File No. 70-______
SECURITIES AND
EXCHANGE COMMISSION
450 FIFTH STREET, N.W.
WASHINGTON, D.C. 20549
__________________________________________
FORM U-1 APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
____________________________________________
Cinergy Corp.
139 East Fourth Street
Cincinnati, Ohio 45202
New Century Energies, Inc.
1225 17th Street
Denver, Colorado 80202
Cadence Network LLC
105 East Fourth Street, Suite 200
Cincinnati, Ohio 45202
(Name of companies filing this statement
and addresses of principal executive offices)
Cinergy Corp.
New Century Energies, Inc.
(Name of top registered holding company parents)
Mark L. Shunk, President
Cadence Network LLC
105 East Fourth Street, Suite 200
Cincinnati, Ohio 45202
(Name and address of agent of service)
Applicants request that all notices, orders
and communications be given to:
George Dwight II William M. Dudley
Senior Counsel Associate General Counsel
Cinergy Corp New Century Services, Inc.
221 East 4th Street, 25 AT2 1225 17th Street, Suite 600
Cincinnati, Ohio 45202 Denver, Colorado 80202
513-287-2643 303-294-2500
513-287-3810 (fax) 303-294-8255 (fax)
William C. Weeden William T. Baker, Jr.
Skadden Arps Slate Meagher & Flom Thelen Reid & Priest LLP
1400 New York Avenue, N.W. 40 West 57th Street
Washington, D.C. 20005 New York, New York 10019
202-371-7877 212-603-2106
202-371-7973 (fax) 212-603-2182 (fax)
Item 1. Description of Proposed Transactions
A. Introduction/ Authorization Requested
Cinergy Corp. ("Cinergy")and New Century Energies, Inc. ("NCE") are
registered holding companies under the Public Utility Holding Company Act
of 1935, as amended (the "Act")./1/ Cadence Network LLC, a Delaware
limited liability company ("Cadence" or "Company"), is a nonutility
subsidiary of both Cinergy and NCE, each of whom indirectly holds a
one-third ownership interest therein. Specifically, Cinergy holds its
one-third interest in Cadence through its wholly-owned, special-purpose
nonutility subsidiary, Cinergy-Cadence, Inc. ("Cinergy-Cadence"); likewise,
NCE holds its one-third interest in Cadence through its wholly-owned,
special-purpose nonutility subsidiary, New Century-Cadence, Inc. ("New
Century-Cadence"). Florida Progress Corporation ("FPC") owns the
remaining one-third ownership interest in Cadence, holding that interest
indirectly through its subsidiary, Progress Holdings, Inc. Cinergy, NCE
and FPC formed Cadence in September 1997 pursuant to a joint venture
between the parties. (Cinergy, NCE and Cadence are collectively referred
to herein as "Applicants.")
Cadence uses information to reduce energy-related costs for
commercial businesses that own and operate families of chain stores or
other multi-location retail establishments. As the essential first step,
Cadence collects, centralizes and redistributes to customers relevant cost
information using sophisticated technology. More specifically, The
Cadence Network ("Cadence Network" or "Network"), a Web-based interactive
reporting tool developed by Cadence, permits the Company's clients to
better track and manage electricity, natural gas and related costs
incurred at their facilities. At the same time, the Network lays the
groundwork for Cadence to achieve significant reductions in the customer's
energy costs e.g., by consolidating site information, detecting billing
errors, finding better rates, identifying high-cost stores, and determining
how to get costs back into line. The Cadence Network thus anchors the
range of additional services offered by Cadence, which are specifically
targeted at reducing the customer's energy-related costs. Currently these
services consist of bill verification and correction, "best rate"
assurance, and consulting with respect to gas and electric commodity
purchasing and energy efficiency projects. At June 30, 1999, Cadence was
serving customers including Blockbuster Entertainment, CKE/Hardees, Winn
Dixie Supermarkets and Service Merchandise in all 50 states.
Cinergy and NCE acquired their ownership interests in Cadence
(including the special-purpose subsidiaries established to hold those
interests, Cinergy-Cadence and New Century-Cadence) without prior
Commission authorization pursuant to Rule 58 under the Act./2/ As an
"energy-related company," substantially all of Cadence's revenues must
derive, and have derived, from permissible energy-related activities
carried out within the United States.
