BEFORE

SOUTH CAROLINA PUBLIC SERVICE COMMISSION

DOCKET NO. 2012-218-E

In the Matter of:

Application of South Carolina Electric & Gas Company)For Increases and Adjustments in Electric Rate )Schedules and Tariffs and Request for Mid-Period )Reduction in Base Rates for Fuel )

Docket No. 2012-218-E

Exhibit 6

to the

Surrebuttal Testimony of Kevin W. O'Donnell, CFA

Fewer employers offering defined benefit pension plans to new salaried employees~

Busi... Page 1 of 2

Fewer employers offering defined benefitpension plans to new salaried employeesPosted On: Oct. 03, 2012 11:06 AM CST

Jerry Geisel (mailto:jgeisel Businesslnsurance.corn)

ADVEPvTISL'iVIEN'I The percentage ofthe largest U.S.employers thatoffer a definedbenefit pensionplan to new

Protectioncontinues to fall,according to newresearch. Fewer employers are offering

of Jtme 3 0 defined benefit Pension Plans

3 0 / f F rt to new salaried employees.

100 companiesoffered a definedbenefit plan to new salaried employees, according

to New York-based Towers Watson & Co. That's down from 33% atthe end of 2011,37% in 2010and 43% in 2009.As recently as 1998, defined benefit plans were the norm among the nation's largestemployers, when 90% of Fortune 100 companies offered the plans to new salaried employees.Sincethen, large employers have moved away from the plans. "Large employers have been reassessing theirretirement offerings for some time.... The shift is motivated by several factors, includingemployers'esire

to reduce overall retirement costs — perhaps due to higher compensation and benefit costselsewhere, especially health care — perceptions that workers prefer more portable plans, markettrends, and the belief that such a sluft reduces financial risk," Towers Watson said in an article postedTuesday in The Insider, a company publication.In addition, as more companies have moved awayfrom defined benefit plans, the competitive pressure on employers to continue to offer the plans hasdeclined, said Alan Glickstein, a Towers Watson senior retirement consultant in Dallas.

Traditional plans hit hardest

http;//www.businessinsurance.corn/article/20121003/NEWS03/121009979?template~rin... 11/20/2012

Fewer employers offering defined benefit pension plans to new salaried employees~

Busi... Page 2 of 2

The move away from defined benefit plans has been especially pronounced for traditional plans, inwhich the benefit is typically based on employees'ears of service and employees'alary during theirlast years of employment.

Just 11 Fortune 100 companies offered a traditional defined benefit plan to new salaried employees asof June 30, down from 14 in 2011, 17 in 2010 and 19 in 2009.By contrast, during the 1980s, definedbenefit plans were the norm among Fortune 100 companies. In 1985, for example, nearly 90% ofFortune 100 companies offered a traditional defined benefit plan to new employees.The prevalence ofhybrid plans, typically cash balance plans, also has sharply declined. As of June 30, 19 Fortune 100companies offered hybrid plans to new salaried employees. That's unchanged from 2011, but almost50% less compared with 2004, when 35 Fortune 100 companies offered the plans. While hybrid planshave defined benefit and defined contribution plan elements, legally they are defined benefitplans.While a handful of big employers, including Dow Chemical Co. and The Coca-Cola Co., haveset up new cash balance plans in recent years, new formations have been more than offset by otherFortune 100 companies, including Bank of America Corp. (/article/20120223/NEWS03/120229941),SunTrust Banks Inc. (/article/20111121/NEWS03/111129983) and Wells Fargo /k Co., which began tophase out their cash balance plans.

Most only offer defined contribution plans

As employers have moved away from defined benefit plans, the overwhelming majority of Fortune100 companies now offer only a defined conuibution plan to new salaried employees, according toTowers Watson.As of June 30, 70% of the Fortune 100 offered only defined contribution plans, upfrom 67% in 2011, 63% in 2010 and 57% in 2009. By contrast, as recently as 1998, just 10% ofFortune 100 companies offered only defined contribution plans.

