
                             STATE OF NORTH CAROLINA
                              UTILITIES COMMISSION

                                     RALEIGH

                             DOCKET NO. G-5, SUB 400
                                 DOCKET NO. G-43

BEFORE THE NORTH CAROLINA UTILITIES COMMISSION

                  In the Matter of

Application of SCANA Corporation and Public          )        ORDER
Service Company of North Carolina, Inc., for         )        APPROVING
Authorization under General Statute Sections         )        MERGER AND
62-111 and 62-161 to Exchange and Redeem             )        ISSUANCE OF
Securities in Connection with a Business             )        SECURITIES
Combination Transaction                              )

HEARD:    Community  Classroom of the Gaston County Health Department,  991 West
          Hudson Boulevard, Gastonia, North Carolina, on Tuesday, July 13, 1999,
          at 7:00 p.m.;

          Courtroom  No.  2,  Buncombe  County  Courthouse,   Asheville,   North
          Carolina, on Wednesday, July 14, 1999, at 7:00 p.m.;

          Commission  Hearing Room 2115,  Dobbs  Building,  430 North  Salisbury
          Street,  Raleigh,  North Carolina, on Monday, August 30, 1999, at 7:00
          p.m. and Tuesday, August 31, 1999, at 9:30 a.m.; and

          Commission  Hearing Room 2115,  Dobbs  Building,  430 North  Salisbury
          Street,  Raleigh,  North  Carolina,  on Monday,  September  27,  1999,
          through Wednesday, September 29, 1999.

BEFORE:   Chairman Jo Anne Sanford,  Presiding, and Commissioners Ralph A. Hunt,
          Judy Hunt, William R. Pittman, J. Richard Conder, and Robert V. Owens,
          Jr.

APPEARANCES:

     For SCANA Corporation and Public Service Company of North Carolina, Inc.

          Sarena D. Burch,  Associate General Counsel,  SCANA Corporation,  1426
          Main Street, Columbia, South Carolina 29201



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          J. Paul  Douglas,  Corporate  Counsel and  Secretary,  Public  Service
          Company of North Carolina, Inc., Post Office Box 1398, Gastonia, North
          Carolina 28053

          Allyson K. Duncan,  Kilpatrick  Stockton,  LLP, 3737 Glenwood  Avenue,
          Suite 400, Raleigh, North Carolina 27612

     For Carolina Utility Customers Association, Inc.:

          James P. West,  West Law  Offices,  PC, Suite 1735,  434  Fayetteville
          Street Mall, Raleigh, North Carolina 27601

     For the Using and Consuming Public:

          Gisele  L.  Rankin  and  Amy  Barnes  Babb,  Staff  Attorneys,  Public
          Staff-North  Carolina  Utilities  Commission,  Post  Office Box 29520,
          Raleigh, North Carolina 27626-0520

          Leonard Green,  Assistant Attorney General,  North Carolina Department
          of Justice, Post Office Box 629, Raleigh, North Carolina 27602-0629

     BY THE COMMISSION:  On May 3, 1999,  SCANA  Corporation  (SCANA) and Public
Service Company of North Carolina, Inc. (PSNC) (collectively Applicants),  filed
a joint application with the North Carolina Utilities Commission  (Commission or
NCUC)  pursuant to G.S.  62-111,  G.S.  62-161,  and  Commission  Rule R1-16 for
authorization to engage in and to issue securities in connection with a business
combination  transaction.  In the initial application,  the Applicants explained
that they had agreed to a two-step  merger  transaction.  In the first  step,  a
wholly-owned  subsidiary of SCANA formed for the purposes of the merger would be
merged into SCANA and SCANA would  survive.  In the second  step,  PSNC would be
merged with and into another  wholly owned  subsidiary  of SCANA,  and the SCANA
subsidiary  would  survive.  Depending  on the  outcome  of  certain  regulatory
proceedings,  PSNC was to be merged either into a special purpose  subsidiary of
SCANA formed for the purposes of the merger,  or into South Carolina  Electric &
Gas Company (SCE&G),  SCANA's existing gas and electric  utility.  Following the
receipt of the required state and federal  regulatory and other approvals,  PSNC
was to become either a direct subsidiary of SCANA or a division of SCE&G.

     By a petition dated May 14, 1999,  Carolina Utility Customers  Association,
Inc. (CUCA), filed a petition to intervene, which was allowed by the Commission.
By notice dated July 20, 1999, the Attorney General filed his intervention.  The
intervention of the Public Staff is noted pursuant to Commission Rule R1-19(e).

     On May 19, 1999, the Commission  issued an order scheduling the application
for public hearings in Gastonia,  Asheville,  and Raleigh,  North Carolina.  The
evidentiary


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hearing on the  application  was scheduled to begin August 31, 1999, in Raleigh.
The Order also established the due dates for prefiled  testimony,  the filing of
petitions  to  intervene,  and  required  PSNC to provide  public  notice of the
application and the scheduled  hearings.  Notice was properly given by PSNC. The
public hearings were held as scheduled.

     On August 11,  1999,  the Public Staff filed a motion  requesting  that the
Commission  issue an order extending the due date for the filing of Public Staff
and other intervenor  testimony to and including Friday,  August 20, 1999, based
on SCANA's notice from the Securities and Exchange  Commission  (SEC) that SCANA
could not acquire  PSNC and remain an exempt  holding  company  under the Public
Utility  Holding  Company Act of 1935  (PUHCA).  In  addition,  the Public Staff
requested  additional  time to file its testimony in order to review SCANA's and
PSNC's filings pursuant to the Hart-Scott-Rodino  Antitrust  Improvements Act of
1976  (Hart-Scott-Rodino)  with the United States  Department of Justice and the
Federal Trade  Commission  (FTC). By Order dated August 11, 1999, the Commission
granted the Public  Staff's  request for an extension of time to file  testimony
and  extended  the due  date  for the  filing  of  intervenor  testimony  to and
including August 20, 1999.

     On  August  19,  1999,  the  Applicants  filed  a  motion  to  amend  their
application  and  testimony  to  reflect  SCANA's  decision  to  hold  PSNC as a
wholly-owned  subsidiary of SCANA and register with the SEC as a holding company
under PUHCA. As a result of this change,  it was necessary to revise paragraph 9
on page 4 of the  Applicants'  initial  application and to reflect the change in
the prefiled  direct  testimony of William B.  Timmerman and Charles E. Zeigler,
Jr.

     On August 19,  1999,  CUCA  filed a request  with the  Commission  that the
hearing be continued  until at least October 5, 1999,  and that the due date for
intervenor testimony be extended commensurately.  On August 20, 1999, the Public
Staff  filed a second  motion for an  extension  of time to file  testimony  and
requested  that the  Commission  issue an order  extending  the due date for the
filing of intervenor testimony to Monday,  August 23, 1999, and the due date for
the filing of the Applicants' rebuttal testimony to Friday, August 27, 1999. The
Commission  issued an Order  granting  the  extensions  requested  by the Public
Staff.

     On  August  20,  1999,  CUCA  filed a motion  asking  that  the  Commission
reconsider  the  extensions  of time granted in its Order of August 20, 1999. In
its motion,  CUCA requested that the Commission postpone the hearing by at least
one month and reset the procedural schedule to accommodate additional discovery.
On August 23, 1999,  the Public  Staff filed its  response to CUCA's  motion for
reconsideration.  SCANA and PSNC also filed on August 23, 1999, in opposition to
CUCA's motion for a continuance.  On August 24, 1999,  the Commission  issued an
order allowing the Applicants'  motion to amend their  application and testimony
and allowing  CUCA's motion for a continuance.  The motion for  continuance  was
allowed "[b]ased upon the Applicants' moving to amend


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the application only one business day before intervenor testimony was due."1 The
evidentiary  hearing was rescheduled to begin on Monday,  September 27, 1999, at
1:30 p.m.,  intervenor  testimony was made due on or before  September 13, 1999,
and the  Applicants'  rebuttal  testimony,  if any,  was made  due on or  before
September 20, 1999.

     Numerous  motions  regarding   discovery   disputes  were  filed,  and  the
Commission made rulings on these motions.

     The case was heard on  September  27,  1999,  through  September  29, 1999.
Following opening statements,  the Applicants presented the testimony of William
B.  Timmerman,  Chairman and Chief  Executive  Officer of SCANA,  and Charles E.
Zeigler, Jr., Chairman, President and Chief Executive Officer of PSNC. Eugene H.
Curtis,  Director,  Natural  Gas  Division;  Thomas W.  Farmer,  Jr.,  Director,
Economic Research Division; and James G. Hoard, Supervisor, Natural Gas Section,
Accounting  Division,  presented  testimony  as a panel on behalf of the  Public
Staff.  CUCA  presented the  testimony of Dr. Mark  Frankena,  a Principal  with
Economists,  Incorporated,  and  Kevin  W.  O'Donnell,  President,  Nova  Energy
Consultants,  Inc. The Applicants then presented the rebuttal testimony of Kevin
B. Marsh,  Senior Vice  President,  Chief Financial  Officer,  and Controller of
SCANA; Charles E. Zeigler, Jr., Chairman,  President and Chief Executive Officer
of PSNC; and Dr. Julius A. Wright,  President,  J. A. Wright and Associates.  No
other parties  presented  testimony,  and no public  witnesses  testified at the
hearings. Proposed orders and briefs were filed on November 3, 1999.

     Based on the Applicants' verified  application,  the testimony and exhibits
received into evidence at the hearing, and the record as a whole, the Commission
now makes the following

                                FINDINGS OF FACT

     1. PSNC is a public utility company incorporated in North Carolina,  and it
is subject to the jurisdiction of this Commission.  PSNC is engaged primarily in
the  business  of   transporting,   distributing  and  selling  natural  gas  to
approximately  350,000 customers in 95 cities and communities within its service
territories in the central and western portions of the State.

--------
     1 The Commission notes that Carolina Power & Light Company (CP&L) and North
Carolina Natural Gas Corporation (NCNG), in their merger proceeding (Docket Nos.
E-2, Sub 740 and G-21, Sub 377),  similarly moved to amend their application one
day before intervenor  testimony was due.  However,  unlike the instant case, no
party to the CP&L/NCNG merger proceeding requested that the hearing be delayed.


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     2. SCANA is an  energy-based  holding  company duly  organized and existing
under  the  laws of the  State of  South  Carolina  with  total  assets,  net of
accumulated  depreciation,  of $5.3 billion at December  31,  1998.  Its primary
subsidiary,  SCE&G, is a public utility that provides  electric  service to more
than  517,000  electric  customers in the central,  southern,  and  southwestern
portions of South Carolina and provides natural gas service to more than 256,000
retail  customers  in  central  and  southern  South  Carolina,  subject  to the
jurisdiction of the Public Service Commission of South Carolina. SCANA also owns
South Carolina  Pipeline  Corporation,  an intrastate  pipeline;  South Carolina
Generating  Company,  which sells  electricity  to SCE&G and is regulated by the
Federal  Energy  Regulatory   Commission   (FERC);   and  several   nonregulated
energy-related, telecommunications, and other businesses.

     3.  Through  their  application  to the  Commission,  SCANA  and PSNC  seek
authorization  under  G.S.  62-111  and G.S.  62-161  to  engage  in a  business
combination  transaction and for  authorization to exchange or redeem securities
in connection with that transaction.  The proposed transaction would make PSNC a
wholly-owned  subsidiary of SCANA through a two-step process. In the first step,
a  wholly-owned  subsidiary  of SCANA  would be formed  for the  purpose  of the
merger; it would be merged with and into SCANA, and SCANA would survive. In step
two,  PSNC would be merged with and into a special  purpose  subsidiary of SCANA
formed  for the  purposes  of the  merger,  and  after all  approvals  have been
obtained,  PSNC would  become a direct  subsidiary  of SCANA.  The merger  would
maintain the existing legal and regulatory status of PSNC.

     4. If the merger is approved, shareholders of both SCANA and PSNC will have
the option of electing  either cash or SCANA  common stock or a  combination  of
both in return for their shares,  subject to specific  limitations.  In exchange
for each share of common stock,  PSNC  shareholders  will be given the option of
receiving  either (1) $33 in cash,  subject to the limitation  that a maximum of
50% of the aggregate  consideration to be paid to PSNC  shareholders may be paid
in cash, or (2) shares of SCANA common stock based on an exchange ratio designed
to distribute  SCANA common stock with a market value of  approximately  $33 for
each  share of PSNC  common  stock,  subject  to  specific  restrictions.  SCANA
shareholders will have the option of electing either $30 in cash or 1.0 share of
SCANA common  stock for each share of SCANA  common  stock held,  subject to the
requirement  that  SCANA  will  pay a  maximum  of $700  million  in cash in the
aggregate as consideration  if the merger is approved.  PSNC  shareholders  will
have the right of first  refusal to receive cash from this pool,  subject to the
50% limitation of total PSNC consideration.

     5. Upon the closing of the merger transaction, SCANA will register with the
SEC as a holding company under PUHCA.  SCANA and PSNC committed in their amended
application  to taking all such  actions as the  Commission  finds  necessary to
protect the Commission's jurisdiction from preemption. The Regulatory Conditions
adopted herein,


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along with the commitments made by the Applicants,  are adequate to protect this
Commission's jurisdiction from preemption by the SEC pursuant to PUHCA.

     6. After the merger is  consummated,  PSNC will  continue to  maintain  and
issue its own debt and will  remain an entity  separate  from SCANA with its own
Commission- approved capital structure.

     7. The quantitative  measures of financial strength commonly  considered by
bond rating  agencies are expected to improve for PSNC,  because SCANA and SCE&G
both have stronger  corporate  credit and debt ratings than PSNC.  Specifically,
Standard  &  Poor's,  a bond  rating  agency,  placed  the  ratings  for PSNC on
CreditWatch with positive implications, and Moody's Investment Service confirmed
the ratings and changed its outlook to positive.

     8. While it is too soon to quantify  the  benefits  of PSNC's  strengthened
financial  position  to PSNC and its  ratepayers,  the merger is very  likely to
reduce PSNC's cost of borrowing over the long-term.

     9. The  cost-of-capital  Regulatory  Conditions  (Regulatory  Conditions 20
through  24),  adequately  protect  PSNC's  ratepayers  from any  merger-related
increases in the cost of capital.

     10. Other  significant  benefits to PSNC's ratepayers would result from the
merger, including,  among others, the creation of a larger, more viable and more
financially  diverse  company with a broader range of assets;  the creation of a
company  that is better able to compete  and better  able to provide  stable and
reliable service; the implementation of operating efficiencies from economies of
scale and the more  efficient use of such features as SCANA's  state-of-the  art
information   system;   the  avoidance  of  future  rate   increases;   and  the
implementation of an immediate rate reduction and a five-year rate cap.

