EX 99-1
Vectren Corporation
P.O. Box 209
Evansville, IN 47702-0209
FOR IMMEDIATE RELEASE
October 12, 2004
Vectren Contacts: Media - Mike Roeder, (812) 491-4143 or mroeder@vectren.com
Investor Relations - Steve Schein, (812) 491-4209 or sschein@vectren.com
OUCC Contact: Anthony Swinger, (317) 233-2747 or aswinger@oucc.IN.gov
CAC Contact: Jerry Polk, (317) 636-5165 or jpolk@mullettlaw.com
Industrial Group Contact:Jack Wickes,(317) 639-1210 or jwickes@lewis-kappes.com
Settlement Reached on Vectren North Natural Gas Base Rate Increase
Indianapolis, Ind. -- Vectren Corporation (NYSE: VVC), announced today that its
utility subsidiary, Vectren Energy Delivery of Indiana - North (Vectren North),
has entered into a settlement agreement with several parties, including the
Indiana Office of Utility Consumer Counselor (OUCC), the Indiana Gas Industrial
Group and the Citizens Action Coalition of Indiana, Inc. (CAC), regarding the
proposed changes to the base rates and charges for Vectren North's gas
distribution business in 49 central and southeastern Indiana counties. The
settlement agreement was filed today with the Indiana Utility Regulatory
Commission (IURC) and completes a collaborative effort between Vectren North and
other interested parties to the proceeding resolving issues presented by the
case. The IURC will now review the settlement and must approve the terms before
it becomes final.
The settlement agreement provides for a $24 million increase in Vectren North's
base distribution rates to cover the ongoing cost of operating, maintaining and
expanding the approximately 12,000-mile distribution and storage system used to
serve more than 525,000 customers. If approved by the IURC, the settlement will
result in an approximate 3.5 percent increase in the total average bill for
residential customers who heat their homes with natural gas.
The settlement also permits Vectren North to recover the on-going costs
associated with the federal Pipeline Safety Improvement Act of 2002. The
Pipeline Safety Improvement Tracker provides for the recovery of incremental
non-capital dollars, capped at $2.5 million per year. Costs in excess of the
annual cap amounts are deferred for future recovery.
The proceeding was initiated by Vectren North on March 19, 2004. Vectren North
originally requested an increase of approximately $47 million, which would have
increased an average residential consumer's monthly bill by about 7 percent. The
request to adjust base rates was the first by Vectren North since 1991. Over the
past 13 years, investments made to serve Vectren North customers have exceeded
$270 million, and the amounts paid for taxes, health care, labor and other
operating costs have increased as well. Terms of the settlement agreement
include:
o a rate increase of $24 million;
o a tracker to recover annual pipeline integrity compliance costs up to $2.5
million;
o an authorized return on equity (ROE) of 10.6 percent;
o an overall cost of capital of 8.38 percent;
o a return on a $708 million rate base;
o a new rate design that includes a larger service charge, which is intended
to address to some extent earnings volatility related to weather;
o a demand side management pilot program and market study to determine
potential benefits associated with gas demand side management programs;and
o a statement by the parties urging the IURC for prompt approval in this
proceeding.
"We have worked cooperatively with all the parties to craft a balanced
settlement," said Vectren Chairman, CEO and President Niel C. Ellerbrook. "In
order to attract new capital for future infrastructure improvements, it is
critical for us to begin earning on the more than $270 million invested since
the last rate case. This is a reasonable and fair outcome that will allow us to
continue serving our customers with safe and reliable energy." "By cutting
Vectren's requested increase in half, consumers' rates will be kept as low as
reasonably possible, while providing the utility with the revenue it is allowed
by law to ensure safe, reliable service for all of its customers," said Indiana
Utility Consumer Counselor Anne E. Becker.
"The settlement also takes a major step toward a sustainable energy policy in
Indiana," said Grant Smith, Executive Director of the Citizens Action Coalition
of Indiana. According to Smith, "If approved, the settlement will result in new
programs to help customers reduce their bills through investments in efficiency
and creates an innovative and collaborative framework for including gas
efficiency programs in utility long-term planning."
The settlement agreement addresses Vectren North's "non-gas" costs only. These
costs represent between 25 and 30 cents of every dollar paid by customers for
their gas service. These "non-gas" costs are incurred to build, operate and
maintain the pipes, other equipment and systems that are used to deliver gas
across Vectren North's system to its customers. The remaining 70 to 75 cents of
each dollar represent the cost of the gas used by customers. That gas is
purchased on the competitive wholesale market by Vectren North on behalf of its
customers, and its actions are subject to quarterly regulatory scrutiny under
the state's Gas Cost Adjustment (GCA) procedures to ensure its purchasing
actions are reasonable. Vectren North utilizes a portfolio approach to purchase
gas to reduce price volatility. Under Indiana regulation, Vectren North and
other Indiana natural gas utilities are not allowed to make a profit on the cost
of gas.
Vectren North (formerly known as Indiana Gas Co.)serves all or a portion of
Adams, Allen, Bartholomew, Blackford, Boone, Clark, Clay, Clinton, Daviess,
Decatur, Delaware, Fayette, Floyd, Fountain, Grant,Greene, Hamilton, Hancock,
Hendricks, Henry, Huntington, Jackson, Jay,Jefferson, Johnson, Lawrence,
Madison, Marion, Martin, Miami, Monroe,Montgomery, Morgan, Orange, Owen, Parke,
Putnam, Randolph, Rush, Shelby, Tippecanoe, Tipton, Vermillion, Vigo, Wabash,
Warren, Wayne, Wells and White counties.
This case does not affect gas or electric rates for customers of Vectren South
(formerly known as Southern Indiana Gas and Electric Co.), which serves
customers in nine southwestern Indiana counties.