File No. 70-9449
SECURITIES AND EXCHANGE COMMISSION
450 FIFTH STREET, N.W.
WASHINGTON, D.C. 20549
__________________________________________
AMENDMENT NO.1 TO FORM U-1 DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
____________________________________________
Cinergy Corp.
139 East Fourth Street
Cincinnati, Ohio 45202
(Name of company filing this statement
and address of principal executive offices)
Cinergy Corp.
(Name of top registered holding company parent)
William L. Sheafer
Vice President and Treasurer
Cinergy Corp.
(address above)
(Name and address of agent of service)
The Commission is requested to direct all notices, orders and
communications in this matter to:
George Dwight II/Senior Counsel William T. Baker, Jr.
Cinergy Corp. Thelen Reid & Priest LLP
139 East Fourth Street, 25 Atrium 2 40 West 57th Street
Cincinnati, Ohio 45202 New York, New York 10019
513-287-2643 212-603-2106
513-287-3810 (fax) 212-603-2182 (fax)
[email protected] [email protected]
Item 1. Description of Proposed Transactions
A. Service Agreements between Utilities and Domestic Nonutility
Affiliates
On behalf of the proposed parties thereto, Cinergy Corp.
("Cinergy"), a registered holding company under the Public Utility Holding
Company Act of 1935, as amended (the "Act"), requests authorization for its
domestic nonutility subsidiaries to enter into service agreements with
Cinergy's utility subsidiaries under which, subject to the terms and
conditions thereof, the nonutility subsidiaries may provide a range of
services to the utility affiliates, and vice versa,/1/ priced at "cost" as
determined pursuant to Rule 91 under the Act. Cinergy requests
authorization for each of its domestic nonutility subsidiaries (including
those formed after the date of the Commission's order herein, but excluding
exempt telecommunications companies as defined in the Act ("ETCs")) to
enter into a separate but substantially similar contract ("Service
Agreement" or "Agreement") with all of Cinergy's utility subsidiaries.
Cinergy's two principal utility subsidiaries, each of which is a
direct, wholly-owned subsidiary of Cinergy, are The Cincinnati Gas &
Electric Company, an Ohio electric and gas utility ("CG&E"), and PSI
Energy, Inc., an Indiana electric utility ("PSI"), which are subject to
state utility regulation by the Public Utilities Commission of Ohio
("PUCO") and the Indiana Utility Regulatory Commission ("IURC"),
respectively. Pursuant to provisions regarding affiliate contracts
contained in settlement agreements dating from the 1994 merger that created
Cinergy, /2/ CG&E and PSI submitted identical proposed forms of Service
Agreements to the PUCO and the IURC staff in August 1998 for their review
prior to review by this Commission. In late January 1999 the PUCO and the
IURC staff completed their review and, based upon certain modifications
made to the CG&E Service Agreement and assurances regarding certain costs
that may arise under the PSI Service Agreement (see letter from PSI filed
as Exhibit D-4), cleared the CG&E and PSI Service Agreements for filing
with this Commission in the forms submitted herewith./3/ The letters from
the PUCO and IURC staff are included as Exhibits D-2 and D-5.
The proposed Service Agreements with the remaining utility
subsidiaries of Cinergy, all of whom are direct, wholly-owned subsidiaries
of CG&E (collectively, with CG&E and PSI, the "Operating Companies") - The
Union Light, Heat and Power Company, a Kentucky electric and gas utility
("ULH&P"), Lawrenceburg Gas Company, an Indiana gas utility
("Lawrenceburg"), The West Harrison Gas and Electric Company, an Indiana
electric utility ("West Harrison"), and Miami Power Corporation ("Miami"),
an electric utility by virtue of its ownership of certain transmission
assets - do not require prior state commission review. Except in regard to
prior state commission review of amendments thereto, the proposed Service
Agreement for each CG&E utility subsidiary conforms in all material
respects to the CG&E Service Agreement, including the additional
protections incorporated as a result of the PUCO's review.
The proposed Service Agreements for CG&E, PSI and CG&E's utility
subsidiaries are filed as Exhibits B-1, B-2 and B-3, respectively.
B. Parties to Service Agreements
The parties to the Service Agreements will be the Operating
Companies and Cinergy's domestic nonutility subsidiaries excluding ETCs.
Cinergy has five direct subsidiaries all of whom are wholly-owned:
CG&E, PSI, Cinergy Investments, Inc. ("Cinergy Investments"), which holds
all of Cinergy's domestic nonutility businesses and interests (with certain
minor exceptions),/4/ Cinergy Global Resources, Inc., which holds all of
Cinergy's foreign businesses and interests, and Cinergy Services, Inc.,
Cinergy's service company subsidiary which provides a variety of support
services to its utility and nonutility affiliates.
The Operating Companies generate, transmit, distribute and sell
electricity and transport and sell natural gas to approximately 1.4 million
customers in southwestern Ohio, most of Indiana and northern Kentucky.
PSI produces, transmits, distributes and sells electricity in north
central, central and southern Indiana, serving an estimated population of
2.1 million people located in 69 of the state's 92 counties including the
cities of Bloomington, Columbus, Kokomo, Lafeyette, New Albany and Terre
Haute. At and for the year ended December 31, 1997, PSI had total
consolidated assets of approximately $3.4 billion and operating revenues of
approximately $1.9 billion.
