VECTREN CORP
U-1/A, 2000-10-05
GAS & OTHER SERVICES COMBINED
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                                File No. 70-9703

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                ------------------------------------------------

                                   FORM U-1/A

                               AMENDMENT NO. 3 TO

                                   DECLARATION

                                      UNDER

                 THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935

                ------------------------------------------------

                               VECTREN CORPORATION

                          VECTREN UTILITY HOLDINGS INC.
                              20 N.W. Fourth Street

                               Post Office Box 209

                         Evansville, Indiana 47702-0209

              (Names of company or companies filing this statement
                  and addresses of principal executive offices)
                ------------------------------------------------

                                 Not applicable

                (Name of top registered holding company parent of
                          each applicant or declarant)
                ------------------------------------------------

                               Ronald E. Christian

              Senior Vice President, General Counsel and Secretary

                               Vectren Corporation

                               Post Office Box 209

                         Evansville, Indiana 47702-0209

                     (Name and address of agent for service)
                 -----------------------------------------------

                                       1

<PAGE>



The  Commission  is  requested  to  send  copies  of  all  notices,  orders  and
communications in connection with this application to:

                               Joanne C. Rutkowski
                     LeBoeuf, Lamb, Greene & MacRae, L.L.P.
                          1875 Connecticut Avenue, N.W.

                             Washington, D.C. 20009

                                       2

<PAGE>



                                TABLE OF CONTENTS

Item 1. Description of Proposed Transactions

     A. Introduction
     B. Description of the Companies
        1. Vectren Corporation
        2. The Dayton Power & Light Company
     C. The Proposed Transactions
        1. The Intermediate Holdco
        2. Acquisition of the DP&L Assets
     D. Utility Regulation

Item 2. Fees, Commissions and Expenses

Item 3. Statutory Analysis

     A. Applicable Statutory Provisions
     B. Legal Analysis
        1. Section 10(b)(1)
        2. Section 10(b)(2)
        3. Section 10(b)(3)
        4. Section 10(c)(1)
        5. Section 10(c)(2)
        6. Section 10(f)
        7. Section 3(a)(1)

Item 4. Regulatory Approvals

     A. Antitrust
     B. FERC
     C. State Regulation

Item 5. Procedure

Item 6. Exhibits and Financial Statements

     A. Exhibits
     B. Financial Statements


Item 7. Information as to Environmental Effects

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<PAGE>



     ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS

     This Pre-Effective Amendment No. 3 amends in its entirety the Form U-1 that
was filed with the  Securities  and Exchange  Commission  on June 16, 2000,  and
amended on June 20, 2000 and October 4, 2000.

     A. Introduction.

     Vectren  Corporation  ("Vectren")  is  seeking  approval  under the  Public
Utility  Holding  Company  Act of 1935 (the "1935  Act" or "Act") in  connection
with:  (i)  the  formation  of  an   intermediate   holding   company  over  its
public-utility  subsidiaries  and (ii) the  indirect  acquisition,  through  the
Intermediate  Holdco,  of a public utility company that will hold certain of the
natural gas  distribution  assets of The Dayton Power & Light  Company  ("DP&L")
(collectively, the "Transactions"). Vectren is a recently created Indiana public
utility holding company that claims exemption from registration pursuant to Rule
2 under Section 3(a)(1) of the Act.  Following  completion of the  Transactions,
Vectren and the intermediate  holding company will qualify as exempt  intrastate
holding  companies  and so ask the  Commission  to issue an order  granting them
exemptions under Section 3(a)(1) of the Act.

     B. Description of the Companies

     1. Vectren

     Vectren  was  formed on March  31,  2000 from the  combination  of  Indiana
Energy, Inc. and SIGCORP, Inc. Vectren Corporation,  Holding Co. Act Release No.
27150 (March 8, 2000) (the "March Order"). Through its public-utility subsidiary
companies,  Southern  Indiana Gas and  Electric  Company  ("SIGECO"),  Community
Natural Gas Company, Inc.  ("Community") and Indiana Gas Company, Inc. ("Indiana
Gas"),  Vectren  provides  electric  and/or gas utility  service to customers in
Southern and Central Indiana

     Indiana Gas  provides gas  distribution  service to  approximately  510,000
customers in Indiana.  For the twelve months  ending June 30, 2000,  Indiana Gas
had  operating   revenues  of   approximately   $455.7  million  and  assets  of
approximately $698.3 million.

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<PAGE>

     The  properties  of  Indiana  Gas  used  for the  production,  storage  and
distribution  of gas are located solely within the state of Indiana,  except for
pipeline  facilities  extending  from points in  northern  Kentucky to points in
southern  Indiana,  by means of which gas is  transported to Indiana for sale or
transportation  by Indiana Gas to  ultimate  customers  in Indiana.  Indiana Gas
purchases approximately 50% of its total system gas supply requirements from the
Gulf Coast  production  basin,  and  approximately  48% from  production  in the
Mid-Continent  basin. The interstate  pipelines that transport pipeline supplies
to the Indiana Gas service territory  include ANR Pipeline Company ("ANR"),  CMS
Panhandle Eastern Pipeline Company,  Texas Eastern Transmission  Company,  Texas
Gas Transmission Corporation and Midwestern Gas Transmission Company (via ANR).

     SIGECO provides  electric  distribution  service at retail to approximately
126,000 customers and retail gas distribution to approximately 107,000 customers
in Indiana.  In 1999,  SIGECO had  operating  revenues of  approximately  $385.5
million  and  assets of  approximately  $878.4  million.  SIGECO's  gas  utility
operations  are located in a single  contiguous  area in  southwestern  Indiana.
SIGECO purchases nearly 100% of its system supply gas requirements from the Gulf
Coast  production  basin,  particularly  in the on-shore and offshore  Texas and
Louisiana  producing  regions.  SIGECO  has  contracted  for  firm  transmission
capacity on five interstate gas pipelines:  Texas Gas Transmission  Corporation,
Midwestern Gas Transmission  Company,  Tennessee Gas Pipeline  Company,  ANR Gas
Pipeline Company and Texas Eastern Transmission Corporation.

     Vectren  also owns  approximately  33% of the  outstanding  common stock of
Community,  a small  Indiana gas  distribution  company.  Community  has several
service territories in southwestern Indiana that are adjacent to or near the gas
service  territory of SIGECO.  Community  has 6,638  natural gas  customers  and
approximately 470 miles of distribution mains.

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<PAGE>


     In the March  Order,  the  Commission  found  "substantial"  evidence  that
Indiana Gas,  SIGECO and Community  share a common source of supply,  within the
meaning of Section  2(a)(29)(B),  in that the utilities "derive their gas supply
predominantly  from the Gulf Coast  production  basin." The  Commission  further
found that the SIGECO  electric  operations  constitute an  integrated  electric
utility  system within the meaning of Section  2(a)(29)(A)  and,  further,  that
there is "de facto integration" of the Vectren electric and gas systems.

     Vectren  owns a number  of  additional  non-utility  subsidiaries  that are
described in Appendix A.

     2. DP&L

     DP&L is a wholly owned  subsidiary of DPL, Inc., a public  utility  holding
company that claims exemption from registration pursuant to Rule 2 under Section
3(a)(1).  DP&L  provides  electric  and gas service to customers in west central
Ohio. For the twelve months ended June 30, 2000, DP&L had  approximately  $219.4
million  of  gross  operating  revenues  from  its gas  utility  operations  and
approximately  $425 million in gas assets as of June 30, 2000. Of interest here,
DP&L provides retail gas distribution to approximately 300,000 customers.  Under
DP&L's  operation,  the gas assets were  supported  by long-term  firm  pipeline
transportation  agreements with ANR Gas Pipeline Company, Texas Gas Transmission
Corporation,  CMS Panhandle Eastern Pipe Line Company, Columbia Gas Transmission
Corporation  and  Columbia  Gulf  Transmission  Corporation.   Along  with  firm
transportation  services,  DP&L has  approximately 14 billion cubic feet of firm
storage service with various pipelines.

     In addition,  DP&L is  interconnected  with CNG  Transmission  Corporation.
Interconnections  with  interstate  pipelines  provide DP&L the  opportunity  to
purchase  competitively priced natural gas supplies and pipeline services.  DP&L
purchases its natural gas supplies  using a portfolio  approach  that  minimizes
price risks and ensures  sufficient  firm  supplies  at peak demand  times.  The

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<PAGE>

portfolio consists of long-term, short-term and spot supply agreements. In 1999,
firm agreements  provided  approximately 60% of total supply, with the remaining
supplies purchased on a spot/short-term  basis. DP&L purchases the vast majority
of its total system gas supply requirements at the Lebanon Hub, through the Gulf
Coast production basin, the Mid-Continent basin and the Appalachian basin.

