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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q



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

For quarterly period ended June 30, 2002

OR

[ ] 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 1-3553


SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
-----------------------------------------
(Exact name of registrant as specified in its charter)

INDIANA 35-0672570
------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

20 N.W. Fourth Street, Evansville, Indiana 47708
---------------------------------------------------------------------
(Address of principal executive offices and 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) have been subject to such filing
requirements for the past 90 days: Yes [X] No [ ]

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

Common Stock - Without Par Value 15,754,826 August 1, 2002
- -------------------------------- ---------------- --------------
Class Number of Shares Date

As of August 1, 2002, all shares outstanding of the Registrant's classes of
common stock were held by Vectren Corporation through its wholly owned
subsidiary, Vectren Utility Holdings, Inc.





Table of Contents
Item Page
Number Number
Part I. Financial Information

1 Financial Statements (Unaudited) ....................................
Southern Indiana Gas and Electric Company
Condensed Balance Sheets............................................ 1-2
Condensed Statements of Income...................................... 3
Condensed Statements of Cash Flows.................................. 4
Notes to Condensed Unaudited Financial Statements.................... 5-11
2 Management's Discussion and Analysis
Of Results of Operations and Financial Condition....................12-19
3 Qualitative and Quantitative Disclosures About Market Risk...........20-21

Part II. Other Information

1 Legal Proceedings.................................................... 22
6 Exhibits and Reports on Form 8-K..................................... 22
Signatures........................................................... 23
Certification Pursuant To 18 U.S.C. Section 1350,
As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002. 24

Definitions
As discussed in this Form 10-Q, the abbreviations
AFUDC means allowance for funds used during construction,
APB means Accounting Principles Board
EITF means Emerging Issues Task Force,
FASB means Financial Accounting Standards Board,
IDEM means Indiana Department of Environmental Management,
IURC means Indiana Utility Regulatory Commission,
MMDth means millions of dekatherms,
MMBTU means millions of British thermal units,
USEPA means United States Environmental Protection Agency, and
throughput means combined gas sales and gas transportation volumes.




PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONDENSED BALANCE SHEETS
(Unaudited- In thousands)

June 30, December 31,
2002 2001
- ------------------------------------------------ ---------- -----------
ASSETS

Utility Plant
Original cost $1,494,707 $1,455,826
Less: Accumulated depreciation & amortization 708,617 690,344
---------- ----------
Net utility plant 786,090 765,482
---------- ----------

Current Assets
Cash & cash equivalents 983 2,451
Accounts receivable-less reserves of $3,129 &
$3,241, respectively 47,352 41,227
Receivables from other Vectren companies 1,018 10,065
Accrued unbilled revenues 16,441 17,013
Inventories 34,698 38,322
Recoverable fuel & natural gas costs 15,531 22,132
Prepayments & other current assets 19,816 14,053
---------- ----------
Total current assets 135,839 145,263
---------- ----------

Investments in unconsolidated affiliates 160 160
Other investments 8,546 9,254
Non-utility property-net 3,789 4,386
Goodwill-net 5,557 5,557
Regulatory assets 54,751 41,525
Other assets 2,127 1,595
---------- ----------
TOTAL ASSETS $ 996,859 $ 973,222
========== ==========

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





SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONDENSED BALANCE SHEETS
(Unaudited - In thousands)

June 30, December 31,
2002 2001
- ------------------------------------------ --------- -----------
LIABILITIES & SHAREHOLDER'S EQUITY

Capitalization
Common shareholder's equity
Common stock (no par value) $ 78,258 $ 78,258
Retained earnings 257,067 255,464
Accumulated other comprehensive income 76 94
-------- --------
Total common shareholder's equity 335,401 333,816
-------- --------
Cumulative redeemable preferred stock
of subsidiary 344 460
Long-term debt-net of current maturities 290,798 291,702
Long-term debt to VUHI 49,460 49,460
-------- --------
Total capitalization 676,003 675,438
-------- --------
Commitments & Contingencies (Notes 4-6)

Current Liabilities
Accounts payable 22,241 27,135
Payables to other Vectren companies 7,843 3,390
Accrued liabilities 41,522 33,545
Short-term borrowings - 874
Short-term borrowings to VUHI 84,001 80,664
Current maturities of long-term debt 999 -
-------- --------
Total current liabilities 156,606 145,608
-------- --------
Deferred Income Taxes & Other Liabilities
Deferred income taxes 123,143 112,746
Deferred credits & other liabilities 41,107 39,430
-------- --------
Total deferred income taxes & other liabilities 164,250 152,176
-------- --------
TOTAL LIABILITIES & SHAREHOLDER'S EQUITY $996,859 $973,222
======== ========


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






SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONDENSED STATEMENTS OF INCOME
(Unaudited - In thousands)



Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2002 2001 2002 2001
- ---------------------------------------- -------- -------- -------- --------

OPERATING REVENUES
Electric revenues $158,924 $ 95,020 $285,724 $183,229
Gas revenues 17,624 11,351 47,231 63,301
-------- -------- -------- --------
Total operating revenues 176,548 106,371 332,955 246,530
-------- -------- -------- --------
COST OF OPERATING REVENUES
Fuel for electric generation 19,068 17,857 36,859 35,841
Purchased electric energy 87,013 33,662 146,836 46,815
Cost of gas sold 11,394 4,529 28,938 45,987
-------- -------- -------- --------
Total cost of operating revenues 117,475 56,048 212,633 128,643
-------- -------- -------- --------

TOTAL OPERATING MARGIN 59,073 50,323 120,322 117,887

OPERATING EXPENSES
Other operating 27,105 25,364 51,797 48,891
Merger & integration costs - - - 302
Restructuring costs - 4,344 - 4,344
Depreciation & amortization 11,058 11,053 22,041 22,137
Income taxes 7,008 666 13,333 9,707
Taxes other than income taxes 2,900 3,227 6,318 6,853
-------- -------- -------- --------
Total operating expenses 48,071 44,654 93,489 92,234
-------- -------- -------- --------

OPERATING INCOME 11,002 5,669 26,833 25,653

Other income - net 7,113 928 8,183 1,787
Interest expense 5,729 5,117 11,485 10,373
-------- -------- -------- --------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 12,386 1,480 23,531 17,067
-------- -------- -------- --------

Cumulative effect of change in accounting
principle-net of tax - - - 3,938

-------- -------- -------- --------
NET INCOME 12,386 1,480 23,531 21,005

Preferred stock dividends 2 242 10 480

-------- -------- -------- --------
NET INCOME APPLICABLE TO
COMMON SHAREHOLDER $ 12,384 $ 1,238 $ 23,521 $ 20,525
======== ======== ======== ========



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

SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited - In thousands)



Six Months
Ended June 30,
--------------------
2002 2001
- ---------------------------------------------- -------- --------

