Vectren 2008 Annual Report Download - page 95

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93
14. Commitments & Contingencies
Commitments
Future minimum lease payments required under operating leases that have initial or remaining noncancelable lease
terms in excess of one year during the five years following 2008 and thereafter (in millions) are $6.6 in 2009, $4.5
in 2010, $2.3 in 2011, $1.5 in 2012, $1.2 in 2013, and $0.5 thereafter. Total lease expense (in millions) was $8.8 in
2008, $8.7 in 2007, and $8.5 in 2006.
Firm nonutility purchase commitments for commodities by consolidated companies total (in millions) $55.3 in
2009, $5.2 in 2010-2013. Firm purchase commitments for utility and nonutility plant total (in millions) $45.1 in
2009, and zero in 2010-2013.
The Company’s regulated utilities have both firm and non-firm commitments to purchase natural gas and electricity
as well as certain transportation and storage rights. Costs arising from these commitments, while significant, are
pass-through costs, generally collected dollar-for-dollar from retail customers through regulator-approved cost
recovery mechanisms.
Other Guarantees
Vectren issues guarantees to third parties on behalf of its unconsolidated affiliates. Such guarantees allow those
affiliates to execute transactions on more favorable terms than the affiliate could obtain without such a guarantee.
Guarantees may include posted letters of credit, leasing guarantees, and performance guarantees. As of December
31, 2008, guarantees issued and outstanding on behalf of unconsolidated affiliates approximated $3 million. The
Company has accrued no liabilities for these guarantees as they relate to guarantees executed prior to the adoption
of FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others.”
Legal Proceedings
The Company is party to various legal proceedings arising in the normal course of business. In the opinion of
management, there are no legal proceedings pending against the Company that are likely to have a material adverse
effect on its financial position, results of operations or cash flows.
15. Environmental Matters
Clean Air Act
In March of 2005, the USEPA finalized the Clean Air Interstate Rule (CAIR). CAIR is an allowance cap and trade
program requiring further reductions from coal-burning power plants in NOx emissions beginning January 1, 2009
and SO2 emissions beginning January 1, 2010, with a second phase of reductions in 2015. On July 11, 2008, the
US Court of Appeals for the District of Columbia vacated the federal CAIR regulations. Various parties filed
motions for reconsideration, and on December 23, 2008, the Court reinstated the CAIR regulations and remanded
the regulations back to the USEPA for promulgation of revisions in accordance with the Court’s July 11, 2008
Order. Thus, the original version of CAIR promulgated in March of 2005 remains effective while USEPA revises
it per the Court’s guidance. It is possible that a revised CAIR will require further reductions in NOx and SO2 from
SIGECO’s generating units. SIGECO is in compliance with the current CAIR Phase I annual NOx reduction
requirements in effect on January 1, 2009. Utilization of the Company’s inventory of NOx and SO2 allowances
may also be impacted if CAIR is further revised; however, most of the these allowances were granted to the
Company at zero cost, so a reduction in carrying value is not expected.
Similarly, in March of 2005, USEPA promulgated the Clean Air Mercury Rule (CAMR). CAMR is an allowance
cap and trade program requiring further reductions in mercury emissions from coal-burning power plants. The
CAMR regulations were vacated by the US Court of Appeals for the DC Circuit in July 2008. It is quite possible
that the vacatur of the CAMR regulations will lead to increased support for the passage of a multi-pollutant bill in
Congress. It is also possible that the USEPA will promulgate a revised mercury regulation in 2009.
To comply with Indiana’s implementation plan of the Clean Air Act of 1990, the CAIR regulations, and to comply
with potential future regulations of mercury and further NOx and SO2 reductions, SIGECO has IURC authority to
invest in clean coal technology. Using this authorization, SIGECO has invested approximately $307 million in