     DP&L  interstate  pipeline  contracts that are used in connection  with the
operation of the gas assets will be  transferred to Vectren as part of the asset
acquisition.  The  existing  DP&L  commodity  purchase  contracts  will  not  be
transferred to Vectren.  Instead,  Vectren will access commodity through the use
of transferred  transportation contracts from the same sources that historically
have been available to DP&L.

     C. The Proposed Transactions

     1. Intermediate Holdco

     Vectren has established a new Indiana subsidiary, Vectren Utility Holdings,
Inc. ("VUHI") that will serve as the intermediate  holding company for Vectren's
utility   interests.   Vectren   will   contribute   the  common  stock  of  its
public-utility  subsidiary  companies to VUHI,  which will qualify for exemption
under  Section  3(a)(1) of the Act. By order  dated  August 16,  2000,  the FERC
approved  the  formation  of the  Intermediate  Holdco.  Southern  Indiana Gas &
Electric Co., FERC Docket No.  EC00-113-000  (a copy of the order is attached as
Exhibit D-2.2).

     2. Acquisition of the DP&L Assets

     Vectren and one of its subsidiaries,  Vectren Energy Delivery of Ohio, Inc.
(formerly Number-3CHK, Inc.) (referred to here as "OhioCo") have entered into an
agreement  to purchase  certain of the natural gas  distribution  assets of DP&L
(the "DP&L Assets") for a purchase price of approximately $425 million.  Vectren
proposes to acquire the DP&L Assets as a tenancy in common  through two separate
subsidiaries:  Indiana Gas will acquire an approximately 47% ownership  interest

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<PAGE>

in the DP&L  Assets and OhioCo  will  acquire the  remaining  approximately  53%
ownership  interest  in the DP&L  Assets.  OhioCo  will be the  operator of DP&L
Assets. Because Ohio law requires domestic incorporation of any entity providing
utility  services in Ohio, to ensure that it complies with Ohio law, Indiana Gas
has incorporated under Ohio, as well as Indiana, law.

     D. Utility Regulation

     Indiana Gas,  SIGECO and  Community  are subject to broad  regulation as to
rates  and other  matters,  including  affiliate  transactions,  by the  Indiana
Utility Regulatory Commission ("Indiana  Commission").  After the acquisition of
the DP&L Assets, the gas distribution system jointly owned by OhioCo and Indiana
Gas (the "Ohio  System")  will be subject  to broad  regulation  as to rates and
other matters by The Public Utilities Commission of Ohio ("Ohio Commission").

     By order dated July 11, 2000,  the Ohio  Commission  authorized  OhioCo and
Indiana Gas to acquire the DP&L Assets.  Vectren Energy of Ohio,  Inc., Case No.
00-524-GA-ATR (the "Ohio Order") (a copy of the Ohio Order is attached hereto as
Exhibit D-1.3).  In approving the  acquisition,  the Ohio  Commission  expressly
noted that the transaction  structure was intended to help Vectren  maintain its
exempt status. Of interest here, the Ohio Order notes:

          On June 8, 2000,  joint  petitioners  filed a supplement  to the joint
          petition.  Since the  filing of the joint  petition,  Vectren  and IGC
          consulted with the SEC staff.  Pursuant to that consultation,  Vectren
          and IGC intend to proceed with the  acquisition of the DP&L gas assets
          pursuant  to the  following  structure:  1) [OhioCo]  will  acquire an
          approximate 53 percent ownership  interest in the gas assets,  and IGC
          will acquire an approximate 47 percent ownership  interest in the DP&L
          gas assets; 2) Vectren will be the operator of the DP&L gas assets and
          IGC has now incorporated  under Ohio law; 3) the DP&L gas assets to be
          jointly  owned by [OhioCo] and IGC will be  operationally  combined so
          that  effectively they will be operated in Ohio by Vectren as a single
          entity;  and 4) the combined  enterprise will maintain a single tariff
          applicable  to Ohio  customers and provide gas service to customers in
          the name of Vectren. To effectuate the operational combination,  joint
          petitioners  request that the Commission provide accounting  authority

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<PAGE>

          sufficient in all respects for Vectren to maintain such books,  system
          of accounts,  depreciation  reserve or fund,  and any other records as
          [OhioCo] and IGC may reasonably require to lawfully own, operate,  and
          maintain  the DP&L gas assets in  accordance  with  Title 49,  Revised
          Code, as well as all other applicable laws and regulations.

In approving the acquisition, the Ohio Commission found that:

          The proposed transaction is reasonable,  will not adversely affect the
          public utility  company's  customers,  is in the public interest,  and
          should be approved.  * * * We find that our jurisdiction and authority
          over the rates,  services, and operations of the owner of the DP&L gas
          assets will not change due to the proposed  transaction.  Moreover, we
          find that it will not impair our  ability to protect  ratepayers.  The
          Commission  is  satisfied  that the  potential  transfer of  ownership
          interest  in DP&L's gas assets  will not impair the quality of service
          presently  provided  to  customers  of the  public  utility,  and that
          Vectren has the  ability to  operationally  manage the gas assets.  We
          note that Vectren has made a commitment to hire a  significant  number
          of present DP&L employees who operate the gas distribution  system and
          such can ensure the provision of just and reasonable  service. We also
          find that IGC has sufficiently  demonstrated the requisite  experience
          and capabilities to operate and manage gas assets in Indiana, where it
          operates  a  gas  utility  serving  some  500,000   customers  and  is
          considered  by  the  Indiana  Regulatory   Commission  to  have  solid
          management, finances and operations.

By letter dated September 7, 2000 (the "Indiana Letter"), the Indiana Commission
similarly advised the SEC that:

          the  [Indiana]  Commission  believes that it has the  jurisdiction  to
          monitor   the    activities    of   Indiana   Gas   to   ensure   that
          cross-subsidization  between  Indiana  Gas and  [OhioCo]  or any other
          affiliate does not occur.

               The  foregoing  opinion  is  given  with the  understanding  that
          Vectren's  Indiana  and Ohio  utility  businesses  will be  separately
          operated and that  Indiana Gas and [OhioCo]  will not be merged into a
          single company. * * *

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<PAGE>

               Finally,  the [Indiana]  Commission  advised that Indiana Gas has
          operated in Indiana as a gas utility continuously since 1945 and under
          our regulatory purview.

A copy of the Indiana Letter is attached as Exhibit D-1.4.

     SIGECO's  electric  operations are subject to the  jurisdiction of the FERC
under the Federal Power Act with respect to wholesale  electric  rates and other
matters.  ProLiance Energy,  LLC is also subject to the jurisdiction of the FERC
under  the  Federal  Power  Act,  as a  marketer  of  electric  power.  The  gas
distribution  operations  of Indiana  Gas,  SIGECO and OhioCo are covered by the
Hinshaw  Amendment and thus exempt from  regulation  by the FERC under  sections
1(b) and 1(c) of the Natural Gas Act.  Moreover,  that  portion of Indiana  Gas'
system that extends into Kentucky solely for the purpose of interconnecting with
the pipeline of Texas Gas  Transmission  Corporation is subject to a certificate
issued by the FERC under Section 7f of the Natural Gas Act.

     Following the  acquisition,  the Ohio System will be covered by the Hinshaw
Amendment to the Natural Gas Act and thus exempt from FERC  regulation  pursuant
to Section  1(c) of that act.  The Ohio System will be subject to  comprehensive
rate regulation by the Ohio Commission.  In addition, the costs of purchased gas
charged  to  customers  through  adjustment  clauses in the Ohio  System's  rate
schedules will be subject to periodic  audits by, and  proceedings  before,  the
Ohio Commission.

     The transportation of natural gas to eligible end-use customers through the
Ohio  System  will be  provided  on an  open-access,  non-discriminatory  basis,
overseen by the Ohio Commission which establishes  guidelines for pricing, terms
and conditions for such service.

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<PAGE>

     As a public utility under Ohio law, the Ohio System will also be subject to
regulation  by the Ohio  Commission  as to: (1) record  keeping and  accounting,
including depreciation rates; (2) abandonment of utility facilities; (3) service
quality and safety; (4) issuances of stocks,  bonds, notes and other securities;
and (5) mergers and certain acquisitions and leases with other public utilities.
The Ohio Commission  requires Ohio public  utilities to file various reports and
other  information  with the Ohio Commission on a periodic  basis,  including an
annual report  containing  information  regarding  their utility  operations and
results.

