Edgar Filing: VECTREN UTILITY HOLDINGS INC

vuhi_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

[_]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________

Commission file number: 1-16739

VECTREN UTILITY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

INDIANA		35-2104850
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

One Vectren Square, Evansville, IN 47708

(Address of principal executive offices)

(Zip Code)

812-491-4000

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. xYes □ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes □ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer □ Accelerated filer □

Non-accelerated filer x (Do not check if a smaller reporting company) Smaller reporting company □

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

□ Yes xNo

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	October 31, 2011
Class	Number of Shares	Date

Access to Information

Vectren Corporation makes available all SEC filings and recent annual reports, including those of its wholly owned subsidiaries, free of charge through its website at www.vectren.com as soon as reasonably practicable after electronically filing or furnishing the reports to the SEC, 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:

Robert L. Goocher

Treasurer and Vice President, Investor Relations

rgoocher@vectren.com

Definitions

AFUDC: allowance for funds used during construction	MMBTU: millions of British thermal units
EPA: United States Environmental Protection Agency	MW: megawatts
FASB: Financial Accounting Standards Board	MWh / GWh: megawatt hours / thousands of megawatt hours (gigawatt hours)
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 / BCF: thousands / billions of cubic feet	Throughput: combined gas sales and gas transportation volumes
MDth / MMDth: thousands / millions of dekatherms	XBRL: eXtensible Business Reporting Language
MISO: Midwest Independent System Operator

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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
	Condensed Consolidated Balance Sheets	4-5
	Condensed Consolidated Statements of Income	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
3	Quantitative and Qualitative Disclosures About Market Risk	36
4	Controls and Procedures	36

	PART II. OTHER INFORMATION
1	Legal Proceedings	37
1A	Risk Factors	37
6	Exhibits	37
	Signatures	38

-3-

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VECTREN UTILITY HOLDINGS, INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited – In millions)


	September 30,		December 31,
	2011		2010
ASSETS
Current Assets
Cash & cash equivalents	$	6.0	$	2.4
Accounts receivable - less reserves of $5.9 & $4.5, respectively		60.5		106.7
Receivables due from other Vectren companies		0.2		0.1
Accrued unbilled revenues		36.7		127.8
Inventories		144.4		135.2
Recoverable fuel & natural gas costs		16.0		7.9
Prepayments & other current assets		78.0		83.4
Total current assets		341.8		463.5

Utility Plant
Original cost		4,937.6		4,791.7
Less: accumulated depreciation & amortization		1,922.2		1,836.3
Net utility plant		3,015.4		2,955.4

Investments in unconsolidated affiliates		0.2		0.2
Other investments		31.6		31.3
Nonutility plant - net		157.9		167.2
Goodwill - net		205.0		205.0
Regulatory assets		88.7		96.9
Other assets		40.2		5.0
TOTAL ASSETS	$	3,880.8	$	3,924.5

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

-4-

VECTREN UTILITY HOLDINGS, INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited – In millions)


	September 30,		December 31,
	2011		2010
LIABILITIES & SHAREHOLDER'S EQUITY

Current Liabilities
Accounts payable	$	68.8	$	126.0
Accounts payable to affiliated companies		25.4		59.3
Payables to other Vectren companies		31.5		48.7
Accrued liabilities		121.9		135.9
Short-term borrowings		38.3		47.0
Current maturities of long-term debt		100.0		250.0
Long-term debt subject to tender		-		30.0
Total current liabilities		385.9		696.9

Long-Term Debt - Net of Current Maturities & Debt Subject to Tender		1,204.4		1,024.8
Deferred Income Taxes & Other Liabilities
Deferred income taxes		519.0		474.7
Regulatory liabilities		341.0		333.5
Deferred credits & other liabilities		91.1		79.2
Total deferred credits & other liabilities		951.1		887.4
Commitments & Contingencies (Notes 8 - 10)

Common Shareholder's Equity
Common stock (no par value)		774.6		774.6
Retained earnings		564.8		540.7
Accumulated other comprehensive income		-		0.1
Total common shareholder's equity		1,339.4		1,315.4

