




                                                   Exhibit 4.06

                        GUARANTEE AGREEMENT

                          BY AND BETWEEN


                 SOUTH CAROLINA ELECTRIC & GAS COMPANY

                           as Guarantor


                               and

                       THE BANK OF NEW YORK,

                       as Guarantee Trustee


                           RELATING TO

                          SCE&G TRUST I


                   ---------------------------



                 Dated as of October 28, 1997


                  ---------------------------





<PAGE>


                         CROSS-REFERENCE TABLE*


     Section of
Trust Indenture Act                                Section of

of 1939, as amended                          Guarantee Agreement

     310(a)                                           4.1(a)
     310(b)                                       4.1(c), 2.8
     310(c)                                       Inapplicable
     311(a)                                           2.2(b)
     311(b)                                           2.2(b)
     311(c)                                       Inapplicable
     312(a)                                           2.2(a)
     312(b)                                           2.2(b)
     312(c)                                       Inapplicable
     313                                              2.3
     314(a)                                           2.4
     314(b)                                       Inapplicable
     314(c)                                           2.5
     314(d)                                       Inapplicable
     314(e)                                     1.1, 2.5, 3.2(a)
     314(f)                                        2.1, 3.2
     315(a)                                        3.1(d)(i)
     315(b)                                           2.7
     315(c)                                           3.1(c)
     315(d)                                           3.1(d)
     315(e)                                       Inapplicable
     316(a)                                      1.1, 2.6, 5.4
     316(b)                                           5.5
     316(c)                                           8.3
     317(a)                                           2.7(c)
     317(b)                                       Inapplicable
     318(a)                                           2.1
     318(b)                                           2.1
     318(c)                                           2.1



--------------------
* This Cross-Reference Table does not constitute part of the Guarantee Agreement
and shall not affect the interpretation of any of its terms or provisions.





<PAGE>



                      TABLE OF CONTENTS



                             ARTICLE I

                            DEFINITIONS                         6
   SECTION 1.1.  Definitions                                    6

                            ARTICLE II

                       TRUST INDENTURE ACT                      9
   SECTION 2.1.  Trust Indenture Act; Application               9
   SECTION 2.2.  List of Holders                               10
   SECTION 2.3.  Reports by the Guarantee Trustee              10
   SECTION 2.4.  Periodic Reports to the Guarantee Trustee     10
   SECTION 2.5.  Evidence of Compliance with Conditions
                   Precedent                                   10
   SECTION 2.6.  Events of Default; Waiver                     11
   SECTION 2.7.  Event of Default; Notice                      11
   SECTION 2.8.  Conflicting Interests                         12

                           ARTICLE III

        POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE     12

   SECTION 3.1.  Powers and Duties of the Guarantee Trustee    12
   SECTION 3.2.  Certain Rights of Guarantee Trustee           14
   SECTION 3.3.  Compensation; Indemnity; Fees                 15

                            ARTICLE IV

                        GUARANTEE TRUSTEE                      16
   SECTION 4.1.  Guarantee Trustee; Eligibility                16
   SECTION 4.2.  Appointment, Removal and Resignation
                   of the Guarantee Trustee                    17

                            ARTICLE V

                            GUARANTEE                          18
   SECTION 5.1.  Guarantee                                     18
   SECTION 5.2.  Waiver of Notice and Demand                   18
   SECTION 5.3.  Obligations Not Affected                      18
   SECTION 5.4.  Rights of Holders                             19
   SECTION 5.5.  Unconditional Right of Holders to Payment     20
   SECTION 5.6.  Guarantee of Payment                          20
   SECTION 5.7.  Subrogation                                   20
   SECTION 5.8.  Independent Obligations                       20



<PAGE>


                           ARTICLE VI

                     COVENANTS AND SUBORDINATION               21
   SECTION 6.1.  Subordination                                 21
   SECTION 6.2.  Pari Passu Guarantees                         21


                          ARTICLE VII

                          TERMINATION                          21

   SECTION 7.1.  Termination                                   21

                          ARTICLE VIII

                          MISCELLANEOUS                        22
   SECTION 8.1.  Successors and Assigns                        22
   SECTION 8.2.  Amendments                                    22
   SECTION 8.3.  Record Date                                   22
   SECTION 8.4.  Notices                                       22
   SECTION 8.5.  Benefit                                       23
   SECTION 8.6.  Governing Law                                 23
   SECTION 8.7.  Counterparts                                  23





<PAGE>



     GUARANTEE  AGREEMENT,  dated as of October 28, 1997,  by and between  South
Carolina Electric & Gas Company, a South Carolina corporation (the "Guarantor"),
and The Bank of New  York,  a New York  banking  corporation,  as  trustee  (the
"Guarantee  Trustee"),  for the benefit of the Holders (as defined  herein) from
time to time of the Trust  Preferred  Securities  (as  defined  herein) of SCE&G
TRUST I, a Delaware statutory business trust (the "Issuer Trust").

