RC-02-0083, Virgil C Summer - 2001 Annual Financial Reports

Virgil C Summer - 2001 Annual Financial Reports

ML021230499
Person / Time
Site:	Summer
Issue date:	04/29/2002
From:	Browne M South Carolina Electric & Gas Co
To:	Document Control Desk, Office of Nuclear Reactor Regulation
References
RC-02-0083
Download: ML021230499 (88)

Text

Melvin N. Browne Manager, Nuclear Licensing & Operating Experience 803.345.4141 E

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April 29, 2002 A SCANA COMPANY RC-02-0083 Document Control Desk U. S. Nuclear Regulatory Commission Washington, DC 20555 Gentlemen:

Subject:

VIRGIL C. SUMMER NUCLEAR STATION DOCKET NO. 50/395 OPERATING LICENSE NO. NPF-12 2001 ANNUAL FINANCIAL REPORTS Pursuant to 10CFR50.71 (b), enclosed are ten (10) copies each of South Carolina Electric & Gas Company's 2001 Annual Financial Report and South Carolina Public Service Authority's 2001 Annual Financial Report.

Please contact Mrs. Donna Railey at (803) 345-4107 for additional copies.

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Melvin N. Browne DWR/MNB/dr Enclosures c:

N. 0. Lorick N. S. Cams T. G. Eppink (w/o Enclosures)

R. J. White L. A. Reyes G. E. Edison NRC Resident Inspector K. M. Sutton RTS (0-L-99-0360-1)

File (818.02-5, RH 8200)

DMS (RC-02-0083)

SCE&G I Virgil C. Summer Nuclear Station

• P. 0. Box 88. Jenkinsville, South Carolina 29065.T (803) 345.5209 -www.scana.com

CRITICALLY SPEAKING, you'll like what you hear about SCANA. We are a Southeastern-focused corporation with the breadth and depth of more than 150 years of experience in the energy industry. We are a diverse group of companies with enthusiastic people focused on providing affordable, reliable products and services. An electric and gas company providing our customers a warm home in the winter, a cool home in the summer, and the peace of mind to know the lights will come on with the flip of a switch. A regional energy supplier delivering worry-free natural gas service and electricity at a fair price. A confident and decisive manager of energy needs that optimizes energy portfolios for other businesses.

A telecommunications carrier providing leading-edge fiber optic capacity. A group of 5,500 caring, dedicated people setting the standards for excellence in customer service quality and reliability. A financially solid Fortune 500 corporation aggressively promoting our products and services through geographic, market and product expansions. SCANA is an industry leader focused on five areas critical to the betterment of our shareholders, our customers, our employees and our communities.

[LE'rER]

To Shareholders

I am pleased to submit the 2001 Summary Annual Report of SCANA Corporation and to highlight some of the significant accomplishments of the past year. There were many challenges, but our employees stayed focused on those factors critical to our success. These "critical success factors" are discussed throughout this report.

I would like to pause at the outset and recognize the passing of Allan Mustard, a former officer and director of the Company, and Virgil Summer, who was Chairman and Chief Executive Officer of the Company. They were instrumental in the enormous growth of the Company in the 1970's and 1980's. Virgil Summer started as a floor sweeper in a power plant and worked his way up through the Company to be its leader. They each made important contributions to the growth of our Company and they will be missed.

Financially, earnings from ongoing operations in 2001 were $2.15 per share, about the same level as last year. The declining economy, extremely high natural gas costs and very temperate weather offset customer growth and lower interest costs. We also reported non-recurring earnings of $3.00 per share, net, from our various telecommunications and alternate energy investments. These earnings are not cash yet, and are still subject to fluctuations in the market price of the various securities. In 2002, we will continue to explore opportunities to monetize these investments and redeploy the proceeds to strengthen our financial condition. A complete discussion of the year's financial results is included in SCANA's 2002 Proxy Statement under the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations." At its meeting held February 21, 2002, the Board of Directors raised the indicated annual dividend rate on the Company's common stock by 8.3% to $1.30 per share, effective with the quarterly dividend to he paid April 1, 2002.

The tragedy of September 11 affected our Company in many ways. We have significantly strengthened our security at major facilities, especially at the V.C. Summer Nuclear Station.

I want to assure you that we are working in very close coordination with police, military and other government agencies to ensure the public safety and the continued safe operation of our assets. Our employees have a renewed and heightened commitment to serving our customers.

We all recognize that in troubled times, our customers need the security of reliable, affordable energy service.

The current economic downturn continues to affect our business. Obviously, industrial production is down slightly and consumer spending seems to have slowed but housing remains strong. We have adjusted our expansion plans and operating budgets to reflect these new realities. I believe our announced long-term earnings growth target of 6 percent to 8 percent wiAl be achieved for the foreseeable future, assuming normal weather in our utility service area.

I am frequently asked about the effect the Enron bankruptcy may have on the Company.

Operationally, it will have very little effect on us. We did almost no business with Enron. Trading activities, which were fundamental to Enron's business, were never a part of our strategic plans or business operations. SCANA's historical role has been to supply energy directly to end-users.

Substantially all of our businesses are already closely regulated. Our operations are routinely audited by state regulatory agencies, the Federal Energy Regulatory Commission and the Securities and Exchange Commission.

The unfortunate part of the Enron debacle is that many companies and their people, who have operated in a forthright and ethical manner, now find themselves under a cloud of suspicion solely because of the apparent actions of a very few people at Enron. At SCANA, we have a very strong culture and history of following the rules. Our values are integral to our every activity, and our reputation is based on demonstrated adherence to these values. We have a very effective corporate compliance program with annual training for all employees. Violations of company policies are dealt with sternly. Certainly we are not a perfect organization, but we are committed to observing and enforcing the highest ethical standards in all our operations.

As I look forward to the next few years, there are several major projects ongoing. The project to strengthen the Lake Murray Dam to the latest federal seismic standards is underway. It will be completed in 2005, and will cost nearly $250 million. Our next increment of electric generation has been approved for siting in Jasper County, SC and we will be constructing

approximately 35 miles of interstate natural gas pipeline to serve that facility. These new facilities will be in service in 2004. Later this year we will file for a plant life extension of 20 years for the V. C. Summer Nuclear Station so it can operate until 2042. The opportunity for Summer Station to operate an additional 20 years will substantially lower the cost of power generated from that plant. At the same time, we will be significantly upgrading the pollution abatement equipment at our power plants. These major projects, plus the ongoing distribution system expansion to serve our new electric or gas customers, combined with the reinvestment of retained earnings, will allow us to meet our earnings growth targets.

At this year's Annual Shareholders Meeting, Hugh Chapman and Lawrence Gressette will retire from the Board of Directors. Both men have been instrumental in the progress of the Company and the development of its executives. They have been great mentors and friends to me, and great leaders in the progress of the State of South Carolina. Their advice and counsel will be missed.

In closing, I want to pay a special tribute to our employees. It seems like each month of the past year brought new and extremely challenging events for us. Still, employees garnered awards for excellence in operating the nuclear plant and for excellence in customer service. They have rescaled our operations and our plans to fit new economic realities. They have forthrightly dealt with the threat of terrorism. They have operated our Company in an exemplary manner. As a group, SCANA's employees own almost 13% of the outstanding common stock of our Company.

Their performance during the exceptional challenges of the past year gives me great confidence in our future.

Respectfully submitted, W.B. Timmerman Chairman, President and CEO February 21, 2002

"SOUTHERN HOSPITALITY" When / first moved to South Carolina, I dreaded the hassles of getting settled into my new home. But as soon as / got on the phone with my new electric and gas company, I knew I had made the right choice - talk about southern hospitality!

rakdfrtintento in 200 by larg indsra custmer in vrlcsoe of~~~I relabiity powe quliy prcnenryefcinyadaconereettv pefomace We als ranke seon in th suvytetopIvosyasu reieta raing cosstnl ran ver hig as well Thi exrml hihprfrac in th crtia areaI of cutoe servic ovrteyasbde elfr cmeitiens an fuur in th evlignryinuty

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" THE POWER "TO SAVE LIVES" Caring for human life requires an experienced staff, cutting-edge technology and a continuous supply of energy. In a typical year, our hospital will use over 13 million kilowatt hours of electricity in the course of treating some 80,000 patients. In that sense, the energy we receive from SCANA gives us the power to save lives.

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pt tecalne Th geeato of ectict is th bakbn of ou opraios Wehaeon fhms reional and naioa avrgs Th reliablt of ou sytmrnsaoeteindsr avrg as' wel And, we. ar alay loin aha tomk etihtlwcs expansio prjet tha ar unera wil add th aaiy eneootnet proid a more tha adqut powe suply A'

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"THE DECIDING FACTOR" In selecting a location for our new plont, we considered 18 states, with criteria weighted on regional services and cost of operation. In the end, SCANA's track record for low-cost, reliable electric and natural gas service proved to be the deciding factor.

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"WORTH THE INVESTMENT11 Life is what you make of it. But it helps to have the support of a company that really believes in you.

Thanks to SCANA's generous tuition reimbursement program, I was able to go back to school and get ahead. It's been a long road, but it was definitely worth the investment.

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"ONE OF THE ROCKS" In a rapidly evolving economic landscape, where assumptions about how to increase shareholder value don't always hold, SANA Corporation has proven to be a solid, smart investment. They're one of the rocks in my portfolio, no matter what the financial climate.

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SCANA CORPORATION SELECTED FINANCIAL AND OTHER STATISTICAL DAT)

For the Years Ended December 31, Statement of Income Data Operating Revenues Operating Income Other Income Income Before Cumulative Effect of Accounting Change Net Income Balance Sheet Data 2001 2000 1999 1998 1997

$3,451

$3,433

$2,078

$2,106

$1,725 528 554 353 470 425 550 44 90 19 41 539 221 179 223 221

$539

$250

$179

$223

$221 Utility Plant, Net

$5,263

$4,949

$3,851

$3,787

$3,648 Total Assets 7,822 7,427 6,011 5,281 4,932 Capitalization:

Common equity 2,194 2,032 2,099 1,746 1,788 Preferred Stock [Not subject to purchase or sinking funds]

106 106 106 106 106 Preferred Stock [Subject to purchase or sinking funds]

10 10 11 11 12 Mandatorily Redeemable Preferred Stock 50 50 50 50 50 Long-term Debt, net 2,646 2,850 1,563 1,623 1,566 Total Capitalization Common Stack Data Weighted Average Shares Outstanding [Millions]

Basic and Diluted Earnings Per Share Dividends Declared Per Share of Common Stock Other Statistics [1]

Electric:

Customers [Year-End]

Total sales [Million KWH]

Residential:

Average annual use per customer [KWH]

Average annual rate per KWH Generating capability-Net MW [Year-End]

Territorial peek demand-Net MW Regulated Gas:

Customers [Year-End]

Sales, excluding transportation [Thousand Therms]

Residential:

Average annual use per customer [Therms]

Average annual rate per therm Nonregulated Gas:

Retail customers [Year-End]

Firm customer deliveries [Thousand Therms]

Interruptible customer deliveries [Thousand Therms]

$5,006

$5,048

$3,829

$3,536

$3,522 104.7 104.5 103.6 105.3 107.1

$5.15

$2.40

$1.73

$2.12

$2.06

$1.20

$1.15

$1.32

$1.54

$1.51 547,388 537,253 523,552 517,447 503,905 22,928 23,352 21,744 21,203 18,852 14,196 14,596 14,011 14,481 13,214

$.0805

$.0787

$.0787

$.0801

$.0799 4,520 4,544 4,483 4,387 4,350 4,196 4,211 4,158 3,935 3,734 646,230 637,018 260,456 257,051 252,797 1,183,463 1,389,975 1,013,083 1,002,952 945,289 616 644 507 521 531

$1.17

$1.08

$.86

$.86

$.86 385,581 431,814 430,950 78,091 n/a 359,602 431,115 229,660 4,692 n/a 407,188 306,099 188,828 2,167,931 782,248

[1] Other Statistics for 2000 exclude the effect of the change in accounting for unbilled revenues, where applicable.

SCANA CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS

[Millions of dollars]

Assets December 31, 2001 2000

$5,263

$4,949 93 79 191 203 Utility Plant, net Nonutility Property, net Non-current Investments Utility and Nonufility Property and Investments, net 5,547 5,231 Current Assets:

Cash and temporary investments 212 159 Receivables, net 424 694 Inventories 236 183 Prepayments and other 21 16 Investments 664 479 Total Current Assets 1,557 1,531 Deferred Debits 718 665 Total Assets

$7,822

$7,427 Capitalization and Uabilities Shareholders' Investment Common Equity

$2,194

$2,032 Preferred stock [Not subject to purchase or sinking funds]

106 106 Total Shareholders' Investment 2,300 2,138 Preferred Stock, net [Subject to purchase or sinking funds]

10 10 SCE&G-Obligated Mandatorily Redeemable Preferred Securities, due 2027 50 50 Long-Term Debt, net 2,646 2,850 Total Capitalization 5,006 5,048 Current Uabilities:

Short-term borrowings 165 398 Current portion of long-term debt 739 41 Accounts payable and accrued liabilities 503 579 Deferred income taxes, net 154 98 Total Current Liabilities 1,561 1,116 Deferred Credits 1,255 1,263 Commitments and Contingencies Total Capitalization and ULabilities

$7,822

$7,427

SCANA CORPORATION CONDENSED CONSOUDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31,

[Millions of Dollars]

Operating Activities:

Net income Adjustments to reconcile net income to net cash provided by operating activities:

Cumulative effect of accounting change, net of taxes Depreciation and amortization Amortization of nuclear fuel Gain on sale of assets and investments Impairment on investments Hedging activities Allowance for funds used during construction Over (under) collection, fuel adjustment clauses Changes in certain assets and liabilities Other Net Cash Provided By Operating Activities Investing Activities:

Utility property additions and construction expenditures, net of AFC Purchase of subsidiary, net of cash acquired Other investing activities 2001 2000 1999

$539

$250

$179 1(29) 236 227 177 16 16 18 (558)

(3)

(68) 62 (65)

(26)

(9)

(7) 20 (25)

(6) 292 !

(112)

(53)

(20)

• 76 (15) 496 391 225 (523)

(334)

(238)

(212)

(43)

(39) 15 Net Cash Used In Investing Activities (566)

(585)

(223)

Financing Activities:

Proceeds from debt issuance 803 1,146 299 Debt repayments and stock repurchases (317) 7 (772)

(97)

Dividends on preferred and common stock (130)

(131)

(155)

Short-term borrowings, net (233)

(6) 5 Net Cash Provided By Financing Activities 123 237 52 Net Increase in Cash and Temporary Investments 53 43 54 Cash and Temporary Investments, January 1 159 116 62 Cash and Temporary Investments, December 31

$212

$159

$116

SCANA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Years Ended December 31,

[Millions of Dollars, except per share amounts]

Operating Revenues:

Electric Gas - Regulated Gas - Nonregulated 2001 2000 1999

$1,369

$1,344

$1,226 1,015 998 422 1,067 1,091 430 Total Operating Revenues 3,451 3,433 2,078 Operating Expenses:

Fuel used in electric generation 283 295 285 Purchased power 138 82 36 Gas purchased for resale 1,681 1,694 721 Other operation and maintenance 482 477 411 Depreciation and amortization 224 217 169 Other taxes 115 114 103 Total Operating Expenses 2,923 2,879 1,725 Operating Income 528 554 353 Other Income (Expense):

Other income, including allowance for equity funds used during construction 54 41 22 Gain on sale of assets 13 3

68 Gain on sale of investments 545 Impairment of investments (62)

Total Other Income 550 44 90 Income Before Interest Charges, Income Taxes, Preferred Stock Dividends and Cumulative Effect of Accounting Change 1,078 598 443 Interest Charges, Net of Allowance for Borrowed Funds 223 225 142 Income Before Income Taxes, Preferred Stock Dividends and Cumulative Effect of Accounting Change 855 373 301 Income Taxes 305 141 111 Income Before Preferred Stock Dividends and Cumulative Effect of Accounting Change 550 232 190 Preferred Stock Dividends 11 11 11 Income Before Cumulative Effect of Accounting Change 539 221 179 Cumulative Effect of Accounting Change, net of taxes 29 Net Income

$539

$250

$179 Basic and Diluted Earnings Per Share of Common Stock:

Before Cumulative Effect of Accounting Change Cumulative Effect of Accounting Change, net of taxes Basic and diluted earnings per share Weighted average shares outstanding [Millions]

$5.15

$2.12

$1.73

.28

$5.15

$2.40

$1.73 104.7 104.5 103.6

SCANA CORPORATION SCA/NA is issuing its annual report in summary format. Complete finoandal statements and an extensive review of its financial condition and results of operations are provided to shareholders of record as of March 14, 2002 as part of SCANA's proxy statement. The full financials and extensive discussion of the business and operation of SCANA and ils subsidiaries also are included in the 2001 Form 10-K filed with the Securities and Exchange Commission.

FINANCIAL REVIEW Earnings derived from continuing operations increased by $.03 in 2001, from $2.12 to $2.15, primarily as a result of improved results from retail gas marketing and other energy marketing activities. These improvements were partially offset by decreases in electric and gas margins, primarily attributable to milder than normal weather and the effects of a slowing economy. In 2001 the Company also recognized a non-recurring gain of $3.38 per share in connection with the sale of its investment in Powertel, Inc., which was acquired by Deutsche Telekom AG, and a gain of $.04 per share in connection with the sale of the assets of SCANA Security. In 2001 the Company also recorded impairment charges related to investments in ITCADeltaCom

($.34), a developer of micro-tuibine technology ($.04) and a lime production plant (6.04).

ELECTRIC OPERATIONS -Electric sales margin decreased in 2001 primarily due to milder weather and higher purchased power costs, which were partially offset by customer growth and lower fuel costs. Sales volume decreased primarily due to milder weather and the impact of the slowing economy.

GAS DISTRIBUTION -Gas distribution sales margins decreased in 2001 primarily as a result of a slowing economy and increased competition with alternate fuels. Sales volume decreased due to milder weather and use of alternate fuels by industrial customers.

GAS TRANSMISSION - Gas transmission sales morgins decreased in 2001 primarily as a result of decreased volumes.

Sales to industrial customers were reduced due to competitive pricing of alternate fuels and a slowing economy, while sales to electric generation and sales for resole were reduced due to milder weather.

RETAIL GAS MARKETING - Retail gas operating revenues increased in 2001 due to cold weather and record high gas costs early in the year. Net income increased primarily as a result of increases in gross margins on gas sales.

ENERGY MARKETING - Energy marketing operating revenues decreased in 2001 primarily due to lower prices for natural gas in the latter part of the year, however, net income increased primarily due to improved margins.

OTHER OPERATING EXPENSES -Other operating expenses increased in 2001 primarily as a result of increases in employee benefit costs. Depreciation and amortization increased primarily as a result of normal increases in utility plant. Other taxes increased primarily due to increased property taxes.

