Consolidated Balance Sheets

(Unaudited)

(millions)	March 31, 2020			December 31, 2019
ASSETS
Utility plant in service	$	13,293		$	13,208
Accumulated depreciation and amortization		(4,889	)		(4,851	)
Construction work in progress		339			339
Nuclear fuel, net of accumulated amortization		208			219
Utility plant, net ($714 and $727 related to VIEs)		8,951			8,915
Nonutility Property and Investments:
Nonutility property, net of accumulated depreciation		68			69
Assets held in trust, nuclear decommissioning		209			214
Nonutility property and investments, net		277			283
Current Assets:
Cash and cash equivalents		10			4
Receivables:
Customer, net of allowance for uncollectible accounts of $3 at both periods		304			320
Affiliated and related party		4			14
Other		102			119
Inventories (at average cost):
Fuel		103			104
Materials and supplies		169			168
Prepayments		87			91
Regulatory assets		260			271
Other current assets		30			27
Total current assets ($131 and $143 related to VIEs)		1,069			1,118
Deferred Debits and Other Assets:
Regulatory assets		3,873			3,892
Other		92			93
Total deferred debits and other assets ($39 and $32 related to VIEs)		3,965			3,985
Total assets	$	14,262		$	14,301

~~(Unaudited)~~

Millions of dollars March 31,
2019 December 31,
2018
Assets

Utility Plant In Service $ 12,914
$ 12,803
Accumulated Depreciation and Amortization (4,694 ) (4,581 )
Construction Work in Progress 237
350
Nuclear Fuel, Net of Accumulated Amortization 198
211
Utility Plant, Net ($697 and $711 related to VIEs) 8,655
8,783
Nonutility Property and Investments:

Nonutility property, net of accumulated depreciation 72
72
Assets held in trust, net-nuclear decommissioning 199
190
Other investments —
1
Nonutility Property and Investments, Net 271
263
Current Assets:

     Cash, restricted cash and cash equivalents 120
377
     Receivables:
          Customer, net of allowance for uncollectible accounts of $3 and $4 271
331
          Affiliated companies 6
359
          Other 43
68
     Inventories (at average cost):

     Fuel 96
89
     Materials and supplies 159
158
     Prepayments 69
82
     Regulatory assets 253
223
     Other current assets 1
1
     Total Current Assets ($89 and $96 related to VIEs) 1,018
1,688
Deferred Debits and Other Assets:

Regulatory assets 3,810
4,046
Other 370
183
     Total Deferred Debits and Other Assets ($37 and $34 related to VIEs) 4,180
4,229
Total Assets $ 14,124
$ 14,963

See Notes to Consolidated Financial Statements.

Dominion Energy South Carolina, Inc.

Consolidated Balance Sheets—(Continued)

(Unaudited)

(millions)	March 31, 2020			December 31, 2019
CAPITALIZATION AND LIABILITIES
Common Stock - no par value, 40.3 million shares outstanding	$	3,695		$	3,695
Retained earnings		108			20
Accumulated other comprehensive loss		(3	)		(3	)
Total common equity		3,800			3,712
Noncontrolling interest		185			180
Total equity		3,985			3,892
Long-term debt, net		3,359			3,358
Affiliated long-term debt		230			230
Finance leases		19			20
Total long-term debt		3,608			3,608
Total capitalization		7,593			7,500
Current Liabilities:
Securities due within one year		7			7
Accounts payable		153			245
Affiliated and related party payables		767			624
Customer deposits and customer prepayments		68			76
Taxes accrued		61			218
Interest accrued		82			88
Regulatory liabilities		281			256
Reserves for litigation and regulatory proceedings		492			492
Other		48			60
Total current liabilities		1,959			2,066
Deferred Credits and Other Liabilities:
Deferred income taxes and investment tax credits		654			629
Asset retirement obligations		494			489
Pension and other postretirement benefits		202			203
Regulatory liabilities		3,151			3,210
Affiliated liabilities		14			15
Other		195			189
Total deferred credits and other liabilities		4,710			4,735
Commitments and Contingencies (see Note 10)
Total capitalization and liabilities	$	14,262		$	14,301

Millions of dollars March 31,
2019 December 31,
2018
Capitalization and Liabilities
Common Stock - no par value, 40.3 million shares outstanding $ 3,535
$ 2,860
Retained Earnings 151
1,279
Accumulated Other Comprehensive Loss (4 ) (3 )
Total Common Equity 3,682
4,136
Noncontrolling Interest 185
179
Total Equity 3,867
4,315
Long-Term Debt, net 3,961
5,132
Total Capitalization 7,828
9,447
Current Liabilities:
Short-term borrowings —
73
Current portion of long-term debt 14
14
Accounts payable 130
267
Affiliated payables 623
347
Customer deposits and customer prepayments 74
73
Revenue subject to refund 11
77
Taxes accrued 133
239
Interest accrued 49
72
Regulatory liabilities 262
126
Ratepayer class action settlement reserve 158
—
Other 34
42
Total Current Liabilities 1,488
1,330
Deferred Credits and Other Liabilities:
Deferred income taxes, net 573
989
Asset retirement obligations 499
542
Pension and other postretirement benefits 234
232
Unrecognized tax benefits 38
38
Regulatory liabilities 3,323
2,264
Other 125
105
Other affiliate 16
16
Total Deferred Credits and Other Liabilities 4,808
4,186
Commitments and Contingencies (Note 10)

Total Capitalization and Liabilities $ 14,124
$ 14,963

See Notes to Consolidated Financial Statements.

Dominion Energy South Carolina, Inc. ~~and Affiliates~~

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

	Three Months Ended March 31,
(millions)	2020		2019
Operating Revenue⁽¹⁾	$	672	$	(335	)
Operating Expenses:
Fuel used in electric generation⁽¹⁾		104		137
Purchased power⁽¹⁾		13		8
Gas purchased for resale⁽¹⁾		57		77
Other operations and maintenance		90		96
Other operations and maintenance - affiliated suppliers		55		48
Impairment of assets and other charges		2		271
Depreciation and amortization		118		102
Other taxes⁽¹⁾		62		69
Total operating expenses		501		808
Operating income (loss)		171		(1,143	)
Other income (expense), net		3		(5	)
Interest charges, net of allowance for borrowed funds used during construction of $2 and $-⁽¹⁾		58		73
Income (loss) before income tax expense (benefit)		116		(1,221	)
Income tax expense (benefit)		23		(118	)
Net Income (Loss) and Other Comprehensive Income (Loss)		93		(1,103	)
Comprehensive Income Attributable to Noncontrolling Interest		5		6
Comprehensive Income (Loss) Available (Attributable) to Common Shareholder	$	88	$	(1,109	)

~~(Unaudited)~~

(1)	See Note 12 for amounts attributable to affiliates.

Three Months Ended
March 31,
Millions of dollars 2019 2018
Operating Revenues:
Electric ⁽¹⁾
$ (480 ) $ 547
Gas 145
155
Total Operating Revenues (335 ) 702
Operating Expenses:
Fuel used in electric generation ⁽¹⁾
137
159
Purchased power ⁽¹⁾
8
52
Gas purchased for resale ⁽¹⁾
77
75
Other operation and maintenance 105
102
Other operation and maintenance - affiliated suppliers 48
44
Impairment of assets and other charges 262
4
Depreciation and amortization 102
80
Other taxes ⁽¹⁾
69
65
Total Operating Expenses 808
581
Operating Income (Loss) (1,143 ) 121
Other Income (Expense), net (5 ) 123
Interest charges, net of allowance for borrowed funds used during construction of $- and $2 (73 ) (77 )
Income (Loss) Before Income Tax Expense (Benefit) (1,221 ) 167
Income Tax Expense (Benefit) (118 ) 39
Net Income (Loss) and Other Comprehensive Income (Loss) (1,103 ) 128
Less Comprehensive Income Attributable to Noncontrolling Interest 6
4
Comprehensive Income (Loss) Available (Attributable) to Common Shareholder $ (1,109 ) $ 124

⁽¹⁾ ~~See Note 13 for amounts attributable to affiliates.~~

See Notes to Consolidated Financial Statements.

Dominion Energy South Carolina, Inc. ~~and Affiliates~~

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended March 31,
(millions)	2020			2019
Operating Activities
Net income (loss)	$	93		$	(1,103	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Impairment of assets and other charges		2			262
Provision for refunds to customers		—			985
Deferred income taxes, net		25			(416	)
Depreciation and amortization		118			104
Amortization of nuclear fuel		14			14
Other adjustments		2			(1	)
Changes in certain assets and liabilities:
Receivables		17			68
Receivables - affiliated and related party		4			—
Inventories		(13	)		(23	)
Prepayments		4			13
Pension and other postretirement benefits		(1	)		—
Regulatory assets		(9	)		180
Regulatory liabilities		(48	)		202
Accounts payable		(20	)		(75	)
Accounts payable - affiliated and related party		(8	)		3
Revenue subject to refund		—			(66	)
Taxes accrued		(157	)		(106	)
Interest accrued		(6	)		—
Other assets and liabilities		3			(164	)
Net cash provided by (used in) operating activities		20			(123	)
Investing Activities
Property additions and construction expenditures		(166	)		(120	)
Proceeds from investments and sales of assets		26			7
Purchase of investments		(29	)		(10	)
Short-term investments - affiliated		6			—
Investment in affiliate, net		(1	)		353
Net cash provided by (used in) investing activities		(164	)		230
Financing Activities
Repayment of long-term debt, including redemption premiums		—			(1,210	)
Dividend to parent		—			(29	)
Contribution from parent		—			675
Money pool borrowings, net		—			273
Short-term borrowings, net		—			(73	)
Short-term borrowings - affiliated, net		151			—
Other		(1	)		—
Net cash provided by (used in) financing activities		150			(364	)
Net increase (decrease) in cash, restricted cash and equivalents		6			(257	)
Cash, restricted cash and equivalents at beginning of period⁽¹⁾		4			377
Cash, restricted cash and equivalents at end of period⁽¹⁾	$	10		$	120
Supplemental Cash Flow Information
Significant noncash investing and financing activities:
Accrued construction expenditures	$	53		$	25
Leases⁽²⁾		3			2

(1)	At March 31, 2020, March 31, 2019, December 31, 2019 and December 31, 2018 there were 0 restricted cash and equivalent balances.

~~(Unaudited)~~

(2)	Includes $2 million of financing leases and $1 million of operating leases for the three months ended March 31, 2020 and $1 million of financing leases and $1 million of operating leases for the three months ended March 31, 2019.

Three Months Ended March 31,
Millions of dollars 2019 2018
Cash Flows From Operating Activities:
Net income (loss) $ (1,103 ) $ 128
Adjustments to reconcile net income (loss) to net cash provided from operating activities:
Impairment of assets and other charges 262
4
Provision for refunds to customers 985
—
Deferred income taxes, net (416 ) 39
Depreciation and amortization 104
84
Amortization of nuclear fuel 14
13
Other adjustments (1 ) (4 )
Changes in certain assets and liabilities:
Receivables 68
41
Receivables - affiliate —
(6 )
Inventories (23 ) (9 )
Prepayments 13
8
Regulatory assets 180
(6 )
Regulatory liabilities 202
(112 )
Accounts payable (75 ) (15 )
Accounts payable - affiliate 3
(5 )
Revenue subject to refund (66 ) —
Taxes accrued (106 ) (150 )
Other assets (128 ) (112 )
Other liabilities (36 ) 95
Net Cash Used For Operating Activities (123 ) (7 )
Cash Flows From Investing Activities:
Property additions and construction expenditures (120 ) (159 )
Proceeds from investments and sales of assets 7
25
Purchase of investments (10 ) (10 )
Purchase of investments - affiliate —
(111 )
Proceeds from interest rate derivative contract settlement —
115
Investment in affiliate, net 353
(121 )
Net Cash Provided From (Used For) Investing Activities 230
(261 )
Cash Flows From Financing Activities:
Proceeds from issuance of debt —
100
Repayment of long-term debt, including redemption premiums (1,210 ) (8 )
Dividends (29 ) (82 )
Contribution from parent 675
—
Money pool borrowings, net 273
159
Short-term borrowings, net (73 ) (106 )
Net Cash Provided From (Used For) Financing Activities (364 ) 63
Net Decrease In Cash, Restricted Cash and Equivalents (257 ) (205 )
Cash, Restricted Cash and Equivalents, January 1 377
395
Cash, Restricted Cash and Equivalents, March 31 $ 120
$ 190
Supplemental Cash Flow Information:
Noncash Investing and Financing Activities:⁽¹⁾

Accrued construction expenditures $ 25
$ 21
⁽¹⁾ See Note 11 for lease information

See Notes to Consolidated Financial Statements.

Dominion Energy South Carolina, Inc. ~~and Affiliates~~

Consolidated Statements of Changes in Common Equity

(Unaudited)

	Common Stock
(millions)	Shares		Amount		Retained Earnings			AOCI			Noncontrolling Interest		Total Equity
December 31, 2018		40	$	2,860	$	1,279		$	(3	)	$	179	$	4,315
Cumulative-effect of change in accounting principle						1			(1	)				—
Total comprehensive income (loss) available (attributable) to common shareholder						(1,109	)					6		(1,103	)
Capital contribution from parent			675											675
Dividend to parent						(20	)							(20	)
March 31, 2019		40	$	3,535	$	151		$	(4	)	$	185	$	3,867

December 31, 2019		40	$	3,695	$	20		$	(3	)	$	180	$	3,892
Total comprehensive income available to common shareholder						88						5		93
March 31, 2020		40	$	3,695	$	108		$	(3	)	$	185	$	3,985

~~(Unaudited)~~

Common Stock
Millions Shares Amount Retained Earnings AOCI Noncontrolling Interest Total Equity
Balance at January 1, 2019 40
$ 2,860
$ 1,279
$ (3 ) $ 179
$ 4,315
Cumulative-effect of change in accounting principle 1
(1 ) —
Total comprehensive income (loss) available (attributable) to common shareholder (1,109 ) 6
(1,103 )
Capital contributions from parent 675
675
Cash dividend declared (20 ) (20 )
Balance at March 31, 2019 40
$ 3,535
$ 151
$ (4 ) $ 185
$ 3,867

Balance at January 1, 2018 40
$ 2,860
$ 1,982
$ (4 ) $ 142
$ 4,980
Total comprehensive income available to common shareholder 124
4
128
Cash dividend declared (72 ) (2 ) (74 )
Balance at March 31, 2018 40
$ 2,860
$ 2,034
$ (4 ) $ 144
$ 5,034

See Notes to Consolidated Financial Statements.

Dominion Energy South Carolina, Inc. ~~and Affiliates~~

Notes to Consolidated Financial Statements

(Unaudited)

The following notes should be read in conjunction with the Notes to Consolidated Financial Statements appearing in DESC's Annual Report on Form 10-K for the year ended December 31, ~~2018~~. DESC filed such annual report on a combined basis with SCANA. Accordingly, the information presented in such notes is presented on a combined basis and therefore some of the information may apply only to SCANA and not DESC. DESC makes no representation as to any such information.

2019.

These are interim financial statements and, due to the seasonality of DESC's business and matters that may occur during the rest of the year, the amounts reported in the Consolidated Statements of Comprehensive Income (Loss) are not necessarily indicative of amounts expected for the full year. In the opinion of management, the information furnished herein reflects all adjustments which are necessary for a fair statement of the results for the interim periods reported, and such adjustments are of a normal recurring nature. In addition, the preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Certain amounts in DESC's ~~2018~~2019 Consolidated Financial Statements and Notes have been reclassified to conform to the ~~2019~~2020 presentation for comparative purposes; however, such reclassifications did not affect DESC's net income (loss) and other comprehensive income (loss), total assets, liabilities, equity or cash flows.

DESC is a wholly-owned subsidiary of SCANA, which ~~effective January 2019,~~ is a wholly-owned subsidiary of Dominion Energy.


1.	~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation and Variable Interest Entities

DESC has determined that it has a controlling financial interest in each of GENCO and Fuel Company (which are considered to be VIEs) and, accordingly, DESC's Consolidated Financial Statements include, after eliminating intercompany balances and transactions, the accounts of DESC, GENCO and Fuel Company. ~~The equity interests~~See Note 1 to the Consolidated Financial Statements included in DESC’s Annual Report on Form 10-K for the year ended December 31, 2019 for a description of GENCO and Fuel Company are held solely by SCANA, DESC’s parent. As a result, GENCO’s and Fuel Company’s equity and results of operations are reflected as noncontrolling interest in the Consolidated Financial Statements.

GENCO owns a coal-fired electric generating station with a 605 MW net generating capacity (summer rating). GENCO’s electricity is sold, pursuant to a FERC-approved tariff, solely to DESC under the terms of a power purchase agreement and related operating agreement. The effects of these transactions are eliminated in consolidation. Substantially all of GENCO’s property (carrying value of $499 million) serves as collateral for its long-term borrowings. Fuel Company acquires, owns and provides financing for DESC’s nuclear fuel, certain fossil fuels and emission and other environmental allowances. See also Note 5.

Company.

Additionally, DESC purchases shared services from DESS, an affiliated VIE that provides accounting, legal, finance and certain administrative and technical services to all SCANA subsidiaries, including DESC. DESC has determined that it is not the primary beneficiary of DESS as it does not have either the power to direct the activities that most significantly impact its economic performance or an obligation to absorb losses and benefits which could be significant to it. See Note 1312 for amounts attributable to ~~related parties.~~

affiliates.

Significant Accounting Policies

There have been no significant changes from ~~Note 1 to the Consolidated Financial Statements in DESC's Annual Report on Form 10-K for the year ended December 31, 2018, with the exception of the item described below.~~

~~Leases~~

DESC leases certain assets including vehicles, real estate, office equipment and other assets under both operating and finance leases. Rent expense is expensed as incurred over the term of the lease and is primarily recorded in other operations and maintenance expense in the Consolidated Statements of Comprehensive Income (Loss).

Certain leases include one or more options to renew, with renewal terms that can extend the lease from one to 70 years. The exercise of lease renewal options is at DESC's sole discretion. Leases with original lease terms of one year or less are not included in the Consolidated Balance Sheets and DESC has concluded that the renewal of such leases is unlikely. Were such leases to contain renewal options that DESC is reasonably certain will be exercised, the related right-of-use asset and lease liability would be included in the Consolidated Balance Sheets.

The determination of the discount rate utilized has a significant impact on the calculation of the present value of the lease liability included in the Consolidated Balance Sheets. For DESC's leased assets, the discount rate implicit in the lease is generally unavailable to be determined from a lessee perspective. As such, DESC uses internally-developed incremental borrowing rates as a discount rate in the calculation of the present value of the lease liability. The incremental borrowing rates are determined based on an analysis of DESC's publicly available secured borrowing rates over various lengths of time that most closely corresponds to DESC's lease maturities.

Amortization expense and interest charges associated with finance leases are recorded in depreciation and amortization and interest expense, respectively, in the Consolidated Statement of Comprehensive Income (Loss) or deferred within regulatory assets in the Consolidated Balance Sheets. Costs associated with operating leases, short-term leases and variable leases are primarily recorded in other operations and maintenance expenses in the Consolidated Statements of Comprehensive Income (Loss).

