South Carolina Electric & Gas has been mailing its customers advertisements for home repair service contracts from a Virginia company called Dominion Products and Services, Inc. In exchange for the marketing service, SCE&G receives a cut of the retail price from each service plan sold to its customers.
SCE&G, a regulated public utility serving much of the Midlands and Lowcountry, signed a marketing agreement with Dominion that went into effect in April 2014, according to a utility spokesman. SCE&G has since mailed letters to its customers asking them to sign up for a water line replacement program. The letter is signed by the utility's vice president, Felicia Howard. It begins as follows:
Did you know that if the water line that runs from the street to your home fails, you could pay as much as $4,000 for repairs, labor, and materials? That's right! The water line that runs from the street to your home is your responsibility — and repairs can be expensive. Fortunately, SCE&G offers a service that gives you a choice in how you can weather this unwanted expense. It's our Water Line Replacement Program.
So what is SCE&G getting out of the deal? "We retain a small percentage of the retail price of each residential contract secured through the marketing efforts," says Eric Boomhower, a spokesman for SCE&G's parent company SCANA. "That fee varies based on the type of repair program the customer purchases."
Dominion's parent company, Dominion Resources, made major inroads in South Carolina last year. In December 2014, Dominion Resources agreed to pay SCE&G's parent company SCANA Corporation $493 million for the purchase of Carolina Gas Transmission Corp., which operates almost 1,500 miles of natural gas pipeline in South Carolina and Georgia.
Unlike the Charleston Water System, a local utility that inked a similar marketing agreement with service plan provider HomeServe USA in 2013, SCE&G is not willing to supply the City Paper a copy of the contract it signed with Dominion. "Our agreements are not a matter of public record, and often contain confidentiality provisions," Boomhower says.
Although SCE&G is a public utility regulated by the S.C. Public Service Commission, it is owned by a private company, Cayce-based SCANA Corp. While SCE&G must get approval from the Public Service Commission for any proposed gas and electric rate hikes, its decision to market service plans for an out-of-state company is not subject to the commission's scrutiny under state law.
Unlike the Charleston Water System's deal with HomeServe, Boomhower says SCE&G did not receive a lump up-front payment from Dominion. (CWS received a $120,000 setup fee from HomeServe and gets 12 percent of the proceeds of service plans sold in its area.)
Another important difference between the two marketing deals: Whereas CWS requires HomeServe to clearly indicate that its water line service program is being offered by a private company and not by the utility itself, SCE&G features its own logo prominently on marketing materials, and customers who opt in for the Water Line Replacement Program can have the $4.95 service plan charge added to their monthly SCE&G bill. SCE&G also dedicates a section of its website's homepage to advertising Dominion's full line of plans, which include repair coverage for natural gas piping ($2.95/month), sewer lines ($5.95/month), appliances ($12.95/month), and HVAC ($16.95/month).
One more difference: Whereas CWS officials have said they entered their marketing agreement because customers were calling about water line problems on their property, SCE&G does not provide residential water service anywhere in the state.
When asked why SCE&G has gotten into the business of repairing household appliances and sewer lines, Boomhower says the SCANA Corporation has actually had a toe in that water since the mid-1990s, when a subsidiary called Service Care Inc. started doing appliance and HVAC repair.
"You could argue the same thing: We're not in the appliance business, so why are we offering appliance repair programs? It's just an extension of our business, and the water line repair program is just the latest thing we've added," Boomhower says.
In April 2014, the same month SCE&G signed its marketing agreement with Dominion, SCE&G "purchased the existing book of customers that Service Care had here in South Carolina," Boomhower says.
Before signing a contract with SCE&G, Dominion had already been providing service contracts in North Carolina via SCANA subsidiary PSNC Energy since 2009.
"The question might be, What's the connection between utilities and these repair programs?" Boomhower says. "Well, certainly you have the value of the recognition that comes if you're PSNC Energy or SCE&G here in South Carolina. That's a name that you know, that's a name that you trust, versus most people if you asked them, 'Who's Service Care Inc.?' it's not going to have the same brand recognition."
Boomhower says that Dominion drafts the ad copy for mailers that go out to SCE&G customers, but SCE&G reviews the mailers before they go out. Dominion provides the service plans and uses local subcontractors to conduct repairs as needed.
While HomeServe USA has made headlines nationwide with its controversial marketing practices, which have earned the censure of four state attorneys general and regularly elicit consumer warnings from municipal governments and utilities, Dominion Products and Services Inc. has mostly managed to stay out of the news.
Dominion Resources is a publicly traded holding company based in Richmond, Va., that also owns the Virginia Electric & Power Co. and the natural gas distribution company Dominion Energy. In 2009, Warranty Week described Dominion Products and Services as offering in-house warranty services to Dominion Resources utility customers and taking in an estimated 3.7 percent of the premiums in the then-$1.5 billion U.S. home warranty industry. Together with HomeServe (then called Home Service USA Corp.) and American Water Resources Inc., Warranty Week said Dominion was part of "an emerging segment of the U.S. home warranty industry that collects at least $160 million from homeowners to protect their wires and pipes and the appliances linked to them."
Dominion has since started selling plans outside of its own utility service area via major utility providers including Cleveland Public Utilities. According to Dominion spokesman Jim Norvelle, the company provides service plans in 10 states.
"What we found out was where we had customers who were familiar with our subsidiary brand, they felt comfortable adding on additional services such as water line safety," Norvelle says. "And then we began offering those services under subcontracting relationships to other companies around the country."
Ann Roberson, a spokesperson for the S.C. Department of Insurance, says Dominion Products and Services registered with the state as a service contract provider on Sept. 17, 2009.
The services provided by companies like Dominion and HomeServe are sometimes colloquially called warranties. But legally speaking, those companies are actually considered service contract providers in many states. Under South Carolina law, a warranty can only be provided by a manufacturer, importer, or seller of a property or service. Service contract providers are subject to far less state oversight than insurance companies, which have to report data including loss ratios to the Department of Insurance.
"Insurance companies have to file an annual statement that shows a list of officers, what their reserves are, all that kind of thing," Roberson says. "That is not the case with these warranty whatever-you-want-to-call-them."