Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Common Stock- Without Par Value	10	July 31, 2006
Class	Number of Shares	Date

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Table of Contents

Item Number		Page Number
	PART I. FINANCIAL INFORMATION
1	Financial Statements (Unaudited)
	Vectren Utility Holdings, Inc and Subsidiary Companies
	Consolidated Condensed Balance Sheets	4-5
	Consolidated Condensed Statements of Income	6
	Consolidated Condensed Statements of Cash Flows	7
	Notes to Unaudited Consolidated Condensed Financial Statements	8
2	Management’s Discussion and Analysis of Results of Operations and Financial Condition	19
3	Quantitative and Qualitative Disclosures About Market Risk	28
4	Controls and Procedures	28
	PART II. OTHER INFORMATION
1	Legal Proceedings	28
1A	Risk Factors	28
6	Exhibits	28
	Signatures	29

Access to Information

Vectren Corporation makes available all SEC filings and recent annual reports free of charge, including those of its wholly owned subsidiary, Vectren Utility Holdings, Inc., through its website at www.vectren.com, or by request, directed to Investor Relations at the mailing address, phone number, or email address that follows:

Mailing Address: One Vectren Square Evansville, Indiana 47708

Phone Number: (812) 491-4000

Investor Relations Contact: Steven M. Schein Vice President, Investor Relations sschein@vectren.com

2

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Definitions

AFUDC: allowance for funds used during construction	MMBTU: millions of British thermal units
APB: Accounting Principles Board	MW: megawatts
EITF: Emerging Issues Task Force	MWh / GWh: megawatt hours / thousands of megawatt hours (gigawatt hours)
FASB: Financial Accounting Standards Board	NOx: nitrogen oxide
FERC: Federal Energy Regulatory Commission	OCC: Ohio Office of the Consumer Counselor
IDEM: Indiana Department of Environmental Management	OUCC: Indiana Office of the Utility Consumer Counselor
IURC: Indiana Utility Regulatory Commission	PUCO: Public Utilities Commission of Ohio
MCF / MMCF / BCF: thousands / millions / billions of cubic feet	SFAS: Statement of Financial Accounting Standards
MDth / MMDth: thousands / millions of dekatherms	USEPA: United States Environmental Protection Agency
MISO: Midwest Independent Transmission System Operator	Throughput: combined gas sales and gas transportation volumes

3

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VECTREN UTILITY HOLDINGS, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited - In millions)

		June 30,			December 31,
		2006			2005
ASSETS
Current Assets
Cash & cash equivalents		$	4.6		$	11.7
Accounts receivable - less reserves of $3.7 &
$2.6, respectively			88.6			170.7
Receivables due from other Vectren companies			1.5			2.2
Accrued unbilled revenues			36.3			212.5
Inventories			112.1			126.2
Recoverable fuel & natural gas costs			-			15.4
Prepayments & other current assets			104.3			117.2
Total current assets			347.4			655.9
Utility Plant
Original cost			3,726.2			3,632.0
Less: accumulated depreciation & amortization			1,420.7			1,380.1
Net utility plant			2,305.5			2,251.9
Investments in unconsolidated affiliates			0.2			0.2
Other investments			20.7			21.0
Non-utility property - net			159.1			160.0
Goodwill			205.0			205.0
Regulatory assets			102.7			89.9
Other assets			7.6			7.3
TOTAL ASSETS		$	3,148.2		$	3,391.2

The accompanying notes are an integral part of these consolidated condensed financial statements.

4

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VECTREN UTILITY HOLDINGS, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited - In millions)

		June 30,			December 31,
		2006			2005
LIABILITIES & SHAREHOLDER'S EQUITY
Current Liabilities
Accounts payable		$	59.6		$	131.9
Accounts payable to affiliated companies			38.0			140.6
Payables to other Vectren companies			13.4			29.2
Refundable fuel & natural gas costs			34.9			7.6
Accrued liabilities			117.7			130.4
Short-term borrowings			130.4			226.9
Long-term debt subject to tender			-			53.7
Total current liabilities			394.0			720.3
Long-Term Debt - Net of Current Maturities &
Debt Subject to Tender			1,051.6			997.8
Deferred Income Taxes & Other Liabilities
Deferred income taxes			277.0			275.5
Regulatory liabilities			289.8			272.9
Deferred credits & other liabilities			101.8			100.9
Total deferred credits & other liabilities			668.6			649.3
Commitments & Contingencies (Notes 6 - 8)
Common Shareholder's Equity
Common stock (no par value)			612.9			612.9
Retained earnings			420.1			406.9
Accumulated other comprehensive income			1.0			4.0
Total common shareholder's equity			1,034.0			1,023.8
TOTAL LIABILITIES & SHAREHOLDER'S EQUITY		$	3,148.2		$	3,391.2

The accompanying notes are an integral part of these consolidated condensed financial statements.

5

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VECTREN UTILITY HOLDINGS, INC. AND SUBSIDIARY COMPANIES 

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited - In millions)

		Three Months						Six Months
		Ended June 30,						Ended June 30,
		2006			2005			2006			2005
OPERATING REVENUES
Gas utility		$	159.1		$	186.0		$	731.8		$	702.7
Electric utility			96.0			96.9			201.2			191.6
Other			0.5			0.1			0.9			0.3
Total operating revenues			255.6			283.0			933.9			894.6
OPERATING EXPENSES
Cost of gas sold			88.5			116.3			517.5			487.2
Cost of fuel & purchased power			30.9			33.0			69.0			62.2
Other operating			59.6			59.2			121.2			120.8
Depreciation & amortization			37.7			34.5			74.8			67.9
Taxes other than income taxes			11.6			11.7			34.4			33.5
Total operating expenses			228.3			254.7			816.9			771.6
OPERATING INCOME			27.3			28.3			117.0			123.0
OTHER INCOME - NET			1.9			1.1			2.8			3.3
INTEREST EXPENSE			18.2			16.4			38.2			33.3
INCOME BEFORE INCOME TAXES			11.0			13.0			81.6			93.0
INCOME TAXES			3.9			5.2			31.1			37.1
NET INCOME		$	7.1		$	7.8		$	50.5		$	55.9

The accompanying notes are an integral part of these consolidated condensed financial statements.

