Vectren 2013 Annual Report Download - page 112

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control equipment necessitated by the comprehensive air regulations. The EPA released proposed rules on April 19, 2013 and
the Company is reviewing the proposal. At this time, it is not possible to estimate what potential costs may be required to meet
these new water discharge limits, however costs for compliance with these regulations should qualify as federally mandated
regulatory requirements and be recoverable under Senate Bill 251 referenced above.
Conclusions Regarding Environmental Regulations
To comply with Indiana’s implementation plan of the Clean Air Act, and other federal air quality standards, the Company
obtained authority from the IURC to invest in clean coal technology. Using this authorization, the Company invested
approximately $411 million starting in 2001 with the last equipment being placed into service on January 1, 2010. The pollution
control equipment included SCR systems, fabric filters, and an SO2 scrubber at its generating facility that is jointly owned with
AGC (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. The unamortized portion of the $411
million clean coal technology investment was included in rate base for purposes of determining SIGECO’s new electric base
rates approved in the latest base rate order obtained April 27, 2011. SIGECO’s coal-fired generating fleet is 100 percent
scrubbed for SO2 and 90 percent controlled for NOx.
Utilization of the Company’s NOx and SO2 allowances can be impacted as regulations are revised and implemented. 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.
The Company continues to review the sufficiency of its existing pollution control equipment in relation to the requirements
described in the MATS Rule, the recent renewal of water discharge permits, and the NOV discussed above. Some operational
modifications to the control equipment are likely. The Company is continuing to evaluate potential technologies to address
compliance and what the additional costs may be associated with these efforts. Currently, it is expected that the capital costs
could be between $70 million and $90 million. Compliance is required by government regulation, and the Company believes
that such additional costs, if incurred, should be recoverable under Senate Bill 251 referenced above. On January 17, 2014, the
Company filed its request with the IURC seeking approval to upgrade its existing emissions control equipment to comply with
the MATS Rule, take steps to address EPA's allegations in the NOV and comply with new mercury limits to the waste water
discharge permits at the Culley and Brown generating stations. In that filing, the Company has proposed to defer recovery of
the costs until 2020 in order to mitigate the impact on customer rates in the near term.
Coal Ash Waste Disposal & Ash Ponds
In June 2010, the EPA issued proposed regulations affecting the management and disposal of coal combustion products, such
as ash generated by the Company’s coal-fired power plants. The proposed rules more stringently regulate these byproducts
and would likely increase the cost of operating or expanding existing ash ponds and the development of new ash ponds. The
alternatives include regulating coal combustion by-products that are not being beneficially reused as hazardous waste. The EPA
did not offer a preferred alternative, but took public comment on multiple alternative regulations. Rules have not been finalized
given oversight hearings, congressional interest, and other factors. Recently EPA entered into a consent decree in which it
agreed to finalize by December 2014 its determination whether to regulate ash as hazardous waste, or the less stringent solid
waste designation.
At this time, the majority of the Company’s ash is being beneficially reused. However, the alternatives proposed would require
modification to, or closure of, existing ash ponds. The Company estimates capital expenditures to comply could be as much as
$30 million, and such expenditures could exceed $100 million if the most stringent of the alternatives is selected. Annual
compliance costs could increase only slightly or be impacted by as much as $5 million. Costs for compliance with these
regulations should qualify as federally mandated regulatory requirements and be recoverable under Senate Bill 251 referenced
above.
Climate Change
In April 2007, the US Supreme Court determined that greenhouse gases (GHG's) meet the definition of "air pollutant" under the
Clean Air Act and ordered the EPA to determine whether GHG 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