OTHER INCOME -Other income increased in 2001 primarily as a result of the non-recurring gains recognized in connection with the sale of the Company's investment in Powertel, Inc. and the sale of the assets of SCANA Security. These gains were partially offset by the impairments recorded related to investments in ITCADeltoCom, a developer of micro-turbine technology, and a lime production plant.

INTEREST EXPENSE - Interest expense decreased in 2001 due to the effects of declining variable interest rates, the Company's use of interest rote swap contracts to convert higher fixed rate debt to lower variable rate debt and a decrease in the weighted average interest rate on long-term debt. These decreases were partially offset by increased borrowings.

INCOME TAXES -Income taxes increased in 2001, primarily due to the recording of deferred income taxes in connection with the non-recurring gain on the sale of the Company's investment in Powertel, Inc.

CASH FLOWS - In 2001, cash flows from operating activities increased primarily due to decreases in the levels of accounts receivable. Receivables were unusually high in December 2000 due to record high gas prices and cold weather. Cash was also obtained from several financings, including the issuance of notes and bonds, and was utilized primarily for construction of utility assets, other debt repayments and the payment of dividends.

INVESTOR INFORMATION Corporate Headquarters SCANA Corporation 1426 Main Street Columbia, SC 29201-2845 Telephone: (803) 217-9000 INTERNET ACCESS Information about the Company, including stock quotes, financial reports, press releases and information on the Company's products and services, is available on SCANA's home page on the Internet. Registered shareholders may also access a variety of information about their stock account 24-hours a day, seven days a week through our Company's Web site at www.scana.com.

ANNUAL MEETING SCANA Corporation's 2002 Annual Meeting of Shareholders will be held at 9:00 a.m. on Thursday, May 2, at Leaside, 100 East Exchange Place, in Columbia, SC.

COMMON STOCK SCANA Corporation's common stock is listed and traded on the New York Stock Exchange (NYSE). The ticker symbol is SCG. Quotes may be obtained in daily newspapers under the listing SCANA.

DIVIDENDS Dividends on SCANA's common stock and SCE&G's cumulative preferred stock are declared quarterly by the Company's board of directors, and are normally payable on the first day of January, April, July and October to shareholders of record on or about the 10th day of the preceding month.

SCANA INVESTOR PLUS PLAN The Plan provides investors a convenient and economical means of acquiring, holding and transferring shares of SCANA's common stock. Participants may purchase additional shares of common stock through automatic reinvestment of all or a portion of their cash dividends on SCANA's common stock and SCE&G's cumulative preferred stock and/or by making optional cash payments of up to $100,000 per calendar year. The Plan also features a direct purchase provision through which investors can acquire their first shares of SCANA's common stock directly from the Company. A variety of other services, including direct deposit of dividends and safekeeping of share certificates, are also available.

To receive a Plan prospectus and enrollment form, please contact Shareholder Services.

SHAREHOLDER SERVICES Questions concerning SCANA's Investor Plus Plan, stock transfer requirements, replacement of lost or stolen stock certificates or dividend checks, address changes, direct deposit of dividends, elimination of duplicate mailings, or other account services should be directed to the Shareholder Services Department:

SCANA Corporation Attention: Shareholder Services (054)

Columbia, SC 29218-0001 (800) 763-5891 (24-hour toll-free Investor Line)

(803) 217-7817 (Columbia)

(Note: A Shareholder Services representative is available between 9:00 a.m. and 4:00 p.m. Eastern time, Monday through Friday)

E-MAIL shareholder@scana.com FAX (803) 217-7389 TRANSFER AGENT AND REGISTRAR SCANA Corporation maintains shareholder records, issues dividend checks and acts as Transfer Agent and Registrar for the Company's common stock and SCE&G's cumulative preferred stock. Shareholders may send stock certificates directly to the Company's Shareholder Services Department for transfer. There is no charge for this service. The Company recommends that certificates be mailed by registered or certified mail. Signatures required for transfer must be guaranteed by an official of a financial institution that is an approved member of a Medallion Signature Guarantee Program.

FORM 10-K A copy of SCANA's 2001 Annual Report on Form 10-K (as filed with the Securities and Exchange Commission) is available without charge by contacting Shareholder Services.

AUDITORS Deloitte & Touche LLP Certified Public Accountants 1426 Main Street, Suite 820 Columbia, SC 29201 INVESTOR RELATIONS CONTACTS H. John Winn, III (803) 217-9240 FAX (803) 217-7344 E-MAIL jwinn@scana.com Byron W.

Hinson (803) 217-7458 FAX (803) 217-7344 E-MAIL bhinson@scana.com INVESTORS' ASSOCIATION For information about this organization's activities, please write to:

Association of SCANA Corporation Investors c/o Julian E. Keil P.O. Box 32115 Charleston, SC 29417-2115

BOARD OF DIRECTORS Bill. Amick Chairman and CEO Amick Farms, Inc.

Batesburg, SC James A. Bennett President and CEO South Carolina Community Bank Columbia, SC William B. Bvokhart Jr.

Partner Bookhart Farms Elloree, SC William C. Burkhardt President and CEO, Retired Austin Quality Foods, Inc.

Cary, NC Hugh Mi Chapman Retired Chairman NationsBank South Atlanta, GA Elaine T. Freeman Executive Director ETV Endowment of SC, Inc.

Spartanburg, SC Lawrence Mi Gressette, Jr.

Chairman Emeritus SCANA Corporation Columbia, SC

0. Maybank Hagood President and CEO William M. Bird & Co., Inc Charleston, SC W. Hayne Hipp Chairman, President and CEO The Liberty Corporation Greenville, SC Lynrne M. Miller CEO Environmental Strategies Corporation Reston, VA Harold C. Stowe President and CEO Canal Holdings, LLC Conway, SC Maceo K. Sloean Chairman, President and CEO Sloan Financial Group, Inc.

Chairman and CEO NCM Capital Mgt. Group, Inc.

Durham, NC William B. Timmerman Chairman, President and CEO SCANA Corporation Columbia, SC G. Smedes York President and Treasurer York Properties, Inc.

Raleigh, NC DIRECTORS EMERITI William R. Bruce, Sr William T. Cassels, Jr.

James B. Edwards Benjamin A. Hogood Jack F Hassell, Jr.

F Creighton McMaster Henry Ponder John B. Rhodes John A. Warren EXECUTIVE OFFICERS H. Thomas Arthur Legal George J. Bulivinkel, Jr.

Telecommunications; Governmental Affairs Stephen A. Byrne Nuclear Operations Asbury H. Gibhes Natural Gas Transmission, SC Duane C. Harris Human Resources Neville 0. Lorick Electric and Natural Gas Operations, SC Kevin B. Marsh Finance; Natural Gas Operations, NC; Interstate Supply and Capacity Ann M. Milligan Marketing; Retail Natural Gas, GA William B. Timmerman Chief Executive Officer 1'

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IINTRODUCTION I

Santee Cooper -

Dependable Power, Dependable People.

Construction of the Santee Cooper project began on April 18, 1939, with the first electricity generated on Feb. 17, 1942, from the Pinopolis Power Plant, (renamed Jefferies Hydroelectric Station in 1966), a five-unit hydroelectric facility near Moncks Corner.

Two above-ground stora Santee Cooper serves nearly 2 million gallons of liqui 131,000 retail customers in Berkeley, Generating Station.

Georgetown and Horry counties and supplies power to the municipalities of Bamberg and Georgetown, 32 large industries, and one military installation. The state-owned electric and water utility generates the power distributed by the state's 20 electric cooperatives to almost 600,000 customers in the state's 46 counties. Over 1.6 million South Carolinians receive their power from Santee Cooper.

In addition to its original hydroelectric station, the utility operates four large-scale, coal-fired generating stations in South Carolina: Jefferies Station in Moncks Corner; Cross Station in Cross; Winyah Station in Georgetown; and Grainger Station in Conway.

ge ta I fue Santee Cooper also owns and operates combustion turbine-peaking units at Myrtle Beach and Hilton Sae Head Island, and a small hydroelec tric unit at the Santee Dam.

The utility has a one-third own ership in the V.C. Summer Nuclear Station near Jenkinsville.

inks hold approximately I for use at the Rainey In 2001, Santee Cooper became the first utility in South Carolina to offer green power. Electricity is generated using methane gas from the Horry County Solid Waste Authority.

In October 1994, the Santee Cooper Regional Water System began commercial operation. This signaled a new era in Santee Cooper service to South Carolina. The citizens of Moncks Corner, Goose Creek and Summerville, and customers of the Berkeley County Water & Sanitation Authority, some 94,000 water users, are the beneficiaries of this stable supply of one of life's most precious commodities.

Cover. Construction continued throughout the year on Santee Cooper's 500-megawatt, combined-cycle John S. Rainey Generating Station near Ivo, S.C.

The combined cycle unit began commercial operation on Jan. 1, 2002. Pictured at top, from left to right are Earl Fouch, auxiliary operator; Donna Burnette, technician A; Aaron Langdale, technician A; and Kathy Jones, Stores specialist, all Rainey Station employees.

Santee Cooper 2001 Annual Report theme: Dependable Power. Dependable People.

I JII

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TAL FCNET Santee Cooper has 4,386 miles of transmission lines all across South Carolina.

Mission Statement Energy Sales Executive Summary Corporate Statistics Comparative Highlights Power People Glossary Financials Finance-Audit Committee Chairman's Letter Management's Discussion and Analysis Report of Independent Public Accountants Financial Statements and Notes Board of Directors Advisory Board and Management Schedule of Refunded and Defeased Bonds Outstanding Schedule of Bonds Outstanding Customer Service Offices 2

2 3

7 7

8 16 23 24 25 26 29 30 50 52 53 54 56 1

0 ISONSA The mission of Santee Cooper is to be the state's leading resource for improving the quality of life for the people of South Carolina.

To filfill this mission, Santee Cooper is committed to:

"* being the lowest-cost producer and distributor of reliable energy, water, and other essential services;

"* providing excellent customer service;

"* maintaining a quality workforce through effective employee involvement and training;

"* operating according to the highest ethical standards;

"* protecting our environment; and

"* being a leader in economic development.

Direct Retail Service At the end of 2001, Santee Cooper was serving 130,897 residential, commercial, and other retail customers located in Berkeley, Georgetown, and Horry coun ties. This was an increase of 2 percent over 2000. Sales to these retail customers were 3,084 gigawatt-hours, up 1 percent from the previous year.

Military & Large Industrial Military and large industrial sales were up 1 percent over the previous year.

Wholesale Sales to the Central Electric Power System and Saluda River Electric Cooperative Inc. for their member cooperatives increased 7 percent.

Central is Santee Cooper's largest single customer. These electric cooperatives distribute power to almost 600,000 customers across the state.

Santee Cooper also provides electricity to the municipalities of Bamberg and Georgetown. Sales to these municipalities decreased 3 percent.

2 I ENERGY SALES i

Santee Cooper's corporate headquarters are located in Moncks Corner, S.C.

EXECUTIVE

SUMMARY

We saw tremendous changes in 2001, as a nation, as Americans, and as a company. Following the terrorist attacks on Sept. 11, 2001, our whole world changed. As American citizens, our freedom was challenged. We have changed the way we do so many things that have long been a part of our normal lives. Many businesses, including Santee Cooper, improved procedures to protect our employees and facilities.

Despite many challenges, it was nevertheless a good year at Santee Cooper. We are steadfast in our mission to generate, transmit and distribute low-cost electricity with excellent customer service.

3

John H. Tiencken Jr., President and CEO Leadership and Management H. Donald McElveen, P.E., Santee Cooper's new board chairman, was confirmed by the South Carolina Senate on Aug. 30, 2001.

He is a professional engineer and a founding partner of GMK Associates Architects and Engineers of Columbia, S.C.

Management changes this year included the promotions of Elaine Peterson and Lonnie Carter to the executive management team. Peterson was promoted to senior vice president of Administration and Finance.

Carter was promoted to senior vice president of Corporate Planning and Bulk Power.

Generation Santee Cooper is preparing for the future by adding new electric generation.

As South Carolina's population continues to grow, we're meeting the energy needs of our customers. With 40 percent of the state's population receiving Santee Cooper power, we have committed to our customers that they will not experience the electricity shortages and high costs of power which occurred recently in California.

In 1999, Santee Cooper began construction on a 500-megawatt combined-cycle unit and two 150-MW combustion turbines for an 800 MW generating facility in Anderson County. This is Santee Cooper's first venture in natural gas-fueled base load generation. The combined cycle unit at the John S. Rainey Generating Station began commercial operation on Jan. 1, 2002, with construction costs totaling $347 million.

Completion of the combustion turbines is expected in 2002. This facility was completed on time and under budget and will bring increased fuel diversity to our generation portfolio.

In November, the board of directors approved the construction of three additional 80-MW generating units at Rainey Station.

Construction on this $120 million project will begin in spring 2002, with commercial operation in January 2004. Upon completion, the total gener ating capability at this station will be approximately 1,040 MW.

Also, in May, the board approved the construction of an additional 600-MW unit at Cross Station in Berkeley County. Work on the $675 million project is underway, with an expected commercial operation date of January 2007.

Santee Cooper became the first utility in the state to provide a green power alternative for customers. The Green Power facility near Conway, S.C. generates electricity using methane gas produced from the county's landfill. The $2.5 million plant went into commercial operation Sept. 4 and provides 2 MWs of renewable resource generation.

Santee Cooper's residential and commercial customers can purchase green power in 100 kilowatt-hour and 200 kilowatt-hour blocks, respectively.

Funds generated from the sale of green power will be used to fund future renewable energy projects. This joint project was accomplished with the help of the Horry County Solid Waste Authority and Horry Electric Cooperative.

4 I EXECUTl /IVE SUMM]*v hAR

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Transmission In June, Santee Cooper was asked to join a diverse group of other utilities across Alabama, Florida, Georgia and Mississippi to explore the mutual benefits of forming a Regional Transmission Organization or RTO. Known as SeTrans, this would be one of the nation's largest RTOs, covering more than 39,000 miles of transmission with assets valued at approximately $6 billion. The future of this new arrangement is dependent upon several factors, including the receipt of the requisite approvals from the Federal Energy Regulatory Commission and other applicable regulatory agencies. In addition, for each of the FERC non jurisdictional transmission owners participating in the SeTrans process, a precondition to entering into this new arrangement is careful review of the final SeTrans structure and a cost-benefit analysis that would demonstrate that subjecting one's transmission system to this arrangement would provide an overall benefit to the transmission owner's native load customers.

New Service Area On Jan. 1, 2001, all of the state's 20 electric cooperatives were, for the first time, receiving their power from Santee Cooper. Members of five Upstate cooperatives (Blue Ridge Electric Cooperative, Broad River Electric Cooperative, Laurens Electric Cooperative, Little River Electric Cooperative, and York Electric Cooperative) began receiving Santee Cooper power, bringing the total number of ultimate electric cooperative member-consumers to about 600,000.

Distribution Excellent customer service has always been an essential part of Santee Cooper's mission. Once again, we have received excellent marks for our work in this area. According to survey results released in November, 99.3 percent of our residential electric customers were satisfied with Santee Cooper's performance, well above the national average for utilities.

Santee Cooper has added new features to its customer service menu. We now provide an interactive voice-response system and e-Billing to better serve our customers.

Customer growth continued to be strong at 2 percent for 2001. Santee Cooper now provides electric service to almost 131,000 retail customers in our direct service territory of Berkeley, Georgetown and Horry counties.

New franchise agreements were signed in 2001 with the cities of Myrtle Beach and Moncks Corner, along with a 10-year contract extension with the Bamberg Board of Public Works.

H. Donald McElveen, Chairman of the Board 5

I EXECUTIVE

SUMMARY

Financial Standing In August, the Santee Cooper Board of Directors authorized the sale of $54.89 million of revenue bonds to finance a portion of the

$397 million Rainey Station. The debt was issued at an all in true interest rate of 4.734 percent.

Also in August, the board authorized two separate refundings. First,

$113.38 million 1992 Series A Bonds were refunded with a gross savings of $15.1 million. Later in the month, $10 million in 1991 Series B bonds were refunded with a gross savings of $1.23 million over the life of the bonds.

At the end of 2001, Santee Cooper had approximately $2.2 billion in bonds outstanding. Our bonds continued to be highly rated. We have maintained AA ratings with Moody's and Fitch and AA-with Standard & Poor's.

Santee Cooper had $1 billion in revenues during 2001 and income before contributions and transfers which totaled $66.5 million.

Our People Santee Cooper's diverse, talented and competent employees are to be commended for their hard work. Their efforts and loyalty through the years have contributed greatly to making Santee Cooper what it is today. Dedication to providing superb customer service and dependable power from dependable people is what keeps Santee Cooper one of America's most resourceful electric utilities.

John H. Tiencken Jr.

H. Donald McElveen, P.E.

President and Chief Executive Officer Chairman Board of Directors 6

II EXEC:[*UTIn VE l'a SUM MAR F'

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I~

S CORORTE I

Caena Yea 2001 2000 19919819 (1) Amounts accrued for payment to the municipalities as franchise fees are not included. Amounts totaled $2,679,000 for 2001, $2,544,00 for 2000, $2,427,000 for 1999,

$2 333,000 for 1998, and $2,168,000 for 1997.

(2) Prior year amounts for 1997 have been re-stated to conform to current year presentation.

(3) Does not include non-firm sales to other utilities.

(4) The number of facilities served by the Authority under the Large Light & Power category has not decreased; however, one facility previously served under three service agreements is now served under one service agreement.