However, this geographical restriction saddles Cadence with
significant business and competitive disadvantages. Some of Cadence's
customers, including Blockbuster, Motel 6, Venator and others, have
locations outside of the United States for which they would like Cadence
to provide services consistent with what is being provided within the U.S.
For instance, Cadence is currently serving 3,800 Blockbuster sites in the
U.S., with a pending request from Blockbuster to service 380 additional
sites in Canada. Unless Cadence can provide its services to all of its
existing customers' stores not just those located in the U.S. the
Company risks losing to competitors who are not subject to this
disadvantage not just the incremental business, but also the existing
business within the U.S. In addition, to the extent that Cadence is
precluded from providing its services outside the U.S., the Company will
be foreclosed from competing for potential new business from chains that
are not currently customers of Cadence but have this requirement. More
fundamentally, Cadence's business was founded on the strategy of tracking
and reducing utility-related costs for all the retail sites operated by
chain businesses. Coverage of merely a subset of the client's stores
undercuts Cadence's business strategy and its appeal to clients.
The Commission has issued a number of orders authorizing registered
holding companies to market similar services both inside and outside the
United States. For example, in February 1997, the Commission authorized
another of Cinergy's nonutility subsidiaries, Cinergy Solutions, Inc.
("Cinergy Solutions"), to market energy management services and
utility-related consulting services (collectively, the "Cinergy Solutions
Global Services") anywhere in the world, directly or through subsidiaries,
with no restrictions on the amount or proportion of revenues from services
outside the U. S./3/ The Commission's order broadly defined energy
management services for these purposes
as:
(1) identification (through energy audits or otherwise) of energy
and other resource (water, labor, maintenance, materials, etc.) cost
reduction or efficiency opportunities; (2) design of facility and process
modifications or enhancements to realize such opportunities; (3)management,
or direct construction and installation, of energy conservation or
efficiency equipment; (4) training of client personnel in the operation of
equipment; (5) maintenance of energy systems; (6) design, management or
direct construction and installation of new and retrofit heating,
ventilating, and air conditioning ( HVAC'), electrical and power systems,
motors, pumps, lighting, water and plumbing systems, and related
structures, to realize energy and other resource efficiency goals or to
otherwise meet a customer's energy-related needs; (7) system commissioning
(i.e., monitoring the operation of an installed system to ensure that it
meets design specifications); (8) reporting of system results; (9) design
of energy conservation programs; (10) implementation of energy conservation
programs; (11) provision of conditioned power services (i.e., services
designed to prevent, control or mitigate adverse effects of power
disturbances on a customer's electrical system to ensure the level of power
quality required by the customer, particularly with respect to sensitive
electronic equipment); and (12) other similar or related activities./4/
The Commission applied a similarly broad definition to the consulting
services that Cinergy Solutions was permitted to market throughout the
world, to wit: technical and consulting services involving technology
assessments, power factor correction and harmonics mitigation analysis,
commercialization of electro-technologies, meter reading and repair, rate
schedule analysis and design, environmental services, engineering services,
billing services including conjunctive billing, summary billing for
customers with multiple locations and bill auditing, risk management
services, communications systems, information systems/data processing,
system planning, strategic planning, finance, feasibility studies, and
other similar or related services./5/
In May 1998, the Commission also authorized Columbia Energy Group to
market energy management services and utility-related consulting services
anywhere in the world, again with no restriction on the proportion of
overall revenues derived from services outside the U.S./6/ The energy
management services and consulting services were broadly defined consistent
with the Cinergy Solutions Global Services.
