Vectren 2013 Annual Report Download - page 110

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108
Vectren North Pipeline Safety Investigation
On April 11, 2012, the IURC's pipeline safety division filed a complaint against Vectren North alleging several violations of safety
regulations pertaining to damage that occurred at a residence in Vectren North's service territory during a pipeline replacement
project. The Company negotiated a settlement with the IURC's pipeline safety division, agreeing to a fine and several
modifications to the Company's operating policies. The amount of the fine was not material to the Company's financial results.
The IURC approved the settlement but modified certain terms of the settlement and added a requirement that Company
employees conduct inspections of pipeline excavations. The Company sought and was granted a request for rehearing on the
sole issue related to the requirement to use Company employees to inspect excavations. A settlement in the case was reached
between the IURC's pipeline safety division and Vectren North that allowed Vectren North to continue to use its risk based
approach to inspecting excavations and to allow the Company to continue using a mix of highly trained and qualified contractors
and employees to perform inspections. On January 15, 2014, the IURC issued a Final Order in the case approving the
settlement agreement, without modification.
Vectren North & Vectren South Gas Decoupling Extension Filing
On August 18, 2011, the IURC issued an order granting the extension of the current decoupling mechanism in place at both gas
companies and recovery of new conservation program costs through December 2015.
FERC Return on Equity Complaint
On November 12, 2013, certain parties representing a group of industrial customers filed a joint complaint with the FERC under
Section 206 of the Federal Power Act against MISO and various MISO transmission owners, including SIGECO. The joint
parties seek to reduce the 12.38 percent return on equity used in the MISO transmission owners’ rates, including SIGECO’s
formula transmission rates, to 9.15 percent, and to set a capital structure in which the equity component does not exceed 50
percent. In the event a refund is required upon resolution of the complaint, the parties are seeking a refund calculated as of the
filing date of the complaint. The MISO transmission owners filed their response to the complaint on January 6, 2014, opposing
any change to the return. In addition to the group response, the Company filed a supplemental response, stating that if FERC
allows the complaint to go forward, the complaint should not be applied to the Company’s recently completed Gibson-Brown-
Reid 345 Kv transmission line investment.
FERC has no deadline for action. This joint complaint is similar to a complaint against the New England Transmission Owners
(NETO) filed in September 2011, which requested that the 11.14 percent incentive return granted on qualifying investments in
NETO be lowered. In August 2013, a FERC administrative law judge recommended in that proceeding that the return be
lowered to 9.7 percent, retroactive to the date of the complaint filing. The FERC has yet to rule on that case.
The Company is unable to predict the outcome of the proceeding. A 100 basis point change in the incentive rate of return would
equate to approximately $0.8 million of net income on an annual basis.
19. Environmental Matters
Indiana Senate Bill 251 is also applicable to federal environmental mandates impacting Vectren South's electric operations. The
Company continues to evaluate the impact Senate Bill 251 may have on its operations, including applicability of the stricter
regulations the EPA is currently considering involving air quality, fly ash disposal, cooling tower intake facilities, waste water
discharges, and greenhouse gases. These issues are further discussed below.
Air Quality
Clean Air Interstate Rule / Cross-State Air Pollution Rule
In July 2011, the EPA finalized the Cross-State Air Pollution Rule (CSAPR). CSAPR was the EPA’s response to the US Court of
Appeals for the District of Columbia’s (the Court) remand of the Clean Air Interstate Rule (CAIR). CAIR was originally
established in 2005 as an allowance cap and trade program that required reductions from coal-burning power plants for NOx
emissions beginning January 1, 2009 and SO2 emissions beginning January 1, 2010, with a second phase of reductions in
2015. In an effort to address the Court’s finding that CAIR did not adequately ensure attainment of pollutants in certain
downwind states due to unlimited trading of SO2 and NOx allowances, CSAPR reduced the ability of facilities to meet emission
reduction targets through allowance trading. Like CAIR, CSAPR set individual state caps for SO2 and NOx emissions.