     11. As a  condition  of the merger  (Regulatory  Condition  30),  PSNC will
reduce rates by  $1,043,542  within six months of the merger's  closing date and
then reduce rates 12 months later by an additional  $1,043,542.  This equates to
an annual rate reduction of approximately $2.1 million,  when fully implemented,
that will benefit PSNC's ratepayers until at least the end of the five-year rate
cap period.

     12. The  five-year  rate cap is  equivalent to three years of avoiding rate
increases  comparable  to PSNC's  most recent rate  increase,  which  amounts to
approximately $37.5 million of avoided rate increases.

     13. All costs of the merger and all  direct  and  indirect  corporate  cost
increases  attributable  to the merger  will be  excluded  from  PSNC's  utility
accounts or costs for all purposes that affect its retail rates and charges.


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     14. Upon  closing,  the  difference  between the purchase  price offered by
SCANA and the currently  recorded value of PSNC's assets and liabilities will be
recorded  as an  acquisition  adjustment.  SCANA and PSNC have agreed to exclude
this  acquisition  adjustment from PSNC's utility accounts for all purposes that
could affect PSNC rates and charges.

     15. Total merger costs, including the acquisition adjustment, are estimated
to be $495 million.  PSNC's  ratepayers  will bear no  responsibility  for these
costs.

     16. The  commitments of the Applicants,  including their  absorption of all
direct and indirect  merger costs and the  acquisition  adjustment  that will be
created upon closing,  and the rate reduction and five-year rate cap, constitute
an  equitable   allocation  of  benefits  and  costs  between   ratepayers   and
shareholders.

     17. While an evaluation of potential  savings  resulting  from a merger may
provide relevant information to consider pursuant to G.S. 62-111,  neither North
Carolina  law nor  Commission  rules or  precedent  currently  require  a formal
quantification of such savings in every case.

     18. The Public Staff quantified all of the potential areas of material cost
savings that it believed  could be creditably  quantified.  Most of the items of
potential  savings that were not  quantified  were viewed as too  speculative to
quantify at this time or were viewed as imposing  costs that would  offset part,
if not all, of the potential savings for a particular item.

     19.  PSNC's  quality of  service is  expected  to be  maintained  after the
merger.  Regulatory  Condition  31 is  designed  to ensure  that the  quality of
service  received  by  PSNC's  customers  does not  decline  due to  changes  in
corporate structure or because of other potential effects of the merger.

     20. There is a limited amount of gas-fired  generation in operation at this
time in North  Carolina.  The  approximately  4,000 MW of  gas-fired  combustion
turbine  generation under  construction or in the process of being  certificated
will be  served  by a  significant  number  of  suppliers.  Only  320 MW of this
combustion turbine capacity is in PSNC's territory. Current and future gas-fired
generators  competing  with  SCANA  have  significant  alternatives  to PSNC for
delivered gas service.

     21. The FTC and the  Department of Justice,  which have  jurisdiction  over
market power issues at the federal  level,  found no basis in SCANA's and PSNC's
Hart-Scott-Rodino   filings  on  which  to  request  additional  information  or
otherwise pursue market power as an issue raised by the proposed merger.


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     22.  The  appropriateness  of  imposing  a code of  conduct  as a means  of
mitigating market power concerns is well-recognized nationwide.

     23.  The  Regulatory  Conditions  and Code of  Conduct  adopted  herein are
adequate to address any market power issues which may arise in the future.

     24. The Regulatory  Conditions  and Code of Conduct and the  commitments by
SCANA and PSNC in their testimony,  which have been adopted herein, are adequate
to ensure  that  there  will be no  adverse  impact on the rates and  service of
PSNC's  retail  ratepayers,  that PSNC's  ratepayers  are  protected  as much as
possible from  potential  harm, and that they will receive  sufficient  benefits
from the merger to offset any potential costs and harms.

     25. The  business  combination  transaction  proposed  by SCANA and PSNC is
justified by the public convenience and necessity, and the proposed exchange and
redemption of PSNC stock in connection  therewith are for a lawful  object,  are
compatible with the public interest,  are consistent with the proper performance
by PSNC of its  service to the  public,  and will not impair  PSNC's  ability to
provide that service at just and reasonable rates.

     26. The Regulatory Conditions and Code of Conduct adopted by the Commission
herein,  construed  and applied  consistently  with the  Commission's  Rules and
Regulations  and the  laws of  North  Carolina,  are  adequate  to  address  the
potential  issues and complaints  that might arise.  To the extent new issues or
concerns require that the Regulatory  Conditions and/or Code of Conduct approved
herein be modified,  the Commission has full authority to modify them consistent
with the public interest.

     27. The  unbundling  and/or  deregulation  of natural  gas  service and any
promotions  associated  therewith are not relevant to a determination of whether
SCANA and PSNC's  proposed  business  combination  transaction  is in the public
interest.

             EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 1-4

     Evidence  supporting  these  findings of fact is  contained in the verified
application and direct testimony and in the Commission's records. These findings
of fact are essentially informational,  procedural, and jurisdictional in nature
and are not controverted.

               EVIDENCE AND CONCLUSIONS FOR FINDING OF FACT NO. 5

     The evidence  supporting  this  finding is found in the  testimony of SCANA
witness William B. Timmerman,  PSNC witness Charles E. Zeigler,  Jr., and Public
Staff  witnesses  Eugene H. Curtis,  Jr.,  Thomas W.  Farmer,  Jr., and James G.
Hoard, who testified as a panel.


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     SCANA witness Timmerman  testified that upon completion of the merger, PSNC
will become a wholly-owned  subsidiary of SCANA and SCANA will register with the
SEC as a holding  company under PUHCA. In their amended  application,  SCANA and
PSNC  committed to take all such actions as the  Commission  finds  necessary to
protect the  Commission's  jurisdiction  from  preemption.  The Applicants  also
committed  to not seek to reflect in rates any costs  incurred or revenue  level
earned  under an agreement  subject to PUHCA  except to the extent  permitted by
this Commission.

     SCANA witness Timmerman  discussed in detail the consequences of becoming a
registered holding company in his pre-filed  testimony.  He explained that PUHCA
is directed at the financial  operations and corporate  structure of multi-state
holding companies that own electric and gas public utility companies.  According
to witness  Timmerman,  PUHCA regulation  focuses on protecting the interests of
consumers  and  investors  and  in  furthering  the  public   interest   through
controlling,  among other things,  (1) expansions of utility systems that do not
tend to form an  integrated  and  efficient  system;  (2)  diversification  into
unrelated,  non-utility  activities;  (3) the  issuance of  securities  that are
inconsistent with sound capital structures;  (4) intra-system  transactions such
as loans,  dividends,  and service, sales and construction contracts that may be
detrimental to public  utilities and other  subsidiaries  in the holding company
system; and (5) the maintenance of accounts and records.

     Witness  Timmerman  testified  that  PUHCA  was not  intended  to reach the
production  and sale of natural  gas and  electricity.  The FERC  polices  these
operations  at  the  federal  level  and  state   regulatory   commissions  have
jurisdiction over local operations.  He contended that the SEC acknowledges that
the FERC and state commissions will continue to have the primary  responsibility
to protect consumers through their ratemaking authority and that PUHCA is simply
intended  to  facilitate  the  work  of  other  regulators  by  placing  certain
restraints  on the  activities  of public  utility  holding  companies.  Witness
Timmerman also stated, "I would note that the SEC acknowledges that in many ways
its  regulation  under  the  1935  Act  is  no  longer  necessary  in  light  of
improvements  in the regulation of securities  issuances under the other federal
securities laws and effective state regulatory  oversight of utility operations.
For these reasons the SEC has recommended repeal of the 1935 Act to Congress."

     The Public Staff panel testified that its major concern with the merger was
SCANA becoming a registered holding company under PUHCA, which presents the risk
that certain  aspects of the  Commission's  authority to regulate  PSNC could be
found to be preempted by the SEC. Unless adequate  protections are imposed,  the
Commission  risks  losing  jurisdiction  in a number  of  areas,  including  (1)
affiliate  charges  made to and  incurred  by PSNC,  (2) the  transfer of assets
between and among  affiliates and PSNC, (3) the value placed on such  transfers,
and (4) securities issuances and financings affecting PSNC.


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     The Public Staff panel further testified that a registered  holding company
is generally  prohibited  from charging  their utility  affiliates for services.
Instead,  the SEC tends to favor the  formation of separate  affiliated  service
companies  to  be  used  in  gaining  efficiencies  from   centralization.   SEC
regulations  are in place to govern the terms of  transactions  between  service
companies and affiliated utilities. After the merger is consummated, many of the
goods and services  PSNC  currently  buys or performs for itself or obtains from
independent vendors could be provided by one or more affiliated companies.  As a
result,  the  Commission  could lose  jurisdiction  over much of PSNC's  cost of
service.  This raises the concern that PSNC's  ratepayers could pay higher rates
than the Commission would otherwise find  appropriate.  For example,  if the gas
supply  and  procurement  function  presently  performed  separately  by a SCANA
affiliate  for  SCE&G  and by  PSNC  for  itself  were  to be  centralized  in a
SEC-approved service company, the Commission could be prevented from disallowing
the costs of any gas purchases  made by the service  company unless the SEC also
disallowed  such  purchases.  To solve this problem,  the Public Staff  proposed
Regulatory Conditions that would protect the Commission's jurisdiction.

     These  Regulatory  Conditions  require,  among other things,  that PSNC not
engage in any  transaction  that is subject to PUHCA without  prior  approval by
this  Commission of the contract  memorializing  the  transaction.  The contract
itself must provide  that PSNC may not incur any charges  that are  inconsistent
with the terms and conditions approved by the Commission, nor seek to reflect in
rates any cost  incurred or revenue  level  earned  except as  permitted  by the
Commission.  PSNC,  SCANA, and their affiliates may not assert in any forum that
PUHCA  preempts  this  Commission  from  reviewing  the  reasonableness  of  any
commitment  entered into by PSNC,  and must bear the full risk of any preemptive
effects of PUHCA.  In  addition  to the  foregoing,  the  Regulatory  Conditions
provide  that PSNC is not allowed to take  service  from an  affiliate  at costs
which exceed fair market value,  and the  Applicants  are required to request in
their  application  filed  with the SEC that the SEC  include  certain  language
designed to protect the Commission's  jurisdiction over affiliate  transactions,
the transfer of assets and financings.

     The recommended  Regulatory  Conditions were revised after the Public Staff
filed its testimony,  and the revised  Regulatory  Conditions were admitted into
evidence  as Public  Staff  Panel  Exhibit  4. SCANA and PSNC  indicated  at the
hearing that they were  reserving  their right to comment and oppose some of the
PUHCA Regulatory  Conditions.  They  subsequently did not take issue with any of
these Regulatory Conditions.

     CUCA argued that the  Commission  can neither  control the SEC nor overcome
federal  preemption  and will not be able to  unscramble  the  merger if the SEC
decides to assert  jurisdiction.  Those  arguments  are correct.  However,  they
ignore both the Regulatory Conditions' focus on requiring the Applicants to come
before the  Commission  first as well as  testimony  indicating  that the SEC is
unlikely to preempt state regulation of retail sales of natural gas.


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     Based on the  foregoing,  the  Commission  concludes  that  the  Regulatory
Conditions   adopted  herein  are  adequate  to  ensure  that  the  Commission's
jurisdiction  is protected  from  preemption  and that PSNC's  ratepayers are as
insulated as possible  from  potential  adverse  consequences  of SCANA's  PUHCA
registration.  However,  the  Regulatory  Conditions  require the  Applicants to
request  that the SEC  include  certain  language  in its final  order or orders
approving SCANA's  acquisition of PSNC. The Commission expects the Applicants to
urge the SEC to include such  language.  In addition,  the  Commission  strongly
encourages the SEC to include the requested language.

             EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 6-9

     The  evidence  supporting  these  findings  of  fact  is  contained  in the
testimony and exhibits of SCANA witness Timmerman, PSNC witness Zeigler, and the
Public Staff panel.

     SCANA  witness  Timmerman  testified  that the merger will create a larger,
more  financially  diverse  company with a broader  range of assets.  He further
testified  that the merger should  enable SCANA to enjoy an increased  cash flow
for  reinvestment  or growth in the  competitive  energy and  services  delivery
business  and provide  additional  resources  for the  expansion  of natural gas
service.  With respect to PSNC, he testified that to a considerable  extent, the
benefits to PSNC mirror those to SCANA.  PSNC  witness  Zeigler  testified  that
SCANA's size and its aggressive and successful  management  team will facilitate
future  financial  stability.  He further  testified that SCANA's net income for
1998 was more than ten times the amount earned by PSNC during that same period.

     The  Public  Staff  testified  that  PSNC's  financial   position  will  be
strengthened  as a result of the merger because the merged company would be much
larger than PSNC alone.  This  benefit,  plus the  opportunity  to reduce costs,
should place PSNC in a position to avoid rate  increases  of the same  magnitude
and frequency as in the past.  Public Staff witness Farmer noted that Standard &
Poor's debt and common  stock  ratings and Value Line's  financial  strength and
safety  measures are all stronger for SCANA than they are for PSNC. In addition,
he noted that PSNC also would have  additional  cash flow  available from SCANA,
its access to capital should be increased because of SCANA's higher debt rating,
and  some of  PSNC's  future  requirements  for  capital  expenditures  could be
included in SCANA's  overall debt  financing.  While Mr.  Farmer  stated that he
believed  that there was  insufficient  data at this  point in time to  quantify
these savings to PSNC,  particularly  because the debt rating agencies would not
act on PSNC's  ratings  until  after the merger is  consummated,  the net result
should be a reduction in PSNC's cost of borrowing.

     Based on the  foregoing,  the Commission  concludes  that PSNC's  financial
position should be strengthened as a result of the merger.  In addition,  PSNC's
ratepayers are insulated by the Regulatory Conditions from any increases in cost
of capital and other risks. Specifically,  Regulatory Condition 19 requires PSNC
to  maintain  its  books and  records  in a manner  that  will  allow all of the
components of its cost of capital to be clearly


                                       11


<PAGE>



and  separately  identifiable.  The purpose of this  Regulatory  Condition is to
ensure  that  the  components  of the  cost  of  capital  are  isolated  so that
ratepayers  can be held  harmless from the effect of any  merger-related  risks.
Similarly,  Regulatory  Condition 21 protects ratepayers from the possibility of
higher  borrowing  costs if the merger  was to have a negative  impact on PSNC's
credit  rating.  It provides that to the extent that the cost rates of long-term
debt,  short-term debt, or preferred stock are adversely affected by a downgrade
of the stock due to the  merger,  a  replacement  cost rate will be  utilized to
prevent PSNC's  ratepayers from paying any increased costs. The replacement cost
would be used for all financings,  refundings,  and refinancings  through PSNC's
next general rate case.

     Finally,  under  Regulatory  Condition  23, the cost of capital  Regulatory
Conditions  also  apply  to  PSNC's  determinations  of  its  maximum  allowable
Allowance  for  Funds  Used  During  Construction  (AFUDC),  the rates of return
applied to any of PSNC's deferral accounts and regulatory assets and liabilities
that accrues a return, and any other component of PSNC's cost of service that is
affected by the cost of debt or preferred stock.

