Electric Company LLC
WEC Subcontractors
 
Subcontractors and suppliers to the Consortium
WECTEC
 
WECTEC Global Project Services, Inc. (formerly known as Stone & Webster, Inc.), a wholly-owned subsidiary of WEC
Williams Station
 
A.M. Williams Generating Station, owned by GENCO
WNA
 
Weather Normalization Adjustment


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PART I
 
ITEM 1. BUSINESS
CORPORATE STRUCTURE
Effective January 1, 2019, SCANA became a wholly-owned subsidiary of Dominion Energy under the terms of the Merger Agreement. SCANA's shareholders approved the merger in a special meeting on July 31, 2018, and various regulatory bodies approved the transaction throughout 2018. See additional discussion in Note 2 and Note 11 to the consolidated financial statements in Part II, Item 8. Financial Statements and Supplementary Data.

SCANA is a South Carolina corporation created in 1984 as a holding company. SCANA does not directly own or operate any significant physical properties, but it holds directly all of the capital stock of its subsidiaries, including the subsidiaries described below.

Regulated Utilities

SCE&G is engaged in the generation, transmission, distribution and sale of electricity to approximately 730,000 customers and the purchase, sale and transportation of natural gas to approximately 380,000 customers (each as of December 31, 2018). SCE&G’s business experiences seasonal fluctuations, with generally higher sales of electricity during the summer and winter months because of air conditioning and heating requirements, and generally higher sales of natural gas during the winter months due to heating requirements. SCE&G’s service territory includes portions of central, southern and southwestern South Carolina (for electric and natural gas) as well as portions of eastern South Carolina (for natural gas only). SCE&G’s electric transmission system extends over a large part of the central, southern and southwestern portions of South Carolina.
 
GENCO owns Williams Station and sells electricity solely to SCE&G under the terms of a unit power sales agreement and related operating agreement and pursuant to a FERC-approved tariff. Fuel Company acquires, owns and provides financing for SCE&G's nuclear fuel, certain fossil fuels and emission allowances.

PSNC Energy purchases, sells and transports natural gas to approximately 580,000 residential, commercial and industrial customers (as of December 31, 2018). PSNC Energy serves portions of western, central and eastern North Carolina, including the area known as the Research Triangle.
 
Nonregulated Businesses
 
SCANA Energy markets natural gas in the southeast and provides energy-related services. A division of SCANA Energy sells natural gas to approximately 420,000 customers (as of December 31, 2018) in Georgia’s deregulated natural gas market. As Georgia’s provider of last resort, SCANA Energy provides service to customers considered to be low-income or that are otherwise unable to obtain natural gas service from other marketers. SCANA Energy provides this service at rates approved by the GPSC and receives funding from Georgia's Universal Service Fund to offset some of the resulting bad debt. SCANA Energy files financial and other information periodically with the GPSC, and such information is available at www.psc.state.ga.us (which is not intended as an active hyperlink; the information on the GPSC website is not part of this or any other report filed by the Company with the SEC).
 
SCANA Services provides shared administrative and management services to SCANA's other subsidiaries.

Employees

At December 31, 2018, the Company had approximately 5,200 full-time employees, of which approximately 1,100 were subject to collective bargaining agreements, and Consolidated SCE&G had approximately 2,700 employees, of which approximately 800 were subject to collective bargaining agreements.

COMPETITION

There is no competition for electric distribution or generation service within SCE&G's service territory in South Carolina and no such competition is currently permitted. However, competition from third-party owners for development, construction and ownership of certain transmission facilities in SCE&G’s service territory is permitted pursuant to FERC Order

5


1000, subject to state and local siting and permitting approvals. This could result in additional competition to build and own transmission infrastructure in SCE&G’s service area in the future.

Competition in SCE&G's and PSNC Energy's natural gas distribution operations is generally based on price and convenience. Large commercial and industrial customers often have the ability to switch from natural gas to an alternate fuel, such as propane or fuel oil. Natural gas competes with these alternate fuels based on price. As a result, any significant disparity between supply and demand, either of natural gas or of alternate fuels, and due either to production or delivery disruptions or other factors, will affect price and the ability to retain large commercial and industrial customers.

SCANA Energy faces competition from affiliates of large energy companies and electric membership cooperatives, among others. The ability of SCANA Energy to maintain its market share primarily depends on the prices it charges customers relative to the prices charged by its competitors and its ability to provide high levels of customer service.

REGULATION

SCE&G's electric distribution service, including the rates it may charge to jurisdictional customers, is subject to regulation by the SCPSC. SCE&G's electric generation operations are subject to regulation by the SCPSC, FERC, the NRC, the EPA, the DOE and various other federal, state and local authorities. SCE&G's electric transmission service is primarily regulated by FERC and the DOE. SCE&G and PSNC Energy's gas distribution operations are subject to regulation by the SCPSC and the NCUC, respectively, as well as PHMSA, DOT, the ORS and the NCUC for enforcement of federal and state pipeline safety requirements in their respective service territories. SCANA Energy's activities are subject to regulation by the GPSC as to retail prices for customers served under regulated provider contracts and the FERC.

WHERE YOU CAN FIND MORE INFORMATION

SCANA and SCE&G file their annual, quarterly and current reports and other information with the SEC. Their SEC filings are available to the public over the Internet at the SEC’s website at http://www.sec.gov.

SCANA and SCE&G make their SEC filings available, free of charge, including the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, through Dominion Energy’s internet website, http://www.dominionenergy.com, as soon as reasonably practicable after filing or furnishing the material to the SEC. Information contained on Dominion Energy’s website is not incorporated by reference in this report.

ITEM 1A. RISK FACTORS
 
The risk factors that follow relate in each case to the Company, and where indicated the risk factors also relate to Consolidated SCE&G.

There may be significant challenges to successfully integrate the Company’s and Consolidated SCE&G’s businesses with Dominion Energy.

Significant management attention and resources will be required to integrate the Company’s and Consolidated SCE&G’s businesses with Dominion Energy. Potential difficulties that may be encountered in the integration process include the following:

the complexities associated with integrating the Company, including its utility businesses, while at the same time providing consistent, high quality services;
the complexities of integrating a company with different markets and customers;
the inability to attract and retain key employees;
potential unknown liabilities and unforeseen increased expenses associated with the merger;
difficulties in managing political and regulatory conditions related to the Company's utility businesses;
the moratorium on filing requests for adjustments in SCE&G's base electric rates until 2020 with no change in rates until January 1, 2021, which limits the ability to recover increases in non-fuel related costs of electric operations for SCE&G’s customers;
the stipulation agreement approved by the NCUC, which provides for a rate moratorium at PSNC Energy until November 1, 2021, with certain exceptions; and
performance shortfalls as a result of the diversion of management’s attention caused by integrating the Company's businesses.


6


For these reasons, it is possible that the integration process could result in the distraction of the Company's and Consolidated SCE&G's management, the disruption of each of their ongoing businesses or inconsistencies in their services, standards, controls, procedures and policies, any of which could adversely affect the ability of the Company or Consolidated SCE&G to maintain or establish relationships with current and prospective customers, vendors and employees or could otherwise adversely affect their businesses and financial results.

The Company and Consolidated SCE&G are subject to the reputational risks that may result from a failure to adhere to high standards related to compliance with laws and regulations, ethical conduct, operational effectiveness, customer service and the safety of employees, customers and the public. In addition, the Company and Consolidated SCE&G have been and may continue to be adversely affected by negative publicity related to the abandonment of the Nuclear Project.

The Company and Consolidated SCE&G are committed to operational excellence, to quality customer service, and, through an ethics and compliance program, to maintain high standards of ethical conduct in our business operations. A failure to meet these commitments, or a perceived failure to meet these commitments, may subject the Company and Consolidated SCE&G not only to fraud, regulatory action, litigation or financial loss, but also to reputational risk that could adversely affect the Company’s and Consolidated SCE&G’s access to capital, and result in further regulatory oversight. In addition, traditional news media and social media can very rapidly convey information, whether factual or not, to large numbers of people, including customers, investors, regulators, legislators and other stakeholders, and the failure to effectively manage timely, accurate communication through these channels could adversely impact our reputation.

Political and public sentiment in connection with the abandonment of the Nuclear Project has resulted in and may continue to result in a significant amount of adverse press coverage and other adverse public statements affecting the Company and Consolidated SCE&G. Adverse press coverage and other adverse statements, whether or not driven by political or public sentiment, may also result in investigations by regulators, legislators and law enforcement officials or in legal claims in addition to those which have already occurred or are currently pending. Responding to these investigations and lawsuits, regardless of the ultimate outcome of the proceedings, as well as responding to and addressing adverse press coverage and other adverse public statements, can divert the time and effort of senior management from the management of the Company’s and Consolidated SCE&G’s respective businesses.

Addressing any adverse publicity, governmental scrutiny or enforcement or other legal proceedings is time consuming and expensive and, regardless of the factual basis for the assertions being made, can have a negative impact on the reputation of the Company and Consolidated SCE&G, on the morale and performance of their employees and on their relationships with their respective regulators, customers and commercial counterparties. It may also have a negative impact on their ability to take timely advantage of various business and market opportunities. The direct and indirect effects of negative publicity, and the demands of responding to and addressing it, may have an adverse effect on the Company’s and Consolidated SCE&G’s respective businesses, financial condition, results of operations and prospects.

