UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2017
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to _____
I.R.S. Employer | ||||||
Commission File Number | 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) |
Securities registered pursuant to Section 12(b) of the Act:
None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. SCANA Corporation Yes
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). SCANA Corporation Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | Emerging growth company | ☐ | ||
Non-accelerated filer | ☒ | Smaller reporting company | |||||
☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Dominion Energy South Carolina, Electric & Gas Company. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. South Carolina Electric & Gas Company makes no representation as to information relating to SCANA Corporation or its subsidiaries (other than South Carolina Electric & Gas Company and its consolidated affiliates).
Page | ||||||
3 | ||||||
Item 1. | 5 | |||||
Management's Discussion and Analysis of Financial Condition and Results of Operations | 27 | |||||
30 | ||||||
31 | ||||||
31 | ||||||
Item 6. | 32 | |||||
GLOSSARY OF TERMS
The following abbreviations or acronyms used in this Form 10-Q are defined below:
Abbreviation or Acronym | Definition | ||
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 | ||
AOCI | Accumulated other comprehensive income (loss) | ||
ARO | Asset retirement obligation | ||
BACT | Best available control technology | ||
CAA | Clean Air Act | ||
CCR | Coal combustion residual | ||
CEO | Chief Executive Officer | ||
CERCLA | Comprehensive Environmental Response, Compensation and Liability Act of 1980, also known as Superfund | ||
CFO | Chief Financial Officer | ||
CO2 | Carbon dioxide | ||
CUA | Capacity Use Area | ||
CWA | Clean Water Act | ||
DES | Dominion Energy Services, Inc. | ||
DESC | The legal entity, Dominion Energy South Carolina, Inc., one or more of its consolidated entities or operating segment, or the entirety of Dominion Energy South Carolina, Inc. and its consolidated entities | ||
Dominion Energy | The legal entity, Dominion Energy, Inc., one or more of its consolidated subsidiaries (other than DESC) or operating segments, or the entirety of Dominion Energy, Inc. and its consolidated subsidiaries | ||
Dominion Energy South Carolina | Dominion Energy South Carolina operating segment | ||
DSM | Demand-side management | ||
ELG Rule | Effluent limitations guidelines for the steam electric power generating category | ||
EPA | U.S. Environmental Protection Agency | ||
FERC | Federal Energy Regulatory Commission | ||
FILOT | Fee in lieu of taxes | ||
Fuel Company | South Carolina Fuel Company, Inc. | ||
GAAP | U.S. generally accepted accounting principles | ||
GENCO | South Carolina Generating Company, Inc. | ||
GHG | Greenhouse gas | ||
MD&A | Management's Discussion and Analysis of Financial Condition and Results of Operations | ||
MGD | Million gallons per day | ||
MWh | Megawatt hour | ||
NND Project | V. C. Summer Units 2 and 3 nuclear development project under which DESC and Santee Cooper undertook to construct two Westinghouse AP1000 Advanced Passive Safety nuclear units in Jenkinsville, South Carolina | ||
NOx | Nitrogen oxide | ||
NRC | U.S. Nuclear Regulatory Commission | ||
Order 1000 | Order issued by FERC adopting requirements for electric transmission planning, cost allocation and development | ||
PSD | Prevention of significant deterioration | ||
Questar Gas | Questar Gas Company, a wholly-owned subsidiary of Dominion Energy | ||
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 |
Abbreviation or Acronym | Definition | |
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 | |
SEC | U.S. Securities and | |
SO2 | Sulfur dioxide | |
South Carolina | ||
Public Service Commission of South Carolina | ||
Summer | ||
V. C. Summer | ||
Toshiba | ||
Toshiba Corporation, parent company of | ||
Toshiba Settlement | Settlement Agreement dated as of July 27, 2017, by and among Toshiba, | |
VIE | Variable interest entity | |
Virginia Power | ||
The legal entity, Virginia Electric and Power Company, | ||
Westinghouse | ||
Westinghouse Electric Company LLC |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Dominion Energy South Carolina, Inc.
Consolidated Balance Sheets
(Unaudited)
(millions) |
| September 30, 2022 |
|
| December 31, 2021 |
| ||
ASSETS |
|
|
|
|
|
|
|
|
Utility plant in service |
| $ | 14,561 |
|
| $ | 14,200 |
|
Accumulated depreciation and amortization |
|
| (5,307 | ) |
|
| (5,192 | ) |
Construction work in progress |
|
| 519 |
|
|
| 481 |
|
Nuclear fuel, net of accumulated amortization |
|
| 194 |
|
|
| 216 |
|
Utility plant, net ($703 and $729 related to VIEs) |
|
| 9,967 |
|
|
| 9,705 |
|
Nonutility Property and Investments: |
|
|
|
|
|
|
|
|
Nonutility property, net of accumulated depreciation |
|
| 21 |
|
|
| 42 |
|
Assets held in trust, nuclear decommissioning |
|
| 216 |
|
|
| 256 |
|
Nonutility property and investments, net |
|
| 237 |
|
|
| 298 |
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
| 6 |
|
|
| 30 |
|
Receivables: |
|
|
|
|
|
|
|
|
Customer, net of allowance for uncollectible accounts of $6 and $5 |
|
| 391 |
|
|
| 358 |
|
Affiliated and related party |
|
| 2 |
|
|
| 16 |
|
Other |
|
| 125 |
|
|
| 152 |
|
Inventories (at average cost): |
|
|
|
|
|
|
|
|
Fuel |
|
| 70 |
|
|
| 60 |
|
Gas stored |
|
| 43 |
|
|
| 25 |
|
Materials and supplies |
|
| 217 |
|
|
| 186 |
|
Prepayments |
|
| 94 |
|
|
| 70 |
|
Regulatory assets |
|
| 619 |
|
|
| 361 |
|
Other current assets(1) |
|
| 71 |
|
|
| 57 |
|
Current assets held for sale |
|
| 16 |
|
|
| — |
|
Total current assets ($68 and $77 related to VIEs) |
|
| 1,654 |
|
|
| 1,315 |
|
Deferred Debits and Other Assets: |
|
|
|
|
|
|
|
|
Regulatory assets |
|
| 3,283 |
|
|
| 3,323 |
|
Affiliated receivables |
|
| 81 |
|
|
| 66 |
|
Other(1) |
|
| 300 |
|
|
| 220 |
|
Total deferred debits and other assets ($24 and $31 related to VIEs) |
|
| 3,664 |
|
|
| 3,609 |
|
Total assets |
| $ | 15,522 |
|
| $ | 14,927 |
|
Millions of dollars | September 30, 2017 | December 31, 2016 | ||||||
Assets | ||||||||
Utility Plant In Service | $ | 13,767 | $ | 13,444 | ||||
Accumulated Depreciation and Amortization | (4,559 | ) | (4,446 | ) | ||||
Construction Work in Progress | 768 | 4,845 | ||||||
Nuclear Fuel, Net of Accumulated Amortization | 249 | 271 | ||||||
Goodwill, net of writedown of $230 | 210 | 210 | ||||||
Utility Plant, Net | 10,435 | 14,324 | ||||||
Nonutility Property and Investments: | ||||||||
Nonutility property, net of accumulated depreciation of $135 and $138 | 272 | 276 | ||||||
Assets held in trust, net-nuclear decommissioning | 132 | 123 | ||||||
Other investments | 77 | 76 | ||||||
Nonutility Property and Investments, Net | 481 | 475 | ||||||
Current Assets: | ||||||||
Cash and cash equivalents | 1,011 | 208 | ||||||
Receivables: | ||||||||
Customer, net of allowance for uncollectible accounts of $5 and $6 | 545 | 616 | ||||||
Income taxes | 6 | 142 | ||||||
Other | 189 | 127 | ||||||
Inventories (at average cost): | ||||||||
Fuel and gas supply | 129 | 136 | ||||||
Materials and supplies | 159 | 155 | ||||||
Prepayments | 111 | 105 | ||||||
Other current assets | 14 | 17 | ||||||
Total Current Assets | 2,164 | 1,506 | ||||||
Deferred Debits and Other Assets: | ||||||||
Regulatory assets | 6,690 | 2,130 | ||||||
Other | 249 | 272 | ||||||
Total Deferred Debits and Other Assets | 6,939 | 2,402 | ||||||
Total | $ | 20,019 | $ | 18,707 |
(1) See Note 12 for amounts attributable to affiliates.
See Notes to Condensed Consolidated Financial Statements.
Dominion Energy South Carolina, Inc.
Consolidated Balance Sheets—(Continued)
(Unaudited)
(millions) |
| September 30, 2022 |
|
| December 31, 2021 |
| ||
CAPITALIZATION AND LIABILITIES |
|
|
|
|
|
|
|
|
Common Stock - no par value, 40.3 million shares outstanding |
| $ | 4,088 |
|
| $ | 4,016 |
|
Retained earnings |
|
| 410 |
|
|
| 335 |
|
Accumulated other comprehensive loss |
|
| (1 | ) |
|
| (1 | ) |
Total common equity |
|
| 4,497 |
|
|
| 4,350 |
|
Noncontrolling interest |
|
| 158 |
|
|
| 175 |
|
Total equity |
|
| 4,655 |
|
|
| 4,525 |
|
Long-term debt, net |
|
| 3,725 |
|
|
| 3,724 |
|
Affiliated long-term debt |
|
| 230 |
|
|
| 230 |
|
Finance leases |
|
| 7 |
|
|
| 10 |
|
Total long-term debt |
|
| 3,962 |
|
|
| 3,964 |
|
Total capitalization |
|
| 8,617 |
|
|
| 8,489 |
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Short-term borrowings |
|
| 250 |
|
|
| — |
|
Securities due within one year |
|
| 4 |
|
|
| 5 |
|
Accounts payable |
|
| 225 |
|
|
| 232 |
|
Affiliated and related party payables |
|
| 753 |
|
|
| 458 |
|
Customer deposits and customer prepayments |
|
| 73 |
|
|
| 73 |
|
Taxes accrued |
|
| 185 |
|
|
| 222 |
|
Interest accrued |
|
| 68 |
|
|
| 73 |
|
Regulatory liabilities |
|
| 283 |
|
|
| 245 |
|
Reserves for litigation and regulatory proceedings |
|
| 96 |
|
|
| 211 |
|
Other |
|
| 117 |
|
|
| 144 |
|
Total current liabilities |
|
| 2,054 |
|
|
| 1,663 |
|
Deferred Credits and Other Liabilities: |
|
|
|
|
|
|
|
|
Deferred income taxes and investment tax credits |
|
| 1,176 |
|
|
| 975 |
|
Asset retirement obligations |
|
| 623 |
|
|
| 599 |
|
Pension and other postretirement benefits |
|
| 160 |
|
|
| 164 |
|
Regulatory liabilities |
|
| 2,813 |
|
|
| 2,936 |
|
Other |
|
| 79 |
|
|
| 101 |
|
Total deferred credits and other liabilities |
|
| 4,851 |
|
|
| 4,775 |
|
Commitments and Contingencies (see Note 10) |
|
|
|
|
|
|
|
|
Total capitalization and liabilities |
| $ | 15,522 |
|
| $ | 14,927 |
|
Millions of dollars | September 30, 2017 | December 31, 2016 | ||||||
Capitalization and Liabilities | ||||||||
Common Stock - no par value, 143 million shares outstanding | $ | 2,389 | $ | 2,390 | ||||
Retained Earnings | 3,447 | 3,384 | ||||||
Accumulated Other Comprehensive Loss | (49 | ) | (49 | ) | ||||
Total Common Equity | 5,787 | 5,725 | ||||||
Long-Term Debt, net | 6,455 | 6,473 | ||||||
Total Capitalization | 12,242 | 12,198 | ||||||
Current Liabilities: | ||||||||
Short-term borrowings | 1,022 | 941 | ||||||
Current portion of long-term debt | 177 | 17 | ||||||
Accounts payable | 266 | 404 | ||||||
Customer deposits and customer prepayments | 116 | 168 | ||||||
Taxes accrued | 526 | 201 | ||||||
Interest accrued | 97 | 84 | ||||||
Dividends declared | 85 | 80 | ||||||
Derivative financial instruments | 45 | 35 | ||||||
Other | 117 | 135 | ||||||
Total Current Liabilities | 2,451 | 2,065 | ||||||
Deferred Credits and Other Liabilities: | ||||||||
Deferred income taxes, net | 1,767 | 2,159 | ||||||
Asset retirement obligations | 569 | 558 | ||||||
Pension and other postretirement benefits | 373 | 373 | ||||||
Unrecognized tax benefits | 402 | 219 | ||||||
Regulatory liabilities | 2,015 | 930 | ||||||
Other | 200 | 205 | ||||||
Total Deferred Credits and Other Liabilities | 5,326 | 4,444 | ||||||
Commitments and Contingencies (Note 9) | ||||||||
Total | $ | 20,019 | $ | 18,707 |
See Notes to Condensed Consolidated Financial Statements.
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
Millions of dollars, except per share amounts | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating Revenues: | ||||||||||||||||
Electric | $ | 786 | $ | 817 | $ | 2,042 | $ | 2,035 | ||||||||
Gas - regulated | 123 | 111 | 584 | 538 | ||||||||||||
Gas - nonregulated | 167 | 165 | 623 | 598 | ||||||||||||
Total Operating Revenues | 1,076 | 1,093 | 3,249 | 3,171 | ||||||||||||
Operating Expenses: | ||||||||||||||||
Fuel used in electric generation | 167 | 176 | 464 | 443 | ||||||||||||
Purchased power | 22 | 21 | 54 | 50 | ||||||||||||
Gas purchased for resale | 211 | 202 | 808 | 752 | ||||||||||||
Other operation and maintenance | 183 | 187 | 543 | 558 | ||||||||||||
Impairment loss | 210 | — | 210 | — | ||||||||||||
Depreciation and amortization | 96 | 93 | 285 | 276 | ||||||||||||
Other taxes | 67 | 66 | 200 | 192 | ||||||||||||
Total Operating Expenses | 956 | 745 | 2,564 | 2,271 | ||||||||||||
Operating Income | 120 | 348 | 685 | 900 | ||||||||||||
Other Income (Expense): | ||||||||||||||||
Other income | 28 | 15 | 61 | 46 | ||||||||||||
Other expense | (7 | ) | (7 | ) | (25 | ) | (31 | ) | ||||||||
Interest charges, net of allowance for borrowed funds used during construction of $2, $5, $16 and $14 | (95 | ) | (88 | ) | (270 | ) | (255 | ) | ||||||||
Allowance for equity funds used during construction | — | 7 | 17 | 22 | ||||||||||||
Total Other Expense | (74 | ) | (73 | ) | (217 | ) | (218 | ) | ||||||||
Income Before Income Tax Expense | 46 | 275 | 468 | 682 | ||||||||||||
Income Tax Expense | 12 | 86 | 142 | 211 | ||||||||||||
Net Income | $ | 34 | $ | 189 | $ | 326 | $ | 471 | ||||||||
Earnings Per Share of Common Stock | $ | 0.24 | $ | 1.32 | $ | 2.28 | $ | 3.29 | ||||||||
Weighted Average Common Shares Outstanding (millions) | 143 | 143 | 143 | 143 | ||||||||||||
Dividends Declared Per Share of Common Stock | $ | 0.6125 | $ | 0.5750 | $ | 1.8375 | $ | 1.7250 |
Dominion Energy South Carolina, Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Operating Revenue(1) |
| $ | 1,083 |
|
| $ | 863 |
|
| $ | 2,841 |
|
| $ | 2,299 |
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel used in electric generation |
|
| 342 |
|
|
| 200 |
|
|
| 770 |
|
|
| 452 |
|
Purchased power(1) |
|
| 28 |
|
|
| 24 |
|
|
| 86 |
|
|
| 67 |
|
Gas purchased for resale |
|
| 102 |
|
|
| 57 |
|
|
| 296 |
|
|
| 188 |
|
Other operations and maintenance |
|
| 117 |
|
|
| 116 |
|
|
| 343 |
|
|
| 332 |
|
Other operations and maintenance - affiliated suppliers |
|
| 40 |
|
|
| 45 |
|
|
| 122 |
|
|
| 145 |
|
Impairment of assets and other charges |
|
| 2 |
|
|
| 1 |
|
|
| 6 |
|
|
| 320 |
|
Depreciation and amortization |
|
| 127 |
|
|
| 122 |
|
|
| 378 |
|
|
| 362 |
|
Other taxes(1) |
|
| 72 |
|
|
| 64 |
|
|
| 216 |
|
|
| 191 |
|
Total operating expenses |
|
| 830 |
|
|
| 629 |
|
|
| 2,217 |
|
|
| 2,057 |
|
Operating income |
|
| 253 |
|
|
| 234 |
|
|
| 624 |
|
|
| 242 |
|
Other income, net |
|
| 22 |
|
|
| 6 |
|
|
| 46 |
|
|
| — |
|
Interest charges, net of allowance for borrowed funds used during construction of $1, $1, $3 and $3(1) |
|
| 57 |
|
|
| 50 |
|
|
| 162 |
|
|
| 159 |
|
Income before income tax expense |
|
| 218 |
|
|
| 190 |
|
|
| 508 |
|
|
| 83 |
|
Income tax expense |
|
| 45 |
|
|
| 42 |
|
|
| 102 |
|
|
| 6 |
|
Net Income and Other Comprehensive Income |
|
| 173 |
|
|
| 148 |
|
|
| 406 |
|
|
| 77 |
|
Comprehensive Income Attributable to Noncontrolling Interest |
|
| 5 |
|
|
| 4 |
|
|
| 16 |
|
|
| 13 |
|
Comprehensive Income Available to Common Shareholder |
| $ | 168 |
|
| $ | 144 |
|
| $ | 390 |
|
| $ | 64 |
|
(1) | See Note 12 for amounts attributable to affiliates. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
Millions of dollars | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net Income | $ | 34 | $ | 189 | $ | 326 | $ | 471 | ||||||||
Other Comprehensive Income (Loss), net of tax: | ||||||||||||||||
Unrealized Gains (Losses) on Cash Flow Hedging Activities: | ||||||||||||||||
Arising during period, net of tax of $-, $-, $(3) and $(3) | — | (1 | ) | (5 | ) | (4 | ) | |||||||||
Reclassified as increases to interest expense, net of tax of $1, $1, $3 and $3 | 2 | 2 | 6 | 6 | ||||||||||||
Reclassified as increases (decreases) to gas purchased for resale, net of tax of $-, $ -, $(1) and $3 | — | — | (2 | ) | 6 | |||||||||||
Net unrealized gains (losses) on cash flow hedging activities | 2 | 1 | (1 | ) | 8 | |||||||||||
Deferred cost of employee benefit plans, net of tax of $-, $-, $- and $- | 1 | — | 1 | — | ||||||||||||
Other Comprehensive Income | 3 | 1 | — | 8 | ||||||||||||
Total Comprehensive Income | $ | 37 | $ | 190 | $ | 326 | $ | 479 |
See Notes to Condensed Consolidated Financial Statements.