~~Recently Adopted Accounting Matters~~

In February 2016, the FASB issued revised accounting guidance for the recognition, measurement, presentation and disclosure of leasing arrangements. The update requires that a liability and corresponding right-of-use asset are recorded on the balance sheet for all leases, including those leases classified as operating leases, while also refining the definition of a lease. In addition lessees will be required to disclose key information about the amount, timing, and uncertainty of cash flows arising from leasing arrangements. Lessor accounting remains largely unchanged.

The guidance became effective for DESC's interim and annual reporting periods beginning January 1, 2019. DESC adopted this revised accounting guidance using a modified retrospective approach, which requires lessees and lessors to recognize and measure leases at the date of adoption. Under this approach, DESC utilized the transition practical expedient to maintain historical presentation for periods before January 1, 2019. DESC also applied the other practical expedients, which required no reassessment of whether existing contracts are or contain leases, no reassessment of lease classification for existing leases and no evaluation of existing or expired land easements that were not previously accounted for as leases. In connection with the adoption of this revised accounting guidance, DESC recorded $19 million of offsetting right-of-use assets and liabilities for operating leases in effect at the adoption date. See Note 11 for additional information.

2.~~RATE AND OTHER REGULATORY MATTERS~~

~~Rate Matters~~

~~Other than the items discussed below, which are pending or have been resolved during the period, there have been no changes to the regulatory matters discussed in~~ Note 2 to the Consolidated Financial Statements in DESC's Annual Report on Form 10-K for the year ended December 31, ~~2018.~~

~~Electric - Cost~~2019.

2. RATE AND OTHER REGULATORY MATTERS

Regulatory Matters Involving Potential Loss Contingencies

As a result of ~~Fuel~~issues generated in the ordinary course of business, DESC is involved in various regulatory matters. Certain regulatory matters may ultimately result in a loss; however, as such matters are in an initial procedural phase, involve uncertainty as to the outcome of pending reviews or orders, and/or involve significant factual issues that need to be resolved, it is not possible for DESC to estimate a range of possible loss. For regulatory matters that DESC cannot estimate, a statement to this effect is made in the description of the matter. Other matters may have progressed sufficiently through the regulatory process such that DESC is able to estimate a range of possible loss. For regulatory matters that DESC is able to reasonably estimate a range of possible losses, an estimated range of possible loss is provided, in excess of the accrued liability (if any) for such matters. Any estimated range is based on currently available information, involves elements of judgment and significant uncertainties and may not represent DESC’s maximum possible loss exposure. The circumstances of such regulatory matters will change from time to time and actual results may vary significantly from the current estimate. For current matters not specifically reported below, management does not anticipate that the outcome from such matters would have a material effect on DESC’s financial position, liquidity or results of operations.

2017 Tax Reform Act

In January 2020, GENCO filed to modify its formula rate to incorporate a mechanism to decrease or increase its income tax allowances by any excess deferred income taxes resulting from the 2017 Tax Reform Act, and future changes in tax laws. These modifications are expected to decrease charges to DESC for the power it purchases from GENCO. In April ~~2019,~~2020, the FERC approved GENCO’s request. There have been no other changes to the 2017 Tax Reform Act matters discussed in Note 3 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2019.

Other Regulatory Matters

Other than the following matters, there have been no significant developments regarding the pending regulatory matters disclosed in Note 3 to the Consolidated Financial Statements in DESC's Annual Report on Form 10-K for the year ended December 31, 2019.

South Carolina Base Rate Case

Pursuant to the SCANA Merger Approval Order, DESC will not file an application for a general rate case with the South Carolina Commission ~~approved DESC’s~~with a requested effective date for new rates earlier than January 2021. In April 2020, the South Carolina Commission issued an order vacating the portion of the SCANA Merger Approval Order requiring that new retail electric rates be implemented by January 1, 2021.

Electric – Cost of Fuel

In February 2020, DESC filed with the South Carolina Commission a proposal to decrease the total fuel cost component of retail electric rates. ~~DESC's proposal included maintaining its~~DESC’s proposed decrease would reduce annual base fuel component atrecoveries by $44 million and is projected to return to customers the existing over-collected balance while recovering DESC’s current ~~level to produce a projected under-recovered balance of $35 million at the end of~~base fuel costs over the 12-month period beginning with the first billing cycle of May ~~2019, and requested carrying costs for any base fuel under-collected balances, should they occur.~~2020. In addition, DESC ~~also~~ proposed ~~reducing~~an increase to its variable environmental ~~component~~ and ~~maintaining or reducing its DER~~distributed energy resource components. ~~Changes in rates became effective beginning with~~In April 2020, the ~~first billing cycle of May 2019.~~

South Carolina Commission approved the filing.

Electric -– Other

DESC has approval for a DSM rider through which it recovers expenditures related to its DSM programs. In January ~~2019,~~2020, DESC ~~filed an application with~~submitted its annual DSM programs filing to the South Carolina Commission seeking approval to recover ~~$30~~$40 million of costs ~~incurred~~

and net lost ~~future~~ revenues associated with ~~these~~DSM programs, along with an incentive to invest in such programs. In April ~~2019,~~2020, the South Carolina Commission approved the filing.

DESC utilizes a pension costs rider approved by the South Carolina Commission which is designed to allow recovery of projected pension costs, including under-collected balances or net of over-collected balances, as applicable. The rider is typically reviewed for adjustment every 12 months with any resulting increase or decrease going into effect beginning with the first billing cycle in May. In February 2020, DESC requested that the South Carolina Commission approve an adjustment to this rider to decrease annual revenue by $11 million. In April 2020, the South Carolina Commission approved the ~~request for the rate year beginning with the first billing cycle of May 2019.~~

filing.

Regulatory Assets and Regulatory Liabilities

Rate-regulated utilities recognize in their financial statements certain revenues and expenses in different periods than do other enterprises. As a result, DESC has recorded regulatory assets and regulatory liabilities which are summarized in the following ~~tables.~~table. Except for ~~unrecovered~~ NND Project costs and certain other unrecovered plant costs, substantially all regulatory assets are either explicitly excluded from rate base or are effectively excluded from rate base due to their being offset by related liabilities.

	March 31,		December 31,
(millions)	2020		2019
Regulatory assets:
NND Project costs⁽¹⁾	$	138	$	138
Deferred employee benefit plan costs⁽²⁾		13		13
Other unrecovered plant⁽³⁾		14		14
DSM programs⁽⁴⁾		16		17
AROs⁽⁵⁾		28		28
Cost of fuel under-collections⁽⁶⁾		3		13
Other		48		48
Regulatory assets - current		260		271
NND Project costs⁽¹⁾		2,468		2,503
AROs⁽⁵⁾		305		293
Cost of reacquired debt⁽⁷⁾		255		259
Deferred employee benefit plan costs⁽²⁾		194		196
Deferred losses on interest rate derivatives⁽⁸⁾		318		305
Other unrecovered plant⁽³⁾		66		69
DSM programs⁽⁴⁾		58		54
Environmental remediation costs⁽⁹⁾		21		22
Deferred storm damage costs⁽¹⁰⁾		44		44
Deferred transmission operating costs⁽¹¹⁾		43		37
Other⁽¹²⁾		101		110
Regulatory assets - noncurrent		3,873		3,892
Total regulatory assets	$	4,133	$	4,163
Regulatory liabilities:
Monetization of guaranty settlement⁽¹³⁾	$	67	$	67
Income taxes refundable through future rates⁽¹⁴⁾		20		16
Reserve for refunds to electric utility customers⁽¹⁵⁾		138		143
Cost of fuel over-collections⁽⁶⁾		37		12
Other		19		18
Regulatory liabilities - current		281		256
Monetization of guaranty settlement⁽¹³⁾		953		970
Income taxes refundable through future rates⁽¹⁴⁾		938		948
Asset removal costs⁽¹⁶⁾		558		552
Deferred gains on interest rate derivatives⁽⁸⁾		71		71
Reserve for refunds to electric utility customers⁽¹⁵⁾		623		656
Other		8		13
Regulatory liabilities - noncurrent		3,151		3,210
Total regulatory liabilities	$	3,432	$	3,466

(1)	Reflects expenditures associated with the NND Project, which pursuant to the SCANA Merger Approval Order, will be recovered from electric service customers over a 20-year period ending in 2039. See Note 10 for more information.

(2)

Employee benefit plan costs have historically been recovered as they have been recorded under GAAP. Deferred employee benefit plan costs represent amounts of pension and other postretirement benefit costs which were accrued as liabilities and treated as regulatory assets pursuant to FERC guidance, and costs deferred pursuant to specific South Carolina Commission regulatory orders. DESC expects to recover deferred pension costs through utility rates over periods through 2044. DESC expects to recover other deferred benefit costs through utility rates, primarily over average service periods of participating employees up to 11 years.

Millions of dollars March 31,
2019 December 31,
2018
Regulatory Assets:
Unrecovered NND Project costs $ 138
$ 127
Deferred employee benefit plan costs 16
16
Other unrecovered plant 14
14
DSM programs 16
14
Other 69
52
Regulatory assets - current 253
223
Unrecovered NND Project costs 2,607
2,641
AROs 335
380
Deferred employee benefit plan costs 252
256
Deferred losses on interest rate derivatives 297
442
Other unrecovered plant 76
79
DSM programs 51
51
Environmental remediation costs 23
24
Deferred storm damage costs 34
35
Deferred transmission operating costs 21
15
Other 114
123
Regulatory assets - noncurrent 3,810
4,046
Total Regulatory Assets $ 4,063
$ 4,269

(3)

Represents the carrying value of coal-fired generating units, including related materials and supplies inventory, retired from service prior to being fully depreciated. DESC is amortizing these amounts through cost of service rates over the units' previous estimated remaining useful lives through 2025. Unamortized amounts are included in rate base and are earning a current return.

(4)	Represents deferred costs associated with electric demand reduction programs, and such deferred costs are currently being recovered over five years through an approved rate rider.

Regulatory Liabilities:
Monetization of guaranty settlement $ 67
$ 61
Income taxes refundable through future rates 49
52
Reserve for refunds to electric utility customers 137
—
Other 9
13
Regulatory liabilities - current 262
126
Monetization of guaranty settlement 1,020
1,037
Income taxes refundable through future rates 837
607
Asset removal costs 549
541
Deferred gains on interest rate derivatives 70
75
Reserve for refunds to electric utility customers 846
—
Other 1
4
Regulatory liabilities - noncurrent 3,323
2,264
Total Regulatory Liabilities $ 3,585
$ 2,390

(5)

Represents deferred depreciation and accretion expense related to legal obligations associated with the future retirement of generation, transmission and distribution properties. The AROs primarily relate to DESC’s electric generating facilities, including Summer, and are expected to be recovered over the related property lives and periods of decommissioning which may range up to approximately 105 years.

(6)	Represents amounts under- or over-collected from customers pursuant to the cost of fuel and purchased gas components approved by the South Carolina Commission.

(7)	Costs of the reacquisition of debt are deferred and amortized as interest expense over the would-be remaining life of the reacquired debt or over the life of the replacement debt if refinanced. The reacquired debt had a weighted-average life of approximately 26 years as of March 31, 2020.

(8)

Represents (i) the changes in fair value and payments made or received upon settlement of certain interest rate derivatives designated as cash flow hedges and (ii) the changes in fair value and payments made or received upon settlement of certain other interest rate derivatives not so designated. The amounts recorded with respect to (i) are expected to be amortized to interest expense over the lives of the underlying debt through 2043.The amounts recorded with respect to (ii) are expected to be similarly amortized to interest expense through 2065.

(9)	Reflects amounts associated with the assessment and clean-up of sites currently or formerly owned by DESC. Such remediation costs are expected to be recovered over periods of up to 16 years. See Note 10 for more information.

(10)	Represents storm restoration costs for which DESC expects to receive future recovery through customer rates.

(11)	Includes deferred depreciation and property taxes associated with certain transmission assets for which DESC expects recovery from customers through future rates. See Note 10 for more information.

(12)	Various other regulatory assets are expected to be recovered through rates over varying periods through 2047.

(13)

Represents proceeds related to the monetization of the Toshiba Settlement. In accordance with the SCANA Merger Approval Order, this balance, net of amounts that may be required to satisfy liens, will be refunded to electric customers over a 20-year period ending in 2039. See Note 10 for more information.

(14)

Includes (i) excess deferred income taxes arising from the remeasurement of deferred income taxes in connection with the enactment of the 2017 Tax Reform Act (certain of which are protected under normalization rules and will be amortized over the remaining lives of related property, and certain of which will be amortized to the benefit of customers over prescribed periods as instructed by regulators) and (ii) deferred income taxes arising from investment tax credits, offset by (iii) deferred income taxes that arise from utility operations that have not been included in customer rates (a portion of which relate to depreciation and are expected to be recovered over the remaining lives of the related property which may range up to 85 years). See Note 6 for more information.

(15)	Reflects amounts previously collected from retail electric customers of DESC for the NND Project to be credited to customers over an estimated 11-year period (effective February 2019) in connection with the SCANA Merger Approval Order. See Note 10 for more information.

(16)	Represents estimated net collections through depreciation rates of amounts to be expended for the removal of assets in the future.

Regulatory assets have been recorded based on the probability of their recovery. All regulatory assets represent incurred costs that may be deferred under GAAP for regulated operations. The South Carolina Commission or the FERC has reviewed and approved through specific orders certain of the items shown as regulatory assets. In addition, regulatory assets include, but are not limited to, certain costs which have not been specifically approved for recovery by one of these regulatory agencies, including deferred transmission operating costs that are the subject of regulatory proceedings discussed in Note 10. While such costs are not currently being recovered, management believes they would be allowable under existing rate-making

concepts embodied in rate orders or applicable state law and expects to recover these costs through rates in future periods. In the future, as a result of deregulation, changes in state law, other changes in the regulatory environment or changes in accounting requirements or other adverse legislative or regulatory developments, DESC could be required to write off all or a portion of its regulatory assets and liabilities. Such an event could have a material effect on DESC's financial statements in the period the write-off would be recorded.

Unrecovered NND Project costs reflects expenditures associated with the NND Project, which pursuant to the Merger Approval Order, will be recovered from electric service customers over a 20-year period ending in 2039. See Note 10 for more information.

AROs represent deferred depreciation and accretion expense related to legal obligations associated with the future retirement of generation, transmission and distribution properties, excluding amounts related to CCRs. The AROs primarily relate to nuclear decommissioning activities and are expected to be recovered over the related property lives and periods of decommissioning which may range up to approximately 106 years.

Deferred losses or gains on interest rate derivatives represent (i) the changes in fair value and payments made or received upon settlement of certain interest rate derivatives designated as cash flow hedges and (ii) the changes in fair value and payments made or received upon settlement of certain other interest rate derivatives not so designated. The amounts recorded with respect to (i) are expected to be amortized to interest expense over the lives of the underlying debt through 2043. The amounts recorded with respect to (ii) are expected to be similarly amortized to interest expense through 2065.

Other unrecovered plant represents the carrying value of coal-fired generating units, including related materials and supplies inventory, retired from service prior to being fully depreciated. DESC is amortizing these amounts through cost of service rates over the units' previous estimated remaining useful lives through 2025. Unamortized amounts are included in rate base and are earning a current return.

~~DSM programs represent deferred costs associated with electric demand reduction programs, and such deferred costs are currently being recovered over five years through an approved rate rider.~~

Environmental remediation costs are associated with the assessment and clean-up of sites currently or formerly owned by DESC. Such remediation costs are expected to be recovered over periods of up to 16 years.

~~Deferred storm damage costs represent storm restoration costs for which DESC expects to receive future recovery through customer rates.~~

Deferred transmission operating costs includes deferred depreciation and property taxes associated with certain transmission assets for which DESC expects recovery from customers through future rates. See also Note 10.

~~Various other regulatory assets are expected to be recovered through rates over varying periods through 2047.~~

Monetization of guaranty settlement represents proceeds related to the monetization of the Toshiba Settlement. In accordance with the Merger Approval Order, this balance, net of amounts that may be required to satisfy certain liens, will be refunded to electric customers over a 20-year period ending in 2039. See Note 10.

Income taxes refundable through future rates includes (i) excess deferred income taxes arising from the remeasurement of deferred income taxes in connection with the enactment of the 2017 Tax Reform Act (certain of which are protected under normalization rules and will be amortized over the remaining lives of related property, and certain of which will be amortized to the benefit of customers over prescribed periods as instructed by regulators) and (ii) deferred income taxes arising from investment tax credits, offset by (iii) deferred income taxes that arise from utility operations that have not been included in customer rates (a portion of which relate to depreciation and are expected to be recovered over the remaining lives of the related property which may range up to 85 years). See also Note 6.

Reserve for refunds to electric utility customers reflects amounts previously collected from retail electric customers of DESC for the NND Project to be credited to customers over an estimated 11-year period in connection with the Merger Approval Order. See Note 10.

~~Asset removal costs represent estimated net collections through depreciation rates of amounts to be expended for the removal of assets in the future.~~

3. REVENUE RECOGNITION

DESC has disaggregated operating revenues by customer class as follows:

	Three Months Ended				Three Months Ended
	March 31, 2020				March 31, 2019
(millions)	Electric		Gas		Electric			Gas
Customer class:
Residential	$	252	$	79	$	(271	)	$	78
Commercial		175		33		(139	)		38
Industrial		80		17		(82	)		26
Other		30		4		10			3
Revenues from contracts with customers		537		133		(482	)		145
Other revenues		2		—		2			—
Total Operating Revenues	$	539	$	133	$	(480	)	$	145

Operating Revenue Disaggregation Three Months Ended March 31, 2019 Three Months Ended March 31, 2018
Millions of dollars Electric Gas Electric Gas
Customer class:
  Residential $ (271 ) $ 78
$ 252
$ 86
  Commercial (139 ) 38
169
39
  Industrial (82 ) 26
85
24
  Other 10
3
37
5
Revenues from contracts with customers (482 ) 145
543
154
Other operating revenues 2
—
3
1
Total Operating Revenues $ (480 ) $ 145
$ 546
$ 155

Contract liabilities represent the obligation to transfer goods or services to a customer for which consideration has already been received from the customer. DESC had contract liability balances of $4 million and $9 million at March 31, ~~2019,~~2020 and ~~$4 million at~~ December 31, ~~2018.~~2019, respectively. During the three months ended March 31, 2020 and 2019, DESC recognized as revenue of $5 million and $2 million, ~~that was included in~~respectively, from the beginning contract ~~liabilities~~liability balances as ~~of December 31, 2018.~~DESC fulfilled its obligations to provide service to its customers. Contract liabilities are recorded in ~~Customer~~customer deposits and customer prepayments in the Consolidated Balance Sheets.

4. EQUITY

For all periods presented, DESC's authorized shares of common stock, no par value, were 50 million, of which 40.3 million were issued and outstanding, and DESC's authorized shares of preferred stock, no par value, were 20 million, of which 1,000 shares were issued and outstanding. All outstanding shares of common and preferred stock are held by SCANA.

In February 2019, DESC received an equity contribution of $675 million from its parent that was funded by Dominion Energy. DESC used these funds to redeem long-term debt. See Note 5.

6 to the Consolidated Financial Statements in DESC’s ~~bond indenture under which it issues first mortgage bonds contains provisions that could limit~~Annual Report on Form 10-K for the ~~payment of cash dividends~~year ended December 31, 2019.