The rates that the Company and Consolidated SCE&G can charge customers are subject to regulatory review.

Revenue provided by the Company’s and Consolidated SCE&G’s operations is based primarily on rates approved by state regulatory agencies. The profitability of these businesses is dependent on their ability, through the rates that they are permitted to charge, to recover costs and earn a reasonable rate of return on their capital investment.

The Company’s retail gas base rates for distribution services to customers in North Carolina are regulated on a cost-of-service basis subject to North Carolina statutes and the rules and procedures of the NCUC. Consolidated SCE&G’s retail electric bases rates for services to customers in South Carolina are regulated on a cost-of-service/rate-of-return basis subject to South Carolina statutes and the rules and procedures of the SCSPC. If retail electric earnings exceed the returns established by the SCPSC, retail electric rates may be subject to review and possible reduction by the SCPSC, which may decrease Consolidated SCE&G’s future earnings. If the NCUC and SCPSC do not allow recovery through base rates, on a timely basis, of costs incurred in providing service, the Company’s and Consolidated SCE&G’s future earnings could be negatively impacted.

Additionally, governmental officials, stakeholders and advocacy groups may challenge these regulatory reviews. Such challenges may lengthen the time, complexity and costs associated with such regulatory reviews.

The Company and SCE&G are subject to numerous legal proceedings and ongoing governmental investigations and examinations.


7


The Company and SCE&G are defendants in numerous federal and state legal proceedings and governmental investigations relating to the decision to abandon construction at the Nuclear Project. Among other things, the lawsuits and investigations allege misrepresentation, failure to properly manage the Nuclear Project, unfair trade practices and violation of anti-trust laws. The plaintiffs seek a judgment that SCE&G many not charge its customers for any past or continuing costs of the Nuclear Project, among other remedies.

Additionally, the Company and SCE&G are defendants in federal and state legal proceedings relating to the SCANA Combination. Among other things, the lawsuits allege improper disclosures and breaches of various fiduciary duties. Remedies sought include rescinding the SCANA Combination.

The outcome of these legal proceedings, investigations and examinations is uncertain and may adversely affect the Company’s and Consolidated SCE&G’s financial condition or results of operation.

The Company and Consolidated SCE&G have engaged in activities for which they have claimed research and experimentation tax deductions and credits and tax abandonment losses, all of which are the subject of uncertainty.

The Company and Consolidated SCE&G have claimed significant research and experimentation tax deductions and credits related to the design and construction activities of Unit 2 and Unit 3. A significant portion of these claims followed the issuance of final IRS regulations in 2014 regarding such treatment with respect to expenditures related to the design and construction of pilot models. The Company and Consolidated SCE&G have also claimed a significant tax deduction related to the decision to stop construction and to abandon the Nuclear Project in 2017.

These tax claims primarily involve the timing of recognition of tax deductions rather than permanent tax attributes, and their permanent attributes (net), as well as most of the interest accruals required to be recorded with respect to them, had been deferred within regulatory assets. As such, until December 31, 2017 when these deferrals were considered to be impaired, these claims had not had, and were not expected to have in the future, significant direct effects on the Company’s and Consolidated SCE&G’s results of operations. Nonetheless, the claims contributed significantly to the Company’s and Consolidated SCE&G’s cash flows by providing a significant source of capital and lessening the level of debt and equity financing that the Company and Consolidated SCE&G were required to raise in the financial markets. 

The claims made to date are under examination and, even though a favorable PLR regarding the 2017 abandonment loss related to the Nuclear Project was obtained, all such claims are considered uncertain. To the extent that any of these claims are not sustained as ordinary losses on examination or through any subsequent appeal, the Company and Consolidated SCE&G will be required to repay any cash received for tax benefit claims which are ultimately disallowed, along with interest on those amounts. Such amounts could be significant and could adversely affect the Company's and Consolidated SCE&G's liquidity, cash flows, results of operations and financial condition. In certain circumstances, which management considers to be remote, penalties for underpayment of income taxes could also be assessed. 

An inability to obtain needed capital or financing on satisfactory terms, or at all, could have an adverse effect on our operations and ability to generate cash flow.

The Company and Consolidated SCE&G are dependent on certain financing arrangements with Dominion Energy for any borrowings necessary to meet our working capital and other financial needs. If Dominion Energy’s funding resources were to become unavailable to Dominion Energy, the Company’s and Consolidated SCE&G’s access to funding would also be in jeopardy. In the future, an inability to obtain additional financing from other sources on acceptable terms could negatively affect our financial condition, cash flows, anticipated financial results or impair our ability to generate additional cash flows. The ability to obtain bank financing or to access the capital markets for future debt offerings may be limited by the financial condition of the Company or Consolidated SCE&G at the time of any such financing or offering or other debt agreements in place at the time, adverse market conditions or other contingencies and uncertainties that are beyond our control.

SCE&G also relies on a credit facility with banks to meet short-term funding needs. Banks may be unable or unwilling to extend credit in the future. From time to time, SCE&G may use interest-rate derivatives to fix the rate on a portion of its variable-rate debt. A downgrade of credit ratings could increase the interest cost of debt and decrease future availability of capital from banks and other sources. While management believes it is important to maintain investment-grade credit ratings to conduct SCE&G’s businesses, SCE&G may not be able to keep investment-grade ratings.

The Company and Consolidated SCE&G are subject to numerous environmental laws and regulations that require significant capital expenditures, can increase our costs of operations and may impact our business plans or expose us to environmental liabilities.

8



The Company and Consolidated SCE&G are subject to extensive federal, state and local environmental laws and regulations, including those relating to water quality and air emissions (such as reducing NOX, SO2, mercury and particulate matter). Some form of regulation is expected at the federal and state levels to impose regulatory requirements specifically directed at reducing GHG emissions from fossil fuel-fired electric generating units. For example, on August 21, 2018, the EPA proposed a replacement rule to the CPP, known as the ACE rule, which will establish guidelines for states to develop plans to address GHG emissions from existing coal-fired power plants. However, a number of bills have been introduced in Congress that seek to require GHG emissions reductions from fossil fuel-fired electric generation facilities, natural gas facilities and other sectors of the economy, although none has yet been enacted. Furthermore, the EPA finalized standards under the CWA governing effluent limitation guidelines for electric generating units in September 2015. While the rule setting forth these standards has been stayed administratively, the EPA has begun a new rulemaking process that could take until 2020 before revisions to the effluent limitation guidelines for electric generating units is complete.

Compliance with environmental laws and regulations requires us to commit significant resources toward environmental monitoring, installation of pollution control equipment, emissions fees and permitting at our facilities. These expenditures have been significant in the past and are expected to continue or increase in the future. Changes in compliance requirements, additional regulations and related costs, or more restrictive interpretations by governmental authorities of existing requirements may impose additional costs on us (such as more stringent clean-up of contaminated sites or reduced emission allowances) or require us to incur additional expenditures or curtail some of our cost savings activities (such as the recycling of fly ash and other coal combustion products for beneficial use). Compliance with any GHG emission reduction requirements, including any mandated renewable portfolio standards, also may impose significant costs on us, and the resulting price increases to our customers may lower customer consumption. Such costs of compliance with environmental regulations could negatively impact our businesses and our results of operations and financial position, especially if emissions or discharge limits are reduced or more onerous permitting requirements or additional regulatory requirements are imposed. Additionally, there can be no assurance that a federal tax or fee for carbon emitting generating facilities will not be imposed.

The compliance costs of these environmental laws and regulations are important considerations in the Company's and Consolidated SCE&G's strategic planning and, as a result, significantly affect the decisions to construct, operate, and retire facilities, including generating facilities. In turn, they affect the costs and rates of the Company and Consolidated SCE&G.

Commodity price changes, delays in delivery of commodities, commodity availability and other factors may affect the operating cost, capital expenditures and competitive positions of the Company’s and Consolidated SCE&G’s energy businesses.

Our energy businesses are sensitive to changes in coal, natural gas, uranium and other commodity prices (as well as their transportation costs), availability and deliverability. Any such changes could affect the prices these businesses charge, their operating costs, and the competitive position of their products and services. While Consolidated SCE&G is permitted to recover the prudently incurred cost of purchased power and fuel (including transportation) used in electric generation through retail customers’ bills, such cost increases affect electric prices and therefore the competitive position of electricity against other energy sources. In addition, when natural gas prices are low enough relative to coal to result in the dispatch of gas-fired electric generation ahead of coal-fired electric generation, higher inventories of coal, with related increased carrying costs, may result. This may adversely affect our results of operations, cash flows and financial condition.

In the case of regulated natural gas operations, costs prudently incurred for purchased gas and pipeline capacity may be recovered through retail customers’ bills. However, in both our regulated and deregulated natural gas markets, increases in gas costs affect total retail prices and therefore the competitive position of gas relative to electricity and other forms of energy. Accordingly, customers able to do so may switch to alternate forms of energy and reduce their usage of gas from the Company and Consolidated SCE&G. Customers on a volumetric rate structure unable to switch to alternate fuels or suppliers may reduce their usage of gas from the Company and Consolidated SCE&G. A regulatory mechanism applies to residential and commercial customers at PSNC Energy to mitigate the earnings impact of an increase or decrease in gas usage.