     Based on the  foregoing,  the Commission  concludes  that PSNC's  financial
position  should be  strengthened  as a result  of the  merger  and that  PSNC's
ratepayers are  adequately  protected  from any  merger-related  cost-of-capital
increases and risks.

            EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 10-18

     The  evidence  supporting  these  findings  of  fact  is  contained  in the
testimony and exhibits of SCANA witness  Timmerman,  PSNC witness  Zeigler,  the
Public Staff panel, and CUCA witness O'Donnell.

     SCANA witness  Timmerman  testified that PSNC's ratepayers would benefit in
many ways from the  merger.  In  addition to the  previously  discussed  cost of
capital  benefits,  these include the availability of additional  resources that
will better facilitate  expansion;  the broadening and diversification of PSNC's
customer base; the broadening of the range of the products and services  offered
to  customers;  the  creation of a larger,  more  viable,  and more  financially
diverse  company  with a broader  range of assets that is better able to compete
and  better  able  to  provide  stable  and  reliable  service;   and  operating
efficiencies from economies of scale and the more efficient use of such features
as SCANA's state-of-the-art information systems.

     With respect to direct and indirect  merger-related  costs,  SCANA  witness
Timmerman  committed in his prefiled  direct  testimony that SCANA would exclude
all costs of the merger and all direct and indirect  corporate  cost  increases,
including acquisition premiums,  attributable to the merger, from PSNC's utility
accounts or costs for all purposes that affect PSNC's retail rates and charges.


                                       12


<PAGE>



     PSNC witness  Zeigler  testified  that PSNC's  combination  with SCANA will
enable  PSNC to  provide  a  greater  array of  products  and  services  to more
customers  than it would have been able to provide  as an  independent  company,
which provides two benefits.  First, it provides PSNC's  customers more choices,
and,  second,  it creates  supplemental  margins  that will make it  possible to
expand PSNC's system more  aggressively  with fewer general rate  increases.  In
addition,  he testified that the critical mass and operating  efficiencies  that
would result from the merger would  facilitate  the provision of service by PSNC
at a lower cost than would have been possible  otherwise.  He further  testified
that there  would be longer  intervals  between  rate cases than in the past and
that  greater  financial  resources  and sources of  financing  would  encourage
greater expansion of PSNC's system.  On rebuttal,  he testified that the primary
financial  benefit for PSNC's  customers is future cost  avoidance as opposed to
savings.  PSNC has  agreed to a  five-year  moratorium  on general  rate  cases.
Witness  Ziegler  testified that PSNC's rate case cycle has been two years,  and
the most  recent  general  rate case  resulted  in  increased  revenues of $12.5
million.  If the next PSNC rate case was of the same  magnitude as the 1998 one,
the savings  attributable  to the five-year  moratorium  are equivalent to three
years of avoiding a $12.5 million increase,  or approximately  $37.5 million. He
conceded that there would be reduced costs in the specific  areas  identified by
the Public Staff, although he believed the Public Staff overstated the number of
employees that would be displaced.  In addition,  Mr. Zeigler  elaborated on his
assertion  that cost  avoidance  was a major  benefit of the proposed  merger by
asserting that in order to continue to provide  adequate  customer  service,  it
would be necessary at some point in the future,  absent the merger,  for PSNC to
install an updated customer  information  system at a cost of approximately  $15
million.

     PSNC witness  Zeigler also testified that PSNC's annual capital budgets for
the next five years will range from $46 million to $50 million.  Given that PSNC
now has total net assets of $640  million,  PSNC's  assets would be increased by
almost half that amount ($300  million)  over the next six to seven year period.
Because PSNC had decided not to contest the Public Staff's recommended five-year
rate cap,  Mr.  Zeigler  testified  that he believes  that this is a  tremendous
savings to PSNC's  ratepayers.  He also testified that the  acquisition  premium
that SCANA is paying for PSNC will be excluded from PSNC's utility  accounts for
all purposes that could affect its rates and charges.

     The Public Staff panel testified extensively regarding the known, expected,
and  potential  benefits of the merger,  as compared to its  possible  costs and
risks, and the need to balance any costs and risks with benefits.

     The  Public  Staff  panel  testified  that  the  benefits  of the  business
combination  for PSNC's  ratepayers  are the potential for cost savings that may
occur  as  the  result  of  consolidating  PSNC's  and  SCANA's  public  utility
operations and the strengthened  financial position that will result because the
merged company would be so much larger than PSNC alone.  These  benefits  should
enable PSNC to avoid rate increases of the same magnitude


                                       13


<PAGE>



and frequency as in the past. In addition, any resulting gas costs savings would
be passed through to ratepayers in purchased gas adjustment proceedings.

     The Public Staff panel recommended that Regulatory  Condition 30 be imposed
to reduce  rates for  PSNC's  ratepayers  and  impose a rate cap to ensure  that
PSNC's ratepayers  obtain tangible  benefits from the merger.  Exceptions to the
rate cap are provided for normal gas cost adjustments, governmental actions, and
significant  unexpected events over which PSNC has no control.  The Public Staff
panel proposed that the recommended  $2,087,084  rate reduction  should occur in
two separate steps.  Assuming the merger closes on December 31, 1999, the Public
Staff  panel  testified  that the  first  rate  reduction  would be  implemented
effective  July 1, 2000,  and the second  rate  reduction  would be  implemented
effective July 1, 2001. All rate schedules (including  transportation)  would be
reduced by the same  amount to reflect  the rate  reduction.  This  equates to a
reduction of $0.0151 per dt six months after the merger  closes and then another
rate reduction of the same amount 18 months after the merger closes.  A schedule
showing the  calculation  of the rate  reduction  was admitted  into evidence as
Public  Staff  Panel  Exhibit  2. The  rate  cap  prevents  PSNC,  with  certain
exceptions,  from  increasing  its rates  until  July 1, 2005,  at the  earliest
(assuming a December 31, 1999 closing date).

     With respect to the costs of the merger, Public Staff witness Hoard pointed
out that the treatment of acquisition  premiums often has not been dealt with in
merger  proceedings in this State and in others.  Rather, it has been determined
in the  context of  subsequent  rate  cases and has been  allowed in a number of
states to the extent  that  merger  savings or other  benefits  are  achieved to
offset it. Massachusetts,  for example,  allowed the company acquiring Bay State
Gas Company to come back in and capture some of its acquisition costs at a later
point in time. He further  testified  that while a fair number of  jurisdictions
have quantified savings, only some of them approved rate reductions, and most of
these were small.

     In addition, the Public Staff panel testified that Regulatory Conditions 26
and 27 cover all direct and indirect  merger-related  costs,  including  (1) the
acquisition  adjustment;  (2) investment  bankers' and attorneys'  fees; and (3)
change-of-control  and salary continuation  agreements and/or other severance or
personnel  type  arrangements  that are reasonably  attributable  to the merger.
These  conditions  provide that the  estimated  $495 million cost of the merger,
which  includes the  estimated  acquisition  adjustment,  will be excluded  from
PSNC's utility accounts.

     CUCA witness O'Donnell  testified that he considered the benefits SCANA and
PSNC claim to be largely  illusory.  He further testified that they had not done
any analysis of merger savings and such an analysis is vital to a  determination
of whether the merger is in the public interest.  Mr. O'Donnell  criticized what
he considered to be extremely high investment banker fees,  material benefits to
PSNC's  directors,  and generous  severance  agreements for PSNC  employees.  He
further testified that PSNC could find savings by


                                       14


<PAGE>



eliminating duplicative functions in the areas of billing, customer service, and
executive management.

     In  addition  to the  controverted  issues  with  respect  to the  merger's
benefits  and costs,  there was  considerable  disagreement  about the extent to
which cost savings  would occur and the  necessity  for the  Applicants  to have
filed a study of merger savings.

     SCANA  witness  Timmerman  and PSNC  witness  Zeigler  testified  that cost
savings  were not a major  reason for the merger,  but that they did expect some
savings to  materialize  from  operating  efficiencies.  The Public  Staff panel
testified  that  it  basically  did  its own  study  of  savings  by  using  the
Applicants' integration team report and holding discussions with the Applicants.
On cross-examination  about why the Applicants' expected  quantification had not
been done on  schedule,  Public Staff  witness  Hoard  indicated  that the SEC's
position that SCANA's  acquisition of PSNC would make SCANA a registered holding
company  under  PUHCA  had  changed  the  proposed   organizational   structure.
Specifically,  the need to set up a service  company  was a major  change to the
organizational  structure  that  would  change  many  of the  assumptions  about
savings.

     On  cross-examination of the Public Staff, CUCA asked a series of questions
about  whether  the Public  Staff had  quantified  savings in certain  specified
areas.  The Public Staff panel members  testified  that they believed all of the
potential  areas of material cost savings that could be credibly  quantified had
been quantified. Most of the items of potential savings that were not quantified
were  viewed as too  speculative  to  quantify  at this  time or were  viewed as
imposing costs that would offset part, if not all, of the potential savings. For
example,  Public Staff witness Hoard  testified  that he evaluated the potential
for cost savings in the  information  technology  area and concluded  that while
savings  could be expected,  there would also be a  significant  amount of costs
added in that area. He testified that he did not believe he could credibly argue
to the  Commission  that there were net  savings in the  information  technology
area.

     CUCA witness  O'Donnell  testified that one purpose of his testimony was to
demonstrate that SCANA and PSNC's application was grossly inadequate compared to
utility merger  applications  in other states,  in large part because it did not
include an analysis of merger savings.

     Based upon all of the evidence in the record, the Commission concludes that
there are  benefits to PSNC's  ratepayers  which will  result from the  proposed
merger.  The Applicants  testified at length regarding the benefits that are not
easily quantified, particularly at this stage of the process. The evidence shows
that the merger will  provide the  benefit to North  Carolina of a larger,  more
viable and more  financially  diverse company with a broader range of assets and
increased  ability  to  provide  stable  and  reliable   service.   The  utility
environment  is currently  characterized  by a trend toward  consolidation,  and
small- to mid-sized gas utilities such as PSNC are  particularly  susceptible to
acquisition.


                                       15


<PAGE>



As SCANA witness Timmerman testified,  the proposed  combination  contemplates a
stronger and more diverse company that is better able to compete regionally, but
at the same time is committed to the maintenance of a strong corporate  presence
in North Carolina. The consequences of that presence,  including the services of
a good corporate citizen,  the receipt of all corporate and other taxes, and the
provision of significant employment opportunities, are benefits of the merger.

     An issue of  particular  concern to this  Commission is that of natural gas
expansion.  Both SCANA witness Timmerman and PSNC witness Zeigler testified that
the merger would provide additional resources for continued expansion of service
in PSNC's  franchise  territory.  PSNC's  strengthened  financial  position will
enable it to provide  natural gas to more  customers  without the  necessity for
regular  rate  increases.  CUCA  argued  that  this  was not a  benefit  because
expansion funds are available for infeasible projects.  However, as Public Staff
witness  Hoard  testified,  even  the  financing  of  infeasible  projects  with
expansion funds puts upward pressure on rates. Further, expansion and bond funds
are generally not available to build  facilities in partially  served  counties.
PSNC witness  Zeigler  testified that the combined  entity is committed to using
its best efforts to extend natural gas service,  and that commitment  extends to
rapidly growing areas such as the Triangle where there are neighborhoods without
gas  service,  and to work with state  government  to help  provide  natural gas
solutions statewide.

     With respect to costs, the costs that would be most likely to affect PSNC's
customers are those directly associated with the consummation of the merger. The
Applicants  committed  in their  testimony  not to pass those costs on to PSNC's
ratepayers.  Regulatory  Condition 26  specifically  tracks that  commitment  by
providing  that all  direct  and  indirect  corporate  cost  increases,  such as
severance pay,  associated  with the merger will be excluded from  consideration
for  ratemaking  purposes.  In addition,  Regulatory  Condition 27 prohibits any
acquisition  premium from being flowed through into PSNC's rates. While a number
of other states did not resolve the issue in the merger proceeding of whether an
acquisition  premium is  recoverable or allowed it to be recovered to the extent
merger savings or other benefits could be shown in later proceedings, Regulatory
Condition 27 resolves  this issue in PSNC's  ratepayers'  favor by excluding the
acquisition adjustment from rates in any subsequent proceeding.

     Based on the foregoing, the Commission concludes that PSNC's ratepayers are
protected  from all  direct and  indirect  merger  costs.  In  addition  to this
protection,  the  Regulatory  Conditions  provide for a five-year rate cap and a
rate  reduction  that will continue at least for the five-year  rate cap period.
These  annual rate  reductions,  when fully  implemented,  total in excess of $2
million,  an amount that exceeds  five  percent of PSNC's 1998 net income.  This
rate  reduction,  while  small,  must be  considered  a benefit of the merger to
PSNC's ratepayers.


                                       16


<PAGE>



     Accordingly,  the  Commission  concludes that the  commitments  made by the
Applicants,  including their  absorption of all direct and indirect merger costs
and the acquisition adjustment that will be created upon closing, along with the
rate reduction and five-year rate cap recommended by the Public Staff constitute
an  equitable   allocation  of  benefits  and  costs  between   ratepayers   and
shareholders.

     With  respect to the  necessity of  submitting a formal  analysis of merger
savings  with a merger  application,  the  Commission  notes that to date it has
never  interpreted  G.S.  62-111 to require that proposed  business  combination
transactions  be based upon  demonstrations  of specific cost savings.  While an
evaluation of potential  savings  resulting  from a merger may provide  relevant
information,  the  Commission  concludes  that  neither  North  Carolina law nor
Commission rules or precedent currently require that a formal  quantification of
such savings be filed in every case. As the record makes clear, the Public Staff
quantified all of the potential  areas of material cost savings that it believed
could be creditably quantified,  and most of the items of potential savings that
were not quantified  were viewed as too  speculative to quantify at this time or
were  viewed as  imposing  costs  that would  offset  part,  if not all,  of the
potential  savings  for a  particular  item.  Given  the  Regulatory  Conditions
requiring  the  Applicants  to absorb  all  merger  costs,  implementing  a rate
reduction,  and imposing a five-year  rate cap, the  Commission  concludes  that
merger-related savings have been sufficiently quantified in this case.

               EVIDENCE AND CONCLUSIONS FOR FINDING OF FACT NO. 19

     The evidence  for this finding of fact is found in the direct  testimony of
SCANA witness Timmerman, PSNC witness Zeigler, and the Public Staff panel.

