File No. 70-
SECURITIES AND EXCHANGE COMMISSION
450 FIFTH STREET, N.W.
WASHINGTON, D.C. 20549
__________________________________________
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., a
registered holding company under the Public Utility Holding Company Act of
1935, as amended (the "Act"), requests authorization for its domestic
public utility subsidiaries to enter into service agreements with their
domestic nonutility affiliates under which, subject to the terms and
conditions thereof, the utility subsidiaries may provide a range of
services to the nonutility affiliates, and vice versa, priced at "cost" as
determined pursuant to Rule 91 under the Act. Cinergy requests
authorization for each of its utility subsidiaries to enter into a separate
but substantially similar contract ("Service Agreement" or "Agreement")
with all of Cinergy's 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").
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,/1/ 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./2/ 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),/3/ 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./4/, 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;/5/ 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./6/ 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 $617 million. This amount equals approximately 65% 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)./7/
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 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 4, 1999
CINERGY CORP.
By: /s/ Jerome A. Vennemann
Assistant Secretary
ENDNOTES
/1/ 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.
/2/ 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).
/3/ 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.
/4/ Cinergy Solutions was formed pursuant to HCAR No. 35-26662, February
7,l997.
/5/ Cinergy has pending a request in File No. 70-8427 for an order
releasing Commission jurisdiction over Cinergy's continued retention of
this entity.
/6/ 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).
/7/ 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 B-1
SERVICES AGREEMENT
THIS SERVICES AGREEMENT, made and entered into as of _________, 1999
by and among PSI Energy, Inc., an Indiana corporation ("Operating
Company"), and the respective associate companies listed on the signature
pages hereto (each, a "Nonutility Company").
W I T N E S S E T H:
WHEREAS, Operating Company is a direct subsidiary of Cinergy Corp.
("Cinergy"), a registered holding company under the Public Utility
Holding Company Act of 1935, as amended ("PUHCA"), and a "public-utility
company" as therein defined; and
WHEREAS, each of the Nonutility Companies is a direct or indirect
subsidiary of Cinergy and, within the meaning of PUHCA or applicable
rules, regulations or administrative precedent of the Securities and
Exchange Commission ("SEC") thereunder, is a "nonutility company" (but not
an "exempt telecommunications company" ("ETC") or a "foreign utility
company" ("FUCO")), being neither a "public-utility company," "holding
company" nor "subsidiary service company"; and
WHEREAS, in the ordinary course of their businesses, Operating
Company and Nonutility Companies maintain organizations of employees with
technical expertise in matters affecting public utility companies and
related businesses and own or acquire related equipment, facilities,
properties and other resources; and
WHEREAS, pursuant to applicable law or otherwise, and subject to the
terms and conditions herein provided, the Indiana Utility Regulatory
Commission ("IURC") has authorized Operating Company to enter into this
Agreement; and
WHEREAS, pursuant to the applicable provisions of PUHCA and the
rules and regulations thereunder, and subject to the terms and conditions
herein set forth, the SEC has authorized the parties hereto to enter into
this Agreement; and
WHEREAS, subject to the terms and conditions herein set forth, and
taking into consideration the parties' utility responsibilities or
primary business operations, as the case may be, the parties hereto are
willing, upon request from time to time, to perform such services, and in
connection therewith to make available such equipment, facilities,
properties and other resources, as they shall request from each other;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
ARTICLE 1. PROVISION OF SERVICES; LOANED EMPLOYEES
Section 1.1 Provision of Services.
(a) Upon receipt by a party hereto (in such capacity, a "Service
Provider") of a written request in substantially the form attached hereto
as Exhibit A (a "Service Request") from another party hereto (in such
capacity, a "Client Company") for the provision to such Client Company of
such services as are specified therein, including if applicable use of
any related equipment, facilities, properties or other resources
(collectively, "Services"), the Service Provider, if in its sole discretion
it has available the personnel or other resources needed to perform the
Service Request without impairment of its utility responsibilities or
business operations, as the case may be, shall furnish such Services to the
Client Company at such times, for such periods and in such manner as the
Client Company shall have so requested and otherwise in accordance with the
provisions hereof.