              RECITALS OF THE CORPORATION

     WHEREAS,  pursuant to an Amended and Restated Trust Agreement,  dated as of
October 28, 1997 (the "Trust  Agreement," as more particularly  defined herein),
among South Carolina Electric & Gas Company, as Depositor, the Property Trustee,
the Delaware Trustee, the Administrative  Trustees (as such terms are defined in
the Trust  Agreement),  the Holders and the holders of the Common Securities the
Issuer Trust is issuing $50,000,000  aggregate Liquidation Amount (as defined in
the  Trust  Agreement)  of  its  7.55%  Trust  Preferred  Securities,  Series  A
(liquidation  amount $25 per Trust  Preferred  Security)  (the "Trust  Preferred
Securities"),  representing  preferred  undivided  beneficial  interests  in the
assets  of the  Issuer  Trust  and  having  the  terms  set  forth in the  Trust
Agreement; and

     WHEREAS,  the Trust Preferred Securities will be issued by the Issuer Trust
and the proceeds  thereof,  together  with the proceeds from the issuance of the
Issuer Trust's Common  Securities (as defined herein),  will be used to purchase
the  Debentures  (as defined in the Trust  Agreement)  of the  Guarantor,  which
Debentures  will  be  deposited  with  the  Property  Trustee  under  the  Trust
Agreement, as trust assets; and

     WHEREAS,  as an  incentive  for the  Holders to  purchase  Trust  Preferred
Securities,  the Guarantor desires  irrevocably and unconditionally to agree, to
the  extent  set forth  herein,  to pay to the  Holders  of the Trust  Preferred
Securities the Guarantee  Payments (as defined herein),  as the case may be, and
to make certain other payments on the terms and conditions set forth herein.

     NOW,  THEREFORE,  in  consideration  of the  purchase  of  Trust  Preferred
Securities  by each Holder,  which  purchase the Guarantor  hereby  acknowledges
shall benefit the Guarantor,  the Guarantor executes and delivers this Guarantee
Agreement for the benefit of the Holders from time to time.




<PAGE>


                           ARTICLE I

                          DEFINITIONS

     SECTION 1.1.                                 Definitions.

          For all  purposes of this  Guarantee  Agreement,  except as  otherwise
expressly provided or unless the context otherwise requires:

     (a) The terms defined in this Article have the meanings assigned to them in
this Article, and include the plural as well as the singular;

     (b) All other terms used  herein  that are  defined in the Trust  Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;

     (c) The words "include,"  "includes" and "including"  shall be deemed to be
followed by the phrase "without limitation";

     (d) All  accounting  terms used but not defined  herein  have the  meanings
assigned to them in accordance with United States generally accepted  accounting
principles;

     (e) Unless the context otherwise requires, any reference to an "Article" or
a  "Section"  refers to an  Article  or a  Section,  as the case may be, of this
Guarantee Agreement; and

     (f) The words "hereby,"  "herein," "hereof" and "hereunder" and other words
of similar  import refer to this  Guarantee  Agreement as a whole and not to any
particular Article, Section or other subdivision.

     "Affiliate"  of any  specified  Person means any other  Person  directly or
indirectly  controlling  or  controlled  by or under  direct or indirect  common
control  with  such  specified  Person.  For the  purposes  of this  definition,
"control,"  when used with respect to any specified  Person,  means the power to
direct the  management  and  policies of such  Person,  directly or  indirectly,
whether  through the ownership of voting  securities,  by contract or otherwise;
and the terms  "controlling" and "controlled"  have meanings  correlative to the
foregoing.

     "Board of Directors" means, as the context requires, the board of directors
of the  Guarantor  or the  Executive  Committee of the board of directors of the
Guarantor  (or any other  committee of the board of  directors of the  Guarantor
performing  similar  functions)  or a  committee  designated  by  the  board  of
directors of the Guarantor (or such committee), comprised of two or more members
of the board of directors  of the  Guarantor  or officers of the  Guarantor,  or
both.

     "Common  Securities"  means the securities  representing  common  undivided
beneficial interests in the assets of the Issuer Trust.



<PAGE>


     "Event  of  Default"  means (i) a default  by the  Guarantor  in any of its
payment  obligations  under this  Guarantee  Agreement  or (ii) a default by the
Guarantor in any other obligation hereunder that remains unremedied for 30 days.

     "Guarantee Agreement" means this Guarantee Agreement, as modified,  amended
or supplemented from time to time.

     "Guarantee Payments" means the following payments or distributions, without
duplication,  with respect to the Trust Preferred Securities,  to the extent not
paid or made by or on behalf of the Issuer Trust: (i) any accumulated and unpaid
Distributions  (as  defined in the Trust  Agreement)  required to be paid on the
Trust Preferred  Securities,  to the extent the Issuer Trust shall have funds on
hand available  therefor at such time; (ii) the Redemption  Price (as defined in
the Trust Agreement) with respect to any Trust Preferred  Securities  called for
redemption by the Issuer Trust,  to the extent the Issuer Trust shall have funds
on  hand  available  therefor  at such  time;  and  (iii)  upon a  voluntary  or
involuntary  termination,  winding-up or liquidation of the Issuer Trust, unless
Debentures  are  distributed to the Holders,  the lesser of (a) the  Liquidation
Distribution  (as  defined  in the Trust  Agreement)  with  respect to the Trust
Preferred  Securities,  to the extent that the Issuer  Trust shall have funds on
hand available therefor at such time, and (b) the amount of assets of the Issuer
Trust  remaining  available for  distribution  to Holders on  liquidation of the
Issuer.

     "Guarantee  Trustee" means The Bank of New York,  solely in its capacity as
Guarantee  Trustee  and  not in  its  individual  capacity,  until  a  Successor
Guarantee Trustee has been appointed and has accepted such appointment  pursuant
to the  terms of this  Guarantee  Agreement,  and  thereafter  means  each  such
Successor Guarantee Trustee.

     "Guarantor" has the meaning specified in the preamble of this
Guarantee Agreement.

     "Holder" means any Holder (as defined in the Trust  Agreement) of any Trust
Preferred Securities; provided, however, that in determining whether the holders
of the  requisite  percentage  of Trust  Preferred  Securities  have  given  any
request,  notice,  consent or waiver  hereunder,  "Holder" shall not include the
Guarantor,  the  Guarantee  Trustee or any  Affiliate  of the  Guarantor  or the
Guarantee Trustee.

     "Indenture" means the Junior  Subordinated  Indenture,  dated as of October
28, 1997, among the Guarantor and The Bank of New York, as trustee,  as the same
may be modified, amended or supplemented from time to time.