At March 31, 2020, DESC’s retained earnings are below the balance established by the Federal Power Act as a reserve on ~~its common stock. DESC's bond indenture permits~~earnings attributable to hydroelectric generation plants. As a result, DESC is prohibited from the payment of dividends ~~on DESC's common stock only either (1) out~~without regulatory approval until the balance of its ~~Surplus (as defined~~retained earnings increases. There have been no significant changes to dividend restrictions affecting DESC described in Note 5 to the ~~bond indenture) or (2)~~Consolidated Financial Statements in ~~case there is no Surplus, out of its net profits~~DESC’s Annual Report on Form 10-K for the ~~fiscal~~ year in which the dividend is declared and/or the preceding fiscal year. In addition, the Federal Power Act requires the appropriation of a portion of certain earnings from hydroelectric projects. At March 31, 2019 andended December 31, 2018, retained earnings of $120 million and $115 million, respectively, were restricted by this requirement as to payment of cash dividends on DESC’s common stock. In addition, pursuant to the Merger Approval Order, the amount of any DESC dividends paid must be reasonable and consistent with the long-term payout ratio of the electric utility industry and gas distribution industry.

2019.

5. LONG-TERM AND SHORT-TERM DEBT ~~AND LIQUIDITY~~

~~Long-term Debt~~

In February 2019, DESC launched tender offers for certain of its first mortgage bonds pursuant to which it purchased first mortgage bonds having an aggregate purchase price equal to $1.2 billion. DESC incurred a loss on reacquired debt of $187 million in connection with these tender offers, which is recorded in other deferred debits on the Consolidated Balance Sheet.

~~Substantially all electric utility plant is pledged as collateral in connection with long-term debt.~~

~~Liquidity~~

~~In March 2019, DESC became a co-borrower under Dominion Energy's $6 billion joint revolving credit facility.~~

DESC's short-term financing is supported through its access as co-borrower to ~~this~~Dominion Energy’s $6.0 billion joint revolving credit facility, which can be used for working capital, as support for the combined commercial paper programs of DESC, Dominion Energy, Virginia Power, Dominion Energy Gas and ~~certain other of its subsidiaries (co-borrowers),~~Questar Gas, and for other general corporate purposes.

At March 31, 2020, DESC's share of commercial paper and letters of credit outstanding under its joint credit facility with Dominion Energy, ~~were~~was as follows:

(millions)

Facility Limit

Outstanding

Commercial Paper

Outstanding

Letters of Credit

Joint revolving credit facility⁽¹⁾

1,000

—

Millions of dollars Facility Limit Outstanding Commercial Paper Outstanding Letters of Credit
At March 31, 2019 $ 1,000
$ —
$ —

(1)

A maximum of $1.0 billion of the facility is available to DESC, assuming adequate capacity is available after giving effect to uses by co-borrowers Dominion Energy, Virginia Power, Dominion Energy Gas and Questar Gas. The sub-limit for DESC is set within the facility limit but can be changed at the option of the co-borrowers multiple times per year. At March 31, 2020, the sub-limit for DESC was $500 million. If DESC has liquidity needs in excess of its sub-limit, the sub-limit may be changed or such needs may be satisfied through short-term borrowings from DESC's parent or from Dominion Energy. This credit facility matures in March 2023 and can be used to support bank borrowings and the issuance of commercial paper, as well as to support up to $1.0 billion (or the sub-limit, whichever is less) of letters of credit.

In January 2020, DESC and GENCO applied to FERC for a two-year short-term borrowing authorization. In March 2020, FERC granted DESC ~~less any amounts outstanding to co-borrowers. A sub-limit for DESC is set within the facility limit but can be changed at the option of the co-borrowers multiple times per year. At~~authority through March 31, 2019, the sub-limit for DESC was $500 million. If DESC has liquidity needs in excess of its sub-limit, the sub-limit may be changed or such needs may be satisfied through short-term borrowings from DESC's parent or from Dominion Energy. This credit facility matures in March 2023 and can be used to support bank borrowings and the issuance of commercial paper, as well as to support up to $1.0 billion (or the sub-limit, whichever is less) of letters of credit.

Also in March 2019, DESC canceled its previous committed long-term facility which was a revolving line of credit under a credit agreement with a syndicate of banks. This previous credit agreement was used for general corporate purposes, including liquidity support for DESC's commercial paper program and working capital needs, and was set to expire in December 2020.

Millions of dollars
Facility Limit ⁽¹⁾
Outstanding Commercial Paper Outstanding Letters of Credit
At December 31, 2018 $ 1,200
$ 73
$ —

⁽¹⁾ ~~Included $500 million related to Fuel Company. In February 2019, Fuel Company's commercial paper program and its credit facility were terminated.~~

~~The weighted-average interest rate of the outstanding commercial paper supported by this credit facility was 3.82% at December 31, 2018.~~

~~In April 2019, DESC renewed its FERC authority~~2021 to issue short-term indebtedness (pursuant to Section 204 of the Federal Power Act)~~. DESC may issue unsecured promissory notes, commercial paper and direct loans~~ in amounts not to exceed $2.2 billion outstanding with maturity dates of one year or less. In addition, in ~~April 2019,~~March 2020, FERC granted GENCO ~~renewed its FERC~~ authority through March 2021 to issue short-term indebtedness not to exceed $200 million outstanding with maturity dates of one year or less. The authorities described herein will expire in April 2020, which reflects a one-year authorization period rather than the two-year period DESC and GENCO had requested. In granting the authorization for a shorter period, FERC cited certain regulatory and legislative proceedings at the state level, as well as certain legal proceedings, arising from the NND Project that could affect DESC's and GENCO's circumstances. Were adverse developments to occur with respect to these uncertainties, the ability of DESC or GENCO to secure renewal of this short-term borrowing authority may be adversely impacted.

DESC is obligated with respect to an aggregate of $68 million of industrial revenue bonds which are secured by letters of ~~credit issued by TD Bank N.A.~~credit. These letters of credit expire, subject to renewal, in the fourth quarter of ~~2019.~~

2020.

DESC ~~participates~~received FERC approval to enter into an inter-company credit agreement in April 2019 with Dominion Energy under which DESC may have short-term borrowings outstanding up to $900 million. At March 31, 2020, DESC had borrowings outstanding under this credit agreement totaling $486 million, which are recorded in affiliated and related party payables in DESC’s Consolidated Balance Sheets. For the three months ended March 31, 2020, DESC recorded interest charges of $2 million.

DESC participated in a utility money pool with SCANA and another regulated subsidiary of ~~SCANA.~~SCANA through April 2019. Fuel Company and GENCO remain in the utility money pool. Money pool borrowings and investments bear interest at short-term market rates. For the three months ended March 31, 2020, DESC recorded interest income from money pool transactions of $1 million, and for the same period DESC recorded interest expense from money pool transactions of $1 million. For the three months ended March 31, 2019, DESC recorded interest income from money pool transactions of $3 million, and for the same period DESC recorded interest expense from money pool transactions of $3 million. ~~Interest income and interest expense for the corresponding period in 2018 were not significant. DESC~~Fuel Company had outstanding money pool borrowings due to an affiliate of ~~$555~~$239 million and noGENCO had investments due from an affiliate of $3 million at March 31, ~~2019.~~2020. At December 31, ~~2018 DESC~~2019, Fuel Company had outstanding money pool borrowings due to an affiliate of ~~$282~~$219 million and GENCO had investments due from an affiliate of ~~$353~~$9 million. ~~For each period presented, money pool borrowings were made by~~

~~Fuel Company and GENCO, and money pool investments were made by DESC.~~ On its Consolidated Balance ~~Sheet,~~Sheets, DESC includes money pool borrowings within ~~Affiliated~~affiliated and related party payables and money pool investments within ~~Affiliated companies~~affiliated and related party receivables.

6. INCOME TAXES

DESC has recorded an estimate of excess deferred income tax amortization in 2020. The reversal of these excess deferred income taxes will impact the effective tax rate and rates charged to customers. See Note 3 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2019 for more information.

DESC’s effective tax rate for the three months ended March 31, ~~2019~~2020 is ~~9.7%~~19.9% compared to ~~23.4%~~9.7% for the three months ended March 31, ~~2018.~~2019. Variances in the effective tax rate are primarily driven by charges resulting from the SCANA Combination. In connection with the SCANA Merger Approval Order, Dominion Energy committed to forgo, or limit, the recovery of certain income tax-related regulatory assets associated with the NND Project. DESC's 2019 effective tax rate reflects income tax expense of $198 million in satisfaction of this commitment.

In Also in the first quarter 2019, DESC’s unrecognized tax benefits increased by $51 million and income tax expense increased by $40 million related to a state income tax position taken in prior years. ~~It is reasonably possible~~

In March 2020, the CARES Act was enacted which includes several significant business tax provisions that ~~this unrecognized~~modify or temporarily suspend certain provisions of the 2017 Tax Reform Act. The CARES Act provisions are intended to improve cash flow and liquidity by, among other things, providing a temporary five-year carryback for certain net operating losses, accelerating the refund of previously generated corporate alternative minimum tax ~~benefit could be settled in~~credits, and temporarily loosening the ~~next twelve months, and as such it is included in taxes accrued on~~business interest limitation to 50% of adjusted taxable income for certain businesses. While DESC intends to utilize the ~~Consolidated Balance Sheet.~~

income tax provisions of the CARES Act to accelerate the recognition of certain tax attributes, where applicable, they are not expected to provide a material benefit.

As of March 31, ~~2019,~~2020, there have been no other material changes in DESC’s unrecognized tax benefits. See Note 67 to the Consolidated Financial Statements in DESC's Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 for a discussion of these unrecognized tax ~~benefits and potential changes due to the SCANA Combination.~~

DESC has significant federal and state net operating loss carryforward-related deferred tax assets where the utilization of these tax benefits may be limited in future periods due to the SCANA Combination. For the period ended March 31, 2019, DESC has concluded a valuation allowance is not required on these deferred tax assets. If DESC concludes a valuation allowance is required in future periods, the impact could be material.

The 2017 Tax Reform Act limits the deductibility of interest expense to 30% of adjusted taxable income for certain businesses, with any disallowed interest carried forward indefinitely. Subject to additional guidance in yet to be finalized regulations, DESC expects its interest expense to be deductible in 2019.

benefits.

7. DERIVATIVE FINANCIAL INSTRUMENTS

~~Derivative assets~~

DESC’s accounting policies, objectives, and ~~liabilities~~strategies for using derivative instruments are ~~presented gross on~~discussed in Note 2 in the Consolidated ~~Balance Sheets and are measured at fair value.~~Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2019. See Note 8 for further information about fair value measurements and associated valuation methods for derivatives.

Derivative assets and liabilities are presented gross on the Consolidated Balance Sheets. DESC’s derivative contracts include over-the-counter ~~transactions, which~~transactions. Over-the-counter contracts are bilateral contracts that are transacted directly with a third party. Certain over-the-counter contain contractual rights of setoff through master netting arrangements and contract default provisions. In addition, the contracts are subject to conditional rights of setoff through counterparty nonperformance, insolvency, or other conditions.

In general, most over-the-counter transactions are subject to collateral requirements.

~~Pursuant~~ Types of collateral for over-the-counter contracts include cash, letters of credit, and, in some cases, other forms of security, none of which are subject to ~~regulatory orders, interest rate~~restrictions. Cash collateral is used in the table below to offset derivative assets and liabilities.

All of DESC’s derivative instruments contain credit-related contingent provisions. These provisions require DESC to provide collateral upon the occurrence of specific events, primarily a credit rating downgrade. If the credit-related contingent features underlying the instruments that are in a liability position and not fully collateralized with cash were fully triggered as of March 31, 2020, DESC would have been required to post $10 million of additional collateral to its counterparties. The collateral that would be required to be posted includes the impacts of any amounts already posted for derivatives ~~entered into by~~per contractual terms. DESC ~~after October 2013 have~~had posted $4 million of collateral at March 31, 2020 related to derivatives with credit-related contingent provisions that are in a liability position and not ~~been designated for accounting purposes as cash flow hedges, and~~fully collateralized with cash. The aggregate fair value ~~changes~~of all derivative instruments with credit-related contingent provisions that are in a liability position and ~~settlement amounts~~not fully collateralized with cash was $14 million at March 31, 2020. DESC’s derivatives with credit related to them have been recorded as regulatory assets and liabilities. Settlement losses on swaps generally have been amortized over the lives of subsequent debt issuances, and gains have been amortized to interest expense or have been applied as otherwise directed by the South Carolina Commission. See Note 14 regarding the settlement gains realizedcontingent provisions that were in ~~the first quarter of 2018.~~

a liability position were fully collateralized with cash at December 31,2019.

The table below presents derivative balances by type of financial instrument, if the gross amounts recognized in the Consolidated Balance Sheets were netted with derivative instruments and cash collateral received or paid:

	March 31, 2020								December 31, 2019
	Gross Amounts Not Offset in the Consolidated Balance Sheet								Gross Amounts Not Offset in the Consolidated Balance Sheet
(millions)	Gross Liabilities Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Paid		Net Amounts		Gross Liabilities Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Paid		Net Amounts
Interest rate contracts:
Over-the-counter	$	33	$	—	$	23	$	10	$	19	$	—	$	19	$	—
Total derivatives	$	33	$	—	$	23	$	10	$	19	$	—	$	19	$	—

March 31, 2019 December 31, 2018
Gross Amounts Not Offset in the Consolidated Balance Sheet Gross Amounts Not Offset in the Consolidated Balance Sheet
(millions) Gross Liabilities Presented in the Consolidated Balance Sheet Financial Instruments Cash Collateral Paid Net Amounts Gross Liabilities Presented in the Consolidated Balance Sheet Financial Instruments Cash Collateral Paid Net Amounts
Interest rate contracts:
Over-the-counter $ 14
$ —
$ 14
$ —
$ 11
$ —
$ 11
$ —
Total derivatives $ 14
$ —
$ 14
$ —
$ 11
$ —
$ 11
$ —

Volumes

The following table presents the volume of derivative activity at March 31, ~~2019.~~2020. These volumes are based on open derivative positions and represent the combined absolute value of their long and short positions.

		Current				Noncurrent
Interest rate⁽¹⁾		$	—			$	71,400,000

(1)	Maturity is determined based on final settlement period.

Current Noncurrent
Interest rate ⁽¹⁾
$ —
$ 71,400,000

⁽¹⁾~~Maturity is determined based on final settlement period.~~

Fair Value and Gains and Losses on Derivative Instruments

The following tables present the fair values of derivatives and where they are presented in the Consolidated Balance Sheets:

(millions)	Fair Value - Derivatives under Hedge Accounting		Fair Value - Derivatives not under Hedge Accounting		Total Fair Value
At March 31, 2020
Current Liabilities
Interest rate	$	1	$	1	$	2
Total current derivative liabilities⁽¹⁾		1		1		2
Noncurrent Liabilities
Interest rate		18		13		31
Total noncurrent derivative liabilities⁽²⁾		18		13		31
Total derivative liabilities	$	19	$	14	$	33
At December 31, 2019
Current Liabilities
Interest rate	$	1	$	1	$	2
Total current derivative liabilities⁽¹⁾		1		1		2
Noncurrent Liabilities
Interest rate		11		6		17
Total noncurrent derivative liabilities⁽²⁾		11		6		17
Total derivative liabilities	$	12	$	7	$	19

(1)	Current derivative liabilities are presented in other current liabilities in the Consolidated Balance Sheets.

(2)	Noncurrent derivative liabilities are presented in other deferred credits and other liabilities in the Consolidated Balance Sheets.

(millions) Fair Value - Derivatives under Hedge Accounting Fair Value - Derivatives not under Hedge Accounting Total Fair Value
At March 31, 2019
Current Liabilities
Interest rate $ 1
$ —
$ 1
  Total current derivative liabilities ⁽¹⁾
1
—
1
Noncurrent Liabilities
Interest rate 9
4
13
  Total noncurrent derivative liabilities ⁽²⁾
9
4
13
  Total derivative liabilities $ 10
$ 4
$ 14

At December 31, 2018
Current Liabilities
Interest rate $ 1
$ —
$ 1
  Total current derivative liabilities ⁽¹⁾
1
—
1
Noncurrent Liabilities
Interest rate 7
3
10
  Total noncurrent derivative liabilities ⁽²⁾
7
3
10
  Total derivative liabilities $ 8
$ 3
$ 11

⁽¹⁾ ~~Current derivative liabilities are presented in other current liabilities in the Consolidated Balance Sheets.~~

⁽²⁾ ~~Noncurrent derivative liabilities are presented in other deferred credits and other liabilities in the Consolidated Balance Sheets.~~

The following tables present the gains and losses on derivatives, as well as where the associated activity is presented in its Consolidated Balance Sheets and Statements of Comprehensive Income (Loss):

Derivatives in Cash Flow Hedging Relationships

(millions)	Gain (loss) Reclassified from Deferred Accounts into Income		Increase (Decrease) in Derivatives Subject to Regulatory Treatment⁽¹⁾
Three Months Ended March 31, 2020
Derivative type and location of gains (losses):
Interest rate⁽²⁾	$	—	$	(6	)
Total	$	—	$	(6	)
Three Months Ended March 31, 2019
Derivative type and location of gains (losses):
Interest rate⁽²⁾	$	—	$	(2	)
Total	$	—	$	(2	)

(1)	Represents net derivative activity deferred into and amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/ liabilities have no associated effect in the Consolidated Statements of Comprehensive Income (Loss).

(2)	Amounts recorded in DESC’s Consolidated Statements of Comprehensive Income (Loss) are classified in interest charges.

Derivatives in Cash Flow Hedging Relationships
Increase (Decrease) in Derivatives Subject to Regulatory Treatment ⁽¹⁾
(millions)
Three Months Ended March 31, 2019
Derivative type and location of gains (losses):
  Interest rate $ (2 )
  Total $ (2 )

Three Months Ended March 31, 2018
Derivative type and location of gains (losses):
  Interest rate $ 2
  Total $ 2

⁽¹⁾ Represents net derivative activity deferred into and amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/ liabilities have no associated effect in the Consolidated Statements of Comprehensive Income (Loss).

Derivatives Not designated as Hedging Instruments
(millions)
Increase (Decrease) in Derivatives Subject to Regulatory Treatment ⁽¹⁾

Amount of Gain (Loss) Recognized in Income on Derivatives ⁽²⁾
Three months ended March 31, 2019
2018
Location 2019
2018
Derivative type and location of gains (losses):
Interest rate contracts $ (1 ) $ 65
Other Income $ —
$ 115
Total $ (1 ) $ 65
Other Income $ —
$ 115

⁽¹⁾Represents net derivative activity deferred into and amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/liabilities have no associated effect in the Consolidated Statements of Comprehensive Income (Loss).

⁽²⁾Includes derivative activity amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/liabilities have no associated effect in the Consolidated Statements of Comprehensive Income (Loss).

~~Credit Risk Considerations~~

Certain derivative contracts contain contingent credit features. These features may include (i) material adverse change clauses or payment acceleration clauses that could result in immediate payments or (ii) the posting of letters of credit or termination of the derivative contract before maturity if specific events occur, such as a credit rating downgrade below investment grade or failure to post collateral.

