

                                                                     EXHIBIT K-2

                     INTERIM INCOME TAX ALLOCATION AGREEMENT

     THIS AGREEMENT,  made as of the 31st day of December,  1999, by and between
SCANA Corporation  ("SCANA") and each of its wholly owned  subsidiaries,  namely
SCANA Service  Company,  South Carolina  Electric & Gas Company,  South Carolina
Pipeline  Corporation,  South  Carolina  Fuel  Company,  Inc.,  S.C.  Generating
Company, Inc., SCANA Communications,  Inc. and its wholly owned subsidiary SCANA
Communications   Holdings,   Inc.  (Holdings  being  a  Delaware   corporation),
Primesouth,   Inc.  and  its  wholly  owned  subsidiary  Palmark,   Inc.,  SCANA
Development   Corporation,   SCANA  Energy  Marketing,   Inc.,  SCANA  Petroleum
Resources,  Inc. and its wholly owned  subsidiary SPR Gas Services,  Inc., SCANA
Propane Gas, Inc. and its wholly owned subsidiaries USA Cylinder Exchange,  Inc.
and SCANA Propane Supply, Inc., SCANA Propane Storage, Inc., ServiceCare,  Inc.,
and SCANA Resources,  Inc. and its wholly owned subsidiary Company 19A (formerly
Instel,  Inc.), all of the forementioned  corporations  hereinafter  referred to
individually as the "Company" and  collectively  referred to as the "Companies",
each Company being a South  Carolina  corporation,  except SCANA  Communications
Holdings,  Inc.  as above  indicated,  is  effective  for the  Consolidated  Tax
reflected  on the  Consolidated  Tax  Return  for  calendar  year  end  1999 and
subsequent years.

     In the event that the merger  between SCANA and Public  Service  Company of
North  Carolina,   Inc.  ("PSNC")  is  approved  by  all  required  governmental
authorities -- which is fully  anticipated,  the  shareholders of both SCANA and
PSNC  having on July 1st,  1999  approved  of said  merger -- PSNC will become a
wholly owned subsidiary of SCANA and will likewise participate in this Agreement
beginning with the first calendar year end  Consolidate  Tax Return for which it
is able. Subject to this condition  precedent,  PSNC, which although presently a
North Carolina  corporation will at the conclusion of the merger be incorporated
instead in South  Carolina,  is also a signatory to this  Agreement.  PSNC shall
also be referred to as "Company" in accordance with the preceding paragraph.

                                   WITNESSETH:

     WHEREAS,  the Companies file a  consolidated  federal income tax return and
the  consolidated  federal  income tax  liability has been  allocated  among the
Companies included in the consolidated  return in accordance with the provisions
of subparagraph  (a)(1) of Section 1552 of the Internal Revenue Code of 1986 and
other  applicable  requirements  of Rule 45(c) under the Public Utility  Holding
Company Act of 1935.

     WHEREAS,  Rule  45(c) sets  forth the  method by which  Companies  filing a
consolidated  federal  income  tax  return  (hereinafter   referred  to  as  the
"consolidated  tax return") may use to allocate the consolidated  federal income
tax liability among the members of the group;  however, in order to utilize such
method,  a written  agreement must be executed by the Company  setting forth the
allocation method for each taxable year.

     WHEREAS,  the  Companies  desire  to  allocate  their  federal  income  tax
liability in  accordance  with the  following  procedures;  NOW  THEREFORE,  the
Companies do agree as follows:

                                    ARTICLE I

                                   Definitions

     1.1 "Consolidated Tax" is the aggregate tax liability for a tax year, being
the tax shown on the consolidated  return and any adjustments thereto thereafter
determined.  The consolidated tax will be the refund if the consolidated  return
shows a negative tax. 1.2 "Corporate Tax Credit" is a negative  separate  return
tax of a Company for a tax year,  equal to the amount by which the  consolidated
tax is  reduced  by  including  a net  corporate  taxable  loss or other net tax
benefit of such Company in the consolidated tax return.