On the other hand, as employers have shifted to an all-defined-contribution-plan approach, they haveadded certain defined benefits plan features to those plans, Mr. Glickstein noted.For example, a risingpercentage of employers have added automatic enrollment features to their defined contribution plans.That feature is aimed at those employees who don't respond to company requests to enroll. Unlessthey specifically object, such employees then are enrolled with a percentage of their salary — basedon the employer's design — contributed to the plan, assuring the growth of employees'efinedcontribution plan account balances.

http: //www.businessinsurance.corn/article/20121003/NEWS03/121009979?template~rin... 11/20/2012

BEFORE

SOUTH CAROLINA PUBLIC SERVICE COMMISSION

DOCKET NO. 2012-218-E

In the Matter of:

Application of South Carolina Electric 4 Gas Company)For Increases and Adjustments in Electric Rate )Schedules and Tariffs and Request for Mid-Period )Reduction in Base Rates for Fuel )

Docket No. 2012-218-K

Exhibit 7

to the

Surrebuttal Testimony of Kevin W. O'Donnell, CFA

Date ofFinal Order Utility Jurisdiction

Docket

No.

AuthorizedROE

Specific

Cite

Jan. 25, 2012Jan. 27, 2012Feb. 15, 2D12

Feb. 23, 2012Feb. 27, 2012Feb. 29, 2012April 4, 2012April 26, 2012May 2, 2012

May 7, 2012

May 14, 2012

May 15, 2012

May 29, 2012June 7, 2012June 14, 2012June 15, 2012June 18, 2012June 19, 2012June 26, 2012June 29, 2012July 9, 2012July 16, 2012July 20, 2012July 20, 2012Sept 14, 2012Sept. 19, 2012Sept. 19, 2012Sept. 26, 2012

Duke Energy CarolinasDuke Energy Carolinasindiana-Michigan PowerIdaho PowerGulf PowerNorthern States PowerHawaii Electric Light Co.

Public Service of ColoradoMaui Electric CompanyPuget Sound EnergyNorthern States PowerArizona Public ServiceCommonwealth Edison

Consumers EnergyOrange lk Rockland UtilitiesWisconsin Power and Light

Cheyenne Light Fuel PowerNorthern States PowerWisconsin Power and Light

Hawaii ElectricOklahoma Gas Er Electric

Rocky Mountain PowerDelmarva Power & Light

Potomac Edison

Entergy TexasAmeren IOinois

Rocky Mountain PowerPotomac Edison

SC

NC

Ml

OR

FL

ND

Hl

CO

Hl

WA

MN

AZ

IL

Ml

NY

WI

Wy

SD

Ml

Hl

OK

WY

MD

MD

TX

IL

UT

DC

2011-271-EE-7, Sub 989

16801UE233

110138PU-10-657

2009-016411AL-947E

2D09-0163

UE-0111048

10-971E-01345A-11-0224

11-072116794

11-E-0408

6680-UR-11820003-114-ER-11

EL11-019

168302010-0080

PUD20110008720000-405-ER-11

92859286

3989612-0001

11-035-200

1087

10.50N10.50M

10.20N9.90N10.25M10.4096

10.00M10.00M

10.00N9.80M

10.37M10.0DN

10.50N10.30N9.40N10.40M9.60N9,25M

10.10N10,00M10.20M

9.809k

9.81M

9.31M9.80M

1D.OSN

9.80N9.50M

p. 8 of settlementp. 9 of final orderp. 7 of final orderp. 4 and 5 of stipulationp. 52 of final orderp. 4 of final orderp. 85 of final orderp. 16 of final orderp. 86 of final orderp. 33 of final orderp. 18 of briefp. 33 of final orderp. 138 of final orderp. 65 of final orderp. 11 of final orderp. 2 of final orderpress releasep. 2 of fmal orderp. 18 of final orderp. 127 of final orderp. 2 of final orderp. 6 of stipulationp. 79 of fmal orderp. 109 of final orderp. 6 of final orderp. 1D6 of final orderp. 2 of final orderp. 61 of final order

AverageHigh

Low

9.99M10.5DM

9.25M

BEFORE

SOUTH CAROLINA PUBLIC SERVICE COMMISSION

DOCKET NO. 2012-218-E

In the Matter of:

Application of South Carolina Electric & Gas Company)For Increases and Adjustments in Electric Rate )Schedules and Tariffs and Request for Mid-Period )Reduction in Base Rates for Fuel )

Docket No. 2012-218-E

Exhibit 8

to the

Surrebuttal Testimony of Kevin W. O'Donnell, CFA

Kiss 10% market returns goodbye - MarketWatch Page 1 of 2

Market atchChuck Jade

Nov. JI, 2012, 9.01 a m EST

.+'~I., Kiss 10% market returns goodbyeCommentary: A growing number of experts say investors should no longer expect,,AJ:.:l'afff-~be

the double-digit returns of the pastBy Chuck Jaffe, Marketwatch

BOSTON lMarketwatch) — As the market recently observed the 25th anniversary of the single worst day in itshistory — the Iylarket Crash of 1987 — most investing experts warned that investors should expect similarcrashes and free-falls in the future.