6

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VECTREN UTILITY HOLDINGS, INC. AND SUBSIDIARY COMPANIES 

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited - In millions)

		Six Months Ended June 30,
		2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	50.5		$	55.9
Adjustments to reconcile net income to cash from operating activities:
Depreciation & amortization			74.8			67.9
Deferred income taxes & investment tax credits			(0.5	)		4.0
Expense portion of pension & postretirement periodic benefit cost			2.1			2.2
Provision for uncollectible acccounts			5.4			4.9
Other non-cash charges - net			3.2			(1.8	)
Changes in working capital accounts:
Accounts receivable, including to Vectren companies
& accrued unbilled revenue			253.6			182.0
Inventories			14.1			1.2
Recoverable fuel & natural gas costs			42.7			30.8
Prepayments & other current assets			6.2			47.3
Accounts payable, including to Vectren companies
& affiliated companies			(195.7	)		(103.6	)
Accrued liabilities			(23.0	)		8.6
Changes in noncurrent assets			(12.6	)		(3.7	)
Changes in noncurrent liabilities			2.4			(7.2	)
Net cash flows from operating activities			223.2			288.5
CASH FLOWS FROM FINANCING ACTIVITIES
Requirements for:
Dividends to parent			(37.3	)		(40.0	)
Redemption of preferred stock of subsidiary			-			(0.1	)
Net change in short-term borrowings			(96.5	)		(167.3	)
Net cash flows from financing activities			(133.8	)		(207.4	)
CASH FLOWS FROM INVESTING ACTIVITIES
Requirements for:
Capital expenditures, excluding AFUDC - equity			(96.5	)		(81.7	)
Net cash flows from investing activities			(96.5	)		(81.7	)
Net decrease in cash & cash equivalents			(7.1	)		(0.6	)
Cash & cash equivalents at beginning of period			11.7			5.7
Cash & cash equivalents at end of period		$	4.6		$	5.1

The accompanying notes are an integral part of these consolidated condensed financial statements.

7

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VECTREN UTILITY HOLDINGS, INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

1.	Organization and Nature of Operations

Vectren Utility Holdings, Inc. (Utility Holdings or the Company), an Indiana corporation, serves as the intermediate holding company for Vectren Corporation’s (Vectren) three operating public utilities: Indiana Gas Company, Inc. (Indiana Gas or Vectren North), Southern Indiana Gas and Electric Company (SIGECO or Vectren South), and the Ohio operations. Utility Holdings also has other assets that provide information technology and other services to the three utilities. Vectren is an energy holding company headquartered in Evansville, Indiana. Vectren and Utility Holdings are holding companies as defined by the Energy Policy Act of 2005.

Indiana Gas provides energy delivery services to approximately 562,000 natural gas customers located in central and southern Indiana. SIGECO provides energy delivery services to approximately 140,000 electric customers and approximately 112,000 gas customers located near Evansville in southwestern Indiana. SIGECO also owns and operates electric generation to serve its electric customers and optimizes those assets in the wholesale power market. Indiana Gas and SIGECO generally do business as Vectren Energy Delivery of Indiana. The Ohio operations provide energy delivery services to approximately 318,000 natural gas customers located near Dayton in west central Ohio. The Ohio operations are owned as a tenancy in common by Vectren Energy Delivery of Ohio, Inc. (VEDO), a wholly owned subsidiary, (53% ownership) and Indiana Gas (47% ownership). The Ohio operations generally do business as Vectren Energy Delivery of Ohio.

2.	Basis of Presentation

The interim consolidated condensed financial statements included in this report have been prepared by the Company, without audit, as provided in the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted as provided in such rules and regulations. The Company believes that the information in this report reflects all adjustments necessary to fairly state the results of the interim periods reported. These consolidated condensed financial statements and related notes should be read in conjunction with the Company’s audited annual consolidated financial statements for the year ended December 31, 2005, filed March 2, 2006 on Form 10-K. Certain 2005 amounts have been reclassified to conform to the 2006 presentation. These reclassifications had no impact on reported net income. Because of the seasonal nature of the Company’s utility operations, the results shown on a quarterly basis are not necessarily indicative of annual results.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

3.	Subsidiary Guarantor and Consolidating Information

The Company’s three operating utility companies, SIGECO, Indiana Gas, and VEDO are guarantors of Utility Holdings’ $515.0 million in short-term credit facilities, of which $130.4 million is outstanding at June 30, 2006, and Utility Holdings’ $700.0 million unsecured senior notes outstanding at June 30, 2006. The guarantees are full and unconditional and joint and several, and Utility Holdings has no subsidiaries other than the subsidiary guarantors. However, Utility Holdings does have operations other than those of the subsidiary guarantors. Pursuant to Article 3-10 of Regulation S-X, disclosure of the results of operations and balance sheets of the subsidiary guarantors separate from the parent company’s operations is required. Following are consolidating financial statements including information on the combined operations of the subsidiary guarantors separate from the other operations of the parent company.