Dominion Energy South Carolina, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
|
| Nine Months Ended September 30, |
| |||||
(millions) |
| 2022 |
|
| 2021 |
| ||
Operating Activities |
|
|
|
|
|
|
|
|
Net income |
| $ | 406 |
|
| $ | 77 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Impairment of assets and other charges |
|
| 4 |
|
|
| 320 |
|
Deferred income taxes, net |
|
| 201 |
|
|
| 42 |
|
Depreciation and amortization |
|
| 378 |
|
|
| 362 |
|
Amortization of nuclear fuel |
|
| 29 |
|
|
| 30 |
|
Other adjustments |
|
| (34 | ) |
|
| 8 |
|
Changes in certain assets and liabilities: |
|
|
|
|
|
|
|
|
Receivables |
|
| (23 | ) |
|
| 35 |
|
Receivables - affiliated and related party |
|
| 14 |
|
|
| (31 | ) |
Inventories |
|
| (59 | ) |
|
| (10 | ) |
Prepayments |
|
| (14 | ) |
|
| (33 | ) |
Regulatory assets |
|
| (356 | ) |
|
| (86 | ) |
Regulatory liabilities |
|
| (35 | ) |
|
| (133 | ) |
Accounts payable |
|
| (5 | ) |
|
| 34 |
|
Accounts payable - affiliated and related party |
|
| 56 |
|
|
| (65 | ) |
Taxes accrued |
|
| (37 | ) |
|
| (42 | ) |
Interest accrued |
|
| (5 | ) |
|
| — |
|
Pension and other postretirement benefits |
|
| (4 | ) |
|
| 5 |
|
Other assets and liabilities |
|
| (192 | ) |
|
| 24 |
|
Net cash provided by operating activities |
|
| 324 |
|
|
| 537 |
|
Investing Activities |
|
|
|
|
|
|
|
|
Property additions and construction expenditures |
|
| (514 | ) |
|
| (584 | ) |
Net proceeds from investments and sales or disposals of assets |
|
| (7 | ) |
|
| 7 |
|
Purchase of investments |
|
| (1 | ) |
|
| (7 | ) |
Purchase of investments - affiliated |
|
| — |
|
|
| (2 | ) |
Short-term investments - affiliated |
|
| — |
|
|
| 15 |
|
Other |
|
| 12 |
|
|
| 1 |
|
Net cash used in investing activities |
|
| (510 | ) |
|
| (570 | ) |
Financing Activities |
|
|
|
|
|
|
|
|
Repayment of long-term debt |
|
| — |
|
|
| (34 | ) |
Dividend to parent |
|
| (348 | ) |
|
| (180 | ) |
Short-term borrowings, net |
|
| 250 |
|
|
| — |
|
Short-term borrowings - affiliated, net |
|
| 239 |
|
|
| 268 |
|
Other |
|
| (3 | ) |
|
| (4 | ) |
Net cash provided by financing activities |
|
| 138 |
|
|
| 50 |
|
Net increase (decrease) in cash, restricted cash and equivalents |
|
| (48 | ) |
|
| 17 |
|
Cash, restricted cash and equivalents at beginning of period(1) |
|
| 54 |
|
|
| 5 |
|
Cash, restricted cash and equivalents at end of period(1) |
| $ | 6 |
|
| $ | 22 |
|
Supplemental Cash Flow Information |
|
|
|
|
|
|
|
|
Significant noncash investing and financing activities:(2) |
|
|
|
|
|
|
|
|
Accrued construction expenditures |
| $ | 106 |
|
| $ | 38 |
|
Operating leases |
|
| 6 |
|
|
| — |
|
(1) | Includes $24 million of restricted cash at December 31, 2021, recorded within other current assets on the Consolidated Balance Sheets. At September 30, 2022, September 30, 2021 and December 31, 2020 there were no restricted cash and equivalent balances. |
(2) | See Note 10 for noncash investing activities related to the transfer of property associated with the settlement of litigation and Note 4 for noncash financing activities related to capital contributions associated with the settlement of litigation. |
Nine Months Ended September 30, | ||||||||
Millions of dollars | 2017 | 2016 | ||||||
Cash Flows From Operating Activities: | ||||||||
Net income | $ | 326 | $ | 471 | ||||
Adjustments to reconcile net income to net cash provided from operating activities: | ||||||||
Impairment loss | 210 | — | ||||||
Deferred income taxes, net | (395 | ) | 151 | |||||
Depreciation and amortization | 302 | 289 | ||||||
Amortization of nuclear fuel | 31 | 42 | ||||||
Allowance for equity funds used during construction | (17 | ) | (22 | ) | ||||
Carrying cost recovery | (27 | ) | (12 | ) | ||||
Changes in certain assets and liabilities: | ||||||||
Receivables | 79 | (8 | ) | |||||
Income taxes receivable | 136 | (306 | ) | |||||
Inventories | (58 | ) | (21 | ) | ||||
Prepayments | (6 | ) | (2 | ) | ||||
Regulatory assets | (48 | ) | (14 | ) | ||||
Regulatory liabilities | (3 | ) | 2 | |||||
Accounts payable | (22 | ) | (36 | ) | ||||
Unrecognized tax benefits | 183 | 210 | ||||||
Taxes accrued | 325 | (84 | ) | |||||
Derivative financial instruments | (3 | ) | (9 | ) | ||||
Other assets | (37 | ) | (58 | ) | ||||
Other liabilities | (49 | ) | 86 | |||||
Net Cash Provided From Operating Activities | 927 | 679 | ||||||
Cash Flows From Investing Activities: | ||||||||
Property additions and construction expenditures | (1,095 | ) | (1,178 | ) | ||||
Proceeds from monetization of guaranty settlement | 1,013 | — | ||||||
Proceeds from investments (including derivative collateral returned) | 116 | 629 | ||||||
Purchase of investments (including derivative collateral posted) | (115 | ) | (743 | ) | ||||
Payments upon interest rate derivative contract settlements | — | (88 | ) | |||||
Net Cash Used For Investing Activities | (81 | ) | (1,380 | ) | ||||
Cash Flows From Financing Activities: | ||||||||
Proceeds from issuance of long-term debt | 150 | 592 | ||||||
Repayment of long-term debt | (16 | ) | (15 | ) | ||||
Dividends | (258 | ) | (243 | ) | ||||
Short-term borrowings, net | 81 | 247 | ||||||
Net Cash (Used For) Provided From Financing Activities | (43 | ) | 581 | |||||
Net Increase (Decrease) In Cash and Cash Equivalents | 803 | (120 | ) | |||||
Cash and Cash Equivalents, January 1 | 208 | 176 | ||||||
Cash and Cash Equivalents, September 30 | $ | 1,011 | $ | 56 | ||||
Supplemental Cash Flow Information: | ||||||||
Cash for–Interest paid (net of capitalized interest of $16 and $14) | $ | 247 | $ | 235 | ||||
–Income taxes paid | 1 | 229 | ||||||
–Income taxes received | 123 | — | ||||||
Noncash Investing and Financing Activities: | ||||||||
Accrued construction expenditures | 44 | 80 | ||||||
Capital leases | 6 | 12 | ||||||
Guaranty settlement receivable | 83 | — |
See Combined Notes to Condensed Consolidated Financial Statements.
Dominion Energy South Carolina, Inc.
Consolidated Statements of Changes in Common Equity
(Unaudited)
Quarter-To-Date
|
| Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
(millions) |
| Shares |
|
| Amount |
|
| Retained Earnings |
|
| AOCI |
|
| Noncontrolling Interest |
|
| Total Equity |
| ||||||
June 30, 2021 |
|
| 40 |
|
| $ | 4,017 |
|
| $ | 122 |
|
| $ | (2 | ) |
| $ | 171 |
|
| $ | 4,308 |
|
Total comprehensive income available to common shareholder |
|
|
|
|
|
|
|
|
|
| 144 |
|
|
|
|
|
|
| 4 |
|
|
| 148 |
|
Capital contribution from parent |
|
|
|
|
| 149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 149 |
| |
Dividend to parent |
|
|
|
|
|
|
|
|
|
| (75 | ) |
|
|
|
|
|
|
|
|
|
| (75 | ) |
September 30, 2021 |
|
| 40 |
|
| $ | 4,166 |
|
| $ | 191 |
|
| $ | (2 | ) |
| $ | 175 |
|
| $ | 4,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2022 |
|
| 40 |
|
| $ | 4,088 |
|
| $ | 357 |
|
| $ | (1 | ) |
| $ | 168 |
|
| $ | 4,612 |
|
Total comprehensive income available to common shareholder |
|
|
|
|
|
|
|
|
|
| 168 |
|
|
|
|
|
|
| 5 |
|
|
| 173 |
|
Dividend to parent |
|
|
|
|
|
|
|
|
|
| (115 | ) |
|
|
|
|
|
| (15 | ) |
|
| (130 | ) |
September 30, 2022 |
|
| 40 |
|
| $ | 4,088 |
|
| $ | 410 |
|
| $ | (1 | ) |
| $ | 158 |
|
| $ | 4,655 |
|
Year-To-Date
|
| Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
(millions) |
| Shares |
|
| Amount |
|
| Retained Earnings |
|
| AOCI |
|
| Noncontrolling Interest |
|
| Total Equity |
| ||||||
December 31, 2020 |
|
| 40 |
|
| $ | 4,017 |
|
| $ | 277 |
|
| $ | (2 | ) |
| $ | 192 |
|
| $ | 4,484 |
|
Total comprehensive income available to common shareholder |
|
|
|
|
|
|
|
|
|
| 64 |
|
|
|
|
|
|
| 13 |
|
|
| 77 |
|
Capital contribution from parent |
|
|
|
|
| 149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 149 |
| |
Dividend to parent |
|
|
|
|
|
|
|
|
|
| (150 | ) |
|
|
|
|
|
| (30 | ) |
|
| (180 | ) |
September 30, 2021 |
|
| 40 |
|
| $ | 4,166 |
|
| $ | 191 |
|
| $ | (2 | ) |
| $ | 175 |
|
| $ | 4,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
| 40 |
|
| $ | 4,016 |
|
| $ | 335 |
|
| $ | (1 | ) |
| $ | 175 |
|
| $ | 4,525 |
|
Total comprehensive income available to common shareholder |
|
|
|
|
|
|
|
|
|
| 390 |
|
|
|
|
|
|
| 16 |
|
|
| 406 |
|
Capital contribution from parent |
|
|
|
|
| 72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 72 |
| |
Dividend to parent |
|
|
|
|
|
|
|
|
|
| (315 | ) |
|
|
|
|
|
| (33 | ) |
|
| (348 | ) |
September 30, 2022 |
|
| 40 |
|
| $ | 4,088 |
|
| $ | 410 |
|
| $ | (1 | ) |
| $ | 158 |
|
| $ | 4,655 |
|
Common Stock | Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||||||||||||
Millions | Shares | Outstanding Amount | Treasury Amount | Retained Earnings | Gains (Losses) from Cash Flow Hedges | Deferred Employee Benefit Plans | Total AOCI | Total | ||||||||||||||||||||||
Balance as of January 1, 2017 | 143 | $ | 2,402 | $ | (12 | ) | $ | 3,384 | $ | (36 | ) | $ | (13 | ) | $ | (49 | ) | $ | 5,725 | |||||||||||
Net Income | 326 | 326 | ||||||||||||||||||||||||||||
Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||||||
Losses arising during the period | (5 | ) | — | (5 | ) | (5 | ) | |||||||||||||||||||||||
Losses/amortization reclassified from AOCI | 4 | 1 | 5 | 5 | ||||||||||||||||||||||||||
Total Comprehensive Income | 326 | (1 | ) | 1 | — | 326 | ||||||||||||||||||||||||
Purchase of Treasury Stock | — | — | (1 | ) | (1 | ) | ||||||||||||||||||||||||
Dividends Declared | (263 | ) | (263 | ) | ||||||||||||||||||||||||||
Balance as of September 30, 2017 | 143 | $ | 2,402 | $ | (13 | ) | $ | 3,447 | $ | (37 | ) | $ | (12 | ) | $ | (49 | ) | $ | 5,787 | |||||||||||
Balance as of January 1, 2016 | 143 | $ | 2,402 | $ | (12 | ) | $ | 3,118 | $ | (53 | ) | $ | (12 | ) | $ | (65 | ) | $ | 5,443 | |||||||||||
Net Income | 471 | 471 | ||||||||||||||||||||||||||||
Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||||||
Losses arising during the period | (4 | ) | — | (4 | ) | (4 | ) | |||||||||||||||||||||||
Losses/amortization reclassified from AOCI | 12 | — | 12 | 12 | ||||||||||||||||||||||||||
Total Comprehensive Income | 471 | 8 | — | 8 | 479 | |||||||||||||||||||||||||
Dividends Declared | (247 | ) | (247 | ) | ||||||||||||||||||||||||||
Balance as of September 30, 2016 | 143 | $ | 2,402 | $ | (12 | ) | $ | 3,342 | $ | (45 | ) | $ | (12 | ) | $ | (57 | ) | $ | 5,675 |
See Notes to Condensed Consolidated Financial Statements.
Dominion Energy South Carolina, Electric & Gas Company and Affiliates
Millions of dollars | September 30, 2017 | December 31, 2016 | ||||||
Assets | ||||||||
Utility Plant In Service | $ | 11,783 | $ | 11,510 | ||||
Accumulated Depreciation and Amortization | (4,078 | ) | (3,991 | ) | ||||
Construction Work in Progress | 554 | 4,813 | ||||||
Nuclear Fuel, Net of Accumulated Amortization | 249 | 271 | ||||||
Utility Plant, Net ($740 and $756 related to VIEs) | 8,508 | 12,603 | ||||||
Nonutility Property and Investments: | ||||||||
Nonutility property, net of accumulated depreciation | 71 | 69 | ||||||
Assets held in trust, net-nuclear decommissioning | 132 | 123 | ||||||
Other investments | 2 | 3 | ||||||
Nonutility Property and Investments, Net | 205 | 195 | ||||||
Current Assets: | ||||||||
Cash and cash equivalents | 1,015 | 164 | ||||||
Receivables: | ||||||||
Customer, net of allowance for uncollectible accounts of $4 and $3 | 401 | 378 | ||||||
Affiliated companies | 8 | 16 | ||||||
Income taxes | — | 53 | ||||||
Other | 168 | 94 | ||||||
Inventories (at average cost): | ||||||||
Fuel | 78 | 83 | ||||||
Materials and supplies | 148 | 143 | ||||||
Prepayments | 98 | 88 | ||||||
Other current assets | 1 | 1 | ||||||
Total Current Assets ($57 and $85 related to VIEs) | 1,917 | 1,020 | ||||||
Deferred Debits and Other Assets: | ||||||||
Regulatory assets | 6,582 | 2,030 | ||||||
Other | 221 | 243 | ||||||
Total Deferred Debits and Other Assets ($49 and $52 related to VIEs) | 6,803 | 2,273 | ||||||
Total | $ | 17,433 | $ | 16,091 |
Notes to Condensed Consolidated Financial Statements.