TOTAL LIABILITIES & SHAREHOLDER'S EQUITY	$	3,880.8	$	3,924.5

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

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VECTREN UTILITY HOLDINGS, INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited – In millions)


	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2011		2010		2011		2010
OPERATING REVENUES
Gas utility	$	102.1	$	101.8	$	592.8	$	692.8
Electric utility		186.7		173.2		492.4		469.1
Other		0.5		0.4		1.5		1.2
Total operating revenues		289.3		275.4		1,086.7		1,163.1

OPERATING EXPENSES
Cost of gas sold		30.5		32.4		274.4		371.7
Cost of fuel & purchased power		67.1		64.5		186.9		180.3
Other operating		66.7		70.5		231.8		223.3
Depreciation & amortization		47.8		47.2		143.9		140.5
Taxes other than income taxes		11.6		11.2		40.7		45.1
Total operating expenses		223.7		225.8		877.7		960.9

OPERATING INCOME		65.6		49.6		209.0		202.2

Other income - net		0.1		0.9		4.0		3.9

Interest expense		20.4		20.4		61.2		61.0

INCOME BEFORE INCOME TAXES		45.3		30.1		151.8		145.1

Income taxes		17.4		11.4		59.0		54.8

NET INCOME	$	27.9	$	18.7	$	92.8	$	90.3

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

-6-

VECTREN UTILITY HOLDINGS, INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited – In millions)


	Nine Months Ended September 30,
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	92.8		$	90.3
Adjustments to reconcile net income to cash from operating activities:
Depreciation & amortization		143.9			140.5
Deferred income taxes & investment tax credits		49.8			31.8
Expense portion of pension & postretirement periodic benefit cost		3.4			3.1
Provision for uncollectible accounts		9.0			12.9
Other non-cash expense - net		7.9			10.0
Changes in working capital accounts:
Accounts receivable, including to Vectren companies & accrued unbilled revenue		128.2			115.9
Inventories		(9.2	)		(8.6	)
Recoverable/refundable fuel & natural gas costs		(8.1	)		(34.8	)
Prepayments & other current assets		14.4			(14.9	)
Accounts payable, including to Vectren companies & affiliated companies		(111.7	)		(111.4	)
Accrued liabilities		(13.8	)		0.2
Changes in noncurrent assets		(49.7	)		(9.3	)
Changes in noncurrent liabilities		(4.3	)		(18.4	)
Net cash flows from operating activities		252.6			207.3
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from:
Additional capital contribution		-			4.6
Requirements for:
Dividends to parent		(68.7	)		(59.8	)
Retirement of long-term debt		(0.7	)		(1.6	)
Net change in short-term borrowings, including from other Vectren companies		(8.7	)		9.6
Net cash flows from financing activities		(78.1	)		(47.2	)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from other investing activities		0.4			3.0
Requirements for:
Capital expenditures, excluding AFUDC equity		(170.5	)		(163.4	)
Other investments		(0.8	)		(1.1	)
Net cash flows from investing activities		(170.9	)		(161.5	)
Net change in cash & cash equivalents		3.6			(1.4	)
Cash & cash equivalents at beginning of period		2.4			6.2
Cash & cash equivalents at end of period	$	6.0		$	4.8

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

-7-

VECTREN UTILITY HOLDINGS, INC. AND SUBSIDIARY COMPANIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1.	Organization & Nature of Operations

Vectren Utility Holdings, Inc. (the Company or Utility Holdings), an Indiana corporation, was formed on March 31, 2000 to serve 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 (VEDO or Vectren Ohio). Utility Holdings also has other assets that provide information technology and other services to the three utilities. Vectren, an Indiana corporation, is an energy holding company headquartered in Evansville, Indiana and was organized on June 10, 1999. Both Vectren and Utility Holdings are holding companies as defined by the Energy Policy Act of 2005 (Energy Act).

