Fitch: Nuclear Construction Settlement Agreement Supportive of SCE&G's Credit Profile

Fitch Ratings views the terms of the settlement supporting the revised construction and capital cost schedules for the new V.C. Summer nuclear units as broadly in-line with Fitch's expectations and supportive of the South Carolina Electric and Gas Co.'s (SCE&G; IDR 'BBB', Outlook Stable) and its parent SCANA Corp.'s (SCG; IDR 'BBB-', Outlook Stable) credit profiles.

Fitch expects a supportive outcome to the petition since the Base Load Review Act (BLRA) provides for recovery of additional costs that are not the result of imprudence on the part of SCE&G. Furthermore, the Public Service Commission (PSC) of South Carolina has previously approved such revisions.

The financial impact of the reduction in allowed return on equity (ROE) for the new nuclear program to 10.5% from 11% to be applied on revised rate filings made under the BLRA after Jan. 1, 2016 is marginal over Fitch's 2015-2017 rating horizon. However, the downward revision of the ROE alters the terms of the BLRA and highlights Fitch's concern that investors may be required to share the burden of any future cost increases. That said, the prospective allowed ROE for the new nuclear program compares favorably with the 10.25% allowed ROE on the non-new nuclear rate base.

In March 2015, SCE&G filed a petition with the PSC to approve a roughly two-year delay of the in-service dates of V.C. Summer units 2 and 3, to June 2019 and June 2020 respectively, as well as capital cost increases of $698 million to about $6.8 billion. Yesterday, SCE&G announced a settlement agreement with the South Carolina Office of Regulatory Staff and a key intervenor, the South Carolina Energy Users Committee. The settlement is subject to approval by the PSC. A public hearing is scheduled in late July on SCE&G's petition with a decision expected by September 2015.

Additional information is available on www.fitchratings.com.

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