Millions of dollars | September 30, 2017 | December 31, 2016 | ||||||
Capitalization and Liabilities | ||||||||
Common Stock - no par value, 40.3 million shares outstanding | $ | 2,860 | $ | 2,860 | ||||
Retained Earnings | 2,518 | 2,481 | ||||||
Accumulated Other Comprehensive Loss | (3 | ) | (3 | ) | ||||
Total Common Equity | 5,375 | 5,338 | ||||||
Noncontrolling Interest | 137 | 134 | ||||||
Total Equity | 5,512 | 5,472 | ||||||
Long-Term Debt, net | 4,990 | 5,154 | ||||||
Total Capitalization | 10,502 | 10,626 | ||||||
Current Liabilities: | ||||||||
Short-term borrowings | 945 | 804 | ||||||
Current portion of long-term debt | 173 | 12 | ||||||
Accounts payable | 154 | 247 | ||||||
Affiliated payables | 96 | 122 | ||||||
Customer deposits and customer prepayments | 74 | 126 | ||||||
Taxes accrued | 663 | 195 | ||||||
Interest accrued | 71 | 68 | ||||||
Dividends declared | 81 | 79 | ||||||
Derivative financial instruments | 41 | 28 | ||||||
Other | 69 | 55 | ||||||
Total Current Liabilities | 2,367 | 1,736 | ||||||
Deferred Credits and Other Liabilities: | ||||||||
Deferred income taxes, net | 1,505 | 1,939 | ||||||
Asset retirement obligations | 533 | 522 | ||||||
Pension and other postretirement benefits | 231 | 232 | ||||||
Unrecognized tax benefits | 402 | 236 | ||||||
Regulatory liabilities | 1,779 | 695 | ||||||
Other | 99 | 89 | ||||||
Other affiliate | 15 | 16 | ||||||
Total Deferred Credits and Other Liabilities | 4,564 | 3,729 | ||||||
Commitments and Contingencies (Note 9) | ||||||||
Total | $ | 17,433 | $ | 16,091 |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
Millions of dollars | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating Revenues: | ||||||||||||||||
Electric | $ | 786 | $ | 817 | $ | 2,042 | $ | 2,035 | ||||||||
Electric - nonconsolidated affiliate | 1 | 1 | 4 | 4 | ||||||||||||
Gas | 69 | 64 | 284 | 252 | ||||||||||||
Gas - nonconsolidated affiliate | — | — | 1 | 1 | ||||||||||||
Total Operating Revenues | 856 | 882 | 2,331 | 2,292 | ||||||||||||
Operating Expenses: | ||||||||||||||||
Fuel used in electric generation | 132 | 141 | 370 | 368 | ||||||||||||
Fuel used in electric generation - nonconsolidated affiliate | 35 | 35 | 94 | 75 | ||||||||||||
Purchased power | 22 | 21 | 54 | 50 | ||||||||||||
Gas purchased for resale | 39 | 36 | 147 | 117 | ||||||||||||
Gas purchased for resale - nonconsolidated affiliate | — | — | — | 9 | ||||||||||||
Other operation and maintenance | 109 | 101 | 305 | 298 | ||||||||||||
Other operation and maintenance - nonconsolidated affiliate | 45 | 51 | 141 | 156 | ||||||||||||
Impairment loss | 210 | — | 210 | — | ||||||||||||
Depreciation and amortization | 78 | 76 | 232 | 225 | ||||||||||||
Other taxes | 62 | 61 | 183 | 173 | ||||||||||||
Other taxes - nonconsolidated affiliate | 1 | 1 | 4 | 5 | ||||||||||||
Total Operating Expenses | 733 | 523 | 1,740 | 1,476 | ||||||||||||
Operating Income | 123 | 359 | 591 | 816 | ||||||||||||
Other Income (Expense): | ||||||||||||||||
Other income | 21 | 7 | 36 | 20 | ||||||||||||
Other expense | (6 | ) | (4 | ) | (17 | ) | (19 | ) | ||||||||
Interest charges, net of allowance for borrowed funds used during construction of $2, $5, $15 and $13 | (76 | ) | (70 | ) | (214 | ) | (201 | ) | ||||||||
Allowance for equity funds used during construction | (3 | ) | 6 | 13 | 19 | |||||||||||
Total Other Income (Expense) | (64 | ) | (61 | ) | (182 | ) | (181 | ) | ||||||||
Income Before Income Tax Expense | 59 | 298 | 409 | 635 | ||||||||||||
Income Tax Expense | 17 | 94 | 129 | 202 | ||||||||||||
Net Income and Total Comprehensive Income | 42 | 204 | 280 | 433 | ||||||||||||
Less Net Income and Total Comprehensive Income Attributable to Noncontrolling Interest | (3 | ) | (3 | ) | (10 | ) | (10 | ) | ||||||||
Earnings and Comprehensive Income Available to Common Shareholder | $ | 39 | $ | 201 | $ | 270 | $ | 423 | ||||||||
Dividends Declared on Common Stock | $ | 81 | $ | 76 | $ | 240 | $ | 225 |
Nine Months Ended September 30, | ||||||||
Millions of dollars | 2017 | 2016 | ||||||
Cash Flows From Operating Activities: | ||||||||
Net income | $ | 280 | $ | 433 | ||||
Adjustments to reconcile net income to net cash provided from operating activities: | ||||||||
Impairment loss | 210 | — | ||||||
Deferred income taxes, net | (434 | ) | 127 | |||||
Depreciation and amortization | 238 | 229 | ||||||
Amortization of nuclear fuel | 31 | 42 | ||||||
Allowance for equity funds used during construction | (13 | ) | (19 | ) | ||||
Carrying cost recovery | (27 | ) | (12 | ) | ||||
Changes in certain assets and liabilities: | ||||||||
Receivables | (27 | ) | (70 | ) | ||||
Receivables - affiliate | 8 | 9 | ||||||
Income tax receivable | 53 | (206 | ) | |||||
Inventories | (34 | ) | (14 | ) | ||||
Prepayments | (10 | ) | (15 | ) | ||||
Regulatory assets | (40 | ) | (6 | ) | ||||
Regulatory liabilities | (1 | ) | (3 | ) | ||||
Accounts payable | 31 | (13 | ) | |||||
Accounts payable - affiliate | (28 | ) | (13 | ) | ||||
Taxes accrued | 468 | (151 | ) | |||||
Unrecognized tax benefit | 166 | 210 | ||||||
Other assets | (29 | ) | (117 | ) | ||||
Other liabilities | (14 | ) | 64 | |||||
Net Cash Provided From Operating Activities | 828 | 475 | ||||||
Cash Flows From Investing Activities: | ||||||||
Property additions and construction expenditures | (882 | ) | (1,024 | ) | ||||
Proceeds from monetization of guaranty settlement | 1,013 | — | ||||||
Proceeds from investments (including derivative collateral returned) | 96 | 577 | ||||||
Purchase of investments (including derivative collateral posted) | (98 | ) | (699 | ) | ||||
Payments upon interest rate derivative contract settlements | — | (88 | ) | |||||
Proceeds from money pool investments | — | 9 | ||||||
Net Cash Provided From (Used For) Investing Activities | 129 | (1,225 | ) | |||||
Cash Flows From Financing Activities: | ||||||||
Proceeds from issuance of debt | — | 494 | ||||||
Repayment of long-term debt | (11 | ) | (10 | ) | ||||
Dividends | (238 | ) | (224 | ) | ||||
Contributions from parent | — | 100 | ||||||
Money pool borrowings, net | 2 | (5 | ) | |||||
Short-term borrowings, net | 141 | 294 | ||||||
Net Cash Provided From (Used For) Financing Activities | (106 | ) | 649 | |||||
Net Decrease In Cash and Cash Equivalents | 851 | (101 | ) | |||||
Cash and Cash Equivalents, January 1 | 164 | 130 | ||||||
Cash and Cash Equivalents, September 30 | $ | 1,015 | $ | 29 | ||||
Supplemental Cash Flow Information: | ||||||||
Cash for–Interest (net of capitalized interest of $15 and $13) | $ | 195 | $ | 182 | ||||
– Income taxes paid | 3 | 286 | ||||||
– Income taxes received | 143 | 9 | ||||||
Noncash Investing and Financing Activities: | ||||||||
Accrued construction expenditures | 21 | 71 | ||||||
Capital leases | 6 | 12 | ||||||
Guaranty settlement receivable | 83 | — |
(Unaudited)
Common Stock | |||||||||||||||||||||||
Millions | Shares | Amount | Retained Earnings | AOCI | Noncontrolling Interest | Total Equity | |||||||||||||||||
Balance at January 1, 2017 | 40 | $ | 2,860 | $ | 2,481 | $ | (3 | ) | $ | 134 | $ | 5,472 | |||||||||||
Earnings available to common shareholder | 270 | 10 | 280 | ||||||||||||||||||||
Total Comprehensive Income | 270 | — | 10 | 280 | |||||||||||||||||||
Cash dividend declared | (233 | ) | (7 | ) | (240 | ) | |||||||||||||||||
Balance at September 30, 2017 | 40 | $ | 2,860 | $ | 2,518 | $ | (3 | ) | $ | 137 | $ | 5,512 | |||||||||||
Balance at January 1, 2016 | 40 | $ | 2,760 | $ | 2,265 | $ | (3 | ) | $ | 129 | $ | 5,151 | |||||||||||
Earnings available to common shareholder | 423 | 10 | 433 | ||||||||||||||||||||
Total Comprehensive Income | 423 | — | 10 | 433 | |||||||||||||||||||
Capital Contributions from parent | 100 | 100 | |||||||||||||||||||||
Cash dividend declared | (219 | ) | (6 | ) | (225 | ) | |||||||||||||||||
Balance at September 30, 2016 | 40 | $ | 2,860 | $ | 2,469 | $ | (3 | ) | $ | 133 | $ | 5,459 |
The following unaudited notes to the condensed consolidated financial statements are a combined presentation. Except as otherwise indicated herein, each note applies to the Company and Consolidated SCE&G; however, Consolidated SCE&G makes no representation as to information relating solely to SCANA Corporation or its subsidiaries (other than Consolidated SCE&G).
These are interim financial statements and, due to the seasonality of each company'sDESC's business and matters that may occur during the rest of the year, including the matters described in condensed consolidated Note 9 under
Certain amounts in DESC's 2021 Consolidated Financial Statements and Notes have been reclassified to conform to the 2022 presentation for comparative purposes; however, such reclassifications did not affect DESC's net income and other comprehensive income, total assets, liabilities, equity or cash flows.
DESC is a wholly-owned subsidiary of SCANA, which is a wholly-owned subsidiary of Dominion Energy.
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 SCE&G's condensed consolidated financial statementsFinancial Statements include, after eliminating intercompany balances and transactions, the accounts of SCE&G,DESC, GENCO and Fuel Company. The equity interestsSee Note 2 to the Consolidated Financial Statements included in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021 for a description of GENCO and Fuel Company are held solely by SCANA, SCE&G’s parent. As a result, GENCO’sCompany.
DESC purchases shared services from DES, an affiliated VIE that provides accounting, legal, finance and Fuel Company’s equitycertain administrative and resultstechnical services to all Dominion Energy subsidiaries, including DESC. DESC has determined that it is not the primary beneficiary of operations are reflectedDES as noncontrolling interestit 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 12 for amounts attributable to affiliates.
Significant Accounting Policies
There have been no significant changes from Note 2 to the Consolidated Financial Statements in Consolidated SCE&G’s condensed consolidated financial statements.
2.
RATE AND OTHER REGULATORY MATTERSRegulatory Matters Involving Potential Loss Contingencies
As a result of 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.
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, 2021.
Electric -– Cost of Fuel
DESC’s retail electric rates include a cost of fuel component approved SCE&G's participation in a DER program and recovery of related costs as a separate component of SCE&G's overall fuel factor. Under this order, SCE&G will, among other things, implement programs to encourage the development of renewable energy facilities with a total nameplate capacity of at least approximately 84.5 MW by the endSouth Carolina Commission which may be adjusted periodically to reflect changes in the price of 2020, of which half is to be customer-scale solar capacity and half is to be utility-scale solar capacity.
In August 2022, DESC filed an application with the South Carolina Commission seeking a mid-period adjustment to increase the base fuel component of retail electric rates for the recovery of electric fuel costs. If approved, the increase of the base fuel cost component is expected to be effective with the first billing cycle of May 2017, projected DER program costs of approximately $16.5January 2023. The estimated annual increase is $399 million. Additionally, deferral of carrying costs will be allowedThis matter is pending.
Electric – Other
DESC has approval for base fuel component under-collected balances as they occur.
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 2017.
Natural Gas Rates
In June 22, 2017, the Friends of the Earth and the Sierra Club filed a complaint against SCE&G with the SCPSC, requesting that the SCPSC initiate a formal proceeding to direct SCE&G to immediately cease and desist from expending any further capital costs related to the construction of the New Units; to determine the prudence of acts and omissions by SCE&G in connection with the construction of the New Units; to review and determine the prudence of abandonment of the New Units and of the available least cost efficiency and renewable energy alternatives; and to remedy, abate and make due reparations for the rates charged to ratepayers related to the construction of the New Units. SCE&G filed its answer to the complaint and a motion to dismiss the complaint on July 19, 2017. On October 4, 2017, the SCPSC ordered proceedings under this complaint to be coordinated with proceedings for the Request filed on September 26, 2017, described below, and allowed discovery to proceed. On October 13, 2017, SCE&G2022, DESC filed with the SCPSC a petition for rehearing and reconsideration of the order as well as a response to the SCPSC's request for briefing concerning coordination of proceedings under this complaint with proceedings for the Request. On November 1, 2017, the SCPSC denied SCE&G's petition for rehearing and reconsideration.
In November 2021, DESC filed an application with the South Carolina Commission seeking approval to create DSM programs for DESC's residential and commercial natural gas customers and a new rider to retail gas rates for the recovery of actual gasthe associated program costs incurred, including transportation costs. SCE&G’s gas rates are calculated usingand a methodology which may adjust the costshared savings incentive of gas monthly based on9.9%. The application also includes a 12-month rolling average, and its gas purchasing policies and practices are reviewed annually by the SCPSC. SCE&G’s annual PGA hearing for the 12-month period ending July 31, 2017, is scheduled for November 9, 2017.
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, the Company and Consolidated SCE&G haveDESC has recorded regulatory assets and regulatory liabilities which are summarized in the following tables.table. Except for certain unrecovered nuclear projectNND Project costs and certain other unrecovered plant,costs referenced herein, 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.
|
| September 30, |
|
| December 31, |
| ||
(millions) |
| 2022 |
|
| 2021 |
| ||
Regulatory assets: |
|
|
|
|
|
|
|
|
NND Project costs(1) |
| $ | 138 |
|
| $ | 138 |
|
Deferred employee benefit plan costs(2) |
|
| 4 |
|
|
| 8 |
|
Other unrecovered plant(3) |
|
| 17 |
|
|
| 16 |
|
DSM programs(4) |
|
| 21 |
|
|
| 23 |
|
Cost of fuel and purchased gas under-collections(5) |
|
| 389 |
|
|
| 126 |
|
Other |
|
| 50 |
|
|
| 50 |
|
Regulatory assets - current |
|
| 619 |
|
|
| 361 |
|
NND Project costs(1) |
|
| 2,122 |
|
|
| 2,226 |
|
AROs(6) |
|
| 391 |
|
|
| 311 |
|
Deferred employee benefit plan costs(2) |
|
| 108 |
|
|
| 106 |
|
Deferred losses on interest rate derivatives(7) |
|
| 277 |
|
|
| 295 |
|
Other unrecovered plant(3) |
|
| 60 |
|
|
| 57 |
|
DSM programs(4) |
|
| 40 |
|
|
| 45 |
|
Environmental remediation costs(8) |
|
| 37 |
|
|
| 30 |
|
Deferred storm damage costs(9) |
|
| 39 |
|
|
| 38 |
|
Deferred transmission operating costs(10) |
|
| 76 |
|
|
| 77 |
|
Other(11) |
|
| 133 |
|
|
| 138 |
|
Regulatory assets - noncurrent |
|
| 3,283 |
|
|
| 3,323 |
|
Total regulatory assets |
| $ | 3,902 |
|
| $ | 3,684 |
|
Regulatory liabilities: |
|
|
|
|
|
|
|
|
Monetization of guaranty settlement(12) |
| $ | 67 |
|
| $ | 67 |
|
Income taxes refundable through future rates(13) |
|
| 36 |
|
|
| 42 |
|
Reserve for refunds to electric utility customers(14) |
|
| 102 |
|
|
| 113 |
|
Derivatives(15) |
|
| 68 |
|
|
| 18 |
|
Other |
|
| 10 |
|
|
| 5 |
|
Regulatory liabilities - current |
|
| 283 |
|
|
| 245 |
|
Monetization of guaranty settlement(12) |
|
| 719 |
|
|
| 831 |
|
Income taxes refundable through future rates(13) |
|
| 877 |
|
|
| 903 |
|
Asset removal costs(16) |
|
| 587 |
|
|
| 570 |
|
Deferred gains on interest rate derivatives(7) |
|
| 69 |
|
|
| 67 |
|
Reserve for refunds to electric utility customers(14) |
|
| 352 |
|
|
| 425 |
|
Derivatives(15) |
|
| 199 |
|
|
| 131 |
|
Other |
|
| 10 |
|
|
| 9 |
|
Regulatory liabilities - noncurrent |
|
| 2,813 |
|
|
| 2,936 |
|
Total regulatory liabilities |
| $ | 3,096 |
|
| $ | 3,181 |
|
(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 12 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional 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. |
(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 following deprecation amounts that were designed to recover the retired units’ cost over their previous estimated remaining useful lives, which has been estimated to be through 2025. Based on current projections of remaining decommissioning costs, projected recovery is expected to extend to 2029. In addition, amounts include unrecovered costs of existing meters and equipment retired from service prior to being fully depreciated as part of the Advance Metering Infrastructure project, which are being recovered through rates through 2028.This amount also includes certain inventory and preliminary survey and investigation charges being amortized over five years related to the transition or conversion from coal to gas fired generation at certain facilities. In addition, reflects an increase of approximately $7 million related to the abandonment of certain peaking gas generation |
facilities, such amounts having been reclassified from property, plant and equipment to noncurrent other unrecovered plant. 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 three years through an approved rate rider. |
(5) | Represents amounts under- or over-collected from customers pursuant to the cost of fuel and purchased gas components approved by the South Carolina Commission. Reflects a $66 million reduction recorded in the first quarter of 2022 from the application of a portion of the monetization of guarantee settlement previously reflected as regulatory liabilities associated with the approval of DESC’s cost of fuel proceedings. See above for additional information. |
(6) 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.