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 141,000 electric customers and approximately 110,000 gas customers located near Evansville in southwestern Indiana. SIGECO also owns and operates electric generation assets 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 over 310,000 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 of Utility Holdings (53 percent ownership), and Indiana Gas (47 percent ownership). The Ohio operations generally do business as Vectren Energy Delivery of Ohio.

2.	Basis of Presentation

The interim condensed consolidated 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 and include a review of subsequent events through the date the financial statements were issued. 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 information in this report reflects all adjustments which are, in the opinion of management, necessary to fairly state the interim periods presented, inclusive of adjustments that are normal and recurring in nature. These condensed consolidated 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, 2010, filed with the Securities and Exchange Commission on March 4, 2011, on Form 10-K. 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’ $350 million in short-term credit facilities, of which approximately $38 million is outstanding at September 30, 2011, and Utility Holdings’ $918 million unsecured senior notes outstanding at September 30, 2011. 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 Item 3-10 of Regulation S-X, disclosure of the results of operations and balance sheets of the subsidiary guarantors, which are 100 percent owned, 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. Pursuant to a tax sharing agreement, consolidating tax effects, which are calculated on a separate return basis, are reflected at the parent level.

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Condensed Consolidating Balance Sheet as of September 30, 2011 (in millions):



ASSETS	Subsidiary		Parent			Eliminations &
	Guarantors		Company			Reclassifications			Consolidated
Current Assets
Cash & cash equivalents	$	4.5	$	1.5		$	-		$	6.0
Accounts receivable - less reserves		60.5		-			-			60.5
Intercompany receivables		42.5		384.1			(426.6	)		-
Receivables due from other Vectren companies		-		0.2			-			0.2
Accrued unbilled revenues		36.7		-			-			36.7
Inventories		144.4		-			-			144.4
Recoverable fuel & natural gas costs		16.0		-			-			16.0
Prepayments & other current assets		72.8		12.1			(6.9	)		78.0
Total current assets		377.4		397.9			(433.5	)		341.8
Utility Plant
Original cost		4,937.6		-			-			4,937.6
Less: accumulated depreciation & amortization		1,922.2		-			-			1,922.2
Net utility plant		3,015.4		-			-			3,015.4
Investments in consolidated subsidiaries		-		1,262.3			(1,262.3	)		-
Notes receivable from consolidated subsidiaries		-		520.6			(520.6	)		-
Investments in unconsolidated affiliates		0.2		-			-			0.2
Other investments		26.6		5.0			-			31.6
Nonutility property - net		3.3		154.6			-			157.9
Goodwill - net		205.0		-			-			205.0
Regulatory assets		66.4		22.3			-			88.7
Other assets		43.9		3.0			(6.7	)		40.2
TOTAL ASSETS	$	3,738.2	$	2,365.7		$	(2,223.1	)	$	3,880.8


LIABILITIES & SHAREHOLDER'S EQUITY	Subsidiary		Parent			Eliminations &
	Guarantors		Company			Reclassifications			Consolidated
Current Liabilities
Accounts payable	$	57.3	$	11.5		$	-		$	68.8
Accounts payable to affiliated companies		25.4		-			-			25.4
Intercompany payables		25.8		-			(25.8	)		-
Payables to other Vectren companies		31.3		0.2			-			31.5
Accrued liabilities		105.0		23.8			(6.9	)		121.9
Short-term borrowings		-		38.3			-			38.3
Intercompany short-term borrowings		110.9		42.5			(153.4	)		-
Current maturities of long-term debt		-		100.0			-			100.0
Current maturities of intercompany long-term debt		247.4		-			(247.4	)		-
Long-term debt subject to tender		-		-			-			-
Total current liabilities		603.1		216.3			(433.5	)		385.9
Long-Term Debt
Long-term debt - net of current maturities & debt subject to tender		387.2		817.2			-			1,204.4
Long-term debt due to VUHI		520.6		-			(520.6	)		-
Total long-term debt - net		907.8		817.2			(520.6	)		1,204.4
Deferred Income Taxes & Other Liabilities
Deferred income taxes		530.6		(11.6	)		-			519.0
Regulatory liabilities		338.2		2.8			-			341.0
Deferred credits & other liabilities		96.2		1.6			(6.7	)		91.1
Total deferred credits & other liabilities		965.0		(7.2	)		(6.7	)		951.1
Common Shareholder's Equity
Common stock (no par value)		787.8		774.6			(787.8	)		774.6
Retained earnings		474.5		564.8			(474.5	)		564.8
Total common shareholder's equity		1,262.3		1,339.4			(1,262.3	)		1,339.4

TOTAL LIABILITIES & SHAREHOLDER'S EQUITY	$	3,738.2	$	2,365.7		$	(2,223.1	)	$	3,880.8

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Condensed Consolidating Balance Sheet as of December 31, 2010 (in millions):



ASSETS	Subsidiary		Parent			Eliminations &
	Guarantors		Company			Reclassifications			Consolidated
Current Assets
Cash & cash equivalents	$	2.0	$	0.4		$	-		$	2.4
Accounts receivable - less reserves		106.7		-			-			106.7
Intercompany receivables		65.9		162.2			(228.1	)		-
Receivables due from other Vectren companies		0.1		-			-			0.1
Accrued unbilled revenues		127.8		-			-			127.8
Inventories		135.2		-			-			135.2
Recoverable fuel & natural gas costs		7.9		-			-			7.9
Prepayments & other current assets		97.2		2.4			(16.2	)		83.4
Total current assets		542.8		165.0			(244.3	)		463.5
Utility Plant
Original cost		4,791.7		-			-			4,791.7
Less: accumulated depreciation & amortization		1,836.3		-			-			1,836.3
Net utility plant		2,955.4		-			-			2,955.4
Investments in consolidated subsidiaries		-		1,239.1			(1,239.1	)		-
Notes receivable from consolidated subsidiaries		-		768.7			(768.7	)		-
Investments in unconsolidated affiliates		0.2		-			-			0.2
Other investments		26.1		5.2			-			31.3
Nonutility property - net		3.7		163.5			-			167.2
Goodwill - net		205.0		-			-			205.0
Regulatory assets		73.7		23.2			-			96.9
Other assets		21.5		1.7			(18.2	)		5.0
TOTAL ASSETS	$	3,828.4	$	2,366.4		$	(2,270.3	)	$	3,924.5


LIABILITIES & SHAREHOLDER'S EQUITY	Subsidiary		Parent			Eliminations &
	Guarantors		Company			Reclassifications			Consolidated
Current Liabilities
Accounts payable	$	116.0	$	10.0		$	-		$	126.0
Accounts payable to affiliated companies		59.3		-			-			59.3
Intercompany payables		16.9		-			(16.9	)		-
Payables to other Vectren companies		48.7		-			-			48.7
Accrued liabilities		124.3		27.8			(16.2	)		135.9
Short-term borrowings		-		47.0			-			47.0
Intercompany short-term borrowings		145.1		65.9			(211.0	)		-
Current maturities of long-term debt		-		250.0			-			250.0
Long-term debt subject to tender		30.0		-			-			30.0
Total current liabilities		540.3		400.7			(244.1	)		696.9
Long-Term Debt
Long-term debt - net of current maturities & debt subject to tender		357.1		667.7			-			1,024.8
Long-term debt due to VUHI		768.7		-			(768.7	)		-
Total long-term debt - net		1,125.8		667.7			(768.7	)		1,024.8
Deferred Income Taxes & Other Liabilities
Deferred income taxes		496.9		(22.1	)		(0.1	)		474.7
Regulatory liabilities		330.2		3.3			-			333.5
Deferred credits & other liabilities		96.1		1.4			(18.3	)		79.2
Total deferred credits & other liabilities		923.2		(17.4	)		(18.4	)		887.4
Common Shareholder's Equity
Common stock (no par value)		787.8		774.6			(787.8	)		774.6
Retained earnings		451.2		540.7			(451.2	)		540.7
Accumulated other comprehensive income		0.1		0.1			(0.1	)		0.1
Total common shareholder's equity		1,239.1		1,315.4			(1,239.1	)		1,315.4