CG&E and its utility subsidiaries provide electric and gas service
in the southwestern portion of Ohio and adjacent areas in Kentucky and
Indiana. The area served with electricity, gas or both covers
approximately 3,000 square miles and has an estimated population of 1.8
million. CG&E is engaged in the production, transmission, distribution and
sale of electricity and the sale and transportation of natural gas in the
southwestern portion of Ohio, serving an estimated population of 1.5
million people in 10 of the state's 88 counties including the cities of
Cincinnati and Middletown. ULH&P, which is subject to state utility
regulation by the KPSC, is engaged in the production, transmission,
distribution and sale of electricity and the sale and transportation of
natural gas in northern Kentucky, serving an estimated population of
299,000 people in a 500 square-mile area encompassing six counties and
including the cities of Newport and Covington. Lawrenceburg sells and
transports natural gas to approximately 20,000 people in a 60 square-mile
area in southeastern Indiana. West Harrison sells electricity over a
3-square mile area with a population of approximately 1,000 in West
Harrison,Indiana and bordering rural areas. Lawrenceburg and West Harrison
are subject to state utility regulation by the IURC. Miami owns a 138 kV
transmission line running from the Miami Fort Power Station in Ohio to a
point near Madison, Indiana. Miami is regulated by the Federal Energy
Regulatory Commission under the Federal Power Act, but is not subject to
state utility regulation. At and for the year ended December 31, 1997,
CG&E had total consolidated assets of approximately $4.9 billion and
operating revenues of approximately $2.4 billion ($1.9 billion electric and
$500 million gas).
For more information regarding the Operating Companies, see
Cinergy's Annual Report on Form 10-K for the year ended December 31, 1997
and quarterly reports on Form 10-Q for the quarters ended March 31, June 30
and September 30, 1998, as well as Cinergy's Annual Report on Form U5S.
Cinergy Investments holds all of Cinergy's domestic nonutility
businesses, except for those held by CG&E and PSI. At December 31, 1998,
Cinergy Investments had 11 direct wholly-owned subsidiaries (see the chart
filed as Exhibit I): Cinergy-Cadence, Inc., an "energy-related company"
within the meaning of Rule 58 under the Act (a "Rule 58 Company" or "Rule
58 Subsidiary") which has a one-third ownership interest in its Rule 58
Subsidiary, Cadence Network LLC, which markets various energy management
services to multi-site retail establishments; Cinergy Capital & Trading,
Inc., a Rule 58 Company devoted to energy marketing and trading that has
eight subsidiaries, each devoted to energy marketing or ownership or
operation of EWGs; Cinergy Communications, Inc., an ETC; Cinergy
Engineering, Inc., a Rule 58 Company devoted to utility-related engineering
and other technical services; Cinergy-Centrus, Inc., an ETC;
Cinergy-Centrus Communications, Inc., an ETC that holds a one-third
ownership interest in Centrus LLP, also an ETC; Cinergy Resources, Inc., a
Rule 58 Company devoted to energy marketing and trading; Cinergy Solutions,
Inc./5/, which, together with its 12 partly- and wholly-owned subsidiaries,
primarily markets energy management services and engages in development,
ownership and operation of district cooling and heating systems and
qualifying facilities under the Public Utility Regulatory Policies Act of
1978, principally through a joint venture with a non-affiliate, Trigen
Energy Corporation; Cinergy Supply Network, Inc., a Rule 58 Company, which
engages in utility materials brokering services and, through its
one-third-owned Rule 58 Subsidiary, Reliant Services, LLC, proposes to
engage in underground utility facilities location and construction
services; Cinergy Technology, Inc., which is devoted to commercialization
of utility technologies and related investments;/6/ and Enertech
Associates, Inc., an inactive Rule 58 Company.
For more information concerning Cinergy Investments and its
subsidiaries, including financial information, see Cinergy's Annual Report
on Form U5S for the year ended December 31, 1997, quarterly reports on Form
U-9C-3 and quarterly notification certificates in File No. 70-8933
(relating to Cinergy Solutions) for March 31, June 30 and September 30,
1998 and the application-declaration as amended in File No. 70-9319.
C. Terms of Service Agreements
1. Terms Common to All Service Agreements
In general, the Service Agreements authorize the provision of
services, including loans of employees, from the Operating Companies to the
domestic nonutility companies, excluding ETCs ("Nonutility Companies"), and
from the Nonutility Companies to the Operating Companies, priced at "cost,"
pursuant to a written service request procedure. The Agreements include
provisions regarding liability and indemnification, as well as provisions
to protect the interests of Cinergy's state utility regulators and the
retail customers of the Operating Companies.
More specifically, upon receipt by a party to the Agreement of a
written service request (adhering to the form thereof attached to the
Agreement) requesting such services as are specified therein, including if
applicable use of any related equipment, facilities, properties or other
resources ("Services"), the receiving party shall provide the requested
Services at the time and for the period sought, if in its sole discretion
it can do so without impairing its normal business operations. Services
may include, but are not limited to, engineering and construction;
operations and maintenance; equipment testing; information services;
monitoring, surveying, inspecting, constructing, locating and marking of
overhead and underground utility facilities; meter reading; materials
management; vegetation management; and marketing and customer relations.
In addition to the exclusion of transactions involving affiliated ETCs and
FUCOs, affiliate transactions involving sales, leases, or other transfers
of assets, goods, energy commodities (including electricity, gas, coal and
other combustible fuels) or thermal energy products are outside the scope
of the Service Agreements. (Article 1)
Any loans of employees by the company providing Services shall
likewise be at the service provider's sole discretion. While performing
work on behalf of the client company, any such loaned employees shall be
under its supervision and control, and the client company shall be
responsible for their actions.