Certain construction-related commodities, such as copper and aluminum used in our transmission and distribution lines and in our electrical equipment, and steel, concrete and rare earth elements, have experienced significant price fluctuations due to changes in worldwide demand. To operate our air emissions control equipment, we use significant quantities of ammonia, limestone and lime. With EPA-mandated industry-wide compliance requirements for air emissions controls, increased demand for these reagents, combined with the increased demand for low sulfur coal, may result in higher costs for coal and reagents used for compliance purposes.


9


Changing and complex laws and regulations to which the Company and Consolidated SCE&G are subject could adversely affect revenues, increase costs, or curtail activities.

The Company and Consolidated SCE&G operate under the regulatory authority of the United States government and its various regulatory agencies, including the FERC, NRC, SEC, IRS, EPA, the Department of Homeland Security, CFTC and PHMSA. In addition, the Company and Consolidated SCE&G are subject to regulation by the state governments of South Carolina, North Carolina and Georgia via regulatory agencies, state environmental agencies, and state employment commissions. Accordingly, the Company and Consolidated SCE&G must comply with extensive federal, state and local laws and regulations. Such governmental oversight and regulation broadly and materially affect the operation of our businesses. In addition to many other aspects of our businesses, these requirements impact the services mandated or offered to our customers, and the licensing, siting, construction and operation of facilities. They affect our management of safety, the reliability of our electric and natural gas systems, the physical and cyber security of key assets, customer conservation through DSM Programs, information security, the issuance of securities and borrowing of money, financial reporting, interactions among affiliates, the pricing of utility services, the payment of dividends and employment programs and practices. Changes to governmental regulations are continual and potentially costly to effect compliance. Non-compliance with these requirements by third parties, such as our contractors, vendors and agents, may subject the Company and Consolidated SCE&G to operational risks and to liability. We cannot predict the future course of changes in this regulatory environment or the ultimate effect that this changing regulatory environment will have on the Company’s or Consolidated SCE&G’s businesses. Non-compliance with these laws and regulations could result in fines, litigation, loss of licenses or permits, mandated capital expenditures and other adverse business outcomes, as well as reputational damage, which could adversely affect the cash flows, results of operations, and financial condition of the Company and Consolidated SCE&G.

Furthermore, changes in or uncertainty in monetary, fiscal, tax, economic, trade, or regulatory policies of the federal government may adversely affect the debt and equity markets and the economic climate for the nation, region or particular industries, such as ours or those of our customers. The Company and Consolidated SCE&G also could be adversely impacted by changes in tax policy, or taxes related to the usage of certain fuel types in our businesses or our ownership and/or operation of certain types of generating facilities. Future, unknown regulation of hydraulic fracturing activities also could impact the operations and finances of the Company and Consolidated SCE&G.

SCE&G’s electric operations in South Carolina and the Company’s gas distribution operations in South Carolina and North Carolina are regulated by state utilities commissions. Consolidated SCE&G’s generating facilities are subject to extensive regulation and oversight from the NRC and SCPSC. SCE&G's electric transmission system is subject to extensive regulations and oversight from the SCPSC, NERC and FERC. Implementing and maintaining compliance with the NERC's mandatory reliability standards, enforced by FERC, for bulk electric systems could result in higher operating costs and capital expenditures. Non-compliance with these standards could subject SCE&G to substantial monetary penalties. Our gas marketing operations in Georgia are subject to state regulatory oversight and, for a portion of its operations, to rate regulation. There can be no assurance that Georgia’s gas delivery regulatory framework will remain unchanged as market conditions evolve.

Furthermore, Dodd-Frank affects the use and reporting of derivative instruments. The regulations under this legislation provide for substantial additional regulation of over-the-counter and security-based derivative instruments, among other things, and require numerous rule-makings by the CFTC and the SEC to implement, many of which are still pending final action by those federal agencies. The Company and Consolidated SCE&G have determined that they meet the end-user exception to mandatory clearing of swaps under Dodd-Frank. In addition, the Company and Consolidated SCE&G have taken steps to ensure that they are not the party required to report these transactions in real-time (the "reporting party") by transacting solely with swap dealers and major swap participants, when possible, as well as entering into reporting party agreements with counterparties who also are not swap dealers or major swap participants, which establishes that those counterparties are obligated to report the transactions in accordance with applicable Dodd-Frank regulations. While these actions minimize the reporting obligations of the Company and Consolidated SCE&G, they do not eliminate required recordkeeping for any Dodd-Frank regulated transactions. Despite qualifying for the end-user exception to mandatory clearing and ensuring that neither the Company nor Consolidated SCE&G is the reporting party to a transaction required to be reported in real-time, we cannot predict when the final regulations will be issued or what requirements they will impose.

Hostile cyber intrusions could severely impair the Company’s and Consolidated SCE&G’s operations, lead to the disclosure of confidential information, damage the reputation of the Company and Consolidated SCE&G and otherwise have an adverse effect on the Company’s and Consolidated SCE&G’s business.

The Company and Consolidated SCE&G own assets deemed as critical infrastructure, the operation of which is dependent on information technology systems. Further, the computer systems that run the Company’s and Consolidated

10


SCE&G’s facilities are not completely isolated from external networks. There appears to be an increasing level of activity, sophistication and maturity of threat actors, in particular nation state actors, that wish to disrupt the U.S. bulk power system and the U.S. gas transmission or distribution system. Such parties could view the Company’s and Consolidated SCE&G’s computer systems, software or networks as attractive targets for cyber attack. For example, malware has been designed to target software that runs the nation’s critical infrastructure such as power transmission grids and gas pipelines. In addition, the Company’s and Consolidated SCE&G’s businesses require that they and their vendors collect and maintain sensitive customer data, as well as confidential employee and shareholder information, which is subject to electronic theft or loss.

A successful cyber attack on the systems that control the Company’s and Consolidated SCE&G’s electric generation, electric or gas transmission or distribution assets could severely disrupt business operations, preventing the Company and Consolidated SCE&G from serving customers or collecting revenues. The breach of certain business systems could affect the Company’s and Consolidated SCE&G’s ability to correctly record, process and report financial information. A major cyber incident could result in significant expenses to investigate and repair security breaches or system damage and could lead to litigation, fines, other remedial action, heightened regulatory scrutiny and damage to the Company’s and Consolidated SCE&G’s reputation. In addition, the misappropriation, corruption or loss of personally identifiable information and other confidential data at the Company or Consolidated SCE&G or one of their vendors could lead to significant breach notification expenses and mitigation expenses such as credit monitoring. While the Company and Consolidated SCE&G maintain property and casualty insurance, along with other contractual provisions, that may cover certain damage caused by potential cyber incidents, all damage and claims arising from such incidents may not be covered or may exceed the amount of any insurance available. For these reasons, a significant cyber incident could materially and adversely affect the Company’s and Consolidated SCE&G’s business, financial condition and results of operations.

Operating results may be adversely affected by natural disasters, man-made mishaps and abnormal weather.

The Company has delivered less gas and, in deregulated markets, received lower prices for natural gas when weather conditions have been milder than normal, and as a consequence earned less income from those operations. Mild weather in the future could adversely impact the revenues and results of operations and harm the financial condition of the Company and Consolidated SCE&G. Hot or cold weather could result in higher bills for customers and result in higher write-offs of receivables and in a greater number of disconnections for non-payment. In addition, for the Company and Consolidated SCE&G, severe weather can be destructive, causing outages and property damage, adversely affecting operating expenses and revenues.

Natural disasters (such as hurricanes or other significant weather events, electromagnetic events, earthquakes, flooding or fires) or man-made mishaps (such as natural gas transmission pipeline failure, electric utility companies' ash pond failures, and cyber-security failures experienced by many businesses) could have direct significant impacts on the Company and Consolidated SCE&G and on our key contractors and suppliers or could impact us through changes to federal, state or local policies, laws and regulations, and have a significant impact on our financial condition, operating expenses, and cash flows.

The costs of large capital projects, such as the Company’s and Consolidated SCE&G’s construction and environmental compliance programs, are significant, and these projects are subject to a number of risks and uncertainties that may adversely affect the cost, timing and completion of these projects.

The Company’s and Consolidated SCE&G’s businesses are capital intensive and require significant investments in electric generation and in other internal infrastructure projects, including projects for environmental compliance. Achieving the intended benefits of any large construction project is subject to many uncertainties. For instance, the ability to adhere to established budgets and construction schedules may be affected by many variables, such as the regulatory, legal, training and construction processes associated with securing approvals, permits and licenses and necessary amendments to them within projected time frames, the availability of labor and materials at estimated costs, the availability and cost of financing, and weather. There also may be contractor or supplier performance issues or adverse changes in their creditworthiness and/or financial stability, unforeseen difficulties meeting critical regulatory requirements, contract disputes and litigation, and changes in key contractors or subcontractors. There may be unforeseen engineering problems or unanticipated changes in project design or scope. Our ability to complete construction projects as well as our ability to maintain current operations at reasonable cost could be affected by the availability of key components or commodities, increases in the price of or the unavailability of labor, commodities or other materials, increases in lead times for components, adverse changes in applicable laws and regulations, new or enhanced environmental or regulatory requirements, supply chain failures (whether resulting from the foregoing or other factors), and disruptions in the transportation of components, commodities and fuels. To the extent that, in connection with the construction of a project, delays occur, costs become unrecoverable, or we otherwise become unable to effectively manage and complete the project, our results of operations, cash flows and financial condition, as well as our qualifications for applicable governmental programs, benefits and tax credits may be adversely affected.