Caledar ear2001200

% C ang Total Revenues & Income Total Expenses & Interest Charges Other Income Before Contributions and Transfers Debt Service Coverage (w/o Commercial Paper)

Debt/Equity Ratio (w/o Commercial Paper)

Financial (in thousands of dollars)

$ 999,925 896,834 (36,581)

$ 66,510 1.79 times 69/31

$912,206 816,346 (21,043)

$ 74,817 1.81 times 73/27 9

9 57 (12) 7 Total Electric Revenue (in thousands of dollars) 968,795 858,458 810,572 772,157 724,211 Interdepartmental Sales of Electricity and Water (300)

(260)

(230)

(223)

(239)

Total Electric Revenue-Net of Interdepartmental Sales (in thousands of dollars) 968,495 858,198 810,342 771,934 723,972 Water System 4,544 4,21 7 3,824 3,705 3,852 Total Operating Revenues (in thousands of dollars) 973,039 862,415 814,166 775,639 727,824 Operating & Maintenance Expenses Charged to Operations (in thousands of dollars) 627,493 541,515 480,371 446,537 429,209 Sums in Lieu of Taxes Charged to Operations(" (in thousands of dollars) 2,521 2,490 2,238 2,134 2,203 Payments to the State (in thousands of dollars) 9,216 8,497 7,883 7,605 7,462 Net Operating Revenues Available for Debt Service (in thousands of dollars) 366,435 354,114 354,830 345,498 317,940 Income Before Contributions and Transfers (in thousands of dollars)(2" 66,510 74,817 47,384 39,345 13,596 Energy Sales (in gigawatt-hours) 22,400 22,139 20,281 19,466 18,437 Number of Customers (at year end)

Retail 130,897 128,513 124,647 119,470 114,290 Military and Large Industrial 33tut 35 35 33 33 Wholesale(')

5 4

4 5

5 Total 130,935 128,552 124,686 119,508 114,328 Summer Peak Generating Capability (net megawatts) 3,520 3,518 3,518 3,518 3,360 Power Requirements and Supply (in gigawatt-hours)

Generation: Hydro 220 301 304 571 520 Steam 18,581 19,206 17,165 15,933 15,401 Combustion Turbine 12 33 46 41 7

Nuclear 2,243 2,113 2,450 2,723 2,412 Landfill Methane Gas 4

Total (in gigawatt-hours) 21,060 21,653 19,965 19,268 18,340 Purchases, Net Interchanges, etc. (in gigawatt-hours) 1,445 170 408 506 310 Total Territorial Energy Sales (in gigawatt-hours) 22,505 21,823 20,373 19,774 18,650 Territorial Peak Demand (in megawatts) 4,803 3,876 3,729 3,523 3,336

Some 1.6 million South Carolinians receive power generated by Santee Cooper.

Santee Cooper adds generating capacity to meet forecast demands.

The combined-cycle portion of the John S. Rainey Generating Station, Santee Cooper's first major venture into natural gas-fired electric generation, was completed by year's end. The Rainey Station is Santee Cooper's first wholly owned electric generating facility constructed outside the state's Lowcountry and Pee Dee areas. The 500-megawatt combined-cycle unit, which began commercial operation on Jan. 1, 2002, features two combustion-turbine generators and one steam-turbine generator. The station's two 150-MW simple-cycle generators are slated for commercial operation in the spring of 2002.

"* In November, the Santee Cooper Board of Directors voted to construct three additional 80-MW combustion-turbine units at Rainey Station. The $120 million project is scheduled for completion by 2004.

"* The new units bring the station's total cost to $517 million and total generating capability to 1,040 megawatts.

This new station will be the third largest generating facility on the Santee Cooper system.

"* By comparison, the Cross Station's capability is 1,160 MWs, nearly matched by Winyah Station's 1,155 MWs.

Generating electricity is one thing. Getting the power where it needs to go is another. Completion of the 30-mile long Rainey-Greenwood County 230-kilovolt double-circuit transmission line, and the Rainey 230-kV switching station, were projects critical to Rainey Station's successful startup.

Territorial Peak Demand 1997 1998 1999 2000 2001 Based on load forecasts, even more generation is needed. In May, the board authorized a third coal-fired unit at the Cross Station. The 600-MW unit, costing $675 million, is projected to enter commercial operation no later than 2007.

With a total of 1,760 MWs online, Cross will become Santee Cooper's largest station in terms of generating capability.

Cross Generating Station has a generating capacity of 1,160 megawatts.

3,336 3,523 3,729 3,876 4,803 (in megawatts)

Capacity 1997 1998 1999 2000 2001 3,659 3,817 3,917 3,967 4,306 (in megawatts, includes Rainey Station and purchased power from SEPA and COE)

SEPA =Southeastern Power Administration COE=U.S. Army Corps of Engineers Green Power: A first for South Carolina.

Santee Cooper, as well as South Carolina, had another electric generation "first" in 2001. The Horry County Landfill Gas Generating Facility began commercial operation in September. Methane gas, produced from decaying refuse at the landfill provides fuel for the small plant.

The plant was dedicated in October with Gov. Jim Hodges giving the keynote address before a host of dignitaries.

Using two Austrian-built V-20 engines, the plant can produce 2 MWs of power. Another unit has been ordered, and additional studies are underway to determine if the site can accommodate more units.

The landfill gas project was truly a cooperative project. The Horry County Solid Waste Authority constructed and owns the gas collection and blower system. Santee Cooper owns the generators and associated equipment. Because Santee Cooper lines were not in close proximity to the site, Horry Electric Cooperative rebuilt their line to allow power from the plant to enter the grid.

It's called "Green Power" because the fuel is produced from a renewable resource. Santee Cooper began offering Green Power to its Horry and Georgetown county customers in October. The Green Power program is entirely voluntary. A total of 328 customers, purchasing 2,658 100 kWh blocks of power, signed up in 2001. Because it generally costs more to produce Green Power than electricity produced from 10 I POWER I

conventional sources, customers pay a 3 cents per kilowatt-hour premium. Money from premiums is being set aside to fund future renewable energy projects. Initially, Green Power is being offered to customers of Horry Electric Cooperative and Santee Electric Cooperative.

'01,

+teeooDe eOER Santee Cooper became the first utility in the state to provide green power to its customers.

More customers create more demand for power.

Approximately 6,300 retail customers have been added in the last two years, nearly 2,400 in 2001. Santee Cooper now has approximately 131,000 retail customers.

More customers mean an increased demand for power. The state's population growth in the last decade dramatically shows why Santee Cooper Chairman Donald McElveen, Gov. Jim Hodges, Horry County Council Santee Cooper is actively constructing Chairman Chad Prosser, and Harry County Solid Waste Authority Chairman Carson Benton new generation, pull a symbolic switch signifying the start of According to the U.S. Census green power generation.

Bureau, the state's population grew 15.1 percent from 1990 to 2000. This ranked South Carolina as the 15th fastest growing state in the nation.

Horry County, one of three counties where Santee Cooper has retail customers, showed the most dramatic increase, growing 36.5 percent. This translated into nearly 53,000 more residents, all of whom expect reliable and affordable electricity.

Georgetown County grew 18 percent, adding 9,500 people while Berkeley County's decade of growth was 11 percent or 34,500 additional citizens.

Santee Cooper set an all-time record for power delivery on Jan. 4 when 4,803 MWs were delivered between 7 and 8 a.m. The all-time demand record was the third in as many days.

Santee Cooper line crews restore power quickly.

Weather is a threat to Santee Cooper's ability to deliver reliable power. Fortunately, a hurricane did not threaten South Carolina in 2001. But on July 6, two separate afternoon tornadoes struck Myrtle Beach.

The twisters injured 36 persons, hospitalized 30 and caused $6.5 million in damages to buildings and at least $1 million in damages to vehicles. Thousands lost power and crews went into action as soon as the threat of severe weather subsided.

Tornadoes are a threat any time of year in South Carolina and last summer's experience was a dramatic reminder to monitor weather conditions.

Power was restored to the majority of Santee Cooper customers in just over 12 hours1.388889e-4 days <br />0.00333 hours <br />1.984127e-5 weeks <br />4.566e-6 months <br />.

11 I

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Storage tanks at Rainey Station hold 500,000 gallons of filtered water used in the generation of electricity.

For the first time, Santee Cooper is now a statewide electric utility.

On Jan. 1, Santee Cooper became the source of power for five Upstate electric cooperatives that serve 160,000 member-consumers in 15 counties.

For over half a century, Santee Cooper has been the primary source of power for 15 of the state's 20 electric cooperatives, wholesaling power to Central Electric Power Cooperative. The Columbia-based Central is a transmission cooperative, and beginning in the late 1940s has sold power directly to these distribution cooperatives serving member-consumers in 38 counties.

On New Year's Day 2001, Saluda River Electric Cooperative began receiving power from Santee Cooper under a separate power agreement.

These developments are very significant. For the first time in Santee Cooper's nearly six decades of providing power, Santee Cooper is a statewide electric utility.

Headquartered in Laurens, Saluda River is a generation and transmission cooperative that owns 18.75 percent of Duke Energy Corp.'s Catawba Nuclear Station's Unit 1 in York County. The cooperative also owns 17 MWs of its own diesel generation and two megawatts of hydroelectric gener ation. Saluda River is also entitled to 40 megawatts of capac it), from the Southeastern Power Administration.

Santee Cooper welcomes Saluda River Electric Cooperative and its member cooperatives, now a member of Central. A new public power and cooperative alliance has been forged that serves the people of South Carolina.

Saluda River's member cooperatives are:

"* Blue Ridge Electric Cooperative -

headquartered in Pickens serving 55,300 member-consumers in Anderson, Greenville, Oconee, Pickens and Spartanburg counties.

"* Broad River Electric Cooperative -

headquartered in Gaffney serving 17,600 member-consumers in Cherokee, Newberry, Spartanburg and Union counties -

and North Carolina member-consumers in Cleveland, Polk and Rutherfordton counties.

12

"* Laurens Electric Cooperative -

headquartered in Laurens -

serving 43,250 member-con sumers in Abbeville, Anderson, Greenville, Laurens, Newberry and Union counties.

"* Little River Electric Cooperative -

headquar tered in Abbeville -

serving 12,600 member consumers in Abbeville, Anderson, Greenwood and McCormick counties.

"* York Electric Cooperative -

headquartered in York -

serving 31,000 member-consumers in Cherokee, Chester, Lancaster and York counties.

Growth in Central Electric Power Cooperative's territory in 2001 was approxi mately 3 percent.

Santee Cooper is the direct or indirect source of power for 1.6 million South Carolinians.

A New Horizon employee places a new logo on one of their service vehicles which will help increase awareness of Santee Cooper in the Upstate. The decal identifies Santee Cooper Power as the source of energy for Saluda River Electric Cooperative, for which New Horizon provides transmission services.

Of Santee Cooper's 2001 total power supply, 82 percent was provided by coal-fired generation.

Santee Cooper operates with dependability and efficiency.

For 2001, Winyah Station claimed the top honor in the 17th annual Generation Goals Program. Winyah won by operating below its nonfuel operations and maintenance goal, its net heat-rate target, reducing unplanned outage time and meeting its safety targets.

Santee Cooper and three other publicly owned electric utilities became founding members of Colectric Partners Inc., a generation alliance. Members are provided information and purchasing leverage related to the development, project management, operations and maintenance areas of their generation, transmission, distribution, gas and infrastructure facilities. Other founders are JEA (formerly the Jacksonville Electric Authority), MEAG Power (the Municipal Electric Authority of Georgia) and the Nebraska Public Power District.

Three of these utilities (Santee Cooper, MEAG and JEA) also founded The Energy Authority in 1997, which is responsible for marketing and trading on Santee Cooper's behalf in the wholesale electric market, as well as managing Santee Cooper's natural gas requirements for its Rainey Station.

Santee Cooper burned approximately 7.1 million tons of coal in 2001.

Santee Cooper is taking the fly ash and other combustion byproducts that historically have been waste and is developing uses and markets for these byproducts. Annual utilization of combustion products has reached 47 percent.

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In September, Santee Cooper began an awareness program to educate customers about the Green Power program. Some 328 customers have signed up for the program.

Highlights included:

• 315,000 tons of ash were utilized in cement, redi-mix concrete and concrete block.

• 70,000 tons of gypsum produced at Cross Station were shipped to cement plants at Harleyville, S.C.

• Revenues for ash and gypsum sales exceeded $1.6 million.

The city of Myrtle Beach inked a 20-year franchise agree ment extension, and the Bamberg Board of Public Works inked a 10-year contract extension. Santee Cooper has served Myrtle Beach since the mid-1940s. The municipally owned electric utility in Bamberg has had Santee Cooper as its source of power since the 1950s.

The V.C. Summer Nuclear Station returned to service in March after a nearly five-month refueling and maintenance outage. What began as a routine refueling and inspection soon changed when a small leak was discovered in a weld in the reactor's coolant system pipe.

A section of piping, including the entire weld, was removed and replaced with a new section of pipe. This repair work, unique to the industry, extended the outage I

longer than expected.

Santee Cooper owns one third of the 1,000-MW station, located near the Fairfield County town of Jenkinsville, and receives approximately 320 MWs of the station's generating capability.

For the year 2001, this represented nearly 10 percent of Santee Cooper's total power supply.

In commercial operation since 1983, the V.C. Summer Station is operated by S.C. Electric & Gas Co., an investor owned utility. Summer Station has had an exemplary oper ating and safety record. It routinely receives high marks in periodic reviews by the Nuclear Regulatory Commission.

"° Total megawatt-hour sales increased 1 percent, totaling 22,400,015 MWhs. Retail MWh sales were up 1 percent, industrial 0.6 percent and wholesale 1.6 percent.

"* Electric revenue growth increased 13 percent, totaling

$968,795,000. Retail revenue increased 6 percent, industrial 8 percent and wholesale 18 percent.

Santee Cooper sold, through The Energy Authority, 308,851 MWhs in 2001.

Generation set an all-time availability record at 96.1 percent. The national average is in the mid-80s.

At Santee Cooper, the term "dependable power" isn't just a saying. Santee Cooper's transmission reliability in 2001 was 99.998 percent. On the distribution side, the reliability was also high at 99.994 percent.

Mechanic A Derrick Ginn tightens a pipe flange at Rainey's fuel oil filling station.

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Santee Cooper has 4,386 miles of trans mission lines, an increase of 153 miles.

A group of nine utilities and transmission system operators, including Santee Cooper, announced plans in June to explore the possible development of a regional transmission organization or RTO. The organization would be called the SeTrans RTO. The Federal Energy Regulatory Commission, through its Order 2000, is encouraging utilities to form RTOs.

Customer Core Center Manager Ken Sandiford shows some of the many features of Santee Cooper's Interactive Voice Response system.

Once again, Santee Cooper employees had a very successful safety year.

The 2.39 incident rate (number of recordable injuries/illnesses per 100 employees) was the second best in company history, surpassed only by the prior year's 2.30 rate. As a result, associated Workers' Compensation costs were approximately 30 percent below budgeted levels.

Customer service works hard to make life easier.

Customer service has always been a hallmark of Santee Cooper's service to the people we serve. A new call center, which receives an average of 17,000 calls per month, gives customers a faster, more efficient way to do business.

As another example, customers can now pay their bill via the Internet, using "e-Billing." This service is free to customers and reflects Santee Cooper's "easy to do business with" philosophy.

Retail bills were reformatted to be more easily understood with added information on consumption history.

The Interactive Voice Response, or IVR system, was implemented. It efficiently allows customers to report power outages and is capable of handling over 3,000 reports every hour.

More than 9,000 meters in Horry, Georgetown and Berkeley counties are being read using an automated meter reading system. This reduces the need for additional meter readers and allows meters in difficult locations to be more easily read.

The annual Residential Customer Satisfaction Rating released in November indicated 99.3 percent of customers are satisfied overall with the performance of Santee Cooper.

A new program, leasing standby generators to commercial customers Santee Cooper hosted the APPA Lineman's who desire a backup source of power, Rodeo in Myrtle Beach, S.C. March 24. Three began in June. Santee Cooper installs and Santee Cooper teams placed in the event, with one team being named the overall winner.

maintains the equipment and the customer pays a monthly fee.

Santee Cooper was host to the first American Public Power Association Lineman's Rodeo. Held in Myrtle Beach, one of Santee Cooper's teams won first place in the event.

To meet the increased threat to corporate information and systems posed by expanding Internet connectivity, Santee Cooper recently established a new MIS unit. The unit is dedicated to enhancing Santee Cooper's Information Technology, or IT, security program.

15 I

POWER

Santee Cooper employees give many hours to outreach programs in the community and schools. Pictured here from left to right is Nan Faulk (Moth Buddies at Berkeley Intermediate School), Chris Hively (liaison with business-education partner Westview Middle School), Arthur Ford (liaison with Sampit Elementary School),

Darby Gallagher (liaison with Cross High School), Susie McCaskill (liaison with Waccamaw Elementary School), Lisa Napier (Lunch Buddies at Berkeley Middle School),

Santee Cooper programs star in a supporting role.

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Linda Pickens (liaison with Loris Elementary School), Mitch Mitchum (liaison with Conway Elementary School), Neil James (CHOICES participant at Loris Middle School), Susan Jackson (Read with a Child, Berkeley Elementary School), and Mike Lankford (CHOICES participant at Macedonia Middle School).

The Community Relations unit at Santee Cooper completed its most extensive and successful year through outreach programs.

These programs improve education, support the arts and culture, and help to protect the environment. Support is also lent to key charitable efforts in the communities we serve.

High Performance Partnerships were signed with Berkeley Middle School, Macedonia Middle School and Loris Middle School. A cooperative project with the S.C. Chamber of Commerce, these partnerships help schools identify issues that may be keeping teachers from teaching and students from learning.

CHOICES is a program that introduces eighth-graders to adult-like challenges. Santee Cooper employees teach the nationally known program at Carolina Forest Middle School in Myrtle Beach, Macedonia Middle School in Macedonia and Berkeley Middle School in Moncks Corner.

How is this done? In the program's primary exercise, students are told they are "on their own." They are then given an imaginary job and salary, then instructed to start paying monthly bills that are a routine part of adult life.

Participants quickly discover they must budget for the necessities. It's an eye-opening experience and these young people soon discover the importance of getting an education to get a better job. The message for these youngsters is: The choices you make now largely determine the type of life you will live.

17

The Read With a Child Program at Berkeley Elementary School puts employees in the classroom to share stories with young minds eager to learn about the world.

Math Buddies at Berkeley Intermediate School is direct instruction for third-graders who are learning their multiplication tables.

Pairing a student with a mentor is what Lunch Buddies is all about. A child is assigned an employee and they get to know each other throughout the school year.

There are 22 employees participating in this program, now in its 4th year.

The Santee Cooper Energy Educators Seminar exemplifies educational outreach.

Now in its 13th year, over 850 educators from across the state have come to the Wampee Conference Center for a week of intense instruction on the electric power industry in general and Santee Cooper in particular. This program has continued to receive rave reviews. Teachers can receive recertification credit by completing this program.

The Power Line Hazard Awareness Demonstration unit, called PHAD for short, is one of Santee Cooper's more popular outreach programs. Training and Development instructors showcase and educate the public on power line safety. Eighty-one demonstrations were made to nearly 7,100 children and 250 adults throughout the state in 2001.

.q Santee Cooper sponsors the Cypress After Five concert series in Senior Auditor Belinda Nelson reads with a student at Berkeley Manning. It's the most popular cultural event in Clarendon County, Elementoryi SchooL bringing the Charleston Symphony Orchestra, jazz and popular music to the heart of Santee Cooper Country.

Other participation in the community included the 2001 Fire & Safety Expo held in Myrtle Beach in October and the Black Business Expo held in Charleston in March.

Santee Cooper co-sponsored a community benchmarking project on quality of life issues in Berkeley, Charleston and Dorchester counties. Other sponsors were The Community Foundation Serving Coastal South Carolina, the Charleston Metro Chamber of Commerce and the Trident United Way.

Santee Cooper employees have traditionally been generous to the annual United Way campaigns. Over $150,000 was raised by employees for Trident United Way, Horry County United Way, and Georgetown County United Way.