ITEM 2.  FEES, COMMISSIONS AND EXPENSES

     The fees,  commissions  and  expenses to be paid or  incurred,  directly or
indirectly,  in  connection  with  the  transactions  contemplated  herein,  are
estimated to be approximately $4.3 million.

ITEM 3.  APPLICABLE STATUTORY PROVISIONS

     A. Applicable Provisions

     The  acquisition  by VUHI of the  securities of the Vectren  public-utility
subsidiary companies,  including OhioCo, and the indirect acquisition by Vectren
of OhioCo are subject to Sections 9 and 10 of the Act.

     B. Legal Analysis

     Section 9(a)(2) makes it unlawful, without approval of the Commission under
Section 10, "for any person to acquire  directly or  indirectly  any security of
any public  utility  company if such person is an affiliate  ... of such company
and of any other public  utility or holding  company,  or will by virtue of such
acquisition become such an affiliate." As a result of the proposed Transactions,
Vectren  and VUHI will be  affiliates  of Indiana  Gas,  SIGECO,  Community  and
OhioCo. The statutory standards to be considered by the Commission in evaluating
the proposed  Transactions  are set forth in Section 10 of the Act. As set forth

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more fully below, the Transactions comply with all of the applicable  provisions
of Section 10 and, so, should be approved.

     1. Section 10(b)(1).

     Section  10(b)(1)  precludes  approval  of an  acquisition  that "will tend
towards interlocking relations or the concentration of control of public utility
companies,  of a kind or to an extent  detrimental to the public interest or the
interests of investors or consumers."

     a. Interlocking Relationships.

     By its nature,  any  acquisition  results in new links between  theretofore
unrelated companies. Cf. Northeast Utilities,  Holding Co. Act Release No. 25221
(Dec.  21,  1990),  as  modified,  Holding Co. Act Release No.  25273 (March 15,
1991),  aff'd sub nom.  City of Holyoke v. SEC,  972 F.2d 358 (D.C.  Cir.  1992)
(stating that interlocking  relationships are necessary to integrate two merging
entities).  While it is contemplated that there will be some overlap between the
Vectren Board of Directors,  on the one hand, and the boards of VUHI and OhioCo,
on the other,  interlocking boards are typical of wholly-owned  subsidiaries and
necessary to integrate VUHI and OhioCo into the Vectren system.  The interlocks,
therefore,  will be in the public  interest and the  interests of investors  and
consumers,  and thus not prohibited by Section  10(b)(1).

     b. Concentration of Control.

     Section  10(b)(1)  is  intended  to avoid "an excess of  concentration  and
bigness"  while  preserving  the  "opportunities  for  economies  of scale,  the
elimination of duplicate  facilities and  activities,  the sharing of production
capacity and reserves and generally more efficient  operations"  afforded by the
coordination of local  utilities into an integrated  system.  American  Electric
Power Co., 46 S.E.C.  1299, 1309 (1978). In applying Section 10(b)(1) to utility
acquisitions,  the Commission must determine whether the acquisition will create

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"the type of  structures  and  combinations  at which  the Act was  specifically
directed." Vermont Yankee Nuclear Corp., 43 S.E.C. 693, 700 (1968).

     In the March Order,  the  Commission  found that the Vectren system did not
involve "the concentration of control of public utility companies,  of a kind or
to an extent detrimental to the public interest or the interests of investors or
consumers." The proposed  Transactions will not affect the scope or provision of
services in  Indiana.  While the  acquisition  of the DP&L Assets will result in
subsidiaries of Vectren  (Indiana Gas and OhioCo) owning a gas utility system in
Ohio, it must be noted that Vectren will serve approximately  308,000 customers,
only  approximately  9% of the  total  natural  gas  customers  in Ohio.  In the
combined region of Indiana and Ohio, Vectren's utility companies will serve only
approximately  19% of natural gas  customers.  In  comparison  to those of other
utilities, Vectren's presence will not threaten competition.

     The  competitive  effects  of  the  proposed   Transactions  will  also  be
considered by other regulators. See, e.g., Northeast Utilities,  Holding Co. Act
Release No. 25221 (Dec. 21, 1990) (finding that "antitrust  ramifications  of an
acquisition  must be considered  in light of the fact that public  utilities are
regulated monopolies and that federal and state administrative agencies regulate
the rates charged consumers").  The creation of the Intermediate Holding Company
has been  approved  by the FERC  under  Section  203 of the  Federal  Power Act.
Notification  and Report  Forms were filed with the  Antitrust  Division  of the
Department  of  Justice  and  the  Federal  Trade  Commission  pursuant  to  the
Hart-Scott-Rodino  Antitrust Improvements Act of 1976, 15 U.S.C. ss.1311 et seq.
(1996), describing the competitive impact of the acquisition of the DP&L Assets.
Thereafter,  the Antitrust  Division issued second requests to Vectren and DP&L.
After Vectren and DP&L responded to the requests,  the Antitrust Division closed
its investigation.

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<PAGE>

     For  these  reasons,  the  proposed  Transactions  will  not  "tend  toward
interlocking  relations  or the  concentration  of  control"  of public  utility
companies,  of a kind or to the extent detrimental to the public interest or the
interests of investors or customers within the meaning of Section 10(b)(1).

     2. Section 10(b)(2)

     Section  10(b)(2)   requires  the  Commission  to  determine   whether  the
consideration  Vectren  will give  DP&L for the gas  assets  is  reasonable  and
whether it bears a fair relation to  investment  in and earning  capacity of the
utility assets being  acquired.  The  determination  of the acquiror of the DP&L
Assets was made as a result of an auction  process,  conducted by an  investment
banking firm. There were multiple participants in that process and the resulting
price  and  terms  and  conditions  for  the  acquisition  are  the  product  of
arms'-length negotiations between the buyer and seller.

     In light of this evidence,  Vectren believes that the consideration for the
acquisition  bears a fair  relationship  to the sums invested in and the earning
capacity of the DP&L Assets.

     Further,  Vectren  believes  that the  estimated  fees and expenses in this
matter bear a fair  relation  to the value of the DP&L Assets and the  strategic
benefits  to be  achieved  by the  Transaction,  and  further  that the fees and
expenses  are fair and  reasonable.  See  Northeast  Utilities,  Holding Co. Act
Release No.  25548 (June 3, 1992),  modified on other  grounds,  Holding Co. Act
Release No. 25550 (June 4, 1992) (noting that fees and expenses must bear a fair
relation  to the value of the  company to be  acquired  and the  benefits  to be
achieved in  connection  with the  acquisition).  The total  estimated  fees and
expenses  of  $4.2  million   represent  less  that  1%  of  the  value  of  the
consideration  Vectren will pay for the DP&L  Assets,  and are  consistent  with
percentages  previously  approved by the Commission.  See, e.g.,  Entergy Corp.,
Holding Co. Act Release No. 25952 (Dec. 17, 1993) (fees and expenses represented

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<PAGE>

approximately 1.7% of the value of the consideration paid to the shareholders of
Gulf States Utilities);  Northeast Utilities,  Holding Co. Act Release No. 25548
(June 3, 1992) (approximately 2% of the value of the assets to be acquired).

     3. Section 10(b)(3).

     Section  10(b)(3)  requires the Commission to determine  whether a proposed
acquisition will unduly  complicate the acquirer's  capital structure or will be
detrimental to the public  interest or the interest of investors or consumers or
the proper functioning of the resulting system.

     The proposed  Transactions will not unduly complicate the capital structure
of Vectren or its  subsidiaries.  The proposed  Transactions  do not involve the
creation of any minority  interests nor will the existing senior debt and senior
equity securities of Vectren be affected by the merger.  As demonstrated  below,
post-transactions, Vectren and each of its utility subsidiaries will continue to
fall within the seventy-to-thirty  percent debt-to-common equity ratio generally
prescribed by the Commission.  See, e.g.,  National Grid Group plc,  Holding Co.
Act Release No. 27154 (March 15, 2000).  Vectren provides  projected debt ratios
in Exhibit J-2.

     Section  10(b)(3)  also  directs  the  Commission  to  consider  whether an
acquisition  will be  detrimental  to the public  interest  or the  interest  of
investors or  consumers,  or the proper  functioning  of the  resulting  holding
company system.  In this matter,  the creation of the  Intermediate  Holdco will
serve to further integrate the operations of the Vectren  utilities,  within the
meaning of the Act, and to provide an additional degree of structural separation
and protection for those companies.  Nor will the acquisition of the DP&L Assets
be  detrimental to the protected  interests or to the proper  functioning of the
resulting holding company system. As a practical matter, OhioCo will operate the
Ohio System on its own behalf and on behalf of Indiana Gas. The DP&L Assets will
be operationally combined so that the Ohio customers will perceive that they are
served by a single  entity that will do  business  under the name of the OhioCo.

