Vectren 2012 Annual Report Download - page 111

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be considered a cost of providing electricity, and as such, the Company believes such costs and expenditures should be
recoverable from customers through Senate Bill 251.
Senate Bill 251 also established a voluntary clean energy portfolio standard that provides incentives to electricity suppliers
participating in the program. The goal of the program is that by 2025, at least 10 percent of the total electricity obtained by the
supplier to meet the energy needs of Indiana retail customers will be provided by clean energy sources, as defined. The
financial incentives include an enhanced return on equity and tracking mechanisms to recover program costs. In advance of a
federal portfolio standard and Senate Bill 251, SIGECO received regulatory approval to purchase a 3 MW landfill gas generation
facility from a related entity. The facility was purchased in 2009 and is directly connected to the Company's distribution system.
In 2009, the Company also executed a long term purchase power commitment for 50 MW of wind energy. These transactions
supplement a 30 MW wind energy purchase power agreement executed in 2008. Before the impacts of efficiency measures
which are defined as clean energy in the legislation, the Company currently has approximately 5 percent of its electricity being
provided by clean energy sources due to the long-term wind contracts and landfill gas investment. The Company continues to
evaluate whether to participate in this voluntary program.
Manufactured Gas Plants
In the past, the Company operated facilities to manufacture natural gas. Given the availability of natural gas transported by
pipelines, these facilities have not been operated for many years. Under current 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.
In the Indiana Gas service territory, the existence, location, and certain general characteristics of 26 gas manufacturing and
storage sites have been identified for which the Company may have some remedial responsibility. A remedial investigation/
feasibility study (RI/FS) was completed 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. The remaining sites have been submitted to the IDEM's Voluntary
Remediation Program (VRP). The Company has identified its involvement in five manufactured gas plant sites in SIGECO’s
service territory, all of which are currently enrolled in the IDEM’s VRP. The Company is currently conducting some level of
remedial activities, including groundwater monitoring at certain sites.
The Company has 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, the Company has recorded cumulative costs that it has incurred or reasonably expects to incur totaling approximately
$41.7 million ($23.2 million at Indiana Gas and $18.5 million at SIGECO). The estimated accrued costs are limited to the
Company’s share of the remediation efforts and are therefore net of exposures of other potentially responsible parties (PRP).
With respect to insurance coverage, Indiana Gas has received approximately $20.8 million from all known insurance carriers
under insurance policies in effect when these plants were in operation. Likewise, SIGECO has settlement agreements with all
known insurance carriers and has received to date approximately $14 million of the expected $15 million in insurance
recoveries.
The costs the Company expects to incur 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 with activities at these sites, it is possible that future events may require
remedial activities which are not presently foreseen and those costs may not be subject to PRP or insurance recovery. As of
December 31, 2012 and 2011, approximately $4.6 million and $6.5 million, respectively, of accrued, but not yet spent, costs are
included in Other Liabilities related to both the Indiana Gas and SIGECO sites.