Vectren 2013 Annual Report Download - page 14

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12
Generating Capability
Installed generating capacity as of December 31, 2013, was rated at 1,298 MW. Coal-fired generating units provide 1,000 MW
of capacity, natural gas or oil-fired turbines used for peaking or emergency conditions provide 295 MW, and in 2009 SIGECO
purchased a landfill gas electric generation project which provides 3 MW. Electric generation for 2013 was fueled by coal (97
percent), natural gas (3 percent), and landfill gas (less than 1 percent). Oil was used only for testing of gas/oil-fired peaking
units. The Company generated approximately 5,279 GWh in 2013. Further information about the Company’s owned generation
is included in “Item 2 Properties.”
There are substantial coal reserves in the southern Indiana area, and coal for coal-fired generating stations has been supplied
from operators of nearby coal mines, including coal mines in Indiana owned by Vectren Fuels, Inc. (Vectren Fuels), a wholly
owned subsidiary of the Company. Approximately 1.9 million tons were purchased for generating electricity during 2013, of
which approximately 95 percent was supplied by Vectren Fuels from its mines. This compares to 2.1 million tons and 2.3 million
tons purchased in 2012 and 2011, respectively. The utility’s coal inventory was approximately 300 thousand tons and 1 million
tons at December 31, 2013 and 2012, respectively.
Coal Purchases
The average cost of coal per ton purchased and delivered for the last five years was $58.38 in 2013, $68.65 in 2012, $75.04 in
2011, $70.47 in 2010, and $64.28 in 2009. Effective January 1, 2009, SIGECO began purchasing coal from Vectren Fuels
under new coal purchase agreements. The term of these coal purchase agreements expire at various dates between 2014
through 2016 with prices specified originally ranging from two to four years. The prices in these contracts were at or below
market prices for Illinois Basin coal at the time of execution and were subject to a bidding process with third parties. The IURC
has found that costs incurred under these contracts are reasonable. For contracts with price reopeners, amendments were
finalized in 2011 for coal deliveries that began in 2012 at lower prices.
The Company received an order from the IURC on January 25, 2012 to allow for the lower prices that began late in 2012 and
beyond to be reflected in customer bills beginning in early 2012. Because of the order the cost of coal expensed in 2012 was
lower than amounts paid under existing contracts and included in the carrying amount of inventory at December 31, 2011. The
IURC authorized the deferral of the difference between costs paid under these contracts and that charged to customers. See
"Rate and Regulatory Matters" in Item 7 regarding coal procurement procedures and electric fuel cost reductions.
Firm Purchase Supply
The Company, through SIGECO, has a 1.5 percent interest in the Ohio Valley Electric Corporation (OVEC). OVEC is owned by
several electric utility companies, including SIGECO, and supplies power requirements to the United States Department of
Energy’s (DOE) uranium enrichment plant near Portsmouth, Ohio. The participating companies can receive from OVEC, and
are obligated to pay for, any available power in excess of the DOE contract demand. At the present time, the DOE contract
demand is essentially zero. The Company’s 1.5 percent interest in OVEC makes available approximately 30 MW of
capacity. The Company purchased approximately 169 GWh from OVEC in 2013.
The Company executed a capacity contract with Benton County Wind Farm, LLC in April 2008 to purchase as much as 30 MW
from a wind farm located in Benton County, Indiana, with the approval of the IURC. The contract expires in 2029. In 2013, the
Company purchased approximately 61 GWh under this contract.
In December 2009, the Company executed a 20 year power purchase agreement with Fowler Ridge II Wind Farm, LLC to
purchase as much as 50 MW of energy from a wind farm located in Benton and Tippecanoe Counties in Indiana, with the
approval of the IURC. The Company purchased 134 GWh under this contract in 2013.
MISO Related Activity
The Company is a member of the MISO, a FERC approved regional transmission organization. The MISO serves the electric
transmission needs of much of the Midcontinent region and maintains operational control over the Company’s electric
transmission facilities as well as that of other utilities in the region. The Company is an active participant in the MISO energy
markets, where it bids its generation into the Day Ahead and Real Time markets and procures power for its retail customers at
Locational Marginal Pricing (LMP) as determined by the MISO market. MISO-related purchase and sale transactions are