In light of the business imperatives and Commission precedent just
described, Applicants now request authority for Cadence to market its
utility-related cost reporting and reduction services anywhere outside the
United States, without restriction on the amount or proportion of revenues
derived from such activities outside the U.S., and in that connection
Cinergy and NCE request authority to retain their ownership interests in
Cadence, Cinergy-Cadence and New Century-Cadence previously acquired
pursuant to rule 58. Applicants propose that the authority to offer
services outside the United States cover not merely the utility-related
cost reporting and reduction services now in place and described in this
application, but additional similar and complementary energy-related
services that Cadence may develop and seek to offer to customers in the
future, both in the United States and abroad, provided that in no event
would these future services be broader in scope than the Cinergy Solutions
Global Services. Applicants further request that Cadence be granted the
flexibility to provide its services not just directly, but also indirectly
through one or more special-purpose subsidiaries, formed as corporations,
partnerships, limited liability companies or other legal entities, as
applicable business, legal, tax, accounting or strategic considerations
dictate./7/
Neither Cinergy nor NCE will seek recovery through higher rates to
customers of their utility subsidiaries for any losses or inadequate
returns that may arise from the proposed transactions.
Set forth below is a more detailed description of Cadence and its
business.
B. Cadence/Information Reporting & Cost Reduction
As stated above, the cost reduction services Cadence provides to its
customers are anchored by the cost reporting and tracking capabilities of
the Cadence Network.
The Cadence Network is an Internet-enabled database proprietary to
Cadence that consolidates, analyzes and manages customer site-specific cost
information for electricity and related services, reporting that
information back to customers in an interactive, flexible context. Cadence
collects the cost information that is fed into the Cadence Network
primarily from customer utility bills. Cadence then utilizes the
information provided to the Network to identify and analyze opportunities
for energy-related savings; to implement and administer cost saving
programs; and finally to measure and report results to the customer over
the Network.
The services Cadence offers to its customers thus fall into two
broad categories: (i) the core service consisting of reporting and
tracking, via the Cadence Network, of site costs for electricity, natural
gas and related services (currently limited to water/sewage; heating,
ventilation and air conditioning ("HVAC"); telephone; cable; and trash
collection); and (ii) additional services specifically targeted at reducing
energy-related costs. Customers compensate Cadence on a fixed fee or
shared savings basis. The Cadence web site, http://www.cadencenetwork.com,
provides further information on the Company and its services.
1. Cost Reporting & Tracking /Cadence Network
The customer utility bill is the primary source for the cost data
that drives the Cadence Network./8/ Cadence has entered into arrangements
with Cass Information Systems ("Cass") and Insite Services ("Insite"), both
of which are industry leaders in outsourced utility accounts payable
services. Whenever Cass or Insite pays a utility bill on behalf of a
Cadence client, the data is electronically fed into Cadence's database; the
information then becomes available for analysis, display and retrieval by
the customer over the Cadence Network. The transmitted utility bill data
covers electricity and natural gas usage or consumption and the fees and
expenses charged by the supplier therefor, and may also cover other utility
or utility-like services, such as for water/sewage, telephone, cable and
trash collection. Under the arrangement with Cadence, Cass or Insite
continues to pay the utility bill on behalf of the customer or in a
subcontractor role on behalf of Cadence.
Cadence recently entered into a similar arrangement with a national
HVAC preventive maintenance and service company. Cadence will connect to
the HVAC company's database to pull in HVAC-related information about the
customer's stores or other retail sites - maintenance history, service
performance by contractors and subcontractors, equipment cost information,
etc. - and will then display that information on the Cadence Network for
the customer's benefit, together with the customer's utility cost
information. The HVAC company will continue to collect and maintain the
data; Cadence will download a daily file from the HVAC company and import
that data into Cadence's database. Cadence will not assume any actual
service function, other than reporting the information to the customer.
Cadence or the customer pays Cass/Insite a fixed fee or other
consideration for its services. The HVAC company will pay Cadence an
access fee for use of the Cadence Network.
Once the electronic link to the underlying cost data has been
established, the Cadence Network is in a position to begin generating
interactive reports, charts and graphs for the customer analyzing and
continuously tracking those costs, making the data more usable, and
pointing up opportunities for cost savings. The customer can access
these reporting tools 24 hours a day at Cadence's secure,
password-protected Web site. Because Cadence's database is continually
replenished with the latest cost data for the customer's stores, the
reporting tools are kept current and accurate. With these interactive
reports, the customer can track utility/HVAC costs by site, vendor, or
region; run cost comparisons between facilities; view actual bill images
online; and otherwise better understand and manage its utility/HVAC costs.