NET CASH FLOWS FROM OPERATING ACTIVITIES $ 59,142 $ 35,620
-------- --------
CASH FLOWS (REQUIRED FOR) FINANCING ACTIVITIES
Requirements for:
Dividends on common stock (21,910) (16,329)
Redemption of preferred stock (116) (153)
Dividends on preferred stock (10) (479)
Net change in short-term borrowings,
including to VUHI 2,463 1,136
Proceeds (payments) from other financing
activities - (15)
-------- --------
Net cash flows (required for)
financing activities (19,573) (15,840)
-------- --------
CASH FLOWS (REQUIRED FOR) INVESTING ACTIVITIES
Proceeds from sale of other investments 1,400 -
Requirements for:
Capital expenditures (42,437) (18,511)
Other investments - (2,134)
-------- --------
Net cash flows (required for) investing
activities (41,037) (20,645)
-------- --------
Net increase in cash & cash equivalents (1,468) (865)
Cash & cash equivalents at beginning of period 2,451 1,613
-------- --------
Cash & cash equivalents at end of period $ 983 $ 748
======== ========


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




SOUTHERN INDIANA GAS AND ELECTRIC COMPANY

NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

1. Organization and Nature of Operations

Southern Indiana Gas and Electric Company (the Company or SIGECO), an Indiana
corporation, provides electric generation, transmission, and distribution
services to Evansville, Indiana, and 74 other communities in 8 counties in
southwestern Indiana and participates in the wholesale power market. SIGECO also
provides natural gas distribution and transportation services to Evansville,
Indiana, and 64 communities in 10 counties in southwestern Indiana. SIGECO is a
direct, wholly owned subsidiary of Vectren Utility Holdings, Inc. (VUHI). VUHI
is a direct, wholly owned subsidiary of Vectren Corporation (Vectren).

Vectren, an Indiana corporation, is an energy and applied technology holding
company headquartered in Evansville, Indiana. Vectren was organized on June 10,
1999 solely for the purpose of effecting the merger of Indiana Energy, Inc.
(Indiana Energy) and SIGCORP, Inc. (SIGCORP). On March 31, 2000, the merger of
Indiana Energy with SIGCORP and into Vectren was consummated with a tax-free
exchange of shares and has been accounted for as a pooling-of-interests in
accordance with APB Opinion No. 16 "Business Combinations."

Vectren's wholly owned subsidiary, VUHI, serves as the intermediate holding
company for its three operating public utilities: Indiana Gas Company, Inc.
(Indiana Gas), formerly a wholly owned subsidiary of Indiana Energy, SIGECO,
formerly a wholly owned subsidiary of SIGCORP, and the Ohio operations, a
utility jointly owned by Indiana Gas and Vectren Energy Delivery of Ohio, Inc.
(VEDO). Both Vectren and VUHI are exempt from registration pursuant to Section
3(a)(1) and 3(c) of the Public Utility Holding Company Act of 1935.

2. Basis of Presentation

The interim condensed financial statements included in this report have been
prepared by the Company, without audit, as provided in the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
omitted as provided in such rules and regulations. The Company believes that the
information in this report reflects all adjustments necessary to fairly state
the results of the interim periods reported. These condensed financial
statements and related notes should be read in conjunction with the Company's
audited annual financial statements for the year ended December 31, 2001, filed
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.

Certain reclassifications have been made to prior period financial statements to
conform with the current year classification. These reclassifications have no
impact on previously reported net income.

3. Impact of Recently Issued Accounting Guidance

EITF 02-03
In June 2002, the EITF reached a final consensus in EITF Issue 02-03 "Accounting
for Contracts Involved in Energy Trading and Risk Management Activities" (EITF
02-03) that states mark-to-market gains and losses on energy trading contracts
(whether realized or unrealized and whether financially or physically settled)
should be shown net in the income statement and that expanded disclosure of
energy trading activities is required. This consensus is effective for periods
ending after July 15, 2002, with reclassification of prior period amounts
required.

The Company currently accounts for all its power marketing contracts at gross in
the Condensed Statements of Income. The Company has reviewed all of its current
power marketing contracts and contracts closed in prior periods and identified
no energy trading contracts subject to EITF 02-03. See Note 7 for additional
information on the Company's power marketing operations.

SFAS 142
In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets" (SFAS 142). The Company adopted the provisions of SFAS 142 as required,
on January 1, 2002. SFAS 142 changed the accounting for goodwill from an
amortization approach to an impairment-only approach. Thus, amortization of
goodwill that is not included as an allowable cost for rate-making purposes
ceased upon adoption of the statement. This includes goodwill recorded in past
business combinations. Goodwill is to be tested for impairment at a reporting
unit level at least annually.

SFAS 142 also required the initial impairment review of all goodwill within six
months of the adoption date. The impairment review consisted of a comparison of
the fair value of a reporting unit to its carrying amount. If the fair value of
a reporting unit is less than its carrying amount, an impairment loss would be
recognized. Results of the initial impairment review were to be treated as a
change in accounting principle in accordance with APB Opinion No. 20 "Accounting
Changes." An impairment loss recognized as a result of an impairment test
occurring after the initial impairment review is to be reported as a part of
operations. SFAS 142 also changed certain aspects of accounting for other
intangible assets; however, the Company does not have any significant other
intangible assets.

Initial impairment reviews to be performed within six months of adoption of SFAS
142 were completed and resulted in no impairment.

SFAS 144
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (SFAS 144). SFAS 144 develops one accounting
model for all impaired long-lived assets and long-lived assets to be disposed
of. SFAS 144 replaces the existing authoritative guidance in FASB Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" and certain aspects of APB Opinion No. 30, "Reporting
Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business."

This new accounting model retains the framework of SFAS 121 and requires that
those impaired long-lived assets and long-lived assets to be disposed of be
measured at the lower of carrying amount or fair value (less cost to sell for
assets to be disposed of), whether reported in continuing operations or in
discontinued operations. Therefore, discontinued operations will no longer be
measured at net realizable value or include amounts for operating losses that
have not yet occurred.

SFAS 144 also broadens the reporting of discontinued operations to include all
components of an entity with operations that can be distinguished from the rest
of the entity and that will be eliminated from the ongoing operations of the
entity in a disposal transaction.

The adoption of SFAS 144 on January 1, 2002, did not have a material impact on
operations.

SFAS 143
In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" (SFAS 143). SFAS 143 requires entities to record the fair value of
a liability for an asset retirement obligation in the period in which it is
incurred. When the liability is initially recorded, the entity capitalizes a
cost by increasing the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value, and the capitalized cost
is depreciated over the useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligation for its recorded amount or
incurs a gain or loss upon settlement. SFAS 143 is effective for fiscal years
beginning after June 15, 2002, with earlier application encouraged. The Company
is currently evaluating the impact that SFAS 143 will have on its operations.

4. Transactions With Other Vectren Companies

Support Services & Purchases
Vectren and certain subsidiaries of Vectren have provided corporate, general and
administrative services to the Company including legal, finance, tax, risk
management and human resources. The costs have been allocated to the Company
using various allocators, primarily number of employees, number of customers
and/or revenues. Management believes that the allocation methodology is
reasonable and approximates the costs that would have been incurred had the
Company secured those services on a stand-alone basis. For the three months
ended June 30, 2002 and 2001, amounts billed by other wholly owned subsidiaries
of Vectren to the Company were $10.7 million and $10.4 million, respectively.
For the six months ended June 30, 2002 and 2001, amounts billed by other wholly
owned subsidiaries of Vectren to the Company were $23.3 million and $21.5
million, respectively.

