By Dennis Quick
Senior Staff Writer

South Carolina Electric & Gas Co. has agreed not to raise its natural gas rates as high as the utility giant initially intended. Instead of a 7.09% rate hike, SCE&G will seek a 5.69% rate increase.

This means the company’s revenue projections from natural gas services would be $22.9 million instead of $28.5 million as initially proposed in April in its filing with the Public Service Commission.

The $5.6 million reduction in revenue projections also means SCE&G stockholders will see a 10.25% return on equity rather than the 11.75% return the company proposed earlier.

SCE&G struck an agreement to reduce its rate-hike percentage Aug. 10 with the Office of Regulatory Staff, a state public-interest agency concerned with utility regulation; the S.C. Small Business Chamber of Commerce; the S.C. Energy Users Committee, a consortium of large industrial customers; and the U.S. Department of Defense. These parties challenged SCE&G’s initial natural gas rate-hike proposal as being too high for consumers.

If the Public Service Commission approves SCE&G’s lower rate-hike proposal, the new rates will become effective in November.

Under the proposed rate hike, small- and medium-sized businesses would see a 4.8% increase in natural gas rates, large businesses and industrial customers a 6.4% increase and residential customers an 11.3% increase.

“The agreement will mean a savings of tens of millions of dollars for South Carolina’s business and residential consumers in the coming years,” says Frank Knapp, president of the S.C. Small Business Chamber of Commerce.

SCE&G filed for the rate increase in April to recover capital and operating costs associated with expanding and operating the company’s natural gas system during the past 16 years. It was the first time since 1989 the utility company made a general gas rate increase request.

“It’s a good deal for the consumer,” says Knapp, whose organization has been challenging the state’s regulated utilities since 2000. “It exceeds anything we could have gotten out of a public hearing.”

The state small business chamber last challenged SCE&G in 2002 when the utility proposed an increase in its electricity rates that would have hit small businesses with a nearly 14% rate hike. After a public hearing before the Public Service Commission in Columbia in which the chamber and other parties testified, SCE&G lowered its proposed electricity rate increase so that small businesses saw an 8% rate hike.

A public hearing to get SCE&G to lower its rate-hike request for natural gas services would have been “long, expensive and combative,” says Knapp.

Neville Lorick, SCE&G’s president and chief operating officer, agrees.

“It is very much in the best interest of all parties to settle cases such as these whenever possible” says Lorick. “We were prepared to justify the full amount of the requested increase. However, we believe that we can operate our gas system reliably and efficiently based upon these rates.

“The proposed new rates would provide us the opportunity to earn an adequate return on our current natural gas assets and would enhance our ability to make additional capital investments that will be necessary to support future growth and economic development in our state,” Lorick says. “We hope the commission will approve the settlement agreement as submitted.”

Dennis Quick is senior staff writer for the Charleston Regional Business Journal. E-mail him at dquick@charlestonbusiness.com.

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