SCANA Corporation - Company Profile, Information, Business Description, History, Background Information on SCANA Corporation

1426 Main Street
Columbia, South Carolina 29201-2845

Company Perspectives:

SCANA is a group of southeastern focused companies with knowledge and experience in the energy industry. We are focused on providing quality energy solutions cost effectively to retail customers. This is achieved by the following: Building on demonstrated strengths in operational effectiveness and customer service; Being positioned as experts in residential and commercial markets; Leveraging core competencies to maximize efficiencies and profits; Pursuing growth through geographic, market and product expansions.

History of SCANA Corporation

SCANA Corporation is a diversified holding company headquartered in Columbia, South Carolina. The company's core business is focused on the production, distribution, and sale of electricity and natural gas. Through its subsidiaries, SCANA provides services to more than one million natural gas customers in three southeastern states, in addition to providing electricity to over 550,000 customers in South Carolina. Following the deregulation of the Georgia natural gas industry in the late 1990s, SCANA quickly expanded into the promising new market, gaining nearly 500,000 new customers by the early 21st century. Along with its numerous energy holdings, SCANA operates an extensive telecommunications network through its subsidiary SCANA Communications.

The Emergence of Electric and Natural Gas Power in the 19th Century

Although SCANA was incorporated as recently as 1984, its history dates back to the establishment of the Charleston Gas Light Company in 1846, long before the appearance of the first light bulb or the commercial use of electricity. Lamps lighted by manufactured gas were the sleek and modern means of illumination, thanks to the inventor of manufactured glass, 17th-century Belgian chemist Jan Baptista van Helmont, and to William Murdock, a British engineer who invented gas lighting in 1802. Free enterprise and the spirit of invention were alive in South Carolina. In the 1840s gas lamps were aglow in the graceful streets of Charleston as the result of the establishment in 1846 of the Charleston Gas Light Company by a group of progressive businessmen. The year 1846 marked economic expansion everywhere; it was also the year that war began with Mexico, leading to the acquisition of California and most of the Southwest. The new company was also expanding: business blossomed, and street lighting in the beautiful southern port constantly improved.

The beginning of the Civil War in 1861, only 15 years after the establishment of the Charleston Gas Light Company, proved to be a severe blow to the company, mostly because of the Union blockade of Charleston's harbor, which meant a loss of raw materials. Despite these and other hardships, Charleston's thoroughfares continued to be lighted throughout the war years, that is, when raging city fires or federal bombardments did not interrupt service. The worst fire in Charleston's history took place in the first year of the war, destroying at least 500 private homes and numerous public buildings and churches in the very heart of the city and wiping out a high percentage of the company's customers. The quality of street lighting during this time deteriorated substantially. With no access to raw materials such as coal and oil, the company struggled to extract gas from local pine wood, which produced dim lighting for gas lamps. With the city occupied by the Union Army in 1864, Charlestonians were alarmed to see Union air balloons, filled with Charleston gas, looming in the sky for observation purposes. The end of the war brought little relief to the beleaguered Charleston Gas Light Company, which for nearly two years was taken over by the federal government. Stockholders regained control of the company in 1866.

Columbia, the state's capital and home of the University of South Carolina, was even worse off than Charleston during the war. Gas illumination had arrived somewhat later in Columbia than in Charleston since the Columbia Gas Light Company had been established in 1852, six years after its counterpart, the Charleston Gas Light Company. Despite the relatively late start, the company boomed until the onset of the Civil War, whose effects were more severe in Columbia than in Charleston because of an invasion by General Sherman's troops and a terrible fire that erupted shortly after the Union army's occupation, reducing the new company to cinder and ashes.

Nonetheless, despite the deprivations of the postwar years and occupation by federal troops, population growth and the demand for lighting and gas surged, resurrecting the Columbia Gas Light Company and instilling new vigor in its Charleston counterpart. By 1871, the Columbia Gas Light Company had rebounded to the extent that high quality manufactured gas was efficiently carried through almost ten miles of mains. Eight years later, the still unknown inventor Thomas Edison created the first electric light bulb, inaugurating the revolutionary age of electricity.

Charleston was not far behind in acquiring the newfangled bulbs. By 1886 a strong competitor of the Charleston Gas Light Company emerged--the Charleston Electric Light Company. Soon the old gave way to the new, demand for electricity kept mounting, and after several mergers a newly reconstituted electric company arose in 1897 under the name Charleston Consolidated Railway, Gas and Electric Company. The company's name meant precisely what it implied: all gas and electric services in the greater Charleston area, including the city's public trolley system, would be provided by one company. The same consolidation had occurred in Columbia in 1892, when the Columbia Electric Street Railway, Light and Power Company emerged.

Mergers, Profits, and Regulation: 1900-45

With the advent of gadgets and home appliances powered by electric current still some years in the future, utility companies in the late 19th and early 20th centuries still had to devise inducements for people to use electricity. Profits for utility companies in those days were greatest from the electric trolley car systems; therefore, customers were encouraged to ride the trolleys as often as possible. Utility companies such as Charleston Consolidated and Columbia Consolidated built dance halls, parks, even zoos, all within a stone's throw of the nearest trolley. In a state blessed with mile after mile of beautiful beaches, rail cars in South Carolina did a brisk business carrying summer crowds to the coast, with trolleys shuttling them to the nearest beach. In 1894 the first electrified textile mill in the world opened for business in Columbia, and 20 years later, a hydroelectric generating plant was built north of Columbia, at Parr Shoals. Gas manufacture was by no means dead, despite electricity being the preferred means of street and home lighting. The introduction and increasing popularity of gas stoves for cooking prompted a dramatic 160 percent increase in gas revenues for Charleston Consolidated between 1910 and 1925. Just before the United States entered World War I, Charleston boasted at least 5,000 gas ranges.

The United States' entry in World War I in April 1917 strained utility services to the limit, and drained them of able-bodied workers as well. With the timely addition of extra boilers to the Charlotte Street generating plant in Charleston, the amount of electricity produced in that city at least doubled. The strains of wartime production were exacerbated by the dire effects of a worldwide influenza epidemic that, by the time it had worn itself out in 1920, had taken the lives of more victims than the war. At least one-third of Charleston Consolidated's employees took ill, and recovery for the company was slow.

Postwar population growth and the popularity of electric home appliances such as irons, vacuum cleaners, and electric toasters put increasing demands on utility companies. Meanwhile the profitability of the trolley systems declined drastically in both Charleston and Columbia, undoubtedly because of the mass production of family cars and cheap oil prices. In fact, the last trolley car was replaced by bus systems in 1936.

The Roaring Twenties set some milestones for utility companies. In 1925 the ownership of Columbia Railroad, Gas and Electric Company fell to the Broad River Power Company, which was organized and owned by the New York firm of W.S. Barstow & Company. One year later, the South Carolina Power Company, in a merger of five Charleston utility companies that included the old Charleston Consolidated Railway, Gas and Electric Company, arose as a single powerful entity with a far reaching goal--rural electrification. By 1940 the South Carolina Power Company served 146 towns and villages, or 8,750 square miles. A similar expansion was undertaken in and around Columbia (the Midlands) by the Broad River Power Company, which changed its name in 1937 to South Carolina Electric & Gas Company.

These were heady years of growth and profit. By 1930 construction in South Carolina ended on the largest earthen dam in the world, sitting astride the 50,000-acre artificial Lake Murray that would provide generating power for the Saluda River Hydroelectric Plant; 5,000 residents in the area had to be relocated to make way for the gargantuan project.

By the time the plant went into operation, the effects of the 1929 stock market crash had reverberated throughout the economy, halting the booming expansion and profits of utility companies. A particular threat was the looming power of government, as embodied in the Public Utility Holding Company Act of 1935, which led to the creation of the South Carolina Public Service Authority. This public regulatory agency, established by the South Carolina legislature, soon began to acquire ailing or weak utility companies, which would have bloated the federal agency at the expense of private ownership. On the eve of World War II, the South Carolina Supreme Court put an end to the agency's power of acquisition.

During World War II the federal government encouraged voluntary energy conservation, but the South Carolina Power Company and the SCE&G did not decrease gas and electric services. Again the utility companies temporarily lost much of their workforce, hiring women as replacements for men serving in the armed forces. With the shortage of raw materials, private automobile use declined, and the bus transportation system in both Charleston and Columbia did a profitable business.

Unprecedented Expansion During the Postwar Boom: 1945-90

Compared to the boom in electric use following World War I, what followed World War II was a virtual explosion. So insatiable was the demand for electricity and electric appliances (the latter unobtainable during the war) that to meet these and other future needs, the South Carolina Power Company and SCE&G undertook a merger in 1950. The new corporation retained the name of South Carolina Electric & Gas Company.

Exciting new developments in the 1950s and 1960s held much growth and profit potential. These included the discovery of immense deposits of natural gas in Louisiana, Texas, and Mississippi, resulting in full conversion to natural gas in Columbia and Charleston by 1954, and the use of nuclear power to generate electricity, the demand for which was expected to rise continually. Gas revenues rose rapidly from $2.3 million to $13 million in the decade between 1953 and 1963.

Construction began in 1973 on SCE&G's most costly project to date: its first nuclear power facility (operated by SCE&G and two-thirds owned by the company) and hydroelectric plant facility on a 7,000-acre artificial lake, close to the original atomic power facility. Named after the then-president and chief executive officer of SCE&G, Vergil C. Summer, it was not to be completed until 1984, at a cost of $1.3 billion. Obstacles repeatedly delayed its completion, not the least of which was the skyrocketing price of energy resulting from the Arab oil embargo of the early 1970s, and the Three Mile Island nuclear power plant disaster in 1979. Leadership in this Herculean project fell to SCE&G President and Chief Executive Officer Arthur Williams, who retired before its completion. However, by 1990 the Summer Station was rated by the Nuclear Regulatory Commission as one of the five safest in the United States.

In 1984 SCE&G merged with Carolina Energies, Inc. (CEI), a holding company with six subsidiaries, to form SCANA Corporation. Within a few years SCANA comprised 11 subsidiaries, its latest acquisition being the Peoples Natural Gas Company of South Carolina. Three-quarters of its revenue was still derived from electricity production and service, while gas sales made up the remainder. SCE&G continued to be the largest component of SCANA.

In 1989 SCE&G faced the biggest challenge in its history: Hurricane Hugo, which left 300,000 customers without power. Well prepared for the disaster, SCE&G had enough spare parts and extra vehicles to enable its crews to work day and night to restore service. Over a two-week period employees of SCE&G, including workers borrowed by the company from 48 different utility companies in 15 different states, installed 731,000 new fuses and replaced more than ten million feet of wire. The following year the utility industry awarded SCE&G employees its most prestigious honor, the Edison Award, in recognition of their services.

During this period SCANA adopted an official environmental code, through which it began recycling three-quarters of the ash waste from its generators, as well as tons of office paper, and printing its annual reports on recyclable paper. Utility poles began to sport company-made nesting platforms for South Carolina's osprey population, and customers were encouraged by means of financial incentives to conserve electricity. Many of these environmental initiatives were in SCANA's best interests. For example, selling 75 percent of its ash waste to concrete and cement companies yielded a handsome savings of $2 million in dumping costs annually.

Having grown from a tiny gas light company to a huge corporation, SCANA, like all utility companies, faced formidable challenges in the closing decade of the 20th century. While economic recession in the early 1990s left the company unscathed, and dividends on its stock actually increased, deregulation in the utility industry forced it to re-examine its strategies. SCANA's plans for the future involved continuing to expand its growing interest in natural gas production, broadening its customer base by seeking gas markets out of state, and extending its investments in real estate, fiber optics, and communications.

Challenges and Opportunities in the Era of Deregulation: The 1990s

The early 1990s marked a period of extensive growth for SCANA Corporation. In an effort to gain a solid foothold in newly deregulated energy markets, the company began to look for ways to increase its customer base through the further diversification of its holdings. In November 1990, the company took a significant step toward becoming a major producer of natural gas, with the purchase of extensive gas reserves in Texas from Houston-based Tri-C Resources Inc. The agreement, worth $29 million, gave SCANA an initial daily production capacity of 12 million cubic feet of natural gas, and marked the company's inaugural foray into the production side of the natural gas business. The company further increased its natural gas properties the following February, with the $16 million purchase of offshore natural gas reserves from LLOG Exploration Co. in Louisiana. In June 1993 the company's oil and natural gas exploration subsidiary, SCANA Petroleum Resources, acquired NICOR Exploration and Production Company, significantly increasing SCANA's natural gas holdings in Texas and Louisiana, as well as expanding the company's production operations into Oklahoma. The purchase increased SCANA's overall natural gas reserves to 283 billion cubic feet.

During the mid-1990s, SCANA began to search for other diversification opportunities outside of its core utilities business. One area of potential growth was in the rapidly expanding telecommunications industry. SCANA already utilized an extensive system of fiber optic lines in the monitoring of its electricity supply networks; by 1994 the company's telecommunications arm, MPX Systems, owned 1,600 miles of cable throughout four states, and had plans to extend its network by more than a third over the coming years. With a substantial infrastructure already in place, SCANA hoped to play a major role in the future growth of emerging telecommunications technologies. In March 1996, the company acquired $75 million worth of shares in InterCel, a telecommunications firm dedicated to creating a Personal Communications Service (PCS) network throughout the Southeast. SCANA's investment infused InterCel with the venture capital it needed to enter the lucrative Atlanta, Georgia PCS market, giving it the potential to double its customer base in a relatively short span. SCANA made another $75 telecom investment in June 1998, when it acquired an additional 50,000 shares in InterCel's new incarnation, Powertel. The deal increased SCANA's overall stake in the PCS company to nearly 30 percent.

However, as the new century approached SCANA found its most enticing expansion opportunities in newly opened natural gas markets outside of South Carolina. As neighboring states North Carolina and Georgia forged ahead with deregulation, SCANA began to pursue an aggressive expansion strategy. In late 1998, Georgia prepared to open its natural gas industry to increased competition, SCANA began to market its services to customers in Atlanta, investing $3 million in advertising campaigns and in establishing six regional offices throughout the state. By May 1999 the company had added nearly 300,000 new customers in Georgia, a figure they eventually hoped to increase to 700,000. Within three years, SCANA had become such a significant presence in Georgia that, in June 2002, the Georgia Public Service Commission voted unanimously to allow the company to become the official provider of regulated natural gas service to the state's low-income customers. During this time the company also made significant inroads into the North Carolina energy market, effectively doubling its natural gas customer base with the $900 million acquisition of Public Service Co. in February 2000. Financing this growth activity forced the company to withdraw resources from some of its other recent ventures, which included dumping a significant portion of its wireless stock. The company even unloaded its nascent natural gas exploration operations, SCANA Petroleum Resources, selling the subsidiary to Kelley Oil for $110 million in October 1997. Although the company's earnings suffered initially, by the beginning of the new century its shift in strategy was already paying off, and the company's Georgia operations enjoyed profits of $4.4 million for the year 2000.

Yet while deregulation represented growth potential in Georgia, it posed a threat to SCANA's profitability in its home state. During the late 1990s SCANA was engaged in a pitched battle against deregulation in South Carolina; in late 1997, SCANA CEO Bill Timmerman had even begun to discuss the possibility of relocating the company outside of South Carolina, in the event deregulation made the state's utilities industry too competitive. Although the company's lobbying and marketing efforts eventually helped defeat the deregulation bill in the state legislature, it was clear that the issue of freeing up South Carolina's utilities markets was not going to go away. With the possibility of in-state competition still looming on the horizon, the challenge facing SCANA in the early years of the 21st century remained twofold: While the company needed to remain aggressive in its efforts to gain market share in unregulated markets in other states, at the same time it was compelled to remain highly attentive to its core South Carolina customer base.

Principal Subsidiaries: South Carolina Electric & Gas Company; PSNC Energy; South Carolina Pipeline Corporation; SCANA Energy Marketing, Inc.; Servicecare, Inc.; SCANA Communications, Inc.; Primesouth, Inc.

Principal Competitors: Dominion Resources, Inc.; Duke Energy Corporation; Progress Energy, Inc.


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