TOTAL LIABILITIES & SHAREHOLDER'S EQUITY	$	3,828.4	$	2,366.4		$	(2,270.3	)	$	3,924.5

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Condensed Consolidating Statement of Income for the three months ended September 30, 2011 (in millions):


	Subsidiary			Parent		Eliminations &
	Guarantors			Company		Reclassifications			Consolidated
OPERATING REVENUES
Gas utility	$	102.1		$	-	$	-		$	102.1
Electric utility		186.7			-		-			186.7
Other		-			11.0		(10.5	)		0.5
Total operating revenues		288.8			11.0		(10.5	)		289.3
OPERATING EXPENSES
Cost of gas sold		30.5			-		-			30.5
Cost of fuel & purchased power		67.1			-		-			67.1
Other operating		77.0			-		(10.3	)		66.7
Depreciation & amortization		40.9			6.8		0.1			47.8
Taxes other than income taxes		11.2			0.4		-			11.6
Total operating expenses		226.7			7.2		(10.2	)		223.7
OPERATING INCOME		62.1			3.8		(0.3	)		65.6

Other income (loss) - net		(0.1	)		12.6		(12.4	)		0.1

Interest expense		18.9			14.2		(12.7	)		20.4

INCOME BEFORE INCOME TAXES		43.1			2.2		-			45.3

Income taxes		17.1			0.3		-			17.4

Equity in earnings of consolidated companies, net of tax		-			26.0		(26.0	)		-

NET INCOME	$	26.0		$	27.9	$	(26.0	)	$	27.9

Condensed Consolidating Statement of Income for the three months ended September 30, 2010 (in millions):


	Subsidiary		Parent		Eliminations &
	Guarantors		Company		Reclassifications			Consolidated
OPERATING REVENUES
Gas utility	$	101.8	$	-	$	-		$	101.8
Electric utility		173.2		-		-			173.2
Other		-		11.1		(10.7	)		0.4
Total operating revenues		275.0		11.1		(10.7	)		275.4
OPERATING EXPENSES
Cost of gas		32.4		-		-			32.4
Cost of fuel & purchased power		64.5		-		-			64.5
Other operating		81.1		-		(10.6	)		70.5
Depreciation & amortization		40.3		6.7		0.2			47.2
Taxes other than income taxes		10.8		0.4		-			11.2
Total operating expenses		229.1		7.1		(10.4	)		225.8
OPERATING INCOME		45.9		4.0		(0.3	)		49.6

Other income - net		0.6		12.7		(12.4	)		0.9

Interest expense		18.9		14.2		(12.7	)		20.4

INCOME BEFORE INCOME TAXES		27.6		2.5		-			30.1

Income taxes		10.8		0.6		-			11.4

Equity in earnings of consolidated companies, net of tax		-		16.8		(16.8	)		-

NET INCOME	$	16.8	$	18.7	$	(16.8	)	$	18.7

-11-

Condensed Consolidating Statement of Income for the nine months ended September 30, 2011 (in millions):


	Subsidiary		Parent		Eliminations &
	Guarantors		Company		Reclassifications			Consolidated
OPERATING REVENUES
Gas utility	$	592.8	$	-	$	-		$	592.8
Electric utility		492.4		-		-			492.4
Other		-		32.9		(31.4	)		1.5
Total operating revenues		1,085.2		32.9		(31.4	)		1,086.7
OPERATING EXPENSES
Cost of gas sold		274.4		-		-			274.4
Cost of fuel & purchased power		186.9		-		-			186.9
Other operating		263.0		-		(31.2	)		231.8
Depreciation & amortization		123.2		20.3		0.4			143.9
Taxes other than income taxes		39.6		1.1		-			40.7
Total operating expenses		887.1		21.4		(30.8	)		877.7
OPERATING INCOME		198.1		11.5		(0.6	)		209.0

