Vectren 2012 Annual Report Download - page 49

47
• Implementing conservation and demand side management initiatives in the electric service territory;
• Evaluating potential carbon requirements with regard to new generation, other fuel supply sources, and future
environmental compliance plans;
• Reducing the Company’s carbon footprint by measures such as utilizing hybrid vehicles and optimizing generation
efficiencies by utilizing dense pack technology; and
• Developing renewable energy and energy efficiency performance contracting projects through its wholly owned
subsidiary, Energy Systems Group.
Legislative Actions & Other Climate Change Initiatives
In April 2007, the US Supreme Court determined that greenhouse gases meet the definition of "air pollutant" under the Clean Air
Act and ordered the EPA to determine whether greenhouse gas emissions from motor vehicles cause or contribute to air
pollution that may reasonably be anticipated to endanger public health or welfare. In April 2009, the EPA published its proposed
endangerment finding for public comment. The proposed endangerment finding concludes that carbon emissions from mobile
sources pose an endangerment to public health and the environment. The endangerment finding was finalized in December
2009, and is the first step toward EPA regulating carbon emissions through the existing Clean Air Act in the absence of specific
carbon legislation from Congress.
The EPA has promulgated two greenhouse gas regulations that apply to the Company’s generating facilities. In 2009, the EPA
finalized a mandatory greenhouse gas emissions registry which requires the reporting of emissions. The EPA has also finalized
a revision to the Prevention of Significant Deterioration (PSD) and Title V permitting rules which would require facilities that emit
75,000 tons or more of greenhouse gases a year to obtain a PSD permit for new construction or a significant modification of an
existing facility. EPA's PSD and Title V permitting rules for GHG's were recently upheld by the US Court of Appeals for the
District of Columbia. In 2012, the EPA proposed New Source Performance Standards for greenhouse gases for new electric
generating facilities under Clean Air Act Section 111(b). While standards for new sources are not yet final, EPA has signaled its
intent to propose New Source Performance Standards for greenhouse gases for existing electric generating units under Section
111(d), which would be applicable to the Company's existing units. The Company anticipates that these initial standards will
focus on power plant efficiency and other coal fleet carbon intensity reduction measures. The Company believes that such
additional costs, if necessary, should be recoverable under Indiana Senate Bill 251 referenced above.
Numerous competing federal 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 also slowed.
Impact of Legislative Actions & Other Initiatives is Unknown
If regulations are enacted by the EPA or other agencies or if legislation requiring reductions in CO2 and other greenhouse gases
or legislation mandating a renewable energy portfolio standard is adopted, such regulation could substantially affect both the
costs and operating characteristics of the Company’s fossil fuel generating plants, nonutility coal mining operations, and natural
gas distribution businesses. At this time and in the absence of final legislation or rulemaking, compliance costs and other effects
associated with reductions in greenhouse gas emissions or obtaining renewable energy sources remain uncertain. 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. Costs to purchase allowances that cap greenhouse gas emissions or expenditures made to control emissions should
be considered a cost of providing electricity, and as such, the Company believes such costs and expenditures should be
recoverable from customers through Senate Bill 251.
Senate Bill 251 also established a voluntary clean energy portfolio standard that provides incentives to electricity suppliers
participating in the program. The goal of the program is that by 2025, at least 10 percent of the total electricity obtained by the
supplier to meet the energy needs of Indiana retail customers will be provided by clean energy sources, as defined. The
financial incentives include an enhanced return on equity and tracking mechanisms to recover program costs. In advance of a
federal portfolio standard and Senate Bill 251, 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 connected to the Company's distribution system.