Vectren Fuels, Inc., a wholly owned subsidiary of Vectren, owns and operates
coal mines from which the Company purchases fuel used for electric generation.
Amounts paid for such purchases for the three months ended June 30, 2002 and
2001 were $15.0 million and $9.7 million, respectively. Amounts paid for such
purchases for the six months ended June 30, 2002 and 2001 were $28.2 million and
$20.9 million, respectively.

Cash Management and Borrowing Arrangements
The Company participates in a centralized cash management program with Vectren,
other wholly owned subsidiaries, and banks which permits funding of checks as
they are presented.

Guarantees of Parent Company Debt
Vectren's three operating utility companies, SIGECO, VEDO, and Indiana Gas are
guarantors of VUHI's $325 million commercial paper program, of which $116.2
million is outstanding at June 30, 2002 and VUHI's $350.0 million unsecured
senior notes outstanding at June 30, 2002. These guarantees are full and
unconditional and joint and several. VUHI has no significant independent assets
or operations other than the assets and operations of these operating utility
companies.

5. Commitments & Contingencies

The Company is party to various legal and regulatory proceedings arising in the
normal course of business. In the opinion of management, there are no legal
proceedings pending against the Company that are likely to have a material
adverse effect on its financial position or results of operations. See Note 6
regarding environmental matters.

6. Environmental Matters

Clean Air Act
NOx SIP Call Matter
The Clean Air Act (the Act) requires each state to adopt a State Implementation
Plan (SIP) to attain and maintain National Ambient Air Quality Standards (NAAQS)
for a number of pollutants, including ozone. If the United States Environmental
Protection Agency (USEPA) finds a state's SIP inadequate to achieve the NAAQS,
the USEPA can call upon the state to revise its SIP (a SIP Call).

In October 1998, the USEPA issued a final rule "Finding of Significant
Contribution and Rulemaking for Certain States in the Ozone Transport Assessment
Group Region for Purposes of Reducing Regional Transport of Ozone," (63 Fed.
Reg. 57355). This ruling found that the SIP's of certain states, including
Indiana, were substantially inadequate since they allowed for nitrogen oxide
(NOx) emissions in amounts that contributed to non-attainment with the ozone
NAAQS in downwind states. The USEPA required each state to revise its SIP to
provide for further NOx emission reductions. The NOx emissions budget, as
stipulated in the USEPA's final ruling, requires a 31% reduction in total NOx
emissions from Indiana.

In June 2001, the Indiana Air Pollution Control Board adopted final rules to
achieve the NOx emission reductions required by the NOx SIP Call. Indiana's SIP
requires the Company to lower its system-wide NOx emissions to .14 lbs./MMBTU by
May 31, 2004 (the compliance date). This is a 65% reduction from emission levels
existing in 1998 and 1999.

The Company has initiated steps toward compliance with the revised regulations.
These steps include installing Selective Catalytic Reduction (SCR) systems at
Culley Generating Station Unit 3 (Culley), Warrick Generating Station Unit 4,
and A.B. Brown Generating Station Units 1 and 2. SCR systems reduce flue gas NOx
emissions to atmospheric nitrogen and water using ammonia in a chemical
reaction. This technology is known to be the most effective method of reducing
NOx emissions where high removal efficiencies are required.

On August 28, 2001, the IURC issued an order that (1) approved the Company's
proposed project to achieve environmental compliance by investing in clean coal
technology, (2) approved the Company's initial cost estimate of $198 million for
the construction, subject to periodic review of the actual costs incurred, and
(3) approved a mechanism whereby, prior to an electric base rate case, the
Company may recover through a rider that is updated every six months a return on
its capital costs for the project, at its overall cost of capital, including a
return on equity. The first rider adjustment for ongoing cost recovery was
approved by the IURC on February 6, 2002.

The Company has recently filed another proceeding with the IURC to receive
approval of additional capital costs and to obtain approval for recovery of
future operating costs, including depreciation, related to the SCR's through a
rider mechanism. Based on the level of system-wide emissions reductions required
and the control technology utilized to achieve the reductions, the current
estimated construction cost ranges from $240 million to $250 million and is
expected to be expended during the 2001-2006 period. Through June 30, 2002,
$41.0 million has been expended. After the equipment is installed and
operational, related additional annual operating expenses, including
depreciation expense, are estimated to be between $24 million and $27 million.

The Company expects to achieve timely compliance as a result of the project.
Construction of the first SCR at Culley is nearing completion on schedule, and
installation of SCR technology as planned is expected to reduce the Company's
overall NOx emissions to levels compliant with Indiana's NOx emissions budget
allotted by the USEPA. Therefore, the Company has recorded no accrual for
potential penalties that may result from noncompliance.

Culley Generating Station Litigation
In the late 1990's, the USEPA initiated an investigation under Section 114 of
the Act of SIGECO's coal-fired electric generating units in commercial operation
by 1977 to determine compliance with environmental permitting requirements
related to repairs, maintenance, modifications, and operations changes. The
focus of the investigation was to determine whether new source review permitting
requirements were triggered by such plant modifications, and whether the best
available control technology was, or should have been used. Numerous electric
utilities were, and are currently, being investigated by the USEPA under an
industry-wide review for compliance. In July 1999, SIGECO received a letter from
the Office of Enforcement and Compliance Assurance of the USEPA discussing the
industry-wide investigation, vaguely referring to an investigation of SIGECO and
inviting SIGECO to participate in a discussion of the issues. No specifics were
noted; furthermore, the letter stated that the communication was not intended to
serve as a notice of violation. Subsequent meetings were conducted in September
and October 1999 with the USEPA and targeted utilities, including SIGECO,
regarding potential remedies to the USEPA's general allegations.

On November 3, 1999, the USEPA filed a lawsuit against seven utilities,
including SIGECO. The USEPA alleges that, beginning in 1992, SIGECO violated the
Act by: (1) making modifications to its Culley Generating Station in Yankeetown,
Indiana without obtaining required permits; (2) making major modifications to
the Culley Generating Station without installing the best available emission
control technology; and (3) failing to notify the USEPA of the modifications. In
addition, the lawsuit alleges that the modifications to the Culley Generating
Station required SIGECO to begin complying with federal new source performance
standards at its Culley Unit 3.

SIGECO believes it performed only maintenance, repair and replacement activities
at the Culley Generating Station, as allowed under the Act. Because proper
maintenance does not require permits, application of the best available control
technology, notice to the USEPA, or compliance with new source performance
standards, SIGECO believes that the lawsuit is without merit, and intends to
vigorously defend itself. Since the filing of this lawsuit, the USEPA has
voluntarily dismissed a majority of the claims brought in its original
compliant. In its original complaint, USEPA alleged significant emissions
increases of three pollutants for each of four maintenance projects. Currently,
USEPA is alleging only significant emission increases of a single pollutant at
three of the four maintenance projects cited in the original complaint.

The lawsuit seeks fines against SIGECO in the amount of $27,500 per day per
violation. However, on July 29, 2002, the Court ruled that USEPA could not seek
civil penalties for two of the three remaining projects at issue in the
litigation, significantly reducing potential civil penalty exposure. The lawsuit
also seeks a court order requiring SIGECO to install the best available
emissions technology at the Culley Generating Station. If the USEPA were
successful in obtaining an order, SIGECO estimates that in response it could
incur capital costs of approximately $20 million to $40 million to comply with
the order.