11



A significant portion of Consolidated SCE&G’s generating capacity is derived from nuclear power, the use of which exposes us to regulatory, environmental and business risks.

SCE&G jointly owns and is the operator of Unit 1. Various risks of nuclear generation to which SCE&G is subject include the following:

The potential harmful effects on the environment and human health resulting from a release of radioactive materials in connection with the operation of nuclear facilities and the storage, handling and disposal of radioactive materials; 
Limitations on the amounts and types of insurance commercially available to cover losses that might arise in connection with our nuclear operations or those of others in the United States;
The possibility that new laws and regulations could be enacted that could adversely affect the liability structure that currently exists in the United States;
Uncertainties, including trade disputes, with respect to procurement of nuclear fuel and suppliers thereof, fabrication of nuclear fuel and related vendors, and the storage of spent nuclear fuel;
Uncertainties with respect to contingencies if insurance coverage is inadequate;
Uncertainties with respect to possible future increased regulation of nuclear facilities and nuclear generation, and related costs thereof; and
Uncertainties with respect to the technological aspects of, and adequacy of funding for, decommissioning nuclear plants at the end of their operating lives.

SCE&G maintains a trust to minimize the financial risks associated with the decommissioning of Unit 1; however, it is possible that future decommissioning costs could exceed amounts in the decommissioning trust. If assets in the trust are insufficient to cover the eventual costs of decommissioning, and if SCE&G is unable to recover the shortfall through regulatory means, the Company's and Consolidated SCE&G's results of operations could be negatively impacted.

The NRC has broad authority under federal law to impose licensing and safety-related requirements for the operation of nuclear generation facilities. In the event of non-compliance, the NRC has the authority to impose fines or shut down a unit, or both, depending upon its assessment of the severity of the situation, until compliance is achieved. Revised safety requirements promulgated by the NRC could necessitate capital expenditures at nuclear plants such as ours. In today’s environment, there is a heightened risk of terrorist attack on the nation’s nuclear facilities, which has resulted in increased security costs at our nuclear plant. Although we have no reason to anticipate a serious nuclear incident, a major incident at a nuclear facility anywhere in the world could cause the NRC to limit or prohibit the operation or licensing of any domestic nuclear unit, resulting in costly changes to units in operation and adversely impacting our results of operations, cash flows and financial condition. Furthermore, a major incident at a domestic nuclear facility could result in retrospective premium assessments under our nuclear insurance coverages.

Potential competitive changes may adversely affect our gas and electricity businesses due to the loss of customers, reductions in revenues, or write-down of stranded assets.

The utility industry has been undergoing a structural change for a number of years, resulting in increasing competitive pressures on electric and natural gas utility companies. Competition in wholesale power sales via an RTO/ISO is in effect across much of the country, but the Southeastern utilities have retained the traditional bundled, vertically integrated structure. Should an RTO/ISO-market be implemented in the Southeast, potential risks emerge from reliance on volatile wholesale market prices as well as increased costs associated with new transmission and distribution infrastructure.

Some states have also mandated or encouraged unbundled retail competition. Should this occur in South Carolina or North Carolina, increased competition may create greater risks to the stability of utility earnings generally and may in the future reduce earnings from retail electric and natural gas sales. In a deregulated environment, formerly regulated utility companies that are not responsive to a competitive energy marketplace may suffer erosion in market share, revenues and profits as competitors gain access to their customers. In addition, the Company’s and Consolidated SCE&G’s generation assets would be exposed to considerable financial risk in a deregulated electric market. If market prices for electric generation do not produce adequate revenue streams and the enabling legislation or regulatory actions do not provide for recovery of the resulting stranded costs, a write-down in the value of the related assets could be required.

The Company and Consolidated SCE&G are subject to the risk of loss of sales due to the growth of distributed generation especially in the form of renewable power such as solar photovoltaic systems, which systems have undergone a rapid decline in their costs. As a result of federal and state subsidies, potential regulations allowing third-party retail sales, and

12


advances in distributed generation technology, particularly when combined with storage solutions, the growth of such distributed generation could be significant in the future. Such growth will lessen the Company's and Consolidated SCE&G's sales and will slow growth, potentially causing higher rates to customers.

Renewable and/or alternative electric generation portfolio standards may be enacted at the federal or state level. Such renewable energy may not be readily available in our service territories and could be costly to build, finance, acquire, integrate, and/or operate. Resulting increases in the price of electricity to recover the cost of these types of generation, and the costs of their integration to the electric system, could result in lower usage of electricity by our customers. In addition, DER generation at customers’ facilities could result in the loss of sales to those customers. Compliance with potential future portfolio standards could significantly impact our capital expenditures and our results of operations and financial condition. Utility scale solar development companies are currently working in South Carolina to develop projects in SCE&G's service territory.

Problems with operations could cause us to curtail or limit our ability to serve customers or cause us to incur substantial costs.

Critical processes or systems in the Company’s or Consolidated SCE&G’s operations could become impaired or fail from a variety of causes, such as equipment breakdown, transmission equipment failure, information systems failure or security breach, operator error, natural disasters, and the effects of a pandemic, terrorist attack or cyber attack on our workforce or facilities or on vendors and suppliers necessary to maintain services key to our operations.

In particular, as the operator of power generation facilities, many of which entered service prior to 1985 and may be difficult to maintain, Consolidated SCE&G could incur problems, such as the breakdown or failure of power generation or emission control equipment, transmission equipment, or other equipment or processes which would result in performance below assumed levels of output or efficiency. The integration of a significant amount of distributed generation into our systems may entail additional cycling of our coal-fired generation facilities and may thereby increase the number of unplanned outages at those facilities. In addition, any such breakdown or failure may result in Consolidated SCE&G purchasing emission allowances or replacement power at market rates, if such allowances and replacement power are available at all. These purchases are subject to state regulatory prudency reviews for recovery through rates. If replacement power is not available, such problems could result in interruptions of service (blackout or brownout conditions) in all or part of SCE&G’s territory or elsewhere in the region. Similarly, a natural gas line failure of the Company or Consolidated SCE&G could affect the safety of the public, destroy property, and interrupt our ability to serve customers.

Events such as these could entail substantial repair costs, litigation, fines and penalties, and damage to reputation, each of which could have an adverse effect on the Company’s and Consolidated SCE&G's revenues, results of operations, cash flows, and financial condition. Insurance may not be available or adequate to mitigate the adverse impacts of these events.

The use of derivative instruments could result in financial losses and liquidity constraints. The Company and Consolidated SCE&G do not fully hedge against financial market risks or price changes in commodities. This could result in increased costs, thereby resulting in lower margin.

The Company and Consolidated SCE&G may use derivative instruments, including futures, forwards, options and swaps, to manage our financial market risks. The Company also uses such derivative instruments to manage certain commodity (i.e., natural gas) market risk. We could be required to provide cash collateral or recognize financial losses on these contracts as a result of volatility in the market values of the underlying commodities and financial contracts or if a counterparty fails to perform under a contract. We could also be required to provide additional cash collateral if credit rating agency downgrades of our debt trigger more stringent requirements.

The Company strives to manage commodity price exposure by establishing risk limits and utilizing various financial instruments (exchange traded and over-the-counter instruments) to hedge physical obligations and reduce price volatility. We do not hedge the entire exposure of our operations from commodity price volatility. To the extent we do not hedge against commodity price volatility or our hedges are not effective, results of operations, cash flows and financial condition may be adversely impacted.

Failure to retain and attract key personnel could adversely affect the Company’s and Consolidated SCE&G’s operations and financial performance, particularly in light of uncertainties related to and resulting from regulatory, legislative and legal proceedings and integration.

A significant portion of our workforce will be eligible for retirement during the next few years. Uncertainties related to regulatory, legislative and legal proceedings, as well as the continuing integration of companies, also weigh significantly on the

13


employment considerations made by current and prospective employees, and some workforce attrition has occurred. We must attract, retain and develop executive officers and other professional, technical and craft employees with the skills and experience necessary to successfully manage, operate and grow our businesses. Competition for these employees is high, and in some cases, we must compete for these employees on a regional or national basis. We may be unable to attract and retain these personnel. Further, the Company’s or Consolidated SCE&G’s ability to construct or maintain generation or other assets requires the availability of suitable skilled contractor personnel. We may be unable to obtain appropriate contractor personnel at the times and places needed. Labor disputes with employees or contractors covered by collective bargaining agreements also could adversely affect implementation of our strategic plan and our operational and financial performance. Furthermore, increased medical benefit costs of employees and retirees could adversely affect the results of operations of the Company and Consolidated SCE&G. Medical costs in this country have risen significantly over the past number of years and such increases are expected to continue. Such increases, unless satisfactorily managed by the Company and Consolidated SCE&G, could adversely affect results of operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS
 
Not Applicable.

