Vectren Corporation is committed to responsible environmental stewardship as demonstrated by its historic, proactive approach to addressing environmental needs and obligations. While scientific uncertainties exist and the debate surrounding global climate change is ongoing, the growing understanding of the science of climate change would suggest a strong potential for adverse economic and social consequences. Although action is required, it is essential that climate change policies balance both competing short-term and long-term interest to mitigate greenhouse gas emissions, while encouraging economic stability.

Climate change is an international issue that requires careful analysis and reasoned responses from policy makers. As such, Vectren advocates a national strategy that achieves both short-term measures designed to lessen growth of emissions and long-term strategies that will ultimately manage emissions to appropriate levels in a scientifically sound, cost-effective manner.

Fossil fuel has been the backbone of the electric generation industry and coal continues as one of the nation's most abundant secure natural resources. Vectren believes that with continual advances in clean coal technology with an emphasis on carbon mitigation measures, and a renewed focus on energy conservation measures, coal should remain a primary fuel source, in a diversified portfolio of fuel sources, for affordable electric generation and greater energy independence.

Balance is Vectren's watchword. The need to reduce greenhouse gas emissions, yet provide affordable energy for its customers, requires thoughtful balance. For these reasons, Vectren supports a national climate change policy with the following elements:

• An inclusive scope that involves all sectors of the economy and sources of greenhouse gases, and recognizes early actions and investments made to mitigate greenhouse gas emissions. Any successful climate legislative effort must also effectively engage participation by developing nations;


• Provisions for enhanced use of renewables as a supplement to base load coal generation, including effective energy conservation, demand side management and generation efficiency measures;


• A flexible market-based cap and trade approach with zero cost allowance allocations to coal-based electric generators with a properly designed economic safety valve in order to reduce or eliminate extreme price spikes and potential price volatility. A long lead time must be included to align nearer-term technology capabilities and expanded generation efficiency and other enhanced renewables strategies, ensuring that generation sources will rely less on natural gas to meet short term carbon reduction requirements. This new regime should allow for adequate resource and generation planning and remove existing impediments to efficiency enhancements posed by the current New Source Review provisions of the Clean Air Act;


• Inclusion of incentives including grants and low interest loans for investment supporting advanced clean coal technology research and development ; and


• A strategy supporting alternative energy technologies and biofuels and increasing the domestic supply of natural gas to reduce dependence on foreign oil and imported natural gas.