Derivative Contracts with Credit Contingent Features
(millions) March 31, 2019 December 31, 2018
in Net Liability Position
Aggregate fair value of derivatives in net liability position $ 14
$ 11
Fair value of collateral already posted 14
11
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered $ —
$ —

8. FAIR VALUE MEASUREMENTS, INCLUDING DERIVATIVES

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date. Fair values are based on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs to valuations. This includes not only the credit standing of counterparties involved and the impact of credit enhancements but also the impact of

DESC’s own nonperformance risk on their liabilities. Fair value measurements assume that the transaction occurs in the principal market for the asset or liability (the market with the most volume and activity for the asset or liability from the perspective of the reporting entity), or in the absence of a principal market, the most advantageous market for the asset or liability (the market in which the reporting entity would be able to maximize the amount received or minimize the amount paid). DESC applies fair value measurements ~~to interest rate assets and liabilities. DESC’s interest rate swap agreements~~ are ~~valued using discounted cash flow models with independently sourced data. DESC applies credit adjustments to its derivative fair values~~made in accordance with the ~~requirements described above.~~

~~Inputs and Assumptions~~

~~Fair value is based~~policies discussed in Note 9 to the Consolidated Financial Statements in DESC’s Annual Report on actively-quoted market prices, if available. In the absence of actively-quoted market prices, price information is sought from external sources, including industry publications, and to a lesser extent, broker quotes. When evaluating pricing information, DESC considers the ability to transact at the quoted price. Periodically, inputs to valuation models are reviewed and revised as needed, based on historical information, updated market data, market liquidity and relationships, and changes in third-party sources.

~~The inputs and assumptions used in measuring fair value for interest rate derivative contracts include the following:~~

~~Interest rate curves~~

~~Credit quality of counterparties and DESC~~

~~Notional value~~

~~Credit enhancements~~

~~Time value~~

~~Levels~~

~~DESC utilizes the following fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels:~~

~~Level 1-Quoted prices (unadjusted) in active markets for identical assets and liabilities that they have the ability to access at the measurement date.~~

~~Level 2-Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable~~Form 10-K for the ~~asset or liability, including quoted prices~~year ended December 31, 2019. See Note 7 in this report for ~~similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for~~further information about the ~~asset or liability,~~DESC’s derivatives and ~~inputs that are derived from observable market data by correlation or other means. Instruments categorized in Level 2 include interest rate swaps.~~

~~Level 3-Unobservable inputs for the asset or liability, including situations where there is little, if any, market activity for the asset or liability.~~

The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable data (Level 3). In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. In these cases, the lowest level input that is significant to a fair value measurement in its entirety determines the applicable level in the fair value hierarchy. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability.

hedge accounting activities.

Recurring Fair Value Measurements

~~Fair value measurements~~

The following table presents DESC’s liabilities that are ~~separately disclosed by level within the~~measured at fair value ~~hierarchy.~~

~~All of DESC's interest rate swap agreements were in~~on a ~~liability position~~recurring basis for ~~all periods presented. Such agreements are valued using discounted cash flow models with independently sourced data,~~each hierarchy level, including both current and ~~are considered to be Level 2 fair value measurements. The fair value of these derivatives at March 31, 2019 was $14 million, and at December 31, 2018 was $11 million.~~noncurrent portions:

(millions)	Level 1		Level 2		Level 3		Total
At March 31, 2020
Liabilities
Interest rate	$	—	$	33	$	—	$	33
Total liabilities	$	—	$	33	$	—	$	33
At December 31, 2019
Liabilities
Interest rate	$	—	$	19	$	—	$	19
Total liabilities	$	—	$	19	$	—	$	19

Fair Value of Financial Instruments

Substantially all of DESC’s financial instruments are recorded at fair value, with the exception of the instruments described below, which are reported at historical cost. Estimated fair values have been determined using available market information and valuation methodologies considered appropriate by management. The carrying amount of financial instruments classified within current assets and current liabilities are representative of fair value because of the short-term nature of these instruments. For financial instruments that are not recorded at fair value, the carrying amounts and estimated fair values are as follows:

	March 31, 2020				December 31, 2019
(millions)	Carrying Amount		Estimated Fair Value⁽¹⁾		Carrying Amount		Estimated Fair Value⁽¹⁾
Long-term debt⁽²⁾	$	3,359	$	4,060	$	3,358	$	4,262
Affiliated long-term debt		230		230		230		230

March 31, 2019 December 31, 2018
(millions)
Carrying
Amount

Estimated
Fair Value ⁽¹⁾

Carrying
Amount

Estimated
Fair Value ⁽¹⁾
Long-term debt ⁽²⁾
$ 3,975
$ 4,567
$ 5,146
$ 5,470

(1)

⁽¹⁾

Fair value is estimated ~~based on net present value calculations~~ using ~~independently sourced~~ market ~~data that incorporate a developed discount rate using similarly rated long-term~~prices, where available, and interest rates currently available for issuance of debt ~~along~~ with ~~benchmark interest rates.~~similar terms and remaining maturities. All fair value measurements are classified as Level 2. The carrying amount of debt issuances with short-term maturities and variable rates refinanced at current market rates is a reasonable estimate of their fair value.

(2)
⁽²⁾	Carrying amount includes current portions included in securities due within one year and amounts which represent the unamortized debt issuance costs and discount or premium.

9. EMPLOYEE BENEFIT PLANS

Components of net periodic benefit cost recorded by DESC were as follows:

(millions)	Pension Benefits						Other Postretirement Benefits
Three Months Ended March 31,	2020			2019			2020		2019
Service cost	$	3		$	4		$	1	$	1
Interest cost		6			8			2		2
Expected return on assets		(11	)		(10	)		—		—
Amortization of actuarial losses		2			4			—		—
Net periodic benefit cost	$	—		$	6		$	3	$	3

Millions of dollars Pension Benefits Other Postretirement Benefits
Three months ended March 31, 2019 2018 2019 2018
Service cost $ 4
$ 4
$ 1
$ 1
Interest cost 8
7
2
2
Expected return on assets (10 ) (12 ) —
—
Amortization of actuarial losses 4
3
—
—
Net periodic benefit cost $ 6
$ 2
$ 3
$ 3

No significant contribution to the pension trust is expected for the ~~foreseeable future~~remainder of 2020 based on current market conditions and assumptions, nor is a limitation on benefit payments expected to apply. DESC recovers current pension costs through either a rate rider that may be adjusted annually for retail electric operations or through cost of service rates for gas operations.

~~Voluntary Retirement Program~~

~~In March 2019, Dominion Energy announced~~

10. COMMITMENTS AND CONTINGENCIES

As a ~~voluntary retirement program to employees, including employees~~result of ~~DESC, that meet certain age and service requirements. DESC expects to incur a charge~~issues generated in the ~~second quarter~~ordinary course of ~~2019~~business, DESC is involved in legal proceedings before various courts and is periodically subject to governmental examinations (including by regulatory authorities), inquiries and investigations. Certain legal proceedings and governmental examinations involve demands for unspecified amounts of damages, are in an initial procedural phase, involve uncertainty as ~~determinations~~to the outcome of pending appeals or motions, or involve significant factual issues that need to be resolved, such that it is not possible for DESC to estimate a range of possible loss. For such matters that DESC cannot estimate, a statement to this effect is made in the description of the matter. Other matters may have progressed sufficiently through the litigation or investigative processes such that DESC is able to estimate a range of possible loss. For legal proceedings and governmental examinations that DESC is able to reasonably estimate a range of possible losses, an estimated range of possible loss is provided, in excess of the accrued liability (if any) for such matters. Any accrued liability is recorded on a gross basis with a receivable also recorded for any probable insurance recoveries. Estimated ranges of loss are ~~made concerning~~inclusive of legal fees and net of any anticipated insurance recoveries. Any estimated range is based on currently available information and involves elements of judgment and significant uncertainties. Any estimated range of possible loss may not represent DESC’s maximum possible loss exposure. The circumstances of such legal proceedings and governmental examinations will change from time to time and actual results may vary significantly from the current estimate. For current proceedings not specifically reported below, management does not anticipate that the liabilities, if any, arising from such proceedings would have a material effect on DESC’s financial position, liquidity or results of operations.

Environmental Matters

DESC is subject to costs resulting from a number of ~~employees that elect~~federal, state and local laws and regulations designed to protect human health and the environment. These laws and regulations affect future planning and existing operations. They can result in increased capital, operating and other costs as a result of compliance, remediation, containment and monitoring obligations.

From a regulatory perspective, DESC and GENCO continually monitor and evaluate their current and projected emission levels and strive to comply with all state and federal regulations regarding those emissions. DESC and GENCO participate in the ~~program.~~ SO₂and NO_X emission allowance programs with respect to coal plant emissions and also have constructed additional pollution control equipment at their coal-fired electric generating plants. These actions are expected to address many of the rules and regulations discussed herein.

Air

CAA

The ~~voluntary retirement~~CAA, as amended, is a comprehensive program utilizing a broad range of regulatory tools to protect and preserve the nation's air quality. At a minimum, states are required to establish regulatory programs to address all requirements of the CAA. However, states may choose to develop regulatory programs that are more restrictive. Many of DESC’s facilities are subject to the CAA’s permitting and other requirements.

MATS

In February 2019, the EPA published a proposed rule to reverse its previous finding that it is appropriate and necessary to regulate hazardous air pollutant emissions from coal- and oil-fired electric generating units. In April 2020, the EPA finalized its reconsideration and issued a final rule. The final rule is consistent with the EPA’s February 2019 proposal, and determines that it is not appropriate and necessary to regulate mercury and hazardous air pollutant emissions from coal- and oil-fired electric generating units. The final rule also states that the MATS rule remains in place and the emissions standards for affected coal- and oil-fired electric generating units will not ~~compromise safety or DESC's ability~~change. The effective date of the action will be 60 days after publication in the Federal Register. DESC is complying with the applicable requirements of the rule and does not expect any impacts to ~~comply with applicable laws and regulations. While~~its operations.

Ozone Standards

The EPA published final non-attainment designations for the October 2015 ozone standard in June 2018. States have until August 2021 to develop plans to address the new standard. Until the states have developed implementation plans for the standard, DESC is unable to ~~estimate~~predict whether or to what extent the ~~amount,~~new rules will ultimately require additional controls. The expenditures required to implement additional controls could have a material impact on DESC’s results of operations and cash flows.

ACE Rule

In July 2019, the ~~charge~~EPA published the final rule informally referred to as the ACE Rule, as a replacement for the Clean Power Plan. The ACE Rule applies to existing coal-fired power plants. The final rule includes unit-specific performance standards based on the degree of emission reduction levels achievable from unit efficiency improvements to be determined by the permitting agency. The ACE Rule requires states to develop plans by July 2022 to implement these performance standards. These state plans must be approved by the EPA by January 2024. While the impacts of this rule could be material to ~~DESC's~~DESC’s results of operations, financial condition and/or cash flows, the existing regulatory framework in South Carolina provides rate recovery mechanisms that could substantially mitigate any such impacts for DESC.

Carbon Regulations

In August 2016, the EPA issued a draft rule proposing to reaffirm that a source’s obligation to obtain a PSD or Title V permit for GHGs is triggered only if such permitting requirements are first triggered by non-GHG, or conventional, pollutants that are regulated by the New Source Review program, and to set a significant emissions rate at 75,000 tons per year of CO2 equivalent emissions under which a source would not be required to apply BACT for its GHG emissions. Until the EPA ultimately takes final action on this rulemaking, DESC cannot predict the impact to its results of operations, financial ~~condition.~~

condition and/or cash flows.

In December 2018, the EPA proposed revised Standards of Performance for Greenhouse Gas Emissions from New, Modified, and Reconstructed Stationary Sources. The proposed rule would amend the previous determination that the best system of emission reduction for newly constructed coal-fired steam generating units is no longer partial carbon capture and storage. Instead, the proposed revised best system of emission reduction for this source category is the most efficient demonstrated steam cycle (e.g., supercritical steam conditions for large units and subcritical steam conditions for small units) in combination with the best operating practices.

Oil and Gas NSPS

In August 2012, the EPA issued an NSPS impacting new and modified facilities in the natural gas production and gathering sectors and made revisions to the NSPS for natural gas processing and transmission facilities. These rules establish equipment performance specifications and emissions standards for control of VOC emissions for natural gas production wells, tanks, pneumatic controllers, and compressors in the upstream sector. In June 2016, the EPA issued another NSPS regulation, for the oil and natural gas sector, to regulate methane and VOC emissions from new and modified facilities in transmission and storage, gathering and boosting, production and processing facilities. All projects which commenced construction after September 2015 are required to comply with this regulation. In October 2018, the EPA published a proposed rule reconsidering and amending portions of the 2016 rule, including but not limited to, the fugitive emissions requirements at well sites and compressor stations. The amended portions of the 2016 rule were effective immediately upon publication. Until the proposed rule regarding reconsideration is final, DESC is implementing the 2016 regulation. DESC is still evaluating whether potential impacts on results of operations, financial condition and/or cash flows related to this matter will be material.

Water

The CWA, as amended, is a comprehensive program requiring a broad range of regulatory tools including a permit program to authorize and regulate discharges to surface waters with strong enforcement mechanisms. DESC must comply with applicable aspects of the CWA programs at its operating facilities.

Regulation 316(b)

In October 2014, the final regulations under Section 316(b) of the CWA that govern existing facilities and new units at existing facilities that employ a cooling water intake structure and that have flow levels exceeding a minimum threshold became effective. The rule establishes a national standard for impingement based on seven compliance options, but forgoes the creation of a single technology standard for entrainment. Instead, the EPA has delegated entrainment technology decisions to state regulators. State regulators are to make case-by-case entrainment technology determinations after an examination of five mandatory facility-specific factors, including a social cost-benefit test, and six optional facility-specific factors. The rule governs all electric generating stations with water withdrawals above 2 MGD, with a heightened entrainment analysis for those facilities over 125 MGD. DESC has 5 facilities that are subject to the final regulations. DESC is also working with the EPA and state regulatory agencies to assess the applicability of Section 316(b) to 5 hydroelectric facilities. DESC anticipates that it may have to install impingement control technologies at certain of these stations that have once-through cooling systems. DESC is currently evaluating the need or potential for entrainment controls under the final rule as these decisions will be made on a case-by-case basis after a thorough review of detailed biological, technology, cost and benefit studies. DESC is conducting studies and implementing plans as required by the rule to determine appropriate intake structure modifications at certain facilities to ensure compliance with this rule. While the impacts of this rule could be material to DESC’s results of operations, financial condition and/or cash flows, the existing regulatory framework in South Carolina provides rate recovery mechanisms that could substantially mitigate any such impacts for DESC.

~~10. COMMITMENTS AND CONTINGENCIES~~

Effluent Limitations Guidelines

In September 2015, the EPA released a final rule to revise the ELG Rule. The final rule establishes updated standards for wastewater discharges that apply primarily at coal and oil steam generating stations. Affected facilities are required to convert from wet to dry or closed cycle coal ash management, improve existing wastewater treatment systems and/or install new wastewater treatment technologies in order to meet the new discharge limits. In April 2017, the EPA granted two separate petitions for reconsideration of the final ELG Rule and stayed future compliance dates in the rule. Also in April 2017, the U.S. Court of Appeals for the Fifth Circuit granted the EPA’s request for a stay of the pending consolidated litigation challenging the rule while the EPA addresses the petitions for reconsideration. In September 2017, the EPA signed a rule to postpone the earliest compliance dates for certain waste streams regulations in the final ELG Rule from November 2018 to November 2020; however, the latest date for compliance for these regulations remains December 2023. While the impacts of this rule could be material to DESC’s results of operations, financial condition and/or cash flows, as DESC expects that wastewater treatment technology retrofits will be required at Williams and Wateree generating stations, the existing regulatory framework in South Carolina provides rate recovery mechanisms that could substantially mitigate any such impacts for DESC.

In December 2019, the EPA released proposed revisions to the ELG Rule that, if adopted, could extend the deadlines for compliance with certain standards at several facilities. While the impacts of this rule could be material to DESC’s results of operations, financial condition and/or cash flows, the existing regulatory frameworks in South Carolina provide rate recovery mechanisms that could substantially mitigate any such impacts for the regulated electric utilities.

Waste Management and Remediation

The operations of DESC are subject to a variety of state and federal laws and regulations governing the management and disposal of solid and hazardous waste, and release of hazardous substances associated with current and/or historical operations. The CERCLA, as amended, and similar state laws, may impose joint, several and strict liability for cleanup on potentially responsible parties who owned, operated or arranged for disposal at facilities affected by a release of hazardous substances. In addition, many states have created programs to incentivize voluntary remediation of sites where historical releases of hazardous substances are identified and property owners or responsible parties decide to initiate cleanups.

From time to time, DESC may be identified as a potentially responsible party in connection with the alleged release of hazardous substances or wastes at a site. Under applicable federal and state laws, DESC could be responsible for costs associated with the investigation or remediation of impacted sites, or subject to contribution claims by other responsible parties for their costs incurred at such sites. DESC also may identify, evaluate and remediate other potentially impacted sites under voluntary state programs. Remediation costs may be subject to reimbursement under DESC’s insurance policies, rate recovery mechanisms, or both. Except as described below, DESC does not believe these matters will have a material effect on results of operations, financial condition and/or cash flows.

DESC has 4 decommissioned MGP sites in South Carolina that are in various states of investigation, remediation and monitoring under work plans approved by, or under review by, the SCDHEC or the EPA. DESC anticipates that activities at these sites will continue through 2025 at an estimated cost of $10 million. In September 2018, DESC submitted an updated remediation work plan for one site to SCDHEC, which if approved, would increase costs by approximately $8 million. DESC expects to recover costs arising from the remediation work at all four sites through rate recovery mechanisms and as of March 31, 2020, deferred amounts, net of amounts previously recovered through rates and insurance settlements, totaled $23 million and are included in regulatory assets.

Ash Pond and Landfill Closure Costs

In April 2015, the EPA enacted a final rule regulating CCR landfills, existing ash ponds that still receive and manage CCRs, and inactive ash ponds that do not receive, but still store, CCRs. DESC currently has inactive and existing CCR ponds and CCR landfills subject to the final rule at 3 different facilities. This rule created a legal obligation for DESC to retrofit or close all of its inactive and existing ash ponds over a certain period of time, as well as perform required monitoring, corrective action, and post-closure care activities as necessary.

In December 2016, legislation was enacted that creates a framework for EPA- approved state CCR permit programs. In August 2017, the EPA issued interim guidance outlining the framework for state CCR program approval. The EPA has enforcement authority until state programs are approved. The EPA and states with approved programs both will have authority to enforce CCR requirements under their respective rules and programs. In September 2017, the EPA agreed to reconsider portions of the CCR rule in response to two petitions for reconsideration. In March 2018, the EPA proposed certain changes to the CCR rule related to issues remanded as part of the pending litigation and other issues the EPA is reconsidering. Several of the proposed changes would allow states with approved CCR permit programs additional flexibility in implementing their programs. In July 2018, the EPA promulgated the first phase of changes to the CCR rule. Until all phases of the CCR rule are promulgated, DESC cannot forecast potential incremental impacts or costs related to existing coal ash sites in connection with future implementation of the 2016 CCR legislation and reconsideration of the CCR rule. In August 2018, the U.S. Court of Appeals for the D.C. Circuit issued its decision in the pending challenges of the CCR rule, vacating and remanding to the EPA three provisions of the rule. Until regulatory action is taken to incorporate the U.S. Court of Appeals for the D.C. Circuit’s decision, DESC is unable to make an estimate of the potential financial statement impacts associated with any future changes to the CCR rule in connection with the court’s remand.

Abandoned NND Project

A description of events and circumstances leading up to DESC's abandonment of the NND Project and subsequent regulatory, legislative, legal and investigative proceedings, as well as related impairments of NND Project and other costs are described in Note 1112 in DESC's Annual Report on Form 10-K for the year ended December 31, ~~2018.~~

2019.