ITEM 2. PROPERTIES
 
SCANA owns no significant property other than the capital stock of each of its subsidiaries. It holds directly all of the capital stock of each of its subsidiaries.
SCE&G's bond indenture, which secures its First Mortgage Bonds, constitutes a direct mortgage lien on substantially all of its electric utility property. GENCO's Williams Station is also subject to a first mortgage lien which secures certain outstanding debt of GENCO.
Electric Operations

The following table shows the electric generating facilities and their net generating capacity as of December 31, 2018.
 
 
 
 
Percentage
 
 
Net Summer
 
Net Summer
Plant
Location
Capacity (MW)
 
Capacity
Gas
 
 
 
 
  McMeekin
Irmo, SC
250

 
 
  Urquhart Unit 3
Beech Island, SC
95

 
 
  Jasper (CC)
Hardeeville, SC
852

*
 
  Urquhart (CC)
Beech Island, SC
458

*
 
  Columbia Energy Center (CC)
Gaston, SC
504

*
 
  Hagood Units 4, 5 and 6 (CT)
Charleston, SC
126

*
 
  Parr (CT)
Jenkinsville, SC
60

*
 
  Coit (CT)
Columbia, SC
26

*
 
  Urquhart Units 1, 2, 3 and 4 (CT)
Beech Island, SC
87

 
 
  Williams (CT)
Goose Creek, SC
40

*
 
  Hardeeville (CT)
Hardeeville, SC
9

 
 
     Total Gas
 
2,507

 
42
%
Coal
 
 
 
 
  Wateree
Eastover, SC
684

 
 
  Williams
Goose Creek, SC
605

 
 
  Cope
Cope, SC
415

**
 
     Total Coal
 
1,704

 
28
%
Nuclear
 
 
 
 
  Summer Station Unit 1
Jenkinsville, SC
647

***
11
%
Hydro
 
 
 
 
  Fairfield Pumped Storage
Jenkinsville, SC
576

 
 
  Saluda
Irmo, SC
198

 
 
  Neal Shoals
Union, SC
2

 
 
  Parr
Jenkinsville, SC
7

 
 
  Stevens Creek
Martinez, GA
9

 
 
     Total Hydro
 
792

 
13
%
     Total Utility Generation
 
5,650

 
 
Power Purchase Agreements (contracted capacity)
 
335

 
6
%
     Total Generation
 
5,985

 
100
%
Note: (CT) denotes combustion turbine and (CC) denotes combined cycle.
* Capable of burning fuel oil as a secondary source
** Capable of burning natural gas as a secondary source
***Reflects SCE&G's 66.7% ownership share

SCE&G owns 440 substations. The transmission system consists of 3,478 miles of lines. The distribution system consists of 18,606 pole miles of overhead lines and 7,809 trench miles of underground lines, exclusive of service-level lines.
 
Gas Distribution
 
SCE&G's natural gas system includes 453 miles of transmission pipeline of up to 20 inches in diameter that connect its distribution system with Southern Natural Gas Company, Transco and Dominion Energy Carolina Gas Transmission, LLC. SCE&G’s distribution system consists of 18,005 miles of distribution mains and related service facilities.

SCE&G also owns two LNG plants, one located near Charleston, South Carolina, and the other in Salley, South Carolina. The Charleston facility can store the liquefied equivalent of 1.0 bcf of natural gas, can regasify approximately 6% of its storage capacity per day and can liquefy less than 1% of its storage capacity per day. The Salley facility can store the liquefied equivalent of 0.9 bcf of natural gas and can regasify approximately 10% of its storage capacity per day. The Salley facility has no liquefying capabilities.
 
PSNC Energy’s natural gas system consists of 633 miles of transmission pipeline of up to 24 inches in diameter that connect its distribution systems with Transco. PSNC Energy’s distribution system consists of 22,600 miles of distribution mains and related service facilities. PSNC Energy owns one LNG plant that stores the liquefied equivalent of 1.0 bcf of natural gas, can regasify approximately 10% of its storage capacity per day and can liquefy less than 1% of its storage capacity per day.

ITEM 3.  LEGAL PROCEEDINGS
 
From time to time, the Company and Consolidated SCE&G are alleged to be in violation or in default under orders, statutes, rules or regulations relating to the environment, compliance plans imposed upon or agreed to by the Company or Consolidated SCE&G, or permits issued by various local, state and/or federal agencies for the construction or operation of facilities. Administrative proceedings may also be pending on these matters. In addition, in the ordinary course of business, and particularly following the abandonment of the Nuclear Project, the Company and Consolidated SCE&G are involved in various legal proceedings.

See Claims and Litigation in Note 11 to the consolidated financial statements in Item 8. Financial Statements and Supplementary Data, which information is incorporated herein by reference, for a discussion of various legal, environmental and other regulatory proceedings to which the Company and Consolidated SCE&G are a party to, including any material developments that have occurred in the fourth quarter of 2018.

ITEM 4.  MINE SAFETY DISCLOSURES
 
Not Applicable.

PART II
ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
 
SCANA:
 
SCANA became a wholly-owned subsidiary of Dominion Energy effective January 1, 2019, after which date no established public trading market exists for SCANA common stock. Prior to this date, SCANA common stock traded on the NYSE using the ticker symbol SCG. SCANA intends to pay quarterly cash dividends in 2019 but is neither required to nor restricted from making such payment, except as described in Note 4 to the consolidated financial statements in Item 8. Financial Statements and Supplementary Data.

The following table provides information about purchases by or on behalf of SCANA or any affiliated purchaser (as defined in Rule 10b-18(a)(3) under the Exchange Act) of shares or other units of any class of SCANA's equity securities that are registered pursuant to Section 12 of the Exchange Act:
Issuer Purchases of Equity Securities
 
 
(a)
 
(b)
 
(c)
 
(d)
Period
 
Total number of shares (or units) purchased
 
Average price paid
per share (or unit)
 
Total number of shares (or units) purchased as
part of publicly announced
plans or programs
 
Maximum number (or approximate dollar value) of shares (or units) that may yet be
purchased under the
plans or programs
October 1-31, 2018
 
6,162

 
$
39.85

 
6,162

 
 
November 1-30, 2018
 

 

 

 
 
December 1-31, 2018
 

 

 

 
 
Total
 
6,162

 
 
 
6,162

 
*

*The above table represents shares acquired for non-employee directors under the Director Compensation and Deferral Plan. On December 16, 2014, SCANA announced a program to convert from original issue to open market purchase of SCANA common stock for all applicable compensation and dividend reinvestment plans. This program took effect in the first quarter of 2015. Concurrent with the SCANA Combination, effective January 1, 2019, this program ceased.


14



SCE&G:

All of SCE&G's common stock is owned by SCANA, and no established public trading market exists for SCE&G common stock. SCE&G intends to pay quarterly cash dividends in 2019 but is neither required to nor restricted from making such payment, except as described in Note 4 to the consolidated financial statements in Item 8. Financial Statements and Supplementary Data.

ITEM 6.  SELECTED FINANCIAL DATA

Not Applicable.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SCANA and SCE&G meet the conditions to file under the reduced disclosure format, and therefore have omitted certain information related to themselves and their consolidated affiliates and subsidiaries called for by Item 7 of Form 10-K. As a result, this Item 7 provides a management's narrative analysis of the Company's and Consolidated SCE&G's results of operations, and it should be read in conjunction with Item 8. Financial Statements and Supplementary Data. Consolidated SCE&G makes no representation as to information relating solely to SCANA and its subsidiaries (other than Consolidated SCE&G).

RESULTS OF OPERATIONS

 
2018
 
2017
The Company
 
 
 
Loss per share
$
(3.70
)
 
$
(0.83
)
Cash dividends declared per share
$
0.98

 
$
2.45

 
 
 
 
Consolidated SCE&G
 
 
 
Net loss (millions of dollars)
$
(589.3
)
 
$
(171.9
)
    
2018 vs 2017
The Company's loss per share and Consolidated SCE&G's net loss reflect impairment losses taken in each period related to the abandoned Nuclear Project. Results in 2018 also reflect an electric rate reduction made effective as of the second quarter of 2018 and significant legal and other costs incurred in connection with the Nuclear Project. For the Company, 2018's results also reflect costs associated with the merger with Dominion Energy. These and other results are discussed below.

Electric Operations
 
Electric Operations for the Company and for Consolidated SCE&G is comprised of the electric operations of SCE&G, GENCO and Fuel Company. Electric Operations operating loss (including transactions with affiliates) was as follows: 
 
 
The Company
 
Consolidated SCE&G
Millions of dollars
 
2018
 
2017
 
2018
 
2017
Operating revenues
 
$
2,326.6

 
$
2,664.4

 
$
2,326.6

 
$
2,664.4

Fuel used in electric generation
 
671.3

 
593.6

 
671.3

 
593.6

Purchased power
 
91.9

 
80.1

 
91.9

 
80.1

Other operation and maintenance
 
546.4

 
512.0

 
559.8

 
526.4

Impairment loss
 
1,376.0

 
1,118.1

 
1,376.0

 
1,118.1

Depreciation and amortization
 
307.4

 
294.7

 
296.4

 
282.8

Other taxes
 
227.4

 
220.3

 
225.0

 
217.8

Operating Loss
 
$
(893.8
)
 
$
(154.4
)
 
$
(893.8
)
 
$
(154.4
)

Electric operations can be significantly impacted by the effects of weather. SCE&G estimates the effects on its electric business of actual temperatures in its service territory as compared to historical averages to approximate electric revenue and fuel costs attributable to the effects of abnormal weather. Results in both 2018 and 2017 reflect milder than normal weather in

15


the first quarter, with 2017 being significantly milder than 2018, and warmer than normal weather in the second, third and fourth quarters, with 2018 being warmer than 2017 in each period.