     The Applicants presented evidence to support their contention that existing
customers  will benefit  from  receiving  service from a stronger,  more diverse
company that is better  positioned to provide stable and reliable service in any
market or  economic  environment  and  capable  of  offering  improved  customer
support.  PSNC  witness  Zeigler  testified  that PSNC had  evaluated  the price
differential  between  natural  gas and  electricity  in PSNC's  core market and
concluded  that,  while  PSNC's  prices  were  still  less  expensive  than  its
competitors,  PSNC needed to beat the "bigger,  stronger"  electric companies on
both price and service  quality.  He also  testified that the quality of service
provided to PSNC's customers would not deteriorate in any way as a result of the
proposed  merger.  He based  that  conclusion  on his  assessment  of the strong
customer service  commitment and financial  viability of the combined entity, as
well as the proliferation of products and services that should occur as a result
of the merger.


                                       17


<PAGE>



     The Public Staff proposed a Regulatory Condition to address service quality
concerns.  As modified by the Commission,  Regulatory Condition 31 requires PSNC
to take steps to commit to  providing  superior  natural  gas  services to North
Carolina customers following the merger. This Regulatory Condition requires PSNC
to file by  December  31,  1999,  service  quality  indices to  measure  service
quality.  The purpose of this Regulatory Condition is to ensure that the quality
of service  received  by PSNC's  customers  does not  decline  due to changes in
corporate structure or because of other potential effects of the merger.  Public
Staff witness Hoard  testified  that service  quality would be monitored so that
the quality of service at the very least would be maintained.

     Based on these facts and  representations,  the  Commission  concludes that
service quality should not decline as a result of the merger.

            EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 20-23

     The evidence for these findings of fact is found in the direct testimony of
SCANA witness Timmerman,  PSNC witness Zeigler, the Public Staff panel, and CUCA
witness Frankena,  and in the rebuttal testimony of Applicants witness Julius A.
Wright.

     SCANA witness Timmerman  testified that the purpose of a  Hart-Scott-Rodino
filing is to allow  either the  Department  of Justice or the FTC to look at the
potential for anticompetitive behavior that may result from a merger. The agency
to which the filing is assigned has 30 days to review it and  determine  whether
seeking  additional  information  is  warranted.  If no  action  is  taken or no
additional  information  requested,  the filing is then deemed  approved.  SCANA
witness  Timmerman and PSNC witness Zeigler both testified in additional  direct
testimony  that the FTC had been  assigned  to  review  their  Hart-Scott-Rodino
filings and that the waiting period for both companies expired without action at
midnight on September 26, 1999.

     The Public Staff  testified  that it assumed  that a market  power  problem
would be created  in the merger  proceeding  involving  CP&L and North  Carolina
Natural Gas Corporation (NCNG), and therefore it developed regulatory conditions
and a code of conduct to deal with all possible identified issues. In this case,
the Public Staff panel  testified,  it started with the assumption that the same
conditions  and code of conduct would apply,  although  market power issues were
not viewed as being significant in this case compared to the CP&L/NCNG merger.

     CUCA submitted the prefiled testimony of Dr. Mark Frankena,  who provided a
lengthy theoretical  discussion of market power. Witness Frankena defined market
power as the  ability of a seller or group of  sellers  profitably  to  maintain
prices above competitive levels by restricting output below competitive  levels.
A substantial  market share or a market in which there are barriers to entry can
create market power.  He testified that it was appropriate to analyze a vertical
electric-gas merger, such as the proposed


                                       18


<PAGE>



SCANA/PSNC merger, by using traditional antitrust principles.  This requires the
identification of the relevant products and the geographic scope of the relevant
market,  the computation of market shares and  concentration in that market,  an
evaluation of conditions for entry into the market,  and finally,  based on this
information, the making of inferences about the likely extent of market power.

     While witness  Frankena  discussed three theories that have been applied to
vertical  mergers between  electric  utilities that own generating  capacity and
natural gas  companies,  he applied  only one of these  theories to the proposed
SCANA/PSNC  merger.  The theory for which he  undertook  a  preliminary  factual
investigation  for the  Carolinas  was  the  raising  rivals'  cost  theory.  He
specifically  recommended  that the  Commission  investigate  and  evaluate  the
potential  for the  proposed  merger to  adversely  affect the  ability of rival
electric  generators  to compete  with  incumbent  generating  companies  in the
Carolinas. He described this theory as the principal competitive theory that the
FERC applies in evaluating  mergers between  electric  generating  companies and
natural gas companies that are within its jurisdiction. He further asserted that
if this merger  required the FERC's  approval,  the  Applicants  would have been
required to submit an analysis of the effects of the merger on competition using
the raising rivals' cost theory.

     Witness  Frankena  testified  that,  pending a thorough  investigation  and
analysis,  North and South Carolina (minus the Tennessee  Valley Authority (TVA)
and Virginia  Electric & Power Company  (Virginia Power) control areas) appeared
to be a plausible  relevant  geographic  market in which to analyze market power
over  electric  power  during  periods in which the demand  for  electricity  is
relatively  high.  This  proposed  market would be highly  concentrated  because
together,  Duke,  CP&L,  and SCE&G  own or  control  over 80% of the  generating
capacity in the Carolinas.

     Under the raising rivals' cost theory, according to witness Frankena, SCANA
could have the incentive to delay installation of gas-fired  generating capacity
by rivals in PSNC's  territory  in order to increase the price at which SCE&G is
able to sell its own electric  power.  Because  SCANA,  CP&L, and Duke own large
shares of generating  capacity in the Carolinas,  they may also exercise  market
power by reducing  their  output of electric  power  below  competitive  levels.
Witness Frankena acknowledged that SCE&G has only 11% of the generating capacity
in the  Carolinas  and that,  acting  alone,  it is too small and has too little
market  share  to  exercise  market  power.   However,   he  asserted  it  might
nevertheless be able to do so by acting in unison with Duke and CP&L.

     The Applicants'  rebuttal  witness,  Dr. Julius A. Wright,  took issue with
witness Frankena's position that additional consideration of the issue of market
power is  warranted  on the facts of this case,  giving  both  market-based  and
regulatory reasons for his conclusions.


                                       19


<PAGE>



     Witness Wright first took issue with witness Frankena's assertion that PSNC
would have an incentive, or more importantly,  the means to discriminate against
alternative  generators of electricity in either the sales or  transportation of
natural gas. First, a seller of any price-and-service regulated commodity, which
PSNC is and will remain for the foreseeable  future, has an obvious incentive to
sell or transport as much of that commodity as possible. That is the primary way
in which a regulated utility generates revenues and attempts to earn its allowed
rate of  return.  To  withhold  sales  or  transportation  would  be  ultimately
self-defeating.  Second,  as a  regulated  utility,  PSNC  and its  actions  are
governed by this  Commission.  PSNC would serve a new generator under either its
filed  tariff  or a  negotiated  contract  reviewed  by the  Commission.  If the
generator is served under the filed  tariff,  PSNC could only  increase the rate
through a general  rate case in which it would bear the burden of proof.  If the
service to the new generator is rendered under a negotiated  contract,  then the
contract  will specify  when and to what extent PSNC can  increase the rate.  If
PSNC attempted to charge or increase a negotiated rate in any other manner,  the
generator  could file a  complaint  with the  Commission  or pursue  other legal
alternatives.  Furthermore,  the interstate pipelines provide  nondiscriminatory
open access service, providing all customers with the same transportation rights
as other similarly situated customers, and this Commission's regulations require
PSNC to provide service on a non-discriminatory basis.

     Any attempt to delay  service,  abuse  affiliate  relationships,  or charge
discriminatory prices could be addressed by the Commission through its complaint
procedures  according to witness Wright.  More  specifically,  however,  witness
Wright  testified that he believed the Public Staff's  proposed Code of Conduct,
which covers affiliate abuses and other market power issues in detail,  directly
prohibits the very activities described by witness Frankena.

     Witness Wright further testified that retail electric rates (or prices) are
regulated.  The only way to increase  these rates is through a general rate case
or through the fuel adjustment  mechanism for the cost of purchased power,  both
of which are lengthy  detailed  proceedings  that do not allow the behavior that
would be required for witness Frankena's concerns to have legitimacy.

     The  Department  of Justice,  the FTC, and in a more limited  context,  the
FERC, all of which have  jurisdiction  over mergers at the federal  level,  have
examined the facts and found that they did not warrant additional investigation.

     The FTC,  one of two federal  agencies  with  antitrust  jurisdiction,  was
assigned  this case to review and  considered  the issue of whether the proposed
merger  warranted  any  additional  investigation  of market  power  issues.  It
concluded  that it did not.  CUCA witness  Frankena  argued that the FTC and the
Department of Justice  routinely defer to state commissions to address issues of
market power and  therefore the FTC's  failure to act had no  significance.  The
Commission notes, however, that market power in the wholesale


                                       20


<PAGE>



market,  which is the issue raised by Dr. Frankena,  is more a matter of federal
than state jurisdiction. Furthermore, Dr. Frankena himself acknowledged examples
in which the federal  agencies had taken action.  The Commission is unwilling to
assume,   without  more,   that  the  federal   agencies  take  their  antitrust
responsibilities as lightly as he suggests.

     Although the FERC does not have  jurisdiction  to approve  SCANA and PSNC's
proposed  merger,  it was  required  to  evaluate  the extent to which SCE&G has
market power in the  wholesale  market in the context of deciding to allow SCE&G
to charge market-based wholesale rates. Obviously, the FERC at that time did not
have a significant  concern about the possibility of SCE&G exerting market power
in the wholesale market. In addition,  contrary to witness Frankena's  assertion
that the FERC would have  required  SCANA and PSNC to submit an  analysis of the
effects  of  the  merger  on  competition,   the  FERC's  order  concerning  the
disposition   of  San  Diego  Gas  &  Electric   (SDG&E)   and  Enova   Energy's
jurisdictional  facilities in conjunction  with the merger of Enova  Corporation
and Pacific  Enterprises  states that the  applicants in that case  performed no
analysis  of the  vertical  effects of the  proposed  transaction.  (Docket  No.
EC97-12-000,  order dated June 25, 1997,  p.22) According to that order,  68% of
the installed  generating  capacity of the  utilities in southern  California is
gas-fired.  In  addition,  one of Pacific  Enterprises'  subsidiaries,  Southern
California  Gas  Company  (SoCalGas),  delivered  gas to 96% of  that  gas-fired
generation  (excluding  qualifying  facilities).  The  FERC  performed  its  own
analysis  and  concluded  that  if the  applicants  committed  to  the  remedial
mechanisms  discussed in the order (and if the  California  Commission  accepted
those  remedial  mechanisms  over  which  it  had  jurisdiction),  the  proposed
transaction  would  be  consistent  with the  public  interest.  These  remedial
mechanisms included (1) ensuring that SoCalGas and SDG&E did not inappropriately
share market information,  (2) imposing and/or expanding  restrictions to ensure
that affiliate abuses did not occur between  SoCalGas's natural gas pipeline and
affiliated  marketers and other affiliated  energy  companies,  (3) ensuring the
transparency of transactions  involving sales and purchase of gas transportation
services,   and  (4)   requiring  the   separation   of  SDG&E's   purchases  of
transportation   service  from  SoCalGas  for  gas  that  is  used  for  SDG&E's
generators.  The Commission notes that these remedial  mechanisms are similar to
the mechanisms provided in the Public Staff's proposed Regulatory Conditions and
Code of Conduct.

     The Commission notes that there is a limited amount of gas-fired generation
in operation at this time in North  Carolina.  The gas-fired  generation that is
currently  being  built is  combustion  turbines,  and they are  expected to run
approximately  11% of the time.  Witness  Frankena's  own testimony  about newly
constructed and proposed gas-fired  generation in North Carolina reveals that it
will be served by a number of suppliers.  In fact, of the approximately 4,000 MW
of gas-fired generation he discussed,  only 320 MW of this capacity is in PSNC's
territory.

     It also appears that witness Frankena's  assumption that the Carolinas form
the relevant geographic market because of transmission  constraints was based on
erroneous


                                       21


<PAGE>



information.  The Applicants'  witness Wright  conclusively  showed that witness
Frankena's  use  of  150  MW  and  14  MW as  the  first-contingency  total  and
incremental  transfer  capability from TVA to VACAR was an error.  The 1999 VAST
study shows this first- contingency total and incremental transfer capability to
be 2,400 MW, some 16 times the amount reported by Dr. Frankena,  while the 14 MW
amount was shown to be  irrelevant.  The only market  power issue raised in this
proceeding is in the wholesale electric market, and it hinges on the assumptions
that the relevant  geographic  market can be limited to the  Carolinas  and that
SCANA and SCE&G can effectively  raise rivals' costs,  despite their small share
of the wholesale  electricity  market. The Commission  therefore  concludes that
witness  Frankena's  preliminary  analysis  of the  potential  for market  power
resulting from the SCANA/PSNC merger is flawed and not appropriately relied upon
in this proceeding.

     The Commission  concludes that CUCA's expressed  concern about market power
is too  theoretical  and unsupported to justify a delay in this proceeding for a
more formal study to be  undertaken,  particularly  given the very  specific and
detailed  protections offered by the proposed Regulatory  Conditions and Code of
Conduct.  The  appropriateness  of a code of  conduct  as a means of  mitigating
market  power  concerns  is  well-recognized   nationwide.  The  FERC  obviously
considers codes of conduct and similar behavioral remedies to be effective means
of limiting market power. In addition,  CUCA witness  Frankena's  testimony that
the FTC and the Department of Justice think  behavioral  remedies  "won't do the
job," is contradicted by Dr. Frankena's own Exhibit 3.

     Frankena  Exhibit 3 is a paper written by Dr. Frankena  entitled  "Vertical
Mergers:  Analysis  of  Competitive  Effects in  Markets  for  Electric  Power."
Footnote  45 on page 37 of that paper  clearly  states  that  federal  antitrust
agencies  are more  inclined  to  accept  behavioral  remedies  for  competitive
problems  raised by vertical  mergers than for  horizontal.  The reason given is
that the conduct is easier to monitor in vertical cases because there is a party
involved  who has a  strong  incentive  to alert  the  federal  agencies  to the
inappropriate conduct.

     The  Regulatory  Conditions  and Code of Conduct  adopted by the Commission
provide cost allocation and pricing standards,  natural gas marketing standards,
and an equal treatment  standard;  impose reporting  requirements,  requirements
regarding the sharing of potentially  competitively  sensitive information,  and
requirements  to file cost  allocation  manuals and annual  reports on affiliate
transactions;  and  provide  other  protective  measures.  The  purpose of these
requirements  is to avoid  even the  possibility  of  affiliate  abuse  and,  in
essence,  to prevent the possibility of SCANA exercising market power by raising
rivals'  costs.  Finally,  if any  customer  is denied  access to natural gas or
believes  that the price for  transportation  service is excessive or unfair,  a
complaint process is available under both the Commission's rules and the Code of
Conduct.  Under the facts of this  case,  the Code of  Conduct  is  adequate  to
address any market power issues which may arise.