All requests for Services shall be in writing consistent with the
form thereof appended to the Agreement. Accordingly, each service request
must identify the client company and proposed service provider, be
authorized by an appropriate individual at both the client company and the
service provider, include a detailed description of the proposed services
and estimated costs, and specify the scheduled start date and completion
date. In addition, all Services shall be assigned to applicable
activities, projects, programs or on other appropriate bases to enable
specific work to be properly assigned. The client company may amend
service requests from time to time, subject to certain conditions.
(Article 2)
All Services shall be rendered at the full cost thereof, as
computed in accordance with applicable rules, regulations and accounting
standards including Rules 90 and 91 under the Act. As soon as practicable
after the close of each month, any company providing Services shall render
to each client company a statement reflecting the billing information
necessary to identify the costs charged for that month. The client company
is required to pay all amounts billed within 30 days after receipt thereof.
(Article 3)
The sole and exclusive responsibility of a company providing
Services for any asserted deficiency will be to correct or repair the
deficiency or re-perform the Services, at no additional cost to the client
company. The service provider disclaims any additional warranties or
remedies, and each client company agrees to accept Services on that basis.
In addition, any company receiving Services agrees to indemnify the company
providing those Services (including each of its officers, directors,
employees and agents) from any losses, liabilities or claims arising from
or in connection with the provision of such Services. The indemnity
applies regardless of negligence, willful misconduct, or breach of warranty
by the company that provided the Services or any of its officers,
directors, employees or agents. (Article 4)
The final article of each Service Agreement contains provisions
regarding ratemaking, amending the Agreement, additional parties,
regulatory requirements and miscellaneous "boilerplate." With respect to
ratemaking, the Agreement provides (Section 5.1) that:
Operating Company shall not seek to overturn,
reverse, set aside, change or enjoin, whether through
appeal or the initiation or maintenance of any action in
any forum, a decision or order of the [applicable state
commission - PUCO, IURC or KPSC] which pertains to
recovery, disallowance, deferral or ratemaking treatment
of any expense, charge, cost or allocation incurred or
accrued by Operating Company in or as a result of this
Agreement (or any amendment hereto) on the basis that
this Agreement and any such expense, charge, cost or
allocation was filed with or approved by the SEC.
Any amendment to the Agreement must be in writing executed by all
of the parties. In addition, the CG&E and PSI Service Agreements (but not
the form of Service Agreement for CG&E's utility subsidiaries) provide that
any amendment to either of those Agreements, before being submitted to this
Commission for its review, must first be submitted to the PUCO and the IURC
staff for their review, and submitted to certain other interested parties
for informational purposes (see Section 5.2) - in other words, the same
"pre-SEC filing and review" procedure applicable to the instant Service
Agreements for CG&E and PSI. As with CG&E's and PSI's entry into these
contracts, the PUCO and the IURC staffs have effective veto power over any
proposed amendment to those contracts. Cinergy is precluded from seeking
Commission approval of the contract or amendment, or must withdraw it, and
may not put it into effect as to CG&E or PSI, if the PUCO or IURC staff
disapprove it or find it unreasonable. This protection - as with the
ratemaking "hold-harmless" in Section 5.1 - is a linchpin of the 1994
settlements as they concern matters relating to the Act.
Additional Nonutility Companies may become parties to any Service
Agreement after the original execution thereof by executing appropriate
signature pages. In the absence of any changes to the terms of the
Agreement, merely adding new Nonutility Companies as signatories is not
deemed an amendment, including for purposes of the prior state review just
described. (Section 5.4)
The provision of Services pursuant to the Agreement shall in all
cases, and notwithstanding anything to the contrary, be subject to any
limitations or restrictions contained in any applicable orders or
authorizations, statutory provisions, rules or regulations, tariffs, or
agreements, whether now in existence or hereinafter promulgated, of
regulatory or governmental agencies having jurisdiction over the parties to
the Agreement, including the Commission, the applicable state commission
and the Federal Energy Regulatory Commission. To the extent, if any, that
at any time any provision of the Agreement conflicts with any limitation or
restriction of any such regulatory agency, the latter controls. (Section
5.6)
The foregoing provisions are included in each proposed Service
Agreement, with the sole exception that the provision (Section 5.2)
granting the state commission or its staff the right to prior review of
proposed amendments is included in the CG&E and PSI Service Agreements, but
not the Service Agreements to be entered into by the CG&E utility
subsidiaries. This difference is consistent with the terms of the 1994
merger accommodations with the PUCO, IURC and the KPSC.
2. Additional Terms Resulting from PUCO Review
The PUCO's review in Case No. 98-1183-GE-CMT resulted in the
incorporation of certain additional provisions in the CG&E Service
Agreement (which are reflected in the form filed herewith). There are two
principal substantive provisions./7/ The first is directed at potential
unfair competition and stipulates that none of the Services "may include
the provision of information or other services by the Operating Company
that may result in an undue or unreasonable competitive advantage under law
to any Nonutility Company." (Section 1.1(b), last sentence.)
The second principal substantive provision is intended to protect
confidential information of customers of the Operating Companies, and thus
imposes "certain prohibitions related to the access, sharing, and release
of customer information and customer information databases." (See Section
5.11 of CG&E Service Agreement.) Specifically, this provision requires,
except as otherwise expressly permitted therein, that:
1. No employee of a Nonutility Company may access CG&E's customer
database or release CG&E customer information without the
written consent of the customer specifying the type of
information to be released.
2. No employee of CG&E may release CG&E customer information to a
Nonutility Company without the written consent of the customer
specifying the type of information to be released.
3. CG&E shall keep a log when the CG&E customer database is
accessed by or CG&E customer information is released to a
Nonutility Company. Such log shall include customer name,
date(s) when CG&E's customer database was accessed or CG&E
customer information was released, the type(s) of information
accessed or released, and the employee and entity requesting
access to the database or release of information.