8

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Consolidating Statement of Income for the three months ended June 30, 2006 (in millions):

		Subsidiary			Parent
		Guarantors			Company			Eliminations			Consolidated
OPERATING REVENUES
Gas utility		$	159.1		$	-		$	-		$	159.1
Electric utility			96.0			-			-			96.0
Other			-			9.2			(8.7	)		0.5
Total operating revenues			255.1			9.2			(8.7	)		255.6
OPERATING EXPENSES
Cost of gas sold			88.5			-			-			88.5
Cost of fuel & purchased power			30.9			-			-			30.9
Other operating			67.9			-			(8.3	)		59.6
Depreciation & amortization			32.3			5.4			-			37.7
Taxes other than income taxes			11.3			0.3			-			11.6
Total operating expenses			230.9			5.7			(8.3	)		228.3
OPERATING INCOME			24.2			3.5			(0.4	)		27.3
OTHER INCOME (EXPENSE) - NET
Equity in earnings of consolidated companies			-			6.1			(6.1	)		-
Other income (expense) – net			1.1			10.4			(9.6	)		1.9
Total other income (expense) - net			1.1			16.5			(15.7	)		1.9
Interest expense			15.8			12.4			(10.0	)		18.2
INCOME BEFORE INCOME TAXES			9.5			7.6			(6.1	)		11.0
Income taxes			3.4			0.5			-			3.9
NET INCOME		$	6.1		$	7.1		$	(6.1	)	$	7.1

Consolidating Statement of Income for the three months ended June 30, 2005 (in millions):

		Subsidiary			Parent
		Guarantors			Company			Eliminations			Consolidated
OPERATING REVENUES
Gas utility		$	186.0		$	-		$	-		$	186.0
Electric utility			96.9			-			-			96.9
Other			-			9.1			(9.0	)		0.1
Total operating revenues			282.9			9.1			(9.0	)		283.0
OPERATING EXPENSES
Cost of gas sold			116.3			-			-			116.3
Cost of fuel & purchased power			33.0			-			-			33.0
Other operating			68.1			-			(8.9	)		59.2
Depreciation & amortization			29.9			4.6			-			34.5
Taxes other than income taxes			11.5			0.2			-			11.7
Total operating expenses			258.8			4.8			(8.9	)		254.7
OPERATING INCOME			24.1			4.3			(0.1	)		28.3
OTHER INCOME (EXPENSE) - NET
Equity in earnings of consolidated companies			-			5.3			(5.3	)		-
Other income (expense) – net			0.7			9.3			(8.9	)		1.1
Total other income (expense) - net			0.7			14.6			(14.2	)		1.1
Interest expense			15.6			9.8			(9.0	)		16.4
INCOME BEFORE INCOME TAXES			9.2			9.1			(5.3	)		13.0
Income taxes			3.9			1.3			-			5.2
NET INCOME		$	5.3		$	7.8		$	(5.3	)	$	7.8

9

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Consolidating Statement of Income for the six months ended June 30, 2006 (in millions):

		Subsidiary			Parent
		Guarantors			Company			Eliminations			Consolidated
OPERATING REVENUES
Gas utility		$	731.8		$	-		$	-		$	731.8
Electric utility			201.2			-			-			201.2
Other			-			18.4			(17.5	)		0.9
Total operating revenues			933.0			18.4			(17.5	)		933.9
OPERATING EXPENSES
Cost of gas sold			517.5			-			-			517.5
Cost of fuel & purchased power			69.0			-			-			69.0
Other operating			136.9			-			(15.7	)		121.2
Depreciation & amortization			64.2			10.6			-			74.8
Taxes other than income taxes			33.8			0.6			-			34.4
Total operating expenses			821.4			11.2			(15.7	)		816.9
OPERATING INCOME			111.6			7.2			(1.8	)		117.0
OTHER INCOME (EXPENSE) - NET
Equity in earnings of consolidated companies			-			48.3			(48.3	)		-
Other income (expense) – net			0.9			20.5			(18.6	)		2.8
Total other income (expense) - net			0.9			68.8			(66.9	)		2.8
Interest expense			33.0			25.6			(20.4	)		38.2
INCOME BEFORE INCOME TAXES			79.5			50.4			(48.3	)		81.6
Income taxes			31.2			(0.1	)		-			31.1
NET INCOME		$	48.3		$	50.5		$	(48.3	)	$	50.5

Consolidating Statement of Income for the six months ended June 30, 2005 (in millions):

		Subsidiary			Parent
		Guarantors			Company			Eliminations			Consolidated
OPERATING REVENUES
Gas utility		$	702.7		$	-		$	-		$	702.7
Electric utility			191.6			-			-			191.6
Other			-			18.2			(17.9	)		0.3
Total operating revenues			894.3			18.2			(17.9	)		894.6
OPERATING EXPENSES
Cost of gas sold			487.2			-			-			487.2
Cost of fuel & purchased power			62.2			-			-			62.2
Other operating			136.9			-			(16.1	)		120.8
Depreciation & amortization			58.9			9.0			-			67.9
Taxes other than income taxes			33.0			0.5			-			33.5
Total operating expenses			778.2			9.5			(16.1	)		771.6
OPERATING INCOME			116.1			8.7			(1.8	)		123.0
OTHER INCOME (EXPENSE) - NET
Equity in earnings of consolidated companies			-			51.7			(51.7	)		-
Other income (expense) – net			0.7			18.9			(16.3	)		3.3
Total other income (expense) - net			0.7			70.6			(68.0	)		3.3
Interest expense			31.5			19.9			(18.1	)		33.3
INCOME BEFORE INCOME TAXES			85.3			59.4			(51.7	)		93.0
Income taxes			33.6			3.5			-			37.1
NET INCOME		$	51.7		$	55.9		$	(51.7	)	$	55.9

10

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Consolidating Statement of Cash Flows for the six months ended June 30, 2006 (in millions):