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<PAGE>

Moreover,  for Ohio  regulatory  purposes,  the Ohio System will be treated as a
single entity that is being operated by OhioCo.  Vectren's predecessor,  Indiana
Energy, Inc.,  successfully employed a similar model for the past ten years with
Richmond Gas  Corporation and Terre Haute Gas  Corporation,  which were separate
subsidiaries of Indiana Gas, but which were  operationally  combined for service
and  regulatory  purposes.  Perhaps more  importantly,  this  structure has been
expressly  approved by the Ohio  Commission,  the agency  that is most  directly
responsible for the protection of Ohio utility consumers.

     4. Section 10(c)(1)

     Under this  section,  the  Commission  cannot  approve "an  acquisition  of
securities,  or of any other interest, which is unlawful under the provisions of
Section 8 or is  detrimental  to the carrying out of the  provisions  of Section
11." Section 8, which governs the  combination  of electric and gas  operations,
does not apply to the instant Transactions.  Section 11, which again is directed
to registered  rather than exempt  holding  companies,  stands for the principle
that a  registered  holding  company  should be  generally  limited  to a single
integrated public-utility system.

     As noted  above,  the  Commission  in the March  Order  found that  Vectren
comprised an integrated  electric  utility  system and an integrated gas utility
system  and,  further,  that  there was "de  facto"  integration  of the gas and
electric  systems.  The creation of the  intermediate  holding  company will not
affect the integration of the underlying  utility systems.  The question,  then,
for the Commission is whether the DP&L Assets,  together with Vectren's existing
gas operations,  will constitute a single,  integrated gas-utility system within
the meaning of the Act.

     Section  2(a)(29)(A)  defines an  integrated  public  utility  system  with
respect to gas utility companies as:

          a system  consisting of one or more gas utility companies which are so
          located and related that  substantial  economies may be effectuated by

                                       13
<PAGE>

          being  operated  as  a  single  coordinated  system  confined  in  its
          operations to a single area or region,  in one or more states,  not so
          large  as to  impair  (considering  the  state  of the art and area or
          region  affected) the  advantages of localized  management,  efficient
          operation,  and the  effectiveness of regulation:  provided,  that gas
          utility companies  deriving natural gas from a common source of supply
          may be deemed to be included in a single area or region.

The DP&L Assets are located in a single area that is adjacent to, and contiguous
with, the service territory of the existing Vectren gas operations. Further, the
DP&L Assets and the Vectren gas operations  derive their gas from common sources
of supply,  as established  above in the discussion  regarding common basins and
common  interstate  pipeline  systems that deliver  commodity to the  respective
utilities. See NIPSCO Industries,  Inc., Holding Co. Act Release No. 26975 (Feb.
10, 1999)  ("NIPSCO")  (finding  integration  between Indiana and  Massachusetts
utility companies based upon coordinated gas supply  departments,  obtaining gas
from common basins and using trading hubs).

     The  DP&L  Assets  will  be  included  in  Vectren's  on-going  process  of
consolidating  and  integrating  the  operating  departments,  as  well  as  the
administrative  functions,  of its utility subsidiaries.  The first phase of the
consolidation of the service dispatching function has been announced. Vectren is
planning  full   integration   of  operating   departments   such  as  corporate
engineering,  gas control,  gas system design, sales and marketing into a single
organizational  framework.  Corporate and administrative  functions will also be
integrated and  centralized.  These functions  include planning and forecasting,
budgeting,  tax,  investor  relations,   treasury,  human  resources,  corporate
communications  and  accounting.  Ultimately,  other  customer  services such as
billing, call center and collections are expected to be centralized as well.

     5. Section 10(c)(2)

     The standards of Section  10(c)(2) are satisfied  because the  Transactions
will tend toward the  economical  and  efficient  development  of an  integrated
public utility system,  thereby serving the public interest, as required by that
section of the Act.

                                       14
<PAGE>

     The Commission has previously  found that the creation of a holding company
results in financial and  organizational  benefits for the utility  system.  WPL
Holdings,  Inc.,  Holding Co. Act Release No. 25377 (Sept.  18, 1991);  see also
Chevron Corp.,  Holding Co. Act Release No. 27122 (Dec.  27, 1999);  Roanoke Gas
Co., Holding Co. Act Release No. 26996 (April 1, 1999); BEC Energy,  Holding Co.
Act Release No. 26874 (May 15, 1998);  Western Resources,  Inc., Holding Co. Act
Release No. 26783 (Nov. 24, 1997).

     With respect to the  acquisition of the DPL Assets,  the  Transaction  will
result  in  benefits  to  investors,  consumers  and the  public  interest.  The
transaction  represents an opportunity for growth. The DP&L Assets are a logical
fit in  that  they  are  geographically  close  to  Vectren's  existing  utility
operations,  and,  thus,  there  will be  enhanced  economies  of scale from the
provision of common support to the Vectren public-utility  subsidiary companies.
In addition,  the overlap of  interstate  pipeline  suppliers  and common supply
basins will create  opportunities  for  synergies in the gas cost area.  Because
this matter involves an asset  transaction and not the sale of the DP&L business
as such,  relatively few corporate personnel are being transferred to the buyer,
since  they  will  continue  to be needed to serve  DP&L's  continuing  electric
utility  operations.  Opportunities  for  savings  will thus arise as  Vectren's
existing personnel expand their duties and responsibilities by working on behalf
of the Ohio System.  Further, there will be savings and efficiencies  associated
with the acquisition  itself,  both in financial and  operational  terms, as the
DP&L Assets are fully  integrated into the Vectren  system.  Among other things,
Vectren's larger scale,  both in financial and operational  terms,  will enhance
the utilities' ability to utilize new developments in technology and information
systems.

     Although some of the  anticipated  benefits are strategic and will be fully
realizable only in the longer term, they are properly  considered in determining
whether the  standards  of Section  10(c)(2) are met.  National  Grid Group plc,
supra; see American Electric Power Co., 46 S.E.C.  1299,  1320-1321 (1978).  The

                                       15
<PAGE>

Commission has recognized that potential benefits are entitled to be considered,
regardless  of  whether  they can be  precisely  estimated:  "[S]pecific  dollar
forecasts  of  future  savings  are not  necessarily  required;  a  demonstrated
potential  for  economies  will  suffice  even  where  these  are not  precisely
quantifiable."  Centerior Energy Corp., Holding Co. Act Release No. 24073 (April
29, 1986) (citation omitted). See also Energy East Corporation,  Holding Co. Act
Release No. 26976 (Feb. 12, 1999)  (authorizing  acquisition  based on strategic
benefits and potential,  but unquantifiable,  savings).

     6. Section 10(f)

     Section 10(f) provides that:

          The  Commission  shall  not  approve  any  acquisition  as to which an
          application  is made  under  this  section  unless it  appears  to the
          satisfaction  of the  Commission  that such State laws as may apply in
          respect to such acquisition have been complied with,  except where the
          Commission  finds  that  compliance  with  such  State  laws  would be
          detrimental to carrying out the provisions of section 11.

The Ohio  Commission  is the sole state  regulator  with  jurisdiction  over the
proposed  acquisition of the DP&L Assets. As explained in Item 4, below, Vectren
has  received  the  necessary  approval  under Ohio law.  No state  approval  is
required for the formation of VUHI.

     7. Section 3(a)(1)

     Following the proposed  Acquisition,  both VECTREN and VUHI will be holding
companies within the meaning of Section 2(a)(7) of the Act. As such they will be
required  to  register  with  the  Commission  , and  comply  with  the  various
requirements for registered holding  companies,  unless they are able to qualify
for  exemption.   Section   3(a)(1)   provides  a  presumptive   exemption  from
registration under the 1935 Act if:

          such holding company,  and every subsidiary company thereof which is a
          public-utility  company  from  which  such  holding  company  derives,
          directly  or  indirectly,   any  material  part  of  its  income,  are
          predominantly  intrastate  in  character  and carry on their  business
          substantially  in a single  state in which such  holding  company  and
          every such subsidiary company are organized.