4. CG&E customer information released to a Nonutility Company may
not be shared or supplied by that Nonutility Company with or
to another CG&E affiliate or Cinergy subsidiary.
Both of these provisions - concerning unfair competitive advantages
and safeguarding customer information - have also been included in the form
of Service Agreement for each CG&E utility subsidiary and thus will apply
in respect of service transactions under those agreements as well.
Although these provisions are not part of the express terms of the PSI
Service Agreement, Cinergy will ensure that PSI and the Nonutility
Companies party to that agreement abide by these restrictions. As noted,
the PSI Service Agreement underwent its own review by the IURC staff
pursuant to the 1994 merger settlements; based on its review and certain
assurances given by PSI, the staff requested no changes to the proposed
agreement.
Item 2. Fees, Commissions and Expenses
The fees, commissions and expenses to be incurred, directly or
indirectly, by Cinergy or any associate company thereof in connection with
the proposed transactions are estimated at $15,000, including legal fees
and expenses of Thelen Reid & Priest LLP of approximately $10,000.
Item 3. Applicable Statutory Provisions
Sections 12(f) and 13(b) and Rules 54, 80, 81, 86, 87, 89, 90 and
91 are or may be applicable to the proposed transactions.
Rule 54 provides that in determining whether to approve the issue
or sale of a security by a registered holding company for purposes other
than the acquisition of an EWG or FUCO, or other transactions by such
registered holding company or its subsidiaries other than with respect to
EWGs or FUCOs, the Commission shall not consider the effect of the
capitalization or earnings of any subsidiary which is an EWG or a FUCO upon
the registered holding company system if the conditions of rule 53(a), (b)
and (c) are satisfied.
Cinergy currently does not meet the conditions of rule 53(a). At
December 31, 1998, Cinergy's "aggregate investment," as defined in rule
53(a)(1), in EWGs and FUCOs (including related project parents) was
approximately $628 million. This amount equals approximately 66% of
Cinergy's "consolidated retained earnings," also as defined in rule
53(a)(1) (approximately $949 million), which exceeds the 50% "safe harbor"
limitation contained in rule 53(a). By order dated March 23, 1998 (HCAR
No. 26848) ("100% Order"), the Commission authorized Cinergy to increase
its total investments in EWGs and FUCOs to 100% of consolidated retained
earnings. Accordingly, although Cinergy's aggregate investment exceeds the
50% safe harbor, such additional level of investment is expressly permitted
under the 100% Order.
At September 30, 1997, the most recent period for which financial
statement information was evaluated in the 100% Order, Cinergy's
consolidated capitalization consisted of 44.1% equity and 55.9% debt; at
such date, Cinergy's pro forma consolidated capitalization, taking into
account the entire amount of non-recourse debt allocable to Cinergy's
ownership interest in EWGs and FUCOs (i.e., $949 million) was 38.2% equity
and 61.8% debt. As shown in Exhibit H filed herewith, Cinergy's pro forma
consolidated capitalization at December 31, 1998 consisted of 42% equity
and 58% debt; also as shown in Exhibit H, even if the entire amount of
then-outstanding non-recourse debt of EWGs and FUCOs allocable to Cinergy's
ownership interest therein were consolidated (i.e., $1.2 billion), equity
would still comprise 35.5% of the overall capital structure. The proposed
transactions would have no impact on Cinergy's capitalization.
With respect to earnings, the 100% Order stated that Cinergy did
not report a full-year operating loss attributable to its investments in
EWGs and FUCOs for any year 1992 through 1996. That order also stated that
Midlands Electricity plc ("Midlands"), a FUCO in the United Kingdom in
which Cinergy has a 50% ownership interest, recorded a one-time
extraordinary charge in the third quarter of 1997 as a result of a windfall
profits tax imposed by the authorities in the United Kingdom, of which $109
million was allocable to Cinergy. However, the 100% Order noted that
Midland's credit ratings by Standard and Poor's remained unchanged
following the charge. Since the date of the 100% Order (as disclosed in
the quarterly notification certificates in File No. 70-9011), Cinergy's
investments in EWGs and FUCOs have continued to make a positive
contribution to Cinergy's earnings.
With respect to the remaining conditions of rule 54, Cinergy has
complied and will continue to comply with the record-keeping requirements
of rule 53(a)(2), the limitation under rule 53(a)(3) on the use of
operating company personnel in rendering services to EWGs and FUCOs, and
the requirements of rule 53(a)(4) concerning submission of specified
filings under the Act to retail rate regulatory agencies. In addition,
none of the conditions in rule 53(b) has occurred.
Item 4. Regulatory Approval
OHIO: Pursuant to the 1994 merger-related settlements and conditions
referred to in Item 1, the PUCO has jurisdiction to review in advance for a
60-day period prior to any filing thereof with this Commission, and to
approve or disapprove, certain affiliate contracts to which CG&E proposes
to be a party, including the proposed CG&E Service Agreement. On August
24, 1998 CG&E filed the contract with the PUCO initiating Case
No.98-1183-GE-CMT (see Exhibit D-1); pursuant to the merger settlement
procedures, CG&E has also provided copies of the contract to certain other
interested parties. On January 25, 1999, the PUCO's assistant attorney
general issued a letter (Exhibit D-2) addressed to the Assistant Director
of the Commission's Office of Public Utility Regulation, stating that:
By a vote on January 20, 1999, the [PUCO] has
authorized me to inform you that, pursuant to procedures
agreed to in the 1994 merger which created Cinergy Corp.,
[CG&E] has filed a proposed Utility-Nonutility Services
Agreement for PUCO review. This letter is to inform
you that the PUCO and its staff has completed its review
and has no objections to the Services Agreement as filed
with the PUCO.