     "Issuer Trust" has the meaning specified in the preamble of
this Guarantee Agreement.

     "List of Holders" has the meaning specified in Section 2.2(a).



<PAGE>


     "Majority in Liquidation  Amount of the Trust Preferred  Securities" means,
except as  provided  by the Trust  Indenture  Act,  Trust  Preferred  Securities
representing  more than 50% of the aggregate  Liquidation  Amount (as defined in
the Trust  Agreement) of all Trust  Preferred  Securities  then  Outstanding (as
defined in the Trust Agreement).

     "Officers'  Certificate"  means,  with respect to any Person, a certificate
signed by the  Chairman  of the Board of  Directors  of such Person or the Chief
Executive Officer, the President,  the Chief Financial Officer, a Vice President
or the Treasurer of such Person, and by the Secretary or an Assistant  Secretary
of  such  Person,  and  delivered  to  the  Guarantee  Trustee.   Any  Officers'
Certificate  delivered  with respect to compliance  with a condition or covenant
provided for in this Guarantee Agreement shall include:

     (a) a statement by each officer signing the Officers' Certificate that such
officer has read the covenant or condition and the definitions relating thereto;

     (b) a brief  statement  of the  nature  and  scope  of the  examination  or
investigation undertaken by such officer in rendering the Officers' Certificate;

     (c)  a  statement   that  such  officer  has  made  such   examination   or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed  opinion as to whether or not such  covenant or condition
has been complied with; and

     (d) a  statement  as to  whether,  in the  opinion  of such  officer,  such
condition or covenant has been complied with.

     "Person"  means a legal  person,  including  any  individual,  corporation,
estate, partnership,  joint venture, association,  joint-stock company, company,
limited liability company, trust, business trust,  unincorporated association or
government or any agency or political  subdivision  thereof, or any other entity
of whatever nature.

     "Responsible  Officer" means,  with respect to the Guarantee  Trustee,  any
Senior Vice  President,  any Vice President,  any Assistant Vice President,  the
Secretary,  any Assistant Secretary, the Treasurer, any Assistant Treasurer, any
Trust  Officer or Assistant  Trust Officer or any other officer of the Corporate
Trust  Department  of the  Guarantee  Trustee and also means,  with respect to a
particular  matter, any other officer to whom such matter is referred because of
that officer's knowledge of and familiarity with the particular subject.

     "Successor   Guarantee   Trustee"  means  a  successor   Guarantee  Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.

     "Trust  Agreement"  means the Amended and Restated  Trust  Agreement of the
Issuer  Trust  referred  to in the  recitals  to this  Guarantee  Agreement,  as
modified, amended or supplemented from time to time.

     "Trust  Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this Guarantee Agreement was executed;  provided,  however,
that in the event the Trust  Indenture  Act of 1939 is amended  after such date,
"Trust  Indenture Act" means, to the extent required by any such amendment,  the
Trust Indenture Act of 1939 as so amended.

     "Trust Preferred Securities" has the meaning specified in the
recitals to this Guarantee Agreement.

     "Vice  President," when used with respect to the Guarantor,  means any duly
appointed  vice  president,  whether or not  designated by a number or a word or
words added before or after the title "vice president."

                          ARTICLE II

                      TRUST INDENTURE ACT

     SECTION 2.1.     Trust Indenture Act; Application.

     (a) This  Guarantee  Agreement  is subject to the  provisions  of the Trust
Indenture  Act that are  required  to be part of this  Guarantee  Agreement  and
shall, to the extent applicable, be governed by such provisions.

     (b) If and to the extent that any  provision  of this  Guarantee  Agreement
limits,  qualifies or conflicts  with the duties  imposed by Sections 310 to and
including  317, of the Trust  Indenture Act through  operation of Section 318(c)
thereof,  such imposed duties shall control.  If any provision of this Guarantee
Agreement  modifies or excludes any  provision of the Trust  Indenture Act which
may be so modified or excluded, the latter provision shall be deemed to apply to
this Guarantee Agreement as so modified or to be excluded, as the case may be.

     SECTION 2.2.     List of Holders.

     (a) The  Guarantor  shall furnish or cause to be furnished to the Guarantee
Trustee (a) semi-annually,  on or before March 31 and September 30 of each year,
a list, in such form as the Guarantee  Trustee may  reasonably  require,  of the
names and  addresses  of the Holders (a "List of Holders") as of a date not more
than 15 days prior to the delivery  thereof,  and (b) at such other times as the
Guarantee  Trustee may  request in writing,  within 30 days after the receipt by
the Guarantors of any such request, a List of Holders as of a date not more than
15 days  prior to the time such list is  furnished,  in each case to the  extent
such  information  is in the  possession or control of the Guarantor and has not
otherwise  been received by the Guarantee  Trustee in its capacity as such.  The
Guarantee  Trustee  may destroy  any List of Holders  previously  given to it on
receipt of a new List of Holders.

     (b) The  Guarantee  Trustee shall comply with the  requirements  of Section
311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act.

     SECTION 2.3.     Reports by the Guarantee Trustee.

     Not later than January 31 of each year, the Guarantee Trustee shall provide
to the  Holders  such  reports  as are  required  by  Section  313 of the  Trust
Indenture Act, if any, in the form and in the manner  provided by Section 313 of
the Trust  Indenture  Act.  The  Guarantee  Trustee  shall also  comply with the
requirements of Section 313(d) of the Trust Indenture Act.

     SECTION 2.4.     Periodic Reports to the Guarantee Trustee.

     The Guarantor  shall provide to the Guarantee  Trustee,  the Securities and
Exchange Commission and the Holders such documents,  reports and information, if
any, as required by Section 314 of the Trust  Indenture  Act and the  compliance
certificate  required by Section 314 of the Trust Indenture Act, in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.