(7) | 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. |
(8) | 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 26 years. See Note 10 for additional information. |
The Company | Consolidated SCE&G | |||||||||||||||
Millions of dollars | September 30, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2016 | ||||||||||||
Regulatory Assets: | ||||||||||||||||
Unrecovered nuclear project costs | $ | 4,520 | — | $ | 4,520 | — | ||||||||||
Accumulated deferred income taxes | 315 | $ | 316 | 307 | $ | 307 | ||||||||||
AROs and related funding | 424 | 425 | 401 | 403 | ||||||||||||
Deferred employee benefit plan costs | 321 | 342 | 290 | 309 | ||||||||||||
Deferred losses on interest rate derivatives | 632 | 620 | 632 | 620 | ||||||||||||
Other unrecovered plant | 108 | 117 | 108 | 117 | ||||||||||||
DSM Programs | 58 | 59 | 58 | 59 | ||||||||||||
Carrying costs on deferred tax assets related to nuclear construction | 46 | 32 | 46 | 32 | ||||||||||||
Pipeline integrity management costs | 47 | 33 | 7 | 6 | ||||||||||||
Environmental remediation costs | 30 | 32 | 25 | 26 | ||||||||||||
Deferred storm damage costs | 22 | 20 | 22 | 20 | ||||||||||||
Deferred costs related to uncertain tax position | 28 | 15 | 28 | 15 | ||||||||||||
Other | 139 | 119 | 138 | 116 | ||||||||||||
Total Regulatory Assets | $ | 6,690 | $ | 2,130 | $ | 6,582 | $ | 2,030 |
(9) | Represents storm restoration costs which DESC expects to recover through customer rates over approximately 10 years pursuant to the settlement agreement approved in DESC’s retail electric base rate case.Unamortized amounts are included in rate base and are earning a current return. |
(10) | Includes deferred depreciation and property taxes associated with certain transmission assets which DESC expects to recover from customers through 2063, pursuant to the settlement agreement approved in DESC’s retail electric base rate case.Unamortized amounts are included in rate base and are earning a current return. |
Regulatory Liabilities: | ||||||||||||||||
Monetization of guaranty settlement | $ | 1,095 | — | $ | 1,095 | — | ||||||||||
Asset removal costs | 764 | $ | 755 | 535 | $ | 529 | ||||||||||
Deferred gains on interest rate derivatives | 135 | 151 | 135 | 151 | ||||||||||||
Other | 21 | 24 | 14 | 15 | ||||||||||||
Total Regulatory Liabilities | $ | 2,015 | $ | 930 | $ | 1,779 | $ | 695 |
(11) | Various other regulatory assets are expected to be recovered through rates over varying periods through 2047. |
(12) | 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 12 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information. |
(13) | 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 7 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information. |
(14) | 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 12 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information. |
(15) | Represents changes in the fair value of derivatives, excluding separately presented deferred gains on interest rate derivatives, that following settlement are expected to be recovered from or refunded to customers. |
(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 applicable GAAP for regulated operations. The SCPSC, the NCUCSouth Carolina Commission or the FERC has reviewed and approved through specific orders certain of the items shown as regulatory assets. OtherIn 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 unrecovered nuclear project costs that are the subject of future regulatory proceedings as further discussed in condensed consolidated Note 9. In recordingagencies. While such costs as regulatory assets,are not currently being recovered, management believes the coststhey would be allowable under existing rate-making concepts that are embodied in rate orders or currentapplicable state law. Thelaw and expects to recover these costs are currently not being recovered, but are expected to be recovered through rates in future periods. In
3. REVENUE RECOGNITION
DESC has disaggregated operating revenues by customer class as follows:
|
| Three Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| September 30, 2022 |
|
| September 30, 2021 |
|
| September 30, 2022 |
|
| September 30, 2021 |
| ||||||||||||||||||||
(millions) |
| Electric |
|
| Gas |
|
| Electric |
|
| Gas |
|
| Electric |
|
| Gas |
|
| Electric |
|
| Gas |
| ||||||||
Customer class: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
| $ | 433 |
|
| $ | 39 |
|
| $ | 366 |
|
| $ | 34 |
|
| $ | 1,065 |
|
| $ | 193 |
|
| $ | 912 |
|
| $ | 170 |
|
Commercial |
|
| 294 |
|
|
| 41 |
|
|
| 244 |
|
|
| 26 |
|
|
| 740 |
|
|
| 124 |
|
|
| 618 |
|
|
| 91 |
|
Industrial |
|
| 153 |
|
|
| 54 |
|
|
| 112 |
|
|
| 27 |
|
|
| 396 |
|
|
| 128 |
|
|
| 295 |
|
|
| 67 |
|
Other |
|
| 56 |
|
|
| 4 |
|
|
| 46 |
|
|
| 4 |
|
|
| 156 |
|
|
| 16 |
|
|
| 117 |
|
|
| 16 |
|
Revenues from contracts with customers |
|
| 936 |
|
|
| 138 |
|
|
| 768 |
|
|
| 91 |
|
|
| 2,357 |
|
|
| 461 |
|
|
| 1,942 |
|
|
| 344 |
|
Other revenues |
|
| 8 |
|
|
| 1 |
|
|
| 4 |
|
|
| — |
|
|
| 22 |
|
|
| 1 |
|
|
| 12 |
|
|
| 1 |
|
Total Operating Revenues |
| $ | 944 |
|
| $ | 139 |
|
| $ | 772 |
|
| $ | 91 |
|
| $ | 2,379 |
|
| $ | 462 |
|
| $ | 1,954 |
|
| $ | 345 |
|
Contract liabilities represent the future,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 $9 million and $8 million at September 30, 2022 and December 31, 2021, respectively. During the nine months ended September 30, 2022 and 2021, DESC recognized revenue of $6 million and $4 million, respectively, from the beginning contract liability balances as a result of deregulation, changesDESC fulfilled its obligations to provide service to its customers. Contract liabilities are recorded in state law, other changescustomer deposits and customer prepayments in the regulatory environment or changes in accounting requirements, the Company or Consolidated SCE&G 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 the Company's and Consolidated SCE&G's financial statements in the period the write-off would be recorded.
Balances and to pursue recovery of costs under the abandonment provisions of the BLRA or through a general rate case or other regulatory means, net of an estimated impairment loss of $210 million. See additional discussion at condensed consolidated Note 9.
|
| Regulatory Assets |
| |||||
(millions) |
| September 30, 2022 |
|
| December 31, 2021 |
| ||
Beginning balance |
| $ | 11 |
|
| $ | 12 |
|
Amortization |
|
| (1 | ) |
|
| (1 | ) |
Ending balance |
| $ | 10 |
|
| $ | 11 |
|
4. EQUITY
For all periods of participating employees, or up to approximately 11 years.
In June 2017, PSNCMay 2022, Dominion Energy issued $150$72 million of 4.18% senior notes due June 30, 2047. Proceedsshares of Dominion Energy common stock to partially satisfy DESC’s remaining obligation under a settlement agreement with the SCDOR discussed in Note 10. In connection with this transaction, DESC recorded an equity contribution from this sale wereDominion Energy in the second quarter of 2022.
In July 2021, Dominion Energy issued $104 million of shares of Dominion Energy common stock to satisfy DESC’s obligation under a settlement agreement for the FILOT litigation discussed in Note 12 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021. In August 2021, Dominion Energy issued $45 million of shares of Dominion Energy common stock to satisfy DESC’s obligation for the initial payment under a settlement agreement with the SCDOR discussed in Note 10. In connection with these transactions, DESC recorded equity contributions from Dominion Energy in the third quarter of 2021.
There have been no material changes to the dividend restrictions affecting DESC described in Note 5 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021.
5. LONG-TERM AND SHORT-TERM DEBT
DESC’s short-term financing is supported through its access as co-borrower to Dominion Energy’s $6.0 billion joint revolving credit facility, which can be used to repay short-term debt, to financefor working capital, expenditures,as support for the combined commercial paper programs of DESC, Dominion Energy, Virginia Power and Questar Gas, and for other general corporate purposes.
At September 30, 2022, DESC's share of 0.78%.
(millions) |
| Facility Limit |
|
| Outstanding Commercial Paper |
|
| Outstanding Letters of Credit |
| |||
Joint revolving credit facility(1) |
| $ | 1,000 |
|
| $ | 250 |
|
| $ | — |
|
September 30, 2017 (Millions of dollars) | Total | SCANA | Consolidated SCE&G | PSNC Energy | ||||||||||||
Lines of credit: | + | |||||||||||||||
Five-year, expiring December 2020 | $ | 1,300.0 | $ | 400.0 | $ | 700.0 | $ | 200.0 | ||||||||
Fuel Company five-year, expiring December 2020 | 500.0 | — | 500.0 | — | ||||||||||||
Three-year, expiring December 2018 | 200.0 | — | 200.0 | — | ||||||||||||
Total committed long-term | 2,000.0 | 400.0 | 1,400.0 | 200.0 | ||||||||||||
Outstanding commercial paper (270 or fewer days) | 1,022.1 | 33.0 | 944.8 | 44.3 | ||||||||||||
Weighted average interest rate | 1.78 | % | 1.49 | % | 1.49 | % | ||||||||||
Letters of credit supported by LOC | 3.3 | 3.0 | 0.3 | — | ||||||||||||
Available | $ | 974.6 | $ | 364.0 | $ | 454.9 | $ | 155.7 |
(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 and Questar Gas. 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 September 30, 2022, 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 intercompany borrowings from DESC's parent or from Dominion Energy. This credit facility matures in June 2026, with the potential to be extended by the borrowers to June 2028. The credit facility 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. |
December 31, 2016 (Millions of dollars) | Total | SCANA | Consolidated SCE&G | PSNC Energy | ||||||||||||
Lines of credit: | ||||||||||||||||
Five-year, expiring December 2020 | $ | 1,300.0 | $ | 400.0 | $ | 700.0 | $ | 200.0 | ||||||||
Fuel Company five-year, expiring December 2020 | 500.0 | — | 500.0 | — | ||||||||||||
Three-year, expiring December 2018 | 200.0 | — | 200.0 | — | ||||||||||||
Total committed long-term | 2,000.0 | 400.0 | 1,400.0 | 200.0 | ||||||||||||
Outstanding commercial paper (270 or fewer days) | 940.5 | 64.4 | 804.3 | 71.8 | ||||||||||||
Weighted average interest rate | 1.43 | % | 1.04 | % | 1.07 | % | ||||||||||
Letters of credit supported by LOC | 3.3 | 3.0 | 0.3 | — | ||||||||||||
Available | $ | 1,056.2 | $ | 332.6 | $ | 595.4 | $ | 128.2 |
DESC is obligated with respect to an aggregate of $67.8$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.
DESC has FERC approval to enter into an inter-company credit agreement with Dominion Energy under which DESC may have short-term borrowings outstanding up to $900 million. At September 30, 2022 and December 31, 2021, DESC had borrowings outstanding under this credit agreement totaling $654 million and $415 million, respectively, which are recorded in affiliated and related party payables in DESC’s Consolidated Balance Sheets. For the three and nine months ended September 30, 2022, DESC
recorded interest charges of $4 million and $9 million, respectively. For the three and nine months ended September 30, 2021, DESC recorded interest charges of $2 million and $6 million, respectively.
Fuel Company and GENCO participated in a SCANA utility money pool with SCANA and another regulated subsidiary of SCANA.until January 2021, when that utility money pool was closed. Money pool borrowings and investments bearbore interest at short-term market rates. Consolidated SCE&G’sFor the nine months ended September 30, 2021, DESC recorded both interest income and interest expense from money pool transactions were not significantof less than $1 million.
6. INCOME TAXES
DESC’s effective tax rate for any period presented. Consolidated SCE&G had outstanding money pool borrowings due to an affiliate of $31 million atthe nine months ended September 30, 2017, and $29 million at December 31, 2016. On its condensed consolidated balance sheet, Consolidated SCE&G includes such amounts within Affiliated payables.
As of September 30, 2017, the Company and Consolidated SCE&G2022, there have recorded anbeen no material changes in DESC’s unrecognized tax benefit of $457 million ($402 million net of the impact of state deductions on federal returns and net of receivables related to the uncertain tax positions). If recognized, $17 million of the tax benefit would affect the Company’s and Consolidated SCE&G's effective tax rates (see discussion below regarding deferral of benefits related to 2015 forward). These unrecognized tax benefits are not expected to increase significantly within the next 12 months, although other uncertain tax positions may be identified or taken, particularly with respect to the abandonment of the construction of the New Units during 2017.benefits. It is reasonably possible that these knownrecent case law and interactions with the taxing authority could result in a decrease in unrecognized tax benefits may decrease by $457up to $26 million withinduring the next 12twelve months. NoIf such changes were to occur, other material changes in the statusthan revisions of the Company’s or Consolidated SCE&G'saccrual for interest on tax positions have occurred through September 30, 2017.
7. DERIVATIVE FINANCIAL INSTRUMENTS
DESC’s accounting policies, objectives, and experimentation deductions in the 2015 and 2016 income tax returns has been deferred as a regulatory asset and is expected to be recoverable through customer rates in future years. See also condensed consolidated Note 2. Otherwise, the Company and Consolidated SCE&G recognize interest accrued related to unrecognized tax benefits within interest expense or interest income and recognize tax penalties within other expenses. Amounts recordedstrategies for such interest income, interest expense or tax penalties have not been material for any period presented.
Derivative assets and liabilities are presented gross on the Consolidated Balance Sheets. DESC’s derivative contracts include over-the-counter transactions. Over-the-counter contracts are bilateral contracts that are transacted directly with a componentthird party. Certain over-the-counter contracts 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 comprehensive income (loss) or,conditions.
In general, most over-the-counter transactions are subject to collateral requirements. Types of collateral for regulated operations, within regulatory assets or regulatory liabilities, depending upon the intended useover-the-counter contracts include cash, letters of the derivative and the resulting designation.
Certain of market,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 liquidityrating downgrade. If the credit-related contingent features underlying the instruments that are in a liability position and operationalnot fully collateralized with cash were fully triggered as of December 31, 2021, DESC would have been required to post $8 million of additional collateral to its counterparties. No additional collateral would have been required to be posted to DESC’s counterparties at September 30, 2022. The collateral that would be required to be posted includes the impacts of any offsetting asset positions and administrative risks. SCANA’s Boardany amounts already posted for derivatives, non-derivative contracts and derivatives elected under the normal purchases and normal sales exception, per contractual terms. DESC had posted $3 million and $11 million, respectively, of Directors has delegatedcollateral at September 30, 2022 and December 31, 2021 related to derivatives with credit-related contingent provisions that are in a liability position and not fully collateralized with cash. The aggregate fair value of all derivative instruments with credit-related contingent provisions that are in a liability position and not fully collateralized with cash as of September 30, 2022 and December 31, 2021 was $3 million and $19 million, respectively, which does not include the impact of any offsetting asset positions.
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. DESC’s commodity derivative assets are not subject to a Risk Management Committeemaster netting agreement or similar arrangement. There were $4 million in gross assetspresented in the authority to set risk limits, establish policies and proceduresConsolidated Balance Sheets for risk management and measurement, and oversee and review the risk management process and infrastructure for SCANA and each of its subsidiaries. The Risk Management Committee, which is comprised of certain officers, including the Risk Management Officer and other senior officers, apprises the Audit Committee of the Board of Directors with regard to the management of risk and brings to their attention significant areas of concern. Written policies define the physical and financial transactionsover-the-counter interest rate contracts that are approved, as well assubject to master netting or similar agreements at September 30, 2022 and no such amounts at December 31, 2021. There were no financial instruments or cash collateral received to offset the authorization requirementsgross position at either date.
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||||||||||
|
| 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(1) |
|
| Financial Instruments |
|
| Cash Collateral Paid |
|
| Net Amounts |
|
| Gross Liabilities Presented in the Consolidated Balance Sheet(1) |
|
| Financial Instruments |
|
| Cash Collateral Paid |
|
| Net Amounts |
| ||||||||
Interest rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
| $ | 3 |
|
| $ | — |
|
| $ | 3 |
|
| $ | — |
|
| $ | 19 |
|
| $ | — |
|
| $ | 11 |
|
| $ | 8 |
|
Total derivatives |
| $ | 3 |
|
| $ | — |
|
| $ | 3 |
|
| $ | — |
|
| $ | 19 |
|
| $ | — |
|
| $ | 11 |
|
| $ | 8 |
|
(1) | There were no derivative liabilities that are not subject to master netting or similar arrangements at September 30, 2022 or December 31, 2021. |
Volumes
The following table presents the volume of derivative activity at September 30, 2022. These volumes are based on open derivative positions and limits for transactions.represent the combined absolute value of their long and short positions.
|
| Current |
|
| Noncurrent |
| ||
Electricity (MWh in millions): |
|
|
|
|
|
|
|
|
Fixed price |
|
| 2 |
|
|
| 24 |
|
Interest rate(1) (in millions) |
| $ | — |
|
| $ | 71 |
|
(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 September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
| $ | — |
|
| $ | 68 |
|
| $ | 68 |
|
Total current derivative assets(1) |
|
| — |
|
|
| 68 |
|
|
| 68 |
|
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
| — |
|
|
| 199 |
|
|
| 199 |
|
Interest rate |
|
| — |
|
|
| 4 |
|
|
| 4 |
|
Total noncurrent derivative assets(2) |
|
| — |
|
|
| 203 |
|
|
| 203 |
|
Total derivative assets |
| $ | — |
|
| $ | 271 |
|
| $ | 271 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
| $ | — |
|
| $ | — |
|
| $ | — |
|
Total current derivative liabilities(3) |
|
| — |
|
|
| — |
|
|
| — |
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
| 3 |
|
|
| — |
|
|
| 3 |
|
Total noncurrent derivative liabilities(4) |
|
| 3 |
|
|
| — |
|
|
| 3 |
|
Total derivative liabilities |
| $ | 3 |
|
| $ | — |
|
| $ | 3 |
|
At December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
| $ | — |
|
| $ | 18 |
|
| $ | 18 |
|
Total current derivative assets(1) |
|
| — |
|
|
| 18 |
|
|
| 18 |
|
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
| — |
|
|
| 130 |
|
|
| 130 |
|
Total noncurrent derivative assets(2) |
|
| — |
|
|
| 130 |
|
|
| 130 |
|
Total derivative assets |
| $ | — |
|
| $ | 148 |
|
| $ | 148 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
| $ | 1 |
|
| $ | 1 |
|
| $ | 2 |
|
Total current derivative liabilities(3) |
|
| 1 |
|
|
| 1 |
|
|
| 2 |
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
| 11 |
|
|
| 6 |
|
|
| 17 |
|
Total noncurrent derivative liabilities(4) |
|
| 11 |
|
|
| 6 |
|
|
| 17 |
|
Total derivative liabilities |
| $ | 12 |
|
| $ | 7 |
|
| $ | 19 |
|
(1) | Current derivative assets are presented in other current assets in DESC’s Consolidated Balance Sheets. |
(2) | Noncurrent derivative assets are presented in other deferred debits and other assets in DESC’s Consolidated Balance Sheets. |
(3) | Current derivative liabilities are presented in other current liabilities in DESC’s Consolidated Balance Sheets. |
(4) | Noncurrent derivative liabilities are presented in other deferred credits and other liabilities in DESC’s Consolidated Balance Sheets. |
The basic types of financial instruments utilized are exchange-traded instruments, such as NYMEX futures contracts or options, and over-the-counter instruments such as options and swaps, which are typically offered by energy companies and financial institutions. Cash settlements of commodity derivatives are classified as operating activities infollowing tables present the consolidated statements of cash flows.