INDIANA: Likewise, pursuant to the 1994 merger settlements, on
August 21, 1998 PSI filed the proposed PSI Service Agreement with the staff
of the IURC (and provided copies to certain other interested parties),
initiating a 60-day pre-SEC filing review period by the IURC's staff. (See
Exhibit D-3.) As required by the merger settlement, PSI also published a
notice with respect to the Service Agreement in two local newspapers. On
December 21, 1998, PSI submitted a letter to the IURC (Exhibit D-4)
confirming, in connection with the Service Agreement, that should PSI "be
required to re-perform any services (or to correct or repair any
deficiencies) under section 4.1 of that agreement, the costs of any such
re-performance, correction or repair shall not be allocated or charged to
PSI's retail customers." On January 14, 1999, partly on the basis of these
assurances, the IURC's staff issued a letter to PSI (Exhibit D-5) stating
that the staff had "completed its preliminary review of the [PSI Service
Agreement] and the contract is now cleared for filing with the IURC and
the SEC." Under state law and the 1994 merger-related settlement
agreement with the IURC, PSI, following completion of the staff's review,
is required to file the contract with the IURC (and has done so
concurrently with the filing of this application with the Commission),
although that filing will not initiate any proceeding before the IURC and
the IURC is not required to take any action on the contract (beyond its
staff's earlier review)./8/
KENTUCKY: The KPSC does not have a right to prior review of the
proposed Service Agreement for ULH&P, pursuant to the conditions agreed to
by Cinergy in connection with the KPSC's approval of the Cinergy merger in
1994 or otherwise. As noted however, the ULH&P Service Agreement will
conform in all material respects to the CG&E Service Agreement (but for the
provisions concerning prior state review of proposed amendments to the
agreement), including the additional substantive provisions springing from
the PUCO's review.
In September 1998, the KPSC initiated a proceeding (Administrative
Case No. 369) proposing for comment draft cost allocation and affiliate
transaction guidelines and a code of conduct for jurisdictional utilities
with nonregulated activities or affiliates. The matter is pending.
Other than as described above, no state or federal regulatory agency
other than the Commission under the Act has jurisdiction over the proposed
transactions.
Item 5. Procedure
Cinergy requests 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.
Cinergy waives a recommended decision by a hearing officer or other
responsible officer of the Commission; consents that the Staff of the
Division of Investment Management may assist in the preparation of the
Commission's order; and requests that there be no waiting period between
the issuance of the Commission's order and its effectiveness.
Item 6. Exhibits and Financial Statements
(a) Exhibits:
A Not applicable
B-1 Form of CG&E Service Agreement
B-2 Form of PSI Service Agreement
B-3 Form of Service Agreement for each CG&E Utility
Subsidiary
C Not applicable
D-1 Application to PUCO submitting CG&E Service Agreement
for review (excluding exhibits)
D-2 Letter from PUCO Staff to SEC clearing CG&E Service
Agreement for filing
D-3 Application to IURC Staff submitting PSI Service
Agreement for review (excluding exhibits)
D-4 Letter from PSI to IURC Staff providing certain
assurances regarding PSI Service Agreement
D-5 Letter from IURC Staff to PSI clearing PSI Service
Agreement for filing
F-1 Preliminary opinion of counsel
G-1 Revised form of Federal Register notice
H Pro Forma Consolidated Capitalization at December 31,
1998
I Chart Showing Cinergy Investments and Subsidiaries at
December 31, 1998
(b) Financial Statements:
FS-1 Cinergy Pro Forma Consolidated Financial Statements,
dated December 31, 1998 (to be filed by amendment)
FS-2 Cinergy Pro Forma Financial Statements, dated December
31, 1998 (to be filed by amendment)
FS-3 Cinergy Consolidated Financial Data Schedule (included
as part of electronic submission only) (to be filed by amendment)
FS-4 Cinergy Financial Data Schedule (included as part of
electronic submission only) (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>
SIGNATURE
Pursuant to the requirements of the Act, the undersigned company
has duly caused this statement to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: February 11, 1999
CINERGY CORP.
By:/s/Jerome A. Vennemann
Assistant Secretary
ENDNOTES
/1/ Services rendered under the proposed service agreements by the utility
subsidiaries to the nonutility affiliates are exempt from prior Commission
approval by virtue of Rule 87(b)(1) under the Act. Accordingly, Cinergy
does not seek Commission authorization for those service transactions,
which are an integral aspect of the proposed contracts.
/2/ These merger-related settlement agreements with the PUCO and the IURC
(and other interested parties), as well as conditions agreed to by Cinergy
in connection with related merger proceedings before the Kentucky Public
Service Commission ("KPSC"), were noted by the Commission in its October
21, 1994 order approving the Cinergy merger and related transactions (HCAR
No. 35-26146 in File No. 70-8427). Copies of the relevant documents were
submitted by Cinergy in File No. 70-8427 and summarized in the
application-declaration in that proceeding. In addition, in connection
with the Commission's March 23, 1998 order (HCAR No. 26848) granting
Cinergy authority to invest financing proceeds up to 100% of consolidated
retained earnings in exempt wholesale generators ("EWGs") and foreign
utility companies ("FUCOs"), Cinergy provided a detailed summary of the
merger-related arrangements with the PUCO, IURC and KPSC in the
application-declaration in that proceeding.
/3/ Concurrently with this filing, PSI is submitting the proposed PSI
Service Agreement to the IURC. That submission will initiate no proceeding
before the IURC and neither requires or seeks any approval or other action
by the IURC (beyond the clearance previously issued by its staff).