     SECTION 2.5.     Evidence of Compliance with Conditions
Precedent.

     The  Guarantor  shall  provide to the  Guarantee  Trustee such  evidence of
compliance  with  such  conditions  precedent,  if  any,  provided  for in  this
Guarantee  Agreement  that  relate to any of the  matters  set forth in  Section
314(c) of the Trust  Indenture Act. Any  certificate  or opinion  required to be
given by an officer of the Guarantor  pursuant to Section 314(c)(1) may be given
in the form of an Officers' Certificate.

     SECTION 2.6.     Events of Default; Waiver.

     The  Holders  of at least a  Majority  in  Liquidation  Amount of the Trust
Preferred  Securities  may,  by vote,  on behalf of the Holders of all the Trust
Preferred  Securities,  waive  any past  default  or Event  of  Default  and its
consequences. Upon such waiver, any such default or Event of Default shall cease
to exist, and any default or Event of Default arising  therefrom shall be deemed
to have been cured, for every purpose of this Guarantee  Agreement,  but no such
waiver shall extend to any  subsequent  or other  default or Event of Default or
impair any right consequent thereon.

     SECTION 2.7.     Event of Default; Notice.

     (a) The Guarantee Trustee shall,  within 90 days after the occurrence of an
Event of Default, transmit by mail, first class postage prepaid, to the Holders,
notice of any such Event of Default known to the Guarantee Trustee,  unless such
Event of Default has been cured before the giving of such notice, provided that,
except in the case of a default  in the  payment  of a  Guarantee  Payment,  the
Guarantee  Trustee shall be protected in withholding  such notice if and so long
as the board of  directors,  the  executive  committee  or a trust  committee of
directors  and/or  Responsible  Officers of the Guarantee  Trustee in good faith
determines  that the  withholding  of such  notice  is in the  interests  of the
Holders.


<PAGE>


     (b) The  Guarantee  Trustee  shall not be deemed to have  knowledge  of any
Event of Default  unless the  Guarantee  Trustee  shall  have  received  written
notice,  or a  Responsible  Officer  charged  with  the  administration  of this
Guarantee  Agreement  shall have  obtained  actual  knowledge,  of such Event of
Default.

     (c)  Subject to the  provisions  of Section  5.4  hereof,  in the case of a
default by the Guarantor in any of its payment  obligations under this Guarantee
Agreement,  when and as the same shall  become due and  payable,  the  Guarantee
Trustee shall have the right, subject to the rights of the Holders hereunder, to
recover  judgment  against the  Guarantor  for the whole amount of such payments
remaining unpaid.

     SECTION 2.8.     Conflicting Interests.

     The Trust  Agreement and the Indenture  shall be deemed to be  specifically
described  in this  Guarantee  Agreement  for the  purposes of clause (i) of the
first proviso contained in Section 310(b) of the Trust Indenture Act.

                         ARTICLE III

      POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

     SECTION 3.1.     Powers and Duties of the Guarantee Trustee.

     (a) This Guarantee Agreement shall be held by the Guarantee Trustee for the
benefit of the  Holders,  and the  Guarantee  Trustee  shall not  transfer  this
Guarantee  Agreement to any Person  except to a Successor  Guarantee  Trustee on
acceptance by such  Successor  Guarantee  Trustee of its  appointment  to act as
Guarantee  Trustee  hereunder.  The right,  title and interest of the  Guarantee
Trustee, as such,  hereunder shall automatically vest in any Successor Guarantee
Trustee,  upon acceptance by such Successor Guarantee Trustee of its appointment
hereunder,  and  such  vesting  of  title  shall  be  effective  whether  or not
conveyancing  documents  have  been  executed  and  delivered  pursuant  to  the
appointment of such Successor Guarantee Trustee.

     (b) If an Event of Default has occurred and is  continuing,  the  Guarantee
Trustee shall enforce this Guarantee Agreement for the benefit of the Holders.

     (c) The Guarantee  Trustee,  before the  occurrence of any Event of Default
and after the  curing of all  Events of Default  that may have  occurred,  shall
undertake  to perform  only such  duties as are  specifically  set forth in this
Guarantee Agreement,  and no implied covenants shall be read into this Guarantee
Agreement  against the Guarantee  Trustee.  The Guarantee Trustee shall exercise
such of the rights and powers vested in it by this Guarantee Agreement,  and use
the same degree of care and skill in its exercise  thereof,  as a prudent person
would exercise or use under the  circumstances  in the conduct of his or her own
affairs.


<PAGE>


     (d) No provision of this Guarantee  Agreement shall be construed to relieve
the  Guarantee  Trustee from  liability for its own  negligent  action,  its own
negligent failure to act or its own willful misconduct, except that:

                         (i) Prior to the occurrence of any Event of Default and
                    after the curing or  waiving  of all such  Events of Default
                    that may have occurred:

           (A)     the duties and obligations of the Guarantee  Trustee shall be
                   determined solely by the express provisions of this Guarantee
                   Agreement  (including  pursuant  to  Section  2.1),  and  the
                   Guarantee   Trustee  shall  not  be  liable  except  for  the
                   performance   of  such   duties   and   obligations   as  are
                   specifically set forth in this Guarantee Agreement; and

           (B)     in the absence of bad faith on the part of
                   the  Guarantee Trustee, the Guarantee Trustee may
                   conclusively  rely, as to the truth of the statements and
                   the correctness of  the opinions expressed therein, upon
                   any certificates or  opinions furnished to the Guarantee
                   Trustee and conforming to  the requirements of this
                   Guarantee Agreement; but in the case  of any such
                   certificates or opinions that by any provision  hereof or
                   of the Trust Indenture Act are specifically required  to
                   be furnished to the Guarantee Trustee, the Guarantee
                   Trustee shall be under a duty to examine the  same to
                   determine whether or not they conform to the
                   requirements of this Guarantee Agreement.