The USEPA has also issued an administrative notice of violation to SIGECO making
the same allegations, but alleging that violations began in 1977.

While it is possible that SIGECO could be subjected to criminal penalties if the
Culley Generating Station continues to operate without complying with the
permitting requirements of new source review and the allegations are determined
by a court to be valid, SIGECO believes such penalties are unlikely as the USEPA
and the electric utility industry have a bonafide dispute over the proper
interpretation of the Act. Accordingly, the Company has recorded no accrual and
the plant continues to operate while the matter is being decided.

Information Request
On January 23, 2001, SIGECO received an information request from the USEPA under
Section 114 of the Act for historical operational information on the Warrick and
A.B. Brown generating stations. SIGECO has provided all information requested,
and no further action has occurred.

Manufactured Gas Plants
In June of 2002, the Company received a request from the IDEM concerning
information on any manufactured gas plant sites which the Company has not
enrolled in IDEM's Voluntary Remediation Program, specifically five sites which
were owned and/or operated by SIGECO. Preliminary site investigations conducted
by SIGECO in the mid-1990's confirmed that based upon the conditions known at
the time, the sites posed no risk to human health or the environment.

7. Energy Marketing Activities

When generation capacity is not needed to serve utility customers, the Company
markets available power from its owned generation assets to better utilize and
optimize the return on these key assets. The contracts entered into are
primarily "buy-sell" transactions, short-term in nature, and expose the Company
to limited market risk. During 2002, the Company has increased its activity in
the wholesale market. With the exception of those contracts subject to the
normal purchase and sale exclusion, commodity contracts are accounted for at
market value. As of June 30, 2002, contracts had a net asset value of $0.1
million compared to a net asset value of $3.2 million at December 31, 2001. The
Company has determined these energy marketing contracts are derivatives within
the scope of SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities."

Contracts recorded at market value are recorded as current or noncurrent assets
or liabilities in the Condensed Balance Sheets depending on their value and on
when the contracts are expected to be settled. Changes in market value, which is
a function of the normal decline in fair value as earnings are realized and the
fluctuation in fair value resulting from price volatility, are recorded in
purchased electric energy in the Condensed Statements of Income. Market value is
determined using quoted market prices from independent sources, or absent quoted
market prices, other valuation techniques.

Forward sale contracts, premiums received for written options, and proceeds
received from exercised options are recorded when settled as electric utility
revenues in the Condensed Statements of Income. Forward purchase contracts,
premiums paid for purchased options, and proceeds paid for exercising options
are recorded when settled in purchased electric energy in the Condensed
Statements of Income. Contracts with counter-parties subject to master netting
arrangements are presented net in the Condensed Balance Sheets.

Power marketing contracts at June 30, 2002 totaled $9.7 million of prepayments
and other current assets and $9.6 million of accrued liabilities, compared to
$5.2 million of prepayments and other current assets and $2.0 million of accrued
liabilities at December 31, 2001. The change in the net value of these contracts
to $0.1 million at June 30, 2002 from $3.2 million at December 31, 2001 resulted
in an unrealized loss of $0.1 million and $3.1 million, respectively, for the
three and six months ended June 30, 2002. For the three and six months ended
June 30, 2001, the Company's power marketing operations resulted in unrealized
losses of $7.9 million and $2.4 million, respectively. Including these
unrealized changes in fair value, overall margin (revenue net of purchased
power) from power marketing operations for the three and six months ended June
30, 2002 was $2.4 million and $3.4 million, respectively, and for the three and
six months ended June 30, 2001 was ($4.6) million and $6.8 million,
respectively.






8. Segment Reporting

The Company had two operating segments during the three and six months ended
June 30, 2002: (1) Gas Utility Services and (2) Electric Utility Services. The
Gas Utility Services segment provides natural gas distribution and
transportation services in southwest Indiana. The Electric Utility Services
segment includes the operations of the Company's power generating and marketing
operations, and electric transmission and distribution services, which provides
electricity to primarily southwestern Indiana.

The following tables provide information about business segments. The Company
makes decisions on finance and dividends at the corporate level.

Three Months Six Months
Ended June 30, Ended June 30,
---------------------- ---------------------
In thousands 2002 2001 2002 2001
- ----------------------------- --------- --------- --------- ---------
Operating Revenues
Electric Utility Services $ 158,924 $ 95,020 $ 285,724 $ 183,229
Gas Utility Services 17,624 11,351 47,231 63,301
--------- --------- --------- ---------
Total operating revenues $ 176,548 $ 106,371 $ 332,955 $ 246,530
========= ========= ========= =========

Net Income Applicable to
Common Shareholder
Electric Utility Services $ 12,233 $ 3,272 $ 19,902 $ 20,141
Gas Utility Services 151 (2,034) 3,619 384
--------- --------- --------- ---------
Net income applicable to
common shareholder $ 12,384 $ 1,238 $ 23,521 $ 20,525
========= ========= ========= =========


June 30, December 31,
In thousands 2002 2001
- ----------------------------- --------- -----------
Identifiable Assets
Electric Utility Services $ 841,244 $ 811,248
Gas Utility Services 155,615 161,974
-------- --------
Total identifiable assets $ 996,859 $ 973,222
======== ========







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

Description of the Business

Southern Indiana Gas and Electric Company (the Company or SIGECO), an Indiana
corporation, provides electric generation, transmission, and distribution
services to Evansville, Indiana, and 74 other communities in 8 counties in
southwestern Indiana and participates in the wholesale power market. SIGECO also
provides natural gas distribution and transportation services to Evansville,
Indiana, and 64 communities in 10 counties in southwestern Indiana. SIGECO is a
direct, wholly owned subsidiary of Vectren Utility Holdings, Inc. (VUHI). VUHI
is a direct, wholly owned subsidiary of Vectren Corporation (Vectren).

Vectren, an Indiana corporation, is an energy and applied technology holding
company headquartered in Evansville, Indiana. Vectren was organized on June 10,
1999 solely for the purpose of effecting the merger of Indiana Energy, Inc.
(Indiana Energy) and SIGCORP, Inc. (SIGCORP). On March 31, 2000, the merger of
Indiana Energy with SIGCORP and into Vectren was consummated with a tax-free
exchange of shares and has been accounted for as a pooling-of-interests in
accordance with APB Opinion No. 16 "Business Combinations."

Vectren's wholly owned subsidiary, VUHI, serves as the intermediate holding
company for its three operating public utilities: Indiana Gas Company, Inc.
(Indiana Gas), formerly a wholly owned subsidiary of Indiana Energy, SIGECO,
formerly a wholly owned subsidiary of SIGCORP, and the Ohio operations, a
utility jointly owned by Indiana Gas and Vectren Energy Delivery of Ohio, Inc.
(VEDO). Both Vectren and VUHI are exempt from registration pursuant to Section
3(a)(1) and 3(c) of the Public Utility Holding Company Act of 1935.