		Subsidiary			Parent
		Guarantors			Company			Eliminations			Consolidated
NET CASH FLOWS FROM OPERATING ACTIVITIES		$	210.2		$	13.0		$	-		$	223.2
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from additional capital contribution			20.0			-			(20.0	)		-
Long-term Debt - net of issuance costs & hedging proceeds			150.0			-			(150.0	)		-
Requirements for:
Dividends to parent			(37.3	)		(37.3	)		37.3			(37.3	)
Net change in short-term borrowings			(264.6	)		(80.5	)		248.6			(96.5	)
Net cash flows from financing activities			(131.9	)		(117.8	)		115.9			(133.8	)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from consolidated subsidiary distributions			-			37.3			(37.3	)		-
Requirements for:
Capital expenditures, excluding AFUDC equity			(86.8	)		(9.7	)		-			(96.5	)
Consolidated subsidiary investments			-			(170.0	)		170.0			-
Net change in notes receivable to other Vectren companies			-			248.6			(248.6	)		-
Net cash flows from investing activities			(86.8	)		106.2			(115.9	)		(96.5	)
Net decrease in cash & cash equivalents			(8.5	)		1.4						(7.1	)
Cash & cash equivalents at beginning of period			11.0			0.7						11.7
Cash & cash equivalents at end of period		$	2.5		$	2.1		$	-		$	4.6

Consolidating Statement of Cash Flows for the six months ended June 30, 2005 (in millions):

		Subsidiary			Parent
		Guarantors			Company			Eliminations			Consolidated
NET CASH FLOWS FROM OPERATING ACTIVITIES		$	270.6		$	17.9		$	-		$	288.5
CASH FLOWS FROM FINANCING ACTIVITIES
Requirements for:
Dividends to parent			(40.0	)		(40.0	)		40.0			(40.0	)
Redemption of preferred stock of subsidiary			(0.1	)		-			-			(0.1	)
Net change in short-term borrowings			(138.4	)		(135.9	)		107.0			(167.3	)
Net cash flows from financing activities			(178.5	)		(175.9	)		147.0			(207.4	)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from consolidated subsidiary distributions			-			40.0			(40.0	)		-
Requirements for:
Capital expenditures, excluding AFUDC equity			(61.6	)		(20.1	)		-			(81.7	)
Net change in notes receivable to other Vectren companies			(31.1	)		138.1			(107.0	)		-
Net cash flows from investing activities			(92.7	)		158.0			(147.0	)		(81.7	)
Net decrease in cash & cash equivalents			(0.6	)		-						(0.6	)
Cash & cash equivalents at beginning of period			4.7			1.0						5.7
Cash & cash equivalents at end of period		$	4.1		$	1.0		$	-		$	5.1

11

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Consolidating Balance Sheet as of June 30, 2006 (in millions):

ASSETS		Subsidiary			Parent
		Guarantors			Company			Eliminations			Consolidated
Current Assets
Cash & cash equivalents		$	2.5		$	2.1		$	-		$	4.6
Accounts receivable - less reserves			88.6			-			-			88.6
Receivables due from other Vectren companies			17.4			35.2			(51.1	)		1.5
Accrued unbilled revenues			36.3			-			-			36.3
Inventories			112.1			-			-			112.1
Recoverable fuel & natural gas costs			-			-			-			-
Prepayments & other current assets			90.7			15.3			(1.7	)		104.3
Total current assets			347.6			52.6			(52.8	)		347.4
Utility Plant
Original cost			3,726.2			-			-			3,726.2
Less: accumulated depreciation & amortization			1,420.7			-			-			1,420.7
Net utility plant			2,305.5			-			-			2,305.5
Investments in consolidated subsidiaries			-			1,113.1			(1,113.1	)		-
Notes receivable from consolidated subsidiaries			-			593.1			(593.1	)		-
Investments in unconsolidated affiliates			0.2			-			-			0.2
Other investments			14.6			6.1			-			20.7
Non-utility property - net			4.6			154.5			-			159.1
Goodwill			205.0			-			-			205.0
Regulatory assets			96.1			6.6			-			102.7
Other assets			6.8			0.8			-			7.6
TOTAL ASSETS		$	2,980.4		$	1,926.8		$	(1,759.0	)	$	3,148.2
LIABILITIES & SHAREHOLDER'S EQUITY			Subsidiary			Parent
			Guarantors			Company			Eliminations			Consolidated
Current Liabilities
Accounts payable		$	56.4		$	3.2		$	-		$	59.6
Accounts payable to affiliated companies			37.7			0.3			-			38.0
Payables to other Vectren companies			23.5			0.1			(10.2	)		13.4
Refundable fuel & natural gas costs			34.9			-			-			34.9
Accrued liabilities			109.5			9.9			(1.7	)		117.7
Short-term borrowings			-			130.4			-			130.4
Short-term borrowings from
other Vectren companies			24.9			16.0			(40.9	)		-
Total current liabilities			286.9			159.9			(52.8	)		394.0
Long-Term Debt
Long-term debt - net of current maturities &
debt subject to tender			353.5			698.1			-			1,051.6
Long-term debt due to Utility Holdings			593.1			-			(593.1	)		-
Total long-term debt - net			946.6			698.1			(593.1	)		1,051.6
Deferred Income Taxes & Other Liabilities
Deferred income taxes			255.4			21.6			-			277.0
Regulatory liabilities			281.9			7.9			-			289.8
Deferred credits & other liabilities			96.5			5.3			-			101.8
Total deferred credits & other liabilities			633.8			34.8			-			668.6
Common Shareholder's Equity
Common stock (no par value)			756.3			612.9			(756.3	)		612.9
Retained earnings			355.8			420.1			(355.8	)		420.1
Accumulated other comprehensive income			1.0			1.0			(1.0	)		1.0
Total common shareholder's equity			1,113.1			1,034.0			(1,113.1	)		1,034.0
TOTAL LIABILITIES & SHAREHOLDER'S EQUITY		$	2,980.4		$	1,926.8		$	(1,759.0	)	$	3,148.2

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Consolidating Balance Sheet as of December 31, 2005 (in millions):

