ML20236A577

Scana 1988 Annual Rept

ML20236A577
Person / Time
Site:	Summer
Issue date:	12/31/1988
From:	Warren J SOUTH CAROLINA ELECTRIC & GAS CO.
To:
Shared Package
ML20236A572	List: ML20236A570 ML20236A575 ML20236A577
References
NUDOCS 8903200011
Download: ML20236A577 (49)

Text

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Financlol and Operating Highlights. l % increase 1 1980 1907 (Decrease) ' (Millions of Dollars except statistics andpershare amounts) Financial Total 0 prating Ret es S 1,083.3 S 1,116.0 (2.9) Total Op3 rating Ext.ses S 878.6 S 911.6 (3.6) Netincome $ 120.7 $ 128.9 (6.4) Eomings Per Shore of Common Stock 3.00 S 3.20 (6.3) Dividends Declared Per Shore of Common Stock 2.40 S 2.32 3.4 Book Value Per Share of Common Stock (Year-End) 3 22.23 $ 21.63 2.8 Market Price Per Shore of Common Stock (Year-End) $ 32.25 S 28.50 13.2 Common Stockholders' Equity (Year-End) - S 895.7 S 871.6 2.8 Common Stock Outstanding (Thousands; Year-End) 40,296 40,296 l s Construction Expenditures S 182.9 $ 173 3 5.5 Utility Plant, Net S 2,384.6 S 2,314.0(1) 3.1 Electric Operations Electric Operating Revenues S 788.0 $ 806.8 (2.3) - Scles (Million KWH) 14,457 14,314 1.0 Customers (Year-End) 427,089 417,778 2.2 Generating Capability - Net MW (Year-End) 3,891 3,890 Territorial Peak Demand - Net MW - 3,021 2,943 2.7 Gas Operoflons Gas Op3 rating Revenues $ 291.3 S 306.0 (4.8) Sales (Thousand Therms) 677,580 734,145 (7.7) Customers (Year-End) 201,399 195,338 3.1 Transit Opstations . Transit Operating Revenues S 4.0 3.2 25.0 ) Revenue Passengers Carried (Thousands) 6,723 8,668 (22.4) j i .ry,nmm p.cro, y (+ - ntemgypwggy g&qmpywqp.: .qygpq' 3 g ) (EemhlpsandDhidenden ~ C MarketPnce mut800kQ@ fA\\nhnnon00mann"% 3*m h wrluePerhan h L(yeat4rit)Y[gy); V ' Qmi M,9 -

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t i vl, l m! l $tt$f 10 L ~60 a f@Stockhb/dersL 1 Fellow Stockholders: Eamings for 1988 amounted to $3.00 per share. Even though these results are less h n[ j than the record earnings in 1987 of $3.20 per share, management considers 1988 to have hf ^f. y been a good year. Several significant events contributed to the decrease. The primary factor i l

y was the reduction, effective January 1,1988, in South Carolina Electric & Gas Company's 4 -

[ ,' i fd electric retail rates ordered by The Public Service Commission of South Carolina which ( . j.] lowered the allowed cetum on common equity from 14.25% to 13.25% and reduced l J f ' l earnings approximately $.18 per share. Milder weather caused a reduction in average f g customer usage during the summer months. However, this reduction was partially offset by j f' [ new sales attributable to customer growth. In addition, South Carolina Pipeline Corporation's { lower eamings reduced SCANA's eamings $.10 per share due largely to increased spot H market prices for natural gas sold to its industrial customers. Prices of alternate fuel for these l' [ customers were stable, resulting in much lower margins. These factors continue to impact . _] our operations. While margins from industrial gas sales were down in 1988, earnings were l l[, p !y y positively impacted by an increase in retail natural gas rates effective December 1,1987. 1 { i Eamings from our nonregulated subsidiaries increased $.10 per share, offsetting some of the l decrease in utility earnings and additional interest expense on long-term obligations. 5 On February 22,1989, the Board of Directors increased the indicated annua! .,j dividend rate from $2.40 to $2.46 per common share. The new rate will be reflected in U e dividends to be paid April 1,1989 to holders of record March 10,1989 The Company has l s y ? o' i' increased its dividend in 36 of the past 37 years. J 4 Our principal strategies for 1989 and future years are essentially unchanged from a year age. However, to specifically address the major adverse conditions encountered f. in 1988, ae are taking several steps. First, we have intensified our efforts toward cost containment in 1989. Cost containment and cost reduction have been the focus of a ' i primary long-term strategy of the Company for several years. As a result of this emphasis, our operating and maintenance expenses in 1988 increased only six-tenths of one percent (0.6%) over 1987, whereas they have increased an average of 4.0% per year for the past 3 years. During 1989, we will continue to evaluate additional reductions in personnel through early retirements, some layoffs and attrition while continuing to eliminate nonessential expenditures. We have increased our efforts to acquire our own supplies of lower-cost natural gas in an effort to recapture industrial load lost to competitive fuels, improve our margins on existing industrial sales and lower the total cost of natural gas to our jurisdictional customers. Our commitment to growth follows two directions. First, we will continue to be an active partner with others in the economic development of our service area During _m (John A. Worten ; U 1988, there were announcements by new or existing industries of $3.7 billion in capital ! Ne' rife"ct$ve orricer.. investment in South Carolina, which is projected to result in more than 19,000 new jobs. At I a L4: y l _-.L._.___L__._..2...

i l e 4, i O the same time, we are aggressively pursuing expanded service opportunities within our fronchised service territory. [ ] South Carolina Electric & Gas Company is committed to remaining the low cost I; Q ' ' .( [ *$ investor-owned electric utility in the area. Operational excellence in our electric generating g y7j plants is critical to our success. In a national survey published annually, our fossil-fueled [s ,[ i.] electric generating system ranked eighth most efficient among the nation's 100 largest [

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investor-owned utilities for 1987. This is the sixth consecutive year and nine out of the f,4 y a previous 10 years that SCE&G ranked in the Top 10. The V.C. Summer Nuclear Station y' continued its tradition of superior performance. Since commercial operation began in 1984, _d Summer Station has achieved a capacity factor of 69%, compared to the industry average of g m 61 %. It was successfully refueled during the fourth quarter of 1988, with the next scheduled h,> f outage for refueling not due until the spring of 1990. g "l 1 .) Despite the continued success of our cost containment efforts, operational excellence [ of our production facilities and economic growth of our service territory, SCE&G filed on 4 January 3,1989 for a rate increase of 3.7% in its retail electric rates. This increase, if fully ~ e allowed, would partially offset significant increases in property taxes which have occurred in f the past 24 months, and the fixed charges associated with significant property additions for 2 requested rates are implemented, SCE&G's retail electric rates still would be among the Q,* j ) customer service. The new rates would be placed in effect during July 1989. After the e , ;] lowest of the investor-owned electric utilities in the area. We continue to believe in SCANA's future. SCANA's operations are located in a growing, progressive part of the Sunbelt. Our long-term strategies are working to make all our businesses successful despite the adverse external developments of the past year. The day-to-day implementation of these strategies relies on the skill and dedication of our employees, who as a group own more than eight percent (8%) of the outstanding common stock of SCANA. Their shared interest in the future success of the Company, together with the excellence they have demonstrated to date in implementing our long-i l term strategies, will create increased value for all stockholders in the future. f ^ N f ~ l Yf. o-- H. February 22,1989 i Lawrence M. Gressette, Jr. ; President - 5 _._-__-mom ___.m_

) Year in Review utility Operations i m p p u m u u s u m T)" - .b w (SektiCONkW(pv m. m a as ^ bElechGr h b scE&G's electric rates are among the lowestin the region. At year-end 1988, South wConipenyn%obW i.7,% a Ccrclina Electric & Gas Company's (SCE&G) retail electric rates were about 12% below u y. {40erolino E4c/rn So%q lThe th/ssion~o[ South those in 1984 as a result of lower federal income taxes, lower fuel costs, intemal cost h control measures and a reduction in the company's allowed return on common equity frori. PonyWMk 14.25% to 13.25% effective January 1,1988. Llhe energyneeds andh (ment of thepeople@j engryy.fegfedfagy/re. In an effort to have the opportunity to earn an adequate retum on capital, SCE&G filed a request for a 3.7% increase in retail e )ctric rates with The Public Service and businesses within ' k Lsefyice Or80. To 0c4 Commission of South Carolina (PSC) on January 3,1989. Hearings are scheduled to begin [.complish this, the[ 'l in mid-April, with a decision by the PSC expected in early July. If approved in full, the I (cgnymustsaQ request would generate $27.2 million in revenues ennually and would represent SCE&G's Lon Odequate retum ond Ifhe coplellnvestedin.g first retail electric rate increase since 1984. j f((SeM00s; Coupled withyIng a birprice Drifs]bj jbcIllfles bycharg An increase in expenses over which SCE&G has little or no control led to the request. For example, SCE&G's property taxes have increased by $14.5 million since the last retail y tC high degree of effl.3 electric rate increase five years ago, and depreciation expenses have risen another $15 fclencyin /fs opemtions.l million. SCE&G has alwcys sought to control costs while continuing to provide reliable, 'n YThe mission of tho 'hed quakty seMce. Cost reduchon programs have streamlined operations while maintaining [companyimplies b f quble compensation toj facilities and essential services. i /fs ownerforMe use ofh Even if this requested increase is approved in full, SCE&G's electric rates will remain cap /tal; recognition n I;of aninvolvementinQ among the lowest in the southeaster United States. According to a University of South Epture 4dergylechnold Carolina study released in October 1988, SCE&G's rates are also lower than those of many I sco c nd neighboring rural electric cooperatives, in some cases significantly lower. 7/ndus#idldeve/Optnentq SCE&G customers set several records for electric demand during the summer of 1 (Kof#8 service area,9hd { I 1988. The highest peak of 3,021 megawatts (MW) occurred August 18, an increase of 0 WilFngness to accept ; h Jshoreofsoc/ alt j 2.7% over the 1987 record of 2,943 MW. At year-end 1988, SCE&G was serving 427,089 [tesponsib///fy? % @A electric customers, an increase of 2.2% over 1987. SCE&G projects its electric customer f;) e y[ e f base will grow at a rate of 1.9% annually through 1993. k4 [ " g ' ]j Total system sales in 1988 were 14.5 billion kilowatt hours (KWH), an increase of {4 % j 1.0% over 1987. More moderate weather restrained the growth of residential sales to only C p? M;., Q .9% while commercial sales were up 4.4%. Industrial sales were down.8% as decreased o m p 'Ap? sales to the U.S. Department of Energy's Savannah River Plant offset higher sales to a[wl $[ye N customers in the fabricated metal products and paper industries. 7 f, <j t

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I i ). pg ww ,4 fs:n & W.' h) ! # ' h(k; =q j? RancMpCuenaers@ll] Efficient electric generation is a tradition at SCE&G. SCE&G's outstanding record i [ h of efficiency is the key reason why it remains one of the lowest-cost producers of electricity M;tJ A y,' Q~ I) in the Southeast. SCE&G's 1988 system heat rate for its fossil plants was 9,852 BTU /KWH, rA 3< r n

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marking the sixth year in a row that this important measure of generating efficiency has ) jf f improved. er-m+mO in an annual survey published by Electric Light & Power magazine, SCE&G's fossil-A25, ~ m a h [ }. h,[ n " fueled electric generating system ranked eighth most efficient among the nation's 100 ) e u /3-largest investor-owned utilities for 1987. This marks the sixth straight year that SCE&G has. I 4aa ; + y [@7 j held a Top 10 ranking. j C-a Total electric generation during 1988, including electricity produced by South 375c v 7 '. } Carolina Generating Company, Inc., another SCANA subsidiary, was 16.0 billion KWH, a ^y decrease of.9% from 1987. Coal provided 73.8% of the total, nuclear 21.2% hydroelec-350 w i a i p/* s 1 tric 3.9% and oil and natural gas 1.1%. 'p" t ) At 3,891 MW, SCE&G's peak generating capability provided a reserve margin in

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5;j 1988 of approximately 29% Coal accounted for 56% of this capacity, hydroelectric 20% h U O i p (i 'd n(' {} nuclear 15% and oil and natural gas 9% To meet estimated annual peak Icad growth of j e, ,, e

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g slightly less than 2% through 1994, and to replace the 94 MW capability of a plant j

e oc i n m. M;4if @d scheduled for retirement, SCE&G plans to add 96 MW of gas turbines in 1991,1993 and fs w a kyb {,y ;;>; 1994. No new baseload generating plants are planned through the mid-1990s. j Life extension work on existing generating plants continued in 1988 as four major f e o j g] [ projects were completed at McMeekin Station near Columbia. Six additional life extension f {"pgh 4 f,Edog[ projects are scheduled for completion at other plants in 1989. as.o,, The V.C. Summer Nuclear Station returned to service December 29,1988 following ~ C 4 '1 e w@@g j a scheduled three-month refueling and maintenance outage, in the 16-month operating M o cycle preceding this outage, Summer Station posted an excellent operating capacity factor 32.0 g a Q l /j;; y of 90.5%.

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.: 9.o ;ay 4 c4 r ' "w Nuclear Regulatory Commission Chairman Lando Zech visited Summer Station on i : a - v p, u; /e :{ [ June 30,1988 as part of a nationwide tour of nuclear facilities. In meetings with plant p s y,Q,g c 6.o 17 's q - Workers and company officials, Zech praised management's involvement in the plant's activities and SCE&G's ability to recognize potential problem areas and take positive msn ~~ g g 7:g:g t e J84(85f86E87488 g 7 ? n; ( e ff - t'[ ~T e t-p,, ,; ;, b' W hs -E i

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h ll Successfulmarketing programs promote conservation. In May, SCE&G's Energy .4g Info Centers in Charleston and Columbia honored their one millionth visitor. The Columbia . j;, jd7y -@h$j@h@yygg:j f y center's opening in 1984 offered a unique approach to furnishing hands-on energy g conservation information to consumers in an unconventional setting - a shopping mall. kN@UffhIh.?j Encouraged by the popularity of the Columbia center, another opened in Charleston the j M :s 9. g @h A$<j following year. As the number of visitors indicates, the centers have been successful in their w wr%w [pdbpsQ5QfdMg#d 4 mission. hh qNbNNNh Public response has also been excellent to SCE&G's Good Cents program, part of a .. mg g 7 [EN!(M@hhMN %.yQ national program that stresses energy efficiency in new home construction through design and materials used. More than 2,000 Good Cents homes have been built in SCE&G's hh hhp l/)% map!g hhh service area since the program began in 1986. (Xff QNI 3h Another marketing program is the Great Appliance Trade-Up, which offers rebates to %py e p i dU$qSWMg qualified customers who upgrade old. inefficient heating and cooling systems with modern, p}%_I[,ijhQ,{h more efficient ones. In 1988, more than 2,000 customers took advantage of this program. e f4pZ,D$g{j g The success of these programs is a key part of SCE&G's efforts to postpone new .[$h plant construction costs by controlling peak usage growth. SCE&G's marketing programs b@b[%.WO7 %a A, M are forecast to result in the deferral of approximately 60 MW of demand on the electric %f g <V" JO:TM system by the year 2000. FM gg.; m%9%g y;f Qtf ;_ s;p ps - smJA7 3 (D, s 3 g@% ;fjg 1 y g qw ? q y f < h, ;&l ?, ann:- 3f: 3 . W[iq!v% % {&, ;*'i~ s# yf A Qf Q%gg%y y, }>;;p A, ~, D O ff nyp 1 x f.,'$ L @W kj.f' i $$$$ f 'i $N' , N.y. Mg p fy c,&:.4 f:* [y ' E[.. & ' b M. '] ,f 'l f,' w,, w: l $ g % j e ,% 8 l 1 y e

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[ a p. f SCE&G taking steps to help ensure a clean environment. SCE&G is committed to a ? { GJ s clean environment. The company uses electroslatic precipitators and other environmental h[ I '7l equipment to meet South Carolina's emission requirements. During 1988 coal consumption [ Y' ?- totaled 4.5 million tons. h Sf South Carolina's emissions standards, stricter than those in many other states, , ji'j already have proven effective. The S.C. Department of Health and Environmental Control has E; 7j b, 4 not identified any significant increase, on an annual basis, in the acidity of rainfall in the r f; 'j state. E / Much of the acid rain legislation proposed in Congress in recent years appears to be { nl q politically motivated, scientifically unjustified, too costly and unfair to states such as South 4 [ A Carolina which have exercised their own options to reduce emissions. 4 i ~ 3 e SCE&G favors completion of the 10-year National Acid Precipitation Assessment y W Program, authorized by Congress in 1982, before adoption of legislation that could force b electric utilities and their customers to spend enormous amounts of money on solutions that y may not deliver the desired results. ( In other activity, SCE&G completed a four-month project in December 1988 that 3 provides required safety assurances at the Lake Murray Dom near Columbia. A $4 million i sheet-metal wall across the dam was required by the Federal Energy Regulatory Commis-sion to protect the dam in the unlikely event of a " worst case" flood. 6 n h k {l W .i l'2 e

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% M M p!N p h M jj nnsa A m Whjff$f.%e A&lj ' New offices and programs benefit customers, communities. During 1988 three -yy j new business offices were opened and seven more received extensive renovation as part of p&qn W pq%@hhg$q 8 fQ SCE&G's ongoing commitment to customer service. SCE&G also improved its customer k[h h representative training and telephone services to make it easier for our customers to do - fk$d!Mgj business with us. h%T MM Again in 1988 emphasis was placed on corporate good citizenship. SCE&G hMhN $h ?4g$h(hid continued its involvement in a Cities in Schools program in Columbia. This program takes a mgpg mig WQ personalized approach in coordinating health and other support services with academic $ wp MW2"4 p8 ip4.fm/p[$' tQ . A activities for high school students with a high dropout risk. u gy%YdN A political awareness campaign aimed at employees and members of their families 4 A] resulted in more than 1,800 new or updated names on voter registration rolls. NA hn} Yd Project SHARE, the voluntary donation program made possible by the contributions h[y[ }k fQh of more than 23,000 SCE&G customers, provided over 2,000 needy families and s A w hgw h{,j individuals with nearly $200,000 in crisis situation financial assistance over the course of ? pf ' f 9 9 the year.

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ROf%z%y " wp SCE&G's free firewood program for elderly and needy citizens was expanded in . ^Jk u mw y . n % e f @~ gM 1988 with the establishment of a Wood For Warmth wood lot in Beaufort. More than 650 y

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n gagg 2 'i d truckloads of free firewood were picked up at similar locations in Columbia, Charleston, p6 74M sw n K CdN', gfnj Aiken and North Augusta during the 1987-88 winter. Most of the wood comes from h w w'n k g Q W wdM SCE&G's regular tree-trimming activities, although individual donations are accepted. b ihm M F % M%,J &gA i % e "8}ff Regional transportation systems remain a goal. SCE&G is required to provide \\ u-x w 4 Ngyj transit services in Columbia and Charleston under long-standing franchise agreements. A., m )v < y na: HiGQ-yj!N However, the company continues to work with local officials in each city for the M@, + y, %.. ;.M p y bj establishment of government-owned Regional Transportation Authorities (RTA), which i [$gh4ff ny,d, s V >s y9u y would ultimately diminish SCE&G's role as a provider of public transportation. Pending the hhf ~n y,, a A %[. f[fj approval of local govemmental bodies, a public referendum on the creation of an RTA in pk"M9gy Charleston may be scheduled for mid-1989. k' $ Q,MM During 1988 SCE&G buses carried more than 6.7 million revenue passengers in the w@ A, M

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l k$h passengers from 1987 hMYM hh 4 The decrease in passengers was largely the result of a fare increase of 25 cents that l hh hh Y went into effect in January 1988. Despite the higher fare, SCE&G's operating costs continue ( % pf g'_m' y'Q}g to exceed revenues for transit services. QL rM f(Y k W 3, kc m r [b{g}, %x.,,' y "d a o j l Psf < 4 1l - 7 [14 yw w g% ^4 p; llG',j j p (1l} EElhdnhnM -J l

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Tj Vs Aggressiveness is the key to naturalgas customergrowth. At year-end 1988, (SCE&GNatumiGas \\ [(Customersthousands/ year-enN)7, j SCE&G was serving 201,214 natural gas customers, a 3.1 % increase over 1987. t3 Aggressive sales campaigns, coupled with a sales force paid on commission, accounted for the growth. For example. the company sold and installed more than 12,000 natural gas 205 water heoters in 1988. In addition,88% of the new homes built in the company's service t un,- f area with gas lines nearby were natural gas homes. U Altemative fuels pose a big challenge for SCE&G's gas operations. Throughout the s country large, energy-conscious industrial customers continue to switch from firm service to

I interruptible service, giving them the flexibility to burn lower-cost alternative fuels. SCE&G

( has been able to minimize the impact of this trend by transporting gas for some of its f O j customers and by obtaining lower-cost spot gas through the industrial sales program of its supplier, South Carolina Pipeline Corporation. J G Despite these efforts, industrial sales fell by 19% in 1988, and total retail sales decreased 5.3%. Sales to residential customers were up.3% and commercial sales rose.7% '84 Sa5 yae -87 Mas a 3 SCE&G reached the 80% completion mark in a $30 million, multi-year system ~* g improvement program to replace 650 miles of gas mains in the Columbia area. The ~ reduction in gas line leaks has resulted in lower than expected operating expenses. 4U i in November 1988, the PSC approved SCE&G's request to replace monthly gas cost c adjustments on residential and small commercial customers' bills with a semiannual adjustment similar to the procedure used for fuel adjustments in retail el etric bills. This [I ' Change will make it easier for gas customers to understand their monthly gas charges and 1 vi t E j. budget accurately for those expenses, r l 4, w ~ l Newlyrenovated, the 9 F Lucius Road Propone-Air Plantlocatedin Columbia b has doubledits capacity to 40 million cubic N+\\ - feet / day. The plant ~ ~ - l is completely electronic, featuring a new computerized s I l controlroom. 7, t (16{ _j%. . 9

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Expansion of operations atRiverbanksZoo resulted s In a need toincrease the size / of theirnaturalgas metering station. The additionalzoo r ~~% facililles almostdoubled the previousload. 4 - l l 1 I j ., a.. l i 1[ w, .Ad} g 41&& 9., ,,..a','tw .,.-;,[ .E 17

y ~ y l Tmnsported natumlgas increases competition. As on intrastate natural gas } Pp transmission company, South Carolina Pipeline Corporation (SCPC) serves resale and I g industrial customers throughout South Carolina, including city and county gas authorities and other natural gas utilities. At year-end 1988, SCPC was serving 131 direct customers, .s m g including SCE&G. . 0D#4GIMMMS y% Total throughput in 1988 was 79.7 million MCF, an increase of 3.5% over 1987, j NasMC8"GlWO$ TOMS Total sales during 1988 decreased 5.2% from 1987 to 68.6 million MCF. Industrial sales [f00rsp4InMif/#R$;Odi declined 13.4% Sales to resale customers, including SCE&G, decreased by 1.8%. The Companymusf80RQ [On adequofen2#n onj amount of gas transported over SCPC's system for resale customers and end-users was up { E2804PildiAW8888d/83 230% compared to 1987. Total purchases, including gas purchased for resale, were down l IingabitpriosMrthj^ bCillfles & ChQrg-f 5.2% from 1987 to 68.8 million MCF. C [seMces, coupfedledhf SCPC has contracts with two interstate gas pipelines - Southern Natural Gas PC.high.dspf99 of eMQ (Clencyin h Cpernnon:y$ Company and Transcontinental Gas Pipe Line Corporation. SCPC is negotiating contracts j &The Mlefon of thegg with various supply sources to ensure that the company's contract gas requirements will f00nipanyinpliesodf-F continue to be met in the future. The availability of transportation of natural gas has been a i source of increased competition in 1988 and is expected to continue to provide SCPC with J cap /fot/se00pgon q challenges as well as opportunities into the future. Jiggy'engygyfgghno/y@ gof onlir4Jlwnf /n s die native fuels, particularly No. 6 fuel cil, pose formidable competition to natural [0gy/disodershipM gas companies. Spot market purchases of natural gas have allowed SCPC to compete fin the'8COnomic and4 successfully with alternative fuels in the past, and this strategy will continue as one of the ! of h seMos of80,0nd,y ways SCPC meets the challenges of 1989 and beyond. g ((a w////ppness10 occept]; share ofsoc/0/M gas (LNG) facility near Charleston. These improvements enhanced the safety and reliability During 1988, SCPC completed a five-year program to upgrade its liquefied r tural rsosponsiblHly/ 'n %d o xd i 4:, of the plant to provide service to SCPC customers during periods of peak demand. Also in ,s gyy App q IygSAQ Yq 1988, SCPC installed more than nine miles of six-inch pipeline, looping the existing line to u g/, M, s. Juy. qv F -..,, ~, O_. a Shaw Air Force Base and the rapidly growing city of Sumter. i&f '$YQfg ~ w' " i $ l$sm 4 6 d pq % ;vy D

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Non-Utility Operations yd M w or & %Q4hajh i M 9J M w.m ;_m SCANA invests In the future. SCANA's strategy is to expand its eamings growth h m, UbeWMPKW potential as an energy-related company by diversifying into businesses with which it is j-7gg g r g g} familiar. By capitalizing on its strengths and complementing its existing utility operations, commWSM SCANA has entered into ventures which can make contributions to its earnings as well as h the economic growth of South Carolina. At year-end 1988, SCANA had $88.3 million qy invested in these activities, compared to $54.4 million at year-end 1987. g.m. a g ga MPX Systems' growth cont /nues. MPX Systems, SCANA's telecommunications I "k subsidiary, continued to grow through increased equity earnings from its investment in SouthernNet, Inc., and through income from its own fiber optic lines. MPX contributed NMArd]) 7 cents per share to SCANA's 1988 earnings. lf l gg In November 1988, MPX increased its investment in SouthernNet, an interstate ' bgp carrier that provides communications services to approximately 200,000 customers in the @jhff Southeast. In December 1988, SouthernNet completed a merger with Teleconnect Company g@W%@fMMd g Mh that combined the two regional telecommunications companies into a single holding h e } @h$f company - Telecom* USA. Based on revenues, Telecom* USA is the nation's fourth 2% 3 ,sg 6 @d Q largest interstate carrier, serving nearly half a million long-distance customers in 31 f %g;W% Reg 3 a southeaster, westem and midwestern states. SouthernNet and Teleconnect had combined r ~2 '- mggggpf revenues of roughly $525 million in 1988. At year-end 1988, MPX owned approximately 4 aggigeggp.d{ hletMIO 12.6% of Telecom* USA's common stock. 1 ?: gg MPX introduced a video conferencing product in June 1988 that can allow MPX to 4[gpg. 0hf 8 increase the volume of traffic on its network of fiber optic lines. Within South Carolina during mur 1988, MPX completed construction of a 10-mile link to Walterboro and began construction glWWI Airi of another 60-mile link to Beaufort. lder seek @ juist; contestp N j yltessospeakdnsMi Ep[h$@@b) Jesshapw? h j@ Sq ! if%g? W %w @lijl% %kQ ;cn J \\ 7 &.l hh@N:sf N Mpb [.5 dpM$ j SMhh Mk![hp?$h &m&n$&wp u%b \\ adee gppim j taitMMM $a;j m' aan cA39 y ]

4 f. Othersubs/d/atles expand operaflons. Primescuth, SCANA's construction subsidi-ary, recorded revenues of $32 million during 1988, which represented a 57% increase over p dhemisikofPtt$e-?" mw.* m canysw. 1987. Primesouth has achieved prof!! ability in each of its first two years of operation. p9 -,,,g,p g Primesouth was awarded two major contracts in 1988 for additions and renovations h agtyggg g% andpl JW ba at South Carolina hospitals, and continued work on a variety of projects ranging from office p ggg g 1 buildings to recreation facilities to large retail buildings. kcNe@llthesomtpenf Primesouth also signed a contract during 1988 to operate a 360 MW generating g g g g dl station in Hopewell, VA. The five-year contract with the plant's owners (CRS Sirrine and Transcontinental Gas Pipe Line Corporation, both of Houston) calls for commercial operation of the plant to begin in the second quarter of 1990. In addition to providing nhnendtepsof#efielegsj vgyppsyp electricity to the local electric grid, the plant's three gas turbines and one steam unit will gggygg,gpgggygg l supply a neighboring manufacturing company with steam. g@g$f%#f%ff-} Primesouth is licensed in all of the southeastern states except Florida. It is organized %g gg{q$g hw: 4g.e 826d M/) into commercial, heuvy industrial and metal building divisions. Growth prospects for e W lggp Seniger Gr 80R Pn.mesouth are excellent. 7he ofSOMA c. u o [W[gggq,2ppW4f South Carolina Rect Estate Development Company's (SCRED) growing property g f ^ gg;;g (h VitS(M management division increased its managed office and retail space to nearly one million NOMModucti JhWoe e b-h square feet with acquisitions during 1988. SCRED is involved in virtually every aspect of real estate, from buying and selling residential developments to owning and operating ka4fdeglo$ppesc2p w. casestyslipperta bl stedseniceraridi - shopping centers. Its strategy is to develop current holdings while continuing to buy, i S U888888iI develop and sell additional properties. p3,_ suggonst$gl [je p p-( g-q.g During its second year of operation, SCANA Software Services made significant 4 Qg%g3g g technological advances, opened an additional office and added new products and services to its portfolio. With its products installed in Canada and the United Kingdom, SCANA 3 ( g gl%@ghl&h4) Software is developing an intemational reputation. l . e n,s, yw,tg w 5' hfY

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g. s y my 4 f .k The state's population growth willoutpace the nation's in the 1990s. Three and a fMff)Ok hl half million people now call South Carolina home. The U.S. Census Bureau projects the M $ o$. f 9 state's population will grow 10.1% in the 1990s, compared with a national rate of 7.1%.

SoWh Carolina AfRW, %

In recent years, the growth of the two major metropolitan areas served by SCANA . m.. iIngnorgperandnacre p Ic0989980ch peerdh companies has been dramatic (see charts). The Census Bureau's latest list of the top 100 h f So # SCMM OGlpore-M**population centers in the United States ranks the historic port city of Charleston 74th, with a j " Hon Theyaregroning ]j@h, tasowcesandb$ 1 ,w g three-county population of 502,100, and the capital city of Columbia 78th, with a two-ppoop county population of 451,400. 1 isostgdes oftneshpandl agoga Education is a catalyst for economic development. Hioner education in the state l ((M We.g g ;r-' f ? g I [ traces its origins to 1801 and the founding of the University of South Carolina. Today there c g;fk hf..q.; are more than 60 pub'ic and privat: "J:oges and universities, many of which boast ru g. Lm f f,, g, % d catalyst for economic development by awarding thirty-one $1,000 scholarships at the d v - Ag .t k< %j.) state's four-year colleges and universities. gi p My 4 k phih Sk N The University of South Carolina moved to the forefront of research capabilities in k N lh ((MhhW g.n 1988 with the installation of a Gemini 1000 parallel supercomputer. University officials say y ggfn ^4 ;,m > m]~ i this high-speed computer is capable of duplicating in one hour the equivalent of all hand ,4 &, Q m@ ' W. %.l g computations done by mathematicians throughout history. y ' g ; @m;L L., lm] In its first full year of operation, Clemson University's Emerging Technology l f,} Development & Marketing Center was actively involved in a dozen projects ranging from l 7j gbimonsof dovors)j M ' M biotechnology to integrated circuit design. Begun with a grant from SCANA and its principal .g " Eg.' [y subsidiary, South Carolina Electric & Gas Company, the center helps aspiring entrepreneurs ,$4 o :, A start small manufacturing businesses in areas of advanced technology. [ , [. \\ Since its creation in 1961, South Carolina's intemationally recognized technical { education system has provided more than 163,000 South Carolinians with marketable job ,4 sa.o s y Q ',f. (.J,, 1 skills and a better way of life. With 16 campuses across the state, the TEC system is y g] expanding its training programs to meet the growing demands of industry in South Carolina. s2.o _ r p, 4 y . $V ((' f !gl q y, Si,0 y 3 m e 1 0 1 4 p (84 L'85 ;'86 '87 '88, V source ScsonsacotAbstics Scsuoi !;wtopuntecom : + - p [(l v. v. y+. n .Y A 7, = y

h xp ,A fc < g e' g Public television delivers educational communications. The South Carolina Educo-fiShiSA tQ tional Television Network, which celebrated its 30th anniversary in 1988, is the most h(nouseds);; ; 'W ] ' ;x,Qg5j sophisticated delivery system of instructional television programming in the nation. Nearly a p half million public school students benefit from the network's programs each year. S.C. ETV 800 e. W " ~ JM Od 4 m-is also a leader in national programming for the Public Broadcasting System. These PBS ky 'A 7 broadcasts reach millions of people across the United States and abroad each week, 7 $*,T, a I d boosting South Carolina's image and reputation. Through its facilities, S.C. ETV also 1 gp ~y woo provides statewide training and information on economic development for govemment h (~ s officials and community leaders. Door w South Carolina ranks 10th in business climate. Once heavily reliant on textiles for N2 N its economic strength, South Carolina is committed to the recruitment of new companies to jg[o. ]j diversity its manufacturing and industrial base. That effort, aided by SCANA, is paying i: ] measurable dividends today. A recent study of manufacturing climates by an intemational accounting firm ranked g;, < s'70 l}5 up g j 9 South Carolina 10th best among states with high concentrations of industry. Inc. magazine Co.seemensamm.messemes1 pa mma, ~ a m ranked South Carolina 16th nationally in its latest assessment of economic growth and f"** **** """*"Wf L h.[w[%wgo m s ZW

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^ business climate. $kg k;h The number of new jobs announced in South Carolina during 1988 was 19,415. m m. .s p According to the Inc. survey, new job growth in the state was 15% in the four years from M,.Q ' y ~ g% February 1984 to February 1988, for a total of 183,200 new jobs. During the same time, S$fSd*MippMfil88-4 $ O ChatesMn, SCL L 3 1,141 new companies opened the. doors. y'4 hu(nousnes)gp ir _?;* g' ytg i g e . s South Carolina is the North American headquarters of nearly 100 multinational and foreign-owned firms representing 16 countries, according to a recent survey of foreign fDD g". g.4 gf.g companies by an international accounting firm. E 3 500 s e u x Foreign investment in the state totaled $710.3 million in 1988. Since 1984, foreign g investment in South Carolina has been in excess of $1.8 billion. Overall announced ~ ,go, investment in new and expanded industry in the state during 1988 was a record $3.7 p., g .i m 1 ,m., m billion. foo. t 3 In October 1988, South Carolina played host to a major trade delegation ficm Japan 3 l t 200: as part of the Southeast United States / Japan Association's annual meeting. Later that g *- 3 e m month, SCANA officials welcomed a delegation of businessmen from Great Britain as part of 7,99.. j the Company's continuing contribution to greater economic development within the state. h-. y ] '70 '75 s'so./85 Juty g The U.S. Armed Forces also make a significant contribution to South Carolina's nt s 287 4 n_,. Jg(avogsmaat%[. economy. Eight major military installations pump nearly $2 billion a year into South @cW*% Carolina's economy and provide nearly 80,000 military and civilian jobs. 525i .~ ~ w <.I;..y

mn e;w,q y[iiv * < M, j dgM w w n k[Q. ;a y ?. WW)ghh h gjfh network is essential to future economic growth. Despite South Carolina's relatively small i Highway system is the fifth largestin the nation. An accessible transportation u a %lmm Nih SM size, its highway system is the fifth largest in the nation. In the spring of 1988, the South m n y w g ]A Carolina Department of Highways and Public Transportation embarked on a $2.1 billion h p %, N @t long-range highway improvement plan designed to promote economic development p ( f' % m. n y V$c throughout the state. g w,w q 4 A gg;)n There are more than 70 public airports across the state. The seven largest handle p: %,, ylg=4g, y] yj more than two million commercial passengers each year. The S.C. Aeronautics Com-f$},}[};[q j mission is in the final stages of preparing a plan to identify future airport needs in support of e( ' ' u..%, o[" M economic and tourism growth. .de G u; L(6@y;# . fR & N j Five years ago, the State Ports Authority was laying off workers at the Port of a s <, %; w< t < >T4 Charleston. Today, Charleston is the second largest port along the East and Gulf coasts, 6 W p g D [mMg tmiling only New York in total tonnage. m9 , ga %v 8 Artistic expression scales new heights at Spoleto. A tradition in Charleston each a w[ggbQ {w.y g --n Eyg .. - d spring since 1977, Spoleto Festival U.S. A. continues to gain worldwide renown for l

h hk, encouraging artistic expression through innovative performances. Billed as the world's most g y [? q. M $ % di comprehensive arts festival, Spoleto 1988 drew nearly 84,000 people during its two-and-a-half-week run.

In January 1989, the 2,300-seat Koger Center for the Arts opened on the campus of the University of South Carolina with a performance by .. p o the London Philharmonic Orchestra. Kitty Carlisle Hart, the former actress .2, d. S 4 who now chairs the New York Council on the Arts, heads the University's ~ v3 1 e,. National Advisory Council on the Arts. ~ ~I'%) SCANA and South Carolina are growing together. SCANA Corpo- ~ I ration is aiding South Carolina's economic growth by providing energy, ~ construction, communications, investment and other services. SCANA's p.. m Mtw CensusSursou'sisest3 philosophy is to diversify selectively to provide additional earnings growth while helping to D JktofIlwpop 100pepsh-1 honeenerssiteUWmd j develop, and benefit from, growth in the state's economy. Our belief is that what benefits the [ state of South Carolina benefits SCANA Corporation. m it - un, w hPou?oW2,]W 3 s ^q lC $ h ,, g ;u ]>mg[ i y; hD aL m "3 's, ( m j x[ .j> . 7, p ,M d s L', (, ~

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I mmmmmmmmmmer----- O. %d [SCANAl y 3 oirectors otticers UCorporofton!L d J.K.Addy T. C. Nichols, Jr. John A. Warren t2 5 $"J President President Chairman of the Board and Addy Dodge, Inc. South Carolina Electric & Chief Executive Officer g + Y T J /m t', W Lexington, South Carolina Gas Company L M. Gressette, Jr. 7 % Q. V ' M $h W. B. Bookhart, Jr. 4 Columbia, South Carolina President and Treasurer i,2 fm, <i %d Partner E. W. Pike, Jr. " Cathy B. Novinger , fp

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<M W. B. Bookhart Farms President SeniorVice President lh;, y M "f) Elloree, South Carolina Colonial Development Administration and e' 1 9 H. M. Chapman 3 Company Govemmental Affairs 2 d,/ 9 D .M President Beaufort, South Carolina W. B. Timmerman f,MgN. d ? The Citizens & Southem Henry Ponder, Ph.D. 2. Senior Vice President r %y c w. i. ~ @Ng Corporation President and Controller [S. B ~ T 3 Atlanta, Georgia Fisk University Chief FinancialOfficer Y j,dd J. B. Edwards, DMD " Nashville, Tennessee R. L Cohen

) C \\Q d President J.B. Rhodes

Vice President ' fF/ y dy 1? Medical University of Chief Executive Officer Corporate Development d South Carolina Rhodes Oil Company, Inc. C. B. McFadden %@ Tier, 'f f J Qe A ~Iq Charleston, South Carolina Walterboro, South Carolina Vice President ?? JM6 L M. Gressette, Jr. V. C. Summer " Planning and y4 ,'t bn h WM ]y President Chairman of the Board Corporate Services

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SCANA Corporation Emeritus E. F. Frick C A N 7Y ,3 Columbia, South Carolina SCANA Corporation Assistant Vico President P)stM / '3 J. B. Guess, ll123 Columbia, South Carolina Intemal Audit w *, Owner E. C. Wall, Jr. " Barbara D. Blair* b f' NT ij$f $q p$D 3m$ Edisto Forms President Secretary. W%j% J Denmark, South Carolina Canal Industries, Inc. Harriett M. Gardner h ",4 ' m i@*6 ,b d B.A.Hagood d Conway, South Carolina Assistant Secretary k'j S President John A. Warren ' E. C. Roberts y 9+ j, y# Wm. M. Bird and Co., Inc. Chairman and Chief Assistant Secretary Q> ,,A g' Char;eston, South Carolina Executive Officer O <"'TRaf6 J. F. Hassell, Jr. 2.a SCANA Corporation and f,1. W, ~ Mk US I

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Retired Chairman and Chief Subsidiaries VU, g_ ?3 @M) Executive Officer Columbia, South Carolina if Pre-Stress Concrete yw.nj y g Company, Inc. Directors Emeriti y AP c *h Charleston, South Carolina / Td e 2.4 W. R. Bruce yp, hhh f, M,/[h3N[ P esid n and Chief F'. c, Executive Officer i J. L mpkin Member of Executive Committee g* @j The Liberty Corporation V, p, M - A. C. Mustard Memberof AuditCommittee q Greenville, South Carolin Q 4,;V ' y %p ' J E Schachte, Jr" Membe of Capmate Pedonnam 4 N3y, t.t + , i.t F. C. McMaster u and strategic Planning Committee 4 . M. Williams 4 "~"3 President Member of investment, 1' Compensahon and Management x ~- ~, M,"jh', '. 4 s Winnsboro Petroleum Development committee 'd Company 5 Member of Nuclear oversight ~l fi Winnsboro, South Carolina committee m BB 3',s Wj 6 Also Chairman and CEo of all $/> $ V j y' j subsidianes d Also Vice Chairman of all 7 , y M.7 -P )% i <% subsidiaries where he is not ,g '. >s, v. I President ",. I,.t k N k v, q]~ ,w (hb ^ 8 secretary for all subsidiaries gis X; g.. oh j']4 X Y$Ql'fhl% WeQje, ' N, y yk yj gf y e W 6,< hN _flw A, Ydgb &

w .x ~ N$bOl8 South Carolina Electric South Carolina & Gas Company Pipeline Corporation ppgfsj h(3jtg g g g ;3 T. C. Nichols, Jr.

• B. T. Horton, Jr.

Max Earwood President and Chief Vice President and President Operating Officer Treasurer R. M. Kightlinger d ~,% > J { 4 ' $@W@4

0. W. Dixon, Jr.

John Kinloch Vice President Q# Executive Vice President Vice President Supply and Engineering p' ; [

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Operations Transit and Fleet B. J. MacInnis M 4m, gi ..A .S *' [; O W" 1dp D. A. Nauman Maintenance Vice President E Senior Vice President S. C. McMeekin, Jr. Operations b / 43 Power Production Vice President ? ?+ " i's M4 C. L Rye ' Customer Relations-Primesouth, Inc. 6,,4 ' @9 x. , " gg7j Senior Vice President Northern Division y <m E. H. Crews, Jr. g n(, l Power Delivery and D. C. McNamara Transportation Vice President y j gfj President J. M. Woods ' B. M. Smith, Jr. Electric Marketing / Sales y 4wp 4j Vice President Senior Vice President W. E. Moore, Jr. 4 gj Corporate and Economic Vice President J. C. Chapman 4 g ,gg ggg id Vice President f k T' > fy ; M ~ Development Fossil and Hydro A R. W. Stedman Operations South Carolina Rea/ Estate p? gy e p 9, Senior Vice President E. C. Roberts Administration Vice President and General Development Company, Inc. g < g3 D/fM:q yjg; 44 J. H. Young, Jr. Counsel and Assistant J. W. Wedding ' "T '1 Mid " i-Senior Vice President Secretary President Customer Relations Patricia T. Smith A. H. Gibbes r AM Df @i

0. S. Bradham Vice President V ce President P Mi O $? I Vice President Rates, Purchasing and

%gf g ' ', @$ ?T W 9 k > h j M. U:N Nuclear Operations Regulatory Affairs SCANA Software O G. J. Bullwinkel, Jr. K. B. Marsh Serv /ces, Inc. b : MA X',d Vice President Controller {p#"(,6L - Q"M!qAg Customer Relations-J. G. Black, il L M. Gressette, Jr. Southern Division Assistant Treasurer President

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>y Mg Support Services Operations 2 m M. $[, V[MS) IV 4 & G. C. Croft, Jr. ' T "3 Vice President Transmission and p' V S %3 Distribution Engineering je $ N N .p j Q ,4,'[.xy W. A. Darby .j g, P %H p;, " Vice President Gas Operations [ jM R. D. Hazel W Vice President b'>, om icalon Ge$e C pn n, h <( Carchnafuel Company, Inc., and C n ~ Carotone, Inc. %4- ~ 3 Retired effective I/1/89 I(8 " [ p' d 'U ~~ d ' Retired edective 2/1/89 [ ,di 1 12 Also Vice President of sCE&G and b: President of minor propane p, e subsidianes i. Q, /f L 274 n gj 9 1 e i Y

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S S MJW @p$m@m eg@g y@%@me$n y m m m m wwm W omemgd A h HM1 ( $m, M,h ~W W % M w w h m W W Ts % 8 9. M N M M % C D 6 h M M Eg hSMNgMNN3inm%g wa g g F@ % F W $dd I d Management Report Report ofIndependent Certified Public Accountants i The Management of intemal accounting controls is SCANA CORPORATION: SCANA Corporation (the Com-supported by written policies We have audited the misstatement. An audit in-pany)is responsible for the and guidelines and is comple-Consolidated Balance Sheets cludes examining, on a test preparation and Integri of the mented by the selection, train-and Consolidated Statements basis, evidence supporting the financial data included n the ing and development of of Capitalization of SCANA amounts and disclosures in accompanying Consolidated professional financial man-Corporation and consolidated the Consolidated Financial Financial Statements. These agers and by a staff ofintemal subsidiaries (" Company") as Statements. An audit also in-statem,ents have been pre-auditors who conduct com-of December 31,1988 and cludes assessing the account-pared in conformity with gen-prehensive intemal audits. 1987 and the related Consol.i-Ing principles used and signif-erally accepted accounting The Board of Directors dated Statements of Income Icant estimates made by principles as applicab!e. In provides oversight for the and Reta,ned Earnings and of management, as well as eval-i situations that prevent exact preparation of the financial accounting measurements, statements through its Audit Cash Flows for each of the uating the overall financial . management has used in-Committee, which is com. three years in the period statement presentation. We formed.udgments and esti-posed enhrely of nonemployee ended December 31,1988. believe that our audits provide males. :inancialinformation directors. The Audit Committee These Consolidated Financial a reasonable basis for our presented elsewhere in this meets periodically with man-Statements are the responsi-opinion. Annual Reportis consistent agement and internal auditors bility of the Company's man-In our opinion, such with these financial to review their activities and agement. Our responsibility is Consolidated Financial State-l statements. responsibility;es. The Audit to express an opinion on ments present fairly, in all ma-The Company main-Committee also meets periodi-these Consolidated Financial terial respects, the financial tains and relies upon a sys-cally with the Company's in-Statements based on our position of the Company at fem ofinternal accounting dependent auditors, Deloitte audits. December 31,1988 and controls designed to provide Haskins & Sells. The internal We conducted our au-1987, and the results of its reasonable assurance that all and independent auditors dits in accordance with gener-operations and its cash flows transactions are properly re-have free access to the Audit ally accepted auditing stand-for each of the three years in corded in the books and rec-Committee to discuss internal ords. Those standards require the period ended December ords and that assets are pro-accounting controls, auditing that we plan and perform the 31,1988, in conformity with tected againstloss or and financial reporting audits to obtain reasonable generally accepted accounting unauthorized use. The degree matters. assurance about whether the principles. of Intemal accounting control M k ~ men s re fr e m teri o of the p um b ance between the cost incurred in W. B. Timmerman Columbia, SC 29201 i maintaining a system of inter-Senior Vice President February 6,1989 na! controls and the benefits Chief Financial Officer to be derived. The system of l 29

Consolidated Balance Sheets December 31, 1988 1987 ASSETS (Thousands of Dollars) Utility Plant (Notes 1,3 and 4): Electric $ 2,679,699 $ 2,580,205 Gas 314,731 292,990 Transit 4,013 '024 Common 45,622 42,923 Total 3,044,065 2,920,142 Less accumulated depreciation and amortization 873,060 797,752 j Total 2,171,005 2,122,390 f Construction work in progress 120,187 95,013 i Nuclear fuel, net of accumulated amortization 60,290 62,445 l Acquisition adjustment-gas, net of accumulated amortization 33,151 34,148 Utility Plant, Nel 2,384,633 2,313,996 Other Property and Investments: Nonctility property (substantially at cost) 51,139 40,789 investments (Note 1) 60,509 29,076 Total Other Property and Investments 111,648 69,865 Current Assets: Cash and temporary casn investments 5,278 18,801.' Receivables 123,898 105,041 Inventories (at average cost): Fuel (Notes 3 and 4) 55,224 61,025 Materials and supplies 29,009 24,541 Prepayments 16,023 16,701 Total Current Assets 229,432 226,109 Deferred Debits: Unamortized debt expense 6,693 6,790 Accumulated deferred income taxes (Notes 1 and 7) 19,892 17,843 Unamortized deferred retum on plant investment (Notes 1 and 2) 36,089 40,335 Nuclear plant decommissioning fund (Note 1) 9,529 7,238 Other (Note 3) 89,363 32,081 Total Deferred Debits 161,566 104,287 Total S 2,887,279 $ 2,714,257 30 See Notes to Consolidated FinancialStatements.

% W % Y? % W Y Q f % T O M Y W W WlW CT W W M &II T C W 18 3:~$m$:;,y(hg$pT ldN@M$Q#$)y?Q$df;s,,NgQE 2$dd P

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,y' y.q y, 4;n 3'% u p 9[ e ) g [4 [,;[ y ;) ch.$*d [, m%, $ w %p(s h[ h [Mk;] A[,,f \\ w hY,+ +% O h dy M th i% i n" f../g i G m c 'ue v , g ;g December 31, 1988 1987 CAPITALIZATION AND LIABILITIES (Thousands of Dollars) 4 Stockholders' investment: Common Equity S 895,727 $ 871,620 Preferred Stock (Not Subject to Purchase or Sinking Funds) 26,029 26,029 Total Stockholders' Investment 921,756 897,649 Preferred Stock (Subject to Purchase or Sinking Funds) 77,244 84,632 Long Term Debt, Net 885,679 896,963 Total Capitalization 1,884,679 1,879,244 Current Liabilities: Short-term borrowings (Note 8) 98,851 21,565 Current portion of long-term debt, net (Note 3) 65,543 26,637 Accounts payable 100,033 82,789 Customer deposits 16,710 15,260 Taxes accrued 35,976 36,400 Interest accrued 17,938 16,684 Dividends declared 26,188 25,621 Other 9,056 6,790 Total Current Liabilities 370,295 231,746 Deferred Credits: Accumulated deferred investment tax credits (Notes 1 and 7) 113,633 117,177 Accumulated deterred income taxes (Notes 1 and 7) 451,597 416,700 Accumulated reserve for nuclear plant decommissioning (Note 1) 9,529 7,238 Other 57,546 62,152 Total Deferred Credits 632,305 603,267 Commitments and Contingencies (Note 9) Total S 2,887J79 $ 2,714,257 r See Notes to Consolidated FinancialStatements. 31

4 uh+;ge5g%nkm%g.h@.l$WsONn M C J w sF E-4 x c - n. a Consolidated Statements ofIncome & Retained Eamings For the Years Ended December 31, 1988 1987 1986 (Thousands of Dollars exceptpershare amounts) Operating Revenues (Notes 1 and 2): Electric $ 787,956 $ 806,826 $ 809,488 Gas 291,308 305,934 289,429 Transit 4,060 3,212 3,119 i Total Operating Revenues 1,083,324 1,115,972 1,102,036 Operating Expenses: Fuel used in electric generation 224,278 227,877 216,076 Power purchased, net (6,412) (12,486) (2,823) Gas purchased for resale 209,344 222,319 215,928 Other operation 174,758 169,356 155,588 Maintenance 54,050 57,995 56,864 Depreciation and amortization (Note 1) 97,389 92,583 90,627 income taxes (Notes 1 and 7) 69,030 95,051 119,108 Other taxes 56,217 58,892 51,952 Total 0perating Expenses 878,654 911,587 903,320 Operating income 204,670 204,385 198,716 Other Income (Note 1): Allowance for equity funds used during construction 1,821 2,063 1,264 Deferred retum on plant investment (Notes 1 and 2) 6,063 12,450 Other income (loss), net of income taxes 2,326 (1,731) (3,889) Total Other Income 4,147 6,395 9,825 income Before Interest Charges and _ Preferred Stock Dividends 208,817 210,780 208,541 Interest Charges (Credits): Interest on long-term debt, net 75,075 68,119 68,180 Other interest expense 9,352 5,155 5,771 Allowance for borrowed funds used during construction (Note 1) (4,370) (1,796) (2,017) TotalInterest Charges, Net 80,057 71,478 71,934 Preferred Stock Cash Dividends of Subsidiary (At stated rates) 8,014 10,437 14,443 Net Income 120,746 128,865 122,164 Retained Eamings at Beginning of Year 297,120 262,671 230,549 Common Stock Cash Dividends Declared (Note 5) (96,711) (93,487) (90,263) Other Capital Stock Transactions, Net (929) 221 Retained Earnings at End of Year S 321,155 $ 297,120 $ 262,671 Net income $ 120,746 $ 128,865 $ '22,164 Common Shares Outstanding (Thousands) 40,296 40,296 40,296 Eamings Per Share of Common Stock $ 3.00 $ 3.20 $ 3.03 32 See Notes to Consolidated Financial Statements.

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%y;t.k_f-G f M : ff y; t3 Md1% %,L i v +;M mot 9p Am ;- Q,g p: 6ly% yg 3.3 %y gg<w@r, ,w yy c4 m g, pg.;,' g L :Q e u js o g u5% < %g yg 964,, gg M: 7: >k,s, y g4 s ' W py = - U W@@QM,g, QM f g g 4 gu, Consolidated Statements of Cash Flows For the Years Ended December 31, 1988 1987 1986 (Thousands of Dollars) Cash Flows From Operating Activities: Net income $ 120,746 $ 128,865 $ 122,164 Adjustments to reconcile net income to cash flows: Depreciation and amortization 97,389 92,583 90,627 Amortization of nuclear fuel 14,732 17,196 30,529 Deferred income taxes, net 32,246 20,627 33,635 Deferred investment tax credits, net (3,544) (2,589) (9,593) Allowance for funds used during construction (6,191) (3,859) (3,281) (6,063) (12.450) Deferred retum on plant investment Equity (eamings) losses in investee (Note 1) (1,140) 968 956 Changes in certain current ossets and liabilities: Receivables (18,857) 2,037 (1,129) Inventories 1,333 (12,365) (11,848) Accounts payable 17,244 721 (4,021) Customer deposits 1,450 1,843 1,976 Taxes accrued (424) (9,436) 19,023 Other, net (4,347) 10,121 20,517 Net Cash Provided From 0perations 250,637 240,649 277,105 Cash Flows From investing Activities: Funds used for property additions (182,890) (17's,318) (144,177) Other property and investments (40,643) (21,289) (13,342) Principal noncash items: Allowance for funds used during construction 6,191 3,859 3,281 Net Cash Used For Investing Activities (217,342) (190,748) (154,238) Cash Flows From Financing Activities: Issuance of first mortgage bonds 100,000 Bank note sold 40,000 Pollution control bonds sold 4,365 1,100 Increase (decrease) in short-term borrowings, nel 77,286 (59,011) 78,188 Increase (decrease) in fuel financings, net (778) 13,938 (19,813) Reduction of long term debt (19,794) (13,001) (89,459) Retirement of preferred stock (7,388) (32,910) (35,205) Payment of dividends on common stock (96,144) (93,831) (90,286) Net Cash Used For Financing Activities (46,818) (40,450) (155,475) Net increase (Decrease) in Cash and Temporary Cash Investments (13,523) 9,451 (32,608) l Cash and Temporary Cash Investments, January 1 18,801 9,350 41,958 Cash and Temporary Cash Investments, December 31 S 5,278 S 18,801 9,350 Supplemental Cash Information: Cash paid for-Interest S 83,173 $ 68,737 $ 82,986 - Preferred stock dividends 8,163 11,524 15,346 -Income taxes 47,218 90,510 79,877 Noncash Financing Activities: Capitallease obligations recorded 5,641 Direct billing obligations under supplier take-or-pay arrangements recorded S 50,036 See Notes to Consolidated Financial Statements. 33

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i Consolidated Statements of Capitalization December 31, 1988 1987 Common Equity (Note 5): (Thousands otDollots) Common stock, no par value, authorized 75,000,000 shcros; issued and outstanding,1988 and 1987 40,296,147 shares $574,572 $574,500 j - Retained eamings 321,155 297,120 1 Total Common Equity 895,727 48% 871,620 46% 1 South Carolina Electric & Cos Company: ) Cumulative Preferred Stock (Not Subject to Purchase or Sinking Funds)(Note 5): 1 $100 Por Value - Authorized 200,000 shares $50 Par Value - Autha12ed 125,234 shares Shares Outstanding Redemption Price Eventual Series 1988 1987 Current Through Minimum $100 Por 8.40% 197,668 197,668 104.70 11 30-91 101.00 19,767 19,767 $50 Par 5.00 % 125,234 125,234 52.50 52.50 6,262 6,262 Total Preferred Stock (Not Subject to Purchase or Sinking Funds) 26,029 1% 26,029 1% i South Carolina Electric & Gas Company: Cumulattye Preferred Stock (Subject to Purchase or Sinking Funds)(Note 6): $100 Par Value - Authorized 1,550,000 shares Shares Outstanding Redemption Price Eventual Series 1988 1987 Current Through Minimum 7.70% 105,000 108,000 101.00 101.00 10,500 10,800 ' 8.12% 149,596 153,986 102.03 102.03 14,960 15,399 l 254,596 261,986 l $50 Por Value - Authorized, 1988 - 1,703,386 shares; 1987 - 1,716,086 sharas W Shares Outstanding Redemption Price Eventual Series 1988 1987 Current Through Minimum ) 4.50 % 28,800 30,400 51.00 51.00 1,440 1,520 4.60 % 11,334 12,834 50.50 50.50 567 642 4.60%(A) 40,052 42,052 51.00 51.00 2,002 2,102 4.60%(8) 98,600 102,000 50.50 50.50 4,930 5,100 5.125 % 79,000 80,000 51.00 51.00 3,950 4,000 6.00 % 105.600 108,800 50.50 50.50 5,280 5.440 1 8.00 % 140,000 240,000 50.00 50.00 7,000 12,000 l 8.72 % 302,300 315.125 52.00 12 31 93 50.00 15.115 15,756 9.40% 230,001 237,456 51.175 51.175 11,500 11,873 1,035,687 1,168,667 $25 Por Value - Authorized 2,000,000 shares; None outstanding in 1988 and 1987 Total Preferred Stock (Subject to Purchase or Sinking Funds) 77,244 4% 84,632 5% M See Notes to Consolidated Financial Statements. b

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W.ghm n% '., Sh:: aw' ~ u[nG['IM$# w %e M ;, f h c EdM._K: %N N December 31, 1988 1987 Long4erm Debt (Notes 3 and 4): (Thousands of Dollars) i South Carolina Electric & Gas Company: First and Refunding Mortgage Bonds: Year of Series Maturity 47/8% 1988 10,000 10 1/2% 1990 7,200 7,800 5% 1990 10,000 10,000 5% 1991 8,000 8,000 47/8% 1995 16,000 16,000 5.45% 1996 15,000 15,000 l 6% 1997 15,000 15,000 1 6-1/2% 1998 20,000 20,000 8% 1999 35,000 35,000 91/8% 1999 15,000 15,000 8% 2001 35,000 35,000 71/4% 2002 30,000 30,000 91/8% 2006 50.000 50,000 8.40 % 2006 50,000 50,000 8-3/8% 2007 30,000 30,000 8.90 % 2008 30,000 30,000 10-1/8% 2009 35,000 35,000 97/8% 2009 50,000 50,000 12.15 % 2010 35,890 35,890 8-3/4% 2017 100,000 100,000 Pollution Control Facilities Revenue Bonds: 5.95% Series, due 2003 7,180 - 7,220 Fairfield County Series 1984, due 2014 (variable rate - 6.625% through 8/31/89) 57,000 57,000 Richland County, due 2014 (variable rate - 6.625% through 8/31/89) 5.210 5,210 Fairfield County Series 1986, due 2014 (variable rate - 6.625% through 8/31/89) 1,100 1,100 Colleton and Dorchester Counties Series 1987, due 2014 (variable rate - 6.75% through 8/31/89) 4,365 4,365 Consoll dated Mortgage Gold Bonds 5% Series, due 1999 (non-callable) 949 Capitalized Lease Obligations, due 1991 1997 (various rates between 5-3/4% and 10%) 10,176 12,113 South Onrolina Generating Company, Inc.: Berkeley County Pollution Control Facilities Revenue Bonds, due 2014 (variable rate - 6.125% through 9/30/89) 35,850 35,850 Bank Note, due 1990 (vortable rate - 9.125% at 12/31/88) 72,500 75,500 South Carolina Fuel Company, Inc.: 1 Nuclear fuelliability 59,210 63,883 Fossil fue' liability 24.024 20,12'3 South Carolina Pipeline Corporation: 10-1/2% Ser!es First Mortgage Bonds, due 1990 3,450 6% Series A First Mortgage Bonds, due 1988 675 Direct billing obligations under supplier take-or-pay arrangements, due 1989-1993 (various rates between 8.61% and 3.65%) 48,503 South Carolina Real Estate Development Company, Inc.: Notes, due 1988-1991 (at various rates) 520 47 l l SCANA Corporation: Bank Note,8.32%, due 1989 40,000 40,000 Total 952,728 925,181 Less - Long term debt maturities, including sinking fund requirements 65,543 26,637 Unamortized discount 1,506 1,581 Total Long Term Debt. Het 885,679 47 % 896,963 48% i Total Capitalization $1,884,679 100% $1,879,244 100 % =~ l l l 1 See Notes to Consolidated Financial Statements. 35

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1. Summary of Significant Accounting Policles:

Station was approximately $164 5 million and $130.1 million as of December 31,1988 and 1987, respechvely. SCE&G's share of the direct A. Organization and Principles of Consolidation expenses associated with operating Summer Station is included in the SCANA Corporahon (the Company), a South Carohno corporation, is Company's "Other operahon" and " Maintenance" expenses. a public uhhty holding company within the meaning of tho Public Utihty D. Allowance for Funds Used During Construction Holding Company Act of 1935, but is exempt from registration under such Act. Allowance for funds used dunng construction (AFC), a noncash item, The accompanying Consokdoted Financial Statements reflect the reflects the period cost of capital devoted to pl ant under construction. This consolidahon of the accounts of the Company and its wholly-owned accounting practice results in the inclusion, as o component of (,onstruc-subsidiaries: tion cost (construction work in progress), of the costs of debt and equity Regulated uti// lies capital dedicated to construchon investment. AFC will ultimately be South Carolina Electric & Gas Company (SCE&G) included in rate base investment and depreciated as a component of plant South Carolina Generating Company, Inc. (GENCO) cost in estabhshing rates for utility serv:cen. The Company's regulated South Carolino Fuel Company, Inc. subsidiaries calculated AFC using composite rates (computed on on offer. South Carolina Pipehne Corporation (Pipeline Corporahon) which tax basis) of 7.8% 8.4% and 6.3% for 1988.1987 and 1986, wholly-owns Carohna Exploration Corporahon respechvely. These rates do not exceed the maximum allowable rate os calculated under FERC Order No. 561. Ir/erest on nuclear fuel in process Non-regulaled businesses (rehnement, conversion, enrichment andicbricohon)is capitalized of the E intemsMmwnt PX yst'e s, Inc. Pnmesouth, Inc. E. Deferred Retum on Plant investment SCANA Capital Resources, Inc. Commencing July 1,1987, as opproved by o July 1,1987 PSC order, SCE&G ceased deferring carrying costs associated with 400 MW of th Co o na Rea s at'e velopment Company,Inc' deck genemhng caps @eWwsly mmomom mie Me md Ngon SCANA Hydrocarbons, Inc' l conortizing the accumulated deferred carrying costs on a straight-kne investments in on interstate telecommunicahons carrier and joint basis over a ten-year period (see Note 2C). Amortizahon of deferred ventures in real estte and propane storogo and transmission are reported carrying costs, included in "Depreciahon and amortizahon", was approxi-using the equity metnod of accounting Significant intercompany balances mately $4.2 and $2.1 milhon for 1988 and 1987, respectively. l and transact ons have been eliminated in consolidation. l F. Depreciation and Amortization B. System of Accounts Provisions for depreciation are recorded using the straight kne l The accounting records of the Company's regulated subsidiaries are method for financial reporting purposes and are based on the estimated maintained in accordance with the Uniform System of Accounts prescribed service hves of the various classes of property. The composite weighted-l by the Federal Energy Regulatory Commission (FERC) and as adopted by overage depreciahon rates were as follows: l The Public Service Commission of South Carolino (PSC). l 1988 1987 1986 l C, Utility Plant SCE&G 3.29 % 3 34 % 3.45% GENc0 2.65 % 2.67 % 2.65 % Utikty plant is stated substantially at original cost. The costs of e on additions, renewals and betterments to utility plant, including direct labor, g 6 material and Indirect charges for engineering, supervision, and an allowance for fund 3 used during construction, are added to uhlity plant Nuclear fuel amortizabon, which is included in " Fuel used Ir; electnc accounts. The original cost of utihty property retired or otherwise disposed generahon" and is recovered through SCE&G's cost of fuel, is recorded of is removed from utility plant accounts and generally charged, along using the units-of-produchon method Provisions for amortization of with the cost of removal, less salvage, to accumulated depreciation. The nuclear fuel include amounts necessary to saksfy obhgations to the United costs of repairs, replacements and renewals of items of property deter-States Department of Energy under a contract for disposal of spent nuclear mined to be less than a unit of property are charged to maintenance fuel. The acquisihon adjustment relating to the purchase of certain gas E&G, operator of the V. C Summer Nuclear Station (Summer Station), and the South Carolino Public Seivice Authonty (a pubhc stro h I ne etho ' corporohon of the State of South Carohno) are joint owners of Summer Station in the proporhons of two-thirds and one-third, respechvely. The G. Nuclear Decommissioning parties share the operating cos's and energy output of the plant in these Decommissioning of Summer Stahon is presently projected to com-proportions. The total cost of the construchon of Summer Station upon mence in the year 2014, und the expenditures (on a before tax basis) complehon in 1983 was approximately $ 1.3 billion, or about $ 1,461 per related to SCE&G s share of decommissioning achvihes are currently kilowatt, of which SCE&G's share was approxima' sly $877 milhon. eshmated to bo approximately $211 million (in 2014 dollars, assumirig Accumulated depreciation associated with SCE&G's share of Summer 36

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~ %y ~ q M ] s fy Rf my ,a,G ~ c ip, n+ n ~ a 5% annuci rate of inflation). SCE&G is providing for eshmated The Company adopted Statement of Financial Accounting Standards ' decommissioning costs over the hfe of Summer Stahon and has estab-No. 87, " Employers' Accounting for Pensions", as of January 1,1987, lished a reserve for this purpose. SCE&G is presently funding the res3rve which requires, among other things, the use of the projected unit credit with amounts collected through electric rates (approximately $.8 million actuarial cost method for determining net periodic pension cost for annually, net of taxes), and intends for the fund, including eamings, to financial reporting purposes. The standord, which was adopted on a provide for all eventual decommissioning expenditures on an after-tax prospective basis, did not have a significant effect upon the Company's basis. financial position or results of operahons. Total pension cost for 1988. The Nuclear Regulatory Commission (NRC) has published final 1987 and 1986 was approximately $9.1 million, $9 6 rnillion and regulations on decommissioning of nuclear facilities These regulations $10.4 million, respectively. address decommissioning planning needs, timing, funding methods, and Net periodic pension cost, as determined by an independent actuary , environmental review requirements and require licensed electnc utilities to for the years ended December 31,1988 and 1987, included the submit a decommissioning plan by July 1990 certifying f noncial assur-following components: ance for decommissioning costs. Financial assurance is to be demon-strated by providing an amount that would be sufficient to pay decommis-Year Ended December 31, 1988 1987 sioning costs of the time of termination of any nuclear plant operahon by @ousands of Do#ars) one of three methods: (1) a prepayment into an extemal fund, (2) annual i coninbutions into an extemal sinking fund, or (3) surely, insurance, or Service cost-benefits earned dunn the penod $ 5,027 $ 6,057 other guarantee method. The Company is evoluchng its current funding ,nenth$e 8' ) ( ) n plan a ets ( 0,654 methodology for compliance with the financial assurano requirements of Net omortizanon and deferral 1 (5,560) the NRC rule. Nel penodic pension cost $ 9,138 $ 9,643 H. Income Taxes i The Company and its subsidiaries file consolidated Federal and State The following table sets forth the funded status of the plan, as income tax retums. Income taxes are allocated to all subsidiaries based deterrr;ned by an independent actuary, at December 31,1988 and 1987: on their contnbutions to consolidated taxable income. Because tax laws and financial accounting standards differ in their Year Ended Decernber 31, 1988 1987 recognit on and measurement of economic events, differences arise l between (1) the amount of tax 0ble income and reported prefox financial Actuartal Present Value of Benefit Obliga' ions: income for a year and (2) the tax bases of assets or liob6 ties and their vested benefit obugahon $150,069 $142,589 l reported amounts in the financial statements. Accordingly, the (lornpany Non-vested benefit obligation 9,392 7,584 l provides deferred income taxes for substanhally all timing differences, Accumulated benefit obhgahon 159,461 150,173 l principally accelerated tax depreciation, except for certain basis differ-ences ansing prior to 1982. Deferred income tax provisions are included p[oy33 t, 9jganon cted ab P"" Plan assets less than projected benefit obhgabon (8.560) (17,366) eerred nc Unrecognized net transition liabihty 19,722 21,812 i investment tax credits are generally deferred and amoMzed over the Unrecognized pnor service costs 3,496 usefullives of the respective assets. Unrecognized net gain (16,731) (6,089) In Decembar 1987, the Financial Accounhng Standards Board Pension asset (habikty) (FASB) issued Statement No. 96, "Accounhng for income Taxes". This recognized in consolidated Balance sheets $ (2,073) $ (1,643) Statement requires the use of the "liabikty method" whereby a current or noncurrent deferred tax liabihty or assel would be recognized for deferred The accumulated benefit obhgchon is based on the plan's beneht tax consequences of all temporary differences The Statement (1) requires formulas without considenng expected future salary increases The pro-that a deferred tax liabikty or asset be adjusted for the effect of a change jected benefit obkgohon considers future salary increases, at an assumed in tax law or rates, (2) prohibits nebuf-tax accounhng and reporting, and annual rate of 5.5% Both benefit obligations were determined using an (3) requires recognition of a deferred tax liabihty for tax beneres that are annual discount rate of 8 0%. The expected long-term rate of return on ficwed through to customers when temporary differences or giriate and for plan assets (primanly equity secunhes and government bonds) and the equity component of AFC. The Company does not anticipate that discount rate used in determining pension cost for 1988 were 8 0% and application of this Statement will have a significant impact on results of 8 0%, respectively. The discount rate used in determining pension cost operchons. The balance sheet will require certain reclassifications to was 7 5% in 1987. comply with the provisions of th;s Statement. The Statement must be The unrecognized nel transihon habikty represents the effect of adopted no later than 1990. adophng Statement No 87. Such obilgahon (approximately $23 9 mil. hon at January 1,198 /) was calculated by taking the difference between I. Pension Expense the fair value of the plan assets and the projected benefit obhgohon. This The Company has a nonconinbutory defined benefit plan covering liabihty is not reccgnized in the Company's conschdated hnancial stole-substantially all employees. Benefits are based on years of accredited ments, but is being amortized as a component of pension cost on a service and the employee's overage annual eamings received during the straight 4ne basis over the average remaining service penod (19.6 years last three years of employment. The Company's pokcy has been to fund as of January 1,1987) of employees expected to receive benehts under pension costs accrued to the extent permitted by the opphcable Federal the plan, except for approximately $7 5 milhon of pnor service costs income tax regulat ons as determined by independent actuones being amortized over a six-year penod. 37

hf$' ? b $b N @% s@) S w W g &gA d d k % M g h g h]ff&[Mgy ((yh lMh.QQ% b[W~ % [ %fM h @ hb ' ;nf Q kgy % f Q Q n;]W %, y m )WgWg Qy -93 %4y v , dl gpj% MgqwN Hj? q, #$? V T % A pN 1}spw v h.Ab W NK g ' @ Qemphu g g e in addition to pension benefits, the Company provides certain health N. Reclassifications care, supplemental rehrement and hfe insurance benefits to achve and Certain amounts from poor years have been reclassified to conform - retired employees. Such benefits are generally charged to expense when w th the 1988 presentation. claims and premiums are paid. The annual costs of providing such . benefits to rehred employees are not significant.

2. Rafe Matters!

. J. Revenue Recognition A. On January 3,1989, SCE&G filed an opphcohon with the PSC b m Wease in $ad eMc rams, me mM mse we ' Customers' meters are read and bills are rendered on a monthly generate approximately $27.2 million annually in additional revenues cycle basis. Base revenue is recorded dunng the accounting period in (3.7%) based on the test year ended September 30,1988. Hearings are which the meters are read. Scheduled to begin in April 1989 Projected fuel costs for electnc generchon are collected through the B. The Consumer Advocate of Soutt Carolina has inihated a fuel component in retail electric rates, as estabhshed by the PSC during proceeding of the PSC seeking to reduce Pipeline Corporation's rates. Any semiannual fuel cost heanngs. Any differences between actual and reduchon in Pipekne Corporohon's rates would be prospechve only. projected fuel costs are deferred and included when est mahng the fuel Hearings are scheduled to begin in April 1989. cost component dunng the next semiannual fuel cost hearing Al Decem' C. In on order dated July 1,1987, the PSC approved SCE&G's bar 31,1988, SCE&G had under collected approximately $2.6 milhon January 30,1987 request to restore to its rate base, effective July 1, through the electric fuel clause component, which is included in Deferred 1987, the net production investment (approximately $102.5 million at July 1,1987) associated with 400 MW of electric generating capacity rio to ovember 1988, SCE&G's revenue attnbutable to gas costs previously removed by the PSC in its order doted March 2,1984. The (to the extent collectible through odjustment clauses) was accrued and 1987 order also approved SCE&G,s proposal to include in rate base the recorded in tne month during which the customers' meters were read. associated accumulated deferred carrying costs (approximately $42.5 Amounts accrued were locovered from customers during the following milhon of July 1,1987) and to begin amortizing these costs over o ten-month. Beginning with the first bilkng cycle in November 1988, cus' year period commencing July 1,1987 (see Note I E). The July 1,1987 i tomers subject to the gas cost adjustment clause are billed based on a PSC order has been appealed by the Consumer Advocate of South fixed cost of gas projected by SCE&G and reviewed by the PSC during Carohna to the South Carohno Supreme Court which is expected to hear semiannual gas cost recovery heanngs. Any differences between actual the case in March 1989. While the outcome of this matter is uncertain, ' l and projected gas costs are deferred and included when projechng gas the Company believes the probability of cny significant change in the rate costs during the next semiannual gas cost recovery hearing. At December order is unkkely and, accordingly, has not recorded any provision for 31,1988, SCE&G had under collected approximately $2.9 milkon refunds [ On January 15,1987, the PSC directed SCE& through the go,s cost recovery procedure, which is included in " Deferred D Cabits - Other. The change in the method of recovenng gas costs had no retail electric rates approximately $25 milhon annually, or 3% due to significant effect on the Company's financial position or results of anhcipated income tax savings associated with the Tax Reform Act of I oparahons. 1986 (the Tax Act). Rates implemenhng this reduction were placed in K. Debt Premium, Discount and Expense effect with the first bilkng cycle in February 1987. On December 30,1987, the PSC ordered a reduction in retail electric Long-term debt premium, discount and expense are being amortized rates. effechve January 1,1988. of $27.6 milkon annuahy, or 3.7%. This as components of ' Interest on long term debt, net' over the terms of the reduction was primanly due to the additional tax covings resulting from respachve debt issues' the Tax Act and a change in the method of recovery of municipal franchise i L Cash Flow Statement taxes. The order also reduced SCE&G's authorized rate of retum on common equity from 14.25% to 13.25%. Accounhng Standards No. 95, yrovisions of Statement of Financial The Company odopted the E. On December 1,1987, the PSC issued an order granting SCE&G Statement of Cosh Flows, in 1988 and approximately $4.3 milhon of a requested $6 7 milkoa annual increase replaced prior years Statements of Sources of Funds for Gross Property n retail natural gas rates The new rates were placed into effect December Additions. The Company considers temporary cash investments having 1'1987' motunties of three months or less to be cash equivalents. Temporary cash investments are generally in the form of commercial paper, cert ficates of 3 l.Ong Terrn Debt: deposit, and repurchase agreements. SCE&G's annual tender Pollution Control Facikhes Revenue Bonds M. Restatements (which do not include the 5 95% Series, due 2003) are secured by like pnncipal amounts of its First and Refunding Mortgage Bonds. In accordance with the provisions of Statement of Financial Account-GENCO's annual tender Pollution Control Facikhes Revenue Bonds ing Standards No. 71, the Campany changed its method of accounhng for are secured by an irrevocable letter of credit expiring in 1991. OeMin leases leases that had previously been accounted for as operahng These annual tender Bonds bear interest at a rate, not to exceed 15% leases that met certain enteno have been reclassified as capital leases, per annum, (1) set belween 80% and 120% of an index rate based en and the related property and lease obligatons have been recorded as one year yield evaluahons of comparable tax-exempt obligahons, or (2) assets and liabikhes The Consokdated Botance Sheets and Statements of equal to 65% of one-year yield evaluohons of U S. Treasury Bonds at Cash Flows for prior periods have been restofed for the change. There was par. The interest rate is adjusted annually, but may become fixed unhl no effect on the Consolidated Statements of Income and Retair'ed Eamings 38

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W ;% ' qz je, h, , fr 9^ % ' j Q p y n ' j y j_ y Q, m'c)(; f, ? g }W [ W ,W f },y y$M 13l 7 ~ N'4r+0 Qh* Q$L P A H u :y bM A4 J4 Q; 2 '$ bj H Tu -Am,q R g @Q R rW NQ ,0 M 3g m y; W ' T W, y *g4 .7 ?M W % Un b ' y .*f l i maturity. These Bonds also provide that the holders may require the 4, fuelfinanC/ngs Bonds to be purchased at por upon each annual adjustment of the interest Nuclear and tossil fuel inventones are financed through the issuance rate of of the time the interest rate becomes fixed until matunty. If the of short-term commercial paper. These short term borrowings are sup-Bonds are tendered by the holders, the Company intends to reoffer the ported by irrevocable bank knes of credit which expire in 1991. Accord-Bonds to the public. Due to the irrevocable letter of credit and provisions have been included in long term debt. The of the Bond Indentures, which permit toe Company to purchase the Bonds ingly, the amounts outstanding'm amounts ($75 mdhon related to bank knes provide for maximu in lieu of redemphon and resell them, and to subshtule other secunty fuel and $25 miHion related to fossil fuel) that may be outstanding at any arrangements, the Bonds are classified as long term debt. time. The annual amounts of long term debt matunties, including the At December 31,1988, the amount outstanding for nuclear 'uel was amounts due under nuclear and tossil fuel agreements (see Note 4), and approximately $59 2 million at a weighted average interest rate of 9 44% sinking fund requirements for the years 1989 through 1993 are summa' and the amount outstanding for fossil fuel was approximately $24.0 nzed as follows-milhon at a weighted average interest rate of 9 33% Year Amount Yect Amount l cmousancs orconors) 5, Stockholders' investment (Including Preferred Stock Not 1989 $ 65,543 1992 $21,110 SUDjeCl to Purchase or Sinking Funds): 1990 108,471 1993 17,067 1991 112,656 The changes in " Common stock", without par value, dunng 1988, N and M am summanzees fonows Approximately S9 3 milhon of the current portion of long-term debt for 1989 may be satisfied by either deposit and cancellation of bonds Number Thousands issued upon the basis of property addihons or bond rehrement credits, or of Shares of Dollars by deposit of cash with the Trustee Balance January 1,1986 40,296,147 $575.606 In January 1989, SCE&G arranged for a bark loan due February 1-Omer (1,364) 1991 in the pnncipal amount of $75 milhon. The interest rate is ce December 31,1986 40,296.147

574, determined quarterly and is based upon the three-month LIBOR rate plus B [n 18 basis points. The loan is secured by the pledge of a hke amount of Balance December 31,1987 40,296,147 574,500 SCE&G's First and Refunding Mortgage Bonds,20% Senes due February ONr 72 1,1991. The proceeds of the bank loan were used to refund a kke omount of commercial paper.

Balance December 31,1988 40,296,147 Sc74,572 Pipekne Corporahon's two pnncipal gas supphers have incurred habihtles to gas producers under take-or-pay provisions of gas supply The Company's employee stock benefit plans' trustec and agent for contracts. The FERC has accepted fihngs allowing these pipeline supphers its Dividend Reinvestment and Stock Purchase Plan purchase previously to recover portions of such take or pay habikhes from their customers, issued and outstanding shares of the Company's common stock in the including Pipeline Corporation, through volumetnc surcharges in gas open market. rates and through direct bilkngs The Restated Articles of incorporat on of the Company do not hmit the Pipehne Corporation's future gas purchases over the next five years dividends that may be payable on its common stock. However, the will include volumetnc surcharges of approxima.tely S.10204 per deka-Restated Articles of Incorporation of SCE&G and the indentures underlying therm and S 112 per dekatherm for gas dekvenes from Southem Natural certain of its bond issues contain provisions that kmit the payment of Gas Company and Transconhnental Gas Pipe Line Corporation, respec-cash dividends on common stock. In addihon, with respect to hydroelec. hvely. Pipehne Corporchon is recovenng such surcharges from customers tric projects, the Federal Powe, Act may require the approprichon of a under the purchased gas adjustment provisions of its rate schedules. Al porhon of the earnings therefrom At December 31,1988, approximately December 31,1988, d,:ect bilhng habikhes were eshmated to be approxi- $4 8 million of retained eamings were restricted as to payment of cash mately $48.5 milhon. Direct bilkng liabikhes, which are payable over a dividends on common stock. f ve year period with Interest, are included in "Long-Term Debt", with an Cash dtvidends on common stock were declared at an annual rate offsetting charge to " Deferred Debits"in recognition of recovery of such per share of $2.40, $2.32 and $2.24 for 1988,1987 and 1986, amounts from customers under purchased gas adjustment provisions respechvely. Certain take-or pay issues of a smaller magnitude remain unre-solved and accordingly, Pipehne Corporation may incur addihonal future

6. Preferred Stock (Subject to Purchase or Sinking funds):

liabilities of receive future refunds SCE&G, as a customer of Pipehne Corporation. is billed for its The call premium of the resp 3ctive series of preferred stock in no proportionate share of take-of-pay costs and recovers such costs from its case exceeds the amount of the annual dividend Retirements under customers through the purchased gas adjustment in its rates sinking fund requirements are at par values. Substantially all utihty plant and Oel inventones are p! edged as At any hme when dividends have not been paid in full or declared collateral in connection with long-term debt. and set apart for payment on all senes of preferred stock, SCE&G may not redeem any shares of preferred stock (unless all shares of preferred stock then outstanding are redeemed) or purchase or otherwise ocquire for value any shares of preferred stock except in accordance with an offer made to all holders of preferred stock. SCE&G may not redeem any shares 39

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. gqW wDy~ g, .+ m of preferred stock (unless all shares of preferred stock then outstanding Total income taxes differ from amounts computed by applying the are redeemed) or purchase or otMrwise acquire for value any shares of statutory Federalincome tax rate of 34% for 1988,40% for 1987 and preferred stock (except out of monies set aside as purchase funds or 46% for 1986 to pre-tax income as follows. sinking funds for one or more senes of preferred stock) at any time when it is in default under the provisions of the purchase fund or sinking fund 1988 1987 1986 for any series of preferred stock. (Thousanc's of Dollars) The aggregate annual amounts of purchase fund or sinking fund requirements for preferred stock for the years 1989 through 1993 are Net income $120,746 $128,865 $122,164 summanzed as follows: Totalincome tax expense: Charged to operating expenses 69,030 95,051 119,108 Year Amount Year Amount Charged to other income (1,402) 195 (2,261) Preterr0d stock dividends 8,014 10.437 14,443 Total pre-tax income $196,388 3234,548 $253,454 1989 $7,915 1992 $2,515 1990 2,515 1993 2,515 income taxes on above at statutory 1991 2,515 Federalincome tax rate $ 66,772 $ 93,819 $116,589 increases (decreases) attnbutable to: The changes in " Preferred Stock (Subject to Purchase or Sinking Allowance for funds used during Funds)" during 1988,1987 and 1986 are summanzed as follows- [0hstmchon (aciudmg melear (619) (825) (1,053) Deferred retum on plant investment, Number Thousands netof amortization 1,444 (1,575) (5,727) of Shares of Dollars Depreciation differences 2,028 4,163 5,309 8alance January 1,1986 2,181,228 $152,514 Amortization of investment tax - Shares Redeemed: credits (5,220) (5,410) (8.107) $100 por value - (343,070) (34,307) State income taxes (less Federalin- $50 por value (13,300) (665) come tax effect) 7,071 8.630 8,220 Deferred income tax flowback at 8alance December 31,1986 1,824,858 117,542 higher rates than statutory (2,387) (3,543) Shares Redeemed: Other differences, net (1,461) (13) 1,616 $100 par value (263,994) (26,399) $50 par value (130,211) (6,511) TotalIncome tax expense $ 67,628 $ 95,246 $116,847 8alance December 31,1987 1,430,653 $8*,632 Shares Redeemed: " Total deferred taxes" results from timing differences in recognition of $100 por value (7,390) (739) the following items: $50 por value (132,980) (6.649) Balance December 31,1988 1,290,283 $ 77,244 1988 1987 1986 (Thousands of Dollars)

7. Income Taxes:

Cnarged to expenses: Total income tax expense for 1988,1987 and 1986 is as follows: Accelemted depreciation and amortization $30,384 $31,543 $40,367 Deferred fuel revenue 3,950 (2,041) (4,616) 1988 1987 1986 Other, net (2,088) (8,875) (2,116) (Thousands of Dollars) Tolat deterred taxes $32.246 $20,627 $33,635 Current income taxes: Federal $33,630 $66,850 $ 82,637 The Irvernal Revenue Service has examined the consolidated Federal State 5,297 10,117 9,845 income tax returns of the Company through 1984 and has closed all Foreign (177) years through 1980. A final report for 1981 through 1984 has been Total current taxes 38,927 76,967 92,305 received and all issues resolved, pending final approval by the Joint Deferred taxes, net: Committee on Taxat;on. The Company does not anticipate any significant Federal 26,829 16,361 28,257 effect on its results of operation or financial position resulting from the State 5.417 4,266 5.378 Joint Committee review. Total deterred taxes 32.246 20,627 33,635 At December 31,1988, the cumulative net amount of income tax investment tax credits: timing differences on which deferred taxes have not been provided totaled Deferred 1,675 2,821 (1,486) approximately $87 milhon (See Note I H). Amortization of amounts ^ deferred (credit) (5,220) (5,410) (8,107) Other 241 500 Totalinvestment tax credits (3,545) (2,348) (9,093) Totalincome tax expense $67,628 $95,246 $116,847 40

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8. Short Term Borrowings:

10. Segment of Business Information:

The Company pays fees to banks as compensation for its lines of Segment information at December 31,1988,1987 and 1986 and credit. Short-term borrowings are for 270 days or less. Details of lines of for the years then ended is os follows: credit and short-term borrowings at December 31,1988,1987 and 88 1986 and for the years then ended are as follows: Electric Gas Transit Total December 31, (Thousands of Dollars) 1988 1987 1986 Operating revenues S 767,956 $291,308 $ 4,060 $1,083,324 (Dollars in Millions) Operating expenses, excludmg depreciation 1.ines of credit at year end $90.2 $ 90.2 $133.2 and amortization 515,081 257,500 8,684 781,265 Short-term borrowings (including Depreciation and amortization 86,162 10,843 384 97,389 commercial paper)during the year: Maximum outstanding $98.8 $133.1 $111.2 Total operating expenses 601,243 268,343 9,068 878,654 Average outstanding $55.6 $ 39.1 $ 45.7 Operating income (loss) $ 186,713 $ 22.965 $(5.008) 204,670 Weighted average daily Interest rates: Credit iines 7.45% 7.07% 7.40% Add - Other income, net 4,147 Commercial paper 7.73% 6.65% 6.36% Unsecured promissory note 8.89% less -Interest charges 80,057 - Preferrsd stock dividends 8,014 Short. term borrowings outstanding of Net income $ 120,746 year end: Credit lines $ 2.25 $ 2.25 $ 2.25 Cp Weighted overage interest rate 8.55% 8.76% 6.25% n $ 148,599 $ 26.027 $ 230 $ 174,856 Commercial paper $66.5 $ 19.2 $ 78.2 Weighted average Interest rate 9.40% 8.30% 6.67 % Utilized for overall comoany operations 8.034 Unsecured promissory note $30.0 Total $ 182.890 Weighted average interest rate 8.89% ~- Identifiable ossets at Al December 31,1988, in addition to unused lines of credit, the December 31' net 1988-' util ty plant, $2,098.361 $239,861 $ 1,631 $2,339,853 Company had available to it o $70 million short term loan facility which inventories 73,629 7.285 440 81,354 was used to refund short term obligahons and long-term debt maturing in January 1989. _ Total $2.171,990 $247,146 $ 2,071 $2.421,207 Assets ut;itzed f r over ii Company operahens 466.072 9, Commitments and Contingencies: '8 NuclearInsurance The Price-Anderson indemnification Act (the Act), which deals with l SCE&G's pubhc liabikty for a nuclear incident, was amended in 1988 to increase the liability limit for third-party claims associated with any nuclear incident to $7.2 billion currently. Each reactor licensee is currently l hable for up to $63 milkon per reactor owned for each nuclear incident occurring of any reactor in the United States, provided that not more than $10 milhon of the liabikty per reactor would be ossessed per year. SCE&G's maximum ossessment, based on its two-thirds ownership of Summer Station, would be approximately $42 million per incident, but l not more than $6.7 milhon per year. I SCE&G currently maintains pohcies with Nuclear Electric Insurance l Limited (NEIL) and American Nuclear insurers (ANI) providing combined I property and decontaminahon insurance coverage of $895 milkon for any i losses in excess of $500 milhon pursuant to existing primary coverages I (with ANI) on Summer Station. SCE&G pays annual premiums and, in addition, could be ossessed a retroactive premium not to exceed 7 times its annual premium in the event of property damoge loss to any nuclear generating fac'hties wered by NEIL Based on the current annual premium, this retroactive premium would be approximately $5 2 milhon. To the extent that insurable claims for property damage, decontami-notion, repair and replacement and other costs and expensas crising from o nuclear incident at Summer Stahon exceed the pokcy hmits of insur-ance, or to the extent such insurance becomes uriovoilable in the future, and to the extent that SCE&G's rates would not recover the cost of any purchased replacement power, SCE&G will retain the risl< of loss as a self-insurer. SCE&G has no reason to anticipate a serious nuclear incident of Summer Stahon. If such on incident were to occur, it could have o materially adverse impact on the Company's financial position. t 41

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+ m 1987 1980 Electric Gas Transit Total Electric Gas Transit Total (Thousands of Dollars) (Thousands of Dollars) Operating revenues S 606,826 $305,934 $ 3,212 $1,115,972 Operating revenues S 809,488 $289.429 $ 3,119 $1,102,036 Operating expenses, Operating expenses, excluding depreciation excluding depreciation and amortization 539,604 271,644 7.756 819,004 and amortization 544,067 251,712 6,914 812,693 Depreciation and Depreciation and amortization 82,758 9,519 306 92,583 amortization 80,825 9,557 245 90,627 Total operating expenses 622,362 281,163 8,062 911,587 Total operating expenses 624,892 271,269 7,159 903,320 Operating income (loss) $ 184,464 $ 24,771 $(4,850) 204,385 Operating income (loss) $ 184,596 $ 18,160 $(4,040) 198,716 Add - Other income, net 6,395 Add - Other income, net 9,825 Less-Interes' charges 71,478 Less -Interest charges 71 934 - Preferrei stock dMdends 10,437 - Preterred stock dividends 14,443 NQincome $ ;28,865 Not income $ 122,164 Capital expenditures: Capital expenditures; identifiable $ 146,281 $ 21,034 $ 333 $ 167,648 Identifiable $ 110,249 $ 20,981 $ 247 $ 131,477 Utilized for overall Company operations 5,670 Utilized for overall Company operations 12,700 Total $ 173,318 Total $ 144,177 Identitlable assets at identifiable assets at December 31,1987: Deceniber 31,1986: Utility plant, net $2,045,819 $225,503 $ 1,783 $2,273,105 Utility plant, net $1,995,287 $214,299 $ 1,778 $2,211,364 Inventories 74,977 6,859 374 82,210 inventories 62,930 6,845 320 70,095 Total $2,120,796 $232,362 $ 2,157 $2,355,315 Total $2,058,217 $221,144 $ 2,098 $2,281,459 Assets utilized for overall Company operations 358,942 Assets utilized for overall Company operations 306,032 Total assets $2,714,257 Total assets $2,587,49) )

11. QuarterlyFinancialData(Unaudited):

1988 First Second Third Fourth Quarter Quarter Quarter Quarter Annual Total operottno revenues (000) $302,235 $226,910 $284,062 $270,117 $1,083,324 Operortng income (000) 58,831 37,396 63.879 44,564 204,670 Net income (000) 38.928 17,371 42,744 21,703 120,746 Famings per shore i of common stock os reported .97 .43 1.06 .54 3 00 1987 First Second Third Fourth Quarter Quarter Quarter Quorter Annual Totof operating I revenues (000) $309.294 $258.146 $296,061 $252,471 $1,115.972 Operating Income (000) 57,007 42,978 68,039 36.361 204,385 Net income (000) 40378 23.873 47,537 16,477 128,865 i Earnings per shore of common stock as reported 1,02 .59 1,18 .41 3.20 42 t j

wwgspwp?anyy w.e-w wr*=s n,m k%.sgewga wrmemp wrmaggy mggymg w. ggm a w, aa Jgx a,m g!<n' N,$ Il h [4 @k @% M1 w M., 4 Q p - A ?~4 n m m g.,- h~9 7 *l*y["4NhskM hI libp; w,hQ. . Q f ' W lgg k jte kh, MR jf6 k R > e + @< b]Mpfp(fM,[,Jrri s ib lW 2 M0 RQg ~ ^ f m@Q,w, w a& 'g# g gg.g dm an a.; eaaw 1-Common StockInformation 1988 1987 4th 3rd-2nd 1st 4th 3rd 2nd 1st Qtr. Otr. Qtr. Otr. Otr. Otr. Qtr. Qtr. Price Range:(a) High 32 1/4 32 5/8 33-5/8 33 1/8 33-34-1/2 35-1/8 40 Low 30-3/8 29-3/4 30 28 1/2 26-1/2 30-5/8 30-7/8 34 3/8 Dividends Per Share: .1988 Amount Date Declared Date Poid First Quader S.60 February 24,1988 April 1,1988 Second Quarter ,60 April 27,1988 July 1,1988 Third Quarter .60 August 24,1988 October 1,1988 Fourth Quarter .60 October 26,1988 January 1,1989 - 1987 Amount Date Declared Date Poid First Quarter S.58 January 28,1987 April 1,1987 Second Quarter .58 April 22,1987 July 1,1987 Third Quarter .58 August 26,1967 October 1,1987 Fourth Quarter .58 October 28,1987 January 1,1988 December 31, 1988 1987 Number of common shares outstafiding 40,296,147 40,296,147 Number of common stockholders of record 47,944 49,932 The principal market for SCANA common stock is the New York Stock Exchange (stock symbol-SCG), . (a) As repoded on the New York Stock Exchange Composite Listing. i l I 1 l l 1 l 43

1 mv m y'wm y nnyrmg:r vnnymynN m m, m ;i L4 M y Q444(g. gh w .f'>x(. ap - m p w; y an gb y S i (p' g.+_ / W i $ V %; @< g# 7 5 Q gp g;g 4 cy W e g y 3 p ; 7. yf,:i ) M g%p~ y 4 a [fb MW, p% p g q Management's Discussion & Analysis of Financial Condition & Results of Operation L/QU/d/fy And Cap /f0/ RBSOUTCes The Company and its subsidiaries have available to them funds from unused lines of credit of $8L0 million. The capital needs of the Company arise primarily from the capital The Company anticipates that the remainder of 1989 cash require-requirements of SCE&G's operations and construction program. Because ments will be met primarily through internally generated funds, short-larm rates for regulated services are based on historical cost amounts, to the borrowings and the sale of commercial paper. Actual 1989 construction extent inflation occurs and rates are not appropriately adjusted on a timely and nuclear fuel expenditures moy vary from the estimates set forth above basis, the Company's regulated subsidiaries may not recover all costs of due to factors such as inflation and economic conditions, regulation and providing services. Therefore, the Company's future financial position and legislation, rates of load growth, environmental protection standards and results of operations could be impacted by future inflationary trends. the cost and availability of capital. The abikty of the Company's regulated subsidiaries to replace The Company expects that it has or con obtain adequate sources of existing plant investment, as well os to expand to meet future demand, f noncing to meet its cash requirements in the long-term. will depend upon its abihty to attract the necessary financial capital on For information relating to operations of the Company's subsidiaries reasonable terms. The ability to attract such capital will, in tum, depend see pages 6 through 21' upon the regulated subsidiaries' abihty to obtain adequate and timely rate relief. Results Of Oper0flons Effective January 1,1988, SCE&G reduced its retail electric rates, pursuant to The Public Service Commission of South Carohna (PSC) Earnings and Dividends orders, to reflect income tax savings associated with the Tax Reform Act of Eamings per share of common stock, the percent increase (de-1986 (see Note 20 of Notes to Consolidated Financial Statements). The crease) from the previous year and the rate of retum eamed on common tr.,x savings result from a reduction in the Federal corporate income tax equity for the years 1986 through 1988 were as follows: from 40% to 34%. Because the Company is fully normalized with respect 1988 1987 1986 to investment tax credit and tax depreciation, the Company does not Eamings per share $3.00 $3.20 $3.03 onticipate a signficant effect on its results of operations or financial Percent !ncrease (decrease)In position. Intemal cash flow, however, will be reduced in future years, as it eamings per share (6.3%) 5.6% 7.4% Ret amed on mmen was in 1988, primanly due to the repeal of the investment tax credit retroactive to January 1,1986, and the lengthening of depreciable lives for certain utihty property. The impact of this reduction of intemal cash Earnings per share and return on common equity decreased from flow is dependent upon the level of construction expenditures in each 1987 primarily as a result of lower retail electric rates ordered by the PSC

year, and placed into effect January 1,1988 (see Note 2D of Notes to On January 3,1989, SCE&G filed on application with the PSC for a Consolidated Financial Statements), higher interest charges and temper.

3.7% increase ($27.2 million) in its retail electric rates. The decision by ate summer weather. The increase in eomings per shore for 1987 the PSC on the amount of the rate increase is expected dunng the second resulted primarily from higher sales of electric energy and natural gas and quarter of 1989. a reduction in preferred stock dividends associated with early redemptions The primary cash requirements for 1988 were, and as estimated for of preferred stock issues. 1989 are, as follows: Allowance for funds used during construction (AFC) is a utility 1989 1988 accounting practice whereby a portion of the cost of both equity and (Thousands of Dollars) borrowed funds used to finance construction (which is shown on the Construction expenditures, excluding balonce sheet as construction work in progress) is capitalized. Both the allowance for funds used during equity and the debt portions of AFC are noncash items of nonoperating income which have the effect of increasing reported net income. AFC Nuc ar iexpe ures Matunng obHgations, redemptions and represented approximately 5%, 3% and 3% of net income in 1988, sinking and purchase fund 1987 and 1986. requirements 64,197 27.960 Dunng the period March 1984 through June 1987, the Company Total $243,490 S204,659 recorded carrying costs (including equity retum) associated with the production investment, net of accumulated depreciation, relating to 400 Dunng 1988 approximately 77.5% of total cash requirements wt.re MW of electric generating capacity previously removed from rate base. provided from intemal sources as compared to 56.6% in 1987. To Total deferred carrying costs, a noncash item included under "Other supplement intemally generated funds the Company incurred additional Income" as " Deferred retum on plant investment", represented approxi-short-term indebtedness. mately 5% and 10% of net income for the years 1987 and 1986, in January 1989, SCE&G arranged for a bank loan due February 1, respectively. Commencing July 1,1987, the Company ceased deferring 1991 in the principal amount of $75 million. The interest rate is carrying costs and began amortizing the accumulated defarred carrying determined quarterly and is based upon the three-month UBOR rate plus costs over a ten-year period. (See Notes 1 E and 2C of Notes to 18 basis points. The loan is secured by the pledge of a like amount of Consolidated Financial Statements.) SCE&G's First and Refunding Mortgage Bonds,20% Series due February in February 1989, the Company's Board of Directors raised the 1,1991. The proceeds of the bunk loan were used to refund a hke quarterly cash dividend on common stock to 61 % cents per share from amount of commercial paper. Whether additional securities will be sold 60 cents per share. The increase, effective with the dividend payable on and the bming and amount of such sales will dept,nd pnmarily upon April 1,1989, raised the indicated annual dividend rate to $2.48 per market conditions and other factors. share, up from $2.40 The Company has increased the dividend rate on its common stock in 36 of the last 37 years. 44

f 1 ~ ~( ff f *Q fy hk ,4QyQjyfQlQp?r jf L ';, R*Q ANq h_&pfik Q$DN. & [y9 f jf:% ^ i*' Ll @~l Jd ' e % e i W% h p i. WCJ$n &jW}i} '; +bh < [$ h W W ' l 4 & f D m h [Q,: l is & y &v, C y,f Mji e MD* /+ + " "A 'V QF %# Mr+ Wq ~ "M Operating Margins increase (Decrease) From Prior Year Electric operating margins for 1988,1987 and 1986 were as. Customers Volume (DT) follows: Classification 1988 1987 1988 1987 1988 1987 1986 Residential 5,515 1,791 28,858 1,466,477 Commercial 525 586 73,722 768,576 (Milhons of Dollars) ladustrial 22 12 (6,072.948) 2,080,800 l i Electric operating revenues $788.0 $806.8 $809.5 Sale for resote (1) 8 313,852 1,910,585 Less - Fuel used in electric generation 224.3 227.9 216.1 Total 6,06) 2,397 (5,656,516) 6,226,438 - Power purchased, net (6.4) (12.5) (2.8) Total $570.1 $591.4 $596.2 Gas purchased for resale decreased in 1988 and increased in 1987 - The 1988 electric operating margin decreased from 1987 primority primarily as a result of changing customer demand for natural gas. due to lower retail electric rates placed into effect January 1,1988 (see Other Operating Expenses Note 2D of Notes to Consolidated Financial Statemonfs) which more than Increases (decreases) in other operating expenses, including taxes, offset an increase in customer demand. The 1987 operating margin are presented in the following table: i remairad relatively unchanged from 1986 because sales associated with F increased kilowatt-hour consumption were offset by reduced retail electric increase (Decrease) From Prior Year rates placed in effect in February 1987 (see Note 20 of Notes to ClassifiMtion 1988 1987 Consolidated Financial Statements). (Miuons of Donors) Increases (decreases) in electric customers and megawatt-hour Other operation and maintenance $ 1.5 $ 14.9 (MWH) sales volume by classes of customers are presented in the Depreciation and amortization 4.8 2.0 following table: Income taxes (26.0) (24.1) Other taxes (2.7) 6.9 Increase (Decrease) From Prior Year Total $(22.4) $ (.3) Customers Volume (MWH) Classification 1988 1987 1988 1987 As o result of the Company' tion and maintenance expenses,s cost containment efforts, Residential 7,619 8,936 40 677 181,840 in 1988 did not change significantly from Commercial 1,632 2,296 167l089 184,359 InGuartal 8 (32) (36,059) 186,217 the prior year. Other operahon and maintenance expenses for 1987 Sale for resale (1) (38,731) 50,524 increased primarily because of odditional operating expenses for outside Other 53 67 9,838 7,035 professional services relating to the refueling at Summer Station. In-Total 9,311 11,267 142,814 609,975 creases in depreciation and amortization expense for 1988 and 1987 reflect additions to plant in service and the amortization of deferred Fuel used in electric generc"lon decreased from 1987 primarily carrying costs beginning July 1,1987 (see Note 1 E of Notes to l t:3cause of a reduction in the average costs of fossil and nuclear fuels. Consolidated Financial Statements). These increases were partially offset it a increase in fuel used in electric generation expense for 1987 was due by the effect of lower electric depreciation rates beginning July 1,1987. . primarily to addit'onal fossil fuel requirements (at unit costs higher than The decreases in income tax expense for 1988 and 1987 result primarily nuclear generation) associated with increased electric generation resulting from a reduction in the Federal corporate income tax rate effective July 1, i from an overall increase in customer demand and the scheduled refueling 1987 and lower pre-tax income resulting from a reduction in retail electric of Summer Station from March 6 through June 7,1987. Power pur-rates. The decrease in other taxes in 1988 resulted from a change in the chased, net, increased for 1988 and decreased for 1987, largely due to method of recovery of municipal franchise taxes partially offset by on th3 changing demand for electricity by other utilities-increase in property taxes. The increase in other taxes in 1987 primarily Summer weather combined with an increase in the number of reflects additional property taxes. electric customers resulted in an all-time peak demand record of 3,021 MW on August 18,1988. The previous year's record of 2,943 MW was Interest Charges set on August 10,1987. Interest on long-term debt increased $7.0 million in 1988 and Gas operating margins for 1988,1987 and 1986 were as follows: decreased S.1 million in 1987 compared to the respective previous 1988 1987 1986 years. The increase in 1988 resut;ed primarily from interest associated (umons otDollars) with the issuance of $100 million pnncipal amount of 8-3/4% Series First Gas operating revenues $291.3 $306.0 $289.4 and Refunding Mortgage Bonds in February 1987, the issuance of Less - Goa purchased for resale 209.3 222.3 215.9 $4.365 million of tax-exempt, annual tender pollution control bonds in Total S 82.0 S 83.7 $ 73.5 September 1987 of an initial rote of 5-3/8% per annum through August 1988, a $40 million 8.32% Bank Note in December 1987 and higher The decrease in the gas operating margin for 1988 is primarily the interest rates. The decrease in 1987 resulted primarily from the early result of a decrease in industrial demand which more than offset an redemption of $60 million principal amount of the 15-1/2% Guaranteed increase in retail natural gas rates placed into effect December 1,1987 Notes of South Corolina Electric & Gas Finance, N.V. in April 1986. The (see Note 2E of Notes lo Consolidated Financial Statemenis). The decrease for 1987 was offset by interest associated with the issuance of increase in the operating margin for 1987 is primarily the result of $100 million principal amount of 8-3/4% Series First and Refunding l increases in customers and dekatherm (DT) sales of natural gas as Mortgage Bonds in February 1987. presented in the following table: Other interest expense increased $4.1 million in 1988 and S.6 million in 1987 compared to the respective previous years. The increase in 1988 resulted from an increase in short-term borrowings, higher intemst rates, and interest expense related to amounts accrued for refund to wholesale customers The increase in 1987 reflected the increase in short-term borrowings from the previous year. 1 45 = _ _ _ _ - _ _ _ - _ _ _ _ -

WUQ CQ&WWWWW?BQ5&T k?wt +}&?h[w&afMppAg% v@+9& &yw f t W^% w un N W, h,m e 4p lp $ _% yg!P g p A b 5 h W M M f k s? M"Qg h t;J W" 9 % $q u %M M~ m %$%gd fGwWW L Selected FinanclolData ' For the Years Ended December 31, 1988 1987 1986~ 1985 1984 1983 .1978 Statement of Income Data. (Thousands of Dollars except statistics and per share amounts) Operating Revenues: Electric $ 787,956 $ 806,826 $ 809,488 $ 787,796 $ 746,745 $634,127 $382,370 Gas 291,308 305,934 289,429 318,856 378,491 337,282 101,804' - Transit 4,060 3,212 3.119 3,689 3,178 3,242 1,927 Total 0perating Revenues 1,083,324 1,115,972 1,102,036 1,110.341 1,128,414 974,b51 486,101 Operating Expenses: f Fuel used in electric generation 224,278 227,877 216,076 229,249 223,768 260,381 184,047. i Gas purchased for resale 209,344 222,319 2!5,928 246,760 289,212 277,091 73,455 l Other operation and maintenance 222,396 214,865 209,629 195,031 187,448 135,374 . 55,352 Depreciation and amortization 97,389 92,583 90,627 86,899 74,914 45,000 32,643 j Taxes 125,247 153,943 171,060 154,804 153,776 106,932 65,853 i l Total 0perating Expenses 878,654 911,587 903,320 912,743 929,118 824,778 411,350 l Operating income - 204,670 204,385 198,716 197,598 199,296 149,873 74,751 Total Otherincome 4,147 6,395 9,825 15,721 17,647 11,571 29,275 Income Before Interest Charges and Pretened Stock Dividends 208,817 210,780 208,541 213,319 216,943 161,444 104,026 .l Totalinterest Charges, Net 80,057 71,478 71,934 83,218 78,248 57,506 43,679 I i Preferred Stock Cash Dividends of Subsidiary 8,014 10,437 14,443 16,541 16,877 17,186 10,600 Netincome $ 120,746 $ 128,865 $ 122,164 $ 113,560 $ 121,818 $ 86,752 $ 49,747 i Weighted Average Number of Common l Shores Outstanding (Thousands) 40,296 40,296 40,296 40,296 39,900 37,844 22,029 Eamings Per Shore of Common Stock $3.00 $3.20 $3.03 $2.82 $3.05 $2.29 $2.26 Dividends Declared Per Share of Common Stock $2.40 $2.32 $2.24 $2.16 $2.05 $2.00 $1.62 Percent of Operating income (Loss) Before income Taxes: Electric 90 91 93 92 87 93 94 Gas 13 12 9 10 15 10 9 Transit (3) (3) (2) (2) (2) (3) (3) a l l 46 _______-_________________-__a

fQ %Qf }$ % h @ @ f K* @W W ? f ?? W @W Q Q M ] ? ? } f E R &. ;^ ? ?" P N[ Q ]A }2 %Y %d Y w4 h.ThQ@%p;?AQ4 C f % i ( p 3g;JhPO y?fWfff,fdhnoi My 'WW W hqhlbg% pf W.ggggg;. p WdQWNghg%W%Q2)NW ;;WT g_ - j p- $$h W Od me%Nfhh,;w $j@Mh$%$q%wfu%"u[f 'fYl"gg ?.$7 t k Qd -' by p $f6 $d!@P&We%AMYN N 13NMN d D N e Ar m ev/ MM - : ? V 1'g% - December 31, 1988 1987 1986 1985 1984 1983 1978 Bolonce Sheet Data (Thousands of Dollars except statistics and per shore amounts) Utility Plant, Net $2,384,633 $2,313,996 ' $2.248,657 $2,221,070 $2,205,297 $2,018,942 $1,371,899 Total Assets $2,887,279 $2,714,257 $2,587,491 $2,550,627. $2,506,996 $2,365,777 $1,531,654 Common Equity $ 895,727 $ 871,620 $ 836,913 $ 806,155 $ 778,251 $ 709,908 $ 417,471 Preferred Stock Subject to Purchase or Sinking Fund Requirements 77,244-84,632 117,542 152,514 156,789 160,604 128,019 Preferred Stock Not Subject to Purchase or Sinking Fund Requirements 26,029 26,029 26,029 26,262 26,262 26,262 26,262 Long Term Debt, Net 885,679 896,963 757,340 791,539 900,878 796,518 650,189. Total Capitalization $1,884,679 $1,879,244 $1,737,824 $1,776,470 $1.862,180 $1,693,292 $1,221,941 Common Shares Outstanding (Year End)(Thousands) 40,296 40,296 40,296 40,296 40,296 38,728 22,440 BookValue Per Share of Common Stock (Year End) $22.23 $21.63 $20.77 $20.01 $19.31 $18.33 $18.60 Other Statistics Electric: Customers (Year End) 427,089 417,778 406,511 393,810 378,960 366,424 328,797 Sales (Million KWH) 14,457 14,314 13,704 13.041 12,590 12,063 11,621 Residential: Average annual use per customer (KWH) 12,805 12,988 12,821 11,992 12,061 12,009 12,269 Average annualrate per KWH S.0691 $ 0724 $.0759. $.0774 $.0757 $.0642 $.0437 Generating Capability - Net MW (Year End) 3,891 3,890 3,890 3,959 3,959 3,359 3,364 Terntorial Peak Demand - Net MW 3.021 2,943 2,853 2,703 2,596 2,700 2,271 Gas: Customers (Year-End) 201,399 195,338 192,941 191,002 189,544 187,638 162,412 Sales (Thousand Therms) 677,580 734,145 671,881 647,215 737,059 671,429 501,273 Residential: . Average annual use per customer (therms) 617 627 548 524 618 610 751 l Average annual rate l per therm S.70 $.68 S.68 S.67 $.69 $.65 $ 31 i Transit: Number of Coaches 114 108 117 122 123 112 96 i Revenue Passengers Carried (Thousands) 6,723 8.668 8,699 9,032 9.658 9,744 8,658 I 1 l l 47 I i

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s +- l l InvestorInformation Notice of AnnualMeeting Corpomte Headquarters StockholderInquilleS Bond Trustee and Palmetto Center Questions concemity divi-Paying Agent The 1989 AnnualMeeting

426 Main Sheet dend accounts or related SCE&G First and Refunding of Stockh_olders of SCANA Columbia, SC stockholder matters should be Mortgage Bonds

Corporation willbe heldin Telephone. (803) 748-3000 directed in wnting to the Manufacturers Hanover Trust Columbla, SC on Wednes-Stockholder Records Depart-Com day, April 26. The meeting _jIIInbAdf88S M ment (054) at the Company's Corporat T ust Department - 9A n willconvene at 10:00 a.m. Columbio'IC$9218 maihng address-15th Floor in the Ballroom of the Co-Auditors 450 West 33rd Street lumbia Morriott Hotel, Common and Preferred Deloitte Haskins & Sells New York. NY 10001 1200 Hampton Street, Stock Listings Certified Public Accountants investor Communications Proxles willbe malled to The common stock of SCANA 1426 Main Street, Suite 820 Intenm reports providing up-stockholders in March. Corporahon is listed and Columbia, SC 29201 dated financialinformahon traded on the New York Stock Stockholders who are una-Recordkeep/ng and and Company news are seat ble to attend the Annual fsI"CG Thec l te Paying Agents to stockholders following the close of the first, second and Meeting should retum their SCANA is used in newspaper Common Stock: proxles promptly by mail, stock hstings SCANA Corporation third quarters. A copy of The 5% sene's cumulahve pre. Stockholder Records SCANA s Annual Report on ferred stock of SCE&G is also Department (054) Form 10-K (as filed with the ksted and traded on the New Columbia, SC 29218 Secunties and Exchange Com-mission) and the Statistical York Stock Exchange. The SCE&G Preferred Stock: Supplement to the 1988 An-ticker symbolis SAC Pr, the South Carolina Nabonal Bank nual Report are available to newspaper hsting is SCrE pf-Secunties Transfer Services - stockholders and others with-Room 101 } Dividend Payment out charge. Inquiries concern-101 Greystone Boulevard ing activities of SCANA Corpo-i ggfg3 CoWmba, SC 29226 Quarterly dividends on com-rahon and requests for mon stock are normally payo. TranSferAgentS pubkcations should be ad-I ble on the hrst day of January, Common Stock; dressed to the Investor Rela-( April, July and October to South Carolina National Bank tions Department (054)of the stockholders of record on the Securihes Transfer Services - Company's maikng address. 10th day of the month preced. Room 101 Analyst'S ContaCf { ing the payment date. 101 Greystone Boulevard H John Winn, til Dividends on SCE&G's pre-Columbia, SC 29226 Manager-Investor Relakons ferred stock are paid quarterly Manufacturers Hanover Trust Telephone. (803) 748-3240 on the same dates as the Company investors' Association l l common stock dividends-Stock Transfer Department - For informohon about this or-Dividend Reinvestment 450 Ol Floor ganizahon's ochvibes, wnte to i 15tt [ st 33rd Street Plan Associahon of SCANA Inves-New fork, NY 10001 fors, c/o Mr. Paul Quattle-i SCANA offers a Dividend Rein _ l vestment and Stock Purchase SCE&G Preferred Stock: bcum, Jr.,22 Broughton Plan to its common stock-South Carolina Nahonal Bank Road, Charleston, SC 29407 holders of record. A brochure. Securities Transfer Services - Authorizahon Form and retum Room 101 7nis reportis issued solely for the envelope are automahcally 101 Greystone Boulevard purpose of providing informorion mailed to all new stockhold-Columbia, SC 29226 Itis notintended for use in con-ers For further informa' ion or The Chase Manhatton Bank, N A. nection with any sole or purchase for queshons about your rein-Stock Transfer Department t or any solicitati n at tiers to i vestment account, wnte to the P.O. Box 469 "V 0' 88# ""V 88CU"^88 Stocl< holder Records Depart. Washington Bndge Station ment (054) at the Company's New York, NY 10033 maihng address I l k l l 48

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