The American Cancer Society's Relay for Life fund-raising campaign, conducted over several months, raised almost $45,000 from six Santee Cooper teams. The Relay for Life campaign in Berkeley County was tops in the state, raising $190,000.

The Society of Human Resource Management's Innovative Practice Award was presented to Santee Cooper. This occurred in October for the Equal Opportunity Administration's diversity awareness exercise. Santee Cooper's overall affirmative action goals progress remained at 100 percent.

18 PEOP1LE 1

POWER LI1 JE HAZARDS 6WARENESS DE-' NSTRATION I:t In 200 1, Santee Cooper employees and retirees made over 80 demonstrations of the Power Line Hazards Awareness Demonstration unit. Employees participat ing in this demonstration ore Everette Wright, line technician and Anthony German and Cloud Wessinger both Training instructors.

Santee Cooper works to create a more dependable economic base.

The human tragedy that will forever be summarized by the date, Sept. 11, had an immediate impact on economic activity and economic development.

The economy was instantly slowed, an I

economy already nearing an expected downturn and recession. Still, consider able progress was made during the year by economic development activities conducted by Santee Cooper and Palmetto Economic Development Corporation (PEDC).

Construction of a 2.

manufacturing facih Formed in 1988 by Santee Cooper Center was complet and Columbia-based Central Electric Power Cooperative, PEDC promotes economic development in the service territories of Santee Cooper and the areas served by the state's 20 distribution cooperatives in every South Carolina county. The 2001 report card includes:

• $17.97 million in new investment

• 810 new jobs

• 2,000 kilowatts of new load 5,001 ity in ed in I

The St. Stephen Commerce Park broke ground for its first tenant, Acutec Precision Machining. The 12-year-old Pennsylvania-based manufacturer makes aeronautical components for Boeing jets, Bell helicopters and gas turbines. Its

$2 million, 20,000-square foot facility became operational in the fall and employs approximately 20 people.

Construction was completed and the dedication was held in September 0 square-foot shell on a 25,000-square foot shell manufac the Loris Commerce turing facility at the Loris Commerce September.

Center. This building directly and positively affects the economic development of the city of Loris with a much-needed "product," critical to its future economic growth.

Santee Cooper, the Horry County-based PARTNERS Economic Development Corp., PEDC and Loris are now actively marketing the new facility.

Santee Cooper continued to provide important resources to critical needs, funding economic development through matching grants and economic-development incentive funds to rural communities in their efforts.

19 v

The Wadboo Creek Canoe Trail was recently constructed as a joint effort between Santee Cooper, the U.S. Forest Service and Berkeley County. Trail users canoeing through the creek will enjoy an unspoiled view of a Lowcountry black water creek environment.

Santee Cooper shows its true color: green.

In the same year that Santee Cooper introduced Green Power, our Give Oil for Energy Recovery or GOFER program celebrated its 11th year by collecting 2 million gallons of used oil, another new record. This exceeded last year's collection by 30 percent.

GOFER began as a way to collect used motor oil from do-it-yourself (DIY) oil changers -

and to protect South Carolina's soil and water resources from improper disposal. Working with the S.C. Department of Health and Environmental Control (DHEC), county and municipal governments, and electric cooperatives, 545 collection tanks have been placed statewide. Santee Cooper has a fleet of trucks and four drivers picking up used oil. It is transported to a Santee Cooper generating station where it is safely converted into electric power.

Since its inception, 10 million gallons have been collected.

This has produced enough electricity to light up 13,700 average-sized homes for one year.

While the number of GOFER sites essentially remained the same as last year, 275 new industrial and commercial clients joined the program. Estimates are this new source of oil will contribute approximately 300,000 gallons annually.

The GOFER program is the state's largest used motor oil collection program. Figures published by S.C. DHEC's Office of Solid Waste Reduction and Recycling show the GOFER program collects approximately 84 percent of collections annually reported to the agency.

GOFER is a highly visible aspect of Santee Cooper's service to the state. The program offers DIYers convenience and safety and is an outstanding example of how governmental partnering can result in tremendous environmental benefits.

20

Clean sweeps.

The Santee Cooper board voted in June to spend $280 million on equipment that will reduce nitrogen oxide emissions at coal-fired generating stations. The equipment will be installed over the next four years on certain units at the Cross, Grainger and Winyah stations.

The expenditure and the equipment's installation is necessary for Santee Cooper to maintain compliance with new federal air emissions requirements. In addition to Santee Cooper, utilities in 22 Eastern states are affected by the requirements.

Ground was broken in June on construction of a new plant at Winyah Station to recycle one-half million tons of fly ash. Southeastern Fly Ash Co. is constructing a $13.5 million carbon recycling facility. When completed in June 2002, it will employ 30 people and have a payroll in excess of $1 million.

A $100 million project to significantly reduce overall sulfur dioxide emissions at the Winyah Station got the go-ahead by the Santee Cooper board in May. Marsulex, based in Toronto, Canada, will construct and own two special flue gas desulfurization units, commonly called "scrubbers," at Winyah. Marsulex will lease 15 acres from Santee Cooper for the project, which will create 25 to 30 permanent jobs.

The new process will use Marsulex's patented scrubber technology. The byproduct of the scrubbing process is a granular form of ammonium sulfate, highly desirable as a fertilizer.

Employees load fly ash into a SEFA truck at the fly ash silo at Winyah Generating Station.

Environmental excellence by the gallon.

In May, the Santee Cooper Regional Water System was named as the newest member of the S.C. Environmental Excellence Program. The system earned the honor because the system is designed and operated in a way that reduces the use of electricity and finds alternate reuse for residual material after water is treated.

Santee Cooper sells drinking water wholesale to four Lowcountry water utilities. They are Berkeley County Water and Sanitation Authority, Summerville Commissioners of Public Works, the City of Goose Creek and the Town of Moncks Corner Public Works Commission. The 30-million gallons per day system became operational in 1994 and now serves 94,000 consumers.

The 10th South Carolina Environmental Symposium, of which Santee Cooper is the founder and primary sponsor, drew a diverse gathering of 150 leaders from industry, government and business at the two-day event.

Held in Columbia, the keynote speaker was self-described "corporate environmentalist" Ray Anderson. The author of three acclaimed books, including 1995's "The Journey From Here to There -

the Eco-Odyssey of a CEO," Anderson is the chairman of the board of the Georgia-based Interface Research Corp. Interface is a major carpet and home furnishings manufacturing firm.

In November, volunteers from the committee for the Preservation of Lakes Moultrie and Marion, the Lake Marion Association and the Santee Cooper Waterfowl & Fisheries Coalition conducted a cooperative project. Along with Santee Cooper employees, they planted 665 button bushes at mud flats on Lakes Marion and Moultrie. The plants will provide additional structure and cover for fish in shallow water and provide food for migratory waterfowl.

21 I

PEOPLEJ

Supervisor of Analytical and Biological Services Larry McCord assists with the planting of 665 button bushes in Lakes Marion and Moultrie.

Improving habitats.

Employees in Berkeley County are partners with the S.C. Department of Transportation. In the Adopt-a-Highway program, they scour U.S. Highway 52 between Cypress Gardens Road and Oakley Road, just south of Moncks Corner. In May, the S.C. Department of Transportation recognized Santee Cooper as the Outstanding State Group of the Year.

In October, the Fall for Beautiful Berkeley cleanup campaign puts volun teer employees to work to make the county's highways and byways more attractive. Over three tons of trash were collected and the Berkeley County Water and Sanitation Authority honored Santee Cooper for the cleanup effort.

Santee Cooper co-sponsored the Envirothon in April, a program whereby 32 teams of high school students test their knowledge and skills in five areas of natural resources study: soils, aquatics, forestry, wildlife and household nonpoint-source pollution. Envirothon is now held annually in 42 states and eight Canadian provinces. The South Carolina event was held at Clemson University's Sandhills Research and Education Center near Columbia.

Representatives of Project Habitat presented Santee Cooper their Wildlife Enhancement Partnership Award. Project Habitat utility members use low-volume herbicides to manage their rights of way. This method of management controls fast-growing trees that can grow into power lines, while encouraging the growth of low-growing plants and flowers favored by wildlife. Santee Cooper is one of 41 utilities participating in the seven-year-old program.

Santee Cooper assisted the S.C.

Department of Natural Resources and local lake-user groups in stocking native game fish into Lakes Marion and Moultrie. During 2001, some 100,000 largemouth bass and 20,000 white crappie were spawned and stocked.

A productive partnership continued with the U.S. Fish and Wildlife Service to improve operations at the Santee National Wildlife Refuge located on Lake Marion. Aquatic plant management operations were conducted on 30 acres of refuge property, returning the land to productive use. Two water-control structures were provided and one large pump and one diesel engine were repaired for refuge use.

Supervisor of Aquaculture Jim Tuten and Equipment Operator 11 Scott Nelson seine for largemouth bass which will be introduced into the Santee Cooper lakes.

IPEOPLE values - torcass wha ism truy m potn il u lives.~

SatePoc prahdt7 erilS*

41)-H vi-erc fsudpicpe ha ilsreyuwlilteodtlisal

Availability - The amount of time that a system is available to provide service, usually expressed in percentage, for a specific period of time such as a month or year.

Btu (British Thermal Unit) - The standard unit for measuring quantity of heat energy, such as the heat content of fuel. It is the amount of heat energy necessary to raise the temperature of one pound of water one degree Fahrenheit.

Capacity - The load for which a generating unit, generating station, or other electrical apparatus is rated either by the user or by the manufacturer.

Combustion turbine - A jet-type turbine engine which burns gas or oil and propels a generator to produce electricity.

Commercial customer - All nonresidential retail customers served under the General Service rate schedules. Generally, these customers have a demand less than 1,000 kW per month.

Demand - The rate at which electric energy is delivered to or by a system, part of a system or a piece of equipment. It is expressed in kilowatts at a given instant or averaged over any designated period of time. The primary source of "demand" is the power-consuming equipment of the customers.

Deregulation - The elimination of regulation from a previously regulated industry of sector.

Distribution - The process of delivering electric energy from convenient points on the transmission or bulk power system to the consumers. Also, a functional classification relating to that portion of utility plant used for the purpose of delivering electric energy from convenient points on the transmission system to consumers, or to expenses relating to the operation and maintenance of distribution plant.

Electric cooperative - A group of persons who have organized a joint venture for the purpose of supplying electric energy to a specified area. In South Carolina, there are 20 electric co-ops, which receive Santee Cooper-generated power.

Energy sales - The sale of electric energy to wholesale and retail customers usually expressed in kilowatt-hours.

FERC (Federal Energy Regulatory Commission) - An independent federal agency created within the Department of Energy, FERC is vested with broad regulatory authority over whole sale electric, natural gas, and oil production and the licensing of hydroelectric facilities. Among other things, the agency has regulatory authority over the safety of Santee Cooper's dams and dikes.

Fly ash - Gas-borne particles of matter resulting from the combustion of fuels and other materials.

Generating unit - A combination of equipment needed to produce electricity, such as a turbine generator and its boiler. A generating station usually consists of several units.

Gypsum - This is both a naturally occurring and an artificially produced calcium sulfate (CaSO4) compound. It is used for a multitude of purposes including sheetrock, fertilizer and cement produc tion. Artificial gypsum may be produced by utilities using forced-oxidation desulfurization systems.

Heat rate - A measure of generating station ther mal efficiency, generally expressed in Btu per net kilowatt-hour. It is computed by dividing the total Btu content of fuel burned for electric generation by the resulting kilowatt-hour generation. The lower the heat rate, the more efficient the production.

Income before contributions and transfers Net revenues available for reinvestment in the business.

Industrial customer - Very large retail customers served under Santee Cooper's Large Light and Power rate schedule (or associated riders). These customers have a demand greater than 1,000 kW.

Investor-owned utility - Refers collectively to those integrated utilities organized as privately owned, taxpaying entities financed by the sale of stock in the free market and managed by represen tatives (directors) regularly elected by stockholders.

Kilowatt (kW) - 1,000 watts.

Kilowatt-hour (kWh) - The basic unit of electric energy equal to one kilowatt (1,000 watts) of power flowing through an electric circuit steadily for one hour.

Load - The amount of electric power delivered or required at any specified point or points on a system.

Megawatt (MW) - One million watts or 1,000 kilowatts.

Megawatt-hour (MWh) -The basic unit of electric energy equal to one megawatt (1,000 kilowatts) of power flowing through an electric circuit steadily for one hour.

North American Electric Reliability Council (NERC) - Formed in 1968, its mission is to promote the reliability of the electricity supply for North America.

Open Access Same-Time Information System (OASIS) - A computer information system that enables all buyers and sellers to have equal access to Santee Cooper's transmission system. It is designed to ensure that transmission owners do not have an unfair advantage in using their own transmission resources to sell or wheel power.

Peak demand - The maximum amount of electricity used by a utility customer at any instant during a specific time period. The peak is used to measure the amount of electric generating capacity that is required to meet that maximum demand.

Public power - Refers collectively to those utilities owned by municipalities or the state or federal government. Although not government owned, electric cooperatives are sometimes considered within the scope of public power.

Regional Transmission Organization (RTO)

A voluntarily created entity approved by the Federal Energy Regulatory Commission to efficient ly coordinate transmission planning, operation and use on a regional and interregional basis. It may be a nonprofit or for-profit entity and it may or may not own the transmission facilities that it operates.

Residential customer-The classification of customers to whom electricity is sold for house hold purposes.

Restructuring - The changes in the regulatory and statutory policies governing electric utilities as well as the changes that are taking place in the marketplace and electric utility industry as a result of these changes in policies.

Retail customer - These customers are the ultimate consumer of electric energy. Includes residential, commercial, small industrial and other non-wholesale customers.

Revenue bond - A bond payable solely from net or gross non-taxable revenues derived from the operation and charges paid by users of the system.

Substation - An assemblage of equipment for the purpose of switching and/or changing or regulating the voltage of electricity.

Tax-exempt financing - A form of financing employed by publicly owned utilities that allows such utilities to issue bonds where the interest paid on the bonds is not generally subject to taxation.

This policy, established in law, stems from the long-standing philosophical viewpoint that publicly owned utilities (electric, water, sewer) provide basic services to the citizens they serve and thus should not be taxed.

Transmission - The process of transporting electric energy in bulk from a source or sources of supply to other principal parts of the system or to other utility systems. Also, a functional classification relating to that portion of utility plant used for the purpose of transmitting electric energy in bulk to other principal parts of the system or to other utility systems, or to expenses relating to the operation and maintenance of transmission plant.

Watt - The basic electrical unit of power or rate of doing work. The rate of energy transfer equivalent to one ampere flowing due to an electrical pressure of one volt at unity power factor. One watt is equivalent to approximately 1/746 horsepower, or one joule per second.

Wholesale customer - A customer who purchases all or part of their electricity from the electric utility for resale.

23 I

11O * %

Santee Cooper's Winyah Station, located in Georgetown County, has a generating capacity of 7,155 megawatts. It was at this generating station that one of the first scrubbed units in the Southeast was installed.

FINANCIAL STATEMENTS CALENDAR YEAR 2001 24

I, FIiNC-ADI hOM IT C

LETTER The Finance-Audit Committee of the Board of Directors is composed of six independent directors: Merl F. Code, Laura M. Fleming, Frances B. Gilbert, Rev. Willie E. Givens Jr.,

John R. Jordan Jr. and Joseph J. Turner Jr.

The Committee meets monthly with members of management and Internal Audit to review and discuss their activities and responsibilities.

The Finance-Audit Committee oversees Santee Cooper's financial reporting and internal auditing processes on behalf of the Board of Directors. Periodic financial statements and reports from management and the internal auditors pertaining to operations and representations were received. In fulfilling its responsibilities, the Committee also reviewed the overall scope and specific plans for the respective audits by the internal auditors and the independent public accountants. The Committee discussed the Company's financial statements and the adequacy of its system of internal controls.

The Committee met with the independent public accountants and with the General Auditor, without management present, to discuss the results of the examination, the evaluation of Santee Cooper's internal controls, and the overall quality of Santee Cooper's financial reporting.

Laura M. Fleming Chairman Finance-Audit Committee 25

Management's Discussion and Analysis Financial Highlights Operating revenues for 2001 increased $110.6 million or 13% primarily due to higher fuel adjustment revenue and a small gain in kWh sales. Fuel adjustment revenue was up $117.8 million over last year due to higher fuel and purchased power costs. The Authority began supplying wholesale electric service to the Saluda cooperatives on January 1, 2001, which added about 160,000 customers to the system. In that same month, a new historical generation peak of 4,803 mWh was established in January. However, 2001 as a whole had the lowest number of degree days in recent 5-year history. This warmer weather resulted in less than expected electric sales.

Operating expenses for 2001 increased $88.2 million or 14%. Fuel and purchased power expense was up

$68.8 million compared to last year due to the combi nation of the gain in kWh sales and the extended outage at V.C. Summer Nuclear Station causing a greater reliance on more expensive fuel types and higher purchased power.

Operating income was up $22.4 million or 11% as a result of these differences.

Interest charges for 2001 were down $7.7 million (5%) compared to last year due to lower debt balances and lower commercial paper rates.

Costs to be recovered from future revenue was

$15.5 million or 74% higher than last year due to higher principal payments this year compared to last year.

Other income dropped $22.9 million or 46%.

Interest income was down $11.7 million (41%)

due to lower interest rates and less funds available for investment. Miscellaneous income decreased

$9.2 million (71%) primarily due to decreased 2001 1 2000 (Thousands)

Operating revenues

$ 973,039

$ 862,415 Operating expenses

$ 741,004

$ 652,805 Operating income

$ 232,035

$ 209,610 Interest charges

($ 155,830) ($ 163,541)

Cost to be recovered from future revenue

($ 36,581) ($ 21,043)

Other income 26,886

$ 49,791 Change in net assets 57,294

$ 66,591 Ending net assets

$ 992,468

$ 935,174 gains on the sale of leased lots.

Change in net assets for 2001 was down $9.3 mil lion due to these differences.

Overview of the Financial Statements In June 1999 the Governmental Accounting Standards Board issued Statement No. 34, "Basic Financial Statements - Management's Discussion and Analysis - for State and Local Governments." The objective of this Statement is to enhance the under standability and usefulness of the external financial reports of state and local governments to the citizenry, legislative and oversight bodies, and investors and creditors. This Statement is effective for the Authority beginning in fiscal year 2001 ; consequently the pres entation of financial information this year is different from previous reports.

By definition within this Statement, Santee Cooper is deemed a special-purpose government engaged only in business-type activities; where a government entity operates like a business. GASB 34 requires the following components in a governmental entity's annual report.

Management's Discussion and Analysis The purpose is to provide an objective and easily readable analysis of the Authority's financial activities based on currently known facts, decisions, or conditions.

Balance Sheet Assets and liabilities of proprietary funds should be presented to distinguish between current and long-term assets and liabilities.