Results of Operations

The Company's operations are comprised of its Electric Utility Services and Gas
Utility Services segments. The Electric Utility Services segment includes the
Company's power supply operations, power marketing operations, and electric
transmission and distribution services that provide electricity to primarily
southwestern Indiana. The Gas Utility Services segment includes the operations
of the Company's natural gas distribution business and provides natural gas
distribution and transportation services in southwestern Indiana. The results of
operations are as follows:




Three Months Six Months
Ended June 30, Ended June 30,
------------------- -------------------
In thousands 2002 2001 2002 2001
- --------------------------------------------- -------- -------- -------- --------

Net income applicable to common shareholder,
as reported $ 12,384 $ 1,238 $ 23,521 $ 20,525
Merger and integration costs-net of tax - - - 187
Restructuring costs-net of tax - 2,697 - 2,697
Cumulative effect of change in accounting
principle-net of tax - - - (3,938)
-------- -------- -------- --------
Net income applicable to common shareholder
before nonrecurring items $ 12,384 $ 3,935 $ 23,521 $ 19,471
======== ======== ======== ========



Net Income Applicable to Common Shareholder

For the three months ended June 30, 2002, net income applicable to common
shareholder increased $11.1 million primarily due to the accrual in 2002 of
carrying costs on the Company's demand side management programs consistent with
an existing IURC rate order and the completion in 2001 of merger and
restructuring activities and related costs, and favorable weather, and favorable
fluctuations in fair value of derivative contracts.

For the six months ended June 30, 2002, net income applicable to common
shareholder increased $3.0 million. The increases affecting the quarterly
results were offset for the year to date period by decreased margins resulting
from the effects of warm weather during the peak heating season, and reduced
price volatility affecting energy marketing activity.

New Accounting Principles

EITF 02-03

In June 2002, the EITF reached a final consensus in EITF Issue 02-03 "Accounting
for Contracts Involved in Energy Trading and Risk Management Activities" (EITF
02-03) that states mark-to-market gains and losses on energy trading contracts
(whether realized or unrealized and whether financially or physically settled)
should be shown net in the income statement and that expanded disclosure of
energy trading activities is required. This consensus is effective for periods
ending after July 15, 2002, with reclassification of prior period amounts
required.

The Company currently accounts for all its power marketing contracts at gross in
the Condensed Statements of Income. The Company has reviewed all of its current
power marketing contracts and contracts closed in prior periods and identified
no energy trading contracts subject to EITF 02-03.

SFAS 142

In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets" (SFAS 142). The Company adopted the provisions of SFAS 142, as required
on January 1, 2002. SFAS 142 changed the accounting for goodwill from an
amortization approach to an impairment-only approach. Thus, amortization of
goodwill that is not included as an allowable cost for rate-making purposes
ceased upon adoption of this statement. This includes goodwill recorded in past
business combinations. Goodwill is to be tested for impairment at a reporting
unit level at least annually.

SFAS 142 also required the initial impairment review of all goodwill within six
months of the adoption date. The impairment review consisted of a comparison of
the fair value of a reporting unit to its carrying amount. If the fair value of
a reporting unit is less than its carrying amount, an impairment loss would be
recognized. Results of the initial impairment review were to be treated as a
change in accounting principle in accordance with APB Opinion No. 20 "Accounting
Changes." An impairment loss recognized as a result of an impairment test
occurring after the initial impairment review is to be reported as a part of
operations. SFAS 142 also changed certain aspects of accounting for other
intangible assets; however, the Company does not have any significant other
intangible assets.

Initial impairment reviews to be performed within six months of adoption of SFAS
142 were completed and resulted in no impairment.

SFAS 144

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (SFAS 144). SFAS 144 develops one accounting
model for all impaired long-lived assets and long-lived assets to be disposed
of. SFAS 144 replaces the existing authoritative guidance in FASB Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" and certain aspects of APB Opinion No. 30, "Reporting
Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business."

This new accounting model retains the framework of SFAS 121 and requires that
those impaired long-lived assets and long-lived assets to be disposed of be
measured at the lower of carrying amount or fair value (less cost to sell for
assets to be disposed of), whether reported in continuing operations or in
discontinued operations. Therefore, discontinued operations are no longer
measured at net realizable value or include amounts for operating losses that
have not yet occurred.

SFAS 144 also broadens the reporting of discontinued operations to include all
components of an entity with operations that can be distinguished from the rest
of the entity and that will be eliminated from the ongoing operations of the
entity in a disposal transaction.

The adoption of SFAS 144 on January 1, 2002 did not materially impact
operations.

SFAS 143

In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" (SFAS 143). SFAS 143 requires entities to record the fair value of
a liability for an asset retirement obligation in the period in which it is
incurred. When the liability is initially recorded, the entity capitalizes a
cost by increasing the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value, and the capitalized cost
is depreciated over the useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligation for its recorded amount or
incurs a gain or loss upon settlement. SFAS 143 is effective for fiscal years
beginning after June 15, 2002, with earlier application encouraged. The Company
is currently evaluating the impact that SFAS 143 will have on its operations.

Significant Fluctuations

Utility Margin (Operating Revenues Less Cost of Gas Sold, Fuel for Electric
Generation, & Purchased Electric Energy)

Electric Utility Margin
Electric Utility margin for the three months ended June 30, 2002 of $52.8
million increased $9.3 million, or 21%, from 2001 primarily due to fluctuations
in fair value of derivative contracts. Non-firm wholesale margins in 2001
reflect a $7.9 million reduction due to fair value fluctuations, compared to a
$0.1 million reduction in 2002. The remaining increase, attributable to retail
and firm wholesale sales, results from weather 16% warmer than normal and 10%
warmer than the prior year and a cash return on NOx compliance expenditures
pursuant to a rate recovery rider approved by the IURC in August 2001.

Electric Utility margin for the six months ended June 30, 2002 of $102.0 million
increased $1.5 million, or 1%, from 2001 due to the effects of warmer weather,
offset somewhat by decreases in non-firm wholesale margin.

When generation capacity is not needed to serve utility customers, the Company
markets available power from its owned generation assets to better utilize and
optimize the return on these key assets. The contracts entered into are
primarily "buy-sell" transactions, short-term in nature, and expose the Company
to limited market risk. During 2002, the Company has increased its activity in
the wholesale market, as evidenced by increased electric revenues and purchased
power. While volumes both sold and purchased have increased during 2002, margins
have softened this year as a result of reduced price volatility. As a result of
increased activity offset by reduced price volatility, non-firm wholesale power
margins decreased $3.4 million for the year-to-date period.

Gas Utility Margin
Gas Utility margin for the three months ended June 30, 2002 of $6.2 million
decreased $0.6 million, or 9%, compared to 2001. The decrease is primarily due
to decreased throughput. Despite cooler temperatures than in the prior year,
throughput declined from 6.8 MMDth in 2001 to 6.0 MMDth in 2002 or 12% due to
customer conservation offset somewhat by customer growth.

Gas Utility margin for the six months ended June 30, 2002 of $18.3 million
increased $1.0 million, or 6%, compared to 2001. The increase is primarily due
to favorable changes in unaccounted for gas, customer growth, and other
adjustments. These increases were offset by weather warmer than the prior year
during the peak heating season and customer conservation. These offsets resulted
in an overall 10% decrease in total throughput from 18.7 MMDth in 2001 to 16.7
MMDth in 2002.

