Vectren 2008 Annual Report Download - page 39

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Similarly, in March of 2005, USEPA promulgated the Clean Air Mercury Rule (CAMR). CAMR is an allowance
cap and trade program requiring further reductions in mercury emissions from coal-burning power plants. The
CAMR regulations were vacated by the US Court of Appeals for the DC Circuit in July 2008. It is quite possible
that the vacatur of the CAMR regulations will lead to increased support for the passage of a multi-pollutant bill in
Congress. It is also possible that the USEPA will promulgate a revised mercury regulation in 2009.
To comply with Indiana’s implementation plan of the Clean Air Act of 1990, the CAIR regulations, and to comply
with potential future regulations of mercury and further NOx and SO2 reductions, SIGECO has IURC authority to
invest in clean coal technology. Using this authorization, SIGECO has invested approximately $307 million in
pollution control equipment, including Selective Catalytic Reduction (SCR) systems and fabric filters. SCR
technology is the most effective method of reducing NOx emissions where high removal efficiencies are required
and fabric filters control particulate matter emissions. These investments were included in rate base for purposes of
determining new base rates that went into effect on August 15, 2007. Prior to being included in base rates, return
on investments made and recovery of related operating expenses were recovered through a rider mechanism.
Further, the IURC granted SIGECO authority to invest in an SO2 scrubber at its generating facility that is jointly
owned with ALCOA (the Company’s portion is 150 MW). The order allows SIGECO to recover an approximate 8
percent return on capital investments through a rider mechanism which is periodically updated for actual costs
incurred less post in-service depreciation expense. Through December 31, 2008, the Company has invested
approximately $97.6 million in this project. The scrubber was placed into service on January 1, 2009, and the
Company expects the total project investment to approximate $100 million once all post in-service investments are
completed. Recovery through a rider mechanism of associated operating expenses including depreciation expense
associated with the scrubber also began on January 1, 2009. With the SO2 scrubber fully operational, SIGECO is
positioned for compliance with the additional SO2 reductions required by Phase I CAIR commencing on January 1,
2010.
SIGECO’s coal fired generating fleet is 100 percent scrubbed for SO2 and 90 percent controlled for NOx.
SIGECO's investments in scrubber, SCR and fabric filter technology allows for compliance with existing
regulations and should position it to comply with future reasonable pollution control legislation, if and when,
reductions in mercury and further reductions in NOx and SO2 are promulgated by USEPA.
Climate Change
Vectren is committed to responsible environmental stewardship and conservation efforts as demonstrated by its
proactive approach to balancing environmental and customer needs. While scientific uncertainties exist and the
debate surrounding global climate change is ongoing, the growing understanding of the science of climate change
would suggest a strong potential for adverse economic and social consequences should world-wide carbon dioxide
(CO2) and other greenhouse gas emissions continue at present levels.
The need to reduce CO2 and other greenhouse gas emissions, yet provide affordable energy requires thoughtful
balance. For these reasons, Vectren supports a national climate change policy with the following elements:
 An inclusive scope that involves all sectors of the economy and sources of greenhouse gases, and
recognizes early actions and investments made to mitigate greenhouse gas emissions;
 Provisions for enhanced use of renewable energy sources as a supplement to base load coal generation
including effective energy conservation, demand side management and generation efficiency measures;
 A flexible market-based cap and trade approach with zero cost allowance allocations to coal-fired electric
generators. The approach should have a properly designed economic safety valve in order to reduce or
eliminate extreme price spikes and potential price volatility. A long lead time must be included to align
nearer-term technology capabilities and expanded generation efficiency and other enhanced renewable
strategies, ensuring that generation sources will rely less on natural gas to meet short term carbon reduction
requirements. This new regime should allow for adequate resource and generation planning and remove
existing impediments to efficiency enhancements posed by the current New Source Review provisions of
the Clean Air Act;