Lost amid those headlines, however, was an arguably moredangerous prospect for regular investors: namely, that many marketexperts say the kinds of historic returns they'e come to expect aregone for the foreseeable future.

Jaffe: Surprising investing lessons from

SandyTaking a market time out is better than sliori-term tradingstrategies, Chuck Jalre discovered during the Sandy-imposed markets break. He discusses on Markets Hub.Photo: Getty Images.

Ask most investors what they expect to get from the stock market andthe answer is typically 10%. That's a homage to an old study byRoger Ibbotson and Rex Sinquefeld that showed several generationsof investors that stocks average that level of return — albeit beforeany transaction costs — over time.

No matter how much the market has bounced around — throughperiods where a 10% return lagged behind the overall market badlyand downturns when a double-digit gain felt like a fairy tale—investors have had the sense that if they can stick with the marketlong enough, they will come away with that 10% gain.

The problem is that the experts, including Ibbotson himself, don't believe it.

"Starting in 1928, the return on the large-cap market has been 9.8%,but this was during a period when inflation rates are higher than theyare today, and risk-less rates were higher than they are today," saidIbbotson, a Yale professor who also currently serves as chairman andchief investment officer at Zebra Capital Management. "You have toknock it all down by a couple of percent, because we really are in a risk-

less rate environment where the rates are close to zero."

New ways to pay for collegeSome families are forgoing pricey student loans in

favor of alternative strategies. Photo: AP.

For the next quarter-century or more, Ibbotson said he would "not

predict more than an 8% return on the market, but that's not bad. That'a great return."

http: //www.marketwatch.corn/Story/story/print?guid=lCDB?BD6-2534-11E2-B4EC-002... 11/20/2012

Kiss 10% marlcet returns goodbye - MarjcetWatch Page 2 of 2

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Likewise, Vanguard Group founder Jack Bogle — who, like Ibbotson,appeared on my radio show this month — said the current market,which he called the "most challenging he has ever seen" is going todeliver smaller returns than what experienced, adult investors have in

their heads. He pegged the return in the 6% to 8% range for stocksgoing forward, also citing low yields and low inflation as key reasons toalter long-term expectations.

Of course, a lot of investors would be thrilled to get 8% from the marketthese days, a far sight better than the returns they have earned over thelast decade. But if history has not been suspended — and the expertsdon't think it has been, they just believe returns will be lower — thelowered expectations do significantly change long-term financial andinvestment planning.

Consider someone who starts investing in their 20s and has a long life

ahead of them. A 10% market return would double their market returnevery 7.2 years, compared with a 9-year time frame when the return isjust 8%.

If their initial investment was $ 10,000, it would be $ 160,000 in 36 yearsif it compounds at 10% annually. It would be half that amount over the

same time period if the return is 8%. (See How to Make the Most of Com ound Returns .)

The challenge is that inflation is still in the 2% to 3% range, and investors can't get to where they want to be with a lessthan 2% Treasury bond, combined with a 6% to 8% stock market, said Jeffrey Coons, president of the mutual fund firm

Manning & Napier. vyou combine those together and you never really get ta those numbers you use in your retirementcalculators, or that a pension plan would use for its actuarial assumptions. Those absolute returns really are the issue."

Aside from changing the assumptions they plug into those calculators — a move that makes the ultimate outcomeslook significantly more bleak and doubtful — experts are split over what investors should do as a response to this lessfruitful environment.

Average long-term investors have always tried to capture the long-term trends; it's why low-cost indexing has deliveredso strongly over time.

Now, however, those indexes are poised to return less, which Coons suggested could pull investors away "from buyingthe whole stack market and bond market and focusing on individual investments that are priced to give you better

returns."

Ibbotson had other ideas, namely to get a realistic handle on spending needs, and ta save more.

"We'e been talking about these lower returns for a few years now,x Ibbotson said, noting that the stock market'svolatility and lack of strong returns over a decade has scared off a lot of investors, vBut I don't know that mast peoplehave responded. They haven't changed their expectations, or increased their savings or tried to figure out if they will

really have enough if the market isn't as good over the next 25 years as it was for the last 75.

xQne way or another, however, I think mast people have to change their behavior, change their equation. That's theonly way this tume out over the coming decades the way people expect and hope for."

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http: //www.marjcetwatch.corn/Story/story/print?guid=l CDB?BD6-2534-11E2-B4EC-002... 11/20/2012