"From gasoline to natural gas, our nation's energy prices continue to reach new levels of what's considered 'normal' pricing," Ellerbrook said.

In providing a snapshot of an energy industry outlook, Ellerbrook noted that a national response to the international challenge of global warming appears eminent given each presidential candidate has proposed to cut carbon emissions by 65 to 80 percent in the next 40 years. This action will undoubtedly increase pressure on natural gas, which is currently seen as a substitute for coal in electric generation.

"Policymakers citing environmental concerns are either preventing or delaying the development of nuclear or coal-based generation in anticipation of carbon restraints," said Ellerbrook.

"This has put significant demand on the natural gas supply, and prices for the upcoming winter are forecast to be 25 to 30 percent higher than last winter. Natural gas distribution companies like Vectren pass on these gas costs to customers on a dollar-for-dollar basis, and as prices continue to climb, customers are absorbing the costs. Therefore, we owe it to our customers to find solutions that help ease these high prices."

According to the Energy Information Administration, U.S. electricity consumption grew nearly 30 percent from 1990 to 2003 and is projected to grow another 30 percent by 2020. This rising demand for electricity will require the U.S. to spend $850 billion in the next 15 years for new generation, transmission and distribution facilities and emissions control equipment, according to Cambridge Energy Research Associates.

Ellerbrook turned to potential solutions, both national and local, that may help provide much-needed relief in the ever-changing energy arena. New supply through broader access to natural gas reserves must be part of the solution.

While supply growth is critical, even more emphasis on energy efficiency and conservation in curbing the nation's collective energy appetite will be required. America's economic future depends upon finding the elusive balance between the supply and demand of its energy resources.

"While Congress considers environmental legislation in response to an international challenge, the financial impact these changes may have on the economy and ultimately the customer/voter must be kept at the forefront," Ellerbrook added.

"Regardless, coal can and must remain a part of our nation's energy portfolio given its abundant domestic reserves, nuclear energy will need to re-emerge and renewable energy sources will play an increasingly significant role. Furthermore, the efficient use of natural gas is rising in importance. Natural gas is best employed directly in home use such as space and water heating instead of the less efficient use of fueling electric baseload generation. More efficient utilization will, over time, have the effect of easing price pressures."

Local Solutions
Vectren has taken the lead in providing regional solutions in gas conservation efforts and education through its Conservation Connection program. To date, more than $3 million have been distributed to Vectren's Hoosier customers for rebates on high-efficiency gas appliances, which have led to annual savings of nearly 1.5 million therms or more than $1 million in avoided gas costs.

The company has also filed for similar conservation programs in Ohio and for its electric customers in southwestern Indiana. In addition, renewable energy has been added to Vectren's generation portfolio by purchasing 30 megawatts of wind power from a Benton County, Ind., wind farm.

"We have worked hard to create a framework that aligns our interests with our customers in lowering energy consumption," said Ellerbrook.

"The least expensive and most environment-friendly kilowatt is one that's never produced, and the same statement holds true for the gas industry in that the least expensive therm of natural gas is the one not delivered. As Americans, we must adapt our lifestyles to use less energy. It's the only way we can bear and eventually overcome our nation's energy crisis."

Ellerbrook also provided a 2007 financial and operational overview, which focused on reliable earnings delivered from its core utility business. The company continues to tout its strong dividend performance that boasts 48 consecutive years of increases.

Ellerbrook then called upon shareholders to urge Congress to permanently extend the federal tax rate paid by individuals on corporate dividends, which is currently 15 percent.

"Our shareholders, most of whom are retirees using dividends for daily living expenses, experience unfair double taxation on their dividend," said Ellerbrook.

"Tax relief not only supports the individual investor, but makes utility stocks appealing. The ability to attract competitively priced capital lowers our expenses ultimately benefiting the customer."

At the meeting, shareholders voted to re-elect all 13 members of the current board of directors to a one-year term.

Vectren shareholders also ratified the reappointment of Deloitte and Touche LLP as the independent accountants for the company and its subsidiaries in 2008.

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