Vectren 2013 Annual Report Download - page 22

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NERC, the EPA, the IURC, the PUCO, the DOT, Department of Energy (DOE), and Department of Homeland Security
(DHS). These authorities regulate many aspects of its generation, transmission and distribution operations, including
construction and maintenance of facilities, operations, and safety. In addition, the IURC, PUCO, and FERC approve its utility-
related debt and equity issuances, regulate the rates that Vectren's utilities can charge customers, the rate of return that
Vectren's utilities are authorized to earn, and their ability to timely recover gas and fuel costs and investments in
infrastructure. Further, there are consumer advocates and other parties that may intervene in regulatory proceedings and affect
regulatory outcomes.
Trends Toward Stricter Standards
With the trend toward stricter standards, greater regulation, more extensive permit requirements and an increase in the number
and types of assets operated that are subject to regulation, the Company's investment in infrastructure, and the associated
operating costs have increased and are expected to increase in the future. As examples of the trend toward stricter regulation,
the EPA is currently considering revisions to regulations involving fly ash disposal, cooling tower intake facilities, waste water
discharges, and greenhouse gases and continues to implement increasingly more stringent air quality standards.
Pipeline Safety Considerations
Vectren monitors and maintains its natural gas distribution system to ensure that natural gas is delivered in a safe, efficient, and
reliable manner. Vectren's natural gas utilities are currently engaged in replacement programs in both Indiana and Ohio, the
primary purpose of which is preventive maintenance and continual renewal and improvement. The Pipeline Safety, Regulatory
Certainty and Job Creation Act of 2011 (Pipeline Safety Law) was signed into law on January 3, 2012 and Vectren continues to
study the impact of the Pipeline Safety Law and potential new regulations associated with its implementation. While certain of
the compliance costs remain uncertain, the Pipeline Safety Law is expected to result in further investment in pipeline
inspections, and where necessary, additional investments in pipeline infrastructure; and therefore, result in both increased levels
of operating expenses and capital expenditures associated with the Company's natural gas distribution businesses as
evidenced by recent regulatory filings in Indiana and Ohio by Vectren North, Vectren South, and Vectren Energy Delivery of
Ohio.
Environmental Considerations
Vectren's utility operations and properties are subject to extensive environmental regulation pursuant to a variety of federal,
state and municipal laws and regulations. These environmental regulations impose, among other things, restrictions, liabilities,
and obligations in connection with the storage, transportation, treatment, and disposal of hazardous substances and limit
airborne emissions from electric generating facilities, including particulate matter, sulfur dioxide (SO2), nitrogen oxide (NOx), and
mercury, among others. Environmental legislation/regulation also requires that facilities, sites, and other properties associated
with Vectren's operations be operated, maintained, abandoned, and reclaimed to the satisfaction of applicable regulatory
authorities. The Company's current costs to comply with these laws and regulations are significant to its results of operations
and financial condition.
Climate Change and Renewable Energy Considerations
While there have been a series of legislative proposals to address global climate change that would regulate carbon dioxide
(CO2) and other greenhouse gases and other proposals that would mandate an investment in renewable energy sources, none
have been finalized to date. The US Supreme Court has determined that the EPA has the authority to regulate greenhouse
gases as a pollutant under the Clean Air Act. Any future legislative or regulatory actions taken by the EPA or other agencies to
address global climate change or mandate renewable energy sources could substantially affect both the costs and operating
characteristics of the Company's fossil fuel generating plants and natural gas distribution businesses. Further, such legislation
or regulatory action would likely impact the Company's generation resource planning decisions. The Company has gathered
preliminary estimates of the costs to control greenhouse gas emissions. A preliminary investigation demonstrated costs to
comply would be significant, first with regard to operating expenses and later for capital expenditures as technology becomes
available to control greenhouse gas emissions. However, these compliance cost estimates are based on highly uncertain
assumptions, including allowance prices if a cap and trade approach were employed, and energy efficiency targets. At this time
and in the absence of final legislation or regulatory mandates, compliance costs and other effects associated with reductions in
greenhouse gas emissions or obtaining renewable energy sources remain uncertain.