Commodity and Other Energy Management Contracts (in MMBTU) | |||||||||
Hedge designation | Gas Distribution | Gas Marketing | Total | ||||||
As of September 30, 2017 | |||||||||
Commodity contracts | 8,330,000 | 16,723,000 | 25,053,000 | ||||||
Energy management contracts (a) | — | 46,346,530 | 46,346,530 | ||||||
Total (a) | 8,330,000 | 63,069,530 | 71,399,530 | ||||||
As of December 31, 2016 | |||||||||
Commodity contracts | 4,510,000 | 11,947,000 | 16,457,000 | ||||||
Energy management contracts (a) | — | 67,447,223 | 67,447,223 | ||||||
Total (a) | 4,510,000 | 79,394,223 | 83,904,223 |
Interest Rate Swaps | ||||||||||||||||
The Company | Consolidated SCE&G | |||||||||||||||
Millions of dollars | September 30, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2016 | ||||||||||||
Designated as hedging instruments | $ | 111.2 | $ | 115.6 | $ | 36.4 | $ | 36.4 | ||||||||
Not designated as hedging instruments | 1,285.0 | 1,285.0 | 1,285.0 | 1,285.0 |
Fair Values of Derivative Instruments | ||||||||||||||||||
The Company | Consolidated SCE&G | |||||||||||||||||
Millions of dollars | Balance Sheet Location | Asset | Liability | Asset | Liability | |||||||||||||
As of September 30, 2017 | ||||||||||||||||||
Designated as hedging instruments | ||||||||||||||||||
Interest rate contracts | ||||||||||||||||||
Derivative financial instruments | — | $ | 3 | — | $ | 1 | ||||||||||||
Other deferred credits and other liabilities | — | 25 | — | 9 | ||||||||||||||
Commodity contracts | ||||||||||||||||||
Prepayments | — | 1 | — | — | ||||||||||||||
Derivative financial instruments | $ | 1 | 1 | — | — | |||||||||||||
Total | $ | 1 | $ | 30 | — | $ | 10 | |||||||||||
Not designated as hedging instruments | ||||||||||||||||||
Interest rate contracts | ||||||||||||||||||
Other deferred debits and other assets | $ | 56 | — | $ | 56 | — | ||||||||||||
Derivative financial instruments | — | $ | 40 | — | $ | 40 | ||||||||||||
Other deferred credits and other liabilities | — | 4 | — | 4 | ||||||||||||||
Commodity contracts | ||||||||||||||||||
Prepayments | 1 | — | — | — | ||||||||||||||
Energy management contracts | ||||||||||||||||||
Prepayments | 2 | 1 | — | — | ||||||||||||||
Other current assets | 2 | — | — | — | ||||||||||||||
Other deferred debits and other assets | 1 | — | — | — | ||||||||||||||
Derivative financial instruments | — | 2 | — | — | ||||||||||||||
Other deferred credits and other liabilities | — | 1 | — | — | ||||||||||||||
Total | $ | 62 | $ | 48 | $ | 56 | $ | 44 | ||||||||||
As of December 31, 2016 | ||||||||||||||||||
Designated as hedging instruments | ||||||||||||||||||
Interest rate contracts | ||||||||||||||||||
Derivative financial instruments | — | $ | 4 | — | $ | 1 | ||||||||||||
Other deferred credits and other liabilities | — | 24 | — | 8 | ||||||||||||||
Commodity contracts | ||||||||||||||||||
Prepayments | $ | 5 | — | — | — | |||||||||||||
Other current assets | 1 | — | — | — | ||||||||||||||
Total | $ | 6 | $ | 28 | — | $ | 9 | |||||||||||
Not designated as hedging instruments | ||||||||||||||||||
Interest rate contracts | ||||||||||||||||||
Other deferred debits and other assets | $ | 71 | — | $ | 71 | — | ||||||||||||
Derivative financial instruments | — | $ | 27 | — | $ | 27 | ||||||||||||
Other deferred credits and other liabilities | — | 3 | — | 3 | ||||||||||||||
Commodity contracts | ||||||||||||||||||
Other current assets | 3 | — | — | — | ||||||||||||||
Energy management contracts | ||||||||||||||||||
Prepayments | 6 | 2 | — | — | ||||||||||||||
Other current assets | 2 | 1 | — | — | ||||||||||||||
Other deferred debits and other assets | 2 | — | — | — | ||||||||||||||
Derivative financial instruments | — | 4 | — | — | ||||||||||||||
Other deferred credits and other liabilities | — | 2 | — | — | ||||||||||||||
Total | $ | 84 | $ | 39 | $ | 71 | $ | 30 |
Derivatives in Cash Flow Hedging Relationships
(millions) | Increase (Decrease) in Derivatives Subject to Regulatory Treatment(1) |
| |
Three Months Ended September 30, 2022 |
|
|
|
Derivative type and location of gains (losses): |
|
|
|
Interest rate | $ | 2 |
|
Total | $ | 2 |
|
Three Months Ended September 30, 2021 |
|
|
|
Derivative type and location of gains (losses): |
|
|
|
Interest rate | $ | 1 |
|
Total | $ | 1 |
|
Nine Months Ended September 30, 2022 |
|
|
|
Derivative type and location of gains (losses): |
|
|
|
Interest rate | $ | 10 |
|
Total | $ | 10 |
|
Nine Months Ended September 30, 2021 |
|
|
|
Derivative type and location of gains (losses): |
|
|
|
Interest rate | $ | 7 |
|
Total | $ | 7 |
|
(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. |
Derivatives Not Designated as Hedging Instrument
(millions) |
| Amount of Gain (Loss) Recognized in Income on Derivatives(1) |
| |||||
Three Months Ended September 30, |
| 2022 |
|
| 2021 |
| ||
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
Commodity contracts: |
|
|
|
|
|
|
|
|
Purchased power |
| $ | 48 |
|
| $ | 3 |
|
Interest rate contracts: |
|
|
|
|
|
|
|
|
Interest charges |
|
| (1 | ) |
|
| — |
|
Total |
| $ | 47 |
|
| $ | 3 |
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
Commodity contracts: |
|
|
|
|
|
|
|
|
Purchased power |
| $ | 66 |
|
| $ | 3 |
|
Interest rate contracts: |
|
|
|
|
|
|
|
|
Interest charges |
|
| (2 | ) |
|
| (1 | ) |
Total |
| $ | 64 |
|
| $ | 2 |
|
(1) | 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. |
The Company and Consolidated SCE&G: | ||||||||||||||||||
Loss Deferred in Regulatory Accounts | Loss Reclassified from Deferred Accounts into Income | |||||||||||||||||
Millions of dollars | 2017 | 2016 | Location | 2017 | 2016 | |||||||||||||
Three Months Ended September 30, | ||||||||||||||||||
Interest rate contracts | — | $ | (1 | ) | Interest expense | — | $ | (1 | ) | |||||||||
Nine Months Ended September 30, | ||||||||||||||||||
Interest rate contracts | $ | (1 | ) | $ | (6 | ) | Interest expense | $ | (1 | ) | $ | (2 | ) |
The Company: | ||||||||||||||||||
Gain (Loss) Recognized in OCI, net of tax | Gain (Loss) Reclassified from AOCI into Income, net of tax | |||||||||||||||||
Millions of dollars | 2017 | 2016 | Location | 2017 | 2016 | |||||||||||||
Three Months Ended September 30, | ||||||||||||||||||
Interest rate contracts | — | $ | 1 | Interest expense | $ | (2 | ) | $ | (2 | ) | ||||||||
Commodity contracts | — | (2 | ) | Gas purchased for resale | — | — | ||||||||||||
Total | — | $ | (1 | ) | $ | (2 | ) | $ | (2 | ) | ||||||||
Nine Months Ended September 30, | ||||||||||||||||||
Interest rate contracts | $ | (1 | ) | $ | (4 | ) | Interest expense | $ | (6 | ) | $ | (6 | ) | |||||
Commodity contracts | (4 | ) | — | Gas purchased for resale | 2 | (6 | ) | |||||||||||
Total | $ | (5 | ) | $ | (4 | ) | $ | (4 | ) | $ | (12 | ) |
8. FAIR VALUE MEASUREMENTS, INCLUDING DERIVATIVES
DESC’s fair value measurements are made in accordance with the Company expects that duringpolicies discussed in Note 9 to the next 12 months reclassifications from AOCI to earnings arising from cash flow hedges will include approximately $0.8 million as an increase to gas cost, assuming natural gas markets remain at their current levels, and approximately $6.6 million as an increase to interest expense. As of September 30, 2017, all ofConsolidated Financial Statements in DESC’s Annual Report on Form 10-K for the Company’s commodity cash flow hedges settle by their terms before the end of the fourth quarter of 2019.
Derivatives Not designated as Hedging Instruments | |||||||||||
The Company and Consolidated SCE&G: | |||||||||||
Millions of dollars | Loss Deferred in Regulatory Accounts | Location | Loss Reclassified from Deferred Accounts into Income | ||||||||
Three Months Ended September 30, 2017 | |||||||||||
Interest rate contracts | $ | (6 | ) | Interest Expense | $ | (1 | ) | ||||
Nine Months Ended September 30, 2017 | |||||||||||
Interest rate contracts | $ | (30 | ) | Interest Expense | $ | (2 | ) | ||||
Three Months Ended September 30, 2016 | |||||||||||
Interest rate contracts | $ | (24 | ) | Other Income | $ | (1 | ) | ||||
Nine Months Ended September 30, 2016 | |||||||||||
Interest rate contracts | $ | (268 | ) | Other Income | $ | (1 | ) |
Derivative Contracts with Credit Contingent Features | ||||||||||||||||
The Company | Consolidated SCE&G | |||||||||||||||
Millions of dollars | September 30, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2016 | ||||||||||||
in Net Liability Position | ||||||||||||||||
Aggregate fair value of derivatives in net liability position | $ | 67.1 | $ | 50.3 | $ | 47.7 | $ | 30.3 | ||||||||
Fair value of collateral already posted | 31.0 | 29.2 | 10.3 | 9.2 | ||||||||||||
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered | $ | 36.1 | $ | 21.1 | $ | 37.4 | $ | 21.1 | ||||||||
in Net Asset Position | ||||||||||||||||
Aggregate fair value of derivatives in net asset position | $ | 49.0 | $ | 62.9 | $ | 49.0 | $ | 62.0 | ||||||||
Fair value of collateral already posted | — | — | — | — | ||||||||||||
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered | $ | 49.0 | $ | 62.9 | $ | 49.0 | $ | 62.0 |
Derivative Assets | The Company | Consolidated SCE&G | ||||||||||||||||||
Millions of dollars | Interest Rate Contracts | Commodity Contracts | Energy Management Contracts | Total | Interest Rate Contracts | |||||||||||||||
As of September 30, 2017 | ||||||||||||||||||||
Gross Amounts of Recognized Assets | $ | 56 | $ | 2 | $ | 5 | $ | 63 | $ | 56 | ||||||||||
Gross Amounts Offset in Statement of Financial Position | — | (1 | ) | (2 | ) | (3 | ) | — | ||||||||||||
Net Amounts Presented in Statement of Financial Position | 56 | 1 | 3 | 60 | 56 | |||||||||||||||
Gross Amounts Not Offset - Financial Instruments | (7 | ) | — | — | (7 | ) | (7 | ) | ||||||||||||
Gross Amounts Not Offset - Cash Collateral Received | — | — | — | — | — | |||||||||||||||
Net Amount | $ | 49 | $ | 1 | $ | 3 | $ | 53 | $ | 49 | ||||||||||
Balance sheet location | ||||||||||||||||||||
Prepayments | $ | 1 | — | |||||||||||||||||
Other current assets | 2 | — | ||||||||||||||||||
Other deferred debits and other assets | 57 | $ | 56 | |||||||||||||||||
Total | $ | 60 | $ | 56 | ||||||||||||||||
As of December 31, 2016 | ||||||||||||||||||||
Gross Amounts of Recognized Assets | $ | 71 | $ | 9 | $ | 10 | $ | 90 | $ | 71 | ||||||||||
Gross Amounts Offset in Statement of Financial Position | — | — | (4 | ) | (4 | ) | — | |||||||||||||
Net Amounts Presented in Statement of Financial Position | 71 | 9 | 6 | 86 | 71 | |||||||||||||||
Gross Amounts Not Offset - Financial Instruments | (9 | ) | — | — | (9 | ) | (9 | ) | ||||||||||||
Gross Amounts Not Offset - Cash Collateral Received | — | — | — | — | — | |||||||||||||||
Net Amount | $ | 62 | $ | 9 | $ | 6 | $ | 77 | $ | 62 | ||||||||||
Balance sheet location | ||||||||||||||||||||
Prepayments | $ | 9 | — | |||||||||||||||||
Other current assets | 5 | — | ||||||||||||||||||
Other deferred debits and other assets | 72 | $ | 71 | |||||||||||||||||
Total | $ | 86 | $ | 71 |
Derivative Liabilities | The Company | Consolidated SCE&G | ||||||||||||||||||
Millions of dollars | Interest Rate Contracts | Commodity Contracts | Energy Management Contracts | Total | Interest Rate Contracts | |||||||||||||||
As of September 30, 2017 | ||||||||||||||||||||
Gross Amounts of Recognized Liabilities | $ | 72 | $ | 2 | $ | 4 | $ | 78 | $ | 54 | ||||||||||
Gross Amounts Offset in Statement of Financial Position | — | (1 | ) | (2 | ) | (3 | ) | — | ||||||||||||
Net Amounts Presented in Statement of Financial Position | 72 | 1 | 2 | 75 | 54 | |||||||||||||||
Gross Amounts Not Offset - Financial Instruments | (7 | ) | — | — | (7 | ) | (7 | ) | ||||||||||||
Gross Amounts Not Offset - Cash Collateral Posted | (30 | ) | — | (1 | ) | (31 | ) | (10 | ) | |||||||||||
Net Amount | $ | 35 | $ | 1 | $ | 1 | $ | 37 | $ | 37 | ||||||||||
Balance sheet location | ||||||||||||||||||||
Prepayments | $ | 1 | — | |||||||||||||||||
Derivative financial instruments | 45 | $ | 41 | |||||||||||||||||
Other deferred credits and other liabilities | 29 | 13 | ||||||||||||||||||
Total | $ | 75 | $ | 54 | ||||||||||||||||
As of December 31, 2016 | ||||||||||||||||||||
Gross Amounts of Recognized Liabilities | $ | 58 | — | $ | 9 | $ | 67 | $ | 39 | |||||||||||
Gross Amounts Offset in Statement of Financial Position | — | — | (3 | ) | (3 | ) | — | |||||||||||||
Net Amounts Presented in Statement of Financial Position | 58 | — | 6 | 64 | 39 | |||||||||||||||
Gross Amounts Not Offset - Financial Instruments | (9 | ) | — | — | (9 | ) | (9 | ) | ||||||||||||
Gross Amounts Not Offset - Cash Collateral Posted | (29 | ) | — | — | (29 | ) | (9 | ) | ||||||||||||
Net Amount | $ | 20 | — | $ | 6 | $ | 26 | $ | 21 | |||||||||||
Balance sheet location | ||||||||||||||||||||
Derivative financial instruments | $ | 35 | $ | 28 | ||||||||||||||||
Other deferred credits and other liabilities | 29 | 11 | ||||||||||||||||||
Total | $ | 64 | $ | 39 |
As of September 30, 2017 | As of December 31, 2016 | |||||||||||||||||||||||
The Company | Consolidated SCE&G | The Company | Consolidated SCE&G | |||||||||||||||||||||
Millions of dollars | Level 1 | Level 2 | Level 2 | Level 1 | Level 2 | Level 2 | ||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Available for sale securities | $ | 19 | — | — | $ | 14 | — | — | ||||||||||||||||
Held to maturity securities | — | $ | 7 | — | — | $ | 7 | — | ||||||||||||||||
Interest rate contracts | — | 56 | $ | 56 | — | 71 | $ | 71 | ||||||||||||||||
Commodity contracts | 1 | 1 | — | 8 | 1 | — | ||||||||||||||||||
Energy management contracts | 2 | 3 | — | 6 | 4 | — | ||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Interest rate contracts | — | 72 | 54 | — | 58 | 39 | ||||||||||||||||||
Commodity contracts | 1 | 1 | — | — | — | — | ||||||||||||||||||
Energy management contracts | 1 | 5 | — | 2 | 10 | — |
The Company had nofollowing table presents DESC’s quantitative information about Level 3 fair value measurements at September 30, 2022. The range and weighted average are presented in dollars for either period presented, and there were no transfersmarket price inputs.