                  (ii) The  Guarantee  Trustee shall not be liable for any error
                  of judgment made in good faith by a Responsible Officer of the
                  Guarantee  Trustee,   unless  it  shall  be  proved  that  the
                  Guarantee  Trustee was negligent in ascertaining the pertinent
                  facts upon which such judgment was made.

                  (iii) The  Guarantee  Trustee shall not be liable with respect
                  to any action taken or omitted to be taken by it in good faith
                  in  accordance  with the  direction of the Holders of not less
                  than a Majority in Liquidation  Amount of the Trust  Preferred
                  Securities   relating  to  the  time,   method  and  place  of
                  conducting  any  proceeding  for any remedy  available  to the
                  Guarantee Trustee,  or exercising any trust or power conferred
                  upon the Guarantee Trustee under this Guarantee Agreement.

                  (iv) No provision of this  Guarantee  Agreement  shall require
                  the  Guarantee  Trustee  to  expend  or risk its own  funds or
                  otherwise   incur   personal   financial   liability   in  the
                  performance  of any of its duties or in the exercise of any of
                  its  rights or powers,  if the  Guarantee  Trustee  shall have
                  reasonable  grounds for  believing  that the repayment of such
                  funds or liability is not reasonably


<PAGE>


                  assured to it under the terms of this  Guarantee  Agreement or
                  adequate  indemnity  against  such  risk or  liability  is not
                  reasonably assured to it.

     SECTION 3.2.     Certain Rights of Guarantee Trustee.

     (a)     Subject to the provisions of Section 3.1:

                       (i) The  Guarantee  Trustee  may rely and  shall be fully
                  protected  in  acting  or  refraining  from  acting  upon  any
                  resolution,   certificate,   statement,  instrument,  opinion,
                  report,  notice,  request,  direction,  consent,  order, bond,
                  debenture, note, other evidence of indebtedness or other paper
                  or  document  reasonably  believed  by it to be genuine and to
                  have been  signed,  sent or  presented  by the proper party or
                  parties.

                       (ii) Any  direction  or act of either  of the  Guarantors
                  contemplated by this Guarantee Agreement shall be sufficiently
                  evidenced  by  an  Officers'   Certificate   unless  otherwise
                  prescribed herein.

                       (iii) Whenever,  in the  administration of this Guarantee
                  Agreement,  the Guarantee Trustee shall deem it desirable that
                  a matter be proved or established before taking,  suffering or
                  omitting to take any action  hereunder,  the Guarantee Trustee
                  (unless other evidence is herein specifically prescribed) may,
                  in the absence of bad faith on its part, request and rely upon
                  an Officers'  Certificate  which, upon receipt of such request
                  from the Guarantee Trustee, shall be promptly delivered by the
                  Guarantor.

                       (iv) The Guarantee Trustee may consult with legal counsel
                  of its  selection,  and the written  advice or opinion of such
                  legal  counsel with respect to legal matters shall be full and
                  complete authorization and protection in respect of any action
                  taken, suffered or omitted to be taken by it hereunder in good
                  faith and in  accordance  with such  advice or  opinion.  Such
                  legal  counsel may be legal counsel to the Guarantor or any of
                  its Affiliates and may be one of its employees.  The Guarantee
                  Trustee shall have the right at any time to seek  instructions
                  concerning the administration of this Guarantee Agreement from
                  any court of competent jurisdiction.

                       (v) The Guarantee Trustee shall be under no obligation to
                  exercise  any of the  rights  or  powers  vested in it by this
                  Guarantee  Agreement at the request or direction of any Holder
                  unless  such  Holder  shall  have  provided  to the  Guarantee
                  Trustee such adequate  security and indemnity as would satisfy
                  a reasonable  person in the position of the Guarantee  Trustee
                  against the costs,  expenses  (including  attorneys'  fees and
                  expenses)  and  liabilities  that might be  incurred  by it in
                  complying  with such  request  or  direction,  including  such
                  reasonable  advances  as may  be  requested  by the  Guarantee
                  Trustee;  provided  that  nothing  contained  in this  Section
                  3.2(a)(v)  shall be taken to relieve  the  Guarantee  Trustee,
                  upon the occurrence of an Event of Default,  of its obligation
                  to  exercise  the  rights  and  powers  vested  in it by  this
                  Guarantee Agreement.

                       (vi) The Guarantee Trustee shall not be bound to make any
                  investigation   into  the  facts  or  matters  stated  in  any
                  resolution,   certificate,   statement,  instrument,  opinion,
                  report,  notice,  request,  direction,  consent,  order, bond,
                  debenture, note, other evidence of indebtedness or other paper
                  or document, but the Guarantee Trustee, in its discretion, may
                  make such further inquiry or investigation  into such facts or
                  matters as it may see fit.

                       (vii) The Guarantee Trustee may execute any of the trusts
                  or powers  hereunder  or perform any duties  hereunder  either
                  directly  or by or through  its agents or  attorneys,  and the
                  Guarantee  Trustee shall not be responsible for any misconduct
                  or  negligence  on the  part of any  such  agent  or  attorney
                  appointed by it with due care hereunder.

                       (viii) Whenever in the  administration  of this Guarantee
                  Agreement  the  Guarantee  Trustee  shall deem it desirable to
                  receive  instructions  with respect to enforcing any remedy or
                  right or taking  any other  action  hereunder,  the  Guarantee
                  Trustee (A) may request instructions from the Holders, (B) may
                  refrain  from  enforcing  such  remedy or right or taking such
                  other  action  until such  instructions  are  received and (C)
                  shall  be  protected  in  acting  in   accordance   with  such
                  instructions.