     1.3 "Corporate Taxable Income" is the income or loss of a Company for a tax
year,  computed as though such  Company had filed a separate  return on the same
basis as used in the consolidated  return,  except that dividend income from the
Companies shall be disregarded,  and other intercompany  transactions eliminated
in the consolidated  return shall be given appropriate  effect. It shall further
be  adjusted  to allow  for  applicable  rights  accrued  to a  Company  for the
recognition of negative  corporate taxable income consistent with the provisions
of Article II herein,  but  carryovers  and  carrybacks  shall not be taken into
account as loss Companies are to receive  current payment of their Corporate Tax
Credits.  If a Company is a member of the registered  system's  consolidated tax
group for only part of a tax year, that period will be deemed to be its tax year
for all purposes for that year under this Agreement.  1.4 "Separate  Return Tax"
is the tax on the Corporate  Taxable Income of a Company computed as though such
Company was not a member of a consolidated group.

                                   ARTICLE II

                            Tax Allocation Procedures

     2.1 The  Consolidated  Tax  shall be  apportioned  among the  Companies  in
proportion  to the  Corporate  Taxable  Income of each member of the  affiliated
group.  Each  Company  which incurs a tax loss for the year shall be included in
the allocation of Consolidated Tax and shall receive a Corporate Tax Credit, the
amount of which shall be currently paid to the Company by SCANA increased by any
amounts  previously  assessed by SCANA and  remitted by the Company to SCANA for
estimated  tax  payment  purposes  attributable  to the  subject  taxable  year.
Companies with a positive allocation of the Consolidated Tax shall currently pay
the amount so allocated,  decreased by any amounts previously  assessed by SCANA
and  remitted  by the  Company  to SCANA  for  estimated  tax  payment  purposes
attributable to the subject taxable year.

     Special Rule Regarding SCANA: In making the tax allocations provided for in
this Agreement,  notwithstanding any of the foregoing, no corporate tax benefits
shall be allocated to SCANA.  Although the separate  corporate taxable income or
taxable loss of SCANA and any tax credits attributable to SCANA will be included
in the  consolidated  return,  only the tax savings  attributable  to such items
shall be  allocated  to the other  Companies as if SCANA was not a member of the
Companies in the consolidated  return group. In making this allocation,  the tax
savings of SCANA shall be allocated  only to the other  member  Companies in the
consolidated  return group having  taxable  income.  SCANA will remit,  from its
separate resources,  funds for the payment of tax liabilities owed by SCANA. 2.2
SCANA shall pay to the Internal  Revenue  Service the group's  Consolidated  Tax
liability  from the net of the receipts and  payments.  2.3 No Company  shall be
allocated  any income tax greater than the  Separate  Return Tax of such Company
2.4 To the extent that the  Consolidated  and Corporate  Taxable Incomes include
material  items  taxed at rates other than the  statutory  rate (such as capital
gains and preference items), the portion of the Consolidated Tax attributable to
these items  shall be  apportioned  directly to the members of the group  giving
rise to such items.

     2.5 Should the  Companies  generate a net  consolidated  tax loss for a tax
year that is too large to be used in full for that year,  with result that there
are uncompensated  Corporate Tax Credit benefits for that year, the carryover of
uncompensated  benefits  related to the  carryforward  of tax losses  applied to
reduce  Consolidated  Taxable Income in future tax years shall be apportioned in
accordance with the respective  Companies'  contributions  to such loss. The tax
benefits of any resultant  carryback  shall be allocated  proportionally  to the
Companies that generated  corporate tax losses in the year the  consolidated net
operating  tax  loss was  generated.  Any  related  loss of  credits,  including
investment tax credit  reversals,  shall be allocated to the member Company that
utilized  the credits in the prior year in the same  proportion  that the credit
lost is to the total credit  utilized in the prior year.  Investment  tax credit
reversals  allocated  to a  member  Company  will be  added  to  that  Company's
available corporate  investment tax credit for future allocations.  A prior year
consolidated net operating tax loss carryforward  applied to reduce current year
Consolidated  Taxable  Income  shall  be  allocated   proportionally  to  member
Companies that generated a corporate tax loss in the year the  consolidated  net
operating  loss  was  generated.   2.6   Adjustments  to  or  revisions  of  the
Consolidated  Tax as a result of  subsequent  events  such as  amended  returns,
revenue agents' reports, litigation or negotiated settlements shall be allocated
in accordance with the principles established in this Agreement.