SCANA Merger Approval Order

In accordance with the terms of the South Carolina Commission's SCANA Merger Approval Order, DESC adopted the Plan-B Levelized Customer Benefits Plan, effective February 2019, whereby the average bill for a DESC residential electric customer approximates that which resulted from the legislatively-mandated temporary reduction that had been put into effect by the South Carolina Commission in August 2018. DESC also recorded a significant impairment charge in the fourth quarter of 2018, which charge resulted from its conclusion that NND Project capital costs exceeding the amount established in the SCANA Merger Approval Order were probable of loss, regardless of whether the SCANA Combination was completed. In addition, in the first quarter of 2019, DESC ~~has~~ recorded the following charges and liabilities which arose from or are related to provisions in the SCANA Merger Approval Order.

•	A charge of $105 million ($79 million after-tax) related to certain assets that had been constructed in connection with the NND Project for which DESC committed to forgo recovery.

•

A regulatory liability for refunds and restitution of amounts previously collected from retail electric customers of $1.0 billion ($756 million after-tax), recorded as a reduction in operating revenue, which will be credited to customers over an estimated 11 years. In addition, a previously existing regulatory liability of $1.0 billion will be credited to customers over 20 years, which reflects amounts to be refunded to customers related to the monetization of guaranty settlement described in Note 2.

~~A charge of $105 million ($79 million net of tax) related to certain assets that had been constructed in connection with the NND Project for which DESC committed to forgo recovery.~~

•	A regulatory liability for refunds to natural gas customers totaling $2 million ($2 million after-tax).

A regulatory liability for refunds and restitution of amounts previously collected from retail electric customers of $1.0 billion pre-tax ($756 million net of tax), recorded as a reduction in operating revenue, which will be credited to customers over an estimated 11 years. In addition, a previously existing regulatory liability of $1.0 billion will be credited to customers over 20 years. These refunds include amounts to be refunded to customers related to the monetization of guaranty settlement described in Note 2.

•	A tax charge of $198 million related to $264 million of regulatory assets for which DESC committed to forgo recovery.

~~A regulatory liability for refunds to natural gas customers totaling $2 million pre-tax ($2 million net of tax).~~

~~A tax charge of $198 million related to $264 million of regulatory assets for which DESC committed to forgo recovery.~~

Further, except for rate adjustments for fuel and environmental costs, DSM costs, and other rates routinely adjusted on an annual or biannual basis, DESC will freeze retail electric base rates at current levels until January 1, 2021.

As discussed in Note 2, in April 2020, the South Carolina Commission issued an order vacating the portion of the SCANA Merger Approval Order requiring that new retail electric rates be implemented by January 1, 2021

The South Carolina Commission order also approved the removal of DESC's investment in certain transmission assets that have not been abandoned from BLRA capital costs. As of March 31, ~~2019,~~2020, such investment in these assets included ~~$334~~$345 million within utility plant, net and ~~$21~~$43 million within regulatory assets, which amount represents certain deferred operating costs. The South Carolina Commission approved deferral of these operating costs related to the investment until recovery of the transmission capital costs and associated deferred operating costs is addressed in a future rate proceeding. DESC believes these transmission capital and deferred operating costs are probable of recovery; however, if the South Carolina Commission were to disallow recovery of or a reasonable return on all or a portion of them, an impairment charge equal to the disallowed costs may be required.

~~Various parties filed petitions for rehearing or reconsideration~~

Claims and Litigation

The following describes certain legal proceedings involving DESC relating to events occurring before closing of the ~~Merger Approval Order. In January~~SCANA Combination. No reference to, or disclosure of, any proceeding, item or matter described below shall be construed as an admission or indication that such proceeding, item or matter is material. For certain of these matters, and unless otherwise noted therein, DESC is unable to estimate a reasonable range of possible loss and the related financial statement impacts, but for any such matter there could be a material impact to its results of operations, financial condition and/or cash flows. For the matters for which DESC is able to reasonably estimate a probable loss, the Consolidated Balance Sheets at both March 31, 2020 and December 31, 2019 include reserves of $492 million and insurance receivables of $6 million, included within other receivables. During the three months ended March 31, 2019, the ~~South Carolina Commission issued an order (1) granting the request~~Consolidated Statements of ~~various parties~~Comprehensive Income (Loss) includes charges of $166 million ($125 million after-tax), included within impairment of assets and finding that DESC was imprudent in its actions by not disclosing material information to the ORS and the South Carolina Commission with regard to costs incurred subsequent to March 2015 and (2) denying the petitions for rehearing or consideration as to other ~~issues raised in the various petitions. The deadline to appeal the Merger Approval Order and the order on rehearing expired in April 2019, and no party has sought appeal.~~

~~Contractor Bankruptcy Proceedings and Related Uncertainties~~

WEC’s reorganization plan became effective August 1, 2018. Initially, WEC had projected that its reorganization plan would pay in full or nearly in full its pre-petition trade creditors, including several of the WEC Subcontractors which have alleged non-payment by the Consortium for amounts owed for work performed on the NND Project and have filed liens on related property in Fairfield County, South Carolina. DESC is contesting approximately$285 million of such filed liens. Most of these asserted liens are “pre-petition” claims that relate to work performed by WEC Subcontractors before the WEC bankruptcy, although some of them are “post-petition” claims arising from work performed after the WEC bankruptcy. It is possible that the reorganization plan will not provide for payment in full or nearly in full to its pre-petition trade creditors. The shortfall could be significant. In addition, payments under the Toshiba Settlement are subject to reduction if WEC pays WEC Subcontractors holding pre-petition liens directly. Under these circumstances, DESC and Santee Cooper, each in its pro rata share, would be required to make Citibank, which purchased the scheduled payments under the Toshiba Settlement, whole for reductions related to valid subcontractor and vendor pre-petition liens up to $60 million ($33 million for DESC's 55% share).

DESC and Santee Cooper are responsible for amounts owed to WEC for valid work performed by WEC Subcontractors on the NND Project after the WEC bankruptcy filing (i.e., post-petition) until termination of the IAA (the IAA Period). In the WEC bankruptcy proceeding, deadlines were established for creditors of WEC to assert the amounts owed to such creditors prior to the WEC bankruptcy filing and during the IAA Period. Many of the WEC Subcontractors have filed such claims. DESC does not believe that the claims asserted related to the IAA Period will exceed the amounts previously funded for the currently asserted IAA-related claims, whether relating to claims already paid or those remaining to be paid. DESC intends to oppose any previously unasserted claim that is asserted against it, whether directly or indirectly by a claim through the IAA. To the extent any such claim is determined to be valid, DESC may be responsible for paying its 55% share thereof.

Further, some WEC Subcontractors who have made claims against WEC in the bankruptcy proceeding also filed against DESC and Santee Cooper in South Carolina state court for damages. The WEC Subcontractor claims in South Carolina state court include common law claims for pre-petition work, IAA Period work, and work after the termination of the IAA. Many of these claimants have also asserted construction liens against the NND Project site. While DESC cannot be assured that it will not have any exposure on account of unpaid WEC Subcontractor claims, which claims DESC is presently disputing, DESC believes it is unlikely that it will be required to make payments on account of such claims. To the extent any such claim is determined to be valid, DESC may be responsible for paying its 55% share thereof.

~~Claims and Litigation~~

charges.

Ratepayer Class Actions

In May 2018, a consolidated complaint against DESC, SCANA and the State of South Carolina was filed in the State Court of Common Pleas in Hampton County, South Carolina (the DESC Ratepayer Case). In September 2018, the court certified this case as a class action. The plaintiffs allege, among other things, that DESC was negligent and unjustly enriched, breached alleged fiduciary and contractual duties and committed fraud and misrepresentation in failing to properly manage the NND Project, and that DESC committed unfair trade practices and violated state anti-trust laws. The plaintiffs sought a declaratory judgment that DESC may not charge its customers for any past or continuing costs of the NND Project, sought to have SCANA and DESC’s assets frozen and all monies recovered from Toshiba and other sources be placed in a constructive trust for the benefit of ratepayers and sought specific performance of the alleged implied contract to construct the NND Project.

In December 2018, the State Court of Common Pleas in Hampton County entered an order granting preliminary approval of a class action settlement and a stay of pre-trial proceedings in the DESC Ratepayer Case. The settlement agreement, contingent upon the closing of the SCANA Combination, provided that SCANA and DESC would establish an escrow account and proceeds from the escrow account would be distributed to the class members, after payment of certain taxes, attorneys' fees and other expenses and administrative costs. The escrow account would include (1) up to $2.0 billion, net of a credit of up to $2.0 billion in future electric bill relief, which would inure to the benefit of the escrow account in favor of class members over a period of time established by the South Carolina Commission in its order related to matters before the South Carolina Commission related to the NND Project, (2) a cash payment of $115 million and (3) the transfer of certain DESC-owned real estate or sales proceeds from the sale of such properties, which counsel for the DESC Ratepayer Class estimate to have an aggregate value between $60 million and $85 million. At the closing of the SCANA Combination, SCANA and DESC funded the cash payment portion of the escrow account. The court ~~has scheduled~~held a fairness hearing on the settlement in May 2019. ~~Any distribution from~~In June 2019, the ~~escrow account~~court entered an order granting final approval of the settlement, which order became effective July 2019. In July 2019, DESC transferred $117 million representing the cash payment, plus accrued interest, to the plaintiffs. In addition, property with a net recorded value of $42 million is ~~subject to court approval. As a result,~~ in the ~~first quarter~~process of ~~2019, DESC recorded a charge of $157 million ($118 million after-tax), reflected~~being transferred to the plaintiffs in ~~impairment of assets and other charges in~~coordination with the ~~Consolidated Statements of Comprehensive Income (Loss).~~

court-appointed real estate trustee to satisfy the settlement agreement.

In September 2017, a purported class action was filed by Santee Cooper ratepayers against Santee Cooper, DESC, Palmetto Electric Cooperative, Inc. and Central Electric Power Cooperative, Inc. in the State Court of Common Pleas in Hampton County, South Carolina (the Santee Cooper Ratepayer Case). The allegations are substantially similar to those in the DESC Ratepayer Case. The plaintiffs seek a declaratory judgment that the defendants may not charge the purported class for reimbursement for past or future costs of the NND Project. In March 2018, the plaintiffs filed an amended complaint including as additional named defendants certain then current and former directors of Santee Cooper and SCANA. In June 2018, Santee Cooper filed a Notice of Petition for Original Jurisdiction with the Supreme Court of South ~~Carolina.~~Carolina which was denied. In December 2018, Santee Cooper filed its answer to the plaintiffs' fourth amended complaint and filed cross claims against DESC. In October 2019, Santee Cooper voluntarily consented to stay its cross claims against DESC pending the outcome of the trial of the underlying case. In November 2019, DESC removed the case to the U.S. District Court for the District of South Carolina. In December 2019, the plaintiffs and Santee Cooper filed a motion to remand the case to state court. In January 2020, the case was remanded to state court. In March 2020, the parties executed a settlement agreement relating to this matter as well as the Luquire Case and the Glibowski Case described below. The settlement agreement provides that Dominion Energy and Santee Cooper will establish a fund for the benefit of class members in the amount of $520 million, of which DESC’s portion is $320 million of shares of Dominion Energy common stock. Also in March 2020, the court granted preliminary approval for the settlement agreement. This case is pending.

In July 2019, a similar purported class action was filed by certain Santee Cooper ratepayers against DESC, ~~cannot currently estimate~~SCANA, Dominion Energy and former directors and officers of SCANA in the ~~financial statement impacts~~State Court of Common Pleas in Orangeburg, South Carolina (the Luquire Case). In August 2019, DESC, SCANA and Dominion Energy were voluntarily dismissed from the case. The claims are similar to the Santee Cooper Ratepayer Case. In March 2020, the parties executed a settlement agreement as described above relating to this matter ~~but there could be a material impact to its results of operations, financial condition and/or cash flows.~~

as well as the Santee Cooper Ratepayer Case and the Glibowski Case. This case is pending.

RICO Class Action

In January 2018, a purported class action was filed, and subsequently amended, against SCANA, DESC and certain former executive officers in the U.S. District Court for the District of South ~~Carolina.~~Carolina (the Glibowski Case). The plaintiff alleges, among other things, that SCANA, DESC and the individual defendants participated in an unlawful racketeering enterprise in violation of RICO and conspired to violate RICO by fraudulently inflating utility bills to generate unlawful proceeds. The DESC Ratepayer Class Action settlement described previously contemplates dismissal of claims by DESC ratepayers in this case against DESC, SCANA and their officers. In August 2019, the individual defendants filed motions to dismiss. In March 2020, the parties executed a settlement agreement as described above relating to this matter as well as the Santee Cooper Ratepayer Case and the Luquire Case. This case is pending. ~~DESC cannot currently estimate the financial statement impacts of this matter, but there could be a material impact to its results of operations, financial condition and/or cash flows.~~

~~Merger Action~~

SCANA Shareholder Litigation

In February 2018, a purported class action was filed against Dominion Energy and certain former directors of SCANA and DESC ~~and Dominion Energy~~ in the State Court of Common Pleas in Richland County, South Carolina (the Metzler Lawsuit). The plaintiff alleges, among other things, that defendants violated their fiduciary duties to shareholders by executing a merger agreement that would unfairly deprive plaintiffs of the true value of their SCANA stock, and that Dominion Energy aided and abetted these actions. Among other remedies, the plaintiff seeks to enjoin and/or rescind the merger. In February 2018, Dominion Energy removed the case to the U.S. District Court for the District of South Carolina and filed a Motion to Dismiss in March 2018. In August 2018, the case was remanded back to the State Court of Common Pleas in Richland County. Dominion Energy appealed the decision to remand to the U.S. Court of Appeals for the Fourth Circuit, where the appeal ~~has been~~was consolidated with another lawsuit regarding the SCANA Merger Agreement to which DESC is not a party. In June 2019, the U.S. Court of Appeals for the Fourth Circuit reversed the order remanding the case to state court. In September 2019, the U.S. District Court for the District of South Carolina granted the plaintiffs’ motion to consolidate the Metzler Lawsuit with another lawsuit regarding the SCANA Merger Agreement to which DESC is not a party. In October 2019, the plaintiffs filed an amended complaint against certain former directors and executive officers of SCANA and DESC, which stated substantially

similar allegations to those in the initial lawsuits as well as an inseparable fraud claim. In November 2019, the defendants filed a motion to dismiss. In April 2020, the U.S. District Court for the District of South Carolina denied the motion to dismiss. This case is pending. ~~DESC cannot currently estimate the financial statement impacts of this matter, but there could be a material impact to its results of operations, financial condition and/or cash flows.~~

Employment Class ~~Action~~Actions and Indemnification

In ~~July 2018,~~August 2017, a case was filed in the U.S. District Court for the District of South Carolina ~~was certified as a class action~~ on behalf of persons who were formerly employed at the NND Project. In July 2018, the court certified this case as a class action. In February 2019, certain of these plaintiffs filed an additional case, which case has been dismissed and the plaintiffs have joined the case filed in August 2017. The plaintiffs allege, among other things, that SCANA, DESC, Fluor Corporation and Fluor Enterprises, Inc. violated the Worker Adjustment and Retraining Notification Act in connection with the decision to stop construction at the NND Project. The plaintiffs allege that the defendants failed to provide adequate advance written notice of their terminations of employment and are seeking damages, which are estimated to be as much as ~~$75~~

~~million. DESC as co-owner~~$100 million for 100% of the NND ~~Project would have a 55% proportional share in any damages owed upon the ultimate outcome. The ultimate loss could rise due to the Fluor defendants seeking indemnification from DESC.~~

Project.

In September 2018, a case was filed in the State Court of Common Pleas in Fairfield County, South Carolina by Fluor Enterprises, Inc. and Fluor Daniel Maintenance Services, Inc. against DESC and Santee Cooper. The plaintiffs make claims for indemnification, breach of contract and promissory estoppel arising from, among other things, the defendants' alleged failure and refusal to defend and indemnify the Fluor defendants in the aforementioned case. These cases are pending.

FILOT Litigation and Related Matters

In November 2017, Fairfield County filed a complaint and a motion for temporary injunction against DESC in the State Court of Common Pleas in Fairfield County, South Carolina, making allegations of breach of contract, fraud, negligent misrepresentation, breach of fiduciary duty, breach of implied duty of good faith and fair dealing and unfair trade practices related to DESC’s termination of the FILOT agreement between DESC and Fairfield County related to the NND Project. The plaintiff sought a temporary and permanent injunction to prevent DESC from terminating the FILOT agreement. The plaintiff withdrew the motion for temporary injunction in December 2017. ~~DESC is currently unable to make an estimate of the potential impacts to its Consolidated Financial Statements related to this matter.~~ This case is pending.

Governmental Proceedings and Investigations

In June 2018, DESC received a notice of proposed assessment of approximately $410 million, excluding interest, from the SCDOR following its audit of DESC’s sales and use tax returns for the periods September 1, 2008 through December 31, 2017. The proposed assessment, which includes 100% of the NND Project, is based on the SCDOR’s position that DESC’s sales and use tax exemption for the NND Project does not apply because the facility will not become operational. DESC has protested the proposed assessment, which remains ~~pending, and recorded a $20 million liability in its Consolidated Balance Sheet as of March 31, 2019.~~

pending.

In September and October 2017, SCANA was served with subpoenas issued by the U.S. Attorney’s Office for the District of South Carolina and the Staff of the SEC’s Division of Enforcement seeking documents related to the NND Project. In February 2020, the SEC filed a complaint against SCANA, two of its former executive officers and DESC in the U.S. District Court for the District of South Carolina alleging that the defendants violated federal securities laws by making false and misleading statements about the NND Project. In April 2020, SCANA and DESC reached an agreement in principle with the Staff of the SEC’s Division of Enforcement to settle, without admitting or denying the allegations in the complaint. The Staff of the SEC’s Division of Enforcement has not yet presented the proposed settlement to the SEC. The agreement in principle would, among other things, require SCANA to pay a civil monetary penalty totaling $25 million, and SCANA and DESC to pay disgorgement and prejudgment interest totaling $112.5 million, which disgorgement and prejudgment interest amount will be deemed satisfied by the settlements in the SCANA Securities Class Action and the DESC Ratepayer Case. The proposed settlement is contingent on the review and approval of final documentation by SCANA, DESC and the Staff of the SEC’s Division of Enforcement and is subject to approval by the SEC and the U.S. District Court for the District of South Carolina. This matter is pending.

In addition, the South Carolina Law Enforcement Division is conducting a criminal investigation into the handling of the NND Project by SCANA and DESC. ~~These matters are pending. SCANA and DESC are~~Dominion Energy is cooperating fully with the investigations by the U.S. Attorney’s Office and the South Carolina Law Enforcement Division, including responding to additional subpoenas and document ~~requests; however, DESC cannot currently predict whether~~requests. Dominion Energy has also entered into a cooperation agreement with the U.S. Attorney’s Office and the South Carolina Attorney General’s Office. The cooperation agreement provides that in consideration of its full cooperation with these investigations to the satisfaction of both agencies, neither such agency will criminally prosecute or bring any civil action against Dominion Energy or any of its current, previous, or future direct or indirect subsidiaries related to ~~what extent it may incur a material liability.~~

the NND Project. These matters are pending.