/4/ CG&E has two nonutility subsidiaries - Tri-State Improvement Company,
which acquires and holds property in support of the businesses of CG&E and
its utility subsidiaries, and KO Transmission Company, a gas pipeline
company. CG&E also holds limited partnership interests in several local
venture capital and community development funds. PSI has one nonutility
subsidiary, South Construction Company, which holds title to real estate
not used and useful in PSI's business. PSI also holds limited partnership
interests in several local venture capital and community development funds.
For more information concerning the nonutility businesses and interests of
CG&E and PSI, see the post-effective amendments in File No. 70-8427 in
which Cinergy requests an order releasing Commission jurisdiction over
Cinergy's continued retention, through CG&E and PSI, of these nonutility
businesses and interests.
/5/ Cinergy Solutions was formed pursuant to HCAR No. 35-26662, February
7, 1997.
/6/ Cinergy has pending a request in File No. 70-8427 for an order
releasing Commission jurisdiction over Cinergy's continued retention of
this entity.
/7/ The additional provisions, beyond the two provisions described in the
text, consist of certain preliminary recitals (i.e., the fifth through
seventh "Whereas" clauses), acknowledgements of exiting obligations to
which CG&E is already and will remain subject (i.e., second and third
paragraphs of Section 5.6) and notification requirements with respect to
the addition of new Nonutility Companies to the Service Agreement (last
sentence of Section 5.4).
/8/ Similarly, pursuant to requirements of state law, the proposed Service
Agreements with Lawrenceburg and West Harrison - each of which is a public
utility under Indiana law subject to IURC jurisdiction - will also be filed
with the IURC, although such filing will neither initiate any proceeding
before the IURC nor require the IURC to take any action in respect of those
contracts.
Exhibit G-1
REVISED FORM OF PUBLIC NOTICE
Cinergy Corp. 70-9449
Cinergy Corp., a registered holding company ("Cinergy"), 139 East
Fourth Street, Cincinnati, Ohio 45202, has filed a declaration under
Sections 12(f) and 13(b) of the Act and Rules 54, 80, 81, 86, 87, 89, 90
and 91 thereunder.
On behalf of the proposed parties thereto, Cinergy requests
authorization for its domestic nonutility subsidiaries to enter into
service agreements with Cinergy's utility subsidiaries under which, subject
to the terms and conditions thereof, the nonutility subsidiaries may
provide a range of services to the utility affiliates, and vice versa,/1/
priced at "cost" as determined pursuant to Rule 91 under the Act. Cinergy
requests authorization for each of its domestic nonutility subsidiaries
(including those formed after the date of the Commission's order herein,
but excluding exempt telecommunications companies ad defined in the Act
("ETCs")) to enter into a separate but substantially similar contract
("Service Agreement" or "Agreement") with all of Cinergy's utility
subsidiaries.
Cinergy's two principal utility subsidiaries, each of which is a
direct, wholly-owned subsidiary of Cinergy, are The Cincinnati Gas &
Electric Company, an Ohio electric and gas utility ("CG&E"), and PSI
Energy, Inc., an Indiana electric utility ("PSI"), which are subject to
state utility regulation by the Public Utilities Commission of Ohio
("PUCO") and the Indiana Utility Regulatory Commission ("IURC"),
respectively. Pursuant to provisions regarding affiliate contracts
contained in settlement agreements dating from the 1994 merger that created
Cinergy,/2/ CG&E and PSI submitted identical proposed forms of Service
Agreements to the PUCO and the IURC staff in August 1998 for their review
prior to review by this Commission. In late January 1999 the PUCO and the
IURC staff completed their review and, based upon certain modifications
made to the CG&E Service Agreement and assurances regarding certain costs
that may arise under the PSI Service Agreement, cleared the CG&E and PSI
Service Agreements for filing with this Commission./3/
Cinergy states that the proposed Service Agreements with the
remaining utility subsidiaries of Cinergy, all of whom are direct,
wholly-owned subsidiaries of CG&E (collectively, with CG&E and PSI, the
"Operating Companies") - The Union Light, Heat and Power Company, a
Kentucky electric and gas utility ("ULH&P"), Lawrenceburg Gas Company, an
Indiana gas utility ("Lawrenceburg"), The West Harrison Gas and Electric
Company, an Indiana electric utility ("West Harrison"), and Miami Power
Corporation ("Miami"), an electric utility by virtue of its ownership of
certain transmission assets - do not require prior state commission review.
According to Cinergy, except in regard to prior state commission review of
amendments thereto, the proposed Service Agreement for each CG&E utility
subsidiary conforms in all material respects to the CG&E Service Agreement,
including the additional protections incorporated as a result of the PUCO's
review.
The Operating Companies generate, transmit, distribute and sell
electricity and transport and sell natural gas to approximately 1.4 million
customers in southwestern Ohio, most of Indiana and northern Kentucky.
PSI produces, transmits, distributes and sells electricity in north
central, central and southern Indiana, serving an estimated population of
2.1 million people located in 69 of the state's 92 counties including the
cities of Bloomington, Columbus, Kokomo, Lafeyette, New Albany and Terre
Haute. At and for the year ended December 31, 1997, PSI had total
consolidated assets of approximately $3.4 billion and operating revenues of
approximately $1.9 billion.
