South Carolina Electric & Gas Co. signed an agreement Monday that it says will cushion the impact of a proposed and highly controversial power-rate increase.

If approved, the deal with the state Office of Regulatory Staff would provide a $25 million credit to the company's power customers and lower the amount of profit SCE&G shareholders would get from the next rate hike to 10.7 percent from 11.6 percent.

Also, the agreement would create a pilot program that would address abnormally high, weather-driven spikes in monthly electricity bills.

The basic terms of the deal were released late Monday, after ORS officials signed off on them. But many of the details still need to be hashed out, said SCE&G spokesman Eric Boomhower.

The Cayce-based utility said the agreement effectively reduces its rate-increase request by about one-third, to 6.55 percent from 9.55 percent. The state Public Service Commission has scheduled a public hearing on that

issue May 24. The commission also must approve the new deal with the ORS, which represents consumers when utilities seek to raise prices.

SCE&G has not decided how the $25 million credit will be distributed, Boomhower said. That figure was based on what customers probably would have saved this past winter if SCE&G had a mechanism in place to offset weather-related power-bill increases, he said.

Many SCE&G customer experienced a case of sticker shock after a cold snap earlier this year, shortly after the company filed its request to raise electric rates.

"Since that time, we have been looking for a way to provide some relief to our customers and protect them from spikes in their bills due to extreme weather," said Kevin Marsh, SCE&G's president.

Under the agreement, SCE&G will set up a pilot program that would adjust electric bills to reflect normal, rather than actual, weather conditions. The utility said it would base its definition of "normal" on a 15-year average of temperatures.

"This program will protect customers from large spikes in their electric bills during periods of unseasonably hot and cold weather," SCE&G said.

Boomhower said the company will review the results before deciding whether to adopt the "weather normalization" initiative permanently.

"We want to see what happens with it and if it works," he said. "We're not ready to say this is a permanent mechanism at this point.

The company's original 9.55 percent rate increase request drew howls of protests at two public hearing held in the Charleston area last week.

The utility has said it needs to raise an extra $1 billion from ratepayers to pay for $700 million in mandated environmental upgrades to its coal-fired power plants and a backup dam it owns near Columbia, as well as $300 million or so to fund power-line improvements, tree-trimming, equipment maintenance, shareholder returns and other expenses.

The utility said it has saved $111 million through cutbacks, salary freezes and other measures, but not enough to prevent higher rates. The utility said it postponed its request by a year because of the dire economic outlook in 2009.

Without a rate adjustment, Marsh told regulators in recent written testimony, the company will not have the funds to operate its electric system safely, efficiently and reliably over the long term.

About 300,000 of SCE&G's 655,000 electric customers live in the greater Charleston area.