ASSETS		Subsidiary			Parent
		Guarantors			Company			Eliminations			Consolidated
Current Assets
Cash & cash equivalents		$	11.0		$	0.7		$	-		$	11.7
Accounts receivable - less reserves			170.6			0.1			-			170.7
Receivables due from other Vectren companies			0.9			294.7			(293.4	)		2.2
Accrued unbilled revenues			212.5			-			-			212.5
Inventories			126.2			-			-			126.2
Recoverable fuel & natural gas costs			15.4			-			-			15.4
Prepayments & other current assets			104.1			13.7			(0.6	)		117.2
Total current assets			640.7			309.2			(294.0	)		655.9
Utility Plant
Original cost			3,631.6			0.4			-			3,632.0
Less: accumulated depreciation & amortization			1,380.1			-			-			1,380.1
Net utility plant			2,251.5			0.4			-			2,251.9
Investments in consolidated subsidiaries			-			1,085.0			(1,085.0	)		-
Notes receivable from consolidated subsidiaries			-			443.1			(443.1	)		-
Investments in unconsolidated affiliates			0.2			-			-			0.2
Other investments			14.9			6.1			-			21.0
Non-utility property - net			5.1			154.9			-			160.0
Goodwill			205.0			-			-			205.0
Regulatory assets			83.1			6.8			-			89.9
Other assets			6.3			1.0			-			7.3
TOTAL ASSETS		$	3,206.8		$	2,006.5		$	(1,822.1	)	$	3,391.2
LIABILITIES & SHAREHOLDER'S EQUITY			Subsidiary			Parent
			Guarantors			Company			Eliminations			Consolidated
Current Liabilities
Accounts payable		$	125.7		$	6.2		$	-		$	131.9
Accounts payable to affiliated companies			140.0			0.6			-			140.6
Payables to other Vectren companies			27.8			5.2			(3.8	)		29.2
Refundable fuel & natural gas costs			7.6			-			-			7.6
Accrued liabilities			120.7			10.3			(0.7	)		130.4
Short-term borrowings			-			226.9			-			226.9
Short-term borrowings from
other Vectren companies			289.5			-			(289.5	)		0.0
Long-term debt subject to tender			53.7			-			-			53.7
Total current liabilities			765.0			249.2			(294.0	)		720.3
Long-Term Debt
Long-term debt - net of current maturities &
debt subject to tender			299.9			697.9			-			997.8
Long-term debt due to Utility Holdings			443.1			-			(443.1	)		-
Total long-term debt - net			743.0			697.9			(443.1	)		997.8
Deferred Income Taxes & Other Liabilities
Deferred income taxes			251.6			23.9			-			275.5
Regulatory liabilities			266.2			6.8			-			272.9
Deferred credits & other liabilities			96.0			4.9			-			100.9
Total deferred credits & other liabilities			613.8			35.6			-			649.3
Common Shareholder's Equity
Common stock (no par value)			736.3			612.9			(736.3	)		612.9
Retained earnings			344.7			406.9			(344.7	)		406.9
Accumulated other comprehensive income			4.0			4.0			(4.0	)		4.0
Total common shareholder's equity			1,085.0			1,023.8			(1,085.0	)		1,023.8
TOTAL LIABILITIES & SHAREHOLDER'S EQUITY			3,206.8			2,006.5			(1,822.1	)		3,391.2

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4.	Transactions with Other Vectren Companies

Support Services and Purchases

Vectren provides corporate and general and administrative services to the Company including legal, finance, tax, risk management and human resources, which includes charges for share-based compensation and for pension and other postretirement benefits not directly charged to subsidiaries. These costs have been allocated using various allocators, primarily number of employees, number of customers and/or revenues. Allocations are based on cost. Utility Holdings received corporate allocations totaling $20.5 million and $21.1 million for the three months ended June 30, 2006 and 2005, respectively. Utility Holdings received corporate allocations totaling $40.6 million and $43.0 million for the six months ended June 30, 2006 and 2005, respectively.

Vectren Fuels, Inc., a wholly owned subsidiary of Vectren, owns and operates coal mines from which SIGECO purchases fuel used for electric generation. The Company has a letter agreement from the IURC regarding the price of coal that is charged by Fuels to SIGECO. Amounts paid for such purchases for the three months ended June 30, 2006 and 2005, totaled $31.2 million and $24.7 million, respectively. Amounts paid for such purchases for the six months ended June 30, 2006 and 2005, totaled $62.5 million and $48.1 million, respectively.

Share-Based Incentive Plans

On January 1, 2006, the Company adopted SFAS 123R “Share Based Compensation” (SFAS 123R) using the modified prospective method. Prior to the adoption of SFAS 123R, the Company accounted for these programs using APB Opinion 25, “Accounting for Stock Issued to Employees” (APB 25), and its related interpretations. The effect of the adoption of SFAS 123R was not material to the Company’s operating results or financial condition.

Utility Holdings does not have share-based compensation plans separate from Vectren. An insignificant number of Utility Holdings’ employees participate in Vectren’s share-based compensation plans.

5.	Transactions with ProLiance Energy, LLC

ProLiance Energy, LLC (ProLiance), a nonutility energy marketing affiliate of Vectren and Citizens Gas and Coke Utility (Citizens Gas), provides services to a broad range of municipalities, utilities, industrial operations, schools, and healthcare institutions located throughout the Midwest and Southeast United States. ProLiance’s customers include Vectren’s utilities and nonutility gas supply operations as well as Citizens Gas. ProLiance’s primary businesses include gas marketing, gas portfolio optimization, and other portfolio and energy management services.

