Vectren 2008 Annual Report Download - page 41

39
control greenhouse gas emissions. However, these compliance cost estimates are very sensitive to highly uncertain
assumptions, including allowance prices. Costs to purchase allowances that cap greenhouse gas emissions should
be considered a cost of providing electricity, and as such, the Company believes recovery should be timely reflected
in rates charged to customers. Approximately 22 percent of electric volumes sold in 2008 were delivered to
municipal and other wholesale customers. As such, the Company has some flexibility to modify the level of these
transactions to reduce overall emissions and reduce costs associated with complying with new environmental
regulations.
Environmental Remediation Efforts
In the past, Indiana Gas, SIGECO, and others operated facilities for the manufacture of gas. Given the availability
of natural gas transported by pipelines, these facilities have not been operated for many years. Under currently
applicable environmental laws and regulations, those that owned or operated these facilities may now be required to
take remedial action if certain contaminants are found above the regulatory thresholds at these sites.
Indiana Gas identified the existence, location, and certain general characteristics of 26 gas manufacturing and
storage sites for which it may have some remedial responsibility. Indiana Gas completed a remedial
investigation/feasibility study (RI/FS) at one of the sites under an agreed order between Indiana Gas and the IDEM,
and a Record of Decision was issued by the IDEM in January 2000. Indiana Gas submitted the remainder of the
sites to the IDEM's Voluntary Remediation Program (VRP) and is currently conducting some level of remedial
activities, including groundwater monitoring at certain sites, where deemed appropriate, and will continue remedial
activities at the sites as appropriate and necessary.
Indiana Gas accrued the estimated costs for further investigation, remediation, groundwater monitoring, and related
costs for the sites. While the total costs that may be incurred in connection with addressing these sites cannot be
determined at this time, Indiana Gas has recorded cumulative costs that it reasonably expects to incur totaling
approximately $21.6 million. The estimated accrued costs are limited to Indiana Gas’ share of the remediation
efforts. Indiana Gas has arrangements in place for 19 of the 26 sites with other potentially responsible parties
(PRP), which serve to limit Indiana Gas’ share of response costs at these 19 sites to between 20 percent and 50
percent.
With respect to insurance coverage, Indiana Gas has received and recorded settlements from all known insurance
carriers under insurance policies in effect when these plants were in operation in an aggregate amount
approximating $20.5 million.
In October 2002, SIGECO received a formal information request letter from the IDEM regarding five manufactured
gas plants that it owned and/or operated and were not enrolled in the IDEM’s VRP. In October 2003, SIGECO
filed applications to enter four of the manufactured gas plant sites in IDEM's VRP. The remaining site is currently
being addressed in the VRP by another Indiana utility. SIGECO added those four sites into the renewal of the
global Voluntary Remediation Agreement that Indiana Gas has in place with IDEM for its manufactured gas plant
sites. That renewal was approved by the IDEM in February 2004. SIGECO is also named in a lawsuit filed in
federal district court in May 2007, involving another site subject to potential environmental remediation efforts.
SIGECO has filed a declaratory judgment action against its insurance carriers seeking a judgment finding its
carriers liable under the policies for coverage of further investigation and any necessary remediation costs that
SIGECO may accrue under the VRP program and/or related to the site subject to the May 2007 lawsuit. While the
total costs that may be incurred in connection with addressing these sites cannot be determined at this time,
SIGECO has recorded cumulative costs that it reasonably expects to incur totaling approximately $8.7 million.
With respect to insurance coverage, SIGECO has received and recorded settlements from insurance carriers under
insurance policies in effect when these sites were in operation in an aggregate amount of $8.0 million.
Environmental remediation costs related to Indiana Gas’ and SIGECO’s manufactured gas plants and other sites
have had a minor impact on results of operations or financial condition since cumulative costs recorded to date
approximate PRP and insurance settlement recoveries. Such cumulative costs are estimated by management using
assumptions based on actual costs incurred, the timing of expected future payments, and inflation factors, among
others. While the Company’s utilities have recorded all costs which they presently expect to incur in connection