Operating Expenses (excluding Cost of Gas Sold, Fuel for Electric Generation, &
Purchased Electric Energy)

Other Operating
Other operating expenses for the three months ended June 30, 2002 increased $1.7
million, or 7%, and $2.9 million, or 6% for the six months ended June 30, 2002
compared to 2001. The 2002 increase results, primarily, from charges for the use
of corporate assets offset by merger synergies and the timing of maintenance
expenditures.

Income Tax Expense
Federal and state income taxes increased $6.3 million and $3.6 million for the
three and six months ended June 30, 2002, respectively. The increase results
from higher pretax earnings offset somewhat by a small decrease in the current
year effective tax rate from 37% to 36%.

Other income-net

Other income-net increased $6.2 million and $6.4 million for the three and six
months ended June 30, 2002 as compared to the prior year periods. The increases
are attributable to the accrual of $5.2 million in carrying costs for demand
side management programs not currently in rates pursuant to an existing IURC
rate order and $0.6 million from the sale of excess emission allowances.

Interest Expense

Interest expense increased $0.6 million and $1.1 million for the three and six
months ended June 30, 2002. The increase was due primarily to increased
borrowings resulting from NOx compliance capital expenditures.

Environmental Matters

Clean Air Act

NOx SIP Call Matter
The Clean Air Act (the Act) requires each state to adopt a State Implementation
Plan (SIP) to attain and maintain National Ambient Air Quality Standards (NAAQS)
for a number of pollutants, including ozone. If the United States Environmental
Protection Agency (USEPA) finds a state's SIP inadequate to achieve the NAAQS,
the USEPA can call upon the state to revise its SIP (a SIP Call).

In October 1998, the USEPA issued a final rule "Finding of Significant
Contribution and Rulemaking for Certain States in the Ozone Transport Assessment
Group Region for Purposes of Reducing Regional Transport of Ozone," (63 Fed.
Reg. 57355). This ruling found that the SIP's of certain states, including
Indiana, were substantially inadequate since they allowed for nitrogen oxide
(NOx) emissions in amounts that contributed to non-attainment with the ozone
NAAQS in downwind states. The USEPA required each state to revise its SIP to
provide for further NOx emission reductions. The NOx emissions budget, as
stipulated in the USEPA's final ruling, requires a 31% reduction in total NOx
emissions from Indiana.

In June 2001, the Indiana Air Pollution Control Board adopted final rules to
achieve the NOx emission reductions required by the NOx SIP Call. Indiana's SIP
requires the Company to lower its system-wide NOx emissions to .14 lbs./MMBTU by
May 31, 2004 (the compliance date). This is a 65% reduction from emission levels
existing in 1998 and 1999.

The Company has initiated steps toward compliance with the revised regulations.
These steps include installing Selective Catalytic Reduction (SCR) systems at
Culley Generating Station Unit 3 (Culley), Warrick Generating Station Unit 4,
and A.B. Brown Generating Station Units 1 and 2. SCR systems reduce flue gas NOx
emissions to atmospheric nitrogen and water using ammonia in a chemical
reaction. This technology is known to be the most effective method of reducing
NOx emissions where high removal efficiencies are required.

On August 28, 2001, the IURC issued an order that (1) approved the Company's
proposed project to achieve environmental compliance by investing in clean coal
technology, (2) approved the Company's initial cost estimate of $198 million for
the construction, subject to periodic review of the actual costs incurred, and
(3) approved a mechanism whereby, prior to an electric base rate case, the
Company may recover through a rider that is updated every six months a return on
its capital costs for the project, at its overall cost of capital, including a
return on equity. The first rider adjustment for ongoing cost recovery was
approved by the IURC on February 6, 2002.

The Company has recently filed another proceeding with the IURC to receive
approval of additional capital costs and to obtain approval for recovery of
future operating costs, including depreciation, related to the SCR's through a
rider mechanism. Based on the level of system-wide emissions reductions required
and the control technology utilized to achieve the reductions, the current
estimated construction cost ranges from $240 million to $250 million and is
expected to be expended during the 2001-2006 period. Through June 30, 2002,
$41.0 million has been expended. After the equipment is installed and
operational, related additional annual operating expenses, including
depreciation expense, are estimated to be between $24 million and $27 million.

The Company expects to achieve timely compliance as a result of the project.
Construction of the first SCR at Culley is nearing completion on schedule, and
installation of SCR technology as planned is expected to reduce the Company's
overall NOx emissions to levels compliant with Indiana's NOx emissions budget
allotted by the USEPA. Therefore, the Company has recorded no accrual for
potential penalties that may result from noncompliance.

Culley Generating Station Litigation
In the late 1990's, the USEPA initiated an investigation under Section 114 of
the Act of SIGECO's coal-fired electric generating units in commercial operation
by 1977 to determine compliance with environmental permitting requirements
related to repairs, maintenance, modifications, and operations changes. The
focus of the investigation was to determine whether new source review permitting
requirements were triggered by such plant modifications, and whether the best
available control technology was, or should have been used. Numerous electric
utilities were, and are currently, being investigated by the USEPA under an
industry-wide review for compliance. In July 1999, SIGECO received a letter from
the Office of Enforcement and Compliance Assurance of the USEPA discussing the
industry-wide investigation, vaguely referring to an investigation of SIGECO and
inviting SIGECO to participate in a discussion of the issues. No specifics were
noted; furthermore, the letter stated that the communication was not intended to
serve as a notice of violation. Subsequent meetings were conducted in September
and October 1999 with the USEPA and targeted utilities, including SIGECO,
regarding potential remedies to the USEPA's general allegations.

On November 3, 1999, the USEPA filed a lawsuit against seven utilities,
including SIGECO. The USEPA alleges that, beginning in 1992, SIGECO violated the
Act by: (1) making modifications to its Culley Generating Station in Yankeetown,
Indiana without obtaining required permits; (2) making major modifications to
the Culley Generating Station without installing the best available emission
control technology; and (3) failing to notify the USEPA of the modifications. In
addition, the lawsuit alleges that the modifications to the Culley Generating
Station required SIGECO to begin complying with federal new source performance
standards at its Culley Unit 3.

SIGECO believes it performed only maintenance, repair and replacement activities
at the Culley Generating Station, as allowed under the Act. Because proper
maintenance does not require permits, application of the best available control
technology, notice to the USEPA, or compliance with new source performance
standards, SIGECO believes that the lawsuit is without merit, and intends to
vigorously defend itself. Since the filing of this lawsuit, the USEPA has
voluntarily dismissed a majority of the claims brought in its original
compliant. In its original complaint, USEPA alleged significant emissions
increases of three pollutants for each of four maintenance projects. Currently,
USEPA is alleging only significant emission increases of a single pollutant at
three of the four maintenance projects cited in the original complaint.

The lawsuit seeks fines against SIGECO in the amount of $27,500 per day per
violation. However, on July 29, 2002, the Court ruled that USEPA could not seek
civil penalties for two of the three remaining projects at issue in the
litigation, significantly reducing potential civil penalty exposure. The lawsuit
also seeks a court order requiring SIGECO to install the best available
emissions technology at the Culley Generating Station. If the USEPA were
successful in obtaining an order, SIGECO estimates that in response it could
incur capital costs of approximately $20 million to $40 million to comply with
the order.

The USEPA has also issued an administrative notice of violation to SIGECO making
the same allegations, but alleging that violations began in 1977.

