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S&P downgrades SCANA, subsidiaries after judge rejects rate-cut challenge

S&P Global Ratings on Aug. 9 downgraded SCANA Corp. and its subsidiaries by one notch to the lowest investment-grade rating after a federal judge denied South Carolina Electric & Gas Co.'s attempt to halt a temporary rate reduction tied to V.C. Summer cost recovery.

The rating agency lowered its ratings, including the issuer credit ratings, on SCANA and subsidiaries South Carolina Electric & Gas, or SCE&G, and Public Service Co. of North Carolina Inc. to BBB- from BBB and said the ratings remain on CreditWatch with negative implications. The short-term ratings on SCANA, both utility subsidiaries and South Carolina Fuel Co. were lowered to A-3 from A-2 and also remain on CreditWatch negative.

"The downgrade on SCANA and its subsidiaries reflects our expectation of reduced consolidated credit metrics over the next two years, even after incorporating the company's announced cut to its dividend payments," S&P Global Ratings wrote in its report. "The CreditWatch with negative implications on SCANA and its subsidiaries reflects our view of ongoing uncertainty regarding cost recovery of the abandoned V.C. Summer nuclear construction project. We could lower ratings again if credit metrics weaken further beyond those in our base-case scenario, which assumes the temporary rate cut is made permanent."

SCE&G on July 2 filed a motion for preliminary injunction in the U.S. District Court for the District of South Carolina Columbia Division as part of the utility's request for the court to prohibit the Public Service Commission of South Carolina from implementing a nearly 15% rate reduction enacted by the South Carolina General Assembly.

The "experimental rate" is retroactive to April 1 and will be in effect until the PSC rules in December on Dominion Energy Inc.'s proposed acquisition of SCANA or final cost recovery of the scrapped V.C. Summer reactors. SCE&G said the temporary rate cut amounts to a revenue reduction of approximately $31 million per month and argues the rate reduction and other aspects of the new state law constitute "an unlawful taking of private property" and deny the utility due process.

U.S. District Judge J. Michelle Childs in her Aug. 6 ruling denying injunctive relief said SCE&G "has not established that it is clearly likely to succeed on the merits of its claims."

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.