Transactions with ProLiance

The Company contracted for approximately 72% of its natural gas purchases through ProLiance during the six months ended June 30, 2006. In the period ended June 30, 2005, the Company contracted for all of its natural gas purchases through ProLiance. Purchases from ProLiance for resale and for injections into storage for the three months ended June 30, 2006 and 2005, totaled $117.3 million and $192.8 million, respectively, and for the six months ended June 30, 2006 and 2005, totaled $344.0 million and $410.2 million, respectively. Amounts owed to ProLiance at June 30, 2006, and December 31, 2005, for those purchases were $34.9 million and $137.4 million, respectively, and are included in Accounts payable to affiliated companies. Amounts charged by ProLiance for gas supply services are established by supply agreements with each utility.

The Company received regulatory approval on April 25, 2006, from the IURC for ProLiance to provide natural gas supply services to the Indiana utilities through March 2011.

As required by a June 2005, PUCO order, VEDO solicited bids for its gas supply/portfolio administration services and selected a third party provider under a one year contract. ProLiance’s obligation to supply these services to VEDO ended October 31, 2005.

6.	Commitments & Contingencies

The Company is party to various legal proceedings arising in the normal course of business. In the opinion of management, there are no legal proceedings, except those discussed herein, pending against the Company that are likely to have a material adverse effect on its financial position, results of operations or cash flows.

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7.  Environmental Matters

Clean Air Interstate Rule & Clean Air Mercury Rule

In March of 2005 USEPA finalized two new air emission reduction regulations.  The Clean Air Interstate Rule (CAIR) is an allowance cap and trade program requiring further reductions in Nitrogen Oxides (NOx) and Sulfur Dioxide (SO₂) emissions from coal-burning power plants. The Clean Air Mercury Rule (CAMR) is an allowance cap and trade program requiring further reductions in mercury emissions from coal-burning power plants.  Both sets of regulations require emission reductions in two phases. The first phase deadline for both rules is 2010 (2009 for NOx under CAIR), and the second phase deadline for compliance with the emission reductions required under CAIR is 2015, while the second phase deadline for compliance with the emission reduction requirements of CAMR is 2018. The Company is evaluating compliance options and fully expects to be in compliance by the required deadlines.

In February 2006, the IURC approved a multi-emission compliance plan filed by the Company’s utility subsidiary, SIGECO. Once the plan is implemented, SIGECO’s coal-fired plants will be 100% scrubbed for SO₂, 90% scrubbed for NOx, and mercury emissions will be reduced to meet the new mercury reduction standards. The order, as previously agreed to by the OUCC and Citizens Action Coalition, allows SIGECO to recover an approximate 8% return on up to $110 million in capital investments through a rider mechanism which is updated every six months for actual costs incurred. The Company will also recover through a rider its operating expenses, including depreciation, once the equipment is placed into service. The order also stipulates that SIGECO study renewable energy alternatives and include a carbon forecast in future filings with regard to new generation and further environmental compliance plans, among other initiatives. As of June 30, 2006, the Company has made capital investments of approximately $15.3 million related to this initiative.

Manufactured Gas Plants

In the past, Indiana Gas, SIGECO, and others operated facilities for the manufacture of gas. Given the availability of natural gas transported by pipelines, these facilities have not been operated for many years. Under currently applicable environmental laws and regulations, Indiana Gas, SIGECO, and others may now be required to take remedial action if certain byproducts are found above the regulatory thresholds at these sites.

Indiana Gas has identified the existence, location, and certain general characteristics of 26 gas manufacturing and storage sites for which it may have some remedial responsibility. Indiana Gas has completed a remedial investigation/feasibility study (RI/FS) at one of the sites under an agreed order between Indiana Gas and the IDEM, and a Record of Decision was issued by the IDEM in January 2000. Although Indiana Gas has not begun an RI/FS at additional sites, Indiana Gas has submitted several of the sites to the IDEM's Voluntary Remediation Program (VRP) and is currently conducting some level of remedial activities, including groundwater monitoring at certain sites, where deemed appropriate, and will continue remedial activities at the sites as appropriate and necessary.

In conjunction with data compiled by environmental consultants, Indiana Gas has accrued the estimated costs for further investigation, remediation, groundwater monitoring, and related costs for the sites. While the total costs that may be incurred in connection with addressing these sites cannot be determined at this time, Indiana Gas has recorded costs that it reasonably expects to incur totaling approximately $20.4 million.

The estimated accrued costs are limited to Indiana Gas’ proportionate share of the remediation efforts. Indiana Gas has arrangements in place for 19 of the 26 sites with other potentially responsible parties (PRP), which serve to limit Indiana Gas’ share of response costs at these 19 sites to between 20% and 50%.

With respect to insurance coverage, Indiana Gas has received and recorded settlements from all known insurance carriers in an aggregate amount approximating $20.4 million.

Environmental matters related to manufactured gas plants have had no material impact on earnings since costs recorded to date approximate PRP and insurance settlement recoveries. While Indiana Gas has recorded all costs which it presently expects to incur in connection with activities at these sites, it is possible that future events may require some level of additional remedial activities which are not presently foreseen.

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In October 2002, the Company received a formal information request letter from the IDEM regarding five manufactured gas plants owned and/or operated by SIGECO and not currently enrolled in the IDEM’s VRP. In response, SIGECO submitted to the IDEM the results of preliminary site investigations conducted in the mid-1990’s. These site investigations confirmed that based upon the conditions known at the time, the sites posed no risk to human health or the environment. Follow up reviews have been initiated by the Company to confirm that the sites continue to pose no such risk.

On October 6, 2003, SIGECO filed applications to enter four of the manufactured gas plant sites in IDEM's VRP. The remaining site is currently being addressed in the VRP by another Indiana utility. SIGECO added those four sites into the renewal of the global Voluntary Remediation Agreement that Indiana Gas has in place with IDEM for its manufactured gas plant sites. That renewal was approved by the IDEM on February 24, 2004. On July 13, 2004, SIGECO filed a declaratory judgment action against its insurance carriers seeking a judgment finding its carriers liable under the policies for coverage of further investigation and any necessary remediation costs that SIGECO may accrue under the VRP program. Costs of remediation at the four SIGECO sites, as well as the amount of any PRP or insurance recoveries, cannot be determined at this time. The total costs accrued to date, including investigative costs, have been immaterial.