While it is possible that SIGECO could be subjected to criminal penalties if the
Culley Generating Station continues to operate without complying with the
permitting requirements of new source review and the allegations are determined
by a court to be valid, SIGECO believes such penalties are unlikely as the USEPA
and the electric utility industry have a bonafide dispute over the proper
interpretation of the Act. Accordingly, the Company has recorded no accrual and
the plant continues to operate while the matter is being decided.

Information Request
On January 23, 2001, SIGECO received an information request from the USEPA under
Section 114 of the Act for historical operational information on the Warrick and
A.B. Brown generating stations. SIGECO has provided all information requested,
and no further action has occurred.

Manufactured Gas Plants

In June of 2002, the Company received a request from the IDEM concerning
information on any manufactured gas plant sites which the Company has not
enrolled in IDEM's Voluntary Remediation Program, specifically five sites which
were owned and/or operated by SIGECO. Preliminary site investigations conducted
by SIGECO in the mid-1990's confirmed that based upon the conditions known at
the time, the sites posed no risk to human health or the environment.

Financial Condition

The Company's equity capitalization objective is 40-55% of total capitalization.
This objective may have varied, and will vary, depending on particular business
opportunities and seasonal factors that affect the Company's operation. The
Company's equity component was 50% and 49% of total capitalization, including
current maturities of long-term debt, at June 30, 2002 and December 31, 2001,
respectively.

Short-term cash working capital is required primarily to finance customer
accounts receivable, unbilled utility revenues resulting from cycle billing, gas
in underground storage, and capital expenditures. Short-term borrowings tend to
be greatest during the summer when accounts receivable and unbilled utility
revenues related to electricity are highest and gas storage facilities are being
refilled.

The Company expects the majority of its capital expenditures and debt security
redemptions to be provided by internally generated funds; however, additional
financing may be required in future years due to significant capital expenditure
for NOx compliance equipment.

SIGECO's credit ratings on outstanding secured debt at June 30, 2002 are A-/A1
as rated by Standard and Poor's and Moody's, respectively.

Cash Flow From Operations

The Company's primary source of liquidity to fund working capital requirements
has been cash generated from operations, which totaled approximately $59.1
million and $35.6 million, for the six months ended June 30, 2002 and 2001,
respectively.

Cash flow from operations increased during the six months ended June 30, 2002
compared to 2001 by $23.5 million due primarily to favorable changes in working
capital accounts due to a return to lower gas prices and increased earnings
before non-cash charges.

Financing Activities

Sources & Uses of Liquidity

SIGECO mainly relies on the short-term borrowing arrangements of VUHI for its
short-term working capital needs. The intercompany credit line totals $150
million, but is limited to VUHI's available capacity ($208.8 million at June 30,
2002) and is subject to the same terms and conditions as VUHI's commercial paper
program. Borrowings outstanding at June 30, 2002 were $84.0 million. At June 30,
2002, the Company had approximately $5 million of short-term borrowing capacity
with third parties to supplement its intercompany borrowing arrangements all of
which was available.

Vectren's three operating utility companies, SIGECO, VEDO, and Indiana Gas are
guarantors of VUHI's $325 million commercial paper program, of which $116.2
million is outstanding at June 30, 2002 and VUHI's $350.0 million unsecured
senior notes outstanding at June 30, 2002. VUHI has no significant independent
assets or operations other than the assets and operations of these operating
utility companies. These guarantees are full and unconditional and joint and
several. Ratings triggers on VUHI's commercial paper program existing at
December 31, 2001, were removed as the facility was renewed during 2002.

Financing Cash Flow
Cash flow required for financing activities of $19.6 million for the six months
ended June 30, 2002 includes $21.9 million in common stock dividends and $0.1
million paid for the redemption of preferred stock offset by $2.5 million of
increases in borrowings. This is an increase in cash requirements of $3.7
million over the prior year due primarily due to increased common stock
dividends.

Other Financing Transactions
In January 2002, the Company redeemed 1,160 shares of SIGECO's 8.5% preferred
stock per its stated terms of $100 per share, plus accrued and unpaid dividends.
Prior to the redemption, there were 4,597 shares outstanding.

Capital Expenditures & Other Investment Activities

Cash required for investing activities of $41.0 million for the six months ended
June 30, 2002 includes $42.4 million for capital expenditures. Investing
activities for the six months ended June 30, 2001 were $20.6 million. The
increase is attributable to NOx compliance expenditures and expenditures for the
construction of the new 80 megawatt peaking unit.

Forward-Looking Information

A "safe harbor" for forward-looking statements is provided by the Private
Securities Litigation Reform Act of 1995 (Reform Act of 1995). The Reform Act of
1995 was adopted to encourage such forward-looking statements without the threat
of litigation, provided those statements are identified as forward-looking and
are accompanied by meaningful cautionary statements identifying important
factors that could cause the actual results to differ materially from those
projected in the statement. Certain matters described in Management's Discussion
and Analysis of Results of Operations and Financial Condition are
forward-looking statements. Such statements are based on management's beliefs,
as well as assumptions made by and information currently available to
management. When used in this filing, the words "believe," "anticipate,"
"endeavor," "estimate," "expect," "objective," "projection," "forecast," "goal,"
and similar expressions are intended to identify forward-looking statements. In
addition to any assumptions and other factors referred to specifically in
connection with such forward-looking statements, factors that could cause the
Company's actual results to differ materially from those contemplated in any
forward-looking statements included, among others, the following:

|X| Factors affecting utility operations such as unusual weather conditions;
catastrophic weather-related damage; unusual maintenance or repairs;
unanticipated changes to fossil fuel costs; unanticipated changes to gas
supply costs, or availability due to higher demand, shortages,
transportation problems or other developments; environmental or pipeline
incidents; transmission or distribution incidents; unanticipated changes to
electric energy supply costs, or availability due to demand, shortages,
transmission problems or other developments; or electric transmission or
gas pipeline system constraints.

|X| Increased competition in the energy environment including effects of
industry restructuring and unbundling.

|X| Regulatory factors such as unanticipated changes in rate-setting policies
or procedures, recovery of investments and costs made under traditional
regulation, and the frequency and timing of rate increases.

|X| Financial or regulatory accounting principles or policies imposed by the
Financial Accounting Standards Board, the Securities and Exchange
Commission, the Federal Energy Regulatory Commission, state public utility
commissions, state entities which regulate natural gas transmission,
gathering and processing, and similar entities with regulatory oversight.

|X| Economic conditions including the effects of an economic downturn,
inflation rates, and monetary fluctuations.

|X| Changing market conditions and a variety of other factors associated with
physical energy and financial trading activities including, but not limited
to, price, basis, credit, liquidity, volatility, capacity, interest rate,
and warranty risks.

|X| Availability or cost of capital, resulting from changes in the Company,
including its security ratings, changes in interest rates, and/or changes
in market perceptions of the utility industry and other energy-related
industries.

|X| Employee workforce factors including changes in key executives, collective
bargaining agreements with union employees, or work stoppages.

|X| Legal and regulatory delays and other obstacles associated with mergers,
acquisitions, and investments in joint ventures.

|X| Costs and other effects of legal and administrative proceedings,
settlements, investigations, claims, and other matters, including, but not
limited to, those described in Management's Discussion and Analysis of
Results of Operations and Financial Condition.

|X| Changes in federal, state or local legislature requirements, such as
changes in tax laws or rates, environmental laws and regulations.

