COLUMBIA -- Trying to ease customer anger over a rate hike announced soon after a cold snap sent bills skyrocketing, Scana Corp. said Thursday that it is preparing to give back $25 million to customers instead of shareholders in a move that experts say is unusual.
The Cayce-based energy giant set aside $25 million of its first-quarter revenue to give a credit on customers' bills -- a move that reduced first-quarter earnings by more than 10 percent.
"This is a very unusual event," said Howard Silverblatt, a senior analyst with Standard & Poor's in New York. "If I'm a shareholder, why are you giving away $25 million of my money?"
Still, Scana made money in the quarter. Earnings rose 11.4 percent over a year ago, the company reported Thursday. Energy use spiked in the January cold spell and its customer base grew by 1.1 percent in the quarter -- almost more than in all of 2009.
If Scana did not set aside the money for customers, the company's quarterly profit would have more than doubled over what it posted, reaching $28 million. That's 24.6 percent higher than results from a year ago.
Scana bondholders and analysts didn't make an issue of the $25 million refund during a conference call with company executives Thursday.
"A lot of times in these negotiations on rate cases, you tend to see some gives and takes," Dan Jenkins, with the state of Wisconsin Investment Board, said after the call.
Still, Jenkins said the refund was unusual, something he had seen only once before.
Jimmy Addison, Scana's chief financial officer, said being fair to customers and shareholders is a delicate balance, but that long-term, their interests are the same.
"If it's better for customers and we grow more customers, then it's better for shareholders," he said Thursday.
Scana is in the midst of a public-relations battle as its main subsidiary, S.C. Electric & Gas, seeks to raise power rates for $700 million in government-mandated environmental plant upgrades.
Backlash from customers, still smarting from the brutal recession, has been fierce. Hundreds have shown up at public hearings to complain and more than 550 protest letters have been filed with state regulators.
In addition to giving back the $25 million to energy users, SCE&G said this week it wants to reduce its profit from the rate hike and start a pilot plan to keep bills from spiking during extreme weather periods.
While companies often try to improve their images in the community by contributing to arts programs or animal protection leagues, Scana is taking a different path, Silverblatt said.
"Here, you're dealing directly with a cash distribution to customers. One that was not required," he said.
The S.C. Public Service Commission is expected to rule on the rate hike as well as the rebate and other initiatives by July 15, when SCE&G wants the increases to start.
That means customers who paid higher rates during the cold snap should see a credit and all customers should see a stabilization of their bills starting this year, Addison said.
Meanwhile, the company plans to request another rate hike this month to help pay for a $9.8 billion nuclear plant expansion. That increase would take effect in October, company officials said. Requests for the nuclear expansion will come annually until the last of the new reactors goes online by 2019.
At Scana's annual shareholder meeting in Columbia Thursday, Bill Timmerman, chief executive officer, said the past 18 months have been one of the most challenging periods he has seen in his career. He cited rapidly fluctuating fuel prices, immense credit challenges and "this $10 billion start-up business called two new nuclear reactors."
The only Fortune 500 company based in South Carolina has responded by reducing its contracting work, freezing pay for two years and keeping its workforce flat.
The outlook for 2010 is positive, Timmerman told shareholders in Columbia. Industrial electric use is up about 7 percent, which means plants are increasing productivity and putting people back to work.
And residential customers are starting to use more electricity again, as well, Addison said. Even without the extreme weather, energy use would have been up by an estimated 3.7 percent, he said.
"That's the real encouraging part to me," he said. "A quarter does not make a trend, but it's certainly better than the last half-dozen quarters."