Statement of Revenues, Expenses and Changes in Net Assets This statement provides the operating results of the Authority broken into the various categories of operating revenue and expenses, non-operat ing revenues and expenses, as well as capital contributions and transfers out.

Statement of Cash Flows Using the direct method, sources and uses of cash from operating activities are illustrated.

Notes to the Financial Statements Used to explain some of the information in the financial statements and provide more detailed data.

26

Competition The electric utility industry in general has been affected by regulatory changes, market developments and other factors that have impacted, and will proba bly continue to impact, the financial condition and competitiveness of electric utilities and the level of uti lization of facilities, such as those of the Authority.

Historically, electric utilities have operated as monopolies in their service areas, subject to certain exceptions. Under this regulatory regime, electric utilities have generally been able to charge rates determined by reference to their costs of service, rather than by competitive forces, and customers of an electric utility with high rates have not been allowed to purchase power at lower rates from other electric utilities. In contrast, in a deregulated market, it is anticipated that customers in a particular service area will be permitted to choose among competing electric suppliers, resulting in a market price for elec tric power in that service area. An electric utility with power costs that are high in relation to the power costs of competing electric utilities may have costs that cannot be recovered by charging the market rate.

Although certain deregulation measures proposed to date would allow for recovery of some portion of the costs that would otherwise be non-recoverable when markets are deregulated, the ultimate regulatory treat ment of such costs cannot be predicted. The loss of customers by an electric utility, particularly in the absence of a method to recover costs allocable to such customers, could have a material adverse effect on the financial condition of the utility.

Senate Task Force on Deregulation of South Carolina's Electric Utility Industry.

Late in 1998, a 19 member Senate task force was established to study the deregulation of South Carolina's electric utility industry. The Task Force had its organi zational meeting on December 1, 1998 and consists of eight members of the Senate and 11 additional members, including the Authority's President and Chief Executive Officer, representing various stakeholder groups. The mission of the Task Force is to answer the threshold question of whether a fundamental restructur ing of the electric utility industry is in the best interests of the citizens of the State and, if so, to recommend legislative changes. The Task Force established five subcommittees: Operations, Consumer, Financial, Regulatory and Legal and Oversight. The Task Force has no specific deadline within which it must accom plish its work. The Task Force last met in November 1999. No future meetings of the Task Force have been scheduled, although no action has been taken to formally disband the group. The Authority is unable to predict whether there will be retail deregulation in the State and, if so, when or under what conditions.

Regulatory Matters Hydroelectric Relicensing The Authority operates its Jefferies Hydro Station and certain other property, including the Pinopolis Dam on the Cooper River and the Santee Dam on the Santee River, which are major parts of the Authority's integrated hydroelectric complex, under a license issued by the FERC pursuant to the Federal Power Act. The license, which has been renewed once, is scheduled to expire on March 31, 2006. A Notice of Intent to relicense the hydroelectric complex was filed with the FERC on November 13, 2000. The Authority has begun the ini tial strategic planning and preparation for relicensing.

SeTrans Participation Agreement On September 24, 2001 the Authority, along with six municipal and electric cooperative transmission owners and Southern Company (together with the Authority, the "participating transmission owners"), executed an agreement to investigate the development of a Regional Transmission Organization (RTO) for the southeastern United States, currently referred to as SeTrans. The Entergy Companies recently became signatories to this agreement; other transmission own ers in this region are expected to join the SeTrans development process. The RTO concept that is being explored involves utilizing an independent entity, which would own no generation or transmission assets, to operate the combined transmission assets of the participating transmission owners. The participating transmission owners would continue to own their respective transmission assets. These discussions and negotiations regarding the development of an RTO in the Authority's region are ongoing, and their outcome and any potential impact on the Authority are unknown at this time.

Impact of September 11, 2001 The impact that the terrorist attacks of September 11, 2001, may have on the Authority are not fully known at this time including changes in the cost and availability of sufficient insurance. Additional efforts have been implemented to bolster the security of employees and the generating, transmission and distribution facilities from direct attack. In addition, the Nuclear Regulatory Commission has instituted a series of heightened security measures at nuclear facilities around the country which apply to the V.C.

Summer Nuclear Station, of which the Authority is a one-third owner.

27

Capital Improvement Program The Authority's capital improvement program for years 2002 through 2004 consists of expenditures for the completion of the Rainey Generating Station, construction expenditures for Cross Unit 3 and Rainey Units 3, 4 and 5 and general improvements to the Authority's System. These general improve ments include the power supply facilities, extensions of and improvements to transmission and distribution facilities, environmental compliance, and other improvements to general facilities.

The total cost of the capital improvement program in years 2002 through 2004 is estimated to be approximately $1,028,000,000. This amount is expected to be applied as follows:

(1) $6 million for completion of Rainey Generating Station, Bond Market Transactions during 2001 Type Revenue Obligations:

2001A Date Closed 09/18/2001 (2) $459 million for Cross Unit 3 and Rainey Units 3, 4 and 5, (3) $232 million for environmental compliance expenditures, and (4) $331 million for general improvements to the System.

The cost of the capital improvement program will be provided from internally generated funds of the Authority, long-term bonds, and Commercial Paper Notes and other short-term obligations of the Authority, as determined by the Authority.

The Authority has been active in the bond market due to needing funds for planned construction, as well as "refunding" outstanding debt to take advantage of lower interest rates.

Purpose Finance portion of Rainey Generating Station and refund the 1991 Refunding

& Improvements Series B Bonds.

Comments All-in-true interest cost of 4.734%.

Gross savings of

$668,000 over the life of the bonds Bond Market Transactions during 2002 (Known to date)

Par Amount

$108,035,000

$281,140,000

$91,775,000 Type Revenue Obligations:

2002A Revenue Obligations:

2002B Revenue Obligations:

2002C Date Closed 04/03/2002*

02/13/2002 02/13/2002 Purpose Refund 1992 Series A Refunding Bonds.

To finance the tax-exempt portion of construction for Cross Unit #3 and the three simple cycle units at Rainey Generating Station.

To finance the taxable portion of construction of the three simple cycle units at Rainey Generating Station and SIP CALL environmental requirements.

Comments Gross savings of

$15.1 million over the life of the bonds Tax-exempt bonds.

All-in-true interest cost of 5.28%.

Taxable bonds as required by IRS Private Use ruling.

All-in-true interest cost 5.38%.

• On August 10, 2001, the Authority entered is scheduled to close on April 3, 2002.

into a Forward Delivery Bond Purchase Agreement which Par Amount

$54,890,000 28

I

• REOTO INEND T PULI ACONAT To the Advisory Board and Board of Directors of the South Carolina Public Service Authority:

We have audited the accompanying combined balance sheets of the South Carolina Public Service Authority (a component unit of the state of South Carolina-Note 1) as of December 31, 2001 and 2000, and the related combined statements of revenues, expenses and changes in net assets, and cash flows for each of the years then ended. These financial statements are the responsibility of the Authority's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the South Carolina Public Service Authority as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States.

Arthur Anderson, L.L.P Charlotte, North Carolina February 15, 2002 29

Combined Balance Sheets South Carolina Public Service Authority As of December 31, 2001 and 2000 ASSETS Current assets Unrestricted cash and cash equivalents Unrestricted investments Restricted cash and cash equivalents Restricted investments Receivables, net of allowance for doubtful accounts of

$4,236,000 and $332,000 at December 31, 2001 and 2000, respectively Materials inventory Fuel inventory Fossil fuels Nuclear fuel-net Interest receivable Prepaid expenses Total current assets Noncurrent assets Restricted cash and cash equivalents Restricted investments Capital assets Utility plant Accumulated depreciation Total utility plant-net Construction work in progress Other physical property-net Investment in associated company Deferred debits and other noncurrent assets Unamortized debt expenses Costs to be recovered from future revenue Other Total noncurrent assets Total The accompanying notes to financial statements are an integral part of these balance sheets.

70,473 122,645 98,268 73,233 93,891 37,524 71,300 21,157 3,199 1,759 593,449 37,474 123,682 3,567,720 (1,467,312) 2,100,408 410,711 1,647 10,972 23,622 246,849 54,387 3,009,752 3,603,201 77,882 120,040 117,702 52,544 95,695 35,221 35,754 27,240 3,238 537 565,853 86,756 129,558 3,464,528 (1,387,482) 2,077,046 331,793 1,688 8,307 25,390 283,430 53,991 2,997,959

$ 3,563,872 2001 2000 (Thousands)

ý 1.

LIABILITIES 2001 2000 (Thousands)

Current liabilities Current portion of long term debt Accrued interest on long term debt Commercial paper-net Accounts payable Other current liabilities Total current liabilities Noncurrent liabilities:

Construction Fund liabilities Accrued nuclear decommissioning costs Total long-term debt (net of current portion)

Unamortized loss on refunded debt Unamortized debt discount and premium-net Long term debt-net Other deferred credits and noncurrent liabilities Total noncurrent liabilities Total 71,814 60,458 308,965 74,110 17,459 532,806 15,035 84,366 2,213,108 (233,602)

(35,101) 1,944,405 34,121 2,077,927 2,610,733 68,082 61,646 331,578 59,723 31,478 552,507 11,901 75,775 2,240,033 (247,695)

(38,374) 1,953,964 34,491 2,076,131 2,628,638 COMMITMENTS AND CONTINGENCIES (Notes 7, 8 and 9)

NET ASSETS Invested in capital assets, net of related debt Restricted for debt service Restricted for capital projects Restricted for other Unrestricted Total Total 231,233 111,043 64,181 55,654 530,357 992,468 3,603,201 161,418 108,601 131,006 49,862 484,287 935,174

$ 3,563,812 31

Combined Statements of Revenues, Expenses and Changes in Net Assets South Carolina Public Service Authority Years Ended December 31, 2001 and 2000 2001 2000 (Thousands)

Operating revenues Sale of electricity Sale of water Other operating revenue Total operating revenues Operating expenses Electric operation expense Production Fuel Purchased and interchanged power Transmission Distribution Customer accounts Sales Administrative and general Electric maintenance expense Water operation expense Water maintenance expense Total operation and maintenance expenses Depreciation and amortization Sums in lieu of taxes Total operating expenses Operating income 955,670 4,544 12,825 973,039 48,746 309,560 118,143 14,096 7,134 9,354 2,358 51,319 65,471 1,017 295 627,493 110,990 2,521 741,004 232,035 847,960 4,217 10,238 862,415 42,910 295,334 63,577 10,896 6,598 4,361 2,330 48,957 65,143 1,116 293 541,515 108,800 2,490 652,805 209,610 The accompanying notes to financial statements are an integral part of these statements.

32

2001 (Thousands)

Nonoperating revenues (expenses)

Interest and investment revenue Net increase in the fair value of investments Interest expense on long term debt Other interest expense Costs to be recovered from future revenue Other-net Total nonoperating revenues (expenses)

Income before contributions and transfers Capital contributions Transfers out Change in net assets Total net assets-beginning of year Total net assets-end of year 16,480 6,602 (124,882)

(30,948)

(36,581) 3,804 (165,525) 66,510 0

(9,216) 57,294 935,174 992,468 28,145 8,654 (127,406)

(36,135)

(21,043) 12,992 (134,793) 74,817 271 (8,497) 66,591 868,583 935,174 33 2000

Combined Statements of Cash Flows South Carolina Public Service Authority Years Ended December 31, 2001 and 2000 Cash flows from operating activities Receipts from customers Payments to non-fuel suppliers Payments for fuel Purchased power Payments to employees Other (payments) receipts, net Net cash provided by operating activities Cash flows from non-capital related financing activities Distribution to the state of South Carolina Water system grant Net cash used in non-capital related financing activities Cash flows from capital-related financing activities Proceeds from sale of bonds Retirements of reacquired debt Net commercial paper repayments Repayment and refunding of bonds Interest paid on borrowings Construction and betterments of utility plant Debt premium (issuance costs)

Other, net Net cash used in cpital-related financing activities Cash flows from investing activities Net (increase) decrease in investments Interest on investments Net cash provided by investing activities Net (decrease) increase in cash and cash equivalents Balance-beginning of year Balance-end of year 970,939 (133,812)

(304,987)

(118,163)

(94,330)

(287) 319,360 (9,216) 0 (9,216) 54,890 2

(22,630)

(75,530)

(136,811)

(209,372) 90 (2,552)

(391,913)

(10,816) 16,460 5,644 (76,125) 282,340 206,215 850,535 (60,171)

(291,453)

(61,853)

(89,674) 9,491 356,875 (8,497) 271 (8,226) 0 1,071 (38,488)

(83,520)

(142,833)

(237,212)

(506)

(2,763)

(504,251) 196,114 30,031 226,145 70,543 211,797 282,340 The accompanying notes to financial statements are an integral part of these statements.

34 2001 2000 (Thousands)

2000 (Thousands)

Reconciliation of operating income to net cash provided by operating activities:

Operating income 232,035 Adjustments to reconcile operating income to net cash provided by operating activities Depreciation and amortization 118,961 Impact of transactions involving associated company (48,909)

Distributions from associated company 39,789 Advance to associated company 0

Other income 135 Changes in assets and liabilities:

Accounts receivable, net 1,804 Inventories (37,334)

Prepaid expenses (1,222)

Other deferred debits (6,332)

Deferred coal contract buy-out costs 7,300 Accounts payable 14,387 Other current liabilities (12,941)

Other noncurrent liabilities 11,687 209,610 116,539 (43,779) 39,367 (1,083) 101 (12,539) 11,502 236 (11,567) 6,976 6,059 11,347 24,106 Net cash provided by operating activities Reconciliation of cash and cash equivalents Cash and investments held by trustee (designated)

Cash and investments held by trustee Bond funds - current portion Less investments, not considered cash and cash equivalents Cash and cash equivalents at the end of the year 319,360 248,003 175,523 102,249 319,560 206,215 356,875 318,986 164,347 101,149 302,142 282,340 35 2001

Notes to Financial Statements Note 1 - Summary of Significant Accounting Policies:

A - Reporting Entity - The South Carolina Public Service Authority (the Authority), a component unit of the state of South Carolina, was created in 1934 by the state legislature. The Board of Directors is appointed by the Governor of South Carolina with the advice and consent of the Senate. The purpose of the Authority is to provide electric power and wholesale water to the people of South Carolina. Capital projects are funded by commercial paper notes in addition to bonds and internally generated funds. The Board of Directors sets rates charged to customers to pay debt service and operating expenses and to provide funds required under bond covenants.

B - System of Accounts - The accounting records of the Authority are maintained on an accrual basis in accordance with generally accepted accounting principles (GAAP) issued by the Governmental Accounting Standards Board (GASB) applicable to governmental entities that use proprietary fund accounting and the Financial Accounting Standards Board (FASB) that do not conflict with rules issued by the GASB. The Authority's financial statements include the accounts of the Lake Moultrie Regional Water System after elimination of intercompany accounts and transactions. The accounts are maintained substantially in accor dance with the Uniform System of Accounts prescribed by the Federal Energy Regulatory Commission (FERC) for the electric system and the National Association of Regulatory Utility Commissioners (NARUC) for the water system. The Authority also complies with policies and practices prescribed by its Board of Directors and to practices common in both industries. As the Board of Directors sets rates, the Authority has historically followed FASB 71, which provides for the reporting of assets and liabilities consis tent with the economic effect of the rate structure. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results may differ from those estimates.

C - Utility Plant - Utility plant is recorded at cost, which includes materials, labor, overhead, and interest capitalized during con struction. Interest is capitalized when funded through borrowings.

There was no interest capitalized in 2001 or 2000. The costs of maintenance, repairs and minor replacements are charged to appropriate operation and maintenance expense accounts. The costs of renewals and betterments are capitalized. The original cost of utility plant retired and the cost of removal, less salvage, are charged to accumulated depreciation.

D - Depreciation - Depreciation is computed on a straight-line basis over the estimated useful lives of the various classes of the plant. Annual depreciation provisions, expressed as a percentage of average depreciable utility plant in service, were approximately 3.3% and 3.4% for the periods ended December 31, 2001 and 2000, respectively. Amortization of capitalized leases is also included in depreciation expense.

E - Revenue Recognition and Fuel Costs - Substantially all wholesale and industrial revenues are billed and recorded at the end of each month. Revenues for electricity delivered to retail customers which have not been billed are accrued. Fuel costs are reflected in operating expenses as fuel is consumed.

F - Bond Issuance Costs - Unamortized debt discount, premium, and expense are amortized to income over the terms of the related debt issues. Gains or losses on refunded debt are amortized to income over the shorter of the remaining life of the refunded debt or the life of the new debt.

G - Cash and Cash Equivalents - For purposes of the statements of cash flows, the Authority considers highly liquid investments with original maturities of less than three months and cash on deposit with financial institutions as cash and cash equivalents.

As stated in Note L, the Authority adopted GASB 34 which requires cash and cash equivalents to be shown as either restricted or unrestricted. "Restricted" refers to those funds limited by law, regulations or Board action as to their allowable disbursement.

"Unrestricted" is all other funds not meeting the requirements of restricted.

H - Payment to the State - The distribution to the state of South Carolina is a payment in lieu of taxes and is determined consistent with requirements under bond indentures. This payment totaled

$9.2 million in 2001 and $8.5 million in 2000. The distribution for payment to the state is shown as "Transfers out" on the Statements of Revenues, Expenses, and Changes in Net Assets.

I - Deferred Coal Contract Buy-Out Costs - During 1995, the Authority exercised a buy-out option on an existing coal contract in order to take advantage of lower coal costs. The cost of the buy-out, which was approximately $53.0 million is recorded in deferred debits and included as a component of fuel costs over the remaining life of the former contract. The balance in this account at December 31, 2001 was $11.3 million.

J - Investment in Associated Company - The Authority is a member of The Energy Authority (TEA) along with City Utilities of Springfield (Missouri), Gainesville Regional Utilities (Florida),

Jacksonville Electric Authority (Florida), the Municipal Electric Authority of Georgia, and Nebraska Public Power District.

TEA markets wholesale power and coordinates the operation of the generation assets of its members to maximize the efficient 36

ý I

use of electrical energy resources, reduce operating costs and increase operating revenues of the members. TEA is expected to accomplish the foregoing without impacting the safety and reliabil ity of the electric system of each member. TEA does not engage in the construction or ownership of generation or transmission assets.

All of TEA's revenues and its costs are allocated to the mem bers. The Authority's exposure relating to TEA is limited to the Authority's capital investments in TEA, any accounts receivable from TEA and trade guarantees provided to TEA by the Authority.

During 2001, the Authority recorded distributions from power marketing of $39,789,000 from TEA and recognized

$39,977,000 in reductions to power costs partially offset by

$1,439,000 in equity losses. With respect to natural gas market ing, the Authority advanced $10,245,000 to fund authorized gas forward purchases and sales contracts. During 2001, the Authority recorded $3,217,000 in realized losses from natural gas hedging transactions and $3,119,000 as unrealized losses using mark-to market accounting as outlined by FASB 133. The unrealized losses were deferred at December 31, 2001, as regulatory assets and will be recognized and recovered through rates as the hedged power delivery occurs and is recorded to fuel expense.