                                       16
<PAGE>

In other  words,  the  objective  requirements  of Section  3(a)(1) are that the
holding company and each of its (a) "material"  public utility  subsidiaries be,
(b)   "predominantly"   intrastate  in  character  and  carry  on  its  business
"substantially"  in a single state in which the holding company and the material
subsidiaries are organized. If an applicant satisfies the objective requirements
of the  statute,  Section  3(a) directs the  Commission  to grant an  exemption,
"unless and except insofar as [the Commission]  finds the exemption  detrimental
to the public  interest or the  interest of  investors  or  consumers."  For the
reasons set forth herein,  Vectren and VUHI, and each of their material  utility
subsidiaries,  will be predominantly  intrastate in character and carry on their
business substantially in Indiana.

     Although the statute speaks of "income," the  Commission has  traditionally
considered  a wide  range of  numerical  factors  and,  in  practice,  given the
greatest  deference  to  revenues in  determining  materiality.  In NIPSCO,  the
Commission  also  determined  that it was  appropriate  to  consider  "operating
margin" or "net operating  revenues,"  which are defined as gross revenues minus
costs of  purchased  gas for  retail gas  distribution  and the cost of fuel for
electric  generation,  when  considering  combination gas and electric  systems.
Here,  as in  NIPSCO,  the  netting  out of fuel  costs  is  necessary  to avoid
overstating the size, and therefore  materiality,  of the acquired company.  The
Commission has explained:  "This is because  pass-through costs represent a much
larger part of revenues in the gas business than in the electric  business." AES
Corporation, Holding Co. Act Release No. 27063 (Aug. 20, 1999).

     a. Materiality of Utility Subsidiaries

     In NIPSCO,  the Commission  found that an out-of-state  utility  subsidiary
which contributed the following  percentages of the consolidated holding company
figures would not be material for purposes of Section 3(a)(1):




                Measure                          NIPSCO Range of Values

Gross Operating Revenues                             16.0-16.2%
Operating Margin                                     10.8-11.2%
Utility Operating Income                               7.1-8.7%

In the instant matter,  VECTREN,  VUHI and the utility  subsidiaries  other than
OhioCo will  continue to be  incorporated  in Indiana.  For purposes of analysis
under Section  3(a)(1),  the only  out-of-state  utility will be OhioCo.,  which
would have contributed the following revenues,  margin and income on a pro-forma
basis for 1999:1

-----------

1/ Although Indiana Gas will be an Ohio, as well as an Indiana,  utility,  it is
treated as an  Indiana  utility  for  purposes  of the  analysis  under  Section
3(a)(1).  This approach is consistent with that approved by the Commission in KU
Energy Corp., Holding Co. Act Release No. 25409 (Nov. 13, 1991). In that matter,
Kentucky Utilities Company, a Kentucky public-utility company and exempt holding
company, merged with its Virginia subsidiary  public-utility  company.  Kentucky
Utilities then  incorporated  in Virginia,  as well as in Kentucky,  in order to
satisfy the requirements of Virginia law. For purposes of analysis under Section
3(a)(1),  Kentucky  Utilities was treated as a Kentucky utility.  See discussion
infra.

----------


                Measure                               OhioCo Values

Gross Operating Revenues                                   11.3%
Operating Margin                                            8.8%
Utility Operating Income                                   10.9%

The OhioCo contributions fall within the range of acceptable values under NIPSCO
for both gross operating revenues and operating margin.  While utility operating
income is higher  than that  considered  in NIPSCO,  it is within the 10% to 12%
range generally  considered the bright-line limit on contributions by immaterial
subsidiaries  and  so,  neither  VECTREN  nor  VUHI  will  have  any  "material"
out-of-state public-utility subsidiary companies.

                                       18
<PAGE>

     b. Predominantly and Substantially Intrastate

     In NIPSCO,  the  Commission  found the  "predominantly  and  substantially"
standard satisfied where the out-of-state utility operations represented no more
than the following percentage of total utility operations:


                Measure                          NIPSCO Range of Values


Gross Operating Revenues                                  19.2-19.8%
Operating Margin                                          13.0-13.7%
Utility Operating Income                                   8.7-11.1%

Under the language of the statute,  the "predominantly  and substantially"  test
must be applied both, on a consolidated  basis, to the holding company and, on a
corporate basis, to each material utility subsidiary. In the instant matter, the
out-of-state  utility  operations  of VECTREN and VUHI, on a pro forma basis for
1999,  would have had  revenues,  margins and income  slightly  higher than that
approved in NIPSCO but well within the range  established  by Rule 2 filings and
the  Commission's  interpretation  of similar language in Section 3(a)(2) of the
Act:/2

----------

2/ See,  e.g.,  1999 Form U-3A-2 filed by  Southwestern  Energy  Company (24% of
utility revenues and retail gas sales, on an Mcf basis, from out-of-state), 1997
Form  U-3A-2  filed by LG&E Energy  Corporation  (20.43%  out-of-state  electric
utility sales, on a Kwh basis), and 1997 Form U-3A-2 filed by MidAmerican Energy
Holdings  Company (31.98%  out-of-state  electric utility sales, on a Kwh basis,
and 17.36% out-of-state  utility  customers).  In addition,  the Commission,  in
Houston  Industries  Inc.,  Holding Co. Act Release No.  26744 (July 24,  1997),
found that a holding  company  which  receives  approximately  one-third  of its
utility operating revenues from a subsidiary company is still  "predominantly" a
public-utility company within the meaning of Section 3(a)(2) of the Act.


----------

                Measure                               VECTREN/VUHI


Gross Operating Revenues                                21.3%
Operating Margin                                        16.6%
Utility Operating Income                                20.6%


                                       19
<PAGE>


On a corporate basis,  Indiana Gas will be the only subsidiary with out-of-state
utility  operations.  The  contributions of revenues,  margins and income by the
Ohio  operations of Indiana Gas, on a pro forma basis for 1999,  would have been
slightly  higher  than  that  approved  in  NIPSCO  but well  within  the  range
established  by Rule 2 filings and the  Commission's  interpretation  of similar
language in Section 3(a)(2) of the Act:


                Measure                            Indiana Gas Values
Gross Operating Revenues                                 19.3%
Operating Margin                                         17.0%
Utility Operating Income                                 22.5%


     c. "Unless and Except" Clause Considerations

     As  noted  above,   notwithstanding  an  applicant's  compliance  with  the
objective  requirements of Section 3(a)(1), the Commission can deny or condition
an exemption,  "insofar as [the Commission]  finds the exemption  detrimental to
the public  interest or the interest of investors  or  consumers."  In assessing
this standard, the Commission has traditionally focused on the presence of state
regulation on the theory that federal  intervention  is  unnecessary  when state
control is adequate.  See,  e.g., KU Energy  Corp.,  Holding Co. Act Release No.
25409 (Nov. 13, 1991); CIPSCO Inc., Holding Co. Act Release No. 25212 (Sept. 18,
1990).  The  proposed  Acquisition  will  have not  have an  adverse  effect  on
VECTREN's  existing  electric and gas  operations,  or on the way that rates are
regulated  by the  Indiana  and  Ohio  Commissions,  or  the  ability  of  those
commission  to  effectively  regulate  the  operations  of the  Vectren  utility
subsidiaries.

     Chapter 6 of the 1995 Report on The  Regulation of  Public-Utility  Holding
Companies (the "1995 Report") discusses the background and administration of the

                                       20
<PAGE>

Act's  exemptive  provisions  and explains  that:  "Congress  subjected  holding
companies to the requirements of the Act because  meaningful state regulation of
their abuses was often  obstructed by their control of  subsidiaries  in several
states and by the constitutional  doctrines limiting state economic regulation."
Id. at 109, note 4. The  legislative  history makes clear that  exemptions  from
registration are available where the holding company is susceptible to effective
state  regulation  or is otherwise  not the type of company at which the Act was
directed.  See Sen. Rep. No. 621, 74th Cong.,  1st Sess.  (1935).

     Both of those factors are present in this matter.  As noted above, the Ohio
Commission has made extensive findings about its ability to protect consumers in
the  context of this  particular  transaction,  and the Indiana  Commission  has
issued a letter similarly  addressing these concerns,  particularly with respect
to the question of  cross-subsidization.  In matters  involving  exempt  holding
companies,  the SEC has traditionally  given great deference to the views of the
affected state regulators. In NIPSCO, for example, the Commission noted that:

          Each of Bay State's and Northern's  regulators  made the finding aware
          of the fact  that,  if we  approved  the  application,  Bay  State and
          Northern would be owned by an out-of-state holding company exempt from
          registration  under the Act.  The  Commission  has  given  weight to a
          state's  judgment   concerning  its  ability  to  exercise   effective
          regulatory control (emphasis added).

