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Executives

Byron Hinson – Director, Financial Planning and Investor Relations

Jimmy Addison – CFO

Steve Byrne – COO

Analysts

David Paus – Bank of America/Merrill Lynch

Jim von Riesemann – UBS

Travis Miller – Morningstar, Inc.

John Ali – Decade Capital

Michael Lapides – Goldman Sachs

Jay Dobson – Wunderlich Securities

Andrew Levi – Caris & Co.

Ashar Khan – Visium

Paul Patterson – Glenrock Associates

Dan Jenkins – State of Wisconsin

(Usman Aragondia – Catopal Capital)

Tim Winter – Gabelli & Co.

SCANA Corporation (SCG) Q4 2011 Earnings Call February 15, 2012 2:00 PM ET

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. My name is Denise, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the SCANA Corporation Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. (Operator Instructions).

As a reminder, this conference call is being recorded on Wednesday, February 15, 2012. Anyone who does not consent to the taping may drop off the line.

At this time, I would like to turn the call over to Byron Hinson, Director of Financial Planning and Investor Relations.

Byron Hinson

Thank you. I’d like to welcome everyone to our earnings conference call, including those who are joining us on the webcast. As you know, earlier today we announced financial results for the fourth quarter and full-year of 2011.

Joining us on the call today are Jimmy Addison, SCANA’s Chief Financial Officer and Steve Byrne, Chief Operating Officer of SCE&G. The slides and the earnings release that we’ll refer to in this call are available at scana.com.

Before I turn the call over to Jimmy, I would like to remind you that certain statements that may be made during today’s call, which are not statements of historical facts are considered forward-looking statements and are subject to a number of risk and uncertainties, which are shown on slide two and discussed in the company’s SEC filings. The company does not recognize obligation to update any forward-looking statements.

Finally, as noted on slide two, we may disclose certain non-GAAP measures during this presentation and the required Reg G information can be found in the slides used in conjunction with this earnings call.

I’ll now turn the call over to Jimmy.

Jimmy Addison

Thanks Byron, and thank you all for joining us today. During today’s call, we will discuss our financial results for the fourth quarter and the full-year of 2011, and provide an update on our outlook for 2012. Additionally, Steve will provide an update on our nuclear project.

Let’s start on Slide 3, which reflects SCANA’s 2011 full-year basic earnings per share of 3.01 compared to $2.99 per share in 2010. Increases in electric margin from rate increases under the Base Load Review Act, and lower operating and maintenance expenses were partially offset by lower gas margins, higher interest, property tax and depreciation expense and share dilution.

Our results were within our 2011 guidance of 2.95 to 3.10 per share, and only $0.01 below our internal target of 3.02. The mild weather in Georgia cost us approximately $0.01 in December.

I’ll remind you that 2010 includes $0.07 of weather prior to the implementation of electric weather normalization, resulting in weather normalized earnings of $2.92. You can reference the appendix on Slide 18 for a reconciliation from GAAP to weather normalized earnings.

Slide 4 shows the basic earnings in the fourth quarter of 2011 were $0.76 per share compared to $0.74 per share in the same quarter of 2010. While operation and maintenance expenses were lower in the current quarter, those benefits were offset by the anticipated cost of our capital program, higher interest, property tax, and depreciation expense along with related share dilution.

Now on Slide 5, I’d like to review results for our principal lines of business. South Carolina Electric and Gas Company’s full-year 2011 earnings, denoted in blue, were up $0.04 compared to 2010. Improved margins from increases under the Base Load Review Act offset the increased capital related cost.

For the fourth quarter, SCE&G earnings were $0.02 lower than the same period last year, reflecting the aforementioned increased capital related cost. PSNC Energy’s earnings for 2011, shown in red, were $0.37 per share compared to $0.36 per share in 2010.

Fourth quarter 2011 earnings were flat over the same period in 2010. Increases in customer growth along with lower operating and maintenance expenses were partially offset by higher depreciation and property tax expense.

SCANA Energy, in green, reported lower earnings for the full year 2011, due principally to milder weather.

I’m pleased to report that SCANA Energy has again been selected to serve as the regulated provider for the state for the upcoming two-year term, covering September 2012 through August 2014. SCANA Energy has served as a regulated provider since the program’s inception in 2002.

SCANA’s corporate and other businesses reported a 2011 loss for the year of $0.01 per share and earnings for the quarter of $0.01 per share compared to losses of $0.03 and $0.02 per share respectively for 2010. The improvement is due to improved results in our communications business during 2011.

Slide 6 shows customer growth at our major subsidiaries. We experienced customer growth in our North and South Carolina regulated business, while Georgia, while the Georgia market saw a decrease in customer count over the prior year. We are pleased that our regulated businesses continue to yield organic growth. The reduction in Georgia is due to a loss of customers in our Regulated Provider program, which was partially offset by increased customer count in our deregulated sector.

Several marketers now have offerings such as a prepay service as an alternative to the regulated provider structure. Additionally, our analysis also shows that customers have been slower to connect their gas service this winter, due to the unseasonably mild temperatures.

Our Electric and Gas sales statistics can be found in the press release we filed earlier today and are available on our website.

On our weather normalize basis, electric residential sales are up approximately 1%. Industrial sales also saw improvement with an increase of a little more than 1%. Commercial sales continued to lag behind last year with a decrease of approximately 2% when weather normalized.

As we’ve mentioned previously, industrial growth typically leads, followed by residential, and then commercial. So it appears that some of the industrial activity in our area over the last couple of years has translated into residential consumption, but we’ve yet to see that in the commercial sector. These results were anticipated in our 2011 plan, and we’ve forecast similar patterns in 2012.

While we continue to see customer growth, we expect that customer usage will be slightly lower in 2012 as a result of demand side management programs, new lightbulb standards that are being phased in, more energy efficient air conditioners, and general conservation.

For the year, retail sales of natural gas were lower by 1.6% because of milder weather. The residential and commercial sectors were down approximately 18% and 9% respectively, while industrial sales, which are not significantly impacted by weather increased more than 7%.

Of course weather is contemplated in our rate mechanisms in both regulated jurisdictions, so there is no margin impact in the residential and commercial sectors.

Fourth quarter brought more industrial announcements in our service territory. On Slide 7, you can see a update of economic expansion plans in South Carolina. During the fourth quarter alone, announced investment exceeded $500 million with the largest coming from a pharmaceutical company that will be located near our corporate campus here in Central South Carolina. These announcements during the quarter suggest the ultimate creation of over 1,900 additional jobs.

For the full year, total announced investment was over $3.2 billion and more than 7,700 expected jobs. This was the best year for industrial economic announcements in South Carolina in the last decade.

Unemployment continued to show improvement in the areas we serve. As you can see on Slide 8, we continue to see improvement at the national, state, and local level. At December 31, the unemployment rate in South Carolina was the lowest since 2008, and is now lower than that of North Carolina and Georgia, as a surge of economic development activities begin to take hold.

Our service territory of South Carolina is heavily concentrated in the Charleston and Columbia Metro areas where unemployment is lower than the national average as denoted in the green box.

Please turn to Slide 9, which sets forth our regulated returns in South Carolina, regulatory calendar for 2012. The chart at the top shows the earned returns as of September 30, the date of our most recent filings.

Our Electric operations earned 8.74% a slight improvement over our June filing, due to margin improvement and cost containment. This figure is exclusive of any new nuclear equip or associated rate increases as those amounts are handled separately under the Base Load Review Act and earned an 11% ROE.

As noted on the second line, we have $1.1 billion of new nuclear equip currently in rates. This amount covers spending through June 2011. Subsequent to June, we incurred incremental quip of $156 million that will be considered in our next revised rates filing later this year.

Many of you have asked if we expect to follow the base electric case in the near-term. While we have not made a decision of when we would file our next case, we typically file on a two-to-three year cycle. One of the stipulations from our last case was that we could not have another increase in base rates for 24 months, or until after the middle of 2012.

As we have mentioned previously, our 2012 guidance does not include additional revenue from a base rate increase. We recognize the importance of earning our allowed return, and we will evaluate our position regularly.

As of September 30, our Gas Business at SCE&G was earning approximately 9.5% after annualizing the impact from the most recent $8.5 million rate increase under the Rate Stabilization Act, effective in November.

Our North Carolina Gas Business continues to perform well and is earning it’s allowed return, principally due to the growth in the business and cost control.

The bottom of the slide includes two time lines depicting our regulatory filings schedule for 2012. Consistent with prior years, we anticipate making our annual gas RSA filing in June, and our annual nuclear BLRA revised rate application in May.

Yesterday, we filed our most recent BLRA status report with the Commission and Office of Regulatory Staff for the fourth quarter. Steve will address the project fully in a few minutes.

Slide 10 presents our CapEx forecast. This forecast assumes receipt of our COL in early 2012, and incorporates new nuclear spending as reported in our latest BLRA filing. We have also provided a preliminary estimate of additional owner’s cost related to our nuclear project which Steve will discuss. As you can see, new nuclear spending accounts for more than half of our projected CapEx over the next three years.

Please turn to Slide 11. This slide presents our estimated financing plan through 2014. In January, we completed two of our three planned debt offerings for the year. We issued $250 million in medium term notes at SCANA for a refinancing and $250 million of first mortgage bonds at SCE&G to fund CapEx. We were pleased with the market’s reception to these offerings, with substantial over subscriptions and historically low interest rates, and we remain confident in our ability to raise the funds necessary to complete construction of our nuclear project from public sources.

We expect an additional issuance of approximately $200 million at SCE&G later in the year.

We continue to anticipate to draw the remaining funds from our equity floor during the fourth quarter of 2012. From the beginning, our strategy has been to finance our nuclear project from public sources with 50% debt and 50% equity, and nothing has changed.

I would also like to touch briefly on our pension assets. I’m pleased to report that our pension plan is adequately funded. We have not had to make a cash contribution to the plan since 1997, and do not anticipate any until at least 2013. Our plan was recognized as one of the best funded among our peers in a recent study by UBS.

Now I would like to discuss our 2012 earnings guidance and related assumptions as shown on slide 12. We reaffirm our 2012 guidance of $3.05 to $3.25 per share with an internal target of $3.17, and our long-term outlook to deliver 3 to 5% earnings growth over the three-to-five year period, based on the 2010 weather normalize base of $2.92 per share. We are pleased that our 2011 earnings per share of $3.01 were within – were in line with our guidance, and essentially at our announced target of $3.02.

I want to point out that our guidance is based on basic earnings per share. As you have probably noticed, we focus on basic earnings in our discussions with you. In May of 2011, we entered in to an equity forward contract. And to comply with accounting requirements, we present basic and diluted earnings in our financial statements. Basic earnings per share reflect the shares we’ve actually issued during the year. In contrast, diluted earnings per share include the effect of theoretical shares that would have been outstanding if we had issued the shares under the forward contracts, which we didn’t. If our stock price stays above the contract forward price, we expect similar amounts of potential dilution through the fourth quarter of 2012, when we anticipate drawing the remaining funds under the forward.

At that time, those shares will begin to affect our basic earnings, and are considered in our forecasted share price count and earnings guidance. The diluted commutation is required but is a little consequent in this particular situation as the shares were not issued and can only dilute earnings when issued.

We continue to forecast 2012 residential customer growth to be in line with 2011, while we believe average customer usage will be slightly lower as a result of continued efficiency efforts. We plan to keep O&M expenses relatively flat over 2011, with modest growth in CapEx-related cost of property taxes, depreciation, interest and share dilution.

We anticipate weather normalized earnings from our Georgia business will be in the range of $0.22 to $0.24 per share. Our effective tax rate for 2011 was 30.28% and we estimate the rate for 2012 will be approximately 31%.

Additionally, we have included the impact of base rate increases from our new nuclear filings under the BLRA and the 2011 gas RSA filing, as well as the effects of additional cash flow from our tax strategies. These tax strategies will enable us to delay drawing the remainder of our equity forward until the fourth quarter of 2012, and should postpone a supplemental equity offering until 2013, thus minimizing the effects of dilution.

I’d now like to turn the call over to Steve, to provide a update on our nuclear project.

Steve Bryne

Thanks, Jimmy. I would now like to direct your attention to Slide 13. The Nuclear Regulatory Commission licensing proceedings continue to progress towards a successful conclusion. At the end of the third quarter, we needed a completion of three items in order for the commission to be able to approve our COL.

The first, was completion of a mandatory hearing before the Nuclear Regulatory Commission commissioners. This was completed in October. The hearing was uncontested and we believe went well.

We also needed a 401 Water Quality permit, and this was received in December. Finally, we needed the NRC’s approval of the AP1000 certified design. As you can see in the green section of the chart, the NRC has approved the AP1000 certified design. This approval came on December 22, and the rule was published in the federal register on December 30. The rule became effective immediately upon it being published in the federal register.

At this point, there are not any remaining steps for us to take in order to receive our license. We were pleased to see the commissions recent affirmation vote to issue southern companies COL. We believe the commission will follow the same process in regards to our license. After the session, the license will be signed and we can proceed with full nuclear construction. We continue to have confidence that our license will be issued early this year.

Please turn now to Slide 14, which gives you an overview of some of the activity that is underway at the site. Construction of the heavy lift derrick continues and the attachment of the boom and the back mass to the carriage has been completed. Our control room simulators are being installed, and welding of the containment vessel lower bowl continues to progress well. Construction of the cooling towers continues to move forward as plan; we continue to make progress on construction of the switchyard, as you can see by the picture at the bottom of the slide. The switchyard is scheduled to be energized in March of 2013, which fully supports the nuclear project schedule.

On Slide 15, you can see an aerial shot of the site from late 2011, which highlights several of the items I discussed. As Jimmy mentioned early, we filed our quarterly status report with the South Carolina Public Service Commission yesterday. This report provided an overview of our project and a discussion of project cost.

Construction work on the site is proceeding safely and efficiently. The project has met the goal of completing the work necessary to allow the first nuclear safety-related construction to commence onsite, when the COL is issued. The project has compiled a safety record that is unprecedented for a heavy construction site of its size, totalling well over 5 million safe work hours, with only two lost-time instances since construction began over three years ago.

In the quarterly BLRA filing, we also discussed additional costs that are included in our current estimates, which are described at the top of Slide 16. These cost include increased cost being passed on to SCE&G by Shawn Westinghouse, as a result of the new Federal Healthcare Laws, increased cost for cyber security regulation, incremental cost associated with the design modifications of the water discharge system, and additional forecasted transmission costs.

In addition to these cost, currently reflected in the recent BLRA filing, we anticipate an increase in perspective owner’s cost of approximately $150 million, related to accelerated hiring and training of staff, along with the cost of facilities, equipment, and information technology to support the nuclear units and associated personnel.

A portion of these cost expected in 2012 through 2014 was included as a line item on the CapEx forecast Jimmy discussed previously. It is important to note that these cost are preliminary and may change as we refine the estimates by year and cost category.

In the coming months, we plan to make a updated cost filing with the public service commission to include these cost in our budget.

As you might recall, this filing’s necessary due to the decision by the South Carolina Supreme Court in 2010, which found that previously-approved general contingency cost could not be included in the forecasts approved for the Basic Review Act. Instead, as the proposed use of contingency funds is identified and itemized to specific cost categories, we must file with the PSC for approval.

I would now like to talk about the COL delay study. When we signed our EPC contract in 2008, it was anticipated that the COL would be issued by the NRC in July of 2011, due primarily to delays in approval of Revision 19 to the certified design, it should now be issued early this year.

As we have previously discussed, in 2011 we asked Shaw and Westinghouse to perform a COL delay impact study, which would provide various cost and timing alternatives arising from this delay in issuance of the COL.

The first scenario compresses the construction schedule for Unit 2, the first new unit, to retain the original commercial operation date set forth in the EPC contract. The second scenario pushes out commercial operation date for Unit 2 to account for the COL delay, while maintaining the commercial operation date for Unit 3 unchanged.

The third scenario considers delaying the commercial operation date of Unit 2, and accelerating the date for Unit 3, in order to take advantage of economies and efficiencies in the construction schedule. While negotiations are not complete, we have indicated to the consortium that we intend to pursue scenario three.

Included in negotiations of the COL delay study are all the commercial issues currently on the table. As mentioned in our February 14 BLRA filing, the consortium has asserted the right to addition cost to recovery under the EPC contract for cost associated with design modifications to the shield building and structural modules, delay in NRC licensing and unanticipated rock conditions. We have not accepted the volatility of those claims.

While the parties have not reached an agreement, the upper bond of our portion of the claims is estimated to be approximately $188 million, valued in 2007 dollars. These cost have not been billed to the project. We are still hopeful these claims will be resolved through negotiations. We know that you are interested in the results of our negotiations and we will certainly communicate that information to you, once it is available.

That concludes our prepared remarks. We will now be glad to respond to any questions you might have.

Question-and-Answer Session

Operator

(Operator instructions). And our first question will come from David Paus of Bank of America/Merrill Lynch, please go ahead.

David Paus – Bank of America/Merrill Lynch

Good afternoon.

Jimmy Addison

Hello, Dave.

David Paus – Bank of America/Merrill Lynch

I just have a few questions on ’11, but actually before, that I may have missed this, but in your 2012 guidance, what range are you assuming for the earned ROE at SCE&G Electric excluding new nuc?

Jimmy Addison

Well, we haven’t published an assumed ROE there, but what I did say in my comments earlier is that, you know, we’ve got moratorium on any new rate cases until the middle of the year, and we’ve not included any new revenue in our earnings guidance for 2012. So our current, most recent published return on the non-nuc is about 8 ¾.

David Paus – Bank of America/Merrill Lynch

Okay, got it. All right, and just on 2011, in the 246 that you earned at SCE&G, how much of that is related to your return on your nuclear investments?

Jimmy Addison

Oh, David, I don’t really have it analyzed that way because you would have to consider, of course, accumulative BLRA increases less the associated debt and equity cost of carrying those increases. I really haven’t analyzed it that way. But it will certainly build over the next few years, but it’s not a huge amount at this point.

David Paus – Bank of America/Merrill Lynch

Okay, is it fair to say if I just took your average QUIP and I think you’re allowed a 53% equity and 11% return, that should be roughly your earnings from nuclear project?

Jimmy Addison

Yes, that’s fair.

David Paus – Bank of America/Merrill Lynch

Okay. And just on the – I know it’s only a penny on the pair and another segment, but I know there is some offsetting items in there, could you just give us some color on how that penny breaks out on the CGTC Energy marketing? I know you mentioned communications was a huge driver in the last year, I believe a lot of that would be offset by I guess just interest at the hold COL level, Is it – can you kind of just break those out, break that penny out? And then…

Jimmy Addison

Yes, we…

David Paus – Bank of America/Merrill Lynch

What do you expect going forward?

Jimmy Addison

Yes, I think what you saw this year is a reasonable expectation. We kind of, you know, we made improvement on it this year. I expect us to be able to whittle away on that from a net basis and the reason for that being the debt that we renewed is at or below, the existing costs of a debt that is being replaced. We really don’t have any more debt, refinancing subdued for the next eight or nine years at the hold COL. So really it’s going to come down to what kind of growth do we see in those smaller subsidiaries and we haven’t in the past broken out the detailed numbers in those subs, but I think they will – I think it’s reasonable to see that they will grow at least at the level that the major part of the business does. So I’d expect us to continue to be able to mitigate that interest cost at the holding company through the earnings of other small subs.

David Paus – Bank of America/Merrill Lynch

Got it, okay. And just on your new – last question, on – I may have missed this too, but just when do you expect to make that updated filing that you refer to in your quarterly filing last night? And then, I guess, if you said, when do you expect the unit two completion date or substantial completion date to be? Are we talking months, are we talking – what’s the – what kind of color can you give us there?

Steve Bryne

Yes, relative to the completion date for the first new unit, which for us is unit two, we’re looking to accommodate the delay in receiving the license. So, what we’ve been talking about with our consortium partners is roughly a six-month delay, so, we are looking at late ‘16 as opposed to, what, April of ’16, which was the originally BC contract date.

David Paus – Bank of America/Merrill Lynch

Thank you so much.

Operator

And our next question will come from Jim von Riesemann of UBS, please go ahead.

Jim von Riesemann – UBS

Hi guys, how are you?

Jimmy Addison

Good, Jim.

Jim von Riesemann – UBS

Hey, just a follow up on that last question, so, you Unit Two would come on line at the end of 2016, and under scenario three, when would Unit Three come on now?

Jimmy Addison

Well, we’re still working out what is the optimum, what we’re trying to avoid here is demobilization and remobilization costs, and when we had originally picked the split between those units, it really was not what the contractor, or the vendors, would have ideally liked. So what we’ve asked them for is what is that ideal split between the units that will save us money, and we think it’s going to come in to be accelerating unit number three by less than a year, but probably somewhere in the 10, 11 month range.

Jim von Riesemann – UBS

Okay, super. And then I guess the second question is on – you know, I’ve been following on the NRC website closely and I haven’t seen an affirmation meeting posted. Do you know what the rules are on about how much notice they have to give on that; like 24 hours, 72 hours, a week, or what have you?

Jimmy Addison

Yes, the short answer is I don’t know what all the rules are; in general, for an affirmation hearing they would give seven day notice, which would be today.

Jim von Riesemann – UBS

Okay.

Jimmy Addison

But here are circumstances under which they could give less than a seven day notice. So for their next meeting on the 22nd, the 15th, or today, would be that seven day notice period.

Jim von Riesemann – UBS

Okay.

Jimmy Addison

And they follow the seven day period for Southern, right Steve?

Steve Bryne

They did with – I know they follow that, but there are some circumstances where they can go with less than seven day notice.

Jim von Riesemann – UBS

Okay.

Jimmy Addison

And honestly, I do not understand all of those rules.

Jim von Riesemann – UBS

Okay, I understand. I don’t think I understand them either. Last question is could you just talk a little bit about where maybe Santee Cooper stands in the negotiation to sell down it’s stake in the summary units?

Jimmy Addison

Well, what we know is Santee is still in negotiations to sell down some portion of their units, and we have not been involved in those negotiations to date. So nothing has really changed from what we’ve previously disclosed, which is that they have notified us of their interest in divesting some of their 45% and they are in negotiations, but I don’t know exactly where they stand.

Jim von Riesemann – UBS

Let me ask this question a little bit differently. Is there anything that you guys see on a 10 or 15 year horizon economically in the state of South Carolina that would make them materially, maybe take out all of their – have no stake left?

Jimmy Addison

Well, you’re asking me to read the minds of Santee Cooper, but I will tell you that from me, personally, I would not see anything that would drive them to zero, which I think was your question. I think they are going to want to have some nuclear portfolio. I believe they have some stated objectives for a emission-free generation in which they cannot achieve without nuclear. And then everything else is going to depend on a couple of things. One, it’s going to be load growth, and secondly, it’s going to be the impacts of EPA rules and regulations on coal facilities.

Jim von Riesemann – UBS

Okay, that is all I had today, thanks guys.

Jimmy Addison

Thank you, Jim.

Operator

Our next question will come from Travis Miller of Morningstar.

Travis Miller – Morningstar, Inc.

Good afternoon, thanks.

Jimmy Addison

Good afternoon.

Travis Miller – Morningstar, Inc.

Is there anything that we could read into the Chairman’s decision to vote against Vogel that might have any kind of impact on the upcoming vote for you guys?

Jimmy Addison

No…

Travis Miller – Morningstar, Inc.

Material differences that…

Jimmy Addison

Yes, we don’t expect any material differences; I would anticipate that when we see our vote, it will be the same as the Vogel vote because there’s really is no reason for it to be any different. They’re the reference combined offering a license application, and we are the first subsequent. So at the premise under which he voted against it for Vogel should be the same as his vote for us. So my anticipation would be that we will still see a four to one vote.

His vote really was based on the Fukushima lessons learned and their incorporation and he would like to see a licensed condition. The other commissioners did not see it that way, and in reality, from my perspective, there is really very little difference whether there was a licensed condition or whether we have to comply with all of the Fukushima-related orders that the NRC will put out once we become a licensee. So we’re going to have to comply with them anyway whether there was a licensed condition or not, I think really is not really that relevant.

Travis Miller – Morningstar, Inc.

Sure, and then on those extra regulations, I assume that if you had to incur extra costs based on whatever the NRC comes out on, you’d have to go back to the South Carolina regulators, get all of that approved, get that into the budget, under the BLRA, is that the plan that you guys would foresee if you needed to make adjustments to the current project?

Jimmy Addison

If we had to make any adjustments to the project we would see that as additional costs. They would either be an owner’s cost, or cost that the consortium would pass onto us, but more likely an owner’s cost, and then we would go into the public service commission which we’re roughly planning on doing annually to update anyway, with an update filing to recover those costs.

Travis Miller – Morningstar, Inc.

Okay, great. Thanks a lot.

Jimmy Addison

Thank you.

Operator

Our next question will come from John Ali from Decade Capital. Please go ahead.

John Ali - Decade Capital

Hey guys, nice quarter. Just a question, I apologize if you answered this, I joined late. When you filed for the new build schedule what does that do to 12/13 CapEx?

Jimmy Addison

Well, we've been delayed by, we're running almost eight months now, Steve, beyond what we expected for the COL delivery, seven months or so. So we've naturally pushed some of the construction that was expected in 2011 into 2012. So we're kind of pushing that a little bit into another year. We really haven't changed it a great deal other than the two items Steve outlined earlier, which we the potential owner’s cost increases that were filed in our BLRA yesterday, referenced. And also, these challenge costs we're negotiating with the consortium.

Steve Bryne

So keep in mind that a lot of the capital expenditures we would not intend to change. For example, we've got a large component being manufactured overseas, things like reactor vessels or steam generators or piping, turbine generators, all those kinds of things. We would not anticipate changing the schedule for delivery on those, we would like to keep the pressure on those suppliers to hold their original dates. I would much prefer to store it onsite then to give them another six months in their delivery schedule. And then we've got another raft of activities that are going on at the site. For example, the containment vessel itself, which is a very, very large steel cylinder, we are fabricating that right at the site adjacent to our construction project. And we would anticipate continuing with the fabrication construction of those kinds of items irregardless of which option we would have chosen in that COL delay study.

John Ali - Decade Capital

So the CapEx in 12/13 won't be materially different from what's in the slides today?

Jimmy Addison

That's right, our best estimate today is in the slide. That slide is updated from what we had previously published. For example, 2012 went up about $90 million and that's due to that push of items from 11 to 12, not increased cost in 2012.

John Ali - Decade Capital

Right, but there's no slide from pushing the Unit Two back?

Jimmy Addison

No, at this point, well, of course we, as Steve said earlier, and maybe you missed this part of his comments, but we have indicated a preference for the Option 3, we have not gotten the revised construction cash curve from the consortium back. And once we have that we will refine the CapEx.

John Ali - Decade Capital

Okay, but if that were to, if Option 3 were to become official what would you expect the CapEx in ’11-‘12 to do? Or all the changes in kind of like the outer years – ’14, ‘15?

Steve Bryne

Yes, unfortunately I really don't have an answer to that. That's why we've asked the contractor to give us that answer, we just don't have that. As Steve gave you some example of things that are going on in parallel with the COL delay, I mean, I wouldn't expect a material change in it, but I would expect some.

John Ali - Decade Capital

Got you. And today’s guidance assumes normal weather or assumes kind of the weather we've all been having?

Jimmy Addison

Well, that's irrelevant in all our regulated jurisdictions of the Carolina's because we have weather normalization in our electric and both of our LDC gas businesses, so…

John Ali - Decade Capital

[Inaudible] Georgia.

Jimmy Addison

Yes, the only one is Georgia. It was a little milder in January, but that's based on normal weather.

John Ali - Decade Capital

Got you, thank you very much.

Operator

Our next question will come from Michael Lapides of Goldman Sachs.

Michael Lapides - Goldman Sachs

Yes, hey, guys, thanks. I just want to follow on John's questions, I want to make sure I understand. The CapEx guidance you laid out in that BLRA report last night and that are on the slides do not reflect the feedback you're expecting to get from Westinghouse and Shaw, is that correct? And that feedback could have a revised schedule.

Steve Bryne

Yes, that's correct. It could have a revised CapEx expenditure schedule, but I don't think that we would anticipate that it would be hugely different than what we already have loaded into our CapEx budget for the next three years.

Michael Lapides - Goldman Sachs

Got it. It can push it out, you know, move ‘12 CapEx in ‘13 a little bit or ‘13 into ‘14, but the grand total of three year CapEx probably doesn't move around a lot.

Jimmy Addison

Yes, the point we're really trying to get across here is that even if we were to defer the one unit by like six months, not everything stops or is deferred six months. We've got a lot of things that we're continuing to push towards their original completion date.

Michael Lapides - Goldman Sachs

Got it, okay. The other thing, the CapEx guidance laid out on these slides does not include – I want to make sure I understand this; it does include the incremental $150 million of owner’s cost, but it does not include the $188 million disputed cost between you and the contractors?

Jimmy Addision

Yes, that's correct.

Steve Bryne

Yes, with one clarification, Michael. As far as the 150, it includes the parts that we project to fall within ‘12, ‘13, and ‘14 so some of it is in ‘15, ‘16, ‘17. So we estimate about $85 to $90 million of that 150 is in ‘13 and ‘14 with none of it in ‘12.

Michael Lapides - Goldman Sachs

Got it, but that's in your numbers already?

Jimmy Addison

Absolutely.

Michael Lapides - Goldman Sachs

Okay. Last thing, in the BRLA report you all talk a little bit about two issues that we had questions on. One was some of the QA/QC issues that Shaw Modular Systems in terms of kind of the fabrication of the modules. And second, the permitting process for some of the water, the NPDEF permits. Can you just walk us through what some of the issues are and what any concerns you may have and what you're doing to resolve those issues.

Steve Bryne

Let's start first with the modules, Shaw Modular Solution facility in Lake Charles is a facility that has, that Shaw constructed specifically for assembly of these modules or what we would call submodules that will be shipped to our site and then finally assembled at our site. Now we have a schedule for receipt of those and as is typical of startup type facilities, they're struggling a little bit with getting their quality assurance and quality control up to nuclear standards. That is something that we're trying to help them with. They did have one Nuclear Regulatory Commission inspection in 2011 that was suspended basically because they didn't have enough work going for the NRC to evaluate. They've subsequently finished that inspection in November of last year. So they're getting their act together at Shaw Modular Solutions, but as we point out in that BLRA a quarterly filing, it is an area of focus for us, and we SCE&G, are spending a lot of time at that facility. Relative to the other part of your question, remind me again what the question was.

Michael Lapides - Goldman Sachs

On the NPEDF permit process.

Steve Bryne

Yes, we have had, we have a lot of permits that are required for this, the COL is obviously the biggest one, but it's just one. We have permits that are issued by a lot of different agencies. The NPEDF is something that should not slow us down. It’s just that we had anticipated receiving it at one date and we were asked for additional information that really has to do with flows in the Broad River. And what you do is you evaluate the lowest flow condition over an extended period of time and they wanted us to reevaluate those flows. So we'll do that and get back to them, but we don't anticipate that's going to have any impact on the project.

Michael Lapides - Goldman Sachs

Got it, okay. I appreciate it guys, thank you.

Operator

Our next question will come from Jay Dobson of Wunderlich Securities.

Jay Dobson - Wunderlich Securities

Good afternoon. I was hoping you could talk a little bit about industrial sales in the fourth quarter, which did seem down a little bit. And maybe talk about them relative to the industrial gas sales, which actually seem to be pretty strong. And sort of what you're seeing from an industrial perspective.

Jimmy Addisonh

Well, things continue to go well here from an industrial stand, but as far as new announcements go we had another 1,900 jobs or so that we referenced back on Slide 7 that were announced in the fourth quarter. So we continue a good trend of industrial announcements.

You know, I don't have specifics, couldn't disclose them if I could, but there are more in the hopper here. So we really see good long-term platform there for restoration.

We've got a good distribution in industrial around our service territory. The largest of any segment is chemicals, which is about a quarter of our base. But then it's well distributed among metals, paper, rubber, plastics, et cetera.

The fourth quarter was a little down. I'm not too concerned about that now because all of the other announcements we've had. And as those come on, the short of it is our largest 20 or 25 customers continue to grow as a group and it has been some of the smaller industrials that have been more erratic. And I think we're showing up there in the fourth quarter kind of year of year.

But if you think back to 2010, there was a rapid buildup in industrial sales compared to 2009 coming out of the depth of the recession. And I think a lot of inventories were beginning to be rebuilt and now some of these smaller industrial customers are kind of finding their point of equilibrium. And I'm not too concerned about that in the fourth on the electric side. On the gas side, you're just continuing to see a lot of folks that can convert from alternative fuels run on gas just because of the low price of natural gas compared to other petroleum products is very competitive.

Jay Dobson - Wunderlich Securities

Okay, great, that's helpful. And in light of your confidence around industrial, do you guys have a forecast for 2012 industrial?

Jimmy Addision

Well we've not broken it out separately but it's obviously built in and it's a bottom-up build from detailed discussions with our account reps with all the industrials that are our territory based on what we think they're going to do from production, expansion, et cetera, and that's built into our earnings guidance and our internal point estimate of 317.

Jay Dobson - Wunderlich Securities

Okay, great. And then Jimmy maybe you could talk a little bit about the decision points around the 2012 rate case. I appreciate that in your prepared comments you mentioned you had not made any decision and obviously has to be a filing in the second half of this year, but just sort of how the decision points must go weighing against your current [Inaudible] earning situation.

Jimmy Addison

Well, we're going to typically follow that two-to-three year cycle. The middle of the year will be two years and obviously middle of 2013 will be three years, we're going to stay within that band. But I think all of you appreciate the importance of communications with the intermediary body, the Office of Regulatory Staff, they serve a critical role here. We're going to keep them informed of where we are. We're going to be considerate of the timing of increases under the Base Load Review Act. We're going to be considerate of items surrounding our potential fuel hearing and adjustments like that. So we're really going to try to do anything we can to keep from really pancaking those increases in rates. And so that's a lot of what goes into the strategy. And we'd like to get a little more feel for what's coming, you know, how the recovery is economically and how much of a potential margin need, that 200 basis points we're looking at there, how much that might be filled by growth in customers and expansion of the economy as opposed to having to raise the rates on the customers to provide it. So that's a long answer to say somewhere between the middle of ‘12 and the middle of ‘13.

Jay Dobson - Wunderlich Securities

Got you. It sounds like it's basically economic and administrative issues. There's nothing really beyond that. I appreciate, you know, I'm not asking you to predict when you're going to file and know you have to communicate with your folks there. But if I'm just to categorize it, it sounds like it's economic issues and then more administrative timing around rate cases.

Jimmy Addison

I would agree. I mean, it's a matter of when, not if. And when you have a business like this that's subject to inflationary pressures and you only have increases periodically you've got to go back and you can't just absorb those costs, although we've done a good job of handling the cost over the last five years or so.

Jay Dobson - Wunderlich Securities

Great. and then last question, I didn't think, maybe I missed it, when do you expect Westinghouse Shaw to come back to you with the re-cut costs as a result of the COL delay study, and your selection, or at least leaning towards scenario three?

Jimmy Addison

The first thing we need to do is conclude on negotiations with the consortium on the validity of those costs, which we have not accepted. So I don't know whether it would be a month, six weeks, two months, something along those lines, but I would imagine it's somewhere in the next couple of months we ought to have both a new construction schedule, milestone schedule, and a CapEx forecast.

Jay Dobson - Wunderlich Securities

Got you, but if you're just getting that in sort of a three-month timeframe it might be, is it fair to say that it might be a bit of a stretch to assume it would be in the next BLRA filing and that it might be a second from now? So not the May, but the August?

Jimmy Addison

Yes, I really think that depends a lot on the negotiations. I think the consortium is certainly capable of turning around within a month or two, it just depends on how else they're going to follow that if they know that we're still in negotiating with them. But at some point they have to give us that new schedule and if we decide to forgo the negotiations and go to some other kind of dispute resolution then they would give it to us based on what they know at the time. And then they would have to rectify that when the dispute resolution played out.

Steve Bryne

And let me just add, if we are successful in negotiations, which we sure hope everyone can reach a negotiated settlement on all of this, you won't necessarily have to wait until a quarterly BLRA filing to get that information. If it happened in between those, as it likely will, we might end up just doing a briefing for the commission of having it in a special update filing with them.

Jay Dobson - Wunderlich Securities

Okay, fair enough, but just so I understand the cadence, you would get something back from them? Again, you've finished your negotiations, then you get something back from them, there's some internal analysis that you're doing. You not, I think you've said several times here, you've not decided on scenario three, you'd be looking at those. So if you got those costs or got that information from Westinghouse Shaw, you know, two days before BLAA filing it's not going to be in that BLRA filing, I assume it's going to be, again as you pointed out Steve, pushed out into either a special briefing or the following BLRA filing?

Jimmy Addison

Yes, unless it was, the BLRA, the quarterly BLRA updates are really due 45 days after the end of the quarter. So if there was something that was that material that happened in that interceding 45 days, again, depending on when those 45 days had transpired we might be able to put it in that previous BLRA quarterly update.

Jay Dobson - Wunderlich Securities

Perfect, that's great. Thanks for the help.

Jimmy Addision

Yes, sure.

Operator

Our next question will come from Andy Levi of Caris. Please go ahead.

Andrew Levi – Caris & Co.

Hi, good afternoon. Can you hear me?

Jimmy Addison

Sure.

Andrew Levi – Caris & Co.

Okay, good. Just a couple questions. This one, I think I missed, I think you answered already, but the 188 million, that would just flow through the BLRA or you’d have to actually have – actually, not the BLRA, that would have to flow through a separate filing, right, is that correct?

Steve Bryne

It would be a separate update filing to the public service commission, but again, included under the BLRA.

Andrew Levi – Caris & Co.

But that would be CapEx though, if you know, we ended up incurring an extra charge in that and the commission approves it, that would be CapEx, it wouldn’t be…

Steve Bryner

That’s right.

Andrew Levi – Caris & Co.

…write-off or anything. And then…

Jimmy Addison

No, we’re not building it for any purpose other than to serve customers.

Andrew Levi – Caris & Co.

Right, I understand. And then of the 188, is there a breakdown, like how much is bedrock, how much are other issues?

Steve Bryne

We’d haven’t broken that down just because we’re still in negoiations with the consortium so we wanted – they had asked to – for us to include all of these things that were open items on the table at the time we wanted to negotiate the COL Delay study, and so we’re going to respect their – the negotiating process of both parties. We put the bond on it, but I don’t want to break it out just yet.

Andrew Levi – Caris & Co.

And I guess what I’m a little confused about, maybe you guys are too, is I guess part of the delay, I mean, bedrock is bedrock, but wasn’t part of the delay because of the design certification taking longer on Westinghouse’s part?

Steve Bryne

Yes. I guess that’s kind of part of the negotiation. That’s the reason for the dispute.

Andrew Levi – Caris & Co.

Okay, I hear you on that one. Okay, and then on the modules, can you give us any specific, like which pieces or which parts that are being constructed had issues?

Steve Bryne

Well, the modules are largely structural modules that form the buildings of the new plant and these will be modules that generally are going to go in the inside of the containment vessel and outside that form parts of the auxiliary building, fuel handling building, those kinds of things. They have had to redesign a number of those based on their discussions with the NRC Regulatory Commission around DCD Revision 19. So it really is – their claim anyway is that they NCR Regulatory Commission, to satisfy them, they’ve had to make changes to this design. So that, you know, without getting into specifics, so we’ve got a number of modules; the first one, for example, we expect to show up on site, it’s a module that’s called CA20, which is a relatively large, it weighs about 2 million pounds, it’s about the size of a 7-story building. We’ll get that in 72 different subassemblies and we will put it together on site. But it’s those 72 subassemblies to CA20 being fabricated at the SMS facility in Lake Charles, Louisiana. They’ve had t make some changes to those structural modules; supports, materials, those kinds of things.

Andrew Levi – Caris & Co.

Okay, and then I guess as you kind of look at your EPC contract with Shaw, is there any other things that we kind of just need to keep an eye out for over the next couple of years that could arise similar to the claims that were made by Shaw on the 188 million, I mean, whether it’s bedrock or other type of things or is that kind of unpredictable?

Steve Bryne

Well, it’s unpredictable but I think a lot of those are probably bias. For example, you know, you take core bores to try to characterize what the bedrock looks like underneath, you know, between 20 and 40 feet of earth, and this one depression in the bedrock just happened to be between two core bores. So you know, that’s something that Shaw could not have known about, so that is probably more legitimate than anything else. They’re going to take some concrete and fill that in, is really what the issue is there.

With regard to the change that they’ve had to do, the design changes they’ve had to do to things like the modules, with the approval of the certified design for the AP1000 Revision 19, which came in December, they are past those design issues. So I would anticipate that those kind of things would be far less significant going forward as a certified design is approved.

Andrew Levi – Caris & Co.

Okay, thank you, guys.

Jimmy Addison

Thank you.

Operator

Our next question will come from Ashar Khan of Visium.

Ashar Khan – Visium

Hi, how are you doing.

Jimmy Addison

Good, Ashar.

Ashar Khan – Visium

Can I just go back, I just wanted to make sure I have this correct. Slide 9, which shows the regulatory returns, rate based numbers are as of September 30, 2011 as well? I know you tell us that they’re allowed ROEs as of that date, but what date are the rate based numbers? Are they also the same date?

Jimmy Addision

They are. The only exception to that, Ashar, would be the new nuclear, the second one. That’s of the mid-year filing in 2011, that’s more like June 30. And I mentioned in my script we had 156 million of additional QUIP subsequent to that date.

Ashar Khan – Visium

So June 30, 2011. Okay.

Jimmy Addison

Right. And all the others are September 30.

Ashar Khan – Visium

Okay. And then if I can just go to this new CapEx slide that you have kind of given us on Page 10, could you tell us, I know from the last slide that we had, your new nuclear builds CapEx, if I’m right, I’m just – sorry, I’m going back and forth, was something like 478 in ’11 and you said you came in shy of that. Can you tell us what exactly new nuclear spend was in 2011, please?

Jimmy Addison

I don’t have that at my fingertips, Ashar, but I can tell you in 2012, we increased $90 million and it’s principally those items that were pushed from ’11 into ’12.

Ashar Khan – Visium

Okay, so all the 90 million increase in ’12 is all because of the – from going from ’11 to ’12?

Jimmy Addison

Right.

Ashar Khan – Visium

Okay. And then could you just help us, the 60, I guess million increase in ’13, what is driving that?

Jimmy Addison

That’s about 40 million increase and the majority of that, you see the separate line we added for estimated additional owner’s costs, so that’s the portion of the 150 million Steve discussed earlier that falls in ’13 and ’14. So the majority of the increase is driven from those additional owner’s costs that we’ll be filing for.

Ashar Khan – Visium

Okay. And Jimmy, can I just ask you, the – now, of course, having known where you are in 2011, which you said you came exactly around your target, and with decoupling and with the BLRA and with the, if I’m right, would you tell us on Slide 9, right, there are no regulatory things to do in 2012, right, except for the BLRA filing. Am I right? There’s no regulatory rate case going on as part of this process?

Jimmy Addison

No, not as in a base-rate case. I mean, there’s always a variety of matters; there’s our annual fuel review for electric fuel, there’s our demand side management file, we’ve got a variety of items that are more, I’ll call them annual repetitive type things.

Ashar Khan – Visium

Okay. So then this comes by big question. We don’t – we are not impacted by weather. We are not impacted by, I guess, sales of such, right because we have [inaudible]. Why do we – can you just remind us again why we have such a wide range as part of the process?

Jimmy Addison

For our guidance for 2012?

Ashar Khan – Visium

Yes.

Ashar Khan – Visium

Okay, but in Georgia Reg, we do have a new contact here, right, so the only exposure in Georgia is, I guess, what, a rate, is that correct?

Jimmy Addison

Well, that’s kind of over simplifying. That’s a very dynamic market and that market changes a lot. Over the last two years it’s moved the majority of more than half of the customers are moving to fixed-price contracts. So it’s an over simplification to say the only thing on the margin is weather.

But we do estimate and I said earlier in my comments that estimate 22 to $0.24 a share in Georgia. So you know, we’ll feel pretty good about that. But if you step back and say, $0.20 a share on $3.17 of earnings, I mean, that’s still 6, 7% range. To me that’s not that broad.

Ashar Khan – Visium

Understood. And can you just remind us, I apologize, I probably didn’t go through the thing. How much did we earn in Georgia in this year, 2011?

Jimmy Addison

About $0.19.

Ashar Khan – Visium

About $0.19. Okay.

Jimmy Addison

We had a mild early part of the year and the mild December.

Ashar Khan – Visium

Okay. And then just, if I can, just going back to Slide 9, right, I’m just trying to do a theoretical, I can just take the rate base of the new nuclear and multiply it with the equity ratio and the 11% ROE to kind of say, hey, this is what earnings are on a dollar basis coming from the new nuclear? Right? Is that a fair thing?

Jimmy Addison

Yes, I think that’s fair. As I said earlier, I mean, that’s really simplifying the calculation. I had not thought about it like that before, but I think that’s fair. It should be covering the debt one for one, right? I mean, that’s the assumption we’re making in that, but we’ll think about that and maybe provide something at maybe our analyst day on that.

Ashar Khan – Visium

But Jimmy, just one more question if I can end up with. Would debt cost coming in much lower, does that help us or hurt us?

Jimmy Addison

Well, the incremental debt costs that – the bond deal, for example, that we did in January at SCE&G was new money. So even though it’s at 4.2, 4.3%, that’s a historically low rate. It’s still a new 4.3% on 250 million dollars. So it’s – it’s additional interest cost on a weighted average basis it will pull down the debt portfolio, weighted average debt cost somewhat, but there’s still more debt out there, more interest to pay.

Steve Bryne

And it’s covered by the BLRA.

Ashar Khan – Visium

Right, but this is what I don’t know. Does the BLRA get updated for capital costs? That part, it doesn’t. So the equity rate results are fixed in it and that ratio is also – debt costs are also fixed in it. Am I right?

Jimmy Addison

No. The equity rate of 11% of 6, the cap structure is updated each time we file.

Ashar Khan – Visium

What about the debt cost, the debt rate?

Jimmy Addison

It’s updated.

Ashar Khan – Visium

The debt rate is also updated?

Jimmy Addison

Yes, the only thing that’s fixed is the return on equity of 11%.

Ashar Khan – Visium

Okay. Thank you so much.

Jimmy Addison

You’re welcome.

Operator

Our next question will come from Paul Patterson of Glenrock. Please go ahead.

Paul Patterson – Glenrock Associates

Good afternoon.

Jimmy Addison

Hello, Paul.

Paul Patterson – Glenrock Associates

How are you doing? All my questions have been answered except just – and I apologize if I missed this, when we talk about customer usage, I know there was some weather impacts for the year and stuff, but just what are you seeing there? How has that been changing? I know the unemployment rate seems to be getting better and what have you, but what are you – can you just give us a little bit of a flavor as to what you’re seeing?

Jimmy Addison

Yes, for the year as a whole, ’11 versus ’10, weather normalized usage for residential and industrial was up less than 1% but commercial was down a couple of percentage. As I said in my comments earlier, you know, industrial has got to lead, there have to be jobs out there for folks to have confidence to start spending money at home. And then that’s got to translate ultimately into more commercial business. So I think we’re seeing that on the industrial and residential side, but it’s not translated to the commercial side yet. To me, the kind of wild card in this, we saw this impact several years ago, I think for our industry is what happens to gasoline prices this summer. I heard a report this morning that gasoline prices could hit an all-time high this summer. And if they do, that’s money straight off of the discretionary income of every household. And that can have a significant impact, that can cause a concern over demand. You know, I hope those reports don’t prove to be true, but certainly, as natural gas has come down, we’ve not seen – we’ve seen the inverse of that in petroleum.

Paul Patterson – Glenrock Associates

Okay, and then just the less than 1%, just to clarify, that is customer usage, that’s not involving customer growth or, that’s usage per customer we’re talking about?

Jimmy Addison

That’s right. We were – I’m personally – we had planned a little more pessimistically than that and we were, you know, it’s a little bit of an optimistic message that we’ve now seen a couple of quarters in a row that translated into a full year, year over year of increased usage, weather normalized, net of the growth of additional number of customers.

Paul Patterson – Glenrock Associates

Right. Well, all my other questions were answered. Thanks a lot.

Jimmy Addison

Sure.

Operator

Our next question will come from Dan Jenkins of State of Wisconsin. Please go ahead.

Dan Jenkins – State of Wisconsin

Hi. Good afternoon.

Jimmy Addison

Hello.

Dan Jenkins – State of Wisconsin

First, I was wondering if you could just update me on a couple of 2011 numbers. The first, the CapEx and then second the cash from operations? Do you have those?

Jimmy Addison

Dan, I do not have those. We will – those will be filed in our 10-K in two weeks.

Dan Jenkins – State of Wisconsin

Okay. And second, I was wondering, you know, you’d mentioned – someone else asked a little bit about the industrial gas sales in the quarter. You know, they were up 20%. I was wondering if you could give a little more color on the particular, you know, is that driven by chemical or new – a new plant coming on, or you know, that seems like a pretty big jump in the quarter.

Jimmy Addison

Well, some of that’s in transportation. I mean, when customers that buy interrupt gas, if they, you know the price of natural gas coming down like it has, when they had the opportunity to run on alternate fuels, and they can switch to natural gas, they’re switching. In addition to that, we’ve got customers that are calling us now that do not operate on natural gas that are interested in getting natural gas supply in the future because of the low price compared to their current fuels. So I just think you’re seeing that really driven off the price of natural gas, you’re just seeing much more driven off that.

Dan Jenkins – State of Wisconsin

Well, is that something then that going forward, you think we’ll be dependent on the price – the gas prices as opposed to just based demand in the service territory or how should we think about that?

Jimmy Addison

Well, I think it’s both. I mean, I think certainly the economy as a whole and what they need to produce in their relative businesses, it’s going to drive – obviously drive their production. Then the price of gas compared to their other choices of fuel is going to drive which choice they make in their fuel source. So I really don’t think you can separate the two although they’re – I don’t think you can say it’s just one over the other, both are included.

Dan Jenkins – State of Wisconsin

Okay. And then I was curious, you know, with the new EPA rules on mercury and all that coming out, if you have any comment on how that will impact? It doesn’t look like there’s a lot of CapEx related to environmental in your budget. How should we think about the environmental rules?

Jimmy Addison

I think we spent quite a bit of money in the last few years on environmental and getting our largest coal-fired stations, scrubbers, SCRs, baghouses so that about 70% of our coal fleet is now fully scrubbed with SCRs and baghouses. So from a compliance perspective, we think those larger plants will meet all of the known EPA rules and regulations. Obviously, we can’t comment on what we don’t yet know.

The phase-in period, we were heartened by, particularly with things like the mercury and air toxins rule with three years plus basically. It has been know that if you ask for an additional year of implementation of a statewide basis, it will likely be granted. So with the four-year phase-in and most of our plants compliant, we think we’re in pretty good shape on the known rules.

Dan Jenkins – State of Wisconsin

Okay, and then the last thing I was curious about was, you know, you saw 6% - I mean, a $0.06 pickup based on the lower O&M in the quarter. I wonder if you could give a little more color on what drove that and if that’s the way to expect going forward?

Jimmy Addison

Well, we’ve had a constant focus on cost control, significantly stepped up during this recession. I think we’ve really got our hands and our culture around that. I think our – if you look over the last several years, it’s not just a quarterly trend, but the fourth quarter there was a fairly significant number there. Frankly, some of that was driven by some of our incentive comp that’s earnings driven. We did not hit our internal target, so we did not – we will not be paying out a portion of that related to that incentive. Some of our incentive comp is driven by the performance of the stock, did not reach targeted levels. Frankly, after Fukushima, the stock took quite a shot, so we did not hit some of those. So some of that is related to the accruals or incentive comp, but they’re just a hodgepodge of other items in there too.

But what you – what you can count on in 2012 is a targeted O&M that’s flat with 2011 and that’s our goal.

Dan Jenkins – State of Wisconsin

Okay, thank you and good luck on COL.

Jimmy Addison

Thank you.

Operator

Our next question will come from (Usman Aragondia of Catopal Capital).

(Usman Aragondia – Catopal Capital)

Hi, guys. Great call. My question has already been asked, so I appreciate it.

Jimmy Addison

Sure. Thank you.

Operator

And our final question will come from Tim Winter of Gabelli & Company. Please go ahead.

Tim Winter – Gabelli & Co.

Good afternoon, guys, and thanks for sticking around a little longer than an hour. Hopefully, I’ll be quick.

I’m just wondering, Jim, can you clarify that 2012 guidance is based on diluted shares versus ’11 which was basic?

Jimmy Addison

No, they’re both based on basic. We have to do this diluted capitalization to comply with the accounting pronouncements, but we’re not going to pull the equity down until the later part of the year, so we base our guidance on basic earnings.

Tim Winter – Gabelli & Co.

Okay, and then the financing plan, that assumes 50% bonus depreciation, would there be any impact if we – we’re at another year of 100%?

Jimmy Addison

Well, there might be some fine tuning around it, but frankly, we would have to put that in consideration in conjunction with the discussion Steve was having earlier around the COL negotiations, the change orders, that type of things. So you’ve got to put all that in, you’ve got some things possibly going off different directions.

Tim Winter – Gabelli & Co.

Okay, and then finally, looking at the Appendage 2 of your BLRA filing, early ’12 and ’13 are the heaviest CapEx years. I assume – and they decline, you know, pretty significantly in ’15 and ’16. I’m assuming those will be the heaviest rate increase years? And as you’re thinking about – or as we’re thinking about when you file a base-rate case for the non-nuclear part of the company, what sort of level or rate BLRA increase are we looking at in ’12 and ’13? Are we still under 5% annual rate increase?

Jimmy Addison

Yes. I think that’s in the ballpark. I mean, of course that’s also dependent upon what kind of change in the CapEx there is as a result of these negotiations, as a result of the COL delay study of delaying the first new unit and accelerating the third new unit. We’ve got to get all of that information form the consortium before we really understand that and the impact on rates.

But overall, we originally, when we originally filed for the approval of the plants and they were approved, we’re projecting about a 2 1/2% average increase and now it’s less than that, principally because of inflation being less than we expected. So yeah, it’s going to – by pushing these out and compacting the period, it’s definitely going to drive up the peak, but the average increase is lower than we originally projected because the overall cost is lower than we originally projected.

Tim Winter – Gabelli & Co.

Okay, thank, guys.

Jimmy Addison

Sure.

Operator

And that will conclude our question-and-answer session. I would like to turn the question back over to Jimmy Addison for any closing comments.

Jimmy Addison

Well, thank you. And just to summarize, we’re very pleased with our results for 2011, which were in line with our guidance and we’re optimistic about 2012. Our nuclear strategy continues to move forward as expected in all areas with the progress of construction and licensing to execution of the plant financings and the BLRA increases each year. We believe 2012 will be an exciting year, as we anticipate receiving the COL and we look forward to further economic recovery in our service territory. And we thank you for your interest in SCANA.

Operator

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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