8.	Rate & Regulatory Matters

Indiana and Ohio Lost Margin Recovery/Conservation Filings

On October 25, 2005, Vectren Energy Delivery of Indiana filed with the IURC for approval of a conservation program and a conservation adjustment rider in its two Indiana service territories. If approved, the plan outlined in the petition will better align the interests of the Company with its customers through the promotion of natural gas conservation. The petition requests the use of a tracker mechanism to recover certain costs of funding the design and implementation of conservation efforts, such as consumer education programs and rebates for high efficiency equipment. The conservation tracker works in tandem with a lost margin recovery mechanism. This mechanism would allow the Company to recover the distribution portion of its rates from residential and commercial customers based on the level of customer usage established in each utility’s last general rate case.

On May 5, 2006, the Company and the OUCC filed a settlement with the IURC that provides for a 5 year energy efficiency program to be implemented at both Indiana Gas and SIGECO. Further, as part of the settlement, Indiana Gas will recover 85% of all lost margin since its last rate case. Recovery of lost margin at SIGECO will not commence until approval of new base rates in its next general rate case. A hearing before the IURC on the settlement occurred on July 18, 2006, post-hearing filings will be completed in August 2006 and an order is anticipated during the fourth quarter.

Similarly, on November 28, 2005, Vectren Energy Delivery of Ohio filed with the PUCO for approval of a conservation program and a conservation adjustment rider that would accomplish the same objectives, including lost margin recovery.  On April 10, 2006, Vectren Energy Delivery of Ohio filed with the PUCO, a settlement agreement between the OCC, the Ohio Partners for Affordable Energy, and the Company that provides for at least two years of comprehensive energy efficiency programs for Ohio customers. A hearing has been conducted and an order by the PUCO is expected in the third quarter.

If the agreements are approved, these efficiency programs should be available to customers before the 2006 winter heating season.

Gas Cost Recovery (GCR) Audit Proceedings

On June 14, 2005, the PUCO issued an order disallowing the recovery of approximately $9.6 million of gas costs relating to the two year audit period ended November 2002. That audit period provided the PUCO staff its initial review of the portfolio administration arrangement between VEDO and ProLiance. The disallowance includes approximately $1.3 million relating to pipeline refunds and penalties and approximately $4.5 million of costs for winter delivery services purchased by VEDO to ensure reliability over the two year period. The PUCO also held that ProLiance should have credited to VEDO an additional $3.8 million more than credits actually received for the right to use VEDO’s gas transportation capacity periodically during the periods when it was not required for serving VEDO’s customers. The PUCO also directed VEDO to either submit its receipt of portfolio administration services to a request for proposal process or to in-source those functions. During 2003, the Company recorded a reserve of $1.1 million for this matter. An additional pretax charge of $4.2 million was recorded in Cost of Gas Sold in 2005, of which $3.0 million was recorded in June 2005. The reserve reflects management’s assessment of the impact of the PUCO decisions, an estimate of any current impact that decision may have on subsequent audit periods, and an estimate of a sharing in any final disallowance by Vectren’s partner in ProLiance.

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VEDO filed its request for rehearing on July 14, 2005, and on August 10, 2005, the PUCO granted rehearing to further consider the $3.8 million portfolio administration issue and all interest on the findings, but denied rehearing on all other aspects of the case. On October 7, 2005, the Company filed an appeal with the Ohio Supreme Court requesting that the $4.5 million disallowance related to the winter delivery service issue be reversed. On December 21, 2005, the PUCO granted in part VEDO’s rehearing request, and reduced the $3.8 million disallowance related to portfolio administration to $1.98 million. The Company has filed an appeal on that decision as well. However, as part of the Ohio lost margin/conservation settlement agreement awaiting a PUCO decision, the Company has proposed to use the $1.98 million disallowance as a funding source for Ohio conservation programs. If the settlement is approved, the appeal of the $1.98 million disallowance amount would be withdrawn. Briefings of all matters were completed by July 31, 2006.

In addition, the Company solicited and received bids for VEDO’s gas supply and portfolio administration services and has selected a third party provider, who began providing services to VEDO on November 1, 2005, under a one year contract.

Commodity Prices

Commodity prices for natural gas purchases have remained above historic levels and have become more volatile. Subject to compliance with applicable state laws, the Company's utility subsidiaries are allowed recovery of such changes in purchased gas costs from their retail customers through commission-approved gas cost adjustment mechanisms, and margin on gas sales are not expected to be impacted. Nevertheless, it is possible regulators may disallow recovery of a portion of gas costs for a variety of reasons, including, but not limited to, a finding by the regulator that natural gas was not prudently procured. In addition, as a result of this near term change in the natural gas commodity price, the Company’s utility subsidiaries have been experiencing, and may continue to experience, increased interest expense due to higher working capital requirements; increased uncollectible accounts expense and unaccounted for gas; and some level of price sensitive reduction in volumes sold or delivered. In response to higher gas prices, the Company increased its utility-related credit facilities in November 2005.

9.	Impact of Recently Issued Accounting Guidance

FIN 48

In June 2006, the FASB issued FASB Interpretation No. 48 (FIN 48) “Accounting for Uncertainty in Income Taxes” an interpretation of SFAS 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of tax positions taken or expected to be taken in an income tax return. FIN 48 also provides guidance related to reversal of tax positions, balance sheet classification, interest and penalties, interim period accounting, disclosure and transition. The interpretation is effective for fiscal years beginning after December 15, 2006. The Company is currently assessing the impact this interpretation will have on its financial statements.