And Cadence's technical experts use this same data to identify and
implement cost saving actions for the customer.
One service option of the Cadence Network is TempuTrak .
Overlaying energy usage patterns at customer facilities with corresponding
weather patterns in those areas, TempuTrak weather adjusts, or
"normalizes," energy usage per location. This enhances the value of the
Network's reporting tools, by allowing "apples to apples" comparisons,
helping to account for budget variances, and pinpointing energy-inefficient
sites.
The Cadence Network also plays a critical role in terms of measuring
and verifying specific cost-reduction steps taken by Cadence on the
customer's behalf. With the customer's historical and ongoing cost data
connected to the Network, Cadence is able to ensure, month by month, that
rates have in fact been changed and that new programs are actually saving
money.
2. Cost Reduction Services
In addition to the core service of cost tracking and reporting via
the Cadence Network, Cadence offers a number of additional services
specifically targeted at reducing the customer's energy-related costs.
Currently these services are comprised of bill verification and correction;
"best rate" assurance; electricity and gas commodity consulting; and energy
efficiency consulting, as described further below.
a. Bill verification and correction
Under this program, Cadence audits and otherwise reviews and
monitors individual invoices and invoicing patterns for electricity,
natural gas and water/sewage service furnished to customer sites. Cadence
also identifies clusters of likely savings and provides comparative
reports. Once errors are detected, Cadence's utility billing experts
isolate the cause and negotiate on the client's behalf directly with the
utility supplier for refunds and credits.
b. Best rate assurance
Cadence also helps clients reduce energy costs through its best rate
assurance program, under which Cadence assures that the client's high
priority facilities are being assessed optimal utility rates for
electricity and natural gas service. Cadence scrutinizes and verifies
facility load data and utility rate schedules and negotiates or
renegotiates directly with the utility supplier to ensure application of
the optimal rates to these high-priority customer facilities. In
connection with this program, clients can also authorize Cadence to conduct
a national rate assessment, identifying and prioritizing tariff-based
rate savings opportunities for electric and natural gas service with
respect to all of the customer's sites throughout the United States.
c. Electric and gas commodity consulting
Cadence will also assist its customers in shopping for electric and
natural gas supplies. Cadence can help secure the most attractive
commodity rates possible through custom proposals and proposal reviews.
After Cadence determines which facilities are most likely to profit from
electric and gas deregulation and other competitive purchasing
opportunities, Cadence uses the Cadence Network to aggregate load
information and create the custom RFPs necessary to shop for the commodity
supply. Cadence then reviews proposals from the various marketers,
analyzes rate pricing options, and helps to negotiate the contractual
terms. Throughout this process, Cadence acts as a consultant for
the customer. Cadence does not take title to the commodity nor act as a
broker for the buyer or seller.
d. Energy efficiency consulting
Finally, Cadence helps implement energy efficiency projects to
realize further cost savings for its customers. Using the detailed data
captured from the Cadence Network, Cadence can begin to identify high-cost
facilities that cannot be corrected by better rates or more accurate
billing. To zero in on the most likely targets for cost reductions,
Cadence conducts internal benchmarking, drawing on internal data-mining
techniques. Once it has identified the problem and likely solution,
Cadence will prepare proposals for national energy-efficiency projects and
develop comprehensive strategies. Whether for a lighting retrofit project,
or installation of an entire energy management system, Cadence will develop
the implementation plan, recommend the proposed application, and negotiate
for project procurement. In short, Cadence acts as a project facilitator
or overseer, rather than a contractor.
Item 2. Fees, Commissions and Expenses
The fees, commissions and expenses that have been or will be
incurred, directly or indirectly, by Cinergy or NCE or any of their
associate companies in connection with the proposed transactions are not
expected to exceed approximately $15,000, consisting primarily of fees and
expenses of Thelen Reid & Priest and Skadden Arps Slate Meagher & Flom,
outside counsel for both Cinergy and NCE in connection with the proposed
transactions.
Item 3. Applicable Statutory Provisions
Sections 6(a), 7, 9(a) and 10 of the Act and Rules 53 or 54
thereunder are or may be applicable to the proposed transactions.
Cinergy and NCE will supply their analysis under said rules by
amendment,incorporating information as of June 30, 1999 when such
information becomes available, i.e., in connection with the filing of their
reports on Form 10-Q for the quarterly period
ended June 30, 1999.
Item 4. Regulatory Approval
No state or federal regulatory agency other than the Commission
under the Act has jurisdiction over the proposed transactions.
Item 5. Procedure
Applicants request that the Commission issue and publish as soon as
practicable the requisite notice under Rule 23 with respect to the filing
of this application, and that the Commission issue an order granting the
authority requested herein as soon as practicable after expiration of the
public notice period.
Applicants waive a recommended decision by a hearing officer or
other responsible officer of the Commission; consent that the Staff of the
Division of Investment Management may assist in the preparation of the
Commission's order; and request that there be no waiting period between the
issuance of the Commission's order and its effectiveness.
Pursuant to Rule 24 under the Act, Applicants propose to file a
certificate in this docket within 60 days after the end of each calendar
quarter (commencing with the first full calendar quarter after issuance of
the order requested herein), providing certain information regarding
Cadence's business and operations, namely:
1. an unaudited balance sheet dated the end of such quarter
together with an unaudited statement of income for the quarter then-ended
and year-to-date period (except that no such financial statements would be
filed with the year-end quarterly report); and
2. (a) a narrative summary of the services provided by Cadence
outside the United States, including identification of the countries in
which such services are provided, and (b) the total operating revenues from
such services outside the United States.
Item 6. Exhibits and Financial Statements
(a) Exhibits:
A Not applicable
B Not applicable
C Not applicable
D Not applicable
E Not applicable
F-1 Preliminary opinion of counsel for Cinergy (to be
filed by
amendment)
F-2 Preliminary opinion of counsel for NCE (to be filed
by
amendment)
G Form of Federal Register notice
(b) Financial Statements:
FS-1 Cinergy Consolidated Financial Statements, dated June
30, 1999 (to be filed by amendment)
FS-2 Cinergy Financial Statements, dated June 30, 1999 (to
be filed by amendment)
FS-3 Cinergy Consolidated Financial Data Schedule, dated
June 30, 1999 (included as part of electronic submission only) (to be filed
by amendment)
FS-4 NCE Consolidated Financial Statements, dated June 30,
1999 (to be filed by amendment)
FS-5 NCE Financial Statements, dated June 30, 1999 (to be
filed by amendment)
FS-6 NCE Consolidated Financial Data Schedule, dated June
30, 1999 (included as part of electronic submission only) (to be filed by
amendment)
FS-7 Cadence Financial Statements, dated June 30, 1999
(filed under request for confidential treatment) (to be filed by amendment)
Item 7. Information as to Environmental Effects
(a) The Commission's action in this matter will not constitute
major federal action significantly affecting the quality of the human
environment.
(b) No other federal agency has prepared or is preparing an
environmental impact statement with regard to the proposed transactions.
<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the undersigned companies have
duly caused this statement to be signed on their behalf by the undersigned
thereunto duly authorized.
Dated: July 27, 1999
CINERGY CORP.
By: /s/William L. Sheafer
Vice President and Treasurer
NEW CENTURY ENERGIES, INC.
By: /s/Richard C. Kelly
Executive Vice President &
Chief Financial Officer
CADENCE NETWORK LLC.
By: /s/Mark L. Shunk
President
ENDNOTES
/1/ NCE and Northern States Power ("NSP") have entered into an Agreement
and Plan of Merger, dated as of March 24, 1999, providing for the merger of
NCE into NSP, with NSP as the surviving corporation. See HCAR
No. 27031, May 19, 1999 (order authorizing proxy solicitation).
/2/ See Cinergy's and NCE's Quarterly Reports on Form U-9C-3 dated
September 30, 1997.
/3/ Cinergy Corp., et al., HCAR No. 26662, February 7, 1997.
/4/ Id.
/5/ Id.
/6/ Columbia Energy Group, et al., HCAR No. 26868, May 6, 1998.
/7/ Cinergy and NCE anticipate that they will satisfy their allocable
shares of Cadence's financing needs through capital contributions or loans
exempt under Rules 45 and 52. In addition, Cadence may issue its
securities to outside parties to finance its business in transactions
exempt under rule 52. To the extent necessary, any Cinergy guarantees in
respect of such securities would be issued under, and consistent with, the
authority therefor granted to Cinergy in File No. 70-9319 (see HCAR No.
26984, March 1, 1999). Likewise, any NCE guarantees in respect of such
securities would be issued under, and consistent with, the authority
therefor granted to NCE in File No. 70-9397 (see HCAR No. 27000, April 7,
1999).
/8/ In certain cases Cadence may also obtain customer cost data from meters
on site. In those situations information from the customer's meter is
transmitted over a public telephone or cellular network to the Cadence
database.
Exhibit G/ Form of Public Notice
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- _____________)
Cinergy Corp. ("Cinergy"), a registered holding company located at
139 East Fourth Street, Cincinnati, Ohio 45202, New Century Energies, Inc.
("NCE"), a registered holding company located at 1225 17th Street Denver,
Colorado 80202, and Cadence Network LLC ("Cadence" and together with
Cinergy and NCE, "Applicants"), a nonutility company and subsidiary of each
of Cinergy and NCE, located at 105 East Fourth Street, Suite 200
Cincinnati, Ohio 45202, have filed an application-declaration
("Application") under sections 6(a), 7, 9(a) and 10 of the Act and rule 54
thereunder.
Cinergy and NCE acquired their ownership interests in Cadence in
September 1997 without prior Commission authorization pursuant to Rule 58
under the Act. Florida Progress Corporation ("FPC") owns the
remaining equity in Cadence. Each of Cinergy, NCE and FPC indirectly holds
a one-third ownership interest in Cadence. Cinergy holds its one-third
interest in Cadence through its wholly-owned, special-purpose nonutility
subsidiary, Cinergy-Cadence, Inc. ("Cinergy-Cadence"); NCE holds its
one-third interest in Cadence through its wholly-owned, special-purpose
nonutility subsidiary, New Century-Cadence, Inc. ("New Century-Cadence").
Both of these subsidiaries were formed without prior Commission
authorization pursuant to Rule 58 in order to acquire and hold Cinergy's
and NCE's interests in Cadence.
Applicants state that Cadence is devoted to using information to
reduce energy-related costs for commercial businesses that own and operate
families of chain stores or other multi-location retail establishments.
First, Cadence collects, centralizes and redistributes to customers
relevant cost information using sophisticated technology. More
specifically, The Cadence Network ("Cadence Network" or "Network"), a
Web-based interactive reporting tool developed by Cadence, permits
Cadence's clients to track and manage electricity, natural gas and related
costs incurred at their facilities (e.g., with respect to heating
ventilation and air conditioning ("HVAC"), water/sewage, telephone, cable,
and trash collection). Second, the Cadence Network anchors other services
offered by Cadence that are specifically targeted at reducing the
customer's energy-related costs. Currently these services consist of bill
verification and correction,/1/ "best rate" assurance,/2/ and consulting
with respect to gas and electric commodity purchasing/3/ and energy
efficiency projects./4/ At June 30, 1999, Cadence was serving customers
including Blockbuster Entertainment, CKE/Hardees, Winn Dixie Supermarkets
and Service Merchandise in all 50 states.
As an "energy-related company" created under rule 58, substantially
all of Cadence's revenues must derive, and according to Applicants have
derived, from permissible energy-related activities carried out within
the United States. However, Applicants assert that this geographical
restriction imposes significant business and competitive disadvantages on
Cadence, noting, among other things, that certain of Cadence's customers
have locations outside of the United States for which they would like
Cadence to provide services consistent with what is being provided within
the U.S. Applicants further state that the Commission has issued recent
orders authorizing registered holding companies to market similar services
both inside and outside the United States, citing a February 1997 order in
respect of another of Cinergy's nonutility subsidiaries (HCAR No.
26662, February 7, 1997) ("Cinergy Solutions Order") and a May 1998 order
issued to the Columbia Energy Group (HCAR No. 26868, May 6, 1998).
In light of these business considerations and Commission precedent,
Applicants propose in the Application that Cadence be permitted to market
its utility-related cost reporting and reduction services anywhere outside
the United States, without restriction on the amount or proportion of
revenues derived from such activities outside the U.S., and in that
connection Cinergy and NCE request authority to retain their ownership
interests in Cadence, Cinergy-Cadence and New Century-Cadence previously
acquired pursuant to rule 58. In addition, Applicants propose that such
authority cover not merely the utility-related cost reporting
and reduction services now in place as described in the Application, but
additional similar and complementary energy-related services that Cadence
may develop and seek to offer to customers in the future, both in the
United States and abroad, provided that in no event would these future
services be broader in scope than the energy management services and
consulting services approved in the Cinergy Solutions Order. Applicants
further request that Cadence be granted the flexibility to provide its
services directly or indirectly through one or more special-purpose
subsidiaries, formed as corporations, partnerships, limited liability
companies or other legal entities, as applicable business, legal, tax,
accounting or strategic considerations dictate./5/ Cinergy and
NCE commit that they will not seek recovery through higher rates to
customers of their utility subsidiaries for any losses or inadequate
returns arising from the proposed transactions.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
ENDNOTES
/1/ Under this service option, Cadence audits and otherwise reviews and
monitors individual invoices and invoicing patterns for electricity,
natural gas and water/sewage service furnished to customer sites. Cadence
also identifies clusters of likely savings and provides comparative
reports. Once errors are detected, Cadence's utility billing experts
isolate the cause and negotiate on the client's behalf directly with the
utility supplier for refunds and credits.
/2/ Under this service option, Cadence assures that the client's high
priority facilities are being assessed optimal utility rates for
electricity and natural gas service. Cadence scrutinizes and verifies
facility load data and utility rate schedules and negotiates or
renegotiates directly with the utility supplier to ensure application of
the optimal rates to these high-priority customer facilities. In
connection with this program, clients can also authorize Cadence to conduct
a national rate assessment, identifying and prioritizing tariff-based rate
savings opportunities for electric and natural gas service with respect to
all of the customer's sites throughout the United States.
/3/ Under this service option, Cadence assists its customers in shopping
for electric and natural gas supplies. Cadence can help secure the most
attractive commodity rates possible through custom proposals and proposal
reviews. After Cadence determines which facilities are most likely to
profit from electric and gas deregulation and other competitive purchasing
opportunities, Cadence uses the Cadence Network to aggregate load
information and create the custom RFPs necessary to shop for the commodity
supply. Cadence then reviews proposals from the various marketers,
analyzes rate pricing options, and helps to negotiate the contractual
terms. Throughout this process, Cadence acts as a consultant for the
customer. Cadence does not take title to the commodity nor act as a broker
for the buyer or seller.
/4/ Under this service option, Cadence helps implement energy efficiency
projects to realize further cost savings for its customers. Using the
detailed data captured from the Cadence Network, Cadence can begin to
identify high-cost facilities that cannot be corrected by better rates or
more accurate billing. To zero in on the most likely targets for cost
reductions, Cadence conducts internal benchmarking, drawing on internal
data-mining techniques. Once it has identified the problem and likely
solution, Cadence will prepare proposals for national energy-efficiency
projects and develop comprehensive strategies. Whether for a lighting
retrofit project, or installation of an entire energy management system,
Cadence will develop the implementation plan, recommend the proposed
application, and negotiate for project procurement. In short, Cadence acts
as a project facilitator or overseer, rather than a contractor.
/5/ Cinergy and NCE anticipate that they will meet their allocable shares
of Cadence's financing needs through capital contributions or loans exempt
under Rules 45 and 52. In addition, Cadence may issue its securities to
outside parties to finance its business in transactions exempt under rule
52. To the extent necessary, any Cinergy guarantees in respect of such
securities would be issued pursuant to the authority granted to Cinergy in
File No. 70-9319 (see HCAR No. 26984, March 1, 1999). Likewise, any NCE
guarantees in respect of such securities would be issued pursuant to the
authority granted to NCE in File No. 70-9397 (see HCAR No. 27000,
April 7, 1999).