2018 vs 2017
Ÿ
Operating revenues decreased in 2018 by $113.7 million pursuant to an SCPSC order whereby fuel cost recovery was offset with gains realized upon the settlement of certain interest rate derivative contracts, as further described in Other Income (Expense) below. Operating revenue also decreased by $300.4 million due to the enactment and implementation of Act 258, by $69.2 million due to the recognition of estimated amounts to be refunded to customers as a result of the Tax Act and by lower residential and commercial average use of $48.6 million. The downward reserve adjustment related to fuel cost recovery had no effect on net income as it was fully offset by the recognition within other income of gains realized upon the settlement of certain derivative interest rate contracts. These revenue decreases were partially offset by the effects of weather of $100.4 million, residential and commercial growth of $22.4 million and higher fuel cost recovery of $65.6 million.

Ÿ
Fuel used in electric generation and purchased power expenses increased due to higher fuel prices of $65.6 million, increased sales volumes associated with residential and commercial customer growth of $5.2 million and higher sales volumes associated with the effects of weather of $24.3 million. These increases were partially offset by lower residential and commercial average use of $12.7 million. In 2018, purchased power expenses were lower and expenses for fuel used in electric generation were higher due to SCE&G's purchase of CEC and the termination of a related purchase power agreement.

Ÿ
Other operation and maintenance expenses increased due to higher legal and other costs arising from the abandonment of the Nuclear Project of approximately $25.6 million and increases in non-labor costs associated with the purchase of CEC of $8.5 million. These increases were partially offset by lower labor costs of $9.4 million, primarily due to the absence of Nuclear Project severance accruals in 2018.

Impairment loss in each period represents probable disallowances of cost recovery associated with the abandoned Nuclear Project.

Ÿ
Depreciation and amortization increased primarily due to net plant additions.

Ÿ
Other taxes increased primarily due to higher property taxes associated with net plant additions.

Sales volumes (in GWh) related to the electric operations above, by class, were as follows: 
Classification
 
2018
 
2017
 
Residential
 
8,366

 
7,782

 
Commercial
 
7,446

 
7,372

 
Industrial
 
6,250

 
6,212

 
Other
 
583

 
584

 
Total retail sales
 
22,645

 
21,950

 
Wholesale
 
1,014

 
916

 
Total Sales
 
23,659

 
22,866

 

2018 vs 2017
Retail and wholesale sales volumes increased primarily due to the effects of weather.
    

16


Gas Distribution
 
Gas Distribution is comprised of the local distribution operations of SCE&G, and for the Company, also includes PSNC Energy. Gas Distribution operating income (including transactions with affiliates) was as follows: 
 
 
The Company
 
Consolidated SCE&G
Millions of dollars
 
2018
 
2017
 
2018
 
2017
Operating revenues
 
$
935.1

 
$
876.0

 
$
435.1

 
$
405.8

Gas purchased for resale
 
449.3

 
393.0

 
239.0

 
205.9

Other operation and maintenance
 
172.6

 
167.9

 
71.2

 
70.6

Depreciation and amortization
 
93.6

 
84.9

 
30.5

 
29.0

Other taxes
 
46.9

 
42.5

 
31.4

 
28.5

Operating Income
 
$
172.7

 
$
187.7

 
$
63.0

 
$
71.8


The effect of abnormal weather conditions on gas distribution operating income is mitigated by the WNA at SCE&G and the CUT at PSNC Energy as further described in Note 3 of the consolidated financial statements in Item 8. Financial Statements and Supplementary Data. The WNA and CUT do not affect sales volumes.

2018 vs 2017
Ÿ
Operating revenues increased at SCE&G primarily due to higher gas cost recovery of $23.5 million, customer growth of $9.7 million and higher average use of $1.7 million. These increases were partially offset by a decrease of $7.5 million due to the deferral of estimated amounts to be refunded to customers as a result of the Tax Act. In addition to these factors, operating revenues for the Company increased due to weather at PSNC Energy of $63.6 million, customer growth of $12.3 million and an increased adjustment related to integrity management of $11.9 million. These increases were partially offset by a CUT adjustment of $34.3 million, decreased gas cost recoveries of $14.7 million and $14.8 million due to deferred revenues related to the Tax Act.
 
Ÿ
Gas purchased for resale increased at SCE&G due to increased sales volumes due to weather of $14.5 million, higher gas prices of $9.0 million, higher average use of $4.8 million and firm customer growth of $4.7 million. In addition to these factors, gas purchased for resale at the Company reflects increased sales volumes due to weather at PSNC Energy of $32.1 million and customer growth of $4.6 million. These increases were partially offset by decreased gas costs of $14.7 million and the effect of a CUT adjustment of $3.9 million.

Ÿ
Other operation and maintenance expenses increased primarily due to higher labor costs.

Ÿ
Depreciation and amortization increased primarily due to net plant additions.

Ÿ
Other taxes increased primarily due to higher property taxes associated with net plant additions.

Sales volumes (in MMBTU) related to gas distribution by class, including transportation, were as follows: 
 
 
The Company
 
Consolidated SCE&G
Classification (in thousands)
 
2018
 
2017
 
2018
 
2017
Residential
 
45,477

 
37,251

 
14,082

 
11,285

Commercial
 
31,640

 
28,429

 
13,344

 
12,565

Industrial
 
21,543

 
20,108

 
19,037

 
18,091

Transportation gas
 
57,867

 
51,587

 
6,401

 
6,229

Total
 
156,527

 
137,375

 
52,864

 
48,170


2018 vs 2017
Residential, commercial and industrial sales volumes at the Company and Consolidated SCE&G increased due to the effects of weather and customer growth. Transportation volumes increased at the Company primarily due to a significant customer expansion and increased natural gas fired electric generation within PSNC Energy's territory.
 

17


Gas Marketing
 
Gas Marketing is comprised of the Company’s nonregulated marketing operation, SCANA Energy, which operates in the southeast and includes Georgia’s retail natural gas market. Gas Marketing operating revenues and net income were as follows: 
Millions of dollars
 
2018
 
2017
 
Operating revenues
 
$
935.1

 
$
1,001.4

 
Net Income
 
43.2

 
26.9

 

2018 vs 2017
Operating revenues decreased primarily due to the impact of adopting revenue recognition guidance (see Note 3 to the consolidated financial statements in Item 8. Financial Statements and Supplementary Data), whereby certain pass through charges are no longer classified as revenues. Net income increased due to the effects of weather.

Other Operating Expenses
 
Other operating expenses were as follows:
 
 
The Company
Consolidated SCE&G
Millions of dollars
 
2018
 
2017
 
2018
 
2017
Other operation and maintenance
 
$
835.3

 
$
727.7

 
$
631.0

 
$
597.0

Impairment loss
 
1,376.0

 
1,118.1

 
1,376.0

 
1,118.1

Depreciation and amortization
 
402.7

 
381.6

 
326.8

 
311.8

Other taxes
 
276.1

 
264.2

 
256.4

 
246.4


Changes in other operating expenses are largely attributable to the electric operations and gas distribution segments and are addressed in those discussions. In addition, other operation and maintenance expense includes certain legal and other costs arising from the abandonment of the Nuclear Project and the merger with Dominion Energy. Increases in such costs at the Company totaled approximately $81.1 million (including $25.6 million attributable to Consolidated SCE&G). The increases attributable to Consolidated SCE&G are included in amounts described in electric operations.

Net Periodic Pension Benefit Cost

     Other operation and maintenance expense includes net periodic pension benefit cost, which was recorded on the income statements and balance sheets as follows:
 
 
The Company
 
Consolidated SCE&G
Millions of dollars
 
2018
 
2017
 
2018
 
2017
Income Statement Impact:
 
 
 
 
 
 
 
 
Employee benefit costs
 
$
10.3

 
$
15.3

 
$
8.4

 
$
12.3

Other expense
 
0.1

 
0.5

 
0.1

 
0.3

Balance Sheet Impact:
 
 
 
 
 
 
 
 
Increase in capital expenditures
 
2.5

 
5.2

 
2.0

 
4.7

Component of amount receivable from Summer Station co-owner
 
0.7

 
2.1

 
0.7

 
2.1

Decrease in regulatory assets
 
(1.9
)
 
(0.8
)
 
(1.9
)
 
(0.8
)
Net periodic benefit cost
 
$
11.7

 
$
22.3

 
$
9.3

 
$
18.6


Pursuant to regulatory orders, SCE&G recovers current pension expense through a rate rider (for retail electric operations) and through cost of service rates (for gas operations), and amortizes pension costs previously deferred in regulatory assets as further described in Note 2 and Note 9 to the consolidated financial statements. Amounts amortized were $2.0 million for retail electric operations and $1.0 million for gas operations for each period presented. Pursuant to regulatory orders, PSNC Energy recovers current pension expense through cost of service rates.

