In mid–January, S.C. Electric and Gas Co. announced it was seeking a 9.5 percent increase in electricity base rates, to be phased in over 18 months. SCE&G President Kevin Marsh said the cost of compliance with governmental regulations for safety and environmental protection was the main cause of the need to increase rates.

This increase is in addition to an established 2.5 percent increase in customers’ bills every year for a decade to help pay for the new nuclear power plant in Jenkinsville.

If approved, the monthly electric bill for a residential customer who uses 1,000 kilowatt hours a month would rise to $118.72, or about 12 cents per kwh, the national average.

SCE&G, SCANA’s largest subsidiary, last January proceeded to itemize its cost problems: scrubbers to reduce sulfur dioxide emissions at its coal–fired plants in Eastover and Goose Creek, special equipment to reduce nitrogen oxide emissions at Cope Station near Orangeburg, and $74.2 million to pay down the $329 million backup dam at Lake Murray.

SCE&G does this every time there’s a rate increase request. There’s always a list of costs. The real criterion, though, is the projected/protected return on common equity. That’s what holds the value of stock high enough to hold down the cost of borrowing low enough to sell kilowatt hours at a reasonable rate. SCANA is like a city: It lives on borrowed money.

On December 27, 1995, for instance, “At a meeting held today, the PSC voted to base the approved rate on a 12 percent authorized return on common equity...” As SCANA’s Investor Relations & Shareholder Services reported it. In other words, in investment circles, there’s little discussion of power plant costs, just the return on common equity protected by the Public Service Commission.

Another number typically missing is the price of electric power per kilowatt hour for the residential retail customer. If the price per kwh gets tossed about, cost comparisons with other communities can be made, and disgruntlement follows.

Take Cleveland, Ohio, for example. Cleveland is an electricity city, which means the city of Cleveland buys/produces its electric power in bulk and then distributes it to its citizens. That not only holds down the cost per kwh for its citizens, it’s a convenient property tax system to apply among properties otherwise known as tax free, such as high schools, churches, federal and state courthouses and office buildings, the stuff Columbia gets stuck with servicing while SCANA collects the “taxes.”

Cleveland charges its homeowners 6 cents per kwh. In April 2009, the national average charge per kwh was 12 cents, which is about what the citizens of nearby Dayton have to pay because Dayton Power & Light is a shareholder– owned utility, like SCANA.

Now, go back to the tax discussion. In Columbia, SCANA/SCE&G has its protected return on common equity, so every customer contributes to the dividends paid out by SCANA to its shareholders around the world. Those dividends come from the profit margin applied to the electric power sold to high schools, churches, federal and state courthouses and office buildings, and all the taxable properties, too.

Back in Cleveland, there’s a tight operating margin on every kwh charge, and that margin just above cost is picked up by the city and put into the city’s general fund, which reduces property taxes. The city, then, keeps the money instead of having its shareholder–owned electric power monopoly send the money around the world, like Columbia.

In Austin, Texas, another electricity city, small apartment occupants, people who can keep their electricity use below 500 kwh per month, pay 5.8 cents per kwh. Any use above 500 kwh per month pays 8.3 cents per kwh (Nov.–Apr.) and 10 cents per kwh (May–Oct.). The City of Austin, albeit home to low electricity charges, transfers about $100 mil. a year from its electric power business into the city’s general fund. That’s money that does not have to be collected in property taxes. The electric power is cheaper, and the property taxes are lower. What’s up with that? Why is Austin doing so well?

Back in the Dark Ages, when capital was hard to come by down here in the former Confederacy, electric power companies were forming to generate, distribute, and sell electricity. But how to attract investment? If the return to the shareholder could be based on the regulated electric power rates paid by the customers, the business could be a go. If the protected return failed to come in at the projected rate, the Public Service Commission could go up on the price per kwh for the next year to compensate for the low levels of return. If the return on common equity came back too high for the year, the rates could be lowered. And so it still goes.

Back then, back at the beginning more than a hundred years ago, we had to do it. It was the only way to attract capital to build an electric power system.