During 2000, the Authority recorded distributions from power marketing of $39,153,000 from TEA and recognized $43,779,000 in reductions to power costs partially offset by $1,569,000 in equity losses. The Authority also received $214,000 representing return of a portion of trading capital previously extended due to the entry of additional members. Also, in 2000, TEA's members voted to authorize TEA to engage in natural gas marketing on behalf of the members. During 2000, the Authority advanced

$1,083,000 to TEA in support of its future gas marketing activities, but no gas marketing transactions occurred.

The amount approved by the Authority's Board of Directors to support TEA's activities is an amount not to exceed approximately

$44.3 million as of December 31, 2001.

K - Impairment of Long-Lived Assets - The Authority follows the accounting requirement of FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of." This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circum stances indicate that the carrying amount of an asset may not be recoverable. This statement also imposes stricter criteria for regu latory assets by requiring that such assets be probable of future recovery at each balance sheet date. Upon adoption, and to date, FASB 121 has had no effect on the Authority's financial position.

The Authority will reassess the effect of FASB 121 in the future as competitive factors influence wholesale and retail pricing in the industry. Refer to Note M, "Statement of Financial Accounting Standards No. 144."

L - Newly Adopted Standards for 2001 GASB 34 and GASB 38: For calendar year 2001, the Authority adopted GASB Statement No. 34, "Basic Financial Statements and Management's Discussion and Analysis - for State and Local Governments" as well as GASB Statement No. 38, "Certain Financial Statement Note Disclosures," and has presented the prior year's financial statements on a basis consistent with that of 2001. The adoption of GASB 34, as amended by GASB 37, requires the Authority to make several changes to the presentation of its basic financial statements in addition to requiring the pres entation of the Authority's Management's Discussion and Analysis (MD&A). MD&A will introduce the basic financial statements and provide an analytical overview of the Authority's financial activities.

The basic financial statements consist of the Statement of Revenues, Expenses & Changes in Net Assets, the Balance Sheets, the Statement of Cash Flows, and notes to the financial statements.

FASB 133/ FASB 138: In June 1998, FASB issued Statement No.

133, "Accounting for Derivative Instruments and Hedging Activities," which established accounting and reporting standards requiring that every derivative instrument (including certain deriv ative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement required that changes in a derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. In June 1999, FASB Statement No.

137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of Statement No. 133," was issued which delayed the original effective date of FASB 133 until fiscal years beginning after June 15, 2000. In June 2000, FASB Statement No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," was issued which amends FASB 133. FASB 138 addresses a limited number of issues related to the implementation of FASB 133. The implementation of FASB 133, as amended, continues to have no material impact on the Authority's financial position or results of operations.

M - Issued But Not Yet Effective Pronouncements Statement of Financial Accounting Standards No. 143: This Statement, "Accounting for Asset Retirement Obligations," will change the way companies recognize and measure retirement obligations that result from the acquisition, construction, develop ment or normal operation of a long-lived asset. Generally, companies will begin to recognize much sooner any liability associated with retiring long-lived assets. Effective for fiscal years beginning after June 15, 2002, asset retirement obligations must be recognized as a liability and be measured at fair value.

The liability will be recognized when the obligation is incurred which, in many cases, will be when the long-lived asset is placed in service. Management has not yet determined the impact of this Statement.

Statement of Financial Accounting Standards No.144: Effective for fiscal year 2002, this Statement, "Accounting for the Impairment or Disposal of Long-lived Assets," addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". FASB 144 states the required accounting for dis posing of long-lived assets whether previously held and used or 37

newly acquired, and broadens the presentation of discontinued operations to include more disposal transactions. The implementa tion of FASB 144 is expected to have no material impact on the Authority's financial position or results of operations.

Note 2 - Costs to Be Recovered from Future Revenue:

The Authority's electric rates are established based upon debt service and operating fund requirements. Straight-line deprecia tion is not considered in the cost of service calculation used to design rates. The differences between debt principal maturities (adjusted for the effects of premiums, discounts, and amortization of deferred gains and losses) and straight-line depreciation on debt financed assets are recognized as costs to be recovered from future revenue. The recovery of outstanding amounts associated with costs to be recovered from future revenue will coincide with the retirement of the outstanding long-term debt of the Authority.

Note 3 - Cash and Investments Held by Trustee (Designated):

Unexpended funds from the sale of bonds, debt service funds, other special funds, and cash and investments are held and maintained by trustees, and their use is designated in accordance with applicable provisions of various trust indentures, bond resolutions, lease agreements, and the Enabling Act included in the South Carolina law. Such funds consist principally of invest ments in government securities. In 1998, the Authority adopted the provisions of the GASB Statement No. 31, "Accounting and Financial Reporting for Certain Investments and for External Investment Pools." GASB Statement No. 31 establishes standards of accounting and financial reporting for certain investments in securities and requires that all equity and debt securities be recorded at their fair value with gains and losses in fair value reflected as a component of nonoperating income in the Statement of Revenues, Expenses, and Changes in Net Assets.

As of December 31, 2001 and 2000, the Authority had investments totalling $518,927,000 and $579,081,000, respectively.

As of December 31, 2001, the Authority's investments carried at fair market value included nuclear decommissioning funds of

$84,044,000 with related unrealized holding gains of

$10,721,000. As of December 31, 2000, decommissioning funds totaled $75,420,000 with related unrealized holding gains of

$11,827,000. These unrealized holding gains are reflected in the decommissioning liability and not as a separate component of nonoperating income in the Statement of Revenues, Expenses, and Changes in Net Assets.

All the Authority's investments with the exception of decommis sioning funds are limited to a maturity of ten years or less. For the year ended December 31, 2001, the Authority made investment purchases and sales at cost totalling approximately $37.6 billion, respectively. For the year ended December 31, 2000, the Authority made investment purchases at cost totalling $26.7 bil lion and realized proceeds from the sale of investments totalling approximately $26.9 billion.

Investments - Trust indentures and resolutions authorize the Authority to invest in obligations of the U.S. Treasury, agencies, instrumentalities, and certificates of deposit. The Authority's invest ments consist of U.S. government securities, certificates of deposit, and repurchase agreements. The Authority requires that securities underlying repurchase agreements have a market value of at least 102 percent of the cost of the repurchase agreement. Securities underlying repurchase agreements are delivered by broker/dealers to the Authority's trust agents. At December 31, 2001, the Authority's repurchase agreements totaled $164,655,000.

The Authority's investments are categorized to give an indication of the level of risk assumed by the Authority at year-end. Category 1 includes investments that are insured or registered or for which the securities are held by trust agents in the Authority's name.

Category 2 includes uninsured certificates of deposit which are collateralized with securities pledged to the Authority by pledging financial institutions but not held in the Authority's name.

Cash - Cash is categorized as follows: Category 1 includes bank balances entirely covered by federal depository insurance.

Category 2 includes bank balances that are uncollateralized or collateralized with securities pledged to the Authority by pledging financial institutions but not held in the Authority's name.

38

2001 Cash and Investments Held by Trustee (Designated)

General Improvement Funds Debt Service Reserve Funds Other Special Funds Investments Cash Total Category Category Category Category Carrying 1

2 1

2 Value (Thousands) 1,490 69,239 175,919 Total Cash and Investments Held by Trustee (Designated)

$ 246,648 Cash and Investments Held by Trustee Revenue Fund

$ 65,496 Revenue Fund-Water System 530 Special Reserve Fund 102,614 Special Reserve Fund-Water 90

$ 1,300 0

0 15 13 27 0

0 0

2,805 69,252 175,946 Market Value 2,805 69,252 175,946

$ 1,300 55 0

$ 248,003 248,003 0

0 0

0 1,131 0

(216) 0 5,878 0

0 0

72,505 530 102,398 90 72,505 530 102,398 90 Total Cash and Investments Held byTrustee

$ 168,730 0

915 5,878

$ 175,523 175,523 Bond Funds-Current Portion Interest 49,838 0

0 0

49,838 49,838 Bond Principal 52,092 0

0 0

52,092 52,092 Lease 319 0

0 0

319 319 Total Bond Funds-Current Portion

$ 102,249 0

0 0

$ 102,249 102,249 2000 Investments Category Category 1

2 Cash and Investments Held by Trustee (Designated)

General Improvement Funds Debt Service Reserve Funds Other Special Funds Total Cash and Investments Held by Trustee (Designated)

Cash and Investments Held by Trustee Revenue Fund Revenue Fund - Water System Special Reserve Fund Special Reserve Fund - Water 19,554 68,144 227,040

$ 1,250 0

0 Cash Category Category Carrying 1

2 Value (Thousands) 5 954 2,037 0

0 2

20,809 69,098 229,079 314,738 1,250 2,996 2

318,986 318,986 78,413 244 83,100 187 0

0 0

0

$ 14,193 0

4,926 0

$ (16,716) 0 0

0 75,890 244 88,026 187 Total Cash and Investments Held by Trustee 161,944 0

$ 19,119

$ (16,716) 164,347 164,347 Bond Funds-Current Portion Interest Bond Principal Lease Total Bond Funds-Current Portion 51,819 49,011 319 101,149 0

0 0

0 0

0 0

0 0

51,819 49,011 319 51,819 49,011 319 0

0 0

101,149 101,149 Total Market Value 20,809 69,098 229,079 75,890 244 88,026 187 39

Note 4 - Long-Term Debt Outstanding:

The Authority's long-term debt at December 31, 2001 and 2000 consisted of the following:

2001 Electric Revenue Bonds-Priority Obligations:

(mature through 2006)

Capitalized Lease Obligations:

(mature through 2014)

Revenue Bonds: (mature through 2032) 1991 Refunding & Improvement Series B 1992 Refunding Series A 1993 Refunding Series A&B 1993 Refunding Series C 1995 Refunding Series A 1995 Refunding Series B 1996 Refunding Series A 1996 Refunding Series B 1997 Refunding Series A 1998 Refunding Series A 1998 Refunding Series B Total Revenue Bonds Revenue Obligations: (mature through 2022) 1999 Tax-exempt Series A 1999 Taxable Series B 2001 Tax-Exempt Improvement Series A 2001 Tax-Exempt Refunding Series A Total Revenue Obligations Less: Current Portion-Long-term Debt Total Long-term Debt - (Net of current portion) 2000 (Thousands)

Interest Rate(s) 20,270 $

23,815 4.1%

26,932 0

113,380 361,140 583,060 106,900 166,655 223,690 21,505 208,835 48,265 25,760 1,859,190 198,320 125,320 46,285 8,605 378,530 71,814 2,213,108 29,485 2.0-5.0 10,000 135,885 368,130 583,515 112,905 168,670 223,690 21,505 210,670 69,875 26,330 1,931,175 198,320 125,320 0

0 323,640 68,082 2,240,033 6.70-7.00 5.70-6.375 5.0-5.60 4.40-5.125 6.125-6.25 5.30-6.50 5.75-6.50 5.50 4.875-5.125 5.00 4.00-5.25 4.80-5.75 6.53-7.42 3.25-5.25 3.50-4.00 Maturities of long-term debt are as follows:

Year Ending December 31, 2002 2003 2004 2005 2006 2007-2011 2012-2016 2017-2021 2022-2026 2027-2032 Priority Capitalized Obligations Leases

$ 3,705 3,870 4,045 4,230 4,420 0

0 0

0 0

$ 2,654 2,762 2,761 2,771 2,672 10,806 2,506 0

0 0

Revenue Revenue Total Bonds Obligations Principal (Thousands) 54,950 58,500 37,085 37,930 34,775 216,765 387,215 550,650 276,905 204,415

$ 10,505 $

24,365 34,625 12,235 15,975 115,630 80,220 70,050 14,925 0

71,814 89,497 78,516 57,166 57,842 343,201 469,941 620,700 291,830 204,415 Total

$ 20,270

$ 26,932

$ 1,859,1 The fair value of the Authority's debt is estimated based on quoted market prices for the same or similar issues or on the cur rent rates offered to the Authority for debt with the same remaining maturities. Based on the borrowing rates currently available to the 90

$ 378,530 $ 2,284,922

$ 1,781,591

$ 4,066,513 Authority for tax-exempt bonds and other debt with similar terms and average maturities, the fair value of debt is approximately

$2.62 billion and $2.68 billion at December 31, 2001 and 2000, respectively.

Call Price 100 N/A N/A 102 102 102 102 102 102 102 101 Non-callable 101 101 Non-callable 101 Non-callable Interest Total 123,293 $

119,877 114,810 111,356 107,958 494,621 371,774 229,613 78,048 30,241 195,107 209,374 193,326 168,522 165,800 837,822 841,715 850,313 369,878 234,656 40

Refunded amounts outstanding, original loss on refunding, and the unamortized loss at December 31, 2001 are as follows:

Refunding Issue Refunded Bonds Cash Defeasance 1992 A Refunding 20,000 of the 1982 Series A 1993 A&B Refunding 1993 C Refunding 1995 A Refunding 1995 B Refunding 1996 A Refundinc 1996 B Refunding 3,370 5,405 100,010 22,555 15,370 12,085 86,180 93,360 4,980 14,935 23,675 135,705 of the 1985 Refunding Series of the 1985 A Refunding Series of the 1986 Refunding Series A of the 1988 Refunding Series A of the 1991 Refunding Series B of the 1991 Series D of the 1974 Series of the 1979 Series A of the 1985 A Refunding Series of the 1986 Refunding Series A of the 1986 Refunding Series B of the 1991 Refunding &

Improvement Series B and C

$ 167,660 of the 1977 Refunding Series 1,565 of the 1979 Series A 900 of the 1985 Refunding Series 2,390 of the 1985 A Refunding Series 6,365 of the 1986 Refunding Series A 14,905 of the 1988 Refunding Series A

$ 100,110 of the 1991 Refunding & Improvement Series B and C

$ 279,905 of the 1991 Series D 138,505 of the 1988 Refunding Series A

$ 175,330 of the 1987 Refunding Series A

$ 257,795 of the 1986 Refunding Series C Cash Defeasance 1997 A Refunding Commercial Paper 1998 B Refunding 2001 A Refunding 5,925 5,830 62,325 6,940 4,155 2,763 6,215 42,188 38,870 279,905 of the 1986 Refunding Series A of the 1986 Refunding Series C of the 1986 Refunding Series D of the 1987 Refunding Series A of the 1988 Refunding Series A 14,080 of the 1992 Series A 14,955 of the 1996 Series A 100,000 68,325 37,495 76,050 105,605 81,420 24,245 37,495 of the 1978 Series of the 1991 Series B of the 1991 Series D of the 1973 Series of the 1977 Series of the 1978 Series 25,000 of the 1992 B Series 10,000 of the 1991 Refunding &

Improvement Series B 24,305 72,311 20,024 40,758 92,596 4,831 4,779 16,990 2,099 1,970 286 372,165

$ 340,465 233,602 41 Refunded Amount Outstanding (Thousands)

Original Loss Unamortized Loss 1,510 18,974 35,337 57,477 12,127 24,936 61,062 2,346 2,560 13,991 1,447 1,584 251 Total

The Authority issued Revenue Obligations Bonds, 2001 Refunding and Improvement Series A, on September 18, 2001, for the par amount of $54,890,000. The purpose of the bonds was to finance a portion of Rainey Generating Station and to refund a portion of the 1991 Refunding and Improvement Series B Bonds. The refunding will save the Authority approximately $668,000 over the life of the bonds resulting in an economic gain over the life of the bonds of approximately $470,000.

On August 10, 2001, the Authority entered into a Forward Delivery Bond Purchase Agreement for the sale of

$108,035,000 Revenue Obligations, 2002 Refunding Series A Bonds (2002 A Bonds) to be delivered on or about April 3, 2002. This refunding will reduce the Authority's total debt serv ice over the life of the bonds by approximately $15,124,000 resulting in an economic gain over the life of the bonds of approximately $8,573,000 after the bonds close.

The Authority's bond indentures provide for certain restric tions, the most significant of which are:

1. The Authority covenants to establish rates sufficient to pay all debt service, required lease payments, capital improve ment fund requirements, and all costs of operation and maintenance of the Authority's electric system and all neces sary repairs, replacements, and renewals thereof.

2. The Authority is restricted from issuing additional parity bonds unless certain conditions are met.

As of December 31, 2001, the Authority is in compliance with all debt covenants.

Note 5 - Commercial Paper:

The Board of Directors has authorized the issuance of commercial paper not to exceed $500,000,000. The paper is issued for valid corporate purposes with a term not to exceed 270 days. For the years ended December 31, 2001 and 2000, the information related to commercial paper was as follows:

Effective interest rate (at December 31)

Average annual amount outstanding ($000)

Average maturity Average annual effective interest rate 2001 1.71%

2000 4.35%

$ 332,438

$ 367,991 50 days 2.83%

69 days 4.13%

At December 31, 2001 the Authority had a Revolving Credit Agreement with Toronto-Dominion (Texas), Inc.,

Commerzbank Aktiengesellschaft, acting through its Atlanta agency and The Bank of Nova Scotia, acting through its New York agency for $425,000,000. This agreement is used to support the Authority's issuance of commercial paper. There were no borrowings under the agreement during 2001 or 2000.

Commercial Paper outstanding at December 31, was as follows:

2001 2000 (Thousands)

Commercial Paper-Gross Less: Unamortized Discount on Taxable Commercial Paper Commercial Paper-Net 308,984 19 308,965

$331,614 36

$ 331,578 Note 6 - Summer Nuclear Station:

The Authority and South Carolina Electric and Gas (SCE&G) are parties to a joint ownership agreement providing that the Authority and SCE&G shall own the Summer Nuclear Station with undivided interests of 33 1 /3% and 66 2/3%,

respectively. SCE&G is solely responsible for the design, construction, budgeting, management, operation, maintenance, and decommissioning of the Summer Nuclear Station, and the Authority is obligated to pay its ownership share of all costs relating thereto. The Authority receives 33 1/3% of the net electricity generated. At December 31, 2001 and 2000, the plant accounts included approximately $491,000,000 and

$494,000,000 representing the Authority's investment, includ ing capitalized interest, in the Summer Nuclear Station. For the years ended December 31, 2001 and 2000, the Authority's operation and maintenance expenses included $47,683,000 and $45,593,000, respectively, for the Summer Nuclear Station.

Nuclear fuel costs are being amortized based on energy expended, which includes a component for estimated disposal costs of spent nuclear fuel. This amortization is included in fuel expense and is recovered through the Authority's rates.

42

SCE&G has an on-site spent fuel storage capability until 2007. It expects to be able to expand its storage capacity to accommodate the spent fuel output for the life of the plant through pool reracking, dry cask storage, or other technology as it becomes available.

The Nuclear Regulatory Commission (NRC) requires a licensee of a nuclear reactor to provide minimum financial assurance of its ability to decommission its nuclear facilities. In compliance with the applicable NRC regulations, the Authority established an external trust fund and began making deposits into this fund in September 1990. In addition to providing for the minimum requirements imposed by the NRC, the Authority makes deposits into an internal fund in the amount necessary to fund the difference between a site-specific decommissioning study completed in 2000 and the NRC's imposed minimum requirement. Based on these estimates,the Authority's one-third share of the estimated decommissioning costs of the Summer Nuclear Station equals approximately $143,419,000 in 1999 dollars. The Authority accrues for its share of the estimated decommissioning costs over the remaining life of the facility.

These costs are being recovered through the Authority's rates.

See Note 1, item M for a discussion of issued, but not yet effective, accounting pronouncement FASB 143.

Based on current decommissioning cost estimates devel oped by SCE&G, these funds, which totaled approximately

$84,070,000 (adjusted to market) at December 31, 2001, along with future deposits into both the external and internal decommissioning accounts and investment earnings, are estimated to provide sufficient funds for the Authority's one-third share of the total decommissioning costs.

The Energy Policy Act of 1992 gave the Department of Energy (DOE) the authority to assess utilities for the decommis sioning of its facilities used for the enrichment of uranium included in nuclear fuel costs. In order to decommission these facilities, the DOE estimates that it would need to charge utili ties a total of $150,000,000, indexed for inflation, annually for 15 years based on enrichment services used by utilities in past periods. Based on an estimate from SCE&G covering the 15 years, the Authority's remaining one-third share of the lia bility at December 31, 2001 totals $1,197,000. Such amount has been deferred and will be recovered through rates as paid. These costs are included on the accompanying balance sheets in "Deferred debits and other noncurrent assets-Other" and "Other deferred credits and noncurrent liabilities."

Note 7 - Leases:

The Authority has capital lease contracts with Central Electric Power Cooperative, Inc. (Central), covering a steam electric generating plant, transmission facilities, and various other facilities. The remaining lease terms range from 1 to 13 years. Quarterly lease payments are based on a sum equal to the interest on and principal of Central's indebtedness to the Rural Utilities Service (formerly Rural Electrification Administration) for funds borrowed to construct the above mentioned facilities. The Authority has options to purchase the leased properties at any time during the period of the lease agreements for sums equal to Central's indebtedness remaining outstanding on the properties at the time the options are exercised or to return the properties at the termination of the lease. The Authority plans to exercise each and every option to acquire ownership of such facilities prior to expiration of the leases.

Future minimum lease payments on Central leases at December 31, 2001 were:

Year ending December 31:

20 0 2............................

20 0 3............................

20 0 4............................

20 05............................

20 06............................

2007-2011 2012-2014 Total minimum lease payments Less amounts representing interest........

Balance at December 31, 2001..........

Amount (Thousands) 3,818 3,819 3,708 3,604 3,388 12,653 2,658 33,648 6,716 26,932 Property under capital leases and related accumulated amortization included in utility plant at December 31, 2001 totaled $93,925,000 and $73,234,000, respectively and at December 31, 2000 totaled $96,556,000 and

$73,215,000, respectively.

Operating lease payments totaled $5,989,000 and

$5,284,000 during the years ended December 31, 2001 and 2000, respectively. Included in these operating leases are the leased coal cars, which are reflected in fuel inventory. The terms of the current coal car leases vary from one month to seven years, with the seven-year lease expiring in 2003.

43

The lease amounts for the coal cars to be paid in calendar year 2002 and 2003 amount to $4,373,000 and $2,796,000, respectively.

Note 8 - Contracts with Electric Power Cooperatives:

Power supply and transmission services are provided to Central Electric Power Cooperative Inc. (Central) in accor dance with a power system coordination and integration agreement (the "Coordination Agreement"). In addition, the Authority is the sole supplier of Central's energy needs excluding energy Central receives from the Southeastern Power Administration and SCE&G.

Saluda River Electric Cooperative Inc. (Saluda) began receiving power from the Authority on January 1, 2001 pur suant to a long-term power supply agreement between Saluda and the Authority (the "Power Sales Agreement"). The Power Sales Agreement was to terminate upon the earlier of (i) two years notice that Saluda has disposed of its interest in the Catawba Nuclear Station or (ii) January 31, 2009. Pursuant to the Power Sales Agreement, the Authority serves all of Saluda's power needs over and above that which it receives from its ownership interest in the Catawba Nuclear Station, its Southeastern Power Administration entitlements, its diesel powered generators, and a small run of the river hydroelectric plant. On October 25, 2001 Saluda notified the Authority in writing that Saluda would be unable to pay the power usage bill for September 2001 due to its cash position and failed to make its payment to the Authority in October. Pursuant to the terms of the Power Sales Agreement, the Authority notified Saluda and Central that the Power Sales Agreement terminated on October 25, 2001 and that subject to the terms of the Wholesale Power Contract between Central and Saluda, the Authority was thereafter providing Saluda's power requirements to Central under the Coordination Agreement.

Subsequently, the Authority has billed Central for Saluda's power usage under the Coordination Agreement and Central has paid such bills when due. Notwithstanding Central's payments, Central has notified the Authority that Central dis putes its obligation to serve Saluda under its wholesale power contract with Saluda. The Authority, Central and Saluda are discussing the applicable terms and conditions of service under their respective agreements. See unaudited Subsequent Event in Note 13, item B. The Authority is unable to predict the outcome of such discussions. However, the Authority believes that it will continue to serve Saluda either pursuant to the provisions of the Power Sales Agreement or through Central pursuant to the provisions of the Coordination Agreement. The change in the Authority's total revenues from serving Saluda either through Central under the Coordination Agreement or the Power Sales Agreement is not expected to have a material adverse impact on the Authority's results of operations or financial position.

Saluda has notified Central and the Authority that Saluda and the Saluda Cooperatives intend to pay Central and the Authority for power service. As of December 31, 2001 Saluda owes the Authority approximately $5.4 million, which includes interest, for power received under the Power Sales Agreement.

At Saluda's request, the Authority is negotiating payment terms with Saluda for the full amount plus interest through equal monthly payments during the period March 2002 through December 2002. Saluda has indicated that the Saluda Cooperatives will guarantee such payments in the event Saluda is unable to pay the Authority. The Authority is unable to predict the outcome of these negotiations or if Saluda will make further payments to the Authority or Central.

Sales to Saluda amounted to approximately 8.9% of the Authority's revenues for the period January 1, 2001 through October 25, 2001.

Note 9 - Commitments and Contingencies:

Budget - The Authority's capital budget provides for expendi tures of approximately $337,685,000 during the year ending December 31, 2002 and $690,781,000 during the two years thereafter. These expenditures include $6,479,000 associated with new generating facilities being constructed to begin oper ations in 2002, $459,010,000 for future generating facilities and $231,879,000 for environmental compliance expendi tures. The total cost, including the financing costs, of the new generating facilities to begin operations in 2002 is estimated to be $397,000,000. Capital expenditures will be financed by internally generated funds and a combination of taxable and tax-exempt debt.

I -I 44

Purchase Commitments - The Authority has contracted for long-term coal purchases under contracts with estimated outstanding minimum obligations after December 31, 2001 as follows:

Year ending December 31:

2002......

2003 2004 2005......

2006......

2007-2008..

Total.......

Amount (Thousands) 126,936 115,024 85,278 85,590 43,230 87,735 543,793 The Authority's outstanding minimum obligations under two existing long-term purchased power contracts as of December 31, 2001 were approximately $85.9 million and

$19.6 million with remaining terms of 33 and 2 years, respec tively. In addition, the Authority has one short-term purchased power contract with minimum obligations of approximately

$3 million with a term of one year or less beginning in 2002.

The Authority has commitments for nuclear fuel enrichment and fabrication contracts which are contingent upon the operating requirements of the nuclear unit. As of December 31, 2001, these commitments total approximately $76.9 million over the next 8 years.

The Authority has entered into a long-term service agreement with General Electric International Inc. in the approximate amount of $76.0 million at the Rainey Generation Station. The contract term is effective through 2009. The agreement provides a service director, initial spare parts, parts and services for specified planned and unplanned maintenance outages and remote monitoring and diagnostics of the turbine generators. The agreement contains certain guarantees pertaining to unit availability, performance and NOx emissions and can be cancelled on Unit 1 after the first hot gas path inspection for $3 million and on Unit 2 after the first combustion inspection for $1,250,000.

Risk Management - The Authority is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; business interruption; and errors and omissions. The Authority purchases commercial insurance to cover these risks, subject to coverage limits and various exclusions. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three years. Policies are subject to deductibles ranging from $5,000 to approximately

$850,000 with the exception of named storm losses which carry deductibles up to $3,000,000. Also a $1 million general liability self-insured layer exists between the Authority's primary and excess liability policies.

The Authority is self-insured for auto, dental, and environ mental incidents that do not arise out of an insured event. The Authority purchases commercial insurance, subject to coverage limits and various exclusions, to cover automotive exposure in excess of $2 million per incident. Risk exposure for the dental plan is limited by plan provisions. There have been no third party claims for environmental damages for 2001 or 2000.

Claims expenditures and liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated.

At December 31, 2001, the amount of the self-insured liabilities for auto, dental, worker's compensation and environ mental remediation was $1.4 million. The liability is the Authority's best estimate based on available information.

Changes in the reported liability are as follows:

2001 2000 (Thousands)

Unpaid claims and claim expenses at beginning of year Incurred claims and claim adjustment expenses:

Provision for insured events of the current ear Increases (decreases) in provision Payments for current and nor years Total unpaid claims and claim epenses at end of year

$ 1,907

$ 2,135 1,138 37 1,656 1,252 (14) 1,466

$ 1,426

$ 1,907 45

The Authority pays insurance premiums to certain other state agencies to cover risks that may occur in normal opera tions. The insurers promise to pay to, or on behalf of, the insured for covered economic losses sustained during the policy period in accordance with insurance policy and benefit program limits. Several state funds accumulate assets, and the state itself assumes all risks for the following:

1) Claims of covered employees for health benefits (Employee Insurance Program Office); and

2) Claims of covered employees for long-term disability and group life insurance benefits (Retirement System).

Employees elect health coverage through either a health maintenance organization or through the state's self-insured plan. All other coverages listed above are through the applicable state self-insured plan except that additional group life and long-term disability premiums are remitted to com mercial carriers. The Authority assumes the risk for claims of employees for unemployment compensation benefits and pays claims through the state's self-insured plan.

Nuclear Insurance - The maximum liability for public claims arising from any nuclear incident has been established at

$9.5 billion by the Price-Anderson Indemnification Act. This

$9.5 billion would be covered by nuclear liability insurance of about $200 million per site, with potential retrospective assessments of up to $88.1 million per licensee for each nuclear incident occurring at any reactor in the United States (payable at a rate not to exceed $10 million per incident, per year). Based on its one-third interest in Summer Nuclear Station, the Authority would be responsible for the maximum assessment of $29.4 million, not to exceed approximately

$3.3 million per incident, per year. This amount is subject to further increases to reflect the effect of (i) inflation, (ii) the licensing for operation of additional nuclear reactors, and (iii) any increase in the amount of commercial liability insurance required to be maintained by the NRC.

Additionally, SCE&G and the Authority maintain with Nuclear Electric Insurance Limited (NEIL) $500 million primary and $1.5 billion excess property and decontamination insur ance to cover the costs of cleanup of the facility in the event of an accident. In addition to the premiums paid on the primary and excess policies, SCE&G and the Authority could also be assessed a retrospective premium, not to exceed ten times the annual premium of each policy, in the event of property damage to any nuclear generating facility covered by NEIL.

Based on current annual premiums and the Authority's one-third interest, the Authority's maximum retrospective premium would be $2.8 million for the primary policy and $3.0 million for the excess policy.

SCE&G and the Authority also maintain accidental outage insurance to cover replacement power costs (within policy limits) associated with an insured property loss. This policy also carries a potential retrospective assessment of $1.4 million.

The Authority is self-insured for any retrospective premium assessments, claims in excess of stated coverage, or cost increases due to the purchase of replacement power associated with an uninsured event.

Clean Air Act - The Authority endeavors to ensure that its facilities comply with applicable environmental regulations and standards.

Congress has promulgated comprehensive amendments to the Clean Air Act, including the addition of a new federal program relating to acid precipitation. The Authority has evaluated the potential impact of this legislation, including new limits on the allowable rates of emission of sulfur dioxide and nitrogen oxides. While the legislation contains a number of new restrictions, the most significant new requirements, relating to acid precipitation, became effective January 1, 2000.

The Clean Air Act Amendments require, among other things, specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating units. These reductions were required in two phases. Phase I compliance was imple mented January 1, 1995, while Phase II compliance became effective January 1, 2000. The Authority has purchased sulfur dioxide emission credits and upgraded the sulfur removal capabilities of existing units to meet Phase II sulfur dioxide emission limitations. To meet monitoring requirements of the Clean Air Act, the Authority has installed continuous emissions monitoring equipment at a cost of $5.2 million. The Authority also upgraded the combustion systems on some of its boilers to meet Phase II nitrogen oxide limitations. These efforts com menced in 1998 and were completed in 1999. The Authority expended $8.02 million to complete these combustion upgrades.

In July 2000, the Authority received a request for information from the U.S. Environmental Protection Agency (EPA) pursuant to Section 114 of the Clean Air Act. The request is part of the EPA's ongoing enforcement initiative involving the power generating sector, with particular emphasis on coal-fired units. The Authority has responded to the request for information and expects to engage in discussions with EPA about its compliance status. Management cannot determine the impact of this request at this time.

46

The Authority recently signed agreements with Marsulex to provide two SO2 scrubbers which are expected to be operational by June 2004 at the Winyah Generating Station Units 1 and 2. Under a capital lease agreement, Marsulex will own and the Authority will operate the new S02 scrubbers and a by-product processing facility. Once the performance standards are met, the agreements require the Authority to pay an annual service fee to Marsulex of an amount not to exceed $13.5 million for 15 years.

The EPA has finalized regulations related to ozone transport for 22 eastern states including South Carolina. These regulations (known as the "SIP CALL") require significant NOx emission reductions from the power industry. As a result, the Authority believes that its cost of compliance, including capital costs, could approach approximately $280 million by 2005 and annual operating costs associated with such compliance could approach $10 million.

Safe Drinking Water Act - The Safe Drinking Water Act (SDWA) was reauthorized during 1996. The Authority continues to stay abreast of proposed regulatory changes as they are developed.

Clean Water Act - The Congress is due to consider reautho rization of the Clean Water Act (CWA). The complex act could generate regulatory changes that could impact the power generation sector. The Authority will be monitoring for CWA regulatory issues impacting electrical utilities.

Open Access Transmission Tariff - In 1997, FERC adopted an order approving the Authority's transmission rates, ancillary charges, and non-rate terms and conditions.

The Authority is participating in the VACAR Open Access Same-Time Information System (OASIS) via the Internet and has implemented and filed with FERC procedures for implemen tation of non-discriminatory standards of conduct.

Regional Transmission Organizations (RTOs) - On September 24, 2001, the Authority, along with six municipal and electric cooperative transmission owners and Southern Company, executed an agreement to investigate the development of a RTO for the southeastern United States, currently referred to as SeTrans. Discussions and negotiations regarding the devel opment of a RTO in the Authority's region are ongoing, and their outcome and any potential impact on the Authority are unknown at this time.

Competition - The electric industry has become, and is expect ed to be, increasingly competitive due to regulatory changes and market developments. As utilities move from a regulated environment where rates are based on cost of service to a deregulated environment where rates are based on market forces, there may be costs that cannot be recovered by charging the market rate. Some deregulation measures proposed to date allow for recovery of some portion of these costs but ultimate regulatory treatment of such costs cannot be predicted.

The Authority has developed and is implementing a long-term strategic plan to position the Authority to compete effectively in the changing competitive environment. Consistent with the plan, the Authority is implementing initiatives to reduce outstanding debt, achieve more financial flexibility, reduce operating, maintenance and capital costs, increase revenue, retain customers, and strengthen employee performance and accountability.

While the Authority is taking these and other actions to prepare for a deregulated market, the Authority cannot predict what effects increased competition will have on the operations and financial condition of the Authority.

Legal Matters - The Authority is a party in various claims and lawsuits that arise in the conduct of its business. Although the results of litigation cannot be predicted with certainty, in the opinion of management and Authority counsel, the ultimate disposition of these matters will not have a material adverse effect on the financial position or results of operations of the Authority, except as described below.

Certain plaintiffs have filed suit against the Authority seeking monetary damages arising out of a change in the Authority's "Good Cents" rate. The plaintiffs seek to represent a class of all "Good Cents" customers of the Authority. The Authority answered the complaint by denying the material allegations and opposing the request for class certification.

A class certification was granted to the plaintiffs. Discovery is ongoing. No accurate prediction of the outcome can be made. In the opinion of management and Authority counsel, it is not probable, but it is reasonably possible, that if the plaintiffs are successful on all claims, the ultimate liabilities arising out of this claim could be between $20 and $30 million.

In a separate case, landowners located along the Santee River contend that the Authority is liable for damage to their real estate as a result of flooding that has occurred since the U.S. Army Corps of Engineers Cooper River Rediversion Project was completed in 1985. A trial held in 1997 returned a jury verdict against the Authority on certain causes of action.

47

The Authority appealed the decision and remanded the case to the District Court. No estimate relative to potential loss to the Authority can be made at this time.

An action was instituted in State Court by a number of leaseholders of land offered for sale to them by the Authority, the lessor. The Plaintiffs allege that the property was improper ly appraised and offered to them at an unfair price. Summary Judgement has been granted in the favor of the Authority, and Plaintiffs have appealed the decision.

Contract Dispute with Central - Central, under the terms of the contract with the Authority, has the right to audit costs billed to them under the cost of service contract. Management has recorded a liability at December 31, 2001, of approxi mately $10.7 million for exposure related to Central audit issues through 2001.

Note 10 - Retirement Plan:

Substantially all Authority regular employees must participate in one of the components of the South Carolina Retirement System (System), a cost sharing, multiple-employer public employee retirement system, which was established by Section 9-1-20 of the South Carolina Code of Laws. The payroll for employees covered by the System for each of the years ended December 31, 2001 and 2000 was

$83,045,000 and $82,216,000, respectively.

Vested employees who retire at age 65 or with 28 years of service at any age are entitled to a retirement benefit, payable monthly for life. The annual benefit amount is equal to 1.82 percent of their average final compensation times years of service. Benefits fully vest on reaching five years of service. Reduced retirement benefits are payable as early as age 55 with 25 years of service. The System also provides death and disability benefits. Benefits are established by state statute.

Article X, Section 16 of the South Carolina Constitution requires that all state-operated retirement plans be funded on a sound actuarial basis. Title 9 of the South Carolina Code of Laws (as amended) prescribes requirements relating to membership, benefits, and employee/employer contributions.

Employees are required by state statute to contribute 6 percent of salary. The Authority is required by the same statute to contribute 7.55 percent of total payroll. The contri bution requirement for the years ended December 31,2001 and 2000 was $6,540,000 and $6,230,000, respectively, from the Authority and $4,996,000 and $4,945,000, respectively from employees. The Authority made 100% of the required contributions for each of the years ended December 31, 2001 and 2000.

The System issues a stand alone financial report that includes all required supplementary information. The report may be obtained by writing to: South Carolina Retirement System, P.O. Box 11960, Columbia, S.C. 29211 The Authority also provides compensation benefits to certain employees designated by management and the board of directors under the Supplemental Executive Retirement Plan (SERP). The cost of these benefits is accrued on an actuarially determined basis. The accrued liability at December 31, 2001 and 2000 was $6,419,000 and $6,197,000, respectively.

Note 11 - Other Postretirement Benefits:

The South Carolina Retirement System provides certain health, dental, and life insurance benefits for retired employees of the Authority. Substantially all of the Authority's employees may become eligible for these benefits if they retire at any age with 28 years of service or at age 60 with at least 20 years of service. Currently, approximately 405 retirees meet these requirements. The cost of the health, dental, and life insurance benefits are recognized as expense as the premiums are paid. For the years ended December 31, 2001 and 2000, these costs totaled $1,495,000 and $1,149,000, respectively.

During their first ten years of service, full-time employees can earn up to 15 days vacation leave per year. After ten years of service, employees earn an additional day of vacation leave for each year of service over ten until they reach the maximum of 25 days per year. Employees earn annually a half day per month plus three additional days at year-end for sick leave.

Employees may carry forward up to 45 days of vacation leave and 180 days of sick leave from one calendar year to the next. Upon termination, the Authority pays employees for accumulated vacation leave at the pay rate then in effect. In addition, the Authority pays employees upon retirement 20 percent of their accumulated sick leave at the pay rate then in effect. The Authority recognizes these costs as expenses in the period incurred.

48

Note 12 - Credit Risk and Major Customers:

Concentrations of credit risk with respect to the Authority's receivables are limited due to the large number of customers in the Authority's customer base and their dispersion across different industries. The Authority maintains an allowance for uncollectible accounts based upon the expected collectibility of all accounts receivable.

Sales to two major customers for the years ended December 31, 2001 and 2000 were as follows:

2001 Central (including Saluda)

Alumax of South Carolina 2000 (Thousands)

$ 473,000

$379,000 99,000

$ 89,000 B (Unaudited) - On March 4, 2002, Saluda filed in the South Carolina Court of Common Pleas for the Eighth Circuit an Action for Declaratory Judgement requesting the court to order among other things that Central has a legal obligation and contractual duty to provide electrical power and energy to Saluda pursuant to Saluda's wholesale power contract with Central. At the same time, Saluda also filed with the court an Action for an Injunction With a Motion for a Temporary Restraining Order to require Central to continue to serve Saluda under the wholesale power contract until the Action for Declaratory Judgement is adjudicated. Central's response to the litigation is pending. The Authority is unable to predict the outcome of such litigation.

No other customer accounted for more than 10 percent of the Authority's sales for either of the years ended December 31, 2001 or 2000.

Note 13 - Subsequent Events:

A - On January 25, 2002, the Authority's Board of Directors authorized the sale of $372,915,000 Revenue Obligations, 2002 Series B & C (2002 B & C Bonds). The 2002 Tax Exempt Series B (2002 B Bonds) totaled $281,140,000. The 2002 Taxable Series C (2002 C Bonds) totaled $91,775,000 and were issued as taxable bonds to comply with the IRS Private Use Regulations. The 2002 B & C Bonds were issued on February 13, 2002.

The proceeds will be used to fund a portion of the cost of constructing a 580-MW coal-fired, steam-electric generating unit at the Cross Generating Station, three 80-MW simple cycle combustion turbines at the Rainey Generating Station and environmental compliance.

The 2002 B & C Bonds were sold at a combined all-in-true interest cost of 5.29 percent and mature between January 1, 2005 and 2037.

49

I Al I

BOR OF DIETR I

H. Donald McElveen, P.E.

J. Calhoun Land IV Julius Barnes Patrick T. Allen Chairman First Vice Chairman Second Vice Chairman Merl F. Code Laura M. Fleming Frances B. Gilbert Willie E. Givens Jr.

John R. Jordan Jr.

Joseph J. Turner Jr.

J. Mike Wooten so

I e~

BOR OF DIECOS H. Donald McElveen, P.E.

Chairman Columbia, S.C.

J. Calhoun Land IV First Vice Chairman Represents 6th Congressional District Manning, S.C.

Julius Barnes Second Vice Chairman Represents Berkeley County St. Stephen, S.C.

Patrick T. Allen Represents the electric cooperatives of South Carolina Columbia, S.C.

Merl F. Code Represents 4th Congressional District Greenville, S.C.

Frances B. Gilbert Represents Horry County Conway, S.C.

Willie E. Givens Jr.

Represents 1st Congressional District Charleston, S.C.

John R. Jordan Jr.

Represents 2nd Congressional District Columbia, S.C.

Joseph J. Turner Jr.

Represents 3rd Congressional District Clemson, S.C.

J. Mike Wooten Represents Georgetown County Georgetown, S.C.

Laura M. Fleming Represents 5th Congressional District Lancaster, S.C.

Changes in the Board On Aug. 30, 2001, H. Donald McElveen replaced Alec B. McLeod as chairman of the board of directors.

51

' DISR

BOARD, James H. Hodges Governor Charles M. Condon Attorney General James A. Lander Comptroller General James M. Miles Secretary of State Grady L. Patterson State Treasurer President and CEO Executive Vice President and Chief Operating Officer Executive Vice President and Chief Legal Officer Senior Vice Presidents:

Power Delivery Corporate Planning and Bulk Power Generation Community Development and Corporate Communications Administration and Finance Vice Presidents:

Marketing and Retail Services Human Resource Management Engineering and Construction Services Fossil & Hydro Generation Corporate Communications Planning and Power Supply Controller Treasurer Auditor Corporate Secretary John H. Tiencken Jr.*

Bill McCall*

John S. West*

Terry L. Blackwell Lonnie N. Carter*

Maxie C. Chaplin Ben Cole Elaine G. Peterson*

Zack W. Dusenbury Ronald H. Holmes Byron C. Rodgers Jr.

R.M. Singletary Jerry L. Stafford William R. Sutton Glenda W. Gillette H. Roderick Murchison Thomas L. Richardson W. Glen Brown Jr.

• Member of executive management team I MANAGEMENT I

I SCHEDULE OF RE.'

E AND!

BS OUTSlTA INGI As of December 31, 2001 (In Thousands)

July 1, 2002 1991-D Int. Rate Amount 6.00 6,215 Call Date Series Original Maturity July 1 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Totals per Series 6,590 7,010

• 7,470

• 7,955

• 8,470

• 61/2 130,275

• 6 5/8 149,630

• 323,615 July 1, 2002 1992-B Int. Rate 5 1/2 5.60 5.70 5.80 5.90 5.90 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.10 6.10 6.10 6.10 6.10 6.10 6.10 6.10 6.10 6.10 6.10 6.10 6.10 Amount 380 405 435 460 490 525 555 595 630 670 715 765 810 865*

920

• 980

• 1,045

• 1,115

• 1,185

• 1,260

• 1,345

• 1,430" 1,525

• 1,625

• 1,730*

1,845

• 24,305 T

r At Maturity 1992-A REF (6)

Int. Rate 5.80 Amount 7,400 6.20 6,680 14,080 At Maturity 1996-A REF (6)(2)

Int. Rate 6 1/4 Amount 4,500 61/4 5,665 10,165 Totals per 347,920 24,245 Call Date

• Term Bonds 53 6.40 6 1/2 6 1/2 6 1/2 6 1/2

I-LL As of December 31, 2001 (In Thousands)

PRIORITY BONDS I~~:

REEU OD Maturity 1967 Date Series July 1 Int. Rate A 2002 4.10 3,

2003 4.10 3,

2004 4.10 4,0 2005 4.10 4,

2006 4.10 4,4 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Add:

Total Outstanding As of 12/31/01 20,270 Bonds Redeemed As of 12/31/01 31,3 Bonds Refunded As of 12/31/01 Net:

Original Issue Amt.

51,6 192 A Refunding Series

,mt.

Int. Rate Amt.

705

• 870*

6.00 5,940 045*

230*

6.20 6,290 420

• 6.20 7,100 6.20 7,540 6 3/8 8,005

• 6 3/8 8,515

• 6 3/8 10,835

• 63/8 11,520*

63/8 12,265

• 6 3/8 1,935

• 6 3/8 2,055

• 6 3/8 2,275

• 6 3/8 2,400

• 6 3/8 2,570

• 6 3/8 9,570

• 6 3/8 7,695

• 6 3/8 6,870

• 113,380 41,085 0

14,080 (6) 00 168,545 361,140 23,985 0

385,125 583,060 48,300 0

631,360 106,900 32,785 0

139,685 166,655 10,420 0

177,075 223,690 33,190 21,505 61,965 10,165 (6) 267,045 0

• Term Bonds (1) Rounding may cause small variances.

(2) Maturities are on January 1 instead on July 1.

(3) These are floating auction tax-exempt ("FLOATs") and residual interest 83,470 tax-exempt ("RITES") bonds which have a semiannual bond equivalent yield of 5.40% per annum on those maturing 6/30/06 and 5.60% per annum on those with a final maturity of 6/28/13.

(4) $10,210,000 are serial bonds and $9,000,000 are term bonds.

54 1993 A&B Refunding Series Int. Rate Amt.

5.00 9,810 5.20 6,280 5.20 10,115 5.30 7,080 5.40 10,400 (3) 5 1/2 8,410 5 1/2 10,920 5 1/2 9,765 5 1/2 11,480 5 1/2 11,240 5.60 12,100 (3) 5.60 29,300 (3) 5 1/2 38,255

• 5 1/2 18,905

• 5 1/2 19,880

• 5 1/2 20,920

• 5 1/2 22,000

• 5 1/2 43,270

• 5 1/2 42,015

• 5 1/2 18,995

• 1993 C 1995 A 1995 B Refundinq Refunding Refunding Series (2)

Series (2J Series (2)

Int. Rate Amt.

Int. Rate Amt.

Int. Rate Amt.

4 1/2 3,625 6 1/4 5,700 5.35 4,260 41/2 12,030 61/4 7,890 5.40 3,410 4 1/2 12,590 6 1/2 10,160 4 5/8 6,440 6 1/2 10,765 4 3/4 13,310 6 1/2 10,350 4 7/8 11,755 5.00 18,230 6 1/8 815

• 5.70 3,255 5.00 1,470 5.10 19,210 (4) 6 1/8 860

• 5.80 3,485 5.10 16,740

• 6 1/8 915

• 5.80 3,705 5.00 19,040

• 6 1/8 970

• 5 7/8 3,940 5.00 16,645

• 61/8 1,025

• 5 7/8 4,180 5.00 9,255

• 6 1/8 4,460

• 5 7/8 4,430 5.00 15,825

• 61/4 8,275

• 5 7/8 4,705 5.00 23,265

• 6 1/4 4,670

• 5 7/8 5,000 5.00 19,045

• 6 1/4 680

• 5 7/8 5,320 5.00 14,055

• 6 1/4 720

• 5 7/8 5,685 5 1/8 18,555

• 6 1/4 10,400

• 5 7/8 6,085 5 1/8 23,880

• 6 1/4 23,100

• 5 7/8 6,515 5 1/8 27,120

• 6 1/4 24,915

• 5 7/8 6,970' 5.00 29,460

• 6 1/4 11,505

• 5 7/8 34,165

• 5.00 28,595

• 5 7/8 30,270 5.00 28,165

• 5.00 29,575

• 5 1/8 31,055

• 5 1/8 26,585

• 5 1/8 21,890

• 5 1/8 23,010

• 5 1/8 24,185

• 5 1/8 25,425

• 5 1/8 13,030

• 1996 A 1996 B Refundin?

Refunding Series (2*

Series (2)

Int. Rate Amt.

Int. Rate Amt.

61/4 1,450 6 1/4 1,645 6 1/4 3,565 6 1/4 4,645 61/2 3,730 5 3/4 1,035

• 5 3/4 15,170

• 5 3/4 6,165

• 5 3/4 5,615*

5 3/4 5,925

• 5 3/4 6,530

• 5 3/4 7,005

• 5 3/4 13,075

• 5 3/4 19,650

• 5 3/4 20,735

• 5 3/4 21,875

• 5 3/4 23,155

• 5 3/4 38,535

• 5 3/4 24,185

• 5 1/2 11,435

• 5 1/2 10,070

1997A 1998 A 1998 B 1999A 1999 B 2001 A 2001 A Refunding Refunding Refundinq Tax-Exempt Taxable Improvement Refunding T

Series 2 Series (2)

Series (24 Series (2)

Series (2)

Series (2)

Series P

R e

Int. Rate Amt.

Int. Rate Amt.

Int. Rate Amt.

Int. Rate Amt.

Int. Rate Amt.

Int. Rate Amt.

Int. Rate Amt.

M

(

48,265 52,620 0

100,885 25,760 1,055 0

26,815 198,320 0

0 198,320 125,320 0

0 125,320 46,285 0

0 46,285 8,605 2,257,990 1,774,894 4,032,884 0

342,455 0

24,245 8,605 2,624,690 (5) Included in year that payment is made.

(6) Cash defeased to maturity, $14,080,000 of the 1992A Refunding Bonds due 7/1/02 and 7/1/06 and $10,165,000 of the 1996A Refunding Bonds due 1/1/02 and 1/1/06. Bonds are subject to the original call provisions as stated in each official statement. (For Details on Calls See "Schedule of Refunded and Defeased Bonds Outstanding.")

(7) The 2010 maturity has a split coupon; $2,000,000 at 5.00% and $450,000 at 4.00%.

208,835 5,720 0

214,555 5.00 1,925 5.00 27,585 4.00 595 6.53 5,000 31/2 5,505 69,160 122,130 191,290 5.00 20,680 4.00 625 5.00 5,360 6.68 19,005 86,735 118,821 205,556 4 1/8 655 5 3/8 5,670 6.85 28,955 75,755 113,865 189,620 5.00 2,025 41/4 685 5.00 5,990 6.97 4,225 3 1/4 2,020 54,395 110,525 164,920 4.40 715 5 3/8 6,335 7.07 4,455 3.40 2,085 4.00 3,100 55,170 107,243 162,413 41/2 750 4.80 6,695 7.12 4,705 4.00 2,155 41,570 104,912 146,482 4 1/2 785 5 1/2 7,070 7.17 4,980 41/2 2,240 59,565 101,986 161,551 41/2 825 5 1/2 7,480 7.22 5,270 41/2 2,340 36,190 99,248 135,438 47/8 2,505 4.70 865 5 1/2 7,940 7.27 5,590

• 2,450 (7) 78,070 96,272 174,342 4.90 9,780 4 3/4 905 5 1/2 18,325 7.27 38,390

• 117,000 90,362 207,362 5.00 15,040 51/4 955

• 55/8 10,910 7.32 1,465 5.00 2,565 84,120 84,757 168,877 5.00 15,815 51/4 1,010*

55/8 11,540 7.37 1,580 5.00 2,690 101,975 79,929 181,904 5.00 16,630 5.00 1,065

• 5 3/4 12,220 7.42 1,700 5.00 2,830 99,310 74,383 173,693 5.00 12,980 5.00 1,120

• 5 3/4 12,940 5 1/4 2,965 86,775 68,746 155,521 5.00 9,095

• 5.00 1,180

• 5 1/2 13,690 5 1/4 3,125 95,255 63,813 159,068 5.00 9,485

• 5.00 1,245

• 5 1/2 14,470 5 1/4 3,290 96,505 58,638 155,143 5.00 22,410

• 5.00 1,310

• 5 1/2 9,230 5 1/4 2,800 101,515 53,306 154,821 5.00 17,755

• 5.00 1,380

• 5 1/2 9,755 5 1/4 2,945 141,590 47,443 189,033 5.00 380

• 5.00 1,455

• 5 1/2 10,305*

5 1/4 3,100 141,600 39,419 181,019 5.00 400

• 5.00 1,530

• 5 1/2 10,890*

4 3/4 3,265

• 139,490 30,805 170,295 5.00 420

• 5.00 1,615

• 5 1/2 11,505*

4 3/4 3,420

• 127,710 22,553 150,263 5.00 440

• 5.00 1,700

• 71,075 17,060 88,135 5.00 465

• 5.00 1,790

• 30,420 14,365 44,785 5.00 485

• 5.00 1,000

• 31,060 12,828 43,888 5.00 510

• 31,565 11,243 42,808 5.00 6,595

• 33,180 9,589 42,769 5.00 12,985

• 34,875 7,857 42,732 5.00 13,635

• 36,645 6,041 42,686 51/8 14,315

• 38,500 4,124 42,624 51/8 15,050

• 40,475 2,100 42,575 51/8 7,710

• 20,740 531 21,271 5S

-- 1!

IANE COPE C

STOE SEVC OFICS Conway 100 Elm St.

Conway, SC 29526 (843) 248-5755 Garden City/Murrells Inlet 900 Inlet Square Dr.

Murrells Inlet, SC 29576 (843) 651-1598 Loris 3701 Walnut St.

Loris, SC 29569 (843) 756-5541 Moncks Corner One Riverwood Drive Moncks Corner, SC 29461 (843) 761-4060 Myrtle Beach 1703 Oak St.

Myrtle Beach, SC 29577 (843) 448-2411 North Myrtle Beach 1000 2nd Ave. North North Myrtle Beach, SC 29582 (843) 249-3505 Pawleys Island 126 Tiller Rd.

Pawleys Island, SC 29585 (843) 237-9222 St. Stephen 1172 Main St.

St. Stephen, SC 29479 (843) 567-3346 56

www. santeecooper. com FOR ADDITIONAL INFORMATION CONTACT:

Beth Fondren Director of Public Relations Santee Cooper P.O. Box 2946101 Moncks Corner, SC 29461-6101 (843) 761-7016 bfondren@santeecooper.com EDITOR Beth Fondren/Santee Cooper PHOTOGRAPHER Jim Huff/Santee Cooper WRITERS Beth Fondren and Willard Strong/Santee Cooper DESIGN Amanda Duggan/NS&G As part of Santee Cooper's corporate commitment to protecting and improving our environment, this annual report was printed with soy-based inks on paper that meets United States Environmental Protection Agency guidelines for recycled paper. We urge you to recycle this report when you are finished with it.

I Santee Cooper Www.santeecooper.com