Vectren 2013 Annual Report Download - page 15

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13
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 2013, in hours when purchases from the MISO were in
excess of generation sold to the MISO, the net purchases were 536 GWh. During 2013, in hours when sales to the MISO were
in excess of purchases from the MISO, the net sales were 514 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 resulted 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, 2013, approximately 131,000 customers in
Vectren’s Ohio service territory had selected their supplier. In addition, VEDO’s service territory continues to 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.
Increased competition, including those from cogeneration, solar, and other renewables opportunities for customers, create
competitive pressures. In this regard, the deployment and commercialization of disruptive technologies, such as renewable
energy sources and cogeneration facilities, have the potential to change the nature of the utility industry and reduce demand for
Vectren’s electric and gas products and services. If Vectren is not able to appropriately adapt to structural changes in the utility
industry as a result of the development of disruptive technologies, this may have an adverse effect on the Company’s financial
condition and results of operations.
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 three primary business areas: Infrastructure Services, Energy Services, and
Coal Mining. Prior to June 18, 2013, the Company was involved in nonutility activities in its Energy Marketing business area.