NIPSCO./3

----------

3/ The NIPSCO order cited  Wisconsin  Energy Corp.,  Holding Co. Act Release No.
24267 (Dec. 18, 1996) ("the judgment of a state's legislature and public service
commission  as  to  what  will  benefit  their   constituents   is  entitled  to
considerable  deference  when not in  conflict  with the  policies of the Act");
Northern States Power Co., 36 S.E.C. 1, 8 (1954) ("The considered  conclusion of
the local  authorities,  deriving their power from specific  State  legislation,
should be given great weight in determining whether the public interest would in
fact be adversely affected . . . ."), cited with approval in Houston Industries,
Inc., Holding Co. Act Release No. 26744 (July 24, 1997).

----------

                                       21
<PAGE>

     Of interest here, the Ohio Commission  specifically cited the experience of
the Indiana  Commission and the absence of regulatory  abuses as a basis for its
finding that the proposed  structure "is reasonable,  will not adversely  affect
the public utility company's customers, is in the public interest, and should be
approved":

          We also find that  [Indiana  Gas] has  sufficiently  demonstrated  the
          requisite experience and capabilities to operate and manage gas assets
          in  Indiana,  where it  operates a gas utility  serving  some  500,000
          customers  and  is  considered  by  the  Indiana  Utility   Regulatory
          Commission to have solid management, finances, and operations.

In the Indiana Letter, that Commission similarly advised the SEC that:

          the  [Indiana]  Commission  believes that it has the  jurisdiction  to
          monitor   the    activities    of   Indiana   Gas   to   ensure   that
          cross-subsidization  between  Indiana  Gas and  [OhioCo]  or any other
          affiliate does not occur.

               The  foregoing  opinion  is  given  with the  understanding  that
          Vectren's  Indiana  and Ohio  utility  businesses  will be  separately
          operated and that  Indiana Gas and [OhioCo]  will not be merged into a
          single company. * * *

               Finally,  the [Indiana]  Commission  advised that Indiana Gas has
          operated in Indiana as a gas utility continuously since 1945 and under
          our regulatory purview.

Further,  exemption  of Vectren  will not give rise to any of the evils that the
Act was  intended  to address.  Vectren is a publicly  held  company  subject to
continuous  reporting  requirements  under the other federal  securities laws. A
transaction that links two adjacent  companies in a narrowly defined  geographic

                                       22
<PAGE>

area does not create a problem of  "scatteration"  for  purposes  of the Act. As
explained  more fully in the  discussion  under  Section  10(c)(2),  supra,  the
proposed Transactions will tend toward the economic and efficient development of
an integrated public-utility system.

     Concerning the structure of the proposed transaction,  a helpful comparison
can be drawn to the Commission's decision in KU Energy Corporation,  Holding Co.
Act Release No. 25409 (Nov.  13, 1991).  In that matter,  KU Energy  Corporation
merged its Virginia  subsidiary,  Old Dominion Power Company,  into its Kentucky
subsidiary  company,  Kentucky  Utilities  Company,  and then  incorporated that
company (Kentucky Utilities) in Virginia,  as well as in Kentucky, in connection
with its request for an order of exemption under Section  3(a)(1).  Although the
order is silent as to the reason for the restructuring  and dual  incorporation,
there is a discussion of the KU Energy case in the 1995 Report:

          In some  instances,  [an overly strict reliance on size as a proxy for
          effective  state  regulation]  has  created   practical   difficulties
          unrelated to the abuses that the Act was intended to address. In 1988,
          for  example,  Kentucky  Utilities  Company  sought SEC approval for a
          restructuring  that would establish a holding company over its utility
          operations.   Under  SEC   precedent,   it  was  unclear   whether  an
          out-of-state  utility  subsidiary  that  contributed  approximately  7
          percent of Kentucky Utilities'  consolidated utility revenues could be
          disregarded  as an  immaterial  subsidiary  for  purposes  of  section
          3(a)(1).  Before an exemption  was granted,  nearly three years later,
          the company was required to merge its operations into a single utility
          company that was then incorporated in two states.

1995 Report at 111-112. In a footnote, the report explained the mechanics of the
transaction:

          Kentucky  Utilities  Company,  a Kentucky  public-utility  company and
          exempt   holding   company,   merged  with  its  Virginia   subsidiary

                                       23
<PAGE>

          public-utility  company,  thereby mooting the materiality  issue under
          section 3(a)(1). The company then incorporated in Virginia, as well as
          in  Kentucky,  in  order  to  satisfy  the  [domestic   incorporation]
          requirements of Virginia law.

Id. at 112, note 23.

     In the 1995 Report, the Division recommended that the Commission apply more
liberal standards for exemption, where the affected states agree. The Commission
implemented this  recommendation  in 1997, when it granted an order of exemption
under Section 3(a)(2) in connection  with the merger of Houston  Industries Inc.
and NorAm Energy Corp.  Houston  Industries,  Inc.,  Holding Co. Act Release No.
26744 (July 24, 1997). To secure an exemption  post-merger,  Houston which was a
Section  3(a)(1)-exempt  holding  company,  merged the holding  company into the
utility, thereby collapsing the holding company structure. The surviving entity,
renamed Houston Industries Incorporated,  then acquired NorAm. At the end of the
day, the parent Texas utility had as its  subsidiary,  NorAm, a gas company with
operations in six states.

     It must be emphasized  that, in moving from a Section  3(a)(1) to a Section
3(a)(2)  structure,  Houston  surrendered  all of the  structural  and financial
benefits -- including  separation  of  regulated  and  nonregulated  operations,
efficiencies in financings and transparency for regulatory  purposes -- that are
the hallmarks of the traditional holding company structure. The sole purpose for
this  structure was to enable  Houston  Industries  Incorporated  to qualify for
exemption under Section 3(a)(2) of the Act. The Commission did not challenge the
applicant's  choice of  corporate  structures  but,  instead,  tested the chosen
structure against the standards of the Act. In particular,  the Commission noted
that:

          There appears to be little  possibility  in this case that the holding
          company structure will be used to evade state and local regulation, or

                                       24
<PAGE>

          that regulation under the Act is needed to supplement state regulation
          in order to prevent detriment to the interests protected by the Act.

               Various state and local  regulatory  bodies that have  continuing
          jurisdiction  over the  utility  operations  of Houston and NorAm have
          formally authorized the proposed business combination.  All were aware
          that Houston was seeking an exemption from most provisions of the Act.
          In  each  case  where  a  specific  finding  to the  effect  that  the
          transaction is consistent with, or not opposed to, the public interest
          was required,  such a finding was made. The  Commission  traditionally
          has given great weight to the views of the states in this regard.

Footnote  omitted.  In this matter as well, there is nothing to suggest that the
holding company structure will be used to evade state and local  regulation,  or
that regulation  under the Act is needed to supplement state regulation in order
to prevent detriment to the interests protected by the Act. In particular,  both
Ohio and Indiana have  continuing  jurisdiction  over the utility  operations of
Indiana Gas and OhioCo.  Both were aware that  Vectren was seeking an  exemption
from  most  provisions  of the Act.  Both have  stated  their  comfort  with the
proposed arrangement.  Consistent with Houston Industries,  NIPSCO and the cases
cited therein,  the Applicants  urge the Commission to give "great weight to the
views of the states in this regard."

     Finally,  a question has arisen whether the  Commission  should look behind
the form and analyze the Vectren transaction as if the DP&L Gas Assets were held
by a single  subsidiary,  ignoring the actual structure in which Indiana Gas and
OhioCo will hold undivided interests in the assets in a tenancy in common. While
there is not a case directly on point, the  Commission's  treatment of Bay State
Gas Company and its wholly-owned  subsidiary,  Northern Utilities,  Inc., in the
NIPSCO  decision  indicates that the SEC will respect the corporate forms absent
some evidence of abuse. At issue in that matter was whether NIPSCO would qualify
for  exemption  under  Section  3(a)(1).   Bay  State  and  Northern  were  both
out-of-state  subsidiaries.  But for the fact that Northern was  wholly-owned by

                                       25
<PAGE>

Bay State, the procedure would have been clear: the Commission would analyze the
subsidiaries  separately,  to  determine  if  either  was  "material"  and then,
consider  the  combined  effect  of all  out-of-state  operations  to see if the
combined system would be "predominantly and substantially" intrastate.

