Business & Finance
Business and Finance
Business and Finance
Fri, February 20, 2009
Thu, February 19, 2009 SCE&G Seeks Fuel Cost Adjustment from South Carolina Public Service Commission
COLUMBIA, S.C.--([ BUSINESS WIRE ])--South Carolina Electric & Gas Co. (SCE&G), principal subsidiary of SCANA Corporation (NYSE: SCG), today filed with the South Carolina Public Service Commission (PSC) for an adjustment to the fuel cost portion of its electric rates. If approved, the monthly electric bill of a 1,000-kwh residential customer will increase $4.52 or 3.96 percent – going from $114.20 to $118.72 beginning in May.
The PSC and the South Carolina Office of Regulatory Staff annually review the costs SCE&G incurs in purchasing fuel to operate its electric generation facilities. The company is then directed to adjust base rates either upward or downward to reflect those costs. Fuel costs are a direct pass-through to customers; SCE&G cannot, and does not, earn a profit on that portion of its rates. Fuel costs currently represent about 32 percent of what a residential customer pays for a kilowatt hour of electricity.
SCE&G President and COO Kevin Marsh explained whatever the company pays for fuel to run its generating plants is what is passed on to customers; there is no markup or profit on fuel costs. There are two principal drivers behind the requested increase.
"Our contract with the railroad company that delivers coal to our power plants expired in December 2008," Marsh said. "The rates charged by our rail supplier in our new contract almost doubled. Transportation costs are included in the price of fuel.
"Also, when the price of coal jumped from $55 to $60 per ton to about $150 per ton during the second half of 2008, we had a number of coal suppliers that did not meet their contractual obligations," he said. "We were forced to go into the market and purchase coal at significantly higher rates instead of our contracted price. I want customers to know that we are aggressively pursuing legal remedies against those suppliers who failed to meet their contractual obligations. Any money we recover from those suppliers will be used to offset fuel costs to the benefit of our customers."
Because of the current economic situation, Marsh said SCE&G has taken the unusual step of requesting that the PSC allow for the fuel cost adjustment to be spread over two years instead of the usual one-year term.
"It was a case of either having a larger, one-year increase or funding this over two years," Marsh said. " Because many of our customers are already facing economic challenges with their family budgets, we felt the best approach was to spread the increase in fuel costs over a longer period of time."
Marsh said SCE&G has also taken other steps to try to minimize the cost of providing power, such as using more of the company's natural gas-fired turbines while natural gas prices are close to a seven-year low and relying less on coal-fired plants.
"The cost of natural gas has been declining for the past several months, so we have changed the mix of plants we are using to reduce our costs of providing power," Marsh said. "Several of our plants are fueled by natural gas, and we have increased the generation from those plants while reducing our reliance on coal-fired plants for power. As our natural gas customers already know, we have been able to significantly reduce bills to residential natural gas customers by 32 percent over the past seven months as wholesale natural gas prices have declined."
South Carolina Electric & Gas Company is a regulated public utility engaged in the generation, transmission, distribution and sale of electricity to approximately 650,000 customers in 26 counties in the central, southern and southwestern portions of South Carolina. The company also provides natural gas service to approximately 307,000 customers in 34 counties in the state. More information about SCE&G is available at [ www.sceg.com ].