Other income - net		3.1		38.3		(37.4	)		4.0

Interest expense		56.5		42.7		(38.0	)		61.2

INCOME BEFORE INCOME TAXES		144.7		7.1		-			151.8

Income taxes		58.1		0.9		-			59.0

Equity in earnings of consolidated companies, net of tax		-		86.6		(86.6	)		-

NET INCOME	$	86.6	$	92.8	$	(86.6	)	$	92.8

Condensed Consolidating Statement of Income for the nine months ended September 30, 2010 (in millions):


	Subsidiary		Parent		Eliminations &
	Guarantors		Company		Reclassifications			Consolidated
OPERATING REVENUES
Gas utility	$	692.8	$	-	$	-		$	692.8
Electric utility		469.1		-		-			469.1
Other		-		33.3		(32.1	)		1.2
Total operating revenues		1,161.9		33.3		(32.1	)		1,163.1
OPERATING EXPENSES
Cost of gas		371.7		-		-			371.7
Cost of fuel & purchased power		180.3		-		-			180.3
Other operating		255.2		-		(31.9	)		223.3
Depreciation & amortization		120.2		20.0		0.3			140.5
Taxes other than income taxes		43.9		1.1		0.1			45.1
Total operating expenses		971.3		21.1		(31.5	)		960.9
OPERATING INCOME		190.6		12.2		(0.6	)		202.2

Other income - net		3.0		38.3		(37.4	)		3.9

Interest expense		56.3		42.7		(38.0	)		61.0

INCOME BEFORE INCOME TAXES		137.3		7.8		-			145.1

Income taxes		53.9		0.9		-			54.8

Equity in earnings of consolidated companies, net of tax		-		83.4		(83.4	)		-

NET INCOME	$	83.4	$	90.3	$	(83.4	)	$	90.3

-12-

Condensed Consolidating Statement of Cash Flows for the nine months ended September 30, 2011 (in millions):


	Subsidiary			Parent
	Guarantors			Company			Eliminations			Consolidated

NET CASH FLOWS FROM OPERATING ACTIVITIES	$	237.5		$	15.1		$	-		$	252.6

CASH FLOWS FROM FINANCING ACTIVITIES
Requirements for:
Dividends to parent		(63.3	)		(68.7	)		63.3			(68.7	)
Retirement of long-term debt, including premiums paid		(0.7	)		(0.7	)		0.7			(0.7	)
Net change in intercompany short-term borrowings		(34.3	)		(23.5	)		57.8			-
Net change in short-term borrowings		-			(8.7	)		-			(8.7	)
Net cash flows from financing activities		(98.3	)		(101.6	)		121.8			(78.1	)

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from
Consolidated subsidiary distributions		-			63.3			(63.3	)		-
Other investing activities		0.2			0.2			-			0.4
Requirements for:
Capital expenditures, excluding AFUDC equity		(159.6	)		(10.9	)		-			(170.5	)
Other investing activities		(0.8	)		-			-			(0.8	)
Net change in long-term intercompany notes receivable		-			0.7			(0.7	)		-
Net change in short-term intercompany notes receivable		23.5			34.3			(57.8	)		-
Net cash flows from investing activities		(136.7	)		87.6			(121.8	)		(170.9	)
Net change in cash & cash equivalents		2.5			1.1			-			3.6
Cash & cash equivalents at beginning of period		2.0			0.4			-			2.4
Cash & cash equivalents at end of period	$	4.5		$	1.5		$	-		$	6.0

Condensed Consolidating Statement of Cash Flows for the nine months ended September 30, 2010 (in millions):


	Subsidiary			Parent
	Guarantors			Company			Eliminations			Consolidated

NET CASH FLOWS FROM OPERATING ACTIVITIES	$	166.5		$	40.8		$	-		$	207.3

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from additional capital contribution from parent		4.6			4.6			(4.6	)		4.6
Requirements for:
Dividends to parent		(51.1	)		(59.8	)		51.1			(59.8	)
Retirement of long-term debt, including premiums paid		(1.6	)		(1.6	)		1.6			(1.6	)
Net change in intercompany short-term borrowings		4.6			(18.4	)