     Because  Northern was  wholly-owned by Bay State,  however,  the Commission
could have  "looked  through"  Bay State and count Bay State and  Northern  as a
single   subsidiary  for  purposes  of  "materiality"   under  Section  3(a)(1),
consistent  with the concept of "direct or indirect"  that pervades the statute.
The fact that the  Commission did not take this  additional  step indicates that
the SEC will not look  behind the form of a  proposed  transaction  absent  some
evidence of financial or regulatory abuse.

     As discussed previously, there are appropriate safeguards in this matter to
ensure  that the  proposed  structure  will  not be  detrimental  to the  public
interest or the interest of investors or consumers,  the  "protected  interests"
under the Act. Indiana Gas, SIGECO and Community are subject to broad regulation
as to rates and other matters, including affiliate transactions,  by the Indiana
Commission.  After the  acquisition  of the DP&L  Assets,  the gas  distribution
system  jointly  owned by OhioCo and  Indiana  Gas (the "Ohio  System")  will be
subject  to  broad  regulation  as to  rates  and  other  matters  by  the  Ohio
Commission.

     In approving the acquisition,  the Ohio Commission expressly noted that the
transaction  structure was intended to help Vectren  maintain its exempt status.
The Indiana  Commission  has  similarly  indicated its comfort with the proposed
arrangement.  Further,  there  are a number  of  safeguards  in place to  ensure
against cross-subsidization or other detriment to the protected interests. Under
the proposed structure,  utility and nonutility  financings will be done through
separate  subsidiaries  of  the  parent  holding  company.  Financings  for  the
nonutility activities are done by Vectren Capital Corp., a first-tier nonutility
subsidiary of Vectren,  while financings for the utilities will be done by VUHI,
the new intermediate utility holding company. Although the nonutility financings
are backed by a parent support agreement, there is no recourse to utility assets
or stock in the event of a nonutility default.

     The ability to finance utility  operations at the VUHI level should further
shield the utility  operations  from any risks that may be  associated  with the
nonutility  activities.  The Ohio and Indiana Commissions have jurisdiction over
all  issuances  of equity and debt with a maturity  of one year or more.  To the
extent that Indiana Gas is now dually incorporated, it will require the approval
of both Ohio and Indiana for equity and long-term  debt  financings.  Thus,  the
proposed structure will result in more regulation, not less.

     Finally, as noted by the Indiana Commission, Indiana Code 8-1-2-49 requires
that Indiana Gas must file any contract  between it and Vectren  and/or  OhioCo.
That section,  in pertinent part,  provides that "[i]f it be found that any such
contract  is  not  in  the  public  interest,  the  [Indiana]  Commission  after
investigation and hearing is authorized to disapprove such contract." While Ohio
does not have a statute that specifically governs affiliate transactions, it can
address  these  types  of  issues  through  codes  of  conduct  and  traditional
ratemaking  proceedings.  Further  discussion  of the  regulation of the Vectren
system is contained in the discussion of Utility Regulation, supra.

     The structural protections,  the degree and quality of other regulation and
the  absence  of any  holding  company  abuses  all tend to  establish  that the
proposed  structure will not be detrimental  to the "protected  interests."  Nor
would the grant of an  exemption  in this  matter  preclude  the  ability of the
Commission to deny the exemption in a subsequent  matter if it appeared that the

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<PAGE>

exemption would prove detrimental to the protected interests. There are a number
of  ways  in  which  this  matter  could  be   distinguished   from   subsequent
nonconforming filings.

     o First, there is no evidence of past problems. Indeed, the Ohio Commission
expressly  focused  on  the  company's  positive  experience  with  the  Indiana
Commission, in determining to approve the acquisition of the DP&L gas assets.

     o Second, each of the affected state regulators has specifically  addressed
the particular  structure and concluded that it would not impair the regulator's
ability to protect consumers.

     o Third, there is no scatteration of utility properties.  As explained more
fully in the discussion under Section 10(c)(2),  supra, the gas utility services
territories of Indiana Gas and DP&L actually adjoin.

     o Fourth, in the event that a holding company would try to use this type of
structure  to  evade  regulation  under  the  Act,  there  is a  natural  limit.
Notwithstanding   the  number  of  subsidiaries   that  may  be  used  to  avoid
"materiality",  the total amount of out-of-state  operations must be counted for
purposes  of  determining  whether the system as a whole is  "predominantly  and
substantially" intrastate.

     o Fifth,  the  Commission  always has the  authority  under the "unless and
except" clause to condition or deny an exemption that it finds to be detrimental
to the protected  interests.  This point is well-illustrated by the Commission's
decisions  denying  orders of  exemption  in Cities  Service  Co., 8 S.E.C.  318
(1940), and Electric Bond and Share Co., 33 S.E.C. 21 (1952),  even though those

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<PAGE>

companies  met the  objective  requirements  for  exemption.  As the  Commission
explained in a recent matter

          In those cases, there was both an attempt to evade section 3(a)(3) . .
          . and a history, and future likelihood, of abuses the Act was intended
          to prevent. In each of these cases, the Commission determined that the
          applicant was essentially the type of company at which the purposes of
          the Act were  directed  and noted that the  exemption  would have been
          denied under the unless and except  clause,  even if the applicant had
          satisfied all the objective criteria for exemption.

AES  Corporation,  Holding Co. Act Release No.  27063,  note 44 (Aug.  20, 1999)
(emphasis added).

     Accordingly,  the Commission  should find that sufficient  safeguards exist
under state law to ensure that no  potential  adverse  consequences  will result
from the proposed Transactions, and that Vectren and VUHI are entitled to orders
of exemption under Section 3(a)(1) of the Act.

ITEM 4. REGULATORY APPROVAL.

     Set  forth  below is a summary  of the  regulatory  approvals  that will be
obtained in connection with the acquisition.

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<PAGE>

(1) Antitrust

     The acquisition is subject to the requirements of the Hart-Scott-Rodino Act
and the rules and regulations thereunder, which provide that certain acquisition
transactions may not be consummated until certain information has been furnished
to the  Antitrust  Division of the  Department  of Justice and the Federal Trade
Commission,  and until  certain  waiting  periods have been  terminated  or have
expired.  Vectren  and  DP&L  filed  their  notifications  on  March  16,  2000.
Thereafter,  as noted above,  the Antitrust  Division  issued second requests to
Vectren  and  DP&L.  After  Vectren  and DP&L  responded  to the  requests,  the
Antitrust Division closed its investigation.

     If  the  acquisition  is not  completed  within  twelve  months  after  the
expiration  or  termination  of the  waiting  period,  Vectren and DP&L would be
required to submit new notices to the  Antitrust  Division and the FTC and a new
waiting  period  would have to expire or be  terminated  before the  acquisition
could be completed.

     (2) Federal Energy Regulatory Commission

     As noted earlier,  the FERC has approved the  intermediate  holding company
transaction.

     (3) State Regulatory Approval

     The Ohio Commission has authorized the acquisition of the DP&L Assets.  See
Exhibits D-1.3, the Ohio Order.

ITEM 5. PROCEDURE.

     The  Commission  is  respectfully  requested to issue and publish not later
than  August 25, 2000 the  requisite  notice  under Rule 23 with  respect to the
filing  of this  Application,  such  notice to  specify  a date not  later  than
September  19, 2000 by which  comments  may be entered and a date not later than
September 19, 2000 as the date after which an order of the  Commission  granting
and  permitting  this  Application  to become  effective  may be  entered by the
Commission.

30
<PAGE>

     Vectren  believes  that  a  recommended  decision  by a  hearing  or  other
responsible officer of the Commission is not needed for approval of the proposed
acquisition. The Division of Investment Management may assist in the preparation
of the  Commission's  decision.  There should be no waiting  period  between the
issuance  of the  Commission's  order  and the  date on  which  it is to  become
effective.

ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.

Exhibits

A-1      Vectren   Corporation's   Articles  of   Incorporation   and   By-Laws,
         incorporated by reference to SEC Form S-4, File No. 333-90763, November
         12, 1999.

A-2      Constituent documents of VUHI.

B-1      Agreements governing the Acquisition,  incorporated by reference to SEC
         Form 8-K, File No. 001-15467, December 28, 1999.

D-1.1    Joint Petition to the Ohio Commission, dated March 20, 2000.

D-1.2    Supplement to Joint Petition to the Ohio Commission, dated June 8,
         2000.

D-1.3    Order of the Ohio Commission.

D-1.4    Letter from Indiana Commission

D-2.1    FERC application.

D-2.2    FERC Order.

E-1      Map of proposed  combined  service  territory (filed in paper format
         on Form SE).