18



Other Income (Expense)
 
Other income (expense), net includes the results of certain incidental non-utility activities of regulated subsidiaries, the activities of certain non-regulated subsidiaries, governance activities of SCANA and AFC. AFC is a utility accounting practice whereby a portion of the cost of both equity and borrowed funds used to finance construction (which is shown on the balance sheet as construction work in progress) is capitalized. An equity portion of AFC is included in nonoperating income and a debt portion of AFC is included in interest charges (credits), both of which have the effect of increasing reported net income. Components of other income (expense), net were as follows:
 
 
The Company
 
Consolidated SCE&G
Millions of dollars
 
2018
 
2017
 
2018
 
2017
Other income
 
$
200.7

 
$
78.4

 
$
146.8

 
$
44.9

Other expense
 
(46.0
)
 
(55.2
)
 
(28.2
)
 
(31.9
)
AFC - equity funds
 
18.7

 
23.2

 
10.8

 
14.8


2018 vs 2017
Other income at the Company and Consolidated SCE&G increased primarily due to the recognition of $113.7 million of gains realized upon the settlement of certain interest rate derivative contracts and $6.9 million of gains from land sales. The gains related to the settlement of interest rate derivative contracts were fully offset by downward adjustments to electric revenues pursuant to a previously received SCPSC order related to fuel cost recovery and, as such, had no effect on net income. These increases were partially offset by $10.9 million due to the absence of accrual of carrying costs on unrecovered Nuclear Project costs in 2018 and by $17.5 million due to lower carrying cost accrual on certain other deferred items. Other expense at the Company and Consolidated SCE&G decreased $2.9 million and $1.9 million, respectively, due to changes in non-service cost components of pension and other postretirement benefit expense recognized within other expense. At the Company, the decreases also include lower expenses related to other benefit programs. Equity AFC decreased primarily due to the abandonment of the Nuclear Project in 2017.

Interest Expense
 
Components of interest expense, net of the debt component of AFC, were as follows:
 
 
The Company
 
Consolidated SCE&G
Millions of dollars
 
2018
 
2017
 
2018
 
2017
Interest on long-term debt, net
 
$
357.7

 
$
346.7

 
$
271.0

 
$
266.1

Other interest expense
 
26.3

 
16.7

 
32.7

 
21.5

Total
 
$
384.0

 
$
363.4

 
$
303.7

 
$
287.6


Interest charges increased primarily due to the issuance of long-term debt at SCE&G and PSNC Energy in 2018, the accrual of interest related to uncertain tax positions and lower debt AFC due to the abandonment of the Nuclear Project. These increases were partially offset by the repayment of long-term debt at GENCO with short-term borrowings at lower rates.

Income Tax Benefit
    
At the Company and Consolidated SCE&G, income tax benefit increased primarily due to higher losses before taxes as a result of the increased impairment loss recognized in 2018 and the effect of the electric rate change effective in the second quarter.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
All financial instruments described in this section are held for purposes other than trading.
 
Interest Rate Risk
 
The tables below provide information about long-term debt issued by the Company and Consolidated SCE&G and other financial instruments that are sensitive to changes in interest rates. For debt obligations, the tables present principal cash flows and related weighted average interest rates by expected maturity dates. For interest rate swaps, the figures shown reflect

19


notional amounts, weighted average interest rates and related maturities. Fair values for debt represent quoted market prices. Interest rate swap agreements are valued using discounted cash flow models with independently sourced data. 

The Company
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
Expected Maturity Date
Millions of dollars
2019
 
2020
 
2021
 
2022
 
2023
 
Thereafter
 
Total
 
Fair Value
Long-Term Debt:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

   Fixed Rate ($)
54.3

 
363.8

 
792.3

 
261.3

 
9.8

 
5,175.2

 
6,656.7

 
7,048.3

   Average Fixed Interest Rate (%)
3.94

 
6.30

 
4.21

 
5.24

 
4.69

 
5.58

 
5.42

 

   Variable Rate ($)
4.4

 
4.4

 
4.4

 
4.4

 
4.4

 
116.2

 
138.2

 
132.5

   Average Variable Interest Rate (%)
3.44

 
3.44

 
3.44

 
3.44

 
3.44

 
2.41

 
1.39

 

Interest Rate Swaps:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Pay Fixed/Receive Variable ($)
4.4

 
4.4

 
4.4

 
4.4

 
4.4

 
119.8

 
146.2

 
(24.4
)
   Average Pay Interest Rate (%)
6.17

 
6.17

 
6.17

 
6.17

 
6.17

 
4.45

 
4.76

 

   Average Receive Interest Rate (%)
3.44

 
3.44

 
3.44

 
3.44

 
3.44

 
2.41

 
2.59

 

December 31, 2017
Expected Maturity Date
Millions of dollars
2018
 
2019
 
2020
 
2021
 
2022
 
Thereafter
 
Total
 
Fair Value
Long-Term Debt:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

   Fixed Rate ($)
722.5

 
12.0

 
361.5

 
490.2

 
259.3

 
4,683.9

 
6,529.4

 
7,261.8

   Average Fixed Interest Rate (%)
6.01

 
4.31

 
6.31

 
4.63

 
5.26

 
5.71

 
5.68

 

   Variable Rate ($)
4.4

 
4.4

 
4.4

 
4.4

 
4.4

 
120.6

 
142.6

 
137.8

   Average Variable Interest Rate (%)
2.18

 
2.18

 
2.18

 
2.18

 
2.18

 
1.64

 
1.72

 

Interest Rate Swaps:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Pay Fixed/Receive Variable ($)
554.4

 
4.4

 
4.4

 
4.4

 
4.4

 
124.2

 
696.2

 
20.4

   Average Pay Interest Rate (%)
2.14

 
6.17

 
6.17

 
6.17

 
6.17

 
4.51

 
2.66

 

   Average Receive Interest Rate (%)
1.48

 
2.18

 
2.18

 
2.18

 
2.18

 
1.91

 
1.58

 

Consolidated SCE&G
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
Expected Maturity Date
Millions of dollars
2019
 
2020
 
2021
 
2022
 
2023
 
Thereafter
 
Total
 
Fair Value
Long-Term Debt:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

   Fixed Rate ($)
13.8

 
13.3

 
341.8

 
10.8

 
9.5

 
4,725.3

 
5,114.5

 
5,406.8

   Average Fixed Interest Rate (%)
4.18

 
4.23

 
3.52

 
4.53

 
5.23

 
5.64

 
5.48

 

   Variable Rate ($)

 

 

 

 

 
67.8

 
67.8

 
63.0

   Average Variable Interest Rate (%)

 

 

 

 

 
1.67

 
1.67

 

Interest Rate Swaps:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Pay Fixed/Receive Variable ($)

 

 

 

 

 
71.4

 
71.4

 
(11.2
)
   Average Pay Interest Rate (%)

 

 

 

 

 
3.29

 
3.29

 

   Average Receive Interest Rate (%)

 

 

 

 

 
1.67

 
1.67

 

December 31, 2017
 
Expected Maturity Date
Millions of dollars
 
2018
 
2019
 
2020
 
2021
 
2022
 
Thereafter
 
Total
 
Fair Value
Long-Term Debt:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

   Fixed Rate ($)
 
722.5

 
12.0

 
11.5

 
40.2

 
9.3

 
4,333.9

 
5,129.4

 
5,726.8

   Average Fixed Interest Rate (%)
 
6.01

 
4.31

 
4.38

 
3.58

 
4.74

 
5.76

 
5.77

 

   Variable Rate ($)
 

 

 

 

 

 
67.8

 
67.8

 
63.5

   Average Variable Interest Rate (%)
 

 

 

 

 

 
1.21

 
1.21

 

Interest Rate Swaps:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Pay Fixed/Receive Variable ($)
 
550.0

 

 

 

 

 
71.4

 
621.4

 
37.4

   Average Pay Interest Rate (%)
 
2.10

 

 

 

 

 
3.29

 
2.24

 

   Average Receive Interest Rate (%)
 
1.48

 

 

 

 

 
1.71

 
1.51

 


 While a decrease in interest rates would increase the fair value of debt, it is unlikely that events which would result in a realized loss will occur.
 

20


For further discussion of long-term debt and interest rate derivatives, see Note 5 and Note 7 to the consolidated financial statements in Item 8. Financial Statements and Supplementary Data.


21


Commodity Price Risk
 
The following table provides information about the Company’s financial instruments, which are limited to financial positions of Energy Marketing and PSNC Energy, that are sensitive to changes in natural gas prices. Weighted average settlement prices are per 10,000 MMBTU. Fair value represents quoted market prices.
Expected Maturity
 
2019
 
2020
 
2021
 
Futures - Long
 
 
 
 
 
 
 
Settlement Price (a)
 
2.85

 
2.82

 
2.81

 
Contract Amount (b)
 
82.2

 
12.3

 
0.2

 
Fair Value (b)
 
69.8

 
12.4

 
0.2

 
 
 
 
 
 
 
 
 
Futures - Short
 
 
 
 
 
 
 
Settlement Price (a)
 
2.90

 

 

 
Contract Amount (b)
 
31.9

 

 

 
Fair Value (b)
 
20.8

 

 

 
 
 
 
 
 
 
 
 
Options - Purchased Call (Long)
 
 
 
 
 
 
 
Strike Price (a)
 
2.58

 
3.54

 

 
Contract Amount (b)
 
17.5

 
2.3

 

 
Fair Value (b)
 
1.6

 
0.1

 

 
 
 
 
 
 
 
 
 
Options - Sold Call (Short)
 
 
 
 
 
 
 
Strike Price (a)
 
0.39

 

 

 
Contract Amount (b)
 
0.4

 

 

 
Fair Value (b)
 
0.5

 

 

 
 
 
 
 
 
 
 
 
Swaps - Commodity
 
 

 
 

 
 

 
Pay fixed/receive variable (b)
 
6.1

 
3.8

 
0.9

 
Average pay rate (a)
 
2.92

 
2.85

 
2.73

 
Average received rate (a)
 
2.80

 
2.69

 
2.74

 
Fair Value (b)
 
5.8

 
3.5

 
0.9

 
Pay variable/receive fixed (b)
 
26.4

 
8.2

 
0.8

 
Average pay rate (a)
 
2.80

 
2.70

 
2.79

 
Average received rate (a)
 
2.90

 
2.80

 
2.77

 
Fair Value (b)
 
27.3

 
8.5

 
0.7

 
 
 
 
 
 
 
 
 
Swaps - Basis
 
 

 
 

 
 

 
Pay variable/receive variable (b)
 
15.9

 

 

 
Average pay rate (a)
 
3.14

 

 

 
Average received rate (a)
 
3.15

 

 

 
Fair Value (b)
 
16.0

 

 

 

(a)                Weighted average, in dollars
(b)               Millions of dollars
 
The Company uses derivative instruments to hedge forward purchases and sales of natural gas, which create market risks of different types. See Note 7 to the consolidated financial statements in Item 8. Financial Statements and Supplementary Data.
 
PSNC Energy utilizes futures, options and swaps to hedge gas purchasing activities. PSNC Energy’s tariffs include a provision for the recovery of actual gas costs incurred. PSNC Energy defers premiums, transaction fees, margin requirements and any realized gains or losses from its hedging program for subsequent recovery from customers.

22


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholder of
SCANA Corporation
Cayce, South Carolina

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of SCANA Corporation and subsidiaries (the "Company") as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income (loss), changes in common equity, and cash flows, for each of the three years in the period ended December 31, 2018, and the related notes and the financial statement schedule listed in the Part IV at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2019, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.




/s/DELOITTE & TOUCHE LLP
 
Charlotte, North Carolina
 
February 28, 2019
 

We have served as the Company's auditor since 1945.


23



SCANA Corporation and Subsidiaries
Consolidated Balance Sheets
 
December 31, (Millions of dollars)
 
2018
 
2017
Assets
 
 

 
 

Utility Plant in Service
 
$
15,171

 
$
14,370

Accumulated Depreciation and Amortization
 
(5,109
)
 
(4,611
)
Construction Work in Progress
 
527

 
471

Nuclear Fuel, Net of Accumulated Amortization
 
211

 
208

Goodwill
 
210

 
210

Utility Plant, Net
 
11,010

 
10,648

Nonutility Property and Investments:
 
 

 
 

Nonutility property, net of accumulated depreciation of $143 and $133
 
267

 
270

Assets held in trust, net-nuclear decommissioning
 
190

 
136

Other investments
 
22

 
68

Nonutility Property and Investments, Net
 
479

 
474

Current Assets:
 
 

 
 

Cash and cash equivalents
 
389

 
409

Receivables:
 
 
 
 
    Customer, net of allowance for uncollectible accounts of $7 and $6
 
632

 
665

    Income taxes
 

 
198

    Other
 
88

 
105

Inventories:
 
 

 
 

Fuel
 
153

 
143

Materials and supplies
 
170

 
161

Prepayments
 
105

 
99

Other current assets
 
12

 
71

Total Current Assets
 
1,549

 
1,851

Deferred Debits and Other Assets:
 
 

 
 
Regulatory assets
 
4,380

 
5,580

Other
 
236

 
186

Total Deferred Debits and Other Assets
 
4,616

 
5,766

Total
 
$
17,654

 
$
18,739

 
See Notes to Consolidated Financial Statements.


 

24


December 31, (Millions of dollars)
 
2018
 
2017
Capitalization and Liabilities
 
 

 
 

Common Stock - no par value, 143 million shares outstanding for all periods presented
 
$
2,389

 
$
2,390

Retained Earnings
 
2,247

 
2,915

Accumulated Other Comprehensive Loss
 
(34
)
 
(50
)
  Total Common Equity
 
4,602

 
5,255

Long-Term Debt, Net
 
6,695

 
5,906

Total Capitalization
 
11,297

 
11,161

Current Liabilities:
 
 

 
 

Short-term borrowings
 
173

 
350

Current portion of long-term debt
 
59

 
727

Accounts payable
 
430

 
438

Customer deposits and customer prepayments
 
114

 
112

Revenue subject to refund
 
77

 

Taxes accrued
 
245

 
214

Interest accrued
 
89

 
87

Dividends declared
 
17

 
86

Other
 
72

 
99

Total Current Liabilities
 
1,276

 
2,113

Deferred Credits and Other Liabilities:
 
 

 
 

Deferred income taxes, net
 
1,112

 
1,261

Asset retirement obligations
 
577

 
568

Pension and postretirement benefits
 
376

 
360

Unrecognized tax benefits
 
38

 
19

Regulatory liabilities
 
2,789

 
3,059

Other
 
189

 
198

Total Deferred Credits and Other Liabilities
 
5,081

 
5,465

Commitments and Contingencies (Note 11)
 

 


Total
 
$
17,654

 
$
18,739

 
See Notes to Consolidated Financial Statements.


25


SCANA Corporation and Subsidiaries
Consolidated Statements of Operations
 
Years Ended December 31, (Millions of dollars, except per share amounts)
 
2018
 
2017
 
2016
Operating Revenues:
 
 

 
 

 
 

Electric
 
$
2,322

 
$
2,659

 
$
2,614

Gas-regulated
 
934

 
874

 
788

Gas-nonregulated
 
796

 
874

 
825

Total Operating Revenues
 
4,052

 
4,407

 
4,227

 
 
 
 
 
 
 
Operating Expenses:
 
 

 
 

 
 

Fuel used in electric generation
 
671

 
594

 
576

Purchased power
 
92

 
80

 
64

Gas purchased for resale
 
1,128

 
1,156

 
1,054

Other operation and maintenance
 
835

 
728

 
741

Impairment loss
 
1,376

 
1,118

 

Depreciation and amortization
 
403

 
382

 
371

Other taxes
 
276

 
264

 
254

Total Operating Expenses
 
4,781

 
4,322

 
3,060

Operating Income (Loss)
 
(729
)
 
85

 
1,167

 
 
 
 
 
 
 
Other Income (Expense), net
 
173

 
47

 
41

Interest charges, net of allowance for borrowed funds used during construction of $12, $18 and $19
 
(384
)
 
(363
)
 
(342
)
 
 
 
 
 
 
 
Income (Loss) Before Income Tax Expense (Benefit)
 
(940
)
 
(231
)
 
866

Income Tax Expense (Benefit)
 
(412
)
 
(112
)
 
271

Net Income (Loss)
 
$
(528
)
 
$
(119
)
 
$
595

 
 
 
 
 
 
 
Earnings (Loss) Per Share of Common Stock
 
$
(3.70
)
 
$
(0.83
)
 
$
4.16

Weighted Average Common Shares Outstanding (millions)
 
143

 
143

 
143

 
 
 
 
 
 
 
 
See Notes to Consolidated Financial Statements.


26


SCANA Corporation and Subsidiaries
 Consolidated Statements of Comprehensive Income (Loss)
 
Years Ended December 31, (Millions of dollars)
 
2018
 
2017
 
2016
Net Income (Loss)
 
$
(528
)
 
$
(119
)
 
$
595

Other Comprehensive Income (Loss), net of tax:
 
 
 
 
 
 
Unrealized Gains (Losses) on Cash Flow Hedging Activities:
 
 
 
 
 
 
Arising during period, net of tax of $(1), $(4) and $2
 
(2
)
 
(7
)
 
4

Reclassified as interest expense, net of tax of $2, $4 and $4
 
9

 
7

 
7

Reclassified as gas purchased for resale, net of tax of $2, $- and $4
 
7

 
(1
)
 
6

Net unrealized gains (losses) on cash flow hedging activities
 
14

 
(1
)
 
17

Deferred Costs of Employee Benefit Plans (Note 9):
 
 
 
 
 
 
Gains arising during the period, net of tax of $1, $- and $-
 
2

 

 

   Reclassified to net income, net of tax of $-, $- and $-
 

 

 
(1
)
Net deferred gains (costs) of employee benefit plans
 
2

 

 
(1
)
     Other Comprehensive Income (Loss)
 
16

 
(1
)
 
16

Total Comprehensive Income (Loss)
 
$
(512
)
 
$
(120
)
 
$
611

 
See Notes to Consolidated Financial Statements.


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