Vectren 2010 Annual Report Download - page 100

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16. Environmental Matters
Clean Air Act
The Clean Air Interstate Rule (CAIR) is 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. On July 11, 2008, the US Court of Appeals for the District of Columbia vacated the federal CAIR
regulations. Various parties filed motions for reconsideration, and on December 23, 2008, the Court reinstated the CAIR
regulations and remanded the regulations back to the EPA for promulgation of revisions in accordance with the Court’s July 11,
2008 order. Thus, the original version of CAIR promulgated in March of 2005 remains effective while EPA revises it per the
Court’s guidance. SIGECO is in compliance with the current CAIR Phase I annual NOx reduction requirements in effect on
January 1, 2009, and the Phase I annual SO2 reduction requirements in effect on January 1, 2010. Utilization of the Company’s
inventory of NOx and SO2 allowances may also be impacted if CAIR is further revised. Most of these allowances were granted
to the Company at zero cost; therefore, any reduction in carrying value that could result from future changes in regulations
would be immaterial.
Similarly, in March of 2005, EPA 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. In response to the court decision, EPA has announced that
it intends to publish proposed Maximum Achievable Control Technology standards for mercury in 2011. It is uncertain what
emission limit the EPA is considering, and whether they will address hazardous pollutants in addition to mercury.
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 $411 million in pollution control equipment, including
Selective Catalytic Reduction (SCR) systems, fabric filters, and an SO2 scrubber at its generating facility that is jointly owned
with ALCOA (the Company’s portion is 150 MW). SCR technology is the most effective method of reducing NOx emissions
where high removal efficiencies are required and fabric filters control particulate matter emissions. Of the $411 million, $312
million was included in rate base for purposes of determining SIGECO’s new electric base rates that went into effect on August
15, 2007, and $99 million is currently recovered through a rider mechanism which is periodically updated for actual costs
incurred including depreciation expense. As part of its recent rate proceeding, the Company has requested to also include these
more recent expenditures in rate base as well.
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 mercury pollution control legislation, if and when, reductions are promulgated by EPA. On July
6, 2010, the EPA issued its proposed revisions to CAIR, renamed the Clean Air Transport Rule, for public comment. The
Transport Rule proposes a 71 percent reduction of SO2 over 2005 national levels and a 52 percent reduction of NOx over 2005
national levels and would further impact the utilization of currently granted SO2 and NOx allowances. The Company is currently
reviewing the sufficiency of its existing pollution control equipment in relation to the requirements proposed in the Clean Air
Transport Rule and currently does not expect significant capital expenditures will be required to comply if the Transport Rule is
adopted in its current form.
Climate Change
Numerous competing legislative proposals have also been introduced in recent years that involve carbon, energy efficiency, and
renewable energy. Comprehensive energy legislation at the federal level continues to be debated, but there has been little
progress to date. The progression of regional initiatives throughout the United States has slowed. While no climate change
legislation is pending in Indiana, the state is an observer to the Midwestern Regional Greenhouse Gas Reduction Accord and
the state’s legislature debated, but did not pass, a renewable energy portfolio standard in 2009.
In advance of a federal or state renewable portfolio standard, SIGECO received regulatory approval to purchase a 3 MW landfill
gas generation facility from a related entity. The facility was purchased in 2009 and is directly interconnected to the Company’s
distribution system. In 2009, the Company also executed a long term purchase power commitment for 50 MW of wind energy.
These transactions supplement a 30 MW wind energy purchase power agreement executed in 2008.