Other Litigation

In December 2018, arbitration proceedings commenced between DESC and Cameco Corporation related to a supply agreement signed in May 2008. This agreement provides the terms and conditions under which DESC agreed to purchase uranium hexafluoride from

Cameco Corporation over a period from 2010 to 2020. Cameco Corporation alleges that DESC violated this agreement by failing to purchase the stated quantities of uranium hexafluoride for the 2017 and 2018 delivery years. DESC denies that it is in breach of the agreement and believes that it has reduced its purchase quantity within the terms of the agreement. This matter is pending.

In September 2019, a South Carolina state court jury awarded a judgment to the estate of Jose Larios in a wrongful death suit filed in June 2017 against DESC, of which DESC was apportioned $19 million. DESC holds general liability insurance coverage which is expected to provide payment for substantially all DESC’s liability in this matter. In October 2019, DESC filed a motion requesting a reduction in the judgment or, in the alternative, a new trial. In November 2019,DESC’s motion for a new trial was granted, setting aside the entire verdict amount. This matter is pending.

Contractor Bankruptcy Proceedings

Westinghouse’s Reorganization Plan became effective August 1, 2018. Initially, Westinghouse had projected that its Reorganization Plan would pay in full or nearly in full its pre-petition trade creditors, including several of the Westinghouse Subcontractors which have alleged non-payment by the Consortium for amounts owed for work performed on the NND Project and have filed liens on related property in Fairfield County, South Carolina. DESC is contesting approximately $285 million of such filed liens. Most of these asserted liens are “pre-petition” claims that relate to work performed by Westinghouse Subcontractors before the Westinghouse bankruptcy, although some of them are “post-petition” claims arising from work performed after the Westinghouse bankruptcy. It is possible that the Reorganization Plan will not provide for payment in full or nearly in full to its pre-petition trade creditors. The shortfall could be significant. In addition, payments under the Toshiba Settlement are subject to reduction if Westinghouse pays Westinghouse Subcontractors holding pre-petition liens directly. Under these circumstances, DESC and Santee Cooper, each in its pro rata share, would be required to make Citibank, N.A., which purchased the scheduled payments under the Toshiba Settlement, whole for reductions related to valid subcontractor and vendor pre-petition liens up to $60 million ($33 million for DESC's 55% share).

DESC and Santee Cooper were responsible for amounts owed to Westinghouse for valid work performed by Westinghouse Subcontractors on the NND Project after the Westinghouse bankruptcy filing (i.e., post-petition) until termination of the IAA (the IAA Period). In the Westinghouse bankruptcy proceeding, deadlines were established for creditors of Westinghouse to assert the amounts owed to such creditors prior to the Westinghouse bankruptcy filing and during the IAA Period. Many of the Westinghouse Subcontractors have filed such claims. In December 2019, DESC and Santee Cooper entered into a confidential settlement agreement with W Wind Down Co LLC resolving claims relating to the IAA.

Further, some Westinghouse Subcontractors who have made claims against Westinghouse in the bankruptcy proceeding also filed against DESC and Santee Cooper in South Carolina state court for damages. The Westinghouse Subcontractor claims in South Carolina state court include common law claims for pre-petition work, IAA Period work, and work after the termination of the IAA. Many of these claimants have also asserted construction liens against the NND Project site. While DESC cannot ~~determine the outcome or timing~~be assured that it will not have any exposure on account of ~~this matter.~~

unpaid Westinghouse Subcontractor claims, which claims DESC is presently disputing, DESC believes it is unlikely that it will be required to make payments on account of such claims.

Nuclear Insurance

Under Price-Anderson, DESC (for itself and on behalf of Santee-Cooper) maintains agreements of indemnity with the ~~NRC~~U.S. Nuclear Regulatory Commission that, together with private insurance, cover third-party liability arising from any nuclear incident occurring at Summer. Price-Anderson provides funds up to $14.0 billion for public liability claims that could arise from a single nuclear incident. Each nuclear plant is insured against this liability to a maximum of $450 million by ~~ANI~~American Nuclear Insurers with the remaining coverage provided by a mandatory program of deferred premiums that could be assessed, after a nuclear incident, against all owners of commercial nuclear reactors. Each reactor licensee is liable for up to $138 million per reactor owned for each nuclear incident occurring at any reactor in the ~~United States,~~U.S., provided that not more than $21 million of the liability per reactor would be assessed per year. DESC’s maximum assessment, based on its two-thirds ownership of Summer, would be $92 million per incident, but not more than $14 million per year. Both the maximum assessment per reactor and the maximum yearly assessment are adjusted for inflation at least every five years.

DESC currently maintains insurance policies (for itself and on behalf of Santee Cooper) with NEIL. The policies provide coverage to Summer for property damage and outage costs up to $2.75 billion resulting from an event of nuclear origin and up to $2.33 billion resulting from an event of a non-nuclear origin. The NEIL policies in aggregate, are subject to a

maximum loss of $2.75 billion for any single loss occurrence. The NEIL policies permit retrospective assessments under certain conditions to cover insurer’s losses. Based on the current annual premium, DESC’s portion of the retrospective premium assessment would not exceed ~~$23~~$24 million. DESC currently maintains an excess property insurance policy (for itself and on behalf of Santee Cooper) with EMANI. The policy provides coverage to Summer for property damage and outage costs up to $415 million resulting from an event of a non-nuclear origin. The EMANI policy permits retrospective assessments under certain conditions to cover insurer's losses. Based on the current annual premium, DESC's portion of the retrospective premium assessment would not exceed $2 million.

To the extent that insurable claims for property damage, decontamination, repair and replacement and other costs and expenses arising from an incident at Summer exceed the policy limits of insurance, or to the extent such insurance becomes unavailable in the future, and to the extent that DESC's rates would not recover the cost of any purchased replacement power, DESC will retain the risk of loss as a self-insurer. DESC has no reason to anticipate a serious nuclear or other incident. However, if such an incident were to occur, it likely would have a material impact on DESC's results of operations, cash flows and financial position.

~~Environmental~~

11. OPERATING SEGMENTS

In ~~August 2018, the EPA proposed the ACE rule~~December 2019, DESC realigned its segments which would replace the CPP. The EPA had proposed in 2017 to replace the CPP on the grounds that it exceeded the EPA’s statutory authority and in response to federal court proceedings and an Executive Order. If implemented, the proposed ACE rule would define the “best system of emission reduction” for GHG emissions from existing power plants as on-site, heat-rate efficiency improvements; provide states with a list of “candidate technologies” that can be used to establish standards of performance and incorporated into their state plans; update the EPA’s NSR permitting program to incentivize efficiency improvements at existing power plants; and align CAA section 111(d) general implementing regulations to give states adequate time and flexibility to develop their state plans. DESC is currently evaluating the ACE rule for potential impact at its coal fired units and expects any costs incurred to comply with such rule to be recoverable through rates.

~~In July 2011, the EPA issued the CSAPR to reduce emissions of SO~~₂~~and NO~~_X ~~from power plants~~resulted in the ~~eastern half~~formation of ~~the United States.~~a single primary operating segment. The ~~CSAPR replaces the CAIR and requires a total of 28 states to reduce annual SO~~₂ ~~emissions and annual and ozone season NO~~_X ~~emissions to assist in attaining the ozone and fine particle NAAQS. The rule establishes an emissions cap for SO~~₂~~and NO~~_X and limits the trading for emission allowances by separating affected states into two groups with no trading between the groups. The State of South Carolina has chosen to remain in the CSAPR program, even though recent court rulings exempted the state. This allows the state to remain compliant with regional haze standards. Air quality control installations that DESC and GENCO have already completed have positioned them to comply with the existing allowances set by the CSAPR. Any costs incurred to comply with CSAPR are expected to be recoverable through rates.

In December 2018, the EPA issued a proposed rule to reverse its previous finding that it is appropriate and necessary to regulate toxic emissions from power plants. However, the emissions standards and other requirements of the MATS rule promulgated in 2012 rule and containing new standards for mercury and other specified air pollutants would remain in place as the EPA is not proposing to remove coal and oil fired power plants from the list of sources that are regulated under MATS. Although litigation of the MATS rule and the outcome of the EPA’s rulemaking are still pending, the regulation remains in effect and is not expected to have an impact on DESC or GENCO due to plant retirements, conversions, and enhancements. DESC and GENCO are in compliance with the MATS rule and expect to remain in compliance.

The CWA provides for the imposition of effluent limitations that require treatment for wastewater discharges. Under the CWA, compliance with applicable limitations is achieved under state-issued NPDES permits such that, as a facility’s NPDES permit is renewed, any new effluent limitations would be incorporated. The ELG Rule was final in September 2015, after which state regulators are required to modify facility NPDES permits to match more restrictive standards, which would require facilities to retrofit with new wastewater treatment technologies. Compliance dates varied by type of wastewater, and some were based on a facility's five-year permit cycle and thus could range from 2018 to 2023. However, the ELG Rule is under reconsideration by the EPA andhistorical information presented herein has been ~~stayed administratively. The EPA has decided~~recast to conduct a new rulemaking that could result in revisions to certain flue gas desulfurization wastewater and bottom ash transport water requirements in the ELG Rule. Accordingly, in September 2017 the EPA finalized a rule that postpones compliance dates under the ELG Rule to a range from November 2020 to December 2023. The EPA indicates that the new rulemaking process may take up to three years to complete, such that any revisions to the ELG Rule likely would not be final until the summer of 2020. While DESC expects that wastewater treatment technology retrofits will be required at Williams and Wateree Stations, any costs incurred to comply with the ELG Rule are expected to be recoverable through rates.

The CWA Section 316(b) Existing Facilities Rule became effective in October 2014. This rule establishes national requirements for the location, design, construction and capacity of cooling water intake structures at existing facilities that reflect the best technology available for minimizing the adverse environmental impacts of impingement and entrainment. DESC and GENCO are conducting studies and implementing plans as required by the rule to determine appropriate intake structure modifications at certain facilities to ensure compliance with this rule. Any costs incurred to comply with this rule are expected to be recoverable through rates.

The EPA's final rule for CCR became effective in the fourth quarter of 2015. This rule regulates CCR as a non-hazardous waste under Subtitle D of the Resource Conservation and Recovery Act and imposes certain requirements on ash storage ponds and other CCR management facilities at certain of DESC's and GENCO's coal-fired generating facilities. DESC and GENCO have already closed or have begun the process of closure of all of their ash storage ponds and have previously recognized AROs for such ash storage ponds under existing requirements. DESC does not expect the incremental compliance costs associated with this rule to be significant and expect to recover such costs in future rates.

DESC is responsible for four decommissioned MGP sites in South Carolina which contain residues of by-product chemicals. These sites are in various stages of investigation, remediation and monitoring under work plans approved by or under review by SCDHEC and the EPA. DESC anticipates that major remediation activities at all of these sites will continue at least through 2022 and will cost an additional $10 million. In February 2019 SCDHEC directed DESC to pursue a stakeholder-developed modified removal action plan for one site (Congaree River). DESC is developing an engineering design for this plan, which would require permits from the USACE and others and further approvals before it could be implemented. If DESC receives the necessary permits and approvals for this plan, remediation cost for the Congaree River site would increase by $8 million. DESC cannot predict if or when such permits or approvals will be received. Major remediation activities are accrued in Other within Deferred Credits and Other Liabilities on the Consolidated Balance Sheets. DESC expects to recover any cost arising from the remediation of MGP sites through rates. At March 31, 2019, deferred amounts, net of amounts previously recovered through rates and insurance settlements, totaled $24 million and are included in regulatory assets.

~~11. LEASES~~

~~At March 31, 2019, DESC had the following lease assets and liabilities recorded in the Consolidated Balance Sheets:~~

Millions of dollars March 31, 2019
Lease assets:
  Operating lease assets ⁽¹⁾
$ 19
  Finance lease assets ⁽²⁾
29
    Total lease assets $ 48
Lease liabilities:
  Operating lease - current ⁽³⁾
$ 2
  Operating lease - noncurrent ⁽⁴⁾
15
  Finance lease - current ⁽⁵⁾
7
  Finance lease - noncurrent ⁽⁶⁾
22
    Total lease liabilities $ 46

⁽¹⁾ ~~Included in other deferred debits and other assets in the Consolidated Balance Sheets.~~

⁽²⁾ ~~Included in utility plant, net, in the Consolidated Balance Sheets, net of $18 million of accumulated amortization at March 31, 2019.~~

⁽³⁾ ~~Included in other~~ current ~~liabilities in the Consolidated Balance Sheets.~~

⁽⁴⁾ ~~Included in other deferred credits and other liabilities in the Consolidated Balance Sheets.~~

⁽⁵⁾ ~~Included in current portion of long-term debt in the Consolidated Balance Sheets.~~

⁽⁶⁾ ~~Included in long-term debt in the Consolidated Balance Sheets.~~

~~For the three months ended March 31, 2019, total lease cost consisted of the following:~~

Millions of dollars Three Months Ended March 31, 2019
Finance lease cost:
Amortization $ 2
Interest —
Operating lease cost 1
Short-term lease cost —
Variable lease cost —
Total lease cost $ 3

For the three months ended March 31, 2019, cash paid for amounts included in the measurement of lease liabilities consisted of the following amounts, included in the Consolidated Statements of Cash Flows:



~~Millions of dollars~~	~~Three Months Ended March 31, 2019~~
~~Operating cash flows from finance leases~~	$	—
~~Operating cash flows from operating leases~~	1
~~Financing cash flows from finance leases~~	2

~~At March 31, 2019, the weighted average remaining lease term and weighted average discount rate for finance and operating leases were as follows:~~



	~~March 31, 2019~~
~~Weighted average remaining lease term - finance leases~~	~~5 years~~
~~Weighted average remaining lease term - operating leases~~	~~23 years~~
~~Weighted average discount rate - finance leases~~	~~2.91~~	%
~~Weighted average discount rate - operating leases~~	~~4.22~~	%

~~Lease liabilities have the following scheduled maturities:~~

Millions of dollars Operating Finance
2019 $ 2
$ 6
2020 1
7
2021 1
6
2022 1
4
2023 1
3
After 2023 23
5
Total undiscounted lease payments 29
31
Present value adjustment (12 ) (2 )
Present value of lease liabilities $ 17
$ 29

~~12. OPERATING SEGMENTS~~

~~Operating segments include Electric Operations and Gas Distribution and are organized primarily on the basis of products and services sold.~~

~~In connection with the SCANA Combination, effective January 2019, reportable segments were changed to include a Corporate and Other~~ segment ~~and to utilize comprehensive income (loss) as the measure of segment profitability.~~ presentation.

The Corporate and Other segment includes specific items attributable to ~~DESC's~~its operating ~~segments~~segment that are not included in profit measures evaluated by executive management in assessing the ~~segments'~~segment’s performance or in allocating resources. ~~Corresponding amounts~~

In the three months ended March 31, 2020, DESC reported an immaterial amount of specific items in ~~prior periods have been recast to conform to~~ the ~~current presentation.~~

Millions of dollars External Revenue
Comprehensive Income (Loss) Available (Attributable) to
Common Shareholder
Three Months Ended March 31, 2019
Electric Operations $ 527
48
Gas Distribution 147
22
Corporate and Other (1,009 ) $ (1,173 )
Adjustments/Eliminations —
(6 )
Consolidated Total $ (335 ) $ (1,109 )

Three Months Ended March 31, 2018
Electric Operations $ 547
$ 100
Gas Distribution 155
32
Corporate and Other —
(4 )
Adjustments/Eliminations —
(4 )
Consolidated Total $ 702
$ 124

~~The items in~~ Corporate and Other segment. In the three months ended March 31, 2019, DESC reported after-tax net expenses of $1.2 billion for specific items in the Corporate and Other segment, all of which were attributable to its operating segment.

The net expense for specific items attributable to DESC’s operating segment in 2019 primarily ~~relate~~related to ~~charges arising from~~ the ~~Merger Approval Order, as described in Note 10.~~impact of the following items:

•	A $1.0 billion ($756 million after-tax) charge for refunds of amounts previously collected from retail electric customers for the NND Project;

•	A $198 million tax charge for $264 million of income tax-related regulatory assets for which DESC committed to forgo recovery;

•	A $166 million ($125 million after-tax) of charges associated with litigation;

~~13.~~

•	A $105 million ($79 million after-tax) charge for utility plant primarily for which DESC committed to forgo recovery; and

•	$40 million tax charges for changes in unrecognized tax benefits.

(millions)	External Revenue			Comprehensive Income (Loss) Available (Attributable) to Common Shareholder
Three Months Ended March 31, 2020
Dominion Energy South Carolina	$	672		$	89
Corporate and Other		—			(1	)
Consolidated Total	$	672		$	88

Three Months Ended March 31, 2019
Dominion Energy South Carolina	$	674		$	64
Corporate and Other		(1,009	)		(1,173	)
Consolidated Total	$	(335	)	$	(1,109	)

12. AFFILIATED AND RELATED PARTY TRANSACTIONS

DESC owns 40% of Canadys Refined Coal, LLC, which is involved in the manufacturing and sale of refined coal to reduce emissions at certain of DESC's generating facilities. DESC accounts for this investment using the equity method. Purchases and sales of the related coal are recorded as ~~Other Income (Expense)~~other income (expense), net onin the Consolidated Statements of Comprehensive Income (Loss).

DESC purchases natural gas and related pipeline capacity from ~~SCANA Energy Marketing, Inc.~~SEMI to serve its retail gas customers and to satisfy certain electric generation requirements. These purchases are included within gas purchased for resale or fuel used in electric generation, onas applicable in the Consolidated Statements of Comprehensive Income (Loss).

DESS, on behalf of itself and its parent company, provides the following services to DESC, which are rendered at direct or allocated cost: information systems, telecommunications, customer support, marketing and sales, human resources, corporate compliance, purchasing, financial, risk management, public affairs, legal, investor relations, gas supply and capacity management, strategic planning, general administrative and retirement benefits. In addition, DESS processes and pays invoices for DESC and is reimbursed. Costs for these services include amounts capitalized. Amounts expensed are primarily recorded in ~~Other operation~~other operations and maintenance - affiliated suppliers and ~~Other Income (Expense)~~other income (expense), net onin the Consolidated Statements of Comprehensive Income (Loss).

	Three Months Ended March 31,
(millions)	2020		2019
Purchases of coal from affiliate	$	—	$	28
Sales of coal to affiliate		—		28
Purchases of fuel used in electric generation from affiliate		—		33
Direct and allocated costs from services company affiliate⁽¹⁾		67		58
Operating Revenues - Electric from sales to affiliate		—		1
Operating Expenses - Other taxes from affiliate		3		2
Purchases of electricity from solar affiliates		2		1
Demand and transportation charges from DECG - Fuel used in electric generation		4		11
Demand and transportation charges from DECG - Gas purchased for resale		11		4

(1)	Includes capitalized expenditures of $12 million and $9 million for the three months ended March 31, 2020 and 2019, respectively.