CG&E and its utility subsidiaries provide electric and gas service
in the southwestern portion of Ohio and adjacent areas in Kentucky and
Indiana. The area served with electricity, gas or both covers
approximately 3,000 square miles and has an estimated population of 1.8
million. CG&E is engaged in the production, transmission, distribution and
sale of electricity and the sale and transportation of natural gas in the
southwestern portion of Ohio, serving an estimated population of 1.5
million people in 10 of the state's 88 counties including the cities of
Cincinnati and Middletown. ULH&P, which is subject to state utility
regulation by the KPSC, is engaged in the production, transmission,
distribution and sale of electricity and the sale and transportation of
natural gas in northern Kentucky, serving an estimated population of
299,000 people in a 500 square-mile area encompassing six counties and
including the cities of Newport and Covington. Lawrenceburg sells and
transports natural gas to approximately 20,000 people in a 60 square-mile
area in southeastern Indiana. West Harrison sells electricity over a
3-square mile area with a population of approximately 1,000 in West
Harrison, Indiana and bordering rural areas. Miami owns a 138 kV
transmission line running from the Miami Fort Power Station in Ohio to a
point near Madison, Indiana. At and for the year ended December 31, 1997,
CG&E had total consolidated assets of approximately $4.9 billion and
operating revenues of approximately $2.4 billion ($1.9 billion electric and
$500 million gas).
Cinergy Investments holds all of Cinergy's domestic nonutility
businesses, except for certain minor interests held by CG&E and PSI./4/ At
December 31, 1998, Cinergy Investments had 11 direct wholly-owned
subsidiaries: Cinergy-Cadence, Inc., an "energy-related company" within
the meaning of Rule 58 under the Act (a "Rule 58 Company" or "Rule 58
Subsidiary") which has a one-third ownership interest in its Rule 58
Subsidiary, Cadence Network LLC, which markets various energy management
services to multi-site retail establishments; Cinergy Capital & Trading,
Inc., a Rule 58 Company devoted to energy marketing and trading that has
eight subsidiaries, each devoted to energy marketing or ownership or
operation of EWGs; Cinergy Communications, Inc., an ETC; Cinergy
Engineering, Inc., a Rule 58 Company devoted to utility-related engineering
and other technical services; Cinergy-Centrus, Inc., an ETC;
Cinergy-Centrus Communications, Inc., an ETC that holds a one-third
ownership interest in Centrus LLP, also an ETC; Cinergy Resources, Inc., a
Rule 58 Company devoted to energy marketing and trading; Cinergy Solutions,
Inc./5/, which, together with its 12 partly- and wholly-owned subsidiaries,
primarily markets energy management services and engages in development,
ownership and operation of district cooling and heating systems and
qualifying facilities under the Public Utility Regulatory Policies Act of
1978, principally through a joint venture with a non-affiliate, Trigen
Energy Corporation; Cinergy Supply Network, Inc., a Rule 58 Company, which
engages in utility materials brokering services and, through its
one-third-owned Rule 58 Subsidiary, Reliant Services, LLC, proposes to
engage in underground utility facilities location and construction
services; Cinergy Technology, Inc., which is devoted to commercialization
of utility technologies and related investments; /6/ and Enertech
Associates, Inc., an inactive Rule 58 Company.
In general, the Service Agreements authorize the provision of
services, including loans of employees, from the Operating Companies to the
domestic nonutility companies, excluding ETCs ("Nonutility Companies"), and
from the Nonutility Companies to the Operating Companies, priced at "cost,"
pursuant to a written service request procedure. The Agreements include
provisions regarding liability and indemnification, as well as provisions
to protect the interests of Cinergy's state utility regulators and the
retail customers of the Operating Companies.
More specifically, upon receipt by a party to the Agreement of a
written service request (adhering to the form thereof attached to the
Agreement) requesting such services as are specified therein, including if
applicable use of any related equipment, facilities, properties or other
resources ("Services"), the receiving party shall provide the requested
Services at the time and for the period sought, if in its sole discretion
it can do so without impairing its normal business operations. Services
may include, but are not limited to, engineering and construction;
operations and maintenance; equipment testing; information services;
monitoring, surveying, inspecting, constructing, locating and marking of
overhead and underground utility facilities; meter reading; materials
management; vegetation management; and marketing and customer relations.
In addition to the exclusion of transactions involving affiliated ETCs and
FUCOs, affiliate transactions involving sales, leases, or other transfers
of assets, goods, energy commodities (including electricity, gas, coal and
other combustible fuels) or thermal energy products are outside the scope
of the Service Agreements.
Any loans of employees by the company providing Services shall
likewise be at the service provider's sole discretion. While performing
work on behalf of the client company, any such loaned employees shall be
under its supervision and control, and the client company shall be
responsible for their actions.
All service requests shall be in writing consistent with the form
thereof appended to the Agreement. Therefore each service request must
identify the client company and proposed service provider, be authorized by
an appropriate individual at both the client company and the service
provider, include a detailed description of the proposed services and
estimated costs, and specify the scheduled start date and completion date.
In addition, all Services shall be assigned to applicable activities,
projects, programs or on other appropriate bases to enable specific work to
be properly assigned. The client company may amend service requests from
time to time, subject to certain conditions.
All Services shall be rendered at the full cost thereof, as
computed in accordance with applicable rules, regulations and accounting
standards including Rules 90 and 91 under the Act. As soon as practicable
after the close of each month, any company providing Services shall render
to each client company a statement reflecting the billing information
necessary to identify the costs charged for that month. The client company
is required to pay all amounts billed within 30 days after receipt thereof.
The sole and exclusive responsibility of a company providing
Services for any asserted deficiency will be to correct or repair the
deficiency or re-perform the Services, at no additional cost to the client
company. The service provider disclaims any additional warranties or
remedies, and each client company agrees to accept Services on that basis.
In addition, any company receiving Services agrees to indemnify the company
providing those Services (including each of its officers, directors,
employees and agents) from any losses, liabilities or claims arising from
or in connection with the provision of such Services. The indemnity
applies regardless of negligence, willful misconduct, or breach of warranty
by the company that provided the Services or any of its officers,
directors, employees or agents.
Each Service Agreement also contains provisions regarding
ratemaking, amending the Agreement, additional parties, regulatory
requirements and miscellaneous "boilerplate." With respect to ratemaking,
each agreement provides that:
Operating Company shall not seek to overturn,
reverse, set aside, change or enjoin, whether through
appeal or the initiation or maintenance of any action in
any forum, a decision or order of the [applicable state
commission - PUCO, IURC or KPSC] which pertains to
recovery, disallowance, deferral or ratemaking treatment
of any expense, charge, cost or allocation incurred or
accrued by Operating Company in or as a result of this
Agreement (or any amendment hereto) on the basis that
this Agreement and any such expense, charge, cost or
allocation was filed with or approved by the SEC.
Any amendment to a Service Agreement must be in writing executed by
all of the parties. In addition, the CG&E and PSI Service Agreements (but
not the form of Service Agreement for CG&E's utility subsidiaries) provide
that any amendment to either of those Agreements, before being submitted to
the Commission for its review, must first be submitted to the PUCO and the
IURC staff for their review (and submitted to certain other interested
parties for informational purposes). As with the original CG&E and PSI
Service Agreements, then, the PUCO and the IURC staffs have effective veto
power over any proposed amendment. Cinergy is precluded from seeking
Commission approval of the contract or amendment, or must withdraw it, and
may not put it into effect with respect to CG&E or PSI, if the PUCO or IURC
staff disapprove it or find it unreasonable.
Additional Nonutility Companies may become parties to the Service
Agreement after the original execution thereof by executing appropriate
signature pages. In the absence of any changes to the terms of the
Agreement, merely adding new Nonutility Companies as signatories shall not
be considered an amendment, including for purposes of any prior state
review.
Finally, the provision of Services shall in all cases, and
notwithstanding anything to the contrary in the Agreement, be subject to
any limitations or restrictions contained in any applicable orders or
authorizations, statutory provisions, rules or regulations, tariffs, or
agreements, whether now in existence or hereinafter promulgated, of
regulatory or governmental agencies having jurisdiction over the parties to
the Agreement, including the Commission, the applicable state commission
and the Federal Energy Regulatory Commission. To the extent, if any, that
at any time any provision of the Agreement conflicts with any limitation or
restriction of any such regulatory agency, such limitation shall control.
The foregoing provisions are common to each of the Service
Agreements, with the sole exception that the provision granting the state
commission or its staff the right to prior review of proposed amendments is
included in the CG&E and PSI Service Agreements but not the Service
Agreements to be entered into by the CG&E utility subsidiaries. Cinergy
states that the presence of this provision in the CG&E and PSI Service
Agreements and its absence from the Service Agreements for the CG&E utility
subsidiaries is consistent with the terms of the 1994 merger accommodations
with the PUCO, IURC and the KPSC.
Cinergy further states that the PUCO's review of the proposed CG&E
Service Agreement, pursuant to the merger-related settlement agreements ,
resulted in the incorporation of certain additional provisions in that
contract, including two principal substantive provisions. The first
addresses concerns relating to unfair competition and stipulates that none
of the Services may result in an undue or unreasonable competitive
advantage under law to any affiliated nonutility company that receives such
Services. The second is intended to protect confidential information of
customers of the Operating Companies and imposes certain prohibitions
relating to the access, sharing, and release of customer information and
customer information databases./7/
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
ENDNOTES
/1/ Services rendered under the proposed service agreements by the utility
subsidiaries to the nonutility affiliates are exempt from prior Commission
approval by virtue of Rule 87(b)(1) under the Act. Accordingly, Cinergy
does not seek Commission authorization for those service transactions,
which are an integral aspect of the proposed contracts.
/2/ These merger-related settlement agreements with the PUCO and the IURC
(and other interested parties), as well as conditions agreed to by Cinergy
in connection with related merger proceedings before the Kentucky Public
Service Commission ("KPSC"), were noted by the Commission in its October
21, 1994 order approving the Cinergy merger and related transactions (HCAR
No. 35-26146).
/3/ Cinergy states that, concurrently with the filing of this application,
PSI is submitting the proposed PSI Service Agreement to the IURC.
According to Cinergy, that submission was not to initiate any proceeding
before the IURC and did not seek any approval or other action by the IURC
(beyond the clearance previously issued by its staff).
/4/ CG&E has two nonutility subsidiaries - Tri-State Improvement Company,
which acquires and holds property in support of the businesses of CG&E and
its utility subsidiaries, and KO Transmission Company, a gas pipeline
company. CG&E also holds limited partnership interests in several local
venture capital and community development funds. PSI has one nonutility
subsidiary, South Construction Company, which holds title to real estate
not used and useful in PSI's business. PSI also holds limited partnership
interests in several local venture capital and community development funds.
Cinergy has pending a request in File No. 70-8427 for an order releasing
Commission jurisdiction over Cinergy's continued retention, through CG&E
and PSI, of these nonutility businesses and interests.
/5/ Cinergy Solutions was formed pursuant to HCAR No. 35-26662, February
7, 1997.
/6/ Cinergy has pending a request in File No. 70-8427 for an order
releasing Commission jurisdiction over Cinergy's continued retention of
this entity.
/7/ Both of these provisions are included in the form of Service Agreement
for each CG&E utility subsidiary. Cinergy also represents that, although
these provisions have not been incorporated into the proposed PSI Service
Agreement, Cinergy will assure that PSI abides by them.