     (b) No provision of this Guarantee  Agreement shall be deemed to impose any
duty or  obligation  on the  Guarantee  Trustee  to  perform  any act or acts or
exercise any right, power, duty or obligation  conferred or imposed on it in any
jurisdiction  in which it shall be illegal,  or in which the  Guarantee  Trustee
shall be  unqualified  or  incompetent  in accordance  with  applicable  law, to
perform  any such act or acts or to  exercise  any such  right,  power,  duty or
obligation.  No permissive power or authority available to the Guarantee Trustee
shall  be  construed  to be a duty to act in  accordance  with  such  power  and
authority.

     SECTION 3.3.     Compensation; Indemnity; Fees.

     The Guarantor agrees:

                     (a) to pay to the Guarantee  Trustee from time to time such
                compensation for all services rendered by it hereunder as may be
                agreed by the Guarantor  and the Guarantee  Trustee from time to
                time (which  compensation  shall not be limited by any provision
                of law in regard to the  compensation of a trustee of an express
                trust);

                     (b)  except as  otherwise  expressly  provided  herein,  to
                reimburse the Guarantee  Trustee upon request for all reasonable
                expenses,  disbursements  and  advances  incurred or made by the
                Guarantee  Trustee  in  accordance  with any  provision  of this
                Guarantee Agreement  (including the reasonable  compensation and
                the  expenses  and  disbursements  of its agents  and  counsel),
                except  any such  expense,  disbursement  or  advance  as may be
                attributable to its negligence or bad faith; and

                     (c) to indemnify the Guarantee  Trustee for, and to hold it
                harmless  against,  any  loss,  liability  or  expense  incurred
                without negligence,  willful misconduct or bad faith on the part
                of the Guarantee  Trustee,  arising out of or in connection with
                the acceptance or  administration  of this Guarantee  Agreement,
                including the costs and expenses of defending itself against any
                claim  or   liability  in   connection   with  the  exercise  or
                performance of any of its powers or duties hereunder.

The  Guarantee  Trustee  will  not  claim or exact  any  lien or  charge  on any
Guarantee  Payments  as a result of any amount  due to it under  this  Guarantee
Agreement.

                      ARTICLE IV

                    GUARANTEE TRUSTEE

     SECTION 4.1.     Guarantee Trustee; Eligibility.

     (a)     There shall at all times be a Guarantee Trustee which
shall:

           (i)     not be an Affiliate of the Guarantor; and

          (ii) be a Person that is eligible  pursuant to the Trust Indenture Act
to act as such and has a combined  capital and surplus of at least  $50,000,000,
and shall be a corporation  meeting the  requirements  of Section  310(a) of the
Trust Indenture Act. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of its supervising or examining
authority,  then,  for the  purposes  of  this  Section  4.1  and to the  extent
permitted by the Trust  Indenture Act, the combined  capital and surplus of such
corporation  shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published.

     (b) If at any time the  Guarantee  Trustee shall cease to be eligible to so
act under Section 4.1(a),  the Guarantee Trustee shall immediately resign in the
manner and with the effect set out in Section 4.2.

     (c)  If the  Guarantee  Trustee  has  or  shall  acquire  any  "conflicting
interest"  within the meaning of Section 310(b) of the Trust  Indenture Act, the
Guarantee  Trustee  and the  Guarantor  shall in all  respects  comply  with the
provisions of Section 310(b) of the Trust Indenture Act.

     SECTION 4.2.    Appointment, Removal and Resignation of the
                     Guarantee Trustee.

     (a) Subject to Section  4.2(b),  the Guarantee  Trustee may be appointed or
removed without cause at any time by the Guarantor.

     (b) The Guarantee Trustee shall not be removed until a Successor  Guarantee
Trustee  has  been  appointed  and has  accepted  such  appointment  by  written
instrument  executed by such  Successor  Guarantee  Trustee and delivered to the
Guarantor.

     (c) The Guarantee  Trustee  appointed  hereunder  shall hold office until a
Successor  Guarantee  Trustee shall have been  appointed or until its removal or
resignation.  The  Guarantee  Trustee may resign from office  (without  need for
prior or subsequent  accounting)  by an  instrument  in writing  executed by the
Guarantee  Trustee and delivered to the Guarantor,  which  resignation shall not
take effect  until a Successor  Guarantee  Trustee  has been  appointed  and has
accepted such  appointment  by instrument in writing  executed by such Successor
Guarantee  Trustee and delivered to the  Guarantor  and the resigning  Guarantee
Trustee.

     (d) If no  Successor  Guarantee  Trustee  shall  have  been  appointed  and
accepted  appointment  as  provided  in this  Section  4.2  within 60 days after
delivery  to the  Guarantor  of an  instrument  of  resignation,  the  resigning
Guarantee  Trustee may petition,  at the expense of the Guarantor,  any court of
competent  jurisdiction for appointment of a Successor  Guarantee Trustee.  Such
court may  thereupon,  after  prescribing  such  notice,  if any, as it may deem
proper, appoint a Successor Guarantee Trustee.

                          ARTICLE V

                          GUARANTEE

     SECTION 5.1.     Guarantee.

     The Guarantor irrevocably and unconditionally  agrees to pay in full to the
Holders the Guarantee Payments (without  duplication of amounts theretofore paid
by or on  behalf  of the  Issuer  Trust),  as and when  due,  regardless  of any
defense,  right of  setoff or  counterclaim  that the  Issuer  Trust may have or
assert,  except the defense of payment.  The  Guarantor's  obligation  to make a
Guarantee  Payment may be satisfied by direct payment of the required amounts by
the  Guarantor to the Holders or by causing the Issuer Trust to pay such amounts
to the Holders.

     SECTION 5.2.     Waiver of Notice and Demand.