(b) For purposes of this Agreement, "Services" may include, but
shall not be limited to: (I) in the case of Services that may be
provided by Operating Company hereunder, services in such areas as
engineering and construction; operations and maintenance; and equipment
testing; and (ii) in the case of Services that may be provided by
Nonutility Companies hereunder, services in such areas as 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.
Affiliate transactions involving sales 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 this Agreement. Likewise, affiliate transactions involving services
to or from ETCs or FUCOs are outside the scope of this Agreement.
Section 1.2 Loaned Employees.
(a) If specifically requested in connection with the provision of
Services, Service Provider shall loan one or more of its employees to
such Client Company, provided that such loan shall not, in the sole
discretion of Service Provider, interfere with or impair Service Provider's
utility responsibilities or business operations, as the case may be. After
the commencement thereof, any such loaned employees may be withdrawn by
Service Provider from tasks duly assigned by Client Company, prior to
completion thereof as contemplated in the associated Service Request, only
with the consent of Client Company (which shall not be unreasonably
withheld or delayed), except in the event of a demonstrable emergency
requiring the use of any such employees in another capacity for Service
Provider.
(b) While performing work on behalf of Client Company, any such
loaned employees shall be under its supervision and control, and Client
Company shall be responsible for their actions to the same extent as
though such persons were its employees (it being understood that such
persons shall nevertheless remain employees of Service Provider and nothing
herein shall be construed as creating an employer-employee relationship
between any Client Company and any loaned employees). Accordingly, for the
duration of any such loan, Service Provider shall continue to provide its
loaned employees with the same payroll, pension, savings, tax
withholding, unemployment, bookkeeping and other personnel support services
then being provided by Service Provider to its other employees.
ARTICLE 2. SERVICE REQUESTS
Section 2.1 Procedure.
All Services (including any loans of employees) (I) shall be
performed in accordance with Service Requests issued by or on behalf of
Client Company and accepted by Service Provider and (ii) shall be assigned
to applicable activities, projects, programs or on other appropriate bases
to enable specific work to be properly assigned. Service Requests shall
be as specific as practicable in defining the Services requested. Client
Company shall have the right from time to time to amend or rescind any
Service Request, provided that (a) Service Provider consents to any
amendment that results in a material change in the scope of Services to
be provided, (b) the costs associated with an amended or rescinded Service
Request shall include the costs incurred by Service Provider as a result
of such amendment or rescission, and no amendment or rescission of a
Service Request shall release Client Company from any liability for costs
already incurred or contracted for by Service Provider pursuant to the
original Service Request, regardless of whether any labor or the
furnishing of any property or other resources has been commenced or
completed.
ARTICLE 3. COMPENSATION FOR SERVICES
Section 3.1 Cost of Services.
Except as may be required pursuant to Section 5.6 (with respect to
regulatory requirements), as compensation for any Services rendered to it
pursuant to this Agreement, Client Company shall pay to Service Provider
the full cost thereof as computed in accordance with applicable rules,
regulations and accounting standards, including Rules 90 and 91 under
PUHCA. As soon as practicable after the close of each month, Service
Provider shall render to each Client Company a statement reflecting the
billing information necessary to identify the costs charged for that
month. All amounts so billed shall be paid by Client Company within 30
days after receipt thereof.
ARTICLE 4. LIMITATION OF LIABILITY; INDEMNIFICATION
Section 4.1 Limitation of Liability/Services.
In performing Services pursuant to Section 1.1 hereof, Service
Provider will exercise due care to assure that the Services are performed
in a workmanlike manner in accordance with the specifications set forth
in the applicable Service Request and consistent with any applicable legal
standards. The sole and exclusive responsibility of Service Provider for
any deficiency therein shall be promptly to correct or repair such
deficiency or to re-perform such Services, in either case at no
additional cost to Client Company, so that the Services fully conform to
the standards described in the first sentence of this Section 4.1. No
Service Provider makes any other warranty with respect to the provision of
Services, and each Client Company agrees to accept any Services without
further warranty of any nature.
Section 4.2 Limitation of Liability/Loaned Employees.
