Vectren 2013 Annual Report Download - page 23

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Evolving Cybersecurity Standards and Considerations
The frequency, size and variety of cybersecurity threats against critical infrastructure companies continues to grow, as do the
evolving frameworks, standards and regulations intended to keep pace with and address these threats. In 2013, there was a
marked increase in interest from both State and Federal regulatory agencies related to cybersecurity in general, and specifically
in critical infrastructure sectors, including electric and natural gas. Vectren has a dedicated cybersecurity team and maintains
vigilance with regard to the assessment of cybersecurity risks, the measures employed to protect information technology assets,
critical infrastructure, the Company and its customers from these threats. Cybersecurity threats, however, constantly evolve in
attempts to identify and capitalize on any weakness or unprotected areas. If these measures were to fail or if a breach were to
occur, it could result in impairment or loss of critical functions, operating reliability, customer or other confidential information.
The ultimate effects of which are difficult to quantify with any certainty.
Increasing regulation and infrastructure replacement programs could affect Vectren's utility rates charged to
customers, its costs, and its profitability.
Any additional expenses or capital incurred by Vectren's utilities, as it relates to complying with increasing regulation and other
infrastructure replacement activities are expected to be borne by the customers in its service territories through increased
rates. Increased rates have an impact on the economic health of the communities served. New regulations could also
negatively impact industries in the Company's service territory, including industries in which the Company operates.
Vectren's utilities' ability to obtain rate increases and to maintain current authorized rates of return depends in part upon
regulatory discretion, and there can be no assurance that Vectren will be able to obtain rate increases or rate supplements or
earn currently authorized rates of return. Both Indiana and Ohio have passed laws allowing utilities to recover at least some of
the cost of complying with federal mandates or other infrastructure replacement expenditures, and in Ohio other capital
investments, outside of a base rate proceeding. However, these activities may have at least a short-term adverse impact on the
Company's cash flow and financial condition.
In addition, failure to comply with new or existing laws and regulations may result in fines, penalties, or injunctive measures and
may not be recoverable from customers and could result in a material adverse effect on the Company's financial condition and
results of operations.
Vectren's regulated energy delivery operations are subject to various risks.
A variety of hazards and operations risks, such as leaks, accidental explosions, and mechanical problems, are inherent in the
Company’s gas and electric distribution activities. If such events occur, they could cause substantial financial losses and result
in injury to or loss of human life, significant damage to property, environmental pollution, and impairment of operations. The
location of pipelines, storage facilities, and the electric grid near populated areas, including residential areas, commercial
business centers, and industrial sites, could increase the level of damages resulting from these risks. These activities may
subject the Company to litigation or administrative proceedings from time to time. Such litigation or proceedings could result in
substantial monetary judgments, fines, or penalties or be resolved on unfavorable terms. In accordance with customary industry
practices, the Company maintains insurance against a significant portion, but not all, of these risks and losses. To the extent that
the occurrence of any of these events is not fully covered by insurance, it could adversely affect the Company’s financial
condition and results of operations.
Vectren’s regulated power supply operations are subject to various risks.
The Company’s electric generating facilities are subject to operational risks that could result in unscheduled plant outages,
unanticipated operation and maintenance expenses and increased power purchase costs. Such operational risks can arise
from circumstances such as facility shutdowns due to equipment failure or operator error; interruption of fuel supply or increased
prices of fuel as contracts expire; disruptions in the delivery of electricity; inability to comply with regulatory or permit
requirements; labor disputes; and natural disasters.