                                       22


<PAGE>



     In summary,  the Commission believes that the weight of the entire evidence
of record in this case with  regard to the market  power  issue does not reach a
threshold sufficient to require the Applicants to submit a market power study at
this point and thereby delay the proposed merger. In this case, CUCA argued that
a market  power  analysis  should  have been  performed.  CUCA had the option of
developing its own market power  analysis and  presenting it to the  Commission.
Yet,  when asked  whether  CUCA had even  requested  the data to perform such an
analysis,  witness Frankena  acknowledged the CUCA had asked "no such question."
The testimony of the Public Staff and the Applicants as discussed  above present
facts in this case  which  cause the  Commission  to  conclude  that no  further
examination of market power is necessary or warranted.

            EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 24-26

     The evidence for these findings of fact is found in the direct testimony of
SCANA witness  Timmerman,  PSNC witness  Zeigler,  CUCA witnesses  O'Donnell and
Frankena, and the Public Staff panel and in the rebuttal testimony of Applicants
witness Wright.

     On cross-examination by the Applicants,  the Public Staff panel agreed to a
number of changes to its proposed Regulatory  Conditions and Code of Conduct and
reserved judgment on several requested changes. (On  cross-examination,  counsel
for the  Applicants  made reference to the  Regulatory  Conditions  filed in the
Public  Staff's  direct  testimony.  The  Commission  notes that the  Regulatory
Conditions  were  subsequently  modified  and  renumbered  in Pubic  Staff Panel
Exhibit 4. The Regulatory  Conditions  discussed below are numbered as in Public
Staff  Panel  Exhibit 4.)  Changes  agreed to by the Public  Staff panel were as
follows:

     (1)  With respect to  Regulatory  Condition 5, the Public Staff agreed that
          it does not apply to interstate  pipeline  capacity or storage  rights
          that PSNC releases through an interstate  pipeline electronic bulletin
          board  or  Internet   site,   when  the  Internet   site  becomes  the
          communications mode under the regulations of the FERC.

     (2)  With respect to Regulatory Condition 32, which requires PSNC and SCANA
          and  their  affiliates  to file a  current  five-year  plan for new or
          expanded  pipeline  facilities  in North  Carolina,  the Public  Staff
          agreed that such plans would be limited to projects  costing  $100,000
          or more.  Also, the Public Staff agreed that the first report would be
          due ninety (90) days after the issuance of the  Commission's  Order in
          this  proceeding  rather than on October 31, 1999,  and all subsequent
          reports will be due on October 31.

     (3)  With respect to  Regulatory  Conditions  29 and 31, which  provide for
          future changes to the  Regulatory  Conditions and the Code of Conduct,
          some of which might not be  acceptable  to PSNC and SCANA,  the Public
          Staff agreed


                                       23


<PAGE>



          that PSNC and SCANA would retain their rights to file  exceptions  and
          seek judicial review as provided by statute.

     (4)  The  Public  Staff  agreed  to modify  the  definition  of  "Similarly
          Situated"  in the Code of  Conduct  to strike  "or  relevant  Standard
          Industrial Classification" and place a period after "swing."

     (5)  In Part II of the Code of Conduct,  the Public  Staff agreed to strike
          the phrase "while not wholly inclusive or totally encompassing."

     (6)  With  respect to  Paragraphs  II(E)(3) and (4) of the Code of Conduct,
          the Public  Staff  agreed  that PSNC would have to report the price of
          the  gas   commodity   itself  in   addition   to  the  rate  for  the
          transportation  only if PSNC is selling  the gas as well as  providing
          the  transportation.  If PSNC only  provides  transportation,  it will
          report only the transportation rate charged.

     (7)  With respect to Paragraphs II(E)(5) of the Code of Conduct, the Public
          Staff agreed to change "two months" to "three  months" as long as PSNC
          advised the Public Staff by facsimile or other immediate communication
          (e.g., Internet e-mail) of such transactions.

     (8)  With respect to the Code of Conduct generally, the Public Staff agreed
          with PSNC that the  activities of Sonat Public Service  Company,  LLC,
          would be governed  by the  Commission's  Order in Docket No. G-5,  Sub
          366, rather than the Code of Conduct.  This exception  applies only to
          Sonat Public Service Company. It does not apply to any other marketing
          affiliate of PSNC,  including any affiliate to which the activities of
          Sonat Public  Service  Company might be transferred as a result of the
          merger approved herein.

     The Public Staff and PSNC disagreed as to Paragraph II(C)(1) of the Code of
Conduct,  which  prohibits  joint  calls by PSNC North  Carolina  jurisdictional
operations  and any affiliate,  including any North Carolina  non-jurisdictional
operations.  PSNC has requested that it be allowed to engage in such joint calls
when  the  customer,  primarily  a large  commercial  and  industrial  customer,
requests such calls as long as (1) the request is in writing and (2) PSNC agrees
to engage in such joint  calls with any  non-affiliated  marketer  at either the
request of the  customer or the  marketer.  The Public  Staff  indicated  in its
Proposed  Order  that it did not  disagree  with this  request.  The  Commission
concludes that it will allow such joint calls on the following  conditions:  (a)
the  customer  must  request  the joint  call in  writing,  which can be sent by
facsimile;  (b) PSNC must participate in similar joint calls with non-affiliated
marketers at the written  request of either the  customer or the  non-affiliated
marketer;  (c) PSNC must post the procedures for such calls on its Internet site
and otherwise  reduce those procedures to writing and make them available to all
customers   (large   commercial   and   industrial    customers   eligible   for
transportation) and non-


                                       24


<PAGE>




affiliated  marketers;  and (d)  PSNC  must  keep a log,  which  identifies  the
customer,   the  marketer   (affiliated   or  not),   and  the  PSNC   personnel
participating,  of all such joint calls, which will be available upon request by
the Public Staff, any customer, or any nonaffiliated marketer.

     As the previous  findings and  discussions of the evidence in the record in
this docket clearly establish, the Regulatory Conditions and Code of Conduct, as
adopted  herein,  and the  commitments by SCANA and PSNC in their  testimony are
adequate to ensure that there will be no adverse impact on the rates and service
of PSNC's  retail  customers,  that PSNC  customers  are as protected as much as
possible from  potential  harm, and that they will receive  sufficient  benefits
from the merger to offset any potential risks and harms.

     The Commission concludes that the business combination transaction proposed
by SCANA and PSNC is justified by the public  convenience and necessity and that
the proposed  exchange and redemption of PSNC stock in connection  therewith are
for a lawful object,  are compatible  with the public  interest,  are consistent
with the proper  performance  by PSNC of its  service to the public and will not
impair PSNC's ability to provide that service at just and reasonable rates.

     Furthermore,  the Regulatory  Conditions and Code of Conduct adopted by the
Commission  herein,  construed and applied  consistently  with the  Commission's
Rules and Regulations  and the laws of North  Carolina,  are adequate to address
any issues and complaints that might arise. To the extent new issues or concerns
require that the Regulatory Conditions and/or Code of Conduct approved herein be
modified,  the Commission has full authority to modify them  consistent with the
public interest.

     Throughout  cross-examination  of the Public Staff witnesses and Applicants
witness Wright,  CUCA questioned the efficacy,  adequacy and  expeditiousness of
the Commission's  complaint proceeding in remedying potential  discrimination or
other market power abuses. For example, CUCA's counsel asked questions regarding
the  Commission's  ability to order an award of money damages to a party that is
alleging  discrimination  and the possible  length of time required to resolve a
dispute.  The  Commission  notes that the  proposed  Code of Conduct  contains a
provision  specifically  requiring  complaint  procedures to be  established  to
resolve potential  complaints that arise in the context of affiliate  relations.
These  procedures,  however,  do not  affect  a  party's  right to file a formal
complaint with the Commission or otherwise  communicate concerns directly to the
Public  Staff.   The   Commission   endeavors  to  address  all   complaints  as
comprehensively and expeditiously as possible.

     While all possible risks and harms cannot be predicted,  the Commission has
full authority to deal with problems and issues as they arise. Chapter 62 of the
North Carolina  General  Statutes  grants the Commission  such general power and
authority to supervise  and control the public  utilities of the State as may be
necessary to carry out the laws


                                       25


<PAGE>



providing for their  regulation  and any and all such other powers and duties as
may be necessary or incident to the proper discharge of the Commission's duties.
The  Commission  also has been granted the power to establish  such rules as are
reasonable and necessary in order to administer and enforce  Chapter 62. Chapter
62 and the  Commission's  Rules and Regulations also establish the procedures to
be followed in  proceedings  before the Commission to ensure that all interested
or aggrieved parties are given notice and an opportunity to be heard.

     It  is  the  Commission's  intention  to  enforce  all  of  the  Regulatory
Conditions  approved herein consistently with their intended goals. In addition,
the  Commission  has  inherent   authority,   consistent  with  the  appropriate
procedural  mechanisms,  to amend the Regulatory  Conditions and Code of Conduct
should  circumstances  warrant.  To the  extent  that a party has a  concern  or
complaint with respect to the actions of SCANA or PSNC or with the  Commission's
interpretation of the Regulatory  Conditions and Code of Conduct, that party may
seek relief from the Commission.

               EVIDENCE AND CONCLUSIONS FOR FINDING OF FACT NO. 27

     This finding of fact is based on the  testimony  of CUCA witness  O'Donnell
and the rebuttal testimony of SCANA witness Kevin B. Marsh.

     In discussing  what he termed the vital need to analyze  merger  savings in
order to determine  whether the merger is in the public  interest,  CUCA witness
O'Donnell  offered what he termed a "real world example." He then segued into an
endorsement of the  deregulation  of natural gas retailing by discussing the gas
market in Georgia.  He testified that when a SCANA marketing  subsidiary entered
the deregulated gas market in Georgia, it offered a one-time $50 discount and an
additional 5% discount off Atlanta Gas Light Company's rates.  Witness O'Donnell
argued that if SCANA offered North  Carolina  residential  customers of PSNC the
same level of savings it offered the  Georgia  residential  customers,  then the
aggregate  savings  to PSNC's  residential  ratepayers  would be at least  $23.2
million in the first year and at least $9.2 million per year after that. Witness
O'Donnell  questioned if Georgia customers are benefiting more from deregulation
than North Carolina customers are from a merger,  then why is North Carolina not
moving toward deregulation of the natural gas industry.

     SCANA rebuttal  witness Marsh testified that it is inappropriate to compare
the Georgia natural gas market to the natural gas market in North  Carolina.  In
1998, the State of Georgia enacted  legislation giving natural gas utilities the
option of unbundling natural gas sales from their regulated utility  operations,
thereby  giving the customers the ability to choose a natural gas provider.  The
deregulated  retail  natural gas market in Georgia is still very  immature,  and
many of the incentives and programs  result in prices below cost for the purpose
of enticing customers to switch to unregulated  suppliers.  He further testified
that pricing has been very volatile since deregulation began in Georgia and that


                                       26


<PAGE>



it is too early for meaningful  comparisons or conclusions to be drawn.  Witness
Marsh concluded that Mr.  O'Donnell's  computations for savings for customers in
Georgia are not  accurate  due to his  reliance on and  convenient  selection of
one-time,  introductory  pricing  levels  that do not  consider  the  impact  of
changing market conditions or current market pricing.

     The Commission  concludes that a determination of the relative benefits and
detriments of the unbundling of natural gas is not before the Commission at this
time.  Whether SCANA's natural gas customers in the newly competitive gas market
in Georgia have  realized  savings is irrelevant  to the  merger-related  issues
pending in this proceeding.

                               CONCLUSIONS OF LAW

     1. The relevant statutes,  G.S. 62-111 and G.S. 62-161, give the Commission
broad  authority  to review  all  aspects  of  proposed  merger  and  securities
transactions and to balance all potential benefits and costs of the transactions
to determine if they should be authorized. Factors to be considered include such
things as the  maintenance of or improvement in service  quality,  the extent to
which costs can be lowered and rates can be maintained or reduced, the extent to
which the merger could have  anticompetitive  effects,  and the  continuation of
effective state regulation.

     2. These  statutes do not require the applicants for approval of a proposed
business  combination  transaction  to file a formal  analysis  of  merger  cost
savings in every case.  Cost savings are just one of the  potential  benefits to
the public  utility's  jurisdictional  ratepayers  and one way of ensuring  that
those  ratepayers  are adequately  protected from cost increases  related to the
merger.

     3.  Approval  should  be given to SCANA  and  PSNC's  proposed  merger  and
securities transactions only if sufficient conditions are imposed to ensure that
(1) the merger  transactions  will have no known adverse impact on the rates and
service of PSNC's  ratepayers;  (2) PSNC's  ratepayers  are protected as much as
possible from potential harm; and (3) these  ratepayers will receive  sufficient
benefit from the merger to offset any potential costs, risks, and harms.

     4. Based on its application of the foregoing standards to the facts of this
case,  with particular  attention paid to the Regulatory  Conditions and Code of
Conduct approved herein, the Commission  concludes that the requirements of G.S.
62-111 and G.S.  62-161 have been met,  and the proposed  merger and  securities
transactions should be approved. Specifically, the Commission concludes that the
business combination  transaction proposed by SCANA and PSNC is justified by the
public convenience and necessity,  and that the proposed exchange and redemption
of PSNC stock in connection  therewith are for a lawful  object,  are compatible
with the public interest, are consistent with the proper


                                       27


<PAGE>



performance  by PSNC of its  service to the public,  and will not impair  PSNC's
ability to provide that service at just and reasonable rates.

     5. It is the intent of the  foregoing  Regulatory  Conditions  and attached
Code of Conduct that PSNC's  ratepayers  shall be held harmless from any adverse
effects  of  the  merger,   including  potential  actions  by  other  regulatory
jurisdictions relating to the merger, and that ratepayers shall receive benefits
from the  merger  that  are at least  commensurate  with the  potential  adverse
effects of the merger.

     IT IS, THEREFORE, ORDERED as follows:

     1. That SCANA and PSNC's  application  to engage in a business  combination
transaction and to exchange and redeem  securities in connection  therewith,  as
described herein and in the  application,  is approved upon the commitments made
by SCANA and PSNC and upon the following Regulatory  Conditions with which SCANA
and PSNC are hereby ordered to comply:

     (1)  With respect to any  transaction  that is subject to Section 13 of the
          Public  Utility  Holding  Company Act of 1935  (PUHCA),  the following
          procedures shall apply:

          (a)  PSNC  shall not  engage  in any such  transaction  without  first
               obtaining from the NCUC such authority as is required under North
               Carolina law  accepting  the contract  that  memorializes  such a
               transaction  and  authorizing the payment of compensation or fees
               pursuant thereto.  Proposed  contracts must first be submitted to
               the Public  Staff for  informal  review at least ten days  before
               filing with the NCUC.

          (b)  Any such contract shall provide that PSNC

               (i)  may not  make or  incur a charge  under  any  such  contract
                    except in accordance  with North Carolina law and the rules,
                    regulations,  and orders of the NCUC promulgated thereunder;
                    and

               (ii) may not seek to  reflect  in  rates  any  cost  incurred  or
                    revenue level earned under an agreement  subject to the 1935
                    Act to the extent disallowed by the NCUC.