In furnishing Services under Section 1.2 hereof (i.e., involving
loaned employees), neither the Service Provider, nor any officer,
director, employee or agent thereof, shall have any responsibility whatever
to any Client Company receiving such Services, and Client Company
specifically releases Service Provider and such persons, on account of any
claims, liabilities, injuries, damages or other consequences arising in
connection with the provision of such Services under any theory of
liability, whether in contract, tort (including negligence or strict
liability) or otherwise, it being understood and agreed that any such
loaned employees are made available without warranty as to their
suitability or expertise.
Section 4.3 Disclaimer.
WITH RESPECT TO ANY SERVICES PROVIDED UNDER THIS AGREEMENT,
THE SERVICE PROVIDER THEREOF MAKES NO WARRANTY OR REPRESENTATION
OTHER THAN AS SET FORTH IN SECTION 4.1, AND THE PARTIES HERETO HEREBY
AGREE THAT NO OTHER WARRANTY, WHETHER STATUTORY, EXPRESS OR
IMPLIED (INCLUDING BUT NOT LIMITED TO ALL WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND
WARRANTIES ARISING FROM COURSE OF DEALING OR USAGE OF TRADE),
SHALL BE APPLICABLE TO THE PROVISION OF ANY SUCH SERVICES. THE
PARTIES FURTHER AGREE THAT THE REMEDIES STATED HEREIN ARE EXCLUSIVE
AND SHALL CONSTITUTE THE SOLE AND EXCLUSIVE REMEDY OF ANY PARTY
HERETO FOR A FAILURE BY ANY OTHER PARTY HERETO TO COMPLY WITH ITS
WARRANTY OBLIGATIONS.
Section 4.4 Indemnification.
In respect of any Services provided under this Agreement, any Client
Company that issued the Service Request requesting such Services shall
defend, indemnify and hold harmless the Service Provider thereof, and
each of its officers, directors, employees and agents, from and against,
and shall pay the full amount of, any loss, liability, claim, damage,
expense (including costs of investigation and defense and reasonable
attorneys' fees), whether or not involving a third-party claim
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with the provision of such Services. Such indemnity shall apply
regardless of whether the Claims result from any asserted or actual
negligence or willful misconduct of, or breach of warranty by, the Service
Provider or any of its officers, directors, employees or agents. Such
indemnity shall not apply, however, to the extent that Service Provider
receives insurance proceeds in respect of any such Claim.
Section 4.5 Procedure for Indemnification.
Within 10 days after receipt by Service Provider of notice of any
claim or the commencement of any action, suit, litigation or other
proceeding against it (a "Proceeding") with respect to which it is
eligible for indemnification hereunder, Service Provider shall notify the
applicable Client Company thereof (it being understood that failure so to
notify Client Company shall not relieve the latter of its indemnification
obligation, unless Client Company establishes that defense thereof has
been prejudiced by such failure). Thereafter, Client Company shall be
entitled to participate in such Proceeding and, at its election upon
notice to Service Provider, to assume the defense of such Proceeding. If
Service Provider has given timely notice to Client Company of the
commencement of such Proceeding, but Client Company has not, within 10 days
after receipt of such notice, given notice to Service Provider of its
election to assume the defense thereof, Client Company shall be bound by
any determination made in such Proceeding or any compromise or settlement
made by Service Provider. A claim for indemnification for any matter not
involving a third-party claim may be asserted by notice from Service
Provider to the applicable Client Company.
ARTICLE 5. MISCELLANEOUS
Section 5.1 Ratemaking.
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 IURC 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.
Section 5.2 Amendments in Writing; State Review.
(a) Any amendments to this Agreement shall be in writing executed
by each of the parties hereto.
(b) In the event the parties hereto execute an amendment hereto,
the parties shall fulfill the following obligations, where applicable:
(I) Prior to filing any amendment with the SEC, the parties
shall file with the IURC and provide to the Indiana Utility Consumer
Counselor (and, provide, upon request, to other appropriate parties) a
copy of such amendment.
(ii) In the event that the amendment is finally rejected or
disapproved or found to be unreasonable by the IURC prior to filing with
the SEC, the amendment shall not become effective and the parties shall
not request SEC approval of the amendment.
