SCANA Earnings Call NUGGETS: SCE&G Rate Case, Shaw and Chicago Bridge & Iron Merger

On Thursday, SCANA Corp (NYSE:SCG) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.

SCE&G Rate Case

Travis Miller – Morningstar: Just wonder what the SCE&G rate case, what do you think the risk is there of a potential ROE cut given or interest rates have moved obviously. Any indications from anywhere either other utilities or other comments from the regulatory staff that could possibly lead to an ROE cut?

A Closer Look: SCANA Corp Earnings Cheat Sheet>>

Jimmy Addison – SVP and CFO: Well, let me first kind of define where we are. Of course, we filed the case, as we say here at 10.95, our current rates are based on 10.7. The only other benchmark that we really have is the most recent case from Duke Energy, which I believe was completed last fall that was at 10.5. So, that’s kind of the range of numbers that we have today and just to give you some perspective on the 10.95 compared to the 10.7, that’s obviously 25 basis points, that’s about $10 million per 25 basis points.

Travis Miller – Morningstar: One follow up do you think there is any risk of rate fatigue in there or you’ve gotten obviously the nuclear rate increases now this is the second time in the couple of years you’ve had a pretty sizeable base rate increase. Do you get any indications of potential customer rate?

Jimmy Addison – SVP and CFO: Well, couple of comments on that. First of all, we’ve taken a fairly unusual step of offering a field decrease simultaneous with this rate increase that would offset roughly a third or more of the cost of it to the customer. So, we are trying to create a situation where we earn a reasonable return for investors to continue to attract the capital that we need to continue the development of the nuclear, while at the same time appreciating the condition of customers and trying to keep their bill down. After that reduction you’ve got an overall average increase of 3.5% – 3.75% and that’s after two years. So, that’s pretty close to the rate of inflation we experienced over the last couple of years. So, having said that, we are very aware that we continue to have the increases under the Base Load Review Act for the nuclear development and we are working very hard – have worked very hard to mitigate this increase and we will work very hard to stay away as long as we can in the future.

Shaw and Chicago Bridge & Iron Merger

Jay Dobson – Wunderlich Securities: Steve, just a question on the agreement between and Shaw and Chicago Bridge & Iron to merge, just sort of practical implications from your roles perspective?

Stephen A. Byrne – COO and President, Generation and Transmission South Carolina Electric & Gas Company; SVP, SCANA: We don’t see any implications to our project from the proposed merger, so if it goes forward we are aware of the fact that CB&I management team will take over as – we understand Jim Bernhard will be retiring. We have experience with Chicago Bridge & Iron. As you portably heard a few minutes ago they are doing welding on our site for the containment vessel. They are going to be on the site for another couple of years, while they complete the ring sections, and if you go back in time, they actually manufactured the reactor vessel for our V.C. Summer Unit number 1. So, we have got a long history with CB&I. So we think that it would be a good move. We don’t see any implications at the site to the merger.

Jay Dobson – Wunderlich Securities: Then, Jimmy, on retail sales, if you can just give us a little more clarity I sensed a bit of – I don’t know optimism may be too strong of a word, but a little bit of glimmer of hope that maybe things could be improving and I am really think to start out into 2013 and I think a lot of us have thought maybe to be flat or is there any hope with what you are seeing right now that trends are improving, that we could see things start to improve from a retail sales perspective out in ’13?

Jimmy Addison – SVP and CFO: Yes, I think that’s a real fair characterization and that’s why we offered this additional chart on Page 7 in the slides to show the kind of consistent trend over the last three quarters in customer growth. So, I am encouraged by this, it has just been so erratic over the last couple of year and it has continued even into the first six months. To be more specific, out of the six months this year, three months sales have increased on a weather normal basis and three months they have been slightly lower. Now, in that overall the increases have been larger, but there has just been some variability and that is just too early to say there is a real definitive linear trend. One thing that we have noticed lately though is that, go back to a year ago and our overall growth rate in the electric business was about, I don’t know, 5%, 0.5% – excuse me, about 5% – 0.5%. The growth in commercial customers was less than half of that, which wouldn’t surprise you in the recession. The industrials led the way out, residentials have starting to follow behind and I have commented for a few quarters now that the commercials have lagged, so they were about half the growth of residential, but if you look at the same numbers today, where our overall growth rate is about 0.8% on Page 7, the commercials are well in excess of that over 1%, so that’s a really interesting sign. Now you’ll notice in our overall commercial sales were relatively flat to last year, so the analysis of that our take is that, all the commercial customers are being very frugal in this difficult economy, but more coming online and I’m encouraged by that – continue to be encouragement by the industrial announcements we’ve focused on over the past year, but I really liked is the middle markets starting to come back some.