F-1      Opinion of counsel - Vectren Corporation

F-2      Past  tense  opinion  of  Vectren  Corporation's  counsel  (to be
         filed by amendment).

H-1      Vectren's 1999 Annual Report, incorporated by reference to SEC
         Form 10-K, File No.      001-15467, March 30, 2000.


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<PAGE>


H-2       1999 Form U-3A-2 for Indiana Energy,  Inc.,  incorporated by reference
          to SEC File No. 69-00312, March 1, 2000.

H-3       1999 Form U-3A-2 for SIGCORP,  Inc.,  incorporated by reference to SEC
          File No. 69-00397, February 29, 2000.

H-4       DP&L's 1999 Annual Report, incorporated by reference to SEC Form 10-K,
          File No. 001-02385, March 31, 2000.

I-1       Proposed Form of Notice.

J-1       Section 3(a)(1) financial projections  (CONFIDENTIAL TREATMENT,  filed
          under Form SE).

J-2       Section 10(b)(3) financial projections (CONFIDENTIAL TREATMENT,  filed
          under Form SE).

Financial Statements

FS-1      Vectren  Corporation's  Unaudited  Pro  Forma  Condensed  Consolidated
          Balance  Sheet  and  Statement  of  Income  for the 12  months  ending
          December  31, 1999,  the 12 months  ended June 30, 2000 and  projected
          data for 2000, 2001 and 2002 (CONFIDENTIAL TREATMENT, filed under Form
          SE).

FS-2      Vectren  Corporation's  Consolidated  Balance  Sheet and  Statement of
          Income for the quarter ended March 31, 2000, incorporated by reference
          to SEC Form 10-Q, File No. 001-15467, May 15, 2000.

FS-3      DP&L's  Consolidated  Balance  Sheet and  Statement  of Income for the
          quarter  ended March 31, 2000,  incorporated  by reference to SEC Form
          10-Q, File No. 001-02385, May 15, 2000.

FS-4      Vectren  Corporation's  Consolidated  Balance  Sheet and  Statement of
          Income for the year ended December 31, 1999, incorporated by reference
          to SEC Form 10-K, File No. 001- 15467, March 30, 2000.

FS-5      DP&L's Consolidated Balance Sheet and Statement of Income for the year
          ended December 31, 1999,  incorporated  by reference to SEC Form 10-K,
          File No. 001-02385, March 31, 2000.

ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.

     The   acquisition   neither   involves  a  "major   federal   action"   nor
"significantly  affects the quality of the human environment" as those terms are
used in Section  102(2)(C) of the National  Environmental  Policy Act, 42 U.S.C.
Sec. 4321 et seq. Consummation of the acquisition will not result in changes in



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<PAGE>

the operations of DP&L that would have any impact on the environment. No federal
agency is  preparing  an  environmental  impact  statement  with respect to this
matter.

                                    SIGNATURE

     Pursuant to the  requirements  of the Public Utility Holding Company Act of
1935, the undersigned  companies have duly caused this  Application to be signed
on its behalf by the undersigned thereunto duly authorized. The signature of the
applicants,  through the undersigned, is restricted to the information contained
in this application which is pertinent to the instant application.

Date:  October 4, 2000                /signed/
                                      --------
                                     Ronald E. Christian
                                     Senior Vice President, General Counsel
                                     and Secretary

                                       33

<PAGE>




                                   Appendix A

             List of Vectren Corporation's Non-Utility Subsidiaries

     1.  Vectren  Utility  Holdings,  Inc. is a holding  company  that  provides
environmental and other services to Vectren's utility companies.

     2. Vectren  Generation  Services,  Inc. is an intermediate  holding company
under Vectren for Southern Indiana Minerals, Inc. and Vectren Fuels, Inc.

     3. Southern Indiana  Minerals,  Inc.  processes and markets coal combustion
by-products.

     4. Vectren Fuels, Inc. owns and operates coal mining properties,  including
a one-hundred  percent (100%)  ownership  interest in Cypress Creek Mine,  Inc.,
Prosperity Mine, LLC and Cypress Creek Mine, LLC and a ninety-nine percent (99%)
ownership interest in SFI Coal Sales, LLC.

     5. Vectren  Foundation,  Inc. is a non-profit  corporation  under  Vectren,
which makes  contributions  to  organizations  and  communities in which Vectren
provides utility services.

     6.  Vectren  Resources,   LLC  primarily  provides  information  technology
resources to Vectren and its subsidiaries.

     7. Vectren Capital Corp., and its direct subsidiary, IEI Capital Corp., are
financing vehicles for Vectren's non-regulated subsidiaries.

     8. Vectren  Enterprises,  Inc. is a intermediate  holding  company for five
non-regulated businesses: Vectren Communications, Inc., Vectren Energy Services,
Inc., Vectren Financial Group, Inc., Vectren Utility Services,  Inc. and Vectren
Ventures, Inc.

     9.  Vectren   Communications,   Inc.  is  a  holding  company  for  SIGCORP
Communications Services, Inc., which conducts  communications-related  strategic
initiatives.

     10. SIGECO  Advanced  Communications,  Inc. holds  Vectren's  investment in
SIGECOM,  Inc. and Utilicom  Networks,  LLC. Utilicom  Networks,  LLC is a joint
venture between Advanced Communications, Inc. and Utilicom Networks, Inc., which
markets and  provides  enhanced  communications  services  over a  high-capacity
fiber-optic network in SIGECO's service territory.

     11. Vectren Energy  Services,  Inc. is an intermediate  holding company for
Vectren  Energy  Solutions,  Inc.,  which  holds a  one-hundred  percent  (100%)
interest in SIGCORP Energy Services,  Inc., Energy Systems Group,  Inc., Vectren
Environmental  Services,  Inc.,  Indiana  Energy  Services,  Inc.  (dormant) and
SIGCORP Power  Marketing,  Inc.  (dormant),  and a fifty percent (50%) ownership
interest in ProLiance Energy, LLC.

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<PAGE>

     12. SIGCORP Energy Services, Inc. has a ninety-nine percent (99%) ownership
interest in SIGCORP Energy Services,  LLC, which provides natural gas,  pipeline
management  and other  natural  gas  related  services,  through  its  ownership
interest in SIGCORP Gas  Marketing,  LLC,  Ohio  Valley Hub,  LLC and  Signature
Energy Management, LLC.

     13.  Energy  Systems  Group,  Inc. has a two-thirds  ownership  interest in
Energy  Systems  Group,  LLC, an  energy-related  performance  contracting  firm
serving industrial and commercial customers.

     14. Vectren  Environmental  Services,  Inc. holds a fifty-one percent (51%)
ownership  interest in Air Quality  Services,  LLC, a joint  venture  created to
provide air quality monitoring and testing services to industry and utilities.

     15.  ProLiance  Energy,  LLC  provides  gas and  power to more  than  1,000
commercial, industrial, municipal, residential and utility customers.

     16. Vectren  Financial Group,  Inc. is an intermediate  holding company for
the following  entities:  Southern Indiana  Properties,  Inc., Vectren Synfuels,
Inc. and Energy Realty, Inc.

     17. Southern  Indiana  Properties,  Inc. makes  investments in real estate,
which include:  SIP-GT I, Inc., Southwest Lease Capital,  Inc., Southern Indiana
Joint Ventures, Inc., MCN Equities, Inc. and Joint Ventures Affiliated, Inc.

     18.  Vectren  Synfuels,  Inc.  owns a limited  partnership  in Pace  Carbon
Synfuels  Investors,  L.P., which produces and sells  coal-based  synthetic fuel
that qualifies for federal tax credits.

     19. Energy  Realty,  Inc.  invests in real estate and  affordable  housing,
including a ninety-eight  percent (98%)  ownership  interest in BCI Holding Co.,
LLC.

     20.  Vectren  Utility  Services,  Inc. holds  investments in  non-regulated
subsidiaries  which provide  various  services to Vectren,  and include  Reliant
Services,  LLC,  CIGMA,  LLC,  IEI  Financial  Services,  LLC and  Utility  Debt
Collectors, Inc. (dormant).

     21. Reliant  Services,  LLC is an underground  locating,  construction  and
meter reading company.

     22. CIGMA,  LLC is a regional  supplier of materials and integrated  supply
solutions to the energy market and related industries.

     23.  IEI  Financial  Services,   LLC  performs   third-party   collections,
energy-related equipment leasing and related services.

     24. Vectren Ventures, Inc. invests in energy-related companies and projects
and holds the remainder one percent (1%)  interests in Vectren  Resources,  LLC,
SIGCORP Energy Services, LLC and IEI Financial Services, LLC.

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