                                   ARTICLE III
                                    Amendment

     This  Agreement is subject to revision as a result of changes in income tax
law and changes in relevant facts and circumstances.


<PAGE>


     IN WITNESS WHEREOF,  this Agreement has been executed by an officer of each
company as of the day and year first above written by the Companies.

ATTEST:                            SCANA Corporation


--------------------------         -----------------------------
L. M. Williams, Secretary          W. B. Timmerman
                                   President and C.E.O

ATTEST:                            SCANA Service Company

--------------------------         ------------------------------
L. M. Williams, Secretary          W.B. Timmerman, C.E.O and C.O.O.


ATTEST:                            South Carolina Electric & Gas Company

--------------------------         -------------------------------
L. M. Williams, Secretary          John L. Skolds, President


ATTEST:                            South Carolina Pipeline Corporation

--------------------------         -------------------------------
L. M. Williams, Secretary          Asbury H. Gibbes, President


ATTEST:                            South Carolina Fuel Company, Inc.


--------------------------         -------------------------------
L. M. Williams, Secretary          John L. Skolds, President


ATTEST:                            South Carolina Generating Company, Inc.


--------------------------         -------------------------------
L. M. Williams, Secretary          John L. Skolds, President

ATTEST:                            SCANA Communications, Inc.


--------------------------         -------------------------------
L. M. Williams, Secretary          George J. Bullwinkel, Jr., President


ATTEST:                            SCANA Communications Holdings, Inc.


--------------------------         -------------------------------
L. M. Williams, Secretary          Kevin B. Marsh, C.F.O.


ATTEST:                            Primesouth, Inc.


--------------------------         -------------------------------
L. M. Williams, Secretary          John L. Skolds, President


ATTEST:                            Palmark, Inc.


--------------------------         -------------------------------
L. M. Williams, Secretary          John L. Skolds, President


ATTEST:                            SCANA Development Corporation

--------------------------         -------------------------------
L. M. Williams, Secretary          Asbury H. Gibbes, President


ATTEST:                            SCANA Energy Marketing, Inc.


--------------------------         -------------------------------
L. M. Williams, Secretary          Asbury H. Gibbes, President




<PAGE>



ATTEST:                            SCANA Petroleum Resources, Inc.


--------------------------         -----------------------------
L. M. Williams, Secretary          Asbury H. Gibbes, President


ATTEST:                            SPR Gas Services, Inc.


--------------------------         -----------------------------
L. M. Williams, Secretary          Asbury H. Gibbes, President


ATTEST:                            SCANA Propane Gas, Inc.


--------------------------         ------------------------------
L. M. Williams, Secretary          Kevin B. Marsh, C.F.O.


ATTEST:                             USA Cylinder Exchange, Inc.


--------------------------          ------------------------------
L. M. Williams, Secretary           Kevin B. Marsh, C.F.O.


ATTEST:                             SCANA Propane Supply, Inc.


--------------------------          -------------------------------
L. M. Williams, Secretary           Kevin B. Marsh, C.F.O.


ATTEST:                             SCANA Propane Storage, Inc.


--------------------------          ------------------------------
L. M. Williams, Secretary           Kevin B. Marsh, C.F.O.




<PAGE>



ATTEST:                             Service Care, Inc.


--------------------------          ------------------------------
L. M. Williams, Secretary           Ann M. Milligan, President


ATTEST:                             SCANA Resources, Inc.


--------------------------          ------------------------------
L. M. Williams, Secretary           Kevin B. Marsh, C.F.O.


ATTEST:                             Company 19A


--------------------------          -------------------------------
L. M. Williams, Secretary           Kevin B. Marsh, C.F.O.


ATTEST:                             Public Service Company of North Carolina,
                                       Inc.


--------------------------          ------------------------------
L. M. Williams, Secretary           C. E. Zeigler, Jr., President