         The Guarantor  hereby  waives  notice of  acceptance of this  Guarantee
Agreement  and of any  liability to which it applies or may apply,  presentment,
demand  for  payment,  any  right to  require a  proceeding  first  against  the
Guarantee  Trustee,  the  Issuer  Trust or any other  Person  before  proceeding
against  either  of the  Guarantor,  protest,  notice of  nonpayment,  notice of
dishonor, notice of redemption and all other notices and demands.



<PAGE>


     SECTION 5.3.     Obligations Not Affected.

         The  obligations,  covenants,  agreements  and duties of the  Guarantor
under this Guarantee Agreement shall in no way be affected or impaired by reason
of the happening from time to time of any of the following:

          (a) the release or waiver,  by operation of law or  otherwise,  of the
performance  or  observance  by the  Issuer  Trust  of any  express  or  implied
agreement,   covenant,  term  or  condition  relating  to  the  Trust  Preferred
Securities to be performed or observed by the Issuer Trust;

          (b) the  extension  of time for the payment by the Issuer Trust of all
or any portion of the Distributions (other than an extension of time for payment
of Distributions  that results from the extension of any interest payment period
on the Debentures as provided in the Indenture),  Redemption Price,  Liquidation
Distribution  or any other sums payable  under the terms of the Trust  Preferred
Securities or the extension of time for the performance of any other  obligation
under, arising out of, or in connection with, the Trust Preferred Securities;

          (c) any failure,  omission,  delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred  on  the  Holders  pursuant  to  the  terms  of  the  Trust  Preferred
Securities, or any action on the part of the Issuer Trust granting indulgence or
extension of any kind;

          (d)   the   voluntary   or   involuntary   liquidation,   dissolution,
receivership,  insolvency,  bankruptcy, assignment for the benefit of creditors,
reorganization,  arrangement,  composition or  readjustment of debt of, or other
similar  proceedings  affecting,  the  Issuer  Trust or any of the assets of the
Issuer Trust;

          (e)     any invalidity of, or defect or deficiency in,
the Trust Preferred Securities;

          (f)     the settlement or compromise of any obligation
guaranteed hereby or hereby incurred; or

          (g) any other circumstance  whatsoever that might otherwise constitute
a legal or equitable  discharge or defense of a guarantor (other than payment of
the  underlying  obligation),  it being the intent of this  Section 5.3 that the
obligations of the Guarantor hereunder shall be absolute and unconditional under
any and all circumstances.

There  shall be no  obligation  of the  Holders to give notice to, or obtain the
consent of, the Guarantor with respect to the happening of any of the foregoing.


<PAGE>


     SECTION 5.4.     Rights of Holders.

     The Guarantor  expressly  acknowledges  that: (i) this Guarantee  Agreement
will be deposited  with the Guarantee  Trustee to be held for the benefit of the
Holders;  (ii) the  Guarantee  Trustee has the right to enforce  this  Guarantee
Agreement  on  behalf  of the  Holders;  (iii)  the  Holders  of a  Majority  in
Liquidation  Amount of the Trust  Preferred  Securities have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Guarantee  Trustee in respect of this  Guarantee  Agreement or exercising
any trust or power  conferred  upon the Guarantee  Trustee under this  Guarantee
Agreement; and (iv) any Holder may institute a legal proceeding directly against
the Guarantor to enforce its rights under this Guarantee Agreement without first
instituting a legal proceeding against the Guarantee  Trustee,  the Issuer Trust
or any other Person.

     SECTION 5.5.     Unconditional Right of Holders to Payment.

     Notwithstanding  any other  provision  of this  Guarantee  Agreement,  each
Holder  shall have the right,  which is absolute and  unconditional,  to receive
Guarantee  Payments when due, and to institute  suit for the  enforcement of any
such payment,  and such right shall not be impaired  without the consent of such
Holder.

     SECTION 5.6.     Guarantee of Payment.

     This  Guarantee  Agreement  creates  a  guarantee  of  payment  and  not of
collection. This Guarantee Agreement will not be discharged except by payment of
the Guarantee Payments in full (without  duplication of amounts theretofore paid
by the  Issuer  Trust) or upon the  distribution  of  Debentures  to  Holders as
provided in the Trust Agreement.

     SECTION 5.7.     Subrogation.

     The  Guarantor  shall be  subrogated  to all rights (if any) of the Holders
against the Issuer  Trust in respect of any  amounts  paid to the Holders by the
Guarantor under this Guarantee Agreement;  provided, however, that the Guarantor
shall not (except to the extent  required  by  mandatory  provisions  of law) be
entitled  to  enforce or  exercise  any  rights  which it may  acquire by way of
subrogation or any indemnity,  reimbursement or other agreement, in all cases as
a result of payment under this Guarantee Agreement,  if, at the time of any such
payment, any amounts are due and unpaid under this Guarantee  Agreement.  If any
amount shall be paid to the  Guarantor in violation of the  preceding  sentence,
the Guarantor agrees to hold the amount in trust for the Holders and to pay over
such amount to the Holders.



<PAGE>


     SECTION 5.8.     Independent Obligations.

     The Guarantor  acknowledges that its obligations  hereunder are independent
of the  obligations  of the  Issuer  Trust with  respect to the Trust  Preferred
Securities  and that it be liable as principal  and as debtor  hereunder to make
Guarantee   Payments   pursuant  to  the  terms  of  this  Guarantee   Agreement
notwithstanding  the  occurrence  of any event  referred to in  subsections  (a)
through (g), inclusive, of Section 5.3 hereof.


                           ARTICLE VI

                   COVENANTS AND SUBORDINATION

     SECTION 6.1.     Subordination.