The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of changes in actual results,
changes in assumptions, or other factors affecting such statements.

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risks associated with commodity prices,
interest rates, and counter-party credit. These financial exposures are
monitored and managed by the Company as an integral part of its overall risk
management program.

Commodity Price Risk

The Company's regulated operations have limited exposure to commodity price risk
for purchases and sales of natural gas and electric energy for its retail
customers due to current Indiana regulations, which subject to compliance with
applicable state regulations, allow for recovery of such purchases through
natural gas and fuel cost adjustment mechanisms.

The Company does engage in limited wholesale power marketing that may expose it
to commodity price risk associated with fluctuating electric power prices. The
Company's wholesale power marketing activities manage the utilization of its
available electric generating capacity. These operations enter into forward and
option contracts that commit the Company to purchase and sell electric power in
the future.

Commodity price risk results from forward sale and option contracts that commit
the Company to deliver commodities on specified future dates. Power marketing
uses planned unutilized generation capability and forward purchase contracts to
protect certain sales transactions from unanticipated fluctuations in the price
of electric power, and periodically, will use derivative financial instruments
to protect its interests from unplanned outages and shifts in demand.

Open positions in terms of price, volume and specified delivery points may occur
to a limited extent and are managed using methods described above and frequent
management reporting.

When generation capacity is not needed to serve utility customers, the Company
markets available power from its owned generation assets to better utilize and
optimize the return on these key assets. The contracts entered into are
primarily "buy-sell" transactions, short-term in nature, and expose the Company
to limited market risk. During 2002, the Company has increased its activity in
the wholesale market. With the exception of those contracts subject to the
normal purchase and sale exclusion, commodity contracts are accounted for at
market value. As of June 30, 2002, contracts had a net asset value of $0.1
million compared to a net asset value of $3.2 million at December 31, 2001. The
Company has determined these energy marketing contracts are derivatives within
the scope of SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities."

Power marketing contracts at June 30, 2002 totaled $9.7 million of prepayments
and other current assets and $9.6 million of accrued liabilities, compared to
$5.2 million of prepayments and other current assets and $2.0 million of accrued
liabilities at December 31, 2001. The change in the net value of these contracts
to $0.1 million at June 30, 2002 from $3.2 million at December 31, 2001 resulted
in an unrealized loss of $0.1 million and $3.1 million, respectively, for the
three and six months ended June 30, 2002. For the three and six months ended
June 30, 2001, the Company's power marketing operations resulted in unrealized
losses of $7.9 million and $2.4 million, respectively. Including these
unrealized changes in fair value, overall margin (revenue net of purchased
power) from power marketing operations for the three and six months ended June
30, 2002 was $2.4 million and $3.4 million, respectively, and for the three and
six months ended June 30, 2001 was ($4.6) million and $6.8 million,
respectively.

Market risk is measured by management as the potential impact on pre-tax
earnings resulting from a 10% adverse change in the forward price of commodity
prices on market sensitive financial instruments (all contracts not expected to
be settled by physical receipt or delivery). For the three and six months ended
June 30, 2002, a 10% adverse change in the forward prices of electricity on
market sensitive financial instruments would have decreased pre-tax earnings by
approximately $0.1 million and $1.5 million, respectively. For the three and six
months ended June 30, 2001, a 10% adverse change in the forward prices of
electricity on market sensitive financial instruments would have decreased
pre-tax earnings by approximately $0.6 million and $1.4 million, respectively.

Interest Rate Risk

Interest rate risk is not significantly different from the information as set
forth in Item 7A. Quantitative and Qualitative Disclosures About Market Risk
included in the Company's 2001 Form 10-K and is therefore not presented herein.

Other Risks

By using forward purchase contracts and derivative financial instruments to
manage risk, the Company exposes itself to counter-party credit risk and market
risk. The Company manages this exposure to counter-party credit risk by entering
into contracts with companies that can be reasonably expected to fully perform
under the terms of the contract. Counter-party credit risk is monitored
regularly and positions are adjusted appropriately to manage risk. Further,
tools such as netting arrangements and requests for collateral are also used to
manage credit risk. The Company attempts to manage exposure to market risk
associated with commodity contracts and interest rates by establishing and
monitoring parameters that limit the types and degree of market risk that may be
undertaken.

The Company's customer receivables from gas and electric sales and gas
transportation services are primarily derived from a diversified base of
residential, commercial, and industrial customers located in Indiana and west
central Ohio. The Company manages credit risk associated with its receivables by
continually reviewing creditworthiness and requests cash deposits based on that
review. Credit risk associated with certain investments is also managed by a
review of creditworthiness and receipt of collateral.







PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is party to various legal and regulatory proceedings arising in the
normal course of business. In the opinion of management, there are no legal
proceedings pending against the Company that are likely to have a material
adverse effect on its financial position or results of operations. See Note 6
regarding environmental matters.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

None

(b) Reports On Form 8-K During The Last Calendar Quarter

On April 25, 2002, SIGECO filed a Current Report on Form 8-K with respect to the
release of financial information to the investment community regarding Vectren's
results of operations, financial position and cash flows for the three and
twelve month periods ended March 31, 2002. The financial information was
released to the public through this filing.
Item 5. Other Events
Item 7. Exhibits
99.1 - Press Release - First Quarter 2002 Vectren Corporation
Earnings
99.2 - Cautionary Statement for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act
of 1995

On May 20, 2002, SIGECO filed an amendment to Current Report on Form 8-K,
originally filed on March 26, 2002 with respect to its decision to dismiss
Arthur Andersen LLP as the Company's independent auditors effective May 17,
2002. Deloitte & Touche LLP has been selected as the independent auditors for
the Company, effective May 17, 2002,
Item 4. Changes in Registrant's Certifying Accountant.
Item 7. Exhibits
16 - Letter from Arthur Andersen LLP to the Securities and
Exchange Commission, dated May 20, 2002.
99 - Press release regarding selection of Deloitte & Touche
LLP dated May 20, 2002.





SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.




SOUTHERN INDIANA GAS
AND ELECTRIC COMPANY
--------------------
Registrant



August 14, 2002 /s/Jerome A. Benkert, Jr.
-------------------------
Jerome A. Benkert, Jr.
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)


/s/M. Susan Hardwick
---------------------------
M. Susan Hardwick
Vice President and Controller
(Principal Accounting Officer)













CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


CERTIFICATION
By signing below, each of the undersigned officers hereby certifies pursuant to
18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that, to his or her knowledge, (i) this report fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934
and (ii) the information contained in this report fairly presents, in all
material respects, the financial condition and results of operations of Southern
Indiana Gas and Electric Company.


Signed this 14th day of August, 2002.







/s/ Jerome A. Benkert, Jr. /s/ Niel C. Ellerbrook
- --------------------------------- ---------------------------------
(Signature of Authorized Officer) (Signature of Authorized Officer)

Jerome A. Benkert, Jr. Niel C. Ellerbrook
- --------------------------------- ---------------------------------
(Typed Name) (Typed Name)

Executive Vice President and
Chief Financial Officer Chairman and Chief Executive Officer
- --------------------------------- ------------------------------------
(Title) Title)