(iii)In the event that the amendment is rejected or disapproved
or found to be unreasonable by IURC after it has been filed with but
before it has been approved by the SEC, the amendment shall be terminated
and the parties agree to request withdrawal of the filing.
(iv) Notwithstanding "(ii)" and "(iii)" immediately above,
in the event that the amendment is rejected, disapproved or found to be
unreasonable by IURC before it has been approved by the SEC, the parties
shall have the right to request further revisions of the amendment in
order to cure or remove the cause of the IURC's rejection, disapproval or
finding of unreasonableness. Upon request by a party hereto, the other
parties shall agree promptly to negotiate in good faith to revise the
amendment and thereafter to file for any necessary regulatory authorization
of the renegotiated amendment. If the parties are unable to reach
agreement satisfactory to each of them and to the IURC after good faith
negotiations, then "(ii)" or "(iii)" immediately above, as applicable,
shall apply.
(v) In the event that the IURC has previously approved the
amendment prior to SEC approval, "(vi)" immediately below shall not
apply.
(vi) In the event that an amendment has become effective and is
subsequently rejected, disapproved or found to be unreasonable by IURC,
the parties shall make a good faith effort to terminate, amend or modify
the amendment in a manner which remedies the IURC's adverse findings
without adverse impact on any of the parties. The parties shall request to
meet with representatives of the IURC and make a good faith attempt to
resolve any differences regarding the subject amendment. If agreement
can be reached to terminate the amendment or amend or modify the amendment
in a manner satisfactory to the parties hereto and to the representatives
of the IURC, then the parties shall file such amendment with the
appropriate state and federal regulatory agencies, seeking all necessary
regulatory authorizations. If the parties are unable to reach agreement
satisfactory to each of them and to the IURC after good faith negotiations,
then they shall be under no further obligation to amend the amendment.
Nothing in this Section 5.2 is intended to detract from the
authority of the SEC under PUHCA.
Section 5.3 Effective Date; Term.
This Agreement shall become effective as of the day and year first
above written and shall continue in full force and effect as to each
party until terminated by any party, as to itself only, upon not less than
30 days prior written notice to the other parties hereto. Any such
termination of parties shall not be deemed an amendment and shall not
require adherence to the procedures set forth in Section 5.2(b).
Section 5.4 Additional Parties.
After the effective date of this Agreement, additional Nonutility
Companies may become parties to this Agreement by executing appropriate
signature pages, whereupon any such additional signatory shall be deemed
a "party" hereto all purposes hereof and shall thereupon become bound by
the terms and conditions of this Agreement as if an original party hereto.
The addition of any such further signatories, in the absence of any changes
to the terms of this Agreement, shall not be deemed an amendment hereto and
shall not be subject to the procedures described in Section 5.2(b).
Section 5.5 Entire Agreement.
This Agreement contains the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes any prior
or concurrent understandings with respect thereto. Any oral or written
statements, representations, promises, negotiations or agreements,
whether prior hereto or concurrently herewith, are superseded by and
merged into this Agreement.
Section 5.6 Severability; Regulatory Requirements.
If any provision of this Agreement or any application thereof shall
be determined to be invalid or unenforceable, the remainder of this
Agreement and any other application thereof shall not be affected thereby.
Without limiting the generality of the foregoing, the provision of
Services pursuant to this Agreement shall in all cases, and
notwithstanding anything herein to the contrary, be subject to any
limitations or restrictions contained in any applicable orders or
authorizations, statutory provisions, rules or regulations, or agreements,
whether now in existence or hereinafter promulgated, of those regulatory or
governmental agencies, including without limitation the IURC, SEC and
Federal Energy Regulatory Commission, having jurisdiction over any of the
parties hereto. To the extent, if any, that at any time any provision of
this Agreement conflicts with any such limitation or restriction of any
such other regulatory agencies, such limitation shall control.
Section 5.7 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of the parties hereto, provided that a Service
Provider shall not be entitled to assign or subcontract to any third
party any of Service Provider's obligations under this Agreement or under
any Service Request issued hereunder without the prior approval of each
affected Client Company.
Section 5.8 Governing Law.
This Agreement shall be construed and enforced under and in
accordance with the laws of the State of Indiana, without regard to
conