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So when you get these wholesale generators, you might have a wholesale generator build a plant here in Columbia, but SCE&G may not need the electricity or they may enter into a contract Santee Cooper. Well, you've got to get the electricity from Columbia down to Moncks Corner or Santee Cooper. Well, how do you do that? You wheel it and that's wholesale wheeling.

When you take from that generator and you put it on the lines and actually it's basically just placement because you can't follow the electricity, but they call it wheeling the electricity from here over the SCE&G's lines. They might have to interconnect with another carrier down to Santee Cooper. That's a wholesale wheeling.

Now retail wheeling is a horse of a different -- a different horse. You've got retail wheeling is where you wheel it actually to the end user. You wheel electricity from one service area to the other to the actual end user. And that's the real issue here.

Now the Energy Policy Act, and I commend Congress on this, they left that to the states where it belongs because under the Energy Policy Act, there was some talk about giving that to the FERC, too, the Federal Regulatory Commission, but they didn't do that.

They left that to the states and that's why. Why? Because when you talk about retail wheeling, you talk about some real adverse effects on some small customers again.

Retail wheeling would be a large business that uses a lot of electricity and I don't know that I'll name any particular, but you think of the largest user of electricity you can think of and what they do would -- on a retail wheeling is you -- they would put out for bids, the electrical powers.
Q. So it gets to be more or less an economies of scale type situation where you have adverse selection like insurance where your big customers may wheel out and leave the mostly costly to service?
A. That's correct, so when you get this big customer, who -- the utility is already built to meet his demands. He's got -- so you get this big customer and he -- and they put out -- now I don't want this to be taken that I'm going to vote against wheeling. I'm just saying that there are some issues there. I would --
Q. Mr. Scott, I'll stop you there because I understand your reluctance to get too far into specifics.
A. Right, but I would tell you --
Q. What I think the committee would like to see is just the analysis that you were going through and I think that's appropriate.

And in the past, but not in the last five years, but one time, I was in the Rotary Club and tried to -- we tried to be good civic servant in that regard. I have raised, not my own children, but two children that Judy had by a previous marriage. I know the trials and tribulations of raising children and wondering where they are and wondering, you know, about the cost of education.

I have a broad background as far as friends are concerned. I have friends with -- on that have problems with issues and talk to them. And I think that I'm a people person. And I think that background would help me in making -- to make any decision.
Q. Mr. Scott, you mentioned earlier that you were some -- in some degree responsible for personnel policies and the administration of personnel at the commission; is that correct?
A. Yes, sir. The personnel director reports to the -- the controller who reports to me and we act with personnel.
Q. But you are actively involved in the setting of personnel policies --
A. Yes, sir.
Q. -- and standards?
A. Yes. Now I'm active in presenting policy to the commissioners for their approval.
Q. Right.
A. But they approve all the personnel.

We're not part of the Judicial branch, but we do quasi-judicial work and we're created by the Legislature. So we're a quasi-judicial body created by the Legislature in the Executive branch of the government.
Q. The reason I ask that question is you would wear a number of hats if you were elected to the commission. I guess one of those would be as you said quasi-judicial. Do attorneys employed by the commission ever take an adversarial role before the commission?
A. Adversarial.
Q. Adversarial to persons appearing for utilities.
A. Yes, sir.

And I might have used the wrong term when I said adversarial to the utility. It is different than the utility. Whereas the utility might be or an intervener might be trying to get the commission to change its position on a particular issue, so it may be different. But the staff doesn't have a role in the sense -- they can't appeal the commission's orders.

Although they present testimony and cross-examine, we -- the past general counsel wrote an opinion that they weren't technically a party of record. So the -- I mean the staff -- and once the commission makes a decision even if it's different than what staff had proposed, the staff is going to be in court defending it because our staff lawyers defend the commission in court.

We're a little different than, say, Workman's Comp. Commission where they make a decision and go to court. I don't think the Workman's Compensation Commission or Industrial Commission actually defends the order.

We actually defend the -- we being the attorneys there defend the order of the commission. So they're not adversarial in the sense that they're trying to win a position. They are there as to present the information to the commission, but they don't -- but they're not -- whether they win or lose is not an issue.
Q. Let me ask you more generically then if you were the attorney for Southern Bell and you were appearing before the commission and you were serving on the commission -- and you were elected and serving on the commission, would they have a valid point that perhaps those attorneys have a leg up on them since they had a close personal relationship?
A. That issue has come up, not necessarily with a utility, but it has come up about the staff and the role of the utility. And that's when the opinion was written that the staff was not a party of record and that they were --

You know, you have a staff lawyer there in the front, someone can make an objection and the commissioners want legal advice on that objection and the staff lawyer would give them that advice. So one of the reasons that they created the executive assistant to the commission position was that you separated that. It used to be that the staff lawyer would get up and say, "I'm Duke Scott and I'm here representing the commission and commission staff."

During the proceedings, they say, "I represent the commission staff," so we do have a dichotomy in that respect and it's been well received. But you have a valid point. There is some uncomfortableness in some of that, but I think the executive assistant to the commission has taken some of that uncomfortableness away as far as --
Q. So the structure that ya'll adopted is --
A. The structure that we have adopted, yes.
Q. Mr. Chairman, we have reviewed the credit report and SLED report on Mr. Scott. They are both -- no negative entries on either one of those. And one final question, if I might, Mr. Scott, before the committee can ask questions, if you had to critique the commission's performance over the past three or four years as to whether it's industry oriented or consumer oriented, what would that critique be and where on the spectrum of 1 to 10, 1 being industry and 10 being a consumer, not being a qualitative spectrum, but just which way is it oriented, where would you put the commission?
A. Well, I would put the commission in a 1 to ten at 5. Now, and reason I say that is I think the commission has done a tremendous job of balancing the interests of the consumer and having good reliable utility and motor carrier service, too.

And I think one of the best examples of how well the commission has done is when we turned these lights on on Wednesday when all that demand was putting on that system, they came on. The utility has to be able to attract capital to build the plants, so that when you reach 16,000 megawatts of electricity of demand that it's there. On the other hand, I think that the rates are reasonable rates, so I think there has been a clear balancing.

And generally speaking the reports are doing that now. The commission -- in last SCE&G case, the way they handled the construction work in progress of the coal fire plant down in Cope I think is sending a positive signal to the investor.

And I think that the customer in the long run is going to be the beneficiary of that. So I would say that we're in the middle. One of the last reports I saw had the commission above average.
Q. Above as average as to --
A. Above average towards the investor, but I think that there was a lot of positive things that contributed to that and one is the way the commission handles the construction work in progress at the Cope plant.

The other is that we started integrated resources plans back in 1987, which is good for the customer. And so we started the prudent reviews of natural gas utilities right after Article 436. We didn't wait on Article 636.

Some states right now are just getting ready to start prudent reviews of the natural gas industry as a result of 636, but our commission did that since 436. I think we -- the commission has done a tremendous job in balancing those interests which is the key job of the commission and when you boil all those things down and you mentioned those terms and things that I've talked about today, balancing that interest is where you end up.
Q. Thank you, Mr. Scott. Mr. Chairman.
THE CHAIRMAN: Representative Wilkes.
EXAMINATION BY REPRESENTATIVE WILKES:
Q. Good morning, Mr. Scott.
A. Good morning, Representative.
Q. First of all, it's gratifying for me to hear your interest in 636 and wheeling and to the potential cost shifting and the mandates that go with

You know, people -- some people say, well, Duke, you're in the executive comp. system, you've got grievance rights. It's not a political appointment. I mean if the commission changes, you're not supposed to be able to come in and just fire me because I'm not of the political party that they might be or whatever, so I'm giving up security and dollars.

But being a commissioner is something that's fascinated me since I went there and I wouldn't run against Yonce. He's an outstanding commissioner. Don't get me wrong. But, I mean, it's something that just pleases me a lot.

The Energy Office I mean that's going down as far as costs. In fact, it's -- it went down another -- it went down half from 1992 to 1993 and it's gone down a third -- I mean, not a half. It went down 25 percent then. It went down, I think, a third effective January the 1st. As they get on their own feet and start doing, so that's not something guarantied.

And the way the commission handled that was they put into the rate base all the dollars spent almost up to past -- at least to the hearing and even maybe even past the hearing where they had certification that dollar was already spent.

Now what that does is that gives them real dollars returned and not artificial dollars, if you will. What that does is that -- the cost of the plant does not continue to build because of book carrying costs. The commission also did a two-step process, so that the -- provided that SCE&G has spent the dollars by next -- by this June that they're projected to spend, not using projected numbers. But to the extent they have spent dollars in this coming year, they will automatically go into -- it's not automatic, but they will go in the rate base upon a finding by the

We have the -- not only the utility presenting information, but Mr. Hamm and his officer is presenting information and in rate cases, the South Carolina Energy Users committee is there and they're presenting their cases. We have in some instances an industrial customer and in some instances we have groups who are representing themselves, and actual consumers who come represent themselves.

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