          (c)  The SEC shall have found that such  contract is not  inconsistent
               with  PUHCA  except  that no such  finding  by the SEC  shall  be
               required if no SEC  approval of such  contract is required  under
               PUHCA.


                                       28


<PAGE>



     (2)  Neither PSNC,  SCANA,  nor any  affiliate  thereof shall assert in any
          forum,  with respect to any  transaction to which PSNC is involved and
          which  is  subject  to  Section  13 of  PUHCA,  that  PUHCA in any way
          preempts the NCUC from reviewing the  reasonableness of any commitment
          entered  into  by PSNC  and  from  disallowing  costs  of or  imputing
          revenues to PSNC.  Should any other entity so assert,  PSNC, SCANA, or
          other affiliates shall not support any such assertion and shall,  upon
          learning of such  assertion,  so advise and consult  with the NCUC and
          the Public Staff regarding such assertion.

     (3)  PSNC and SCANA shall request the SEC to include the following language
          in any  order  issued  approving  SCANA's  acquisition  of  PSNC  (the
          acquisition):

               Approval  of  this  application  in no way  precludes  the  North
               Carolina  Utilities  Commission from scrutinizing and disallowing
               charges  incurred  or made or  allowing  or  imputing a different
               level of such charges when setting rates for services rendered to
               customers of affiliated public utilities in North Carolina.

     (4)  PSNC shall not take any service from an affiliate under  circumstances
          where its costs incurred for that service (whether directly or through
          allocation) exceed fair market value.

     (5)  With  respect  to the  voluntary  transfer  by PSNC  or any  affiliate
          thereof  to  nonjurisdictional  operations,  an  affiliate,  and/or  a
          nonaffiliate  of the  control  or  ownership  of any asset or  portion
          thereof used for the transmission, distribution, or other provision of
          natural gas service to customers in North Carolina:

          (a)  SCANA and PSNC  shall not  commit to or carry out such a transfer
               except in  accordance  with  North  Carolina  law and the  rules,
               regulations and orders of the NCUC promulgated thereunder; and

          (b)  PSNC may not  reflect  in rates  the  value of any such  transfer
               subject to PUHCA except as allowed by the NCUC.

     (6)  SCANA and PSNC shall include in their  application for approval of the
          acquisition  filed with the SEC pursuant to PUHCA the  commitment  set
          forth in paragraph 5 above.


                                       29


<PAGE>



     (7)  SCANA and PSNC shall include in their  application for approval of the
          acquisition  filed with the SEC  pursuant to PUHCA a request  that the
          SEC include the following statement in its approval order(s):

               SCANA and PSNC  recognize  that the NCUC wishes to  preserve  its
               state law  authority,  under  present  or future  state  law,  to
               require  approval of  transfers  of control or  ownership  of any
               asset  or  portion  thereof  from  PSNC  or  one or  more  of its
               affiliates  to  nonjurisdictional   operations,   affiliates,  or
               nonaffiliates.  Without  conceding their right to assert that the
               NCUC does not and should not have such authority,  SCANA and PSNC
               request  the SEC to state,  in its order  approving  the  instant
               acquisition,  that the SEC does not  intend its  approval  of the
               acquisition to preclude a future state commission order mandating
               or otherwise  exercising  state authority over such a transfer of
               assets.

     (8)  Any filing with the SEC in connection with asset  transfers  involving
          PSNC shall request that the SEC include the following  language in its
          approval order(s):

               Approval  of  this  application  in no way  precludes  the  North
               Carolina Utilities  Commission from scrutinizing and establishing
               the value of the asset transfer for purposes of  determining  the
               rates for services rendered to PSNC's customers.  It is the SEC's
               intention that the North Carolina Utilities Commission retain the
               right to review and  determine  the value of such asset  transfer
               for purposes of determining rates.

     (9)  Neither PSNC,  SCANA,  nor any  affiliate  thereof shall assert in any
          forum, with respect to any asset transfer transaction to which PSNC is
          involved and which is subject to PUHCA, that PUHCA in any way preempts
          the NCUC from (a) exercising such authority as it may have under North
          Carolina law to mandate,  approve, or otherwise regulate a transfer of
          assets by or to PSNC, or (b)  scrutinizing  and establishing the value
          of the asset  transfers  for  purposes  of  determining  the rates for
          services  rendered  to PSNC's  customers.  Should any other  entity so
          assert,  PSNC,  SCANA, or other  affiliates shall not support any such
          assertion and shall,  upon learning of such  assertion,  so advise and
          consult with the NCUC and the Public Staff regarding such assertion.


                                       30


<PAGE>



     (10) With respect to any  financing  transaction  entered into between PSNC
          and  SCANA  or  among  PSNC  and/or  any  one or  more  of  its  other
          affiliates,  any contract memorializing such transaction shall provide
          that PSNC:

          (a)  may not  enter  into any such  financing  transaction  except  in
               accordance  with North  Carolina law and the rules,  regulations,
               and orders of the NCUC promulgated thereunder; and

          (b)  may not reflect in rates the effect of any capital  structure  or
               debt and/or equity costs except as allowed by the NCUC.

     (11) PSNC and SCANA shall include in their  application for approval of the
          acquisition  filed with the SEC  pursuant to PUHCA a request  that the
          SEC include the following statement in its approval order(s):

               The SEC further  finds that its approval of this  acquisition  or
               future financing arrangements does not preclude the NCUC or other
               regulatory  authority  from setting rates based on the assumption
               of a capital  structure,  a  corporate  structure,  debt costs or
               equity  costs  that  varies  from  the  structure(s)  or  cost(s)
               approved in this Order.

     (12) Neither PSNC,  SCANA, nor any other affiliate  thereof shall assert in
          any forum,  with respect to any financing  transaction with which PSNC
          is  involved  and which is  subject  to PUHCA,  that  PUHCA in any way
          preempts  the NCUC from  exercising  any lawful  authority it may have
          over such  financings or that the NCUC is precluded from setting rates
          based on the capital structure,  corporate  structure,  debt costs, or
          equity costs that it finds to be appropriate for ratemaking  purposes.
          Should any other entity so assert,  PSNC,  SCANA, or other  affiliates
          shall not support any such assertion and shall,  upon learning of such
          assertion,  so advise and consult  with the NCUC and the Public  Staff
          regarding such assertion.

     (13) With  respect to the  above-described  affiliate  transactions,  asset
          transfers,  and financings,  PSNC,  SCANA,  and their affiliates shall
          bear the full risk of any  preemptive  effects of PUHCA.  The previous
          sentence  includes,  but is not limited to, agreement by PSNC,  SCANA,
          and their  affiliates  to take all such  actions as may be  reasonably
          necessary and appropriate to hold North Carolina  ratepayers  harmless
          from rate increases,  foregone  opportunities  for rate decreases,  or
          other effects of such preemption.  Such actions  include,  but are not
          limited to,  filing with and  obtaining  approval from the SEC of such
          commitments  as the NCUC deems  reasonably  necessary  to prevent such
          preemptive effects.


                                       31


<PAGE>



     (14) If PUHCA is amended or  replaced  by future  legislation,  the parties
          shall  meet  promptly  after  the  passage  of  such  legislation  and
          negotiate  in good faith  whether and how these  conditions  have been
          affected by such  legislation  and  whether  they should be revised or
          removed. In the event the parties are unable to reach agreement within
          a reasonable  time after passage of such  legislation,  the unresolved
          issues shall be submitted to the NCUC for resolution.

     (15) PSNC is required to seek out and buy all goods and  services  from the
          lowest cost  provider of comparable  goods and services.  To this end,
          PSNC must conduct an annual  market price study for goods and services
          it receives from SCANA or other affiliates, which allows assessment of
          whether  PSNC could have  acquired the services at a lower market cost
          from nonaffiliated  providers, or whether PSNC could have provided the
          service itself at lower cost.

     (16) PSNC  shall file a cost  allocation  manual  with the NCUC  within six
          months after closing.  The cost  allocation  manual shall describe how
          all  direct,  indirect,  and other  costs  will be  charged to capital
          projects,   nonjurisdictional  operations,  and  affiliates.  In  that
          connection, PSNC will perform a detailed review of the common costs to
          be  allocated  and  allocation  factors to be used.  Within six months
          after closing, PSNC shall provide a list of items considered to be the
          shared services of PSNC and the basis for each determination.

     (17) SCANA and PSNC  shall  file with the NCUC,  within  six  months  after
          closing,  a cost  allocation  manual for each service company or other
          affiliate  providing  goods and services to PSNC. Each cost allocation
          manual shall describe how all direct,  indirect,  and other costs of a
          service  company or other affiliate will be charged among PSNC and its
          affiliates. In that connection, a detailed review must be performed of
          the common  costs to be  allocated  and the  allocation  factors to be
          used.  Within six months  after  closing,  a list of the  services and
          goods that are  provided or are  anticipated  being  provided  shortly
          thereafter by a service company or other affiliate shall be filed with
          the NCUC. PSNC shall not commit to any cost allocation affected by any
          changes to such cost  allocation  manual or list of services and goods
          unless PSNC has  submitted  such  changes to the NCUC and received its
          approval.

     (18) SCANA and PSNC shall file an annual report of affiliated  transactions
          with the NCUC in a format  prescribed by the NCUC. The first report on
          affiliated transactions shall be filed on March 31, 2001, for activity
          through  December  31,  2000,  and  annually  thereafter  on March 31.
          Transactions  affecting PSNC's regulated  operations shall be reviewed
          regularly by its


                                       32


<PAGE>



          internal auditors. All workpapers shall be available for review by the
          Public Staff and the NCUC Staff.

     (19) PSNC shall keep its accounting books and records in a manner that will
          allow all  components of the cost of capital to be  identified  easily
          and clearly on a separate basis.

     (20) SCANA and PSNC will  identify at the time of PSNC's next rate case the
          amount of  SCANA's  equity  investment  in PSNC that is  reflected  in
          accounting records.

     (21) To the extent the cost rates of SCANA's or PSNC's long-term debt (more
          than one year),  short-term debt (one year or less) or preferred stock
          are or have been adversely affected by the merger, through a downgrade
          or  otherwise,  a  replacement  cost rate to remove the effect will be
          used  for all  purposes  affecting  PSNC's  rates  and  charges.  This
          replacement   cost  rate  will  be  applicable   to  all   financings,
          refundings, and refinancings. This procedure will be effective through
          PSNC's next  general  rate case.  As part of PSNC's next  general rate
          case, any future procedure  relating to a replacement cost calculation
          will be  determined.  This  Regulatory  Condition  does not indicate a
          preference  by any party for any  specific  debt  rating or  preferred
          stock rating for SCANA or PSNC on current or prospective bases.

     (22) SCANA and PSNC will identify as clearly as possible long-term debt (of
          more than one year duration)  issued by PSNC or SCANA, as appropriate,
          with  either (1) the assets  that are or will be  utilized  to provide
          service to PSNC's regulated utility customers or (2) SCANA's or PSNC's
          existing debt to be replaced with the new debt issuance.

     (23) The cost of capital  Regulatory  Conditions  also will apply to PSNC's
          determinations  of its maximum  allowable  AFUDC  rates,  the rates of
          return  applied  to any of PSNC's  deferral  accounts  and  regulatory
          assets and liabilities  that accrue a return,  and any other component
          of  PSNC's  cost of  service  impacted  by the  cost  of  debt  and/or
          preferred  stock.  PSNC will continue to apply an annual interest rate
          of 10% to its Deferred Gas Cost Accounts.

     (24) These Regulatory  Conditions do not supersede any orders or directives
          that have been or will be issued by the NCUC regarding the issuance of
          specific  securities by SCANA and PSNC. As with  securities  issuances
          prior to the  announcement  of the merger,  the issuance of securities
          after the  announcement  of the merger  does not  restrict  the NCUC's
          right to review,


                                       33


<PAGE>



          and if deemed  appropriate,  adjust  SCANA's or PSNC's cost of capital
          for ratemaking purposes for the effect of these securities.

     (25) SCANA,  PSNC, and their  affiliates shall file with the NCUC a copy of
          all  documents or reports filed with the SEC and provide a copy to the
          Public Staff. In addition,  SCANA and PSNC shall provide a copy of all
          orders issued by the SEC.

     (26) All costs of the merger and all direct  and  indirect  corporate  cost
          increases  (including  those that may be assigned to SCANA,  a service
          company or any affiliate), if any, attributable to the merger, will be
          excluded  from  PSNC's  utility  accounts,  and shall be  treated  for
          accounting and  ratemaking  purposes so that they do not affect PSNC's
          natural gas rates and  charges.  For purposes of this  condition,  the
          term  "corporate  cost increases" is defined as costs in excess of the
          level that PSNC would have incurred  using prudent  business  judgment
          had the merger not occurred.

     (27) Any acquisition  adjustment that results from the business combination
          of SCANA and PSNC will be excluded  from PSNC's  utility  accounts and
          treated for  accounting  and  ratemaking  purposes so that it does not
          affect PSNC's natural gas rates and charges.

     (28) In accordance with North Carolina law, SCANA and PSNC will provide the
          NCUC and the  Public  Staff  full  access to the books and  records of
          SCANA and PSNC, their affiliates, and nonutility operations.

     (29) SCANA,  PSNC, their  affiliates,  and PSNC's  nonregulated  operations
          shall be bound by the  Code of  Conduct  approved  by the NCUC in this
          proceeding.  This Code shall be considered  the minimum  conditions to
          which the merged  company is agreeing  and shall not preclude the NCUC
          from amending the Code later to incorporate additional conditions.  If
          necessary,  the Code  will be  modified  if  there is a change  in the
          merged  company's  organizational  structure or if other changes occur
          that warrant such amendments.

     (30) PSNC shall reduce rates by $1,043,542 within six months of the closing
          date  of  its  proposed  business  combination  with  SCANA  and by an
          additional  $1,043,542 within eighteen months of that closing date. In
          addition,  none of the margin  rates for gas sales and  transportation
          services  provided by PSNC will be  increased  for five years from the
          date the first rate reduction  takes effect,  except for the following
          reasons:  (1)  gas  cost  adjustments  or  changes  in  increments  or
          decrements  pursuant to G.S.  62-133.4 or NCUC Rule  R1-17(k);  (2) to
          reflect the  financial  impact of  governmental  action  (legislative,
          executive, or regulatory) having a substantial specific impact on


                                       34


<PAGE>



          the gas industry generally or on a segment thereof that includes PSNC,
          including  but not  limited to major  expenditures  for  environmental
          compliance;  (3) to implement natural gas expansion surcharges imposed
          pursuant to G.S.  62-158;  or (4) to reflect the  financial  impact of
          major expenditures associated with force majeure.