(millions)	March 31, 2020		December 31, 2019
Receivable from Canadys Refined Coal, LLC	$	—	$	2
Payable to Canadys Refined Coal, LLC		—		2
Payable to DESS		58		76
Payable to Public Service Company of North Carolina, Incorporated		6		8
Payable to solar affiliates		1		—
Receivable from DECG		—		1
Payable to DECG		5		5

Three Months Ended March 31,
Millions of Dollars 2019 2018
Purchases of coal from affiliate $ 28
$ 33
Sales of coal to affiliate 28
32
Purchases of fuel used in electric generation from affiliate 33
31
Direct and allocated costs from services company affiliate⁽¹⁾
58
59
Operating Revenues - Electric from sales to affiliate 1
1
Operating Expenses - Other taxes from affiliate 2
2

⁽¹⁾ ~~Includes capitalized expenditures of $9 million and $8 million for the three months ended March 31, 2019 and 2018, respectively.~~

Millions of Dollars March 31, 2019 December 31, 2018
Receivable from Canadys Refined Coal, LLC $ 5
$ 7
Payable to Canadys Refined Coal, LLC 5
7
Payable to SCANA Energy Marketing, Inc. 11
14
Payable to DESS 41
38

In connection with the SCANA Combination, purchases from certain entities owned by Dominion Energy became affiliated transactions. During the three months ended March 31, 2019, DESC purchased electricity generated by two such affiliates, Ridgeland Solar Farm I, LLC and Moffett Solar 1, LLC, totaling $1 million, which is recorded as Purchased power in the Statement of Comprehensive Income (Loss). At March 31, 2019, DESC had accounts payable balances to these affiliates totaling $1 million. In addition, during the three months ended March 31, 2019, DESC incurred demand and transportation charges from Dominion Energy Carolina Gas Transmission, LLC totaling $15 million, of which $11 million is recorded as Fuel used in electric generation and $4 million is recorded as Gas purchased for resale in the Statements of Comprehensive Income (Loss). At March 31, 2019, DESC had an accounts payable balance due to this affiliate totaling $6 million.

Borrowings from an affiliate are described in Note 5.

~~14.~~

13. OTHER INCOME (EXPENSE), NET

Components of other income (expense), net are as follows:

	Three Months Ended March 31,
(millions)	2020			2019
Revenues from contracts with customers	$	1		$	1
Other income		3			4
Other expense		(2	)		(10	)
Allowance for equity funds used during construction		1			—
Other income (expense), net	$	3		$	(5	)

Three Months Ended
March 31,
Millions of dollars 2019 2018
Revenues from contracts with customers $ 1
$ 1
Other income 4
126
Other expense (10 ) (7 )
Allowance for equity funds used during construction —
3
Other income (expense), net $ (5 ) $ 123

~~Other income in 2018 includes gains from the settlement of interest rate derivatives of $115 million (see Note 7).~~

Non-service cost components of pension and other postretirement benefits are included in other ~~expense.~~

income (expense).

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS

MD&A provides management’s narrative analysis of its consolidated results of operation. MD&A should be read in conjunction with DESC's Consolidated Financial Statements. DESC meets the conditions to file under the reduced disclosure format, and therefore has omitted certain sections of MD&A.

Forward-Looking Statements

This report contains statements concerning DESC’s expectations, plans, objectives, future financial performance and other statements that are not historical facts. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In most cases, the reader can identify these forward-looking statements by such words as “anticipate,” “estimate,” “forecast,” “expect,” “believe,” “should,” “could,” “plan,” “may,” “continue,” “target” or other similar words.

DESC makes forward-looking statements with full knowledge that risks and uncertainties exist that may cause actual results to differ materially from predicted results. Factors that may cause actual results to differ are often presented with the forward-looking statements themselves. Additionally, other factors may cause actual results to differ materially from those indicated in any forward-looking statement. These factors include but are not limited to:

•

Unusual weather conditions and their effect on energy sales to customers and energy commodity prices;

•

Extreme weather events and other natural disasters, including, but not limited to, hurricanes, high winds, severe storms, earthquakes, flooding, climate changes and changes in water temperatures and availability that can cause outages and property damage to facilities;

•

The impact of extraordinary external events, such as the current pandemic health event resulting from COVID-19, and their collateral consequences, including extended disruption of economic activity in our markets;

•

Federal, state and local legislative and regulatory developments, including changes in federal and state tax laws and regulations;

•

Risks of operating businesses in regulated industries that are subject to changing regulatory structures;

•

Changes to regulated rates collected;

•

Changes in future levels of domestic and international natural gas production, supply or consumption;

•

Timing and receipt of regulatory approvals necessary for planned construction or growth projects and compliance with conditions associated with such regulatory approvals;

•

The inability to complete planned construction, conversion or growth projects at all, or with the outcomes or within the terms and time frames initially anticipated, including as a result of increased public involvement, intervention or litigation in such projects;

•

Changes to federal, state and local environmental laws and regulations, including those related to climate change, the tightening of emission or discharge limits for GHGs and other substances, more extensive permitting requirements and the regulation of additional substances;

•

Cost of environmental compliance, including those costs related to climate change;

•

Changes in implementation and enforcement practices of regulators relating to environmental standards and litigation exposure for remedial activities;

•

Difficulty in anticipating mitigation requirements associated with environmental and other regulatory approvals or related appeals;

•

The impact of operational hazards, including adverse developments with respect to pipeline and plant safety or integrity, equipment loss, malfunction or failure, operator error, and other catastrophic events;

•

Risks associated with the operation of nuclear facilities, including costs associated with the disposal of spent nuclear fuel, decommissioning, plant maintenance and changes in existing regulations governing such facilities;

•

Changes in operating, maintenance and construction costs;

•

Domestic terrorism and other threats to DESC’s physical and intangible assets, as well as threats to cybersecurity;

•

Additional competition from the development and deployment of alternative energy sources, such as self-generation and distributed generation technologies;

the ability of DESC to recover through rates certain costs expended on the NND Project, and a reasonable return on those costs, under the Merger Approval Order and the abandonment provisions of the BLRA or through other means;

•

Competition in the development, construction and ownership of certain electric transmission facilities in connection with Order 1000;

~~uncertainties relating to the bankruptcy filing by WEC and WECTEC;~~

•

Changes in technology, particularly with respect to new, developing or alternative sources of generation and smart grid technologies;

~~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 NND Project;~~

•

Changes in demand for services, including industrial, commercial and residential growth or decline in service areas, changes in supplies of natural gas delivered, changes in customer growth or usage patterns, including as a result of energy conservation programs, the availability of energy efficient devices and the use of distributed generation methods;

~~legislative and regulatory actions, particularly changes~~

•

Adverse outcomes in litigation matters or regulatory proceedings, including matters 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, and any actions involving or arising from the abandonment of the NND Project;

current and future litigation, including particularly litigation or government investigations or any actions involving or arising from the construction or abandonment of the NND Project, including the possible impacts on liquidity and other financial impacts therefrom;

•

Counterparty credit and performance risk;

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 DESC and Dominion Energy;

•

Fluctuations in the value of investments held in nuclear decommissioning and benefit plan trusts;

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;

•

Fluctuations in energy-related commodity prices and the effect these could have on DESC’s financial position and the underlying value of assets;

~~the results of efforts to ensure the physical and cyber security of key assets and processes;~~

•

Fluctuations in interest rates;

~~changes in the economy, especially in areas served by DESC;~~

•

Changes in rating agency requirements or credit ratings and their effect on availability and cost of capital;

~~the impact of competition from other energy suppliers, including competition from alternate fuels in industrial markets;~~

•

Global capital market conditions, including the availability of credit and the ability to obtain financing on reasonable terms;

~~the impact of conservation and demand side management efforts and/or technological advances on customer usage;~~

•

Political and economic conditions, including inflation and deflation;

~~the loss of electricity sales to distributed generation, such as solar photovoltaic systems or energy storage systems;~~

•

Employee workforce factors including collective bargaining agreements and labor negotiations with union employees; and

~~growth opportunities;~~

•

Changes in financial or regulatory accounting principles or policies imposed by governing bodies.

~~the effects of weather, especially in areas where the generation and transmission facilities of DESC are located and in areas served by DESC;~~

~~changes in accounting rules and accounting policies;~~

~~payment and performance by counterparties and customers as contracted and when due;~~

~~the results of efforts to license, site, construct and finance facilities, and to receive related rate recovery, for generation and transmission;~~

~~the results of efforts to operate DESC's electric and gas systems and assets in accordance with acceptable performance standards, including the impact of additional distributed generation;~~

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;

the availability and retention of skilled, licensed and experienced human resources to properly manage, operate, and grow DESC's businesses, particularly in light of uncertainties with respect to integration within the combined companies of Dominion Energy;

~~labor disputes;~~

~~performance of DESC’s pension plan assets and the effect(s) of associated discount rates;~~

~~inflation or deflation;~~

~~changes in interest rates;~~

~~compliance with regulations; and~~

~~natural disasters, man-made mishaps and acts of terrorism that directly affect our operations or the regulations governing them.~~

Additionally, other risks that could cause actual results to differ from predicted results are set forth in Item 1A. Risk Factors in DESC’s Annual Report on Form 10-K for the year ended December 31, 2019, as updated in Part II, Item 1A. Risk Factors in this report.

DESC’s forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. DESC cautions the reader not to place undue reliance on its forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from actual results. DESC undertakes no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.

~~RESULTS OF OPERATIONS~~

~~FOR THE THREE MONTHS ENDED MARCH 31, 2019~~

~~AS COMPARED TO THE CORRESPONDING PERIOD IN 2018~~

Results of Operations

Presented below is a summary of DESC’s consolidated results:

	First Quarter
(millions)	2020		2019			$ Change
Net income (loss)	$	93	$	(1,103	)	$	1,196

First Quarter
Millions of dollars 2019 2018 $ Change
Net income (loss) $ (1,103 ) $ 128
$ (1,231 )

Overview

First Quarter 2020 vs. 2019

Net income ~~decreased~~increased $1.2 billion, primarily due to the absence of charges for refunds of amounts previously collected from retail electric customers for the NND Project and certain regulatory assets and utility plant for which DESC committed to forgo recovery and a ~~settlement agreement of a ratepayer class action lawsuit~~decrease in ~~2019.~~

charges associated with litigation.

Analysis of Consolidated Operations

Presented below are selected amounts related to DESC’s results of operations:

	First Quarter
(millions)	2020		2019			$ Change
Operating revenues	$	672	$	(335	)	$	1,007
Fuel used in electric generation		104		137			(33	)
Purchased power		13		8			5
Gas purchased for resale		57		77			(20	)
Net revenue		498		(557	)		1,055
Other operations and maintenance		145		144			1
Impairment of assets and other charges		2		271			(269	)
Depreciation and amortization		118		102			16
Other taxes		62		69			(7	)
Other income (expense), net		3		(5	)		8
Interest charges		58		73			(15	)
Income tax expense (benefit)		23		(118	)		141

Millions of dollars 2019 2018 $ Change
Operating revenues $ (335 ) $ 702
$ (1,037 )
Fuel used in electric generation 137
159
(22 )
Purchased power 8
52
(44 )
Gas purchased for resale 77
75
2
Net revenue (557 ) 416
(973 )
Other operation and maintenance 153
146
7
Impairment of assets and other charges 262
4
258
Depreciation and amortization 102
81
21
Other taxes 69
65
4
Other income (expense), net (5 ) 123
(128 )
Interest charges 73
77
(4 )
Income tax expense (benefit) (118 ) 39
(157 )

An analysis of DESC’s results of operations follows:

First Quarter 2020 vs. 2019

Net revenue ~~decreased by $973 million~~ increased $1.1 billion, primarily due to:

•	The absence of a $1.0 billion charge to electric revenue for refunds of amounts previously collected from retail electric customers for the NND Project;

•	A $22 million increase as a result of the amortization of regulatory liabilities associated with the Toshiba Settlement and refunds of amounts previously collected from retail electric customers for the NND Project for the entire period in 2020; and

~~A $1.0 billion charge to electric revenue for refunds of amounts previously collected from retail electric customers for the NND Project;~~

•	A $12 million increase in sales to retail electric customers due to weather.

~~A $44 million decrease due to lower South Carolina Commission approved electric rates in 2019 as a result of the Merger Approval Order; and~~

~~An $11 million decrease in gas revenues due to lower South Carolina Commission approved rates; partially offset by~~

~~Lower purchased power expense of $36 million due to DESC’s purchase of the Columbia Energy Center and the termination of a related purchase power agreement; and~~

A $114 million increase in electric revenue primarily pursuant to a South Carolina Commission order whereby fuel cost recovery was offset with gains realized upon the settlement of certain interest rate derivative contracts in 2018, as further described in Other Income (Expense) below.

Impairment of assets and other charges ~~increased $258 million~~ decreased 99%, primarily due to a~~$157 million charge for a settlement agreement of a ratepayer class action lawsuit,~~ reduction in charges associated with litigation ($166 million) and a ~~$105 million charge~~decrease in charges for utility plant for which DESC committed to forgo ~~recovery.~~

recovery ($103 million).

Depreciation and amortization increased ~~27%~~16%, primarily reflecting the amortization of ~~unrecovered~~ NND Project ~~costs of $23 million.~~

costs.

Other taxes decreased 10%, primarily due to a decrease in property taxes.

Other income (expense), netincreased $8 million, primarily due to a decrease in donations ($4 million) and a decrease in severance expenses ($3 million).

Interest charges decreased ~~by $128~~21%, primarily due to lower long-term debt principal balances primarily as a result of the debt tender offers completed in 2019.

Income tax expense increased $141 million, primarily due to the absence of ~~gains realized upon the settlement of interest rate derivative contracts in 2018 ($115 million) that were fully offset by downward adjustments to electric revenues pursuant to~~ a ~~previously received South Carolina Commission order related to fuel cost recovery and therefore had no effect on net income.~~

~~Income tax expense (benefit)~~ ~~changed by $157 million, primarily due to lower pretax~~charge for certain income ~~partially offset by a $198 million tax charge related to~~tax-related regulatory assets for which DESC committed to forgo ~~recovery.~~

recovery ($198 million) and the absence of changes in unrecognized tax benefits ($40 million), partially offset by higher pretax income ($379 million).


~~ITEM 4.~~	~~CONTROLS AND PROCEDURES~~

ITEM 4. CONTROLS AND PROCEDURES

Senior management of ~~March 31, 2019, management has evaluated, with the participation of the~~DESC, including DESC’s CEO and CFO, ~~(a)~~evaluated the effectiveness of ~~the design and operation of~~DESC’s disclosure controls and procedures ~~(as defined in Rules 13a-15(e) and 15d-15(e)~~as of the ~~Exchange Act) and (b) any change in internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)~~end of the ~~Exchange Act).~~period covered by this report. Based on this evaluation ~~the~~process, DESC’s CEO and CFO have concluded that ~~as of~~ ~~March 31, 2019, these~~DESC’s disclosure controls and procedures are effective.

There were ~~effective. There has been~~ no ~~change in internal control over financial reporting~~changes that occurred during the last fiscal quarter ~~ended~~ ~~March 31, 2019~~that ~~has~~have materially affected, or isare reasonably likely to materially affect, DESC’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, DESC is 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 DESC, 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, DESC is involved in various legal proceedings from time to time, whether in the ordinary course of business or particularly following the abandonment of the NND Project.

See ~~Claims and Litigation in Note 10 to~~ the ~~Consolidated Financial Statements in Part I, Item 1. Financial Statements, which information is incorporated herein by reference,~~following for ~~a discussion of~~discussions on various legal, environmental and other regulatory proceedings to which DESC is a party, ~~to, including any material developments that have occurred in the first quarter of~~which information is incorporated herein by reference:

•	Notes 3 and 12 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2019.

•	Notes 2 and 10 to the Consolidated Financial Statements in this report.

ITEM 1A. RISK FACTORS

DESC’s business is influenced by many factors that are difficult to predict, involve uncertainties that may materially affect actual results and are often beyond its control. A number of these risk factors have been identified in DESC’s Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, which should be taken into consideration when reviewing the information contained in this report. ~~DESC filed such annual report on a combined basis with SCANA. Accordingly,~~Other than the ~~information presented in such~~ risk ~~factors is presented on a combined basis and therefore some of the information may apply only to SCANA and not DESC. DESC makes no representation as to any such information. There~~factor discussed below, there have been no material changes with regard to the risk factors previously disclosed in DESC's Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019. For other factors that may cause actual results to differ materially from those indicated in any forward-looking statement or projection contained in this report, see Forward-Looking Statements in ~~Part I,~~MD&A in this report.

Public health crises and epidemics or pandemics, such as COVID-19, could adversely affect DESC’s business, results of operations, financial condition, liquidity and/or cash flows.

The effects of the continued outbreak of the COVID-19 pandemic and related government responses could include extended disruptions to supply chains and capital markets, reduced labor availability and productivity and a prolonged reduction in economic activity. The effects could also have a variety of adverse impacts on DESC, including reduced demand for energy, particularly from commercial and industrial customers and impairment of goodwill or long-lived assets. There is considerable uncertainty regarding the extent to which COVID-19 will spread and the extent and duration of measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and shutdowns. Such restrictions may cause operational interruptions and delays in construction projects. For the duration of the outbreak of COVID-19, voluntary suspension, or potential legislative or government action, is expected to limit DESC’s ability to collect on overdue accounts or disconnect services for non-payment, which may cause a decrease in DESC’s results of operations and cash flows. To the extent the COVID-19 pandemic adversely affects DESC’s business, results of operations, financial condition, liquidity and/or cash flows, it may also have the effect of heightening many of the other risks described in Item ~~2. MD&A.~~

1A. Risk Factors in DESC’s Annual Report on Form 10-K for the year ended December 31, 2019.

ITEM 6. EXHIBITS

~~Exhibits filed or furnished with this Quarterly Report on Form 10-Q are listed in the following Exhibit Index.~~

As permitted under Item 601(b) (4) (iii) of Regulation S-K, instruments defining the rights of holders of long-term debt of less than 10% of the total consolidated assets of DESC, for itself and its consolidated affiliates, have been omitted and DESC agrees to furnish a copy of such instruments to the SEC upon request.

~~EXHIBIT INDEX~~

Exhibit No.		Description
3.1
~~Exhibit No.~~	~~Description~~
~~3.1~~	Amended and Restated Articles of Incorporation, ~~as amended and restated,~~ effective April 29, 2019 (Exhibit 3.1, Form 8-K filed April 29, 2019, File No. 1-3375).
3.2		Amended and Restated Bylaws, effective April 29, 2019 (Exhibit 3.2, Form 8-K filed April 29, 2019, File No. 1-3375).
~~10.1~~ 4.1	~~$6,000,000,000 Fourth Amended and Restated Revolving Credit Agreement, dated March 22, 2019, among~~	Dominion Energy ~~Inc., Virginia Electric and Power Company, Dominion Energy Gas Holdings, LLC, Questar Gas Company,~~ South Carolina, ~~Electric & Gas Company, JPMorgan Chase Bank, N.A.,~~Inc. agrees to furnish to the U.S. Securities and Exchange Commission upon request any instrument with respect to long-term debt as ~~Administrative Agent, Mizuho Bank, Ltd., Bank~~to which the total amount of ~~America, N.A., The Bank~~securities authorized does not exceed 10% of ~~Nova Scotia and Wells Fargo Bank, N.A., as Syndication Agents, and other lenders named therein (Exhibit 10.1, Form 8-K filed March 26, 2019, File No. 1-3375).~~its total consolidated assets.
~~31.1~~ 31.a		Certification by Chief Executive Officer of Dominion Energy South Carolina, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
~~31.2~~ 31.b		Certification by Chief Financial Officer of Dominion Energy South Carolina, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
~~32.1~~ 32.a		Certification to the Securities and Exchange Commission by Chief Executive Officer and Chief Financial Officer of Dominion Energy South Carolina, Inc. as required by Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
101. INS* 101	~~XBRL Instance Document~~	The following financial statements from Dominion Energy South Carolina, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, filed on May 5, 2020, formatted in iXBRL (Inline eXtensible Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive Income (Loss), (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Changes in Common Equity, and (v) the Notes to Consolidated Financial Statements.
101. SCH* 104	~~XBRL Taxonomy Extension Schema~~
101. CAL*	~~XBRL Taxonomy Extension Calculation Linkbase~~
101. DEF*	~~XBRL Taxonomy Extension Definition Linkbase~~
101. LAB*	~~XBRL Taxonomy Extension Label Linkbase~~
101. PRE*	~~XBRL Taxonomy Extension Presentation Linkbase~~ Cover Page Interactive Data File (formatted in iXBRL (Inline eXtensible Reporting Language) and contained in Exhibit 101).

* Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



DOMINION ENERGY SOUTH CAROLINA, INC.
		(Registrant)



	By:	/s/ Michele L. Cardiff
Date: May ~~9, 2019~~5, 2020		Michele L. Cardiff
		Vice President, Controller and Chief Accounting Officer


☐	~~For the quarterly period ended March 31, 2019~~

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

			I.R.S. Employer
Commission File Number	~~For the transition period from _____ to _____~~	Exact name of registrant as specified in its charter	Identification Number

001-3375		DOMINION ENERGY SOUTH CAROLINA, INC.	57-0248695

		south carolina
		(State or other jurisdiction of incorporation or organization)

		400 OTARRE PARKWAY
		CAYCE, South Carolina	29033
		(Address of principal executive offices)	(Zip Code)

		(803) 217-9000
		(Registrants’ telephone number)



~~South Carolina~~		~~57-0248695~~
~~State or Other Jurisdiction of Incorporation or Organization~~		~~I.R.S. Employer Identification No.~~

~~400 Otarre Parkway, Cayce, South Carolina~~		~~29033~~
~~Address of Principal Executive Offices~~		~~Zip Code~~

~~(803) 217-9000~~
~~Registrant’s Telephone Number, Including Area Code~~



Large accelerated filero	☐	Accelerated filero	☐	Emerging growth company	☐
Non-accelerated filerx	☒	Smaller reporting companyo	~~Emerging growth company~~ o ☐

Abbreviation or Acronym		Definition

~~TERM~~		~~MEANING~~
2017 Tax Reform 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
ACE Rule		Affordable Clean Energy Rule
~~AFC~~ AOCI		~~Allowance for Funds Used During Construction~~ Accumulated other comprehensive income (loss)
~~ANI~~ ARO		~~American Nuclear Insurers~~ Asset retirement obligation
~~AOCI~~ BACT		~~Accumulated Other Comprehensive Income (Loss)~~ Best available control technology
~~ARO~~ BLRA		~~Asset Retirement Obligation~~
~~Bankruptcy Court~~		~~U.S. Bankruptcy Court for the Southern District of New York~~
~~BLRA~~		South Carolina Base Load Review Act
CAA		Clean Air Act ~~as amended~~
~~CAIR~~ CARES Act		~~Clean Air Interstate Rule~~ Coronavirus Aid, Relief and Economic Security Act enacted on March 27, 2020
CCR		Coal ~~Combustion Residuals~~combustion residual
CEO		Chief Executive Officer
~~CFO~~ CERCLA		Comprehensive Environmental Response, Compensation and Liability Act of 1980, also known as Superfund
CFO		Chief Financial Officer
~~CFTC~~ CO₂		~~Commodity Futures Trading Commission~~ Carbon dioxide
~~Citibank~~ Consortium		~~Citibank, N.A.~~
CO₂		~~Carbon Dioxide~~
~~Concurrent Dockets~~		Separate dockets that were before the South Carolina Commission related to the NND Project which were handled concurrently. The Concurrent Dockets included the Joint Petition, a 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.
~~Consortium~~		A consortium consisting of ~~WEC~~Westinghouse and WECTEC
~~Court of Appeals~~ CWA		~~United States Court of Appeals for the Fourth Circuit~~
~~CPP~~		~~Clean Power Plan~~
~~CSAPR~~		~~Cross-State Air Pollution Rule~~
~~CUT~~		~~Customer Usage Tracker (decoupling mechanism)~~
~~CWA~~		Clean Water Act
~~DER~~ DECG		~~Distributed~~ Dominion Energy ~~Resource~~Carolina Gas Transmission, LLC
DESC		The legal entity, Dominion Energy South Carolina, Inc. ~~(formerly known as South Carolina Electric & Gas Company)~~, one or more of its consolidated ~~affiliates~~entities or operating ~~segments,~~segment, or the entirety of Dominion Energy South Carolina, Inc. and its consolidated ~~affiliates~~entities
DESS		Dominion Energy Southeast Services, Inc. ~~(formerly known as SCANA Services, Inc.)~~
~~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		The legal entity, Dominion Energy, Inc., one or more of its consolidated subsidiaries (other than ~~SCANA and~~ DESC) or operating segments, or the entirety of Dominion Energy, Inc. and its consolidated subsidiaries
~~DSM~~ Dominion Energy Gas		~~Demand-Side Management~~ The legal entity, Dominion Energy Gas Holdings, LLC, a wholly-owned subsidiary of Dominion Energy, one or more of its consolidated subsidiaries or operating segment, or the entirety of Dominion Energy Gas Holdings, LLC and its consolidated subsidiaries
Dominion Energy South Carolina		Dominion Energy South Carolina operating segment
DSM		Demand-side management
ELG Rule		~~Federal effluent limitation~~ Effluent limitations guidelines for the steam electric power generating ~~units~~category
EMANI		European Mutual Association for Nuclear Insurance
EPA		~~United States~~ U.S. Environmental Protection Agency
Exchange Act		Securities Exchange Act of 1934, as amended
~~FASB~~ FERC		~~Financial Accounting Standards Board~~
~~FERC~~		~~United States~~ Federal Energy Regulatory Commission
FILOT		Fee in ~~Lieu~~lieu of ~~Taxes~~taxes
~~Fluor~~		~~Fluor Corporation~~
~~Fluor Defendants~~		~~Fluor Enterprises, Inc. and Fluor Daniel Maintenance Services, Inc.~~
Fuel Company		South Carolina Fuel Company, Inc.
GAAP		U.S. generally accepted accounting principles
GENCO		South Carolina Generating Company, Inc.
GHG		Greenhouse ~~Gas~~



x ☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

				Page

			~~Page~~
Glossary of Terms				3

PART I. FINANCIAL INFORMATION
~~Item 1. Financial Statements~~	6
Item 1.	~~Consolidated Balance Sheets~~	6Financial Statements		5
	~~Consolidated Statements of Comprehensive Income~~ ~~(Loss)~~	8
	~~Consolidated Statements of Cash Flows~~		9
	~~Consolidated Statements of Changes in Equity~~		10
	~~Notes to Consolidated Financial Statements~~		11

Item 2.				Management's Discussion and Analysis of Financial Condition and Results of Operations	30	27

Item 4.		Controls and Procedures	32	29

PART II. OTHER INFORMATION

Item 1.		Legal Proceedings	32	30

Item 1A.		Risk Factors	32	30

Item 6. ~~Exhibits~~		32Exhibits		31

~~Exhibit Index~~			33

~~Signatures~~			34

gas
IAA
~~GWh~~		~~Gigawatt hour~~
~~IAA~~		Interim Assessment Agreement dated March 28, 2017, as amended, among DESC, Santee Cooper, ~~WEC~~Westinghouse and WECTEC
~~IRC~~ MATS		~~Internal Revenue Code of 1986, as amended~~
~~IRS~~		~~Internal Revenue Service~~
~~Joint Petition~~		Joint application and petition of DESC 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 NND Project and associated merger benefits and cost recovery plans, filed with the South Carolina Commission on January 12, 2018
~~LOC~~		~~Lines of Credit~~
~~MATS~~		Utility Mercury and Air Toxics Standard Rule
MD&A		Management's Discussion and Analysis of Financial Condition and Results of Operations
~~Merger Agreement~~ MGD		~~Agreement and Plan of Merger entered on January 2, 2018 between Dominion Energy and SCANA~~ Million gallons a day
~~Merger Approval Order~~ MGP		~~Final order issued by the South Carolina Commission on December 21, 2018 setting forth its approval of the SCANA Combination~~ Manufactured gas plant
~~MGP~~ NEIL		~~Manufactured Gas Plant~~
~~NAAQS~~		~~National Ambient Air Quality Standards~~
~~NEIL~~		Nuclear Electric Insurance Limited

Abbreviation or Acronym		Definition
~~NERC~~		~~North American Electric Reliability Corporation~~
~~NOL~~		~~Net Operating Loss~~
NO_X		~~Nitrogen Oxide~~
~~NPDES~~		~~National Pollutant Discharge Elimination System~~
~~NRC~~		~~United States Nuclear Regulatory Commission~~
~~NSPS~~		~~New Source Performance Standards~~
~~NSR~~		~~New Source Review~~
NND Project		V. C. Summer Units 2 and 3 nuclear development project under which ~~SCANA~~DESC and Santee Cooper undertook to construct two Westinghouse AP1000 Advanced Passive Safety nuclear units in Jenkinsville, South Carolina
~~OCI~~ NSPS		~~Other Comprehensive Income (Loss)~~ New Source Performance Standards
~~ORS~~ Order 1000		~~South Carolina Office of Regulatory Staff~~ Order issued by FERC adopting requirements for electric transmission planning, cost allocation and development
~~PGA~~ Price-Anderson		~~Purchased Gas Adjustment~~ Price-Anderson Amendments Act of 1988
~~PHMSA~~ PSD		~~United States Pipeline Hazardous Materials Safety Administration~~ Prevention of significant deterioration
~~PLR~~ Questar Gas		~~Private Letter Ruling~~ Questar Gas Company, a wholly-owned subsidiary of Dominion Energy
~~PPA~~		~~Purchase Power Agreement~~
~~Price-Anderson~~		~~Price-Anderson Nuclear Industries Indemnity Act~~
Reorganization Plan		Modified Second Amended Joint Chapter 11 Plan of Reorganization, filed by ~~WEC~~Westinghouse
RICO		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		The legal entity, SCANA Corporation, one or more of its consolidated subsidiaries (other than DESC) or the entirety of SCANA Corporation and its consolidated subsidiaries
SCANA Combination		Dominion Energy's acquisition of SCANA completed on January 1, 2019 pursuant to the terms of the SCANA Merger Agreement
~~SCDHEC~~ SCANA Merger Agreement		Agreement and plan of merger entered on January 2, 2018 between Dominion Energy and SCANA
SCANA Merger Approval Order		Final order issued by the South Carolina Commission on December 21, 2018 setting forth its approval of the SCANA Combination
SCDHEC		South Carolina Department of Health and Environmental Control
SCDOR		South Carolina Department of Revenue
~~SCEUC~~ SEC		~~South Carolina Energy Users Committee~~
~~SEC~~		~~United States~~ U.S. Securities and Exchange Commission
~~SLED~~ SEMI		~~South Carolina Law Enforcement Division~~ SCANA Energy Marketing, LLC (formerly known as SCANA Energy Marketing, Inc.), a subsidiary of SCANA through December 2019, and effective December 2019, a subsidiary of Wrangler Retail Gas Holdings, LLC, a partnership between Dominion Energy and Interstate Gas Supply Inc.
SO₂		~~Sulfur Dioxide~~
South Carolina Commission		Public Service Commission of South Carolina
Summer		V. C. Summer nuclear power station
~~Supreme Court~~ Toshiba		~~Supreme Court of the United States~~
~~Toshiba~~		Toshiba Corporation, parent company of ~~WEC~~Westinghouse
Toshiba Settlement		Settlement Agreement dated as of July 27, 2017, by and among Toshiba, DESC and Santee Cooper


VIE		Variable interest entity
~~USACE~~ Virginia Power		~~United States Army Corps~~ The legal entity, Virginia Electric and Power Company, a wholly-owned subsidiary of ~~Engineers~~Dominion Energy, one or more of its consolidated subsidiaries or operating segment, or the entirety of Virginia Electric and Power Company and its consolidated subsidiaries
~~VIE~~ VOC		~~Variable Interest Entity~~ Volatile organic compounds
~~WARN Act~~ WECTEC		~~Worker Adjustment and Retraining Notification Act~~ WECTEC Global Project Services, Inc., a wholly-owned subsidiary of Westinghouse
~~WEC~~ Westinghouse		Westinghouse Electric Company LLC
~~WEC~~ Westinghouse 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~~



Millions of dollars	March 31, 2019			December 31, 2018
Assets
Utility Plant In Service	$	12,914		$	12,803
Accumulated Depreciation and Amortization	(4,694		)	(4,581		)
Construction Work in Progress	237			350
Nuclear Fuel, Net of Accumulated Amortization	198			211
Utility Plant, Net ($697 and $711 related to VIEs)	8,655			8,783
Nonutility Property and Investments:
Nonutility property, net of accumulated depreciation	72			72
Assets held in trust, net-nuclear decommissioning	199			190
Other investments	—			1
Nonutility Property and Investments, Net	271			263
Current Assets:
Cash, restricted cash and cash equivalents	120			377
Receivables:
Customer, net of allowance for uncollectible accounts of $3 and $4	271			331
Affiliated companies	6			359
Other	43			68
Inventories (at average cost):
Fuel	96			89
Materials and supplies	159			158
Prepayments	69			82
Regulatory assets	253			223
Other current assets	1			1
Total Current Assets ($89 and $96 related to VIEs)	1,018			1,688
Deferred Debits and Other Assets:
Regulatory assets	3,810			4,046
Other	370			183
Total Deferred Debits and Other Assets ($37 and $34 related to VIEs)	4,180			4,229
Total Assets	$	14,124		$	14,963



	Common Stock
Millions	Shares	Amount		Retained Earnings			AOCI			Noncontrolling Interest			Total Equity
Balance at January 1, 2019	40	$	2,860	$	1,279		$	(3	)	$	179		$	4,315
Cumulative-effect of change in accounting principle				1			(1		)				—
Total comprehensive income (loss) available (attributable) to common shareholder				(1,109		)				6			(1,103		)
Capital contributions from parent		675											675
Cash dividend declared				(20		)							(20		)
Balance at March 31, 2019	40	$	3,535	$	151		$	(4	)	$	185		$	3,867

Balance at January 1, 2018	40	$	2,860	$	1,982		$	(4	)	$	142		$	4,980
Total comprehensive income available to common shareholder				124						4			128
Cash dividend declared				(72		)				(2		)	(74		)
Balance at March 31, 2018	40	$	2,860	$	2,034		$	(4	)	$	144		$	5,034



Regulatory Liabilities:
Monetization of guaranty settlement	$	67	$	61
Income taxes refundable through future rates	49		52
Reserve for refunds to electric utility customers	137		—
Other	9		13
Regulatory liabilities - current	262		126
Monetization of guaranty settlement	1,020		1,037
Income taxes refundable through future rates	837		607
Asset removal costs	549		541
Deferred gains on interest rate derivatives	70		75
Reserve for refunds to electric utility customers	846		—
Other	1		4
Regulatory liabilities - noncurrent	3,323		2,264
Total Regulatory Liabilities	$	3,585	$	2,390



Operating Revenue Disaggregation	Three Months Ended March 31, 2019					Three Months Ended March 31, 2018
Millions of dollars	Electric			Gas		Electric		Gas
Customer class:
Residential	$	(271	)	$	78	$	252	$	86
Commercial	(139		)	38		169		39
Industrial	(82		)	26		85		24
Other	10			3		37		5
Revenues from contracts with customers	(482		)	145		543		154
Other operating revenues	2			—		3		1
Total Operating Revenues	$	(480	)	$	145	$	546	$	155



Millions of dollars	Facility Limit		Outstanding Commercial Paper		Outstanding Letters of Credit
At March 31, 2019	$	1,000	$	—	$	—



Millions of dollars	Facility Limit ⁽¹⁾		Outstanding Commercial Paper		Outstanding Letters of Credit
At December 31, 2018	$	1,200	$	73	$	—



(millions)	Fair Value - Derivatives under Hedge Accounting		Fair Value - Derivatives not under Hedge Accounting		Total Fair Value
At March 31, 2019
Current Liabilities
Interest rate	$	1	$	—	$	1
Total current derivative liabilities ⁽¹⁾	1		—		1
Noncurrent Liabilities
Interest rate	9		4		13
Total noncurrent derivative liabilities ⁽²⁾	9		4		13
Total derivative liabilities	$	10	$	4	$	14

At December 31, 2018
Current Liabilities
Interest rate	$	1	$	—	$	1
Total current derivative liabilities ⁽¹⁾	1		—		1
Noncurrent Liabilities
Interest rate	7		3		10
Total noncurrent derivative liabilities ⁽²⁾	7		3		10
Total derivative liabilities	$	8	$	3	$	11



Derivatives in Cash Flow Hedging Relationships	Increase (Decrease) in Derivatives Subject to Regulatory Treatment ⁽¹⁾
(millions)
Three Months Ended March 31, 2019
Derivative type and location of gains (losses):
Interest rate	$	(2	)
Total	$	(2	)

Three Months Ended March 31, 2018
Derivative type and location of gains (losses):
Interest rate	$	2
Total	$	2



Millions of dollars	March 31, 2019
Lease assets:
Operating lease assets ⁽¹⁾	$	19
Finance lease assets ⁽²⁾	29
Total lease assets	$	48
Lease liabilities:
Operating lease - current ⁽³⁾	$	2
Operating lease - noncurrent ⁽⁴⁾	15
Finance lease - current ⁽⁵⁾	7
Finance lease - noncurrent ⁽⁶⁾	22
Total lease liabilities	$	46



Millions of dollars	Three Months Ended March 31, 2019
Finance lease cost:
Amortization	$	2
Interest	—
Operating lease cost	1
Short-term lease cost	—
Variable lease cost	—
Total lease cost	$	3



Millions of dollars	Operating			Finance
2019	$	2		$	6
2020	1			7
2021	1			6
2022	1			4
2023	1			3
After 2023	23			5
Total undiscounted lease payments	29			31
Present value adjustment	(12		)	(2		)
Present value of lease liabilities	$	17		$	29



Millions of dollars	External Revenue			Comprehensive Income (Loss) Available (Attributable) to Common Shareholder
Three Months Ended March 31, 2019
Electric Operations	$	527		48
Gas Distribution	147			22
Corporate and Other	(1,009		)	$	(1,173	)
Adjustments/Eliminations	—			(6		)
Consolidated Total	$	(335	)	$	(1,109	)

Three Months Ended March 31, 2018
Electric Operations	$	547		$	100
Gas Distribution	155			32
Corporate and Other	—			(4		)
Adjustments/Eliminations	—			(4		)
Consolidated Total	$	702		$	124



Millions of dollars	2019			2018		$ Change
Operating revenues	$	(335	)	$	702	$	(1,037	)
Fuel used in electric generation	137			159		(22		)
Purchased power	8			52		(44		)
Gas purchased for resale	77			75		2
Net revenue	(557		)	416		(973		)
Other operation and maintenance	153			146		7
Impairment of assets and other charges	262			4		258
Depreciation and amortization	102			81		21
Other taxes	69			65		4
Other income (expense), net	(5		)	123		(128		)
Interest charges	73			77		(4		)
Income tax expense (benefit)	(118		)	39		(157		)