     The  obligations  of the  Guarantor  under this  Guarantee  Agreement  will
constitute unsecured  obligations of the Guarantor and will rank subordinate and
junior  in right of  payment  to all  Senior  Indebtedness  (as  defined  in the
Indenture)  of the  Guarantor,  to the extent and in the manner set forth in the
Indenture with respect to the Debentures,  and the provisions of Article XIII of
the Indenture will apply, mutatis mutandis,  to the obligations of the Guarantor
hereunder.  The obligations of the Guarantor  hereunder do not constitute Senior
Indebtedness (as defined in the Indenture) of the Guarantor.

     SECTION 6.2.     Pari Passu Guarantees.

     The obligations of the Guarantor  under this Guarantee  Agreement rank pari
passu with the  obligations  of the  Guarantor  under (i) any similar  guarantee
agreements  issued by the  Guarantor  on behalf of the holders of  preferred  or
capital  securities  issued by any Issuer  Trust (as defined in the  Indenture),
(ii) the Indenture and the Securities (as defined therein) issued thereunder and
(iii) any other  security,  guarantee or other  agreement or obligation  that is
expressly  stated to rank pari passu with the obligations of the Guarantor under
this Guarantee  Agreement or with any obligation  that ranks pari passu with the
obligations of the Guarantor under this Guarantee Agreement.


                         ARTICLE VII

                         TERMINATION

     SECTION 7.1.     Termination.

     This  Guarantee  Agreement  shall  terminate and be of no further force and
effect upon (i) full  payment of the  Redemption  Price (as defined in the Trust
Agreement)  of  all  Trust  Preferred  Securities,   (ii)  the  distribution  of
Debentures to the Holders in exchange for all of the Trust Preferred  Securities
or (iii) full payment of the amounts  payable in  accordance  with Article IX of
the Trust Agreement upon  liquidation of the Issuer Trust.  Notwithstanding  the
foregoing,  this  Guarantee  Agreement  will continue to be effective or will be
reinstated,  as the case may be, if at any time any Holder is  required to repay
any sums paid with  respect  to Trust  Preferred  Securities  or this  Guarantee
Agreement.

                         ARTICLE VIII

                         MISCELLANEOUS

     SECTION 8.1.     Successors and Assigns.

     All guarantees and agreements  contained in this Guarantee  Agreement shall
bind the successors,  assigns,  receivers,  trustees and  representatives of the
Guarantor,  and shall inure to the benefit of the Holders of the Trust Preferred
Securities then outstanding.  Except in connection with a consolidation,  merger
or sale  involving  the  Guarantor  that is permitted  under Article VIII of the
Indenture and pursuant to which the  successor or assignee  agrees in writing to
perform the Guarantor's  obligations  hereunder,  the Guarantor shall not assign
its obligations hereunder, and any purported assignment other than in accordance
with this provision shall be void.

     SECTION 8.2.     Amendments.

     Except with respect to any changes that do not adversely  affect the rights
of the Holders in any material  respect (in which case no consent of the Holders
will be required),  this Guarantee  Agreement may only be amended with the prior
approval of the Holders of not less than a Majority in Liquidation Amount of the
Trust Preferred Securities.

     SECTION 8.3.     Record Date.

     For purposes of any action to be taken by Holders pursuant to Sections 2.6,
5.4  or 8.2  hereof,  the  provisions  of  Article  VI of  the  Trust  Agreement
concerning meetings of the Holders shall apply.

     SECTION 8.4.     Notices.

     Any notice,  request or other  communication  required or  permitted  to be
given hereunder be in writing,  duly signed by the party giving such notice, and
delivered, telecopied or mailed by first class mail as follows:

     (a) if given to the Guarantor,  to the address or telecopy number set forth
below or such other address or telecopy  number as the Guarantor may give notice
to the Guarantee Trustee and the Holders:

              South Carolina Electric & Gas Company
                      1426 Main Street
               Columbia, South Carolina  29201
                   Attention:  Treasurer
                 Telecopy: (803) 933-7037



<PAGE>


     (b) if given to the Guarantee  Trustee,  at the address or telecopy  number
set forth  below or such  other  address  or  telecopy  number as the  Guarantee
Trustee may give notice to the Guarantor and Holders:

                    The Bank of New York
              101 Barclay Street, Floor 21 West
                  New York, New York  10286
         Attention:  Corporate Trust Administration
                Telecopy:  (212) 815-5915

     with a copy to:

                       SCE&G Trust I
             c/o South Carolina Electric & Gas Company
                      1426 Main Street
                 Columbia, South Carolina 29201
                    Attention:  Treasurer
                   Telecopy:  (803) 933-7037

     (c) if given to any  Holder,  at the  address  set  forth on the  books and
records of the Issuer Trust.

     All notices  hereunder  shall be deemed to have been given when received in
person,  telecopied  with  receipt  confirmed,  or mailed by first  class  mail,
postage  prepaid,  except that if a notice or other document is refused delivery
or cannot be  delivered  because  of a changed  address  of which no notice  was
given,  such notice or other  document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.

     SECTION 8.5.     Benefit.

     This  Guarantee  Agreement  is solely for the benefit of the Holders and is
not separately transferable from the Trust Preferred Securities.

     SECTION 8.6.     Governing Law.

     THIS GUARANTEE  AGREEMENT  SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.

     SECTION 8.7.     Counterparts.

     This  instrument  may be  executed in any number of  counterparts,  each of
which so executed shall be deemed to be an original,  but all such  counterparts
together shall constitute but one and the same instrument.




<PAGE>



  IN WITNESS WHEREOF,  the parties hereto have executed this Guarantee Agreement
as of the day and year first above written.

                    SOUTH CAROLINA ELECTRIC & GAS COMPANY



                    By: s/M. R. Cannon
                       Name: M. R. Cannon
                       Title: Treasurer