          For  purposes of this  Regulatory  Condition,  the term force  majeure
          means  an  occurrence  that is  beyond  the  control  of PSNC  and not
          attributable  to  its  fault  or  negligence.   Without  limiting  the
          foregoing,  force majeure includes acts of nature,  like  earthquakes,
          cyclones, rain, tornadoes, hurricanes, flood, fire, acts of the public
          enemy,  war,  riots,  strikes,  mobilization,  labor  disputes,  civil
          disorders,  injunctions-intervention-acts,  or failures or refusals to
          act by government authority;  and other similar occurrences beyond the
          control  of the party  declaring  force  majeure  which  such party is
          unable to prevent by exercising reasonable diligence. To qualify as an
          exception,  a force majeure  event must be reported  within 15 working
          days of its occurrence.

          Any request  pursuant to these exceptions will include a specification
          of the reasons for the request and an accurate  quantification  of the
          financial impact of the request.  For purposes of this condition,  the
          "margin rate" is defined as the tariffed sales rate less the benchmark
          commodity cost of gas,  fixed gas cost rate, and temporary  increments
          and/or  decrements  imposed  pursuant  to G.S.  62-133.4  or NCUC Rule
          R1-17(k).

     (31) PSNC will take steps to implement its commitment to providing superior
          natural gas service to North Carolina customers  following the merger.
          PSNC shall file with the  Commission by December 31, 1999, the Service
          Quality  Indices that it proposes to use to measure  service  quality.
          PSNC will work with the Public Staff to ensure that these  indices are
          appropriate  and  to  revise  them  if and  when  such  revisions  are
          necessary.

     (32) SCANA,  PSNC, and their affiliates shall file a current five-year plan
          for new or expanded  North  Carolina gas pipeline  facilities  costing
          $100,000  or more with the NCUC 90 days after the date the  Commission
          issues its final order in this proceeding,  and updates shall be filed
          with the NCUC by October 31 every  other year  thereafter.  Such plans
          shall incorporate  details to the extent known or projected  regarding
          the pipeline routing, specifications, and costs of the new or expanded
          gas pipeline  facilities.  The filing shall also describe each inquiry
          received  from a  party  interested  in  locating  gas-fired  electric
          generation in North  Carolina and report on the status of each inquiry
          (confidentially if necessary). To the extent substantial changes occur
          in any plans or  proposals to expand or extend  facilities,  notice of
          such  changes  shall be  promptly  filed with the NCUC.  To the extent
          customers want to have


                                       35


<PAGE>



          input into the pipeline expansion  planning process,  SCANA, PSNC, and
          their affiliates shall develop a process to encourage such input on an
          on-going basis.

     (33) Neither SCANA,  PSNC, nor any affiliate will begin the construction of
          natural gas  facilities in North  Carolina,  including a pipeline,  to
          serve an electric  generating  plant without filing a notice of intent
          with the NCUC.  The notice of intent shall be filed well in advance of
          any  construction-related  activity,  including the acquisition of any
          rights-of-way. Any application for a certificate of public convenience
          and  necessity  filed  with the NCUC by  SCANA or an  affiliate  shall
          incorporate details with respect to the routing of any new or expanded
          gas  pipeline  or other  facilities  required  to serve  the  proposed
          electric  generating  plant and details  about any  proposed  pipeline
          routing and specifications  related to any new or expanded natural gas
          facilities needed to provide gas and/or transportation  service to the
          proposed electric generating plant.

     (34) PSNC shall pursue the  expansion  of gas service to unserved  areas of
          its franchise  territory  consistent with the gas expansion  policy of
          the  State as  enunciated  in G.S.  62-2(9)  and the  NCUC's  policies
          pursuant thereto.

     (35) PSNC shall utilize  competitive  solicitation  procedures to determine
          future long-term  sources of interstate  pipeline capacity and supply.
          The  determination  of the  appropriate  source(s) for the  interstate
          pipeline capacity and supply shall be made by PSNC on the basis of the
          benefits  and  costs of such  source(s)  specifically  to  PSNC's  gas
          customers.

     (36) PSNC shall not recover from  ratepayers the margins lost as the result
          of  bypass  by an  interstate  gas  pipeline  in  which  SCANA  or any
          affiliate has an ownership interest.

     2.  That the Code of  Conduct  attached  hereto  as  Appendix  A is  hereby
approved, and SCANA and PSNC are hereby ordered to comply therewith.

         ISSUED BY ORDER OF THE COMMISSION.

         This the 7th day of December, 1999.

                                          NORTH CAROLINA UTILITIES COMMISSION

                                          /s/ Geneva S. Thigpen, Chief Clerk

                                          Geneva S. Thigpen, Chief Clerk


Chairman Jo Anne Sanford filed a concurring opinion.
Commissioner Judy Hunt joins in Chairman Jo Anne Sanford's concurring opinion.
Commissioner Sam J. Ervin, IV did not participate.



                                       36


<PAGE>



                             DOCKET NO. G-5, SUB 400
                                 DOCKET NO. G-43


     Chairman Jo Anne Sanford Concurring:

     I have voted for the majority  order in these  dockets and I fully  support
it. However,  I write this concurring  opinion to call attention to a particular
concern of mine, that service  quality not suffer as a result of this merger.  I
recognize  that this was a concern of the Public Staff and that the Public Staff
recommended  a Regulatory  Condition to the effect that PSNC would  continue its
commitment to providing superior service.  However,  only weeks after the Public
Staff filed this recommendation,  PSNC's customers  experienced service problems
so severe that they were the subject of television  and newspaper  reports.  The
problems related to PSNC customers' inability to contact company representatives
by  telephone.  I recognize  that this is not a part of the record in this case,
and I have not let it influence my vote herein.  I simply want to emphasize that
I view PSNC's commitment to service quality as an important aspect of the public
convenience  and  necessity  that  must  be  served  by  the  merged  companies.
Regulatory  Condition  31 as adopted by the  Commission  requires  PSNC "to take
steps to implement  its  commitment to provide  superior  natural gas service to
North  Carolina  customers  following  the merger," and I urge PSNC to give this
Condition its highest priority.

                                                       \s\ Jo Anne Sanford

                                                       Chairman Jo Anne Sanford




                                       37


<PAGE>



                                                                      APPENDIX A
                                                                    Page 1 of 11

                            CODE OF CONDUCT GOVERNING
                             THE RELATIONSHIP AMONG

                 PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INC.,
                               AND ITS AFFILIATES

I.   DEFINITIONS

     For purposes of this Code of Conduct, the terms listed below shall have the
     following definitions:

     Affiliate: Any company,  including SCANA, that has ownership in common with
     PSNC,  with  ownership  being ten percent (10%) or more of the  outstanding
     voting  securities  owned,  controlled,  or held  with  the  power to vote,
     directly or indirectly.

     Confidential   Systems   Operation    Information:    Interstate   pipeline
     transportation,   storage,  distribution,  gas  supply,  or  other  similar
     information that pertains to the NC Jurisdictional Operations.

     Customer:  Any natural gas sales or natural gas transportation  customer of
     the NC Jurisdictional  Operations  located within PSNC's franchised service
     area.

     Customer Information: Any and all customer specific information obtained by
     the NC Jurisdictional Operations.

     Foreign  Regulated  Operations:   The  public  utility  activities  of  the
     affiliates  that  are  regulated  by  the  South  Carolina  Public  Service
     Commission,  the Federal Energy Regulatory Commission,  or other regulatory
     bodies.

     Fully Distributed Costs: All direct and indirect costs, including overheads
     and the cost of capital,  incurred in  providing  the goods and services in
     question.

     Gas Marketing Affiliate:  An affiliate,  the business unit of an affiliate,
     or  nonjurisdictional  operation of PSNC that is engaged in the unregulated
     sale,  arrangement,   brokering  or  management  of  gas  supply,  pipeline
     capacity, or gas storage.

     Gas Marketing Affiliate  Personnel:  An employee or other representative of
     the gas marketing  affiliate  that is involved in  fulfilling  the business
     purpose of the gas marketing affiliate.  An officer or director of both the
     NC  Jurisdictional  Operations and a gas marketing  affiliate  shall not be
     considered gas marketing affiliate


<PAGE>

                                                                      APPENDIX A
                                                                    Page 2 of 11

     personnel  unless that  individual is directly  involved in fulfilling  the
     business purpose of the gas marketing affiliate.

     NC  Jurisdictional  Operations:  The public  utility  operations  of Public
     Service Company of North Carolina, Inc., as defined in N.C.G.S. 62-3(23).

     NC  Nonjurisdictional  Operations:  All  activities  engaged  in by  Public
     Service  Company of North  Carolina,  Inc.,  that are not a public  utility
     operation as defined in N.C.G.S. 62-3(23).

     Natural  Gas  Services:  NCUC-regulated  natural  gas sales and natural gas
     transportation,  and other related services, including, but not limited to,
     metering and billing.

     NCUC: The North Carolina Utilities Commission.

     PSNC: Public Service Company of North Carolina, Inc.

     PSNC Operating  Personnel:  An employee or other  representative  of the NC
     Jurisdictional  Operations that is involved in the acquisition,  marketing,
     pricing, or scheduling of gas supply,  interstate pipeline capacity, or gas
     storage  facilities  on  behalf  of  NC  Jurisdictional  Operations.   PSNC
     operating  personnel  also includes  personnel  involved in managing the NC
     Jurisdictional Operations's facilities or responsible for determining which
     customers to curtail,  or involved in selling  products and services to the
     NC Jurisdictional Operations' customers eligible to purchase gas, products,
     and services from persons other than the NC Jurisdictional Operations.

     Nonaffiliated Gas Marketer:  An entity,  not affiliated with PSNC or SCANA,
     that  is  engaged  in  the  unregulated  sale,  arrangement,  brokering  or
     management of gas supply, pipeline capacity, or gas storage.

     SCANA: The holding company that owns PSNC, which is an affiliate of PSNC.

     Service Company: An affiliate that provides shared goods and/or services to
     PSNC and other affiliates.

     Shipper: A gas marketing affiliate, nonaffiliated marketer, a municipal gas
     customer, or end-user of gas.


<PAGE>

                                                                      APPENDIX A
                                                                    Page 3 of 11

     Similarly Situated:  Possessing  comparable  characteristics,  such as, the
     type  and  delivered  price  of  alternative  fuel  used,  gas  curtailment
     priority, daily usage and daily load swing.

II.  CODE OF CONDUCT

     This Code of Conduct  establishes  the  minimum  guidelines  and rules that
     apply to  transactions  involving PSNC and/or one or more of the affiliates
     and/or  one or more of the NC  Nonjurisdictional  Operations.  This Code of
     Conduct will become applicable on the date that it is approved by the NCUC.

     A.   GENERAL STANDARDS

          1.   Equal  Treatment  -  PSNC  shall  not  show  any  preference  to:
               customers of the affiliates or NC  Nonjurisdictional  Operations;
               and/or    requests   for   service   from    affiliates   or   NC
               Nonjurisdictional   Operations,   as  compared  to  nonaffiliated
               entities and their customers.

          2.   Cross-subsidies  involving PSNC and one or more of the affiliates
               and/or  one or more of the NC  Nonjurisdictional  Operations  are
               prohibited.

          3.   Separation - PSNC and the affiliates shall operate  independently
               of each other  (except  for  sharing of  services  under  Section
               II.D.3).  PSNC and each of the affiliates shall maintain separate
               books and  records.  The NC  Nonjurisdictional  Operations  shall
               maintain separate records to ensure  appropriate cost allocations
               and any requirements of arm's length  transactions.  PSNC and the
               affiliates  shall  conduct  business  from  physically   separate
               offices  located on different  floors or in different  buildings.
               However,  PSNC and the affiliates may share offices to the extent
               necessary to perform those shared corporate  functions  permitted
               under Section II.D.3 of this Code of Conduct.

          4.   Disclosure  of  Confidential  System  Operations   Information  -
               Confidential System Operations Information shall not be disclosed
               to  an  affiliate  or  NC  Nonjurisdictional   Operation  without
               approval  from  the  NCUC.   Notwithstanding   the   prohibitions
               established by this subsection,  the NC Jurisdictional Operations
               may disclose  Confidential  System  Operations  Information  to a
               Service  Company but only pursuant to a Service  Agreement  filed
               with the NCUC. Such Confidential  System  Operations  Information
               shall only be disclosed



<PAGE>

                                                                        APPENDIX
                                                                    Page 4 of 11

               to those Service Company employees  performing the functions that
               utilize the information  and the  information  shall be stored in
               such a  manner  that  only the  Service  Company  employees  that
               utilize the  information  shall have  access to the  information.
               Every effort must be made to prevent the use of such  information
               in an anticompetitive or otherwise inappropriate ways.

          5.   Disclosure  of  Customer  Information  -  Upon  request,  the  NC
               Jurisdictional  Operations  shall  provide  natural gas  Customer
               Information  to  the  affiliates  and  the  NC  Nonjurisdictional
               Operations   under  the  same  terms  and  conditions  that  such
               information   is   provided   to  all   nonaffiliates.   Customer
               Information  shall not be  disclosed  to any  person  or  company
               without the Customer's  consent except to the extent provided for
               in Section  II.D.3.  If  disclosed,  it must be done with advance
               public notification, in a manner determined by the NCUC to ensure
               that the opportunity to receive the disclosed information is made
               available  to  nonaffiliates  at the  same  time  that it is made
               available to affiliates and/or NC  Nonjurisdictional  Operations.
               Notwithstanding the prohibitions  established by this subsection,
               the  NC   Jurisdictional   Operations   may   disclose   Customer
               Information to a Service  Company  without  Customer  consent and
               without making the  information  available to any other person or
               company in order to allow a Service  Company  to perform  billing
               services  for the NC  Jurisdictional  Operations.  Such  Customer
               Information  shall only be  disclosed  to those  Service  Company
               employees  performing  billing  operations and shall be stored in
               such a  manner  that  only the  Service  Company  employees  that
               perform billing operations and employees in a Service Company who
               are responsible for responding to customer  inquiries  concerning
               customer service and billing matters may access the information.

     B.   NONDISCRIMINATION AND INFORMATION STANDARDS

          1.   The  NC  Jurisdictional  Operations  shall  process  all  similar
               requests  for Natural Gas  Services in the same manner and timely
               fashion,  whether  requested  on  behalf  of an  affiliate,  a NC
               Nonjurisdictional  Operation or a  nonaffiliated  entity.  The NC
               Jurisdictional  Operations  shall  apply  the  provisions  of its
               tariffs equally to affiliates,  NC  Nonjurisdictional  Operations
               and nonaffiliates.



<PAGE>

                                                                      APPENDIX A
                                                                    Page 5 of 11

          2.   The  NC  Jurisdictional  Operations  will  not  represent  to any
               Customer that any affiliate and/or NC Nonjurisdictional operation
               will receive any preference from the NC Jurisdictional Operations
               relative to providing  Natural Gas Services over any unaffiliated
               service  provider,  nor  will  the NC  Jurisdictional  Operations
               provide any affiliates and/or any NC Nonjurisdictional operations
               with  any  preference  over  nonaffiliates  in the  provision  of
               Natural Gas Services.