10.	Segment Reporting

The Company’s operations consist of regulated operations and other operations that provide information technology and other support services to those regulated operations. The Company segregates its regulated operations into a Gas Utility Services operating segment and an Electric Utility Services operating segment. The Gas Utility Services segment provides natural gas distribution and transportation services to nearly two-thirds of Indiana and to west central Ohio. The Electric Utility Services segment provides electric distribution services primarily to southwestern Indiana, and includes the Company’s power generating and marketing operations. The Company cross manages its regulated operations as separated between Energy Delivery, which includes the gas and electric transmission and distribution functions, and Power Supply, which includes the power generating and marketing operations. In total, regulated operations supply natural gas and /or electricity to over one million customers. For these regulated operations the Company uses after tax operating income as a measure of profitability, consistent with regulatory reporting requirements. For Utility Holdings’ other operations, net income is used as the measure of profitability. In total, there are three operating segments as defined by SFAS 131 “Disclosure About Segments of an Enterprise and Related Information” (SFAS 131).

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Information related to the Company’s business segments is summarized below:

		Three Months						Six Months
		Ended June 30,						Ended June 30,
(In millions)		2006			2005			2006			2005
Revenues
Gas Utility Services		$	159.1		$	186.0		$	731.8		$	702.7
Electric Utility Services			96.0			96.9			201.2			191.6
Other Operations			9.2			9.1			18.4			18.2
Eliminations			(8.7	)		(9.0	)		(17.5	)		(17.9	)
Consolidated Revenues		$	255.6		$	283.0		$	933.9		$	894.6
Profitability Measure
Regulated Operating Income
(Operating Income Less Applicable Income Taxes)
Gas Utility Services		$	6.5		$	5.7		$	49.9		$	50.8
Electric Utility Services			14.4			14.5			30.5			31.8
Total Regulated Operating Income			20.9			20.2			80.4			82.6
Regulated other income - net			1.0			0.3			0.9			0.2
Regulated interest expense & preferred dividends			(15.8	)		(15.2	)		(33.0	)		(31.1	)
Regulated Net Income			6.1			5.3			48.3			51.7
Other Operations Net Income			1.0			2.5			2.2			4.2
Consolidated Net Income		$	7.1		$	7.8		$	50.5		$	55.9

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Description of the Business

Vectren Utility Holdings, Inc. (Utility Holdings or the Company), an Indiana corporation, serves as the intermediate holding company for Vectren Corporation’s (Vectren) three operating public utilities: Indiana Gas Company, Inc. (Indiana Gas or Vectren North), Southern Indiana Gas and Electric Company (SIGECO or Vectren South), and the Ohio operations. Utility Holdings also has other assets that provide information technology and other services to the three utilities. Vectren is an energy holding company headquartered in Evansville, Indiana. Vectren and Utility Holdings are holding companies as defined by the Energy Policy Act of 2005.

Indiana Gas provides energy delivery services to approximately 562,000 natural gas customers located in central and southern Indiana. SIGECO provides energy delivery services to approximately 140,000 electric customers and approximately 112,000 gas customers located near Evansville in southwestern Indiana. SIGECO also owns and operates electric generation to serve its electric customers and optimizes those assets in the wholesale power market. Indiana Gas and SIGECO generally do business as Vectren Energy Delivery of Indiana. The Ohio operations provide energy delivery services to approximately 318,000 natural gas customers located near Dayton in west central Ohio. The Ohio operations are owned as a tenancy in common by Vectren Energy Delivery of Ohio, Inc. (VEDO), a wholly owned subsidiary, (53% ownership) and Indiana Gas (47% ownership). The Ohio operations generally do business as Vectren Energy Delivery of Ohio.

Executive Summary of Consolidated Results of Operations

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto.

Earnings were $7.1 million for the three months ended June 30, 2006, compared to $7.8 million in the prior year quarter and $50.5 million for the six months ended June 30, 2006, compared to $55.9 million in 2005. The $0.7 million quarter over quarter decrease, as well as the year over year $5.4 million decrease, is primarily a result of a decline in customer usage, due largely to price sensitivity. Higher depreciation and interest costs largely offset margin increases associated with higher gas base rate revenues, a 2005 second quarter Ohio gas cost disallowance, and higher electric revenues associated with recovery of pollution control investments. Both quarterly and year to date results also reflect lower wholesale power marketing margins compared to the prior year period due largely to mark-to-market gains recognized in 2005. Warmer than normal weather, net of the normal temperature adjustment (NTA) mechanism implemented in the Company’s Indiana natural gas service territories in the fourth quarter of 2005, had a minimal impact compared to the prior year periods. Year to date, management estimates the effect of weather on all utilities, net of the NTA’s impact, was unfavorable $3.0 million after tax in 2006 and unfavorable $3.6 million after tax in 2005.

The Company generates revenue primarily from the delivery of natural gas and electric service to its customers. The primary source of cash flow results from the collection of customer bills and the payment for goods and services procured for the delivery of gas and electric services. The results are impacted by weather patterns in its service territory and general economic conditions both in its service territory as well as nationally.

The Company has in place a disclosure committee that consists of senior management as well as financial management. The committee is actively involved in the preparation and review of the Company’s SEC filings.

Significant Fluctuations

Throughout this discussion, the terms Gas Utility margin and Electric Utility margin are used. Gas Utility margin is calculated as Gas utility revenues less the Cost of gas. Electric Utility margin is calculated as Electric utility revenues less Cost of fuel & purchased power. These measures exclude Other operating expenses, Depreciation and amortization, and Taxes other than income taxes, which are included in the calculation of operating income. The Company believes Gas Utility and Electric Utility margins are better indicators of relative contribution than revenues since gas prices and fuel costs can be volatile and are generally collected on a dollar-for-dollar basis from customers.

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