Vectren 2008 Annual Report Download - page 18

Download and view the complete annual report

Please find page 18 of the 2008 Vectren annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 123

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123

16
decreased demand, the Company’s 1.5 percent interest in OVEC makes available approximately 30 MW of
capacity for use in other operations. The Company purchased approximately 236 GWh from OVEC in 2008.
The Company has a capacity contract with Duke Energy Marketing America, LLC. to purchase as much as 100
MW at any time from a power plant located in Vermillion County, Indiana. The contract ends on December 31,
2009. The Company purchased insignificant amounts under this contract in 2008.
The Company executed a capacity contract with Benton County Wind Farm, LLC on April 15, 2008 to purchase as
much as 30 MW from a wind farm located in Benton County, Indiana. The contract expires in 2029. At the time of
peak in 2008 approximately 5 MW was available. The Company purchased approximately 59 GWh under this
contract in 2008.
Other Power Purchases
The Company also purchases power as needed principally from the MISO to supplement its generation and firm
purchase supply in periods of peak demand. Volumes purchased principally from the MISO in 2008 totaled 80
GWh.
Midwest Independent System Operator (MISO) Capacity Purchase
In May 2008, the Company executed a MISO capacity purchase from Sempra Energy Trading, LLC to purchase
100MW of name plate capacity from its generating facility in Dearborn, Michigan. The term of the contract begins
January 1, 2010 and continues through December 31, 2012.
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 historic ability to simultaneously interchange
approximately 500 MW. However, the ability of the Company to effectively utilize the electric transmission grid in
order to achieve its desired import/export capability has been, and may continue to be, impacted as a result of the
ongoing changes in the operation of the Midwestern transmission grid. The Company, as a member of the MISO,
has turned over operational control of the interchange facilities and its own transmission assets, like many other
Midwestern electric utilities, to MISO. See “Item 7 Management’s Discussion and Analysis of Results of
Operations and Financial Condition” regarding the Company’s participation in MISO.
Competition
The utility industry has undergone structural change 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. At December 31, 2008, over 80,000 customers in Vectren’s Ohio service
territory purchase natural gas from a supplier other than the utility. Margin earned for transporting natural gas to
those customers, who have purchased natural gas from another supplier, are generally the same as those 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.