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| Fair Value (millions) |
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| Valuation Techniques |
| Unobservable Input |
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| Range |
| Weighted Average(1) | |
Assets |
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Physical forwards: |
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Electricity |
| $ | 267 |
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| Discounted cash flow |
| Market price (per MWh) | (2) |
| 28-160 |
| 52 |
Total assets |
| $ | 267 |
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(1) Averages weighted by volume. | |||||||||||||
(2) Represents market prices beyond defined terms for Levels 1 and 2. |
Sensitivity of the fair value amounts into or out of Levels 1, 2 or 3 duringmeasurements to changes in the periods presented. Consolidated SCE&G had no Level 1 orsignificant unobservable inputs is as follows:
Significant Unobservable Inputs | Position | Change to Input | Impact on Fair Value Measurement | |||
Market price | Buy | Increase (decrease) | Gain (loss) | |||
Market price | Sell | Increase (decrease) | Loss (gain) |
Recurring Fair Value Measurements
The following table presents DESC’s assets and liabilities that are measured at fair value on a recurring basis for each hierarchy level, including both current and noncurrent portions:
(millions) |
| Level 1 |
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| Level 2 |
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| Level 3 |
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| Total |
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At September 30, 2022 |
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Assets |
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Commodity |
| $ | — |
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| $ | — |
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| $ | 267 |
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| $ | 267 |
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Interest rate |
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| — |
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| 4 |
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| — |
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| 4 |
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Total assets |
| $ | — |
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| $ | 4 |
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| $ | 267 |
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| $ | 271 |
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Liabilities |
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Interest rate |
| $ | — |
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| $ | 3 |
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| $ | — |
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| $ | 3 |
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Total liabilities |
| $ | — |
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| $ | 3 |
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| $ | — |
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| $ | 3 |
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At December 31, 2021 |
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Assets |
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Commodity |
| $ | — |
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| $ | — |
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| $ | 148 |
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| $ | 148 |
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Total assets |
| $ | — |
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| $ | — |
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| $ | 148 |
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| $ | 148 |
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Liabilities |
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Interest rate |
| $ | — |
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| $ | 19 |
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| $ | — |
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| $ | 19 |
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Total liabilities |
| $ | — |
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| $ | 19 | �� |
| $ | — |
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| $ | 19 |
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The following table presents the net change in DESC's assets and liabilities measured at fair value on a recurring basis and included in the Level 3 fair value measurementscategory.
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| Three Months Ended |
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| Nine Months Ended |
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| September 30, |
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| September 30, |
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| 2022 |
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| 2021 |
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| 2022 |
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| 2021 |
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(millions) |
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Beginning balance |
| $ | 295 |
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| $ | (13 | ) |
| $ | 148 |
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| $ | — |
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Total realized and unrealized gains (losses): |
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Included in earnings: |
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Purchased power |
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| 48 |
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| 3 |
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| 66 |
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| 3 |
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Included in regulatory assets/liabilities |
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| (28 | ) |
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| 59 |
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| 119 |
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| 46 |
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Settlements |
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| (48 | ) |
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| (3 | ) |
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| (66 | ) |
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| (3 | ) |
Ending balance |
| $ | 267 |
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| $ | 46 |
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| $ | 267 |
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| $ | 46 |
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There are no unrealized gains and losses included in earnings in the Level 3 fair value category related to assets/liabilities still held at the reporting date for either period presented,the three and there were no transfersnine months ended September 30, 2022 and 2021.
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 amounts into or outbecause of Levels 1, 2 or 3 during the periods presented.
|
| September 30, 2022 |
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| December 31, 2021 |
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(millions) |
| Carrying Amount |
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| Estimated Fair Value(1) |
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| Carrying Amount |
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| Estimated Fair Value(1) |
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Long-term debt(2) |
| $ | 3,725 |
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| $ | 3,554 |
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| $ | 3,724 |
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| $ | 4,831 |
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Affiliated long-term debt |
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| 230 |
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| 230 |
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| 230 |
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| 230 |
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Long-Term Debt | September 30, 2017 | December 31, 2016 | ||||||||||||||
Millions of dollars | Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | ||||||||||||
The Company | $ | 6,632.4 | $ | 7,462.9 | $ | 6,489.8 | $ | 7,183.3 | ||||||||
Consolidated SCE&G | 5,162.5 | 5,836.9 | 5,166.0 | 5,752.3 |
(1) | |
Fair value is estimated using market prices, where available, and interest rates currently available for issuance of debt with 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) | 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 (credit) recorded by the Company and Consolidated SCE&GDESC were as follows:
(millions) |
| Pension Benefits |
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| Other Postretirement Benefits |
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Three Months Ended September 30, |
| 2022 |
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| 2021 |
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| 2022 |
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| 2021 |
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Service cost |
| $ | 2 |
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| $ | 3 |
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| $ | — |
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| $ | — |
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Interest cost |
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| 5 |
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| 5 |
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| 1 |
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| 1 |
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Expected return on assets |
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| (12 | ) |
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| (12 | ) |
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| — |
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| — |
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Amortization of actuarial losses |
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| 1 |
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| 1 |
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| — |
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| — |
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Net periodic benefit cost (credit) |
| $ | (4 | ) |
| $ | (3 | ) |
| $ | 1 |
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| $ | 1 |
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Nine Months Ended September 30, |
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Service cost |
| $ | 6 |
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| $ | 7 |
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| $ | 1 |
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| $ | 1 |
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Interest cost |
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| 16 |
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| 15 |
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| 4 |
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| 4 |
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Expected return on assets |
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| (37 | ) |
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| (36 | ) |
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| — |
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| — |
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Amortization of actuarial losses |
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| 1 |
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| 4 |
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| — |
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| — |
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Net periodic benefit cost (credit) |
| $ | (14 | ) |
| $ | (10 | ) |
| $ | 5 |
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| $ | 5 |
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The Company | Pension Benefits | Other Postretirement Benefits | ||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Three months ended September 30, | ||||||||||||||||
Service cost | $ | 5.7 | $ | 4.4 | $ | 1.0 | $ | 0.8 | ||||||||
Interest cost | 9.2 | 9.8 | 2.8 | 3.0 | ||||||||||||
Expected return on assets | (13.4 | ) | (13.8 | ) | — | — | ||||||||||
Prior service cost amortization | 0.4 | 1.0 | — | 0.1 | ||||||||||||
Amortization of actuarial losses | 4.4 | 3.7 | — | 0.2 | ||||||||||||
Net periodic benefit cost | $ | 6.3 | $ | 5.1 | $ | 3.8 | $ | 4.1 |
Nine months ended September 30, | ||||||||||||||||
Service cost | $ | 16.3 | $ | 15.5 | $ | 3.4 | $ | 3.3 | ||||||||
Interest cost | 28.0 | 29.5 | 8.6 | 9.1 | ||||||||||||
Expected return on assets | (41.0 | ) | (41.9 | ) | — | — | ||||||||||
Prior service cost amortization | 1.2 | 3.0 | — | 0.2 | ||||||||||||
Amortization of actuarial losses | 12.2 | 11.1 | 0.8 | 0.4 | ||||||||||||
Net periodic benefit cost | $ | 16.7 | $ | 17.2 | $ | 12.8 | $ | 13.0 |
Consolidated SCE&G | Pension Benefits | Other Postretirement Benefits | ||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Three months ended September 30, | ||||||||||||||||
Service cost | $ | 4.8 | $ | 3.6 | $ | 0.8 | $ | 0.7 | ||||||||
Interest cost | 7.8 | 8.3 | 2.3 | 2.5 | ||||||||||||
Expected return on assets | (11.4 | ) | (11.7 | ) | — | — | ||||||||||
Prior service cost amortization | 0.3 | 0.8 | — | 0.1 | ||||||||||||
Amortization of actuarial losses | 3.7 | 3.2 | — | 0.1 | ||||||||||||
Net periodic benefit cost | $ | 5.2 | $ | 4.2 | $ | 3.1 | $ | 3.4 |
Nine months ended September 30, | ||||||||||||||||
Service cost | $ | 13.6 | $ | 12.7 | $ | 2.8 | $ | 2.7 | ||||||||
Interest cost | 24.0 | 25.0 | 7.1 | 7.5 | ||||||||||||
Expected return on assets | (35.0 | ) | (35.5 | ) | — | — | ||||||||||
Prior service cost amortization | 1.0 | 2.5 | — | 0.2 | ||||||||||||
Amortization of actuarial losses | 10.4 | 9.4 | 0.6 | 0.3 | ||||||||||||
Net periodic benefit cost | $ | 14.0 | $ | 14.1 | $ | 10.5 | $ | 10.7 |
During the three and nine months ended September 30, 2022, DESC made no contributions to theits pension trust is expected for the foreseeable future based on current market conditions and assumptions, nor is a limitation on benefit payments expecteddoes not expect to apply. SCE&Gmake any such contributions in 2022. 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. PSNC Energy recovers pension costs
10. COMMITMENTS AND CONTINGENCIES
As a result of issues generated in the ordinary course of 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 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 costthe litigation or investigative processes such that DESC is able to estimate a range of service rates.
Environmental Matters
DESC is subject to costs resulting from a number of federal, state and financial position.
From a regulatory perspective, DESC continually monitors and evaluates its current and projected emission levels and strives to comply with all state and federal regulations regarding those emissions. DESC participates in the bankruptcy process (including WEC SO2 and WECTEC's public announcements that they could not perform under the termsNOX emission allowance programs with respect to coal plant emissions and also has constructed additional pollution control equipment at its coal-fired electric generating plants. These actions are expected to address many of the EPC Contract), the EPC Contract would likely be rejectedrules and that the benefit of the fixed-price terms provided by the EPC Contract would be lost. As such, any cost overruns that would have been absorbed by the Consortium would become the responsibility of SCE&G and Santee Cooper. Additionally, these cost increases and other costs identified by SCE&G would not be fully recoverable from the Consortium or from Toshiba under its payment guaranty or the related Toshiba Settlement Agreement,regulations discussed below, and such costs would likely substantially exceed the amount of the Consortium's payment obligations guaranteed by Toshiba. SCE&G also considered that even the newly revised substantial completion dates identified by WEC of April and December 2020 for Unit 2 and Unit 3, respectively, would not be met, which would result in the nuclear production tax credits discussed below not being earned under current law.
Air
The CAA, as agent for Santee Cooper, filed with the Bankruptcy Court Proofs of Claim for unliquidated damages against each of WEC and WECTEC. The Proofs of Claim are based upon the anticipatory repudiation and material breach by the Consortium of the EPC Contract, and assert against WEC and WECTEC any and all claims that are based thereon or that may be related thereto. These claims were sold to Citibank on September 27, 2017 as part of the monetization transaction discussed below. Notwithstanding the sale of the claims, SCE&G and Santee Cooper remain responsible for any claims that may be made by WEC and WECTEC against them relating to the EPC Contract.
ACE Rule
In July 2019, the EPA published the final rule informally referred to SCE&G. It is possible that the outcome of regulatory or legal proceedings could result in requiring SCE&G's share of these proceeds to be placed in escrow pending their final disposition. Such a requirement would significantly harm the Company's and Consolidated SCE&G's results of operations, cash flows and financial condition.
Carbon Regulations
In August 2016, the EPA issued a noticedraft rule proposing to repealreaffirm 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 exceed a significant emissions rate of 75,000 tons per year of CO2 equivalent emissions. Until the EPA ultimately takes final action on this rulemaking, DESC cannot predict the impact to its results of operations, financial 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 onwould amend the groundsprevious determination that it exceeds the EPA's statutory authority. The EPA is further considering the scope of any potential replacement rule and plans to formally solicit information on systemsbest system of emission reduction that arefor 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 accordcombination with best operating practices. The
proposed revision to the EPA's interpretationperformance standards for coal-fired steam generating units remains pending. Until the EPA ultimately takes final action on this rulemaking, DESC cannot predict the impact to its results of its statutory authority. operations, financial condition and/or cash flows.
Water
The CompanyCWA, as amended, is a comprehensive program requiring a broad range of regulatory tools including a permit program to authorize and Consolidated SCE&G expect any costs incurredregulate discharges to surface waters with strong enforcement mechanisms. DESC must comply with such rule to be recoverable through rates.
Regulation 316(b)
In October 2014, the CAIR and requires a totalfinal regulations under Section 316(b) of 28 states to reduce annual SO
Effluent Limitations Guidelines
In September 2015, the EPA released a final rule to revise the ELG Rule. The final rule established updated standards for wastewater discharges that apply primarily at coal and oil steam generating stations. Affected facilities are expectedrequired 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 was December 2023. In October 2020, the EPA released the final rule that extends the latest dates for compliance. Individual facilities’ compliance dates will vary based on circumstances and the determination by state regulators and may range from 2021 to 2028. 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 and modifications at the Williams and Wateree generating stations will be required, the existing regulatory framework in South Carolina provides rate recovery mechanisms that could substantially mitigate any such impacts for DESC.
Capacity Use Area
In November 2019, a new CUA was established in the counties surrounding the Cope Generating Station (Western Capacity Use Area) under the South Carolina Groundwater Use and Reporting Regulation. Under the regulation any groundwater well in a CUA that withdraws above three million gallons per month must be permitted. The Cope Generating Station is located within this new Western Capacity Use Area. Cope has been using four deep groundwater wells for cooling water and other house loads since 1996. Prior to designation of the new Western Capacity Use Area, the wells at Cope Station were only required to be recoverable through rates.
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 CCR became effective in the fourth quartercleanup on potentially responsible parties who owned, operated or arranged for disposal at facilities affected by a release of 2015. This rule regulates CCRhazardous 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 non-hazardous waste under Subtitle Dpotentially responsible party in connection with the alleged release of the Resource Conservationhazardous substances or wastes at a site. Under applicable federal and Recovery Act and imposes certain requirements on ash storage ponds and other CCR management facilities at SCE&G's and GENCO's coal-fired generating facilities. SCE&G and GENCO have already closed or have begun the process of closure of all of their ash storage ponds and have previously recognized AROsstate laws, DESC could be responsible for such ash storage ponds under existing requirements. The Company and Consolidated SCE&G do not expect the incremental compliance costs associated with this rulethe 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 significant and expectsubject to recover such costs in future rates.
DESC has four decommissioned MGPmanufactured gas plant sites in South Carolina which contain residues of by-product chemicals. These sitesthat are in various stagesstates of investigation, remediation and monitoring under work plans approved by, DHEC andor under review by, the SCDHEC or the EPA. SCE&GDESC anticipates that major remediation activities at all these sites will continue at least through 2018 and will2025 with a remaining estimated cost an additional $9.9 million, which is accrued in Other within Deferred Credits and Other Liabilities on the condensed consolidated balance sheet. SCE&Gof $21 million. DESC expects to recover any costcosts arising from the remediation of MGPwork at all four sites through rates. Atrate recovery mechanisms and as of September 30, 2017,2022, deferred amounts, net of amounts previously recovered through rates and insurance settlements, totaled $24.7$38 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 three 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. 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 this matter is resolved and all phases of the CCR rule are promulgated, DESC is unable to precisely estimate potential incremental impacts or costs related to existing coal ash sites in connection with future implementation of the final CCR rule. While such amounts may 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.
Claims and Litigation
The following describes certain legal proceedings involving DESC relating primarily to events occurring before closing of the SCANA Combination. In addition, certain legal matters which have been resolved are discussed in Note 12 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021. 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 September 30, 2022 and December 31, 2021 include reserves of $96 million and $211 million, respectively, and insurance receivables of $68 million and $85 million, respectively, included within other receivables. These balances at September 30, 2022 and December 31, 2021 include $68 million and $85 million, respectively, of offsetting reserves and insurance receivables related to personal injury or wrongful death cases which are currently pending. During both the three and nine months ended September 30, 2022, charges included in DESC’s Consolidated Statements of Comprehensive Income were inconsequential. During the nine months ended September 30, 2021, DESC’s Consolidated Statements of Comprehensive Income includes charges of $70 million ($53 million after-tax), included within impairment of assets and other charges.
SCANA Shareholder Litigation
In February 2018, a purported class action was filed against Dominion Energy and certain former directors of SCANA and DESC 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,
Employment Class Actions and Indemnification
In August 2017, a case was filed in the U.S. District Court for the District of South Carolina 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 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 could be as much as $100 million for 100% of the NND Project. In January 2021, the U.S. District Court for the District of South Carolina granted summary judgment in favor of SCANA, DESC, Fluor Corporation and Fluor Enterprises, Inc. In February 2021, the plaintiffs filed a notice of appeal with the U.S. Court of Appeals for the Fourth Circuit. In November 2021, the U.S Court of Appeals for the Fourth Circuit affirmed the lower court ruling. In March 2022, the deadline to file an appeal to the Electric Operations and Gas Distribution segments. The Gas Marketing segment measures profitability using net income.
In September 2018, a services company and other nonreportable segments that were insignificant for all periods presented.