          3.   The NC Jurisdictional Operations shall not condition or otherwise
               tie the  provision  or terms of any Natural  Gas  Services to the
               purchasing of any goods or services from an affiliate and/or a NC
               Nonjurisdictional Operation.

          4.   When any NC Jurisdictional Operations employee receives a request
               for information from or provides  information to a Customer about
               an affiliate and/or a NC Nonjurisdictional Operation service, the
               employee  must advise the Customer that such services may also be
               available from nonaffiliated suppliers.

     C.   MARKETING STANDARDS

          1.   The NC  Jurisdictional  Operations,  the  affiliates,  and the NC
               Nonjurisdictional  Operations  may engage in joint  sales,  joint
               sales calls, joint proposals,  and/or joint advertising,  subject
               to any  conditions  or  restrictions  that the NCUC may hereafter
               establish,  provided the NC  Jurisdictional  Operations agrees to
               engage in similar  activities with  nonaffiliates  under the same
               terms and conditions.  However, the NC Jurisdictional  Operations
               and a gas  marketing  affiliate  collectively  may not  engage in
               joint sales,  joint sales  calls,  joint  proposals  and/or joint
               advertising  except as  provided  for herein.  NC  Jurisdictional
               Operations and a gas marketing affiliate  collectively may engage
               in joint sales calls only if the  following  conditions  are met:
               (a) the customer  must  request the joint call in writing,  which
               can be sent by facsimile;  (b) PSNC must  participate  in similar
               joint calls with  nonaffiliated  marketers at the written request
               of either the customer or the  nonafilliated  marketer;  (c) PSNC
               must  post  the  procedures  for  such  calls on its web site and
               otherwise  reduce  those  procedures  to  writing  and make  them
               available  to all  customers  (large  commercial  and  industrial
               customers   eligible  for   transportation)   and   nonaffiliated
               marketers; and (d) PSNC must keep a log of all such



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                                                                      APPENDIX A
                                                                    Page 6 of 11

               joint  calls  that   identifies   the   customer,   the  marketer
               (affiliated or not) and the  participating  PSNC personnel,  with
               such log being available upon request by the  Commission,  Public
               Staff,  any  customer,  or  any  nonaffiliated   marketer.   PSNC
               operating  personnel  must  not  provide  sales  leads to its gas
               marketing affiliate. The NC Jurisdictional  Operations shall post
               certain information regarding the joint marketing  programs/calls
               on the  corporate  internet  web site at  least 14 days  prior to
               commencing  a joint  marketing  arrangement  and the  information
               shall  remain  posted  on the web  site for the  duration  of the
               arrangement.  The  information  disclosed  on the web site  shall
               include  a  description   and  terms  for  the  joint   marketing
               arrangement.  Posting  of  the  terms  for  the  joint  marketing
               arrangement  shall  include  an  offer  by the NC  Jurisdictional
               Operations  to  engage  in joint  marketing  on such  terms  with
               nonaffiliates.

          2.   Affiliates   may  not  use  PSNC's   name   and/or  logo  in  any
               communications  unless a disclaimer  is included  that states the
               following:

               (a)  "[Affiliate]  is not the  same  company  as  [Utility],  and
                    [Affiliate] has separate management and separate employees;"

               (b)  "[Affiliate]   is  not  regulated  by  the  North   Carolina
                    Utilities  Commission  or  in  any  way  sanctioned  by  the
                    Commission;"

               (c)  "there is no advantage to customers of [Utility] if they buy
                    products or services from [Affiliate];" and

               (d)  "a customer  does not have to buy products or services  from
                    [Affiliate]  in order to  continue  to receive the same safe
                    and reliable natural gas service from [Utility]."

               The NC  Nonjurisdictional  Operations  may  not use  PSNC's  name
               and/or logo in any communications unless a disclaimer is included
               that states the following:

               (a)  "[ Nonjurisdictional operation] is not part of the regulated
                    services offered by [Utility] and is not in any



<PAGE>

                                                                      APPENDIX A
                                                                    Page 7 of 11

                    way sanctioned by the North Carolina Utilities Commission;"

               (b)  "there is no advantage to customers of [Utility] if they buy
                    products or services  from  [Nonjurisdictional  operation],"
                    and

               (c)  "a customer  does not have to buy products or services  from
                    [Nonjurisdictional   operation]  in  order  to  continue  to
                    receive the same safe and reliable  natural gas service from
                    [Utility]."

               The required disclaimer must be sized and displayed in a way that
               is commensurate  with the name and/or logo so that the disclaimer
               is no smaller  than the larger of  one-half  the size of the type
               that first  displays  the name and logo or the  predominant  type
               used in the communication.

          3.   Personnel  of an affiliate  or a NC  Nonjurisdictional  Operation
               shall  not  give the  appearance  that  the  affiliate  or the NC
               Nonjurisdictional   Operation   speaks   on   behalf  of  the  NC
               Jurisdictional Operations.

          4.   Personnel  of  PSNC,  an  affiliate,  or a  NC  Nonjurisdictional
               Operation  shall not indicate to a third party that any advantage
               exists  as the  result  of  that  third  party  dealing  with  an
               affiliate or a NC Nonjurisdictional  Operation as compared with a
               nonaffiliate.

     D.   COST ALLOCATION AND TRANSFER PRICING STANDARDS

          1.   As a  general  guideline,  with  regard  to the  transfer  prices
               charged for goods and services, including the use and/or transfer
               of personnel,  exchanged  between and among the NC Jurisdictional
               Operations,   the   affiliates   and  the  NC   Nonjurisdictional
               Operations, the following conditions shall apply:

               a)   For  untariffed  goods  and/or  services  provided by the NC
                    Jurisdictional  Operations  to  an  affiliate  and/or  a  NC
                    Nonjurisdictional Operation, the transfer price shall be the
                    higher of market value or fully distributed cost.

               b)   For  untariffed   goods  and/or  services   provided  by  an
                    affiliate and/or a NC Nonjurisdictional Operation to the NC



<PAGE>

                                                                      APPENDIX A
                                                                    Page 8 of 11

                    Jurisdictional Operations, the transfer price charged by the
                    affiliate and/or the NC  Nonjurisdictional  Operation to the
                    NC  Jurisdictional  Operations  shall be the lower of market
                    value  or  the  affiliate's  or  the  NC   Nonjurisdictional
                    Operations' fully distributed cost. If the NC Jurisdictional
                    Operation  does not engage in competitive  solicitation  and
                    instead  obtains the goods and/or services from an affiliate
                    and/or   a   NC   Nonjurisdictional    Operation,   the   NC
                    Jurisdictional    Operations   shall   implement    adequate
                    safeguards to ensure utility  customers  receive  service at
                    the lowest cost in each case.

               c)   For jurisdictional gas sales and/or transportation  services
                    provided  by  the  NC   Jurisdictional   Operations  to  the
                    affiliates and/or the NC Nonjurisdictional  Operations,  the
                    NC  Jurisdictional  Operations  shall provide service to the
                    affiliates and/or the NC Nonjurisdictional Operations at the
                    same  price  and  terms  that  are made  available  to other
                    similarly situated customers.

          2.   All  permitted   transactions   between  the  NC   Jurisdictional
               Operations  and  the  affiliates,  and  the NC  Nonjurisdictional
               Operations shall be recorded and accounted for in accordance with
               PSNC's cost allocation manual.

          3.   A Service Company may provide the NC  Jurisdictional  Operations,
               the  affiliates  and  the NC  Nonjurisdictional  Operations  with
               certain  corporate  services and functions on a joint basis. Such
               shared  services  shall be  charged  among the NC  Jurisdictional
               Operations,   the   affiliates   and  the  NC   Nonjurisdictional
               Operations.  Shared  services shall be those provided in response
               to Regulatory Condition 17, subject to approval by the NCUC.

          4.   The NC Jurisdictional Operations may participate with one or more
               Foreign  Regulated  Operations  in joint  purchases  of goods and
               services. All joint purchases,  including leases, shall be priced
               in  a  manner  that   permits   clear   identification   of  each
               participant's  portion  of  such  purchases  or  leases.  The  NC
               Jurisdictional  Operations  shall not  engage in joint  purchases
               with affiliates and/or NC  Nonjurisdictional  Operations,  except
               Foreign Regulated  Operations,  unless specifically  permitted in
               advance  by NCUC  order  upon a  finding  that it is in the  best
               interest of ratepayers.



<PAGE>

                                                                      APPENDIX A
                                                                    Page 9 of 11

          5.   Any costs the NC Jurisdictional  Operations incurs in assembling,
               compiling,   preparing  and/or  furnishing   requested   customer
               information to an affiliate, a NC Nonjurisdictional  Operation or
               a  nonaffiliate  shall be  recovered  from the  requesting  party
               pursuant to Section II.D.1 of this Code of Conduct.

          6.   Any   technology   or   trade   secrets   developed   by  the  NC
               Jurisdictional  Operations  will not be transferred to any of the
               affiliates  and/or the NC  Nonjurisdictional  Operations  without
               just    compensation   from   the   affiliate   and/or   the   NC
               Nonjurisdictional  Operation,  and  shall  file  notice  with the
               Public Staff and NCUC at least 60 days prior to the transfer.

          7.   The NC Jurisdictional  Operations shall receive compensation from
               the  affiliates  and  the  NC  Nonjurisdictional  Operations  for
               intangible benefits, if appropriate.

     E.   REGULATORY OVERSIGHT

          1.   The  State's  existing  requirements  under  N.C.G.S.  62-153 for
               reporting of affiliate transactions shall apply.

          2.   The  books  and  records  of  PSNC,  the  affiliates  and  the NC
               Nonjurisdictional Operations shall be open for examination by the
               NCUC,  its  staff,  and the  Public  Staff  consistent  with  the
               provisions of N.C.G.S. 62-34, 62-37, and 62-51.

          3.   The NC  Jurisdictional  Operations shall identify the volumes and
               prices for deliveries to any electric generating facilities owned
               or operated by the  affiliates  in its  monthly  negotiated  loss
               report to the NCUC.

          4.   When requested,  the NC Jurisdictional  Operations shall disclose
               on a confidential basis to nonaffiliated  electricity  generators
               on  its  system  the  gas  supply  and   transportation   prices,
               characteristics, and other terms of service for gas deliveries to
               the affiliates for electric generation.

          5.   All gas supply and/or transportation  arrangements between the NC
               Jurisdictional  Operations  and  the  affiliates,  and/or  the NC
               Nonjurisdictional  Operations  of more than three months shall be
               filed with the NCUC in advance, provided that the Public Staff is
               advised



<PAGE>

                                                                      APPENDIX A
                                                                   Page 10 of 11

               of transactions of shorter  durations by facsimile or other means
               of immediate communications.

     F.   COMPLAINT PROCEDURE - The NC Jurisdictional Operations shall establish
          complaint procedures to resolve potential complaints that arise due to
          the  relationship  of  the  NC  Jurisdictional   Operations  with  the
          affiliates  and/or the NC Jurisdictional  Operations.  These complaint
          procedures  do not  affect  a  complainant's  right  to file a  formal
          complaint  with  or  otherwise  address  questions  to the  NCUC.  The
          complaint procedures shall provide for the following:

          1.   Verbal and written  complaints  shall be referred to a designated
               representative of the NC Jurisdictional Operations .

          2.   The designated  representative shall provide written notification
               to the  complainant  within 15 days that the  complaint  has been
               received.

          3.   The NC Jurisdictional  Operations shall investigate the complaint
               and  communicate  the  results  of  the   investigation   to  the
               complainant within 60 days of receiving the complaint.

          4.   The  NC  Jurisdictional   Operations  shall  maintain  a  log  of
               complaints  and related  records for  inspection by the NCUC, its
               staff or Public Staff.

          5.   If the  complainant  is  not  satisfied,  the  NC  Jurisdictional
               Operations  shall inform the NCUC,  its staff and/or Public Staff
               of the complaint.

     G.   UTILITY  BILLING FORMAT - To the extent the  Customer's  bill includes
          charges for unregulated services, such charges shall be separated from
          all   regulated   Natural  Gas  Services  and  contain  the  following
          introductory notice in bold print: Your natural gas service may not be
          terminated for failure to pay for the following unregulated services.

     H.   NATURAL GAS MARKETING STANDARDS

          1.   The NC Jurisdictional  Operations shall treat similarly  situated
               shippers in the same manner with  respect to the  delivery of gas
               on distribution facilities, contract terms, the scheduling of gas
               supplies,  balancing  provisions,  and allocation of gas supplies
               and capacity at city gate stations.



<PAGE>

                                                                      APPENDIX A
                                                                   Page 11 of 11

          2.   All  NC  Jurisdictional   Operations  information  pertaining  to
               interstate pipeline transportation, storage, distribution, or gas
               supply  that is provided to a gas  marketing  affiliate  shall be
               made   available   to   all   shippers   on  a   contemporaneous,
               nondiscriminatory   and  nonpreferential  basis  by  posting  the
               information on the corporate  internet web site and provided in a
               written  form upon the request of a shipper.  Aggregate  customer
               information  and market data made  available to shippers shall be
               made available on a similar basis.

          3.   The NC Jurisdictional  Operations shall not disclose  information
               provided  by   nonaffiliated   marketers  and  customers  to  its
               marketing affiliate,  unless such parties specifically  authorize
               disclosure of the information.

          4.   A gas marketing affiliate shall function  independently of the NC
               Jurisdictional  Operations and gas marketing  affiliate personnel
               must be located in a facility  that is  physically  separate from
               that  used by the PSNC  Operating  Personnel  performing  similar
               functions.

          5.   PSNC  Operating  Personnel  may not perform any of the  following
               functions on behalf of a gas marketing affiliate:

               (a)  Purchase gas, pipeline capacity or storage capacity.
               (b)  Market or sell gas and related services.
               (c)  Price or administer products and services.
               (d)  Hire and/or train marketing affiliate personnel.
               (e)  Offer consulting services regarding gas functions.

          6.   An  individual  may be an officer or  director of both PSNC and a
               gas marketing  affiliate  provided that the  individual  does not
               obtain or use knowledge of market-sensitive  information for more
               than  one of the  entities.  PSNC  shall  post  on the  corporate
               internet web site the  identity,  job title and  responsibilities
               for each officer or director that falls within the  definition of
               PSNC Operating Personnel.

          7.   The NC  Jurisdictional  Operations  shall post its  criteria  for
               evaluating  proposals from shippers on the corporate internet web
               site. The NC Jurisdictional Operations shall not give one shipper
               any form of preference over other similarly  situated shippers in
               matters  relating to  assignment,  release,  or other transfer of
               capacity rights on interstate pipeline systems.

          8.   The NC  Jurisdictional  Operations  shall  post on the  corporate
               internet web site a current list of contact persons and telephone
               numbers of all gas marketers that are active on its system.

