Vectren 2012 Annual Report Download - page 19

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17
(LMP) as determined by the MISO market. MISO-related purchase and sale transactions are recorded using settlement
information provided by MISO. These purchase and sale transactions are accounted for on a net hourly position. Net purchases
in a single hour are recorded as purchased power in Cost of fuel & purchased power and net sales in a single hour are recorded
in Electric utility revenues. During 2012, in hours when purchases from the MISO were in excess of generation sold to the
MISO, the net purchases were 632 GWh. During 2012, in hours when sales to the MISO were in excess of purchases from the
MISO, the net sales were 322 GWh.
Capacity Purchase
In May 2008, the Company executed a MISO capacity purchase from Sempra Energy Trading, LLC to purchase 100 MW of
name plate capacity from its generating facility in Dearborn, Michigan. The term of the contract began January 1, 2010 and
expired on December 31, 2012. The Company has not replaced this contract.
Interconnections
The Company has interconnections with Louisville Gas and Electric Company, Duke Energy Shared Services, Inc., Indianapolis
Power & Light Company, Hoosier Energy Rural Electric Cooperative, Inc., Big Rivers Electric Corporation, and the City of
Jasper, Indiana, providing the ability to simultaneously interchange approximately 671 MW during peak load periods. This
interchange capability varies from season to season and has been impacted in recent years as a result of ongoing initiatives to
improve the transmission grid throughout the Midwest. As an example, the 345 kV Vectren transmission project that was placed
into service in December 2012 will result in the ability to simultaneously interchange an additional 100 MW. The Company, as
required as a member of the MISO, has turned over operational control of the interchange facilities and its own transmission
assets to MISO.
Competition
The utility industry has undergone structural changes for several years, resulting in increasing competitive pressures faced by
electric and gas utility companies. Currently, several states have passed legislation allowing electricity customers to choose
their electricity supplier in a competitive electricity market and several other states have considered such legislation. At the
present time, Indiana has not adopted such legislation. Ohio regulation allows gas customers to choose their commodity
supplier. The Company implemented a choice program for its gas customers in Ohio in January 2003. Substantially all of
VEDO's customers receive gas from third-party suppliers and at December 31, 2012, approximately 138,000 customers in
Vectren’s Ohio service territory select their supplier. In addition, VEDO’s service territory continues transition toward exiting the
merchant function. Margin earned for transporting natural gas to those customers, who have purchased natural gas from
another supplier, is generally the same as that earned by selling gas under Ohio tariffs. Indiana has not adopted any regulation
requiring gas choice; however, the Company operates under approved tariffs permitting certain industrial and commercial large
volume customers to choose their commodity supplier.
Regulatory and Environmental Matters
See “Item 7 Management’s Discussion and Analysis of Results of Operations and Financial Condition” regarding the Company’s
regulatory environment and environmental matters.
Nonutility Group
The Company is involved in nonutility activities in four primary business areas: Infrastructure Services, Energy Services, Coal
Mining, and Energy Marketing.
Infrastructure Services
Infrastructure Services provides underground pipeline construction and repair to utility infrastructure through its wholly owned
subsidiaries Miller Pipeline, LLC (Miller) and Minnesota Limited, Inc. (Minnesota Limited). The Company, through its wholly
owned subsidiary Vectren Infrastructure Services Company, Inc., purchased Minnesota Limited on March 31, 2011 (see Note 5
in the Company’s Consolidated Financial Statements included under “Item 8 Financial Statements and Supplementary
Data”). Infrastructure Services provides services to many utilities, including the Company’s utilities, as well as other