The Company | ||||||||||||||||
Millions of dollars | External Revenue | Intersegment Revenue | Operating Income | Net Income | ||||||||||||
Three Months Ended September 30, 2017 | ||||||||||||||||
Electric Operations | $ | 786 | $ | 1 | $ | 126 | n/a | |||||||||
Gas Distribution | 123 | — | (7 | ) | n/a | |||||||||||
Gas Marketing | 167 | 35 | n/a | $ | 1 | |||||||||||
All Other | — | 90 | — | (7 | ) | |||||||||||
Adjustments/Eliminations | — | (126 | ) | 1 | 40 | |||||||||||
Consolidated Total | $ | 1,076 | $ | — | $ | 120 | $ | 34 |
Nine Months Ended September 30, 2017 | ||||||||||||||||
Electric Operations | $ | 2,042 | $ | 4 | $ | 549 | n/a | |||||||||
Gas Distribution | 584 | 1 | 109 | n/a | ||||||||||||
Gas Marketing | 623 | 93 | n/a | $ | 17 | |||||||||||
All Other | — | 286 | — | (14 | ) | |||||||||||
Adjustments/Eliminations | — | (384 | ) | 27 | 323 | |||||||||||
Consolidated Total | $ | 3,249 | $ | — | $ | 685 | $ | 326 |
Three Months Ended September 30, 2016 | ||||||||||||||||
Electric Operations | $ | 817 | $ | 1 | $ | 364 | n/a | |||||||||
Gas Distribution | 111 | — | (14 | ) | n/a | |||||||||||
Gas Marketing | 165 | 35 | n/a | $ | (1 | ) | ||||||||||
All Other | — | 100 | — | (7 | ) | |||||||||||
Adjustments/Eliminations | — | (136 | ) | (2 | ) | 197 | ||||||||||
Consolidated Total | $ | 1,093 | $ | — | $ | 348 | $ | 189 |
Nine Months Ended September 30, 2016 | ||||||||||||||||
Electric Operations | $ | 2,035 | $ | 4 | $ | 784 | n/a | |||||||||
Gas Distribution | 538 | 1 | 79 | n/a | ||||||||||||
Gas Marketing | 598 | 83 | n/a | $ | 23 | |||||||||||
All Other | — | 302 | — | (14 | ) | |||||||||||
Adjustments/Eliminations | — | (390 | ) | 37 | 462 | |||||||||||
Consolidated Total | $ | 3,171 | $ | — | $ | 900 | $ | 471 |
Consolidated SCE&G | ||||||||||||
Millions of dollars | External Revenue | Operating Income | Earnings Available to Common Shareholder | |||||||||
Three Months Ended September 30, 2017 | ||||||||||||
Electric Operations | $ | 787 | $ | 125 | n/a | |||||||
Gas Distribution | 69 | (2 | ) | n/a | ||||||||
Adjustments/Eliminations | — | — | $ | 39 | ||||||||
Consolidated Total | $ | 856 | $ | 123 | $ | 39 |
Nine Months Ended September 30, 2017 | ||||||||||||
Electric Operations | $ | 2,046 | $ | 549 | n/a | |||||||
Gas Distribution | 285 | 42 | n/a | |||||||||
Adjustments/Eliminations | — | — | $ | 270 | ||||||||
Consolidated Total | $ | 2,331 | $ | 591 | $ | 270 |
Three Months Ended September 30, 2016 | ||||||||||||
Electric Operations | $ | 818 | $ | 364 | n/a | |||||||
Gas Distribution | 64 | (5 | ) | n/a | ||||||||
Adjustments/Eliminations | — | — | $ | 201 | ||||||||
Consolidated Total | $ | 882 | $ | 359 | $ | 201 |
Nine Months Ended September 30, 2016 | ||||||||||||
Electric Operations | $ | 2,039 | $ | 784 | n/a | |||||||
Gas Distribution | 253 | 32 | n/a | |||||||||
Adjustments/Eliminations | — | — | $ | 423 | ||||||||
Consolidated Total | $ | 2,292 | $ | 816 | $ | 423 |
Segment Assets | The Company | Consolidated SCE&G | ||||||||||||||
September 30, | December 31, | September 30, | December 31, | |||||||||||||
Millions of dollars | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Electric Operations | $ | 12,294 | $ | 11,929 | $ | 12,294 | $ | 11,929 | ||||||||
Gas Distribution | 3,080 | 2,892 | 856 | 825 | ||||||||||||
Gas Marketing | 187 | 230 | n/a | n/a | ||||||||||||
All Other | 970 | 1,124 | n/a | n/a | ||||||||||||
Adjustments/Eliminations | 3,488 | 2,532 | 4,283 | 3,337 | ||||||||||||
Consolidated Total | $ | 20,019 | $ | 18,707 | $ | 17,433 | $ | 16,091 |
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. In December 2020, the parties reached an agreement in principle in the amount of $165 million to resolve this investment usingmatter. In June 2021, the equity method. parties executed a settlement agreement which allows DESC to fund the settlement amount through a combination of cash, shares of Dominion Energy common stock or real estate with an initial payment of at least $43 million in shares of Dominion Energy common stock. In August 2021, Dominion Energy issued 0.6 million shares of its common stock to satisfy DESC’s obligation for the initial payment under the settlement agreement. In May 2022, Dominion Energy issued an additional 0.9 million shares of its common stock to partially satisfy DESC’s remaining obligation under the settlement agreement. In June 2022, DESC requested approval from the South Carolina Commission to transfer certain real estate with a total settlement value of $51 million to satisfy its remaining obligation under the settlement agreement. In July 2022, the South Carolina Commission voted to approve the request and issued its final order in August 2022. In September 2022, DESC transferred certain non-utility property with a fair value of $28 million to the SCDOR under the settlement agreement, resulting in a gain of $19 million ($14 million after-tax) recorded in other income, net in DESC’s Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022. Certain additional utility property representing $3 million of the value to be conveyed is expected to transfer by the end of 2022. The transfer of the remaining real estate remains subject to the approval of FERC. In October 2022, DESC filed for such approval with FERC. If such approval is received, the transfer of such utility and non-utility properties is expected to result in a gain of approximately $20 million upon completion.
Nuclear Operations
Nuclear Insurance
Other than the items discussed below, there have been no significant changes regarding DESC’s nuclear insurance as described in Note 12 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021.
During the second quarter of 2022, Dominion Energy reduced the levels of nuclear property insurance coverage for the reactor site at Summer from $2.75 billion to the NRC minimum requirement of $1.06 billion. As a result of this reduction in nuclear property
insurance coverage, DESC’s maximum retrospective premium assessment for the current annual policy period was reduced to $11 million. Additionally, DESC maintains an excess property insurance policy with the European Mutual Association for Nuclear Insurance which provides coverage to Summer for property damage and outage costs resulting from an event of a non-nuclear origin. Dominion Energy reduced the levels of coverage from $415 million to $1 million.
During the third quarter of 2022, the total liability protection per nuclear incident available to all participants in the Secondary Financial Protection Program increased from $13.5 billion to $13.7 billion. This increase does not impact DESC’s responsibility per active unit under the Price-Anderson Amendments Act of 1988.
11. OPERATING SEGMENTS
The Corporate and Other segment includes specific items attributable to DESC’s operating segment that are not included in profit measures evaluated by executive management in assessing the segment’s performance or in allocating resources.
In the nine months ended September 30, 2022, DESC reported an insignificant amount of specific items in the Corporate and Other segment. In the nine months ended September 30, 2021, DESC reported after-tax net expense of $261 million for specific items in the Corporate and Other segment, all of which was attributable to its operating segment.
The net expense for specific items attributable to DESC’s operating segment in 2021 primarily related to the impact of the total purchases and total sales are recorded in Other expenses on the consolidated statements of income (for the Company) and of comprehensive income (for Consolidated SCE&G).following items:
• | $266 million ($199 million after-tax) of charges associated with the settlement of the South Carolina electric base rate case; and |
• | A $70 million ($53 million after-tax) charge associated with litigation. |
(millions) |
| External Revenue |
|
| Comprehensive Income (Loss) Available (Attributable) to Common Shareholder |
| ||
Three Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
Dominion Energy South Carolina |
| $ | 1,083 |
|
| $ | 169 |
|
Corporate and Other |
|
| — |
|
|
| (1 | ) |
Consolidated Total |
| $ | 1,083 |
|
| $ | 168 |
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
Dominion Energy South Carolina |
| $ | 863 |
|
| $ | 149 |
|
Corporate and Other |
|
| — |
|
|
| (5 | ) |
Consolidated Total |
| $ | 863 |
|
| $ | 144 |
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
Dominion Energy South Carolina |
| $ | 2,841 |
|
| $ | 392 |
|
Corporate and Other |
|
| — |
|
|
| (2 | ) |
Consolidated total |
| $ | 2,841 |
|
| $ | 390 |
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
Dominion Energy South Carolina |
| $ | 2,299 |
|
| $ | 325 |
|
Corporate and Other |
|
| — |
|
|
| (261 | ) |
Consolidated total |
| $ | 2,299 |
|
| $ | 64 |
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
Millions of Dollars | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Purchases from Canadys Refined Coal, LLC | $ | 47.5 | $ | 41.8 | $ | 144.9 | $ | 138.6 | ||||||||
Sales to Canadys Refined Coal, LLC | 47.2 | 41.6 | 144.0 | 137.8 |
Millions of Dollars | September 30, 2017 | December 31, 2016 | ||||||
Receivable from Canadys Refined Coal, LLC | $ | 7.6 | $ | 16.0 | ||||
Payable to Canadys Refined Coal, LLC | 7.7 | 16.1 |
12. AFFILIATED AND RELATED PARTY TRANSACTIONS
DES, on behalf of itself and its parent company, provides the following services to Consolidated SCE&G,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, SCANA Services processes and pays invoices for Consolidated SCE&G and is reimbursed. Costs for these services include amounts capitalized. Amounts expensed are primarily recorded in Other operationother operations and maintenance - nonconsolidated affiliateaffiliated suppliers and Other expenses onother income, net in the consolidated statementsConsolidated Statements of comprehensive income.Comprehensive Income.
DESC transacts with affiliates for certain quantities of electricity in the ordinary course of business. DESC also enters into certain commodity derivative contracts with affiliates. DESC uses these contracts, which are principally comprised of forward commodity purchases, to manage commodity price risks associated with purchases of electricity. See Note 7 for additional information.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Direct and allocated costs from DES(1) |
| $ | 52 |
|
| $ | 53 |
|
| $ | 158 |
|
| $ | 168 |
|
Operating Revenues - Electric from sales to affiliate |
|
| 1 |
|
|
| — |
|
|
| 3 |
|
|
| 2 |
|
Operating Revenues - Gas from sales to affiliate |
|
| 1 |
|
|
| — |
|
|
| 1 |
|
|
| — |
|
Operating Expenses - Other taxes from affiliate |
|
| 1 |
|
|
| 2 |
|
|
| 6 |
|
|
| 6 |
|
Purchases of electricity from solar affiliates |
|
| 5 |
|
|
| 5 |
|
|
| 12 |
|
|
| 12 |
|
(1) | Includes capitalized expenditures of $12 million and $8 million for the three months ended September 30, 2022 and 2021, respectively, and $36 million and $23 million for the nine months ended September 30, 2022 and 2021, respectively. |
(millions) |
| September 30, 2022 |
|
| December 31, 2021 |
| ||
Payable to Dominion Energy |
| $ | 48 |
|
| $ | 1 |
|
Receivable from Dominion Energy |
|
| 2 |
|
|
| — |
|
Payable to DES |
|
| 23 |
|
|
| 30 |
|
Payable to SCANA Corporation |
|
| 7 |
|
|
| — |
|
Payable to Public Service Company of North Carolina, Incorporated |
|
| 9 |
|
|
| — |
|
Receivable from Public Service Company of North Carolina, Incorporated |
|
| — |
|
|
| 60 |
|
Payable to solar affiliates |
|
| 1 |
|
|
| 1 |
|
Receivable from nuclear affiliates |
|
| — |
|
|
| 1 |
|
Derivative assets with affiliates(1) |
|
| 56 |
|
|
| 28 |
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
Millions of Dollars | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Purchases from SCANA Energy | $ | 35.3 | $ | 34.8 | $ | 93.4 | $ | 83.1 | ||||||||
Direct and Allocated Costs from SCANA Services | 78.1 | 80.4 | 233.6 | 236.4 |
Millions of Dollars | September 30, 2017 | December 31, 2016 | ||||||
Payable to SCANA Energy | $ | 10.7 | $ | 8.8 | ||||
Payable to SCANA Services | 45.3 | 63.5 |
(1) Includes amounts recorded in other current assets of $14 million and $4 million as of September 30, 2022 and December 31, 2021, respectively, and amounts recorded in other deferred debits and other assets of $42 million and $24 million as of September 30, 2022 and December 31, 2021, respectively.
Borrowings from an affiliate are described in condensed consolidated Note 4. SCE&G's participation5.
13. OTHER INCOME, NET
Components of other income, net are as follows:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Other income |
| $ | 2 |
|
| $ | 3 |
|
| $ | 5 |
|
| $ | 10 |
|
Other expense |
|
| (1 | ) |
|
| 1 |
|
|
| — |
|
|
| (15 | ) |
Gains on sales of assets(1) |
|
| 20 |
|
|
| — |
|
|
| 37 |
|
|
| — |
|
Allowance for equity funds used during construction |
|
| 1 |
|
|
| 2 |
|
|
| 4 |
|
|
| 5 |
|
Other income, net |
| $ | 22 |
|
| $ | 6 |
|
| $ | 46 |
|
| $ | — |
|
(1) Includes amounts recognized in SCANA's noncontributory defined benefitconnection with the transfer of property to satisfy litigation. See Note 10 for additional information.
Non-service cost components of pension plan and unfundedother postretirement health care and life insurance programs is describedbenefits are included in condensed consolidated Note 8.
In June 2022, DESC completed the sale of certain utility property in South Carolina, as approved by the South Carolina Commission in May 2022, for total cash consideration of $16 million. In connection with the sale, DESC recognized a gain of $16 million ($12 million after-tax) for the nine months ended September 30, 2022.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
MD&A provides management’s narrative analysis of its consolidated results of operation and other information described therein. Such information is presented hereunder specifically for Consolidated SCE&G, but may be presented alongside information presented for the Company generally. Consolidated SCE&G makes no representation as to information relating solely to SCANA and its subsidiaries (other than Consolidated SCE&G).
Forward-Looking Statements
This report contains statements concerning DESC’s expectations, plans, objectives, future financial performance and Results of Operations appearingother statements that are not historical facts. These statements are “forward-looking statements.” 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 SCANA’s and SCE&G’sany 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 and global supply chains; |
• | Federal, state and local legislative and regulatory developments, including changes in or interpretations of 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 strategy and 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; |
• | Competition in the development, construction and ownership of certain electric transmission facilities in connection with Order 1000; |
• | Changes in technology, particularly with respect to new, developing or alternative sources of generation and smart grid technologies; |
• | 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; |
• | Adverse outcomes in litigation matters or regulatory proceedings, including matters related to the NND Project; |
• | Counterparty credit and performance risk; |
• | Fluctuations in the value of investments held in nuclear decommissioning and benefit plan trusts; |
• | Fluctuations in energy-related commodity prices and the effect these could have on DESC’s liquidity position and the underlying value of its assets; |
• | Fluctuations in interest rates; |
• | Changes in rating agency requirements or credit ratings and their effect on availability and cost of capital; |
• | Global capital market conditions, including the availability of credit and the ability to obtain financing on reasonable terms; |
• | Political and economic conditions, including inflation and deflation; |
• | Employee workforce factors including collective bargaining agreements and labor negotiations with union employees; and |
• | Changes in financial or regulatory accounting principles or policies imposed by governing bodies. |
Additionally, other risks that could cause actual results to differ from predicted results are set forth in Part I. Item 1A. Risk Factors in DESC’s Annual Report on Form 10-K for the year ended December 31, 2016. The2021.
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
Presented below is a summary of DESC’s consolidated results:
|
| Third Quarter |
|
| Year-To-Date |
| ||||||||||||||||||
(millions) |
| 2022 |
|
| 2021 |
|
| $ Change |
|
| 2022 |
|
| 2021 |
|
| $ Change |
| ||||||
Net income |
| $ | 173 |
|
| $ | 148 |
|
| $ | 25 |
|
| $ | 406 |
|
| $ | 77 |
|
| $ | 329 |
|
Overview
Third Quarter 2022 vs. 2021
Net income increased 17%, primarily due to increased electric customer usage, including growth, at increased rates.
Year-To-Date 2022 vs. 2021
Net income increased $329 million, primarily due to the absence of charges associated with the settlement of the South Carolina electric base rate case and the absence of charges associated with litigation.
Analysis of Consolidated Operations
Presented below are selected amounts related to DESC’s results of operations:
|
| Third Quarter |
|
| Year-To-Date |
| ||||||||||||||||||
(millions) |
| 2022 |
|
| 2021 |
|
| $ Change |
|
| 2022 |
|
| 2021 |
|
| $ Change |
| ||||||
Operating revenues |
| $ | 1,083 |
|
| $ | 863 |
|
| $ | 220 |
|
| $ | 2,841 |
|
| $ | 2,299 |
|
| $ | 542 |
|
Fuel used in electric generation |
|
| 342 |
|
|
| 200 |
|
|
| 142 |
|
|
| 770 |
|
|
| 452 |
|
|
| 318 |
|
Purchased power |
|
| 28 |
|
|
| 24 |
|
|
| 4 |
|
|
| 86 |
|
|
| 67 |
|
|
| 19 |
|
Gas purchased for resale |
|
| 102 |
|
|
| 57 |
|
|
| 45 |
|
|
| 296 |
|
|
| 188 |
|
|
| 108 |
|
Other operations and maintenance |
|
| 157 |
|
|
| 161 |
|
|
| (4 | ) |
|
| 465 |
|
|
| 477 |
|
|
| (12 | ) |
Impairment of assets and other charges (benefit) |
|
| 2 |
|
|
| 1 |
|
|
| 1 |
|
|
| 6 |
|
|
| 320 |
|
|
| (314 | ) |
Depreciation and amortization |
|
| 127 |
|
|
| 122 |
|
|
| 5 |
|
|
| 378 |
|
|
| 362 |
|
|
| 16 |
|
Other taxes |
|
| 72 |
|
|
| 64 |
|
|
| 8 |
|
|
| 216 |
|
|
| 191 |
|
|
| 25 |
|
Other income, net |
|
| 22 |
|
|
| 6 |
|
|
| 16 |
|
|
| 46 |
|
|
| — |
|
|
| 46 |
|
Interest charges |
|
| 57 |
|
|
| 50 |
|
|
| 7 |
|
|
| 162 |
|
|
| 159 |
|
|
| 3 |
|
Income tax expense |
|
| 45 |
|
|
| 42 |
|
|
| 3 |
|
|
| 102 |
|
|
| 6 |
|
|
| 96 |
|
An analysis of DESC’s results of operations of the Company include those of the parent holding company and each of its subsidiaries, including Consolidated SCE&G. Accordingly, discussions regarding the Company's results of operations necessarily include those of Consolidated SCE&G.
Third Quarter | Year to Date | |||||||||||||||
The Company | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Earnings per share | $ | 0.24 | $ | 1.32 | $ | 2.28 | $ | 3.29 | ||||||||
Consolidated SCE&G | ||||||||||||||||
Net income (millions of dollars) | $ | 41.8 | $ | 204.0 | $ | 279.7 | $ | 432.9 |
Third Quarter
Operating revenues increased 25%, primarily reflecting:
• | A $191 million increase in fuel-related revenue as a result of an increase in commodity costs and purchased power costs associated with sales to electric utility retail customers ($146 million) and gas utility customers ($45 million); |
• | ||||||
A $7 million increase from electric utility customers who previously elected to pay market based or other negotiated rates; |
• | A $7 million increase in sales to electric utility retail customers from an increase in cooling degree days during the cooling season; |
• | A $6 million increase in sales to electric utility retail customers associated with growth; and |
• | A $5 million increase in non-fuel base rates associated with the settlement in 2021 of the South Carolina electric base rate case. |
The Company | Consolidated SCE&G | |||||||||||||||||||||||||||||||
Third Quarter | Year to Date | Third Quarter | Year to Date | |||||||||||||||||||||||||||||
Millions of dollars | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||
Operating revenues | $ | 787.3 | $ | 818.4 | $ | 2,045.9 | $ | 2,038.5 | $ | 787.3 | $ | 818.4 | $ | 2,045.9 | $ | 2,038.5 | ||||||||||||||||
Fuel used in electric generation | 166.5 | 176.4 | 464.1 | 442.9 | 166.5 | 176.4 | 464.1 | 442.9 | ||||||||||||||||||||||||
Purchased power | 22.3 | 21.0 | 54.1 | 49.6 | 22.3 | 21.0 | 54.1 | 49.6 | ||||||||||||||||||||||||
Other operation and maintenance | 133.1 | 130.0 | 382.5 | 389.9 | 136.6 | 133.6 | 393.2 | 400.1 | ||||||||||||||||||||||||
Impairment loss | 210.0 | — | 210.0 | — | 210.0 | — | 210.0 | — | ||||||||||||||||||||||||
Depreciation and amortization | 73.8 | 71.9 | 219.9 | 213.4 | 70.8 | 68.8 | 211.0 | 204.7 | ||||||||||||||||||||||||
Other taxes | 56.4 | 55.4 | 166.8 | 159.0 | 55.9 | 54.9 | 165.0 | 157.5 | ||||||||||||||||||||||||
Operating Income | $ | 125.2 | $ | 363.7 | $ | 548.5 | $ | 783.7 | $ | 125.2 | $ | 363.7 | $ | 548.5 | $ | 783.7 |
Fuel used in electric generation and purchased power expenses decreased due to lower sales volumes associated with the effects of weather of $10.3 million, residential and commercial average use of $1.3 million and industrial usage of $0.7 million. These decreases were partially offset due to higher sales volumes associated with residential and commercial customer growth of $1.6 million, higher fuel handling expenses of $1.2 million and higher fuel prices of $1.4 million.
Purchased power increased 17%, primarily due to an increase in costs associated with electric utility customers, which are offset in operating revenue and do not impact net plant additions.
Gas purchased for resale increased 79%, primarily due to an increase in costs associated with gas utility customers, which are offset in operating revenue and do not impact net income.
Other operations and maintenance remained substantially unchanged, primarily reflecting a decrease in outside services ($10 million), substantially offset by an increase in the materials and supplies expense primarily as a result of higher prices ($13 million).
Other taxes increased 13%, primarily due to higher property taxes associated withtaxes.
Other income, net plant additions.increased $16 million, primarily due to a gain on the transfer of certain non-utility property.
Interest charges increased 14%, primarily due to increased interest on intercompany borrowings and commercial paper borrowings due to higher interest rates.
Year-To-Date 2022 vs. 2021
Operating revenues increased 24%, primarily reflecting:
• | A $436 million increase in fuel-related revenue as a result of an increase in commodity costs and purchased power costs associated with sales to electric utility retail customers ($328 million) and gas utility customers ($108 million); |
• | A $24 million increase in sales to electric utility retail customers from an increase in cooling degree days during the cooling season ($23 million) and an increase in heating degree days during the heating season ($1 million); |
• | A $20 million increase in non-fuel base rates associated with the settlement in 2021 of the South Carolina electric base rate case; |
• | A $20 million increase from electric utility customers who previously elected to pay market based or other negotiated rates; |
• | A $17 million increase in sales to electric utility retail customers associated with growth; |
• | A $15 million increase in sales to electric utility retail customers associated with economic and other usage factors; |
• | A $12 million increase in the fuel cost component of off-system sales; |
• | A $6 million increase in sales to gas utility customers associated with growth; and |
• | A $5 million increase associated with increased infrastructure cost recovery under the Natural Gas Rate Stabilization Act; partially offset by |
• | A $10 million decrease in sales to electric retail customers from the capital cost rider. |
Fuel used in electric generation and purchased power expenses increased 70%, primarily due to higherincreased fuel prices of $45.7 million, higher fuel handling expenses of $1.7 million and increased sales volumescosts associated with residentialelectric utility retail customers ($306 million) and commercial customer growth of $4.4 million. These increases werean increase in fuel costs associated with off-system sales ($12 million), which are offset in operating revenue and do not impact net income.
Purchased power increased 28%, primarily due to an increase in costs associated with electric utility customers, which are offset in operating revenue and do not impact net income.
Gas purchased for resale increased 57%, primarily due to an increase in costs associated with gas utility customers, which are offset in operating revenue and do not impact net income.
Other operations and maintenance decreased 3%, primarily due to a decrease in charges from DES ($15 million) and a decrease in outside services ($13 million), partially offset by an increase in salaries, wages and benefits ($10 million) and an increase in the materials and supplies expense primarily as a result of higher prices ($9 million).
Impairment of assets and other charges decreased 98%, primarily due to lower sales volumesthe absence of charges associated with the effectssettlement of weather of $20.9 million, residential and commercial average use of $3.6 million and lower industrial usage of $2.3 million.
Other taxes increased 13%, primarily due to higher property taxes associated withtaxes.
Other income, net plant additions.
Third Quarter | Year to Date | |||||||||||
Classification | 2017 | 2016 | 2017 | 2016 | ||||||||
Residential | 2,384 | 2,648 | 5,936 | 6,450 | ||||||||
Commercial | 2,159 | 2,259 | 5,663 | 5,861 | ||||||||
Industrial | 1,652 | 1,676 | 4,676 | 4,760 | ||||||||
Other | 163 | 171 | 444 | 462 | ||||||||
Total Retail Sales | 6,358 | 6,754 | 16,719 | 17,533 | ||||||||
Wholesale | 257 | 276 | 699 | 725 | ||||||||
Total Sales | 6,615 | 7,030 | 17,418 | 18,258 |
The Company | Consolidated SCE&G | |||||||||||||||||||||||||||||||
Third Quarter | Year to Date | Third Quarter | Year to Date | |||||||||||||||||||||||||||||
Millions of dollars | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||
Operating revenues | $ | 123.4 | $ | 111.9 | $ | 585.7 | $ | 539.3 | $ | 68.3 | $ | 64.0 | $ | 285.1 | $ | 253.2 | ||||||||||||||||
Gas purchased for resale | 57.8 | 51.2 | 254.1 | 238.2 | 38.5 | 36.5 | 146.5 | 126.0 | ||||||||||||||||||||||||
Other operation and maintenance | 39.8 | 42.9 | 126.2 | 129.7 | 16.9 | 18.4 | 52.9 | 54.1 | ||||||||||||||||||||||||
Depreciation and amortization | 21.4 | 20.8 | 63.3 | 60.9 | 7.4 | 6.8 | 21.6 | 20.3 | ||||||||||||||||||||||||
Other taxes | 10.5 | 10.4 | 32.4 | 31.3 | 7.2 | 7.0 | 21.6 | 20.3 | ||||||||||||||||||||||||
Operating Income (Loss) | $ | (6.1 | ) | $ | (13.4 | ) | $ | 109.7 | $ | 79.2 | $ | (1.7 | ) | $ | (4.7 | ) | $ | 42.5 | $ | 32.5 |
Interest charges increased at SCE&G2%, primarily due to increased baseinterest on intercompany borrowings and commercial paper borrowings due to higher interest rates under the RSA effective November 2016 of $0.6 million, customer growth of $1.8 million($7 million) and higher average use of $1.2 million. In addition to these factors, operating revenues at the Company increased due to PSNC Energy's gas cost recovery of $3.0 million, a rate increase effective November 2016 of $1.8 million, higher industrial revenue of $1.3 million and customer growth of $1.0 million.
Income tax expense increased $96 million, at PSNC Energy and $1.7 million at SCE&G, primarily due to lower incentive compensation costs. These increases were partially offset by higher non-labor costs at PSNC Energy.
The Company | Consolidated SCE&G | |||||||||||||||||||||||
Third Quarter | Year to Date | Third Quarter | Year to Date | |||||||||||||||||||||
Classification (in thousands) | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Residential | 2,196 | 2,073 | 21,958 | 27,055 | 742 | 696 | 6,690 | 8,473 | ||||||||||||||||
Commercial | 4,537 | 4,363 | 19,113 | 20,748 | 2,381 | 2,295 | 8,783 | 9,361 | ||||||||||||||||
Industrial | 4,644 | 4,493 | 14,723 | 14,380 | 4,289 | 4,141 | 13,289 | 12,762 | ||||||||||||||||
Transportation | 14,865 | 15,171 | 38,313 | 37,089 | 1,516 | 1,252 | 4,602 | 3,747 | ||||||||||||||||
Total | 26,242 | 26,100 | 94,107 | 99,272 | 8,928 | 8,384 | 33,364 | 34,343 |
Third Quarter | Year to Date | |||||||||||||||
Millions of dollars | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating revenues | $ | 202.1 | $ | 199.8 | $ | 716.4 | $ | 681.5 | ||||||||
Net income (Loss) | 0.7 | (1.0 | ) | 16.9 | 22.9 |
The Company | Consolidated SCE&G | |||||||||||||||||||||||||||||||
Third Quarter | Year to Date | Third Quarter | Year to Date | |||||||||||||||||||||||||||||
Millions of dollars | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||
Other operation and maintenance | $ | 183.1 | $ | 186.6 | $ | 543.1 | $ | 557.9 | $ | 153.5 | $ | 152.0 | $ | 446.1 | $ | 454.2 | ||||||||||||||||
Impairment loss | 210.0 | — | 210.0 | — | 210.0 | — | 210.0 | — | ||||||||||||||||||||||||
Depreciation and amortization | 95.7 | 93.2 | 284.7 | 276.1 | 78.2 | 75.6 | 232.6 | 225.0 | ||||||||||||||||||||||||
Other taxes | 67.2 | 66.3 | 200.2 | 191.8 | 63.1 | 62.0 | 186.6 | 177.8 |
The Company | Consolidated SCE&G | |||||||||||||||||||||||||||||||
Third Quarter | Year to Date | Third Quarter | Year to Date | |||||||||||||||||||||||||||||
Millions of dollars | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||
Other income | $ | 28.4 | $ | 15.8 | $ | 61.0 | $ | 46.4 | $ | 20.8 | $ | 7.3 | $ | 36.1 | $ | 19.6 | ||||||||||||||||
Other expense | (7.0 | ) | (7.1 | ) | (25.4 | ) | (31.5 | ) | (6.2 | ) | (4.6 | ) | (17.3 | ) | (18.8 | ) | ||||||||||||||||
AFC - equity funds | (0.6 | ) | 6.9 | 17.6 | 21.6 | (3.5 | ) | 6.4 | 12.7 | 18.7 |
Millions of dollars | 2017 | 2018 | 2019 | |||||||||
SCE&G - Gas | $ | 74 | $ | 100 | $ | 106 | ||||||
PSNC Energy | 332 | 244 | 192 | |||||||||
Total | $ | 406 | $ | 344 | $ | 298 |
Expected Maturity | 2017 | 2018 | 2019 | 2020 | ||||||||||
Futures - Long | ||||||||||||||
Settlement Price (a) | 3.10 | 3.15 | 3.07 | — | ||||||||||
Contract Amount (b) | 21.4 | 45.9 | 6.9 | — | ||||||||||
Fair Value (b) | 20.1 | 45.4 | 7.1 | — | ||||||||||
Futures - Short | ||||||||||||||
Settlement Price (a) | 3.09 | 3.16 | — | — | ||||||||||
Contract Amount (b) | 6.7 | 8.0 | — | — | ||||||||||
Fair Value (b) | 6.0 | 7.7 | — | — | ||||||||||
Options - Purchased Call (Long) | ||||||||||||||
Strike Price (a) | — | 2.54 | — | — | ||||||||||
Contract Amount (b) | — | 19.1 | — | — | ||||||||||
Fair Value (b) | — | 1.0 | — | — | ||||||||||
Swaps - Commodity | ||||||||||||||
Pay fixed/receive variable (b) | 6.3 | 20.4 | 5.3 | 1.0 | ||||||||||
Average pay rate (a) | 3.3022 | 3.2285 | 2.9381 | 2.8950 | ||||||||||
Average received rate (a) | 3.1043 | 3.1288 | 2.9703 | 2.8219 | ||||||||||
Fair value (b) | 5.9 | 19.8 | 5.4 | 0.9 | ||||||||||
Pay variable/receive fixed (b) | 6.3 | 25.5 | 8.0 | 0.9 | ||||||||||
Average pay rate (a) | 3.0973 | 3.0822 | 2.9796 | 2.8397 | ||||||||||
Average received rate (a) | 3.1848 | 3.1643 | 2.9499 | 2.9499 | 2.8973 | |||||||||
Fair value (b) | 6.5 | 26.1 | 8.0 | 0.9 | ||||||||||
Swaps - Basis | ||||||||||||||
Pay variable/receive variable (b) | 7.1 | 8.0 | 0.3 | — | ||||||||||
Average pay rate (a) | 3.0073 | 3.2222 | 3.2311 | — | ||||||||||
Average received rate (a) | 2.9666 | 3.1828 | 3.1441 | — | ||||||||||
Fair value (b) | 7.0 | 7.9 | 0.3 | — | ||||||||||
(a) Weighted average, in dollars | ||||||||||||||
(b) Millions of dollars |
ITEM 4. CONTROLS AND PROCEDURES
Senior management of
There were effective. There has been no change in internal control over financial reportingchanges that occurred during the last fiscal quarter ended
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, DESC is party to various legal, proceedings through September 30, 2017. The Company and Consolidated SCE&G intend to vigorously contest the lawsuits which have been filed against them. For developments related to theseenvironmental or other regulatory proceedings, subsequent to September 30, 2017, if any, see Note 2 and Note 9including in the ordinary course of business. SEC regulations require disclosure of certain environmental matters when a governmental authority is a party to the condensed consolidated financial statements. No referenceproceedings and such proceedings involve potential monetary sanctions that DESC reasonably believes will exceed a specified threshold. Pursuant to or disclosurethe SEC regulations, DESC uses a threshold of any proceeding, item or matter described below shall be construed as an admission or indication that$1 million for such proceeding, item or matter is material or that such proceeding, items or matter is required to be referred to or disclosed in this Form 10-Q.
See the following for discussions on behalf of himself and all others similarly situated, in the State Court of Common Pleas in Richland County, South Carolina (the “Richland County Court”). The plaintiff alleges, among other things, that SCE&G was negligent and unjustly enriched and breached alleged fiduciary and contractual duties by failing to properly manage the V.C. Summer construction project. The plaintiff seeks to recover, on behalf of the purported class, unspecified damages and attorneys’ fees, specific performance of the alleged implied contract to construct the now abandoned project, and any other relief the court deems proper.
• | Notes 3 and 12 to the Consolidated Financial Statements in DESC’s Annual Report on Form 10-K for the year ended December 31, 2021. |
• | 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 from the Registrants' combinedhave been identified in DESC’s Annual Report on Form 10-K for the year ended December 31, 2016, and combined Quarterly Report on Form 10-Q for2021, which should be taken into consideration when reviewing the quarter ended June 30, 2017,information contained in this report. There have been updated and are restated below in their entirety.
Issuer Purchases of Equity Securities | ||||||||||||
(a) | (b) | (c) | (d) | |||||||||
Period | Total number of shares (or units) purchased | Average price paid per share (or unit) | Total number of shares (or units) purchased as part of publicly announced plans or programs | Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs | ||||||||
July 1 - 31 | 5,935 | $ | 65.16 | 5,935 | ||||||||
August 1 - 31 | — | — | — | |||||||||
September 1 - 30 | — | — | — | |||||||||
Total | 5,935 | 5,935 | * |
ITEM 6. EXHIBITS
Exhibit No. | Description | |
3.1 | ||
3.2 | ||
4.1 | Dominion Energy South Carolina, Inc. agrees to furnish to the U.S. Securities and Exchange Commission upon request any instrument with respect to long-term debt as to which the total amount of securities authorized does not exceed 10% of its total consolidated assets. | |
10.1 | $6,000,000,000 Fifth Amended and Restated Revolving Credit Agreement, dated June 9, 2021, among Dominion Energy, Inc., Virginia Electric and Power Company, Questar Gas Company, Dominion Energy South Carolina, Inc., JP Morgan Chase Bank, N.A., as Administrative Agent, Mizuho Bank, Ltd., Bank of America, N.A., The Bank of Nova Scotia and Wells Fargo Bank, N.A., as Syndication Agents, J.P. Morgan Securities, LLC and Mizuho Bank, Ltd., as Co-Sustainability Structuring Agent, and other lenders named therein (Exhibit 10.1, Form 8-K filed June 10, 2021, File No. 1-3375);as amended by the First Amendment, dated September 28, 2022, to the Fifth Amended and Restated Revolving Credit Agreement (Exhibit 10.1, Form 8-K filed September 30, 2022, File No. 1-3375). | |
31.a | ||
31.b | ||
32.a | ||
101 | The following financial statements from Dominion Energy South Carolina, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, filed on November 4, 2022, formatted in iXBRL (Inline eXtensible Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Changes in Common Equity, and (v) the Notes to Consolidated Financial Statements. | |
104 | Cover Page Interactive Data File (formatted in iXBRL (Inline eXtensible Reporting Language) and contained in Exhibit 101). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, each of the registrantsregistrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature of each registrant shall be deemed to relate only to matters having reference to such registrant and any subsidiaries thereof.
DOMINION ENERGY SOUTH CAROLINA, INC. | ||
(Registrant) | ||
By: | /s/ Michele L. Cardiff | |
Date: November 4, 2022 | Michele L. Cardiff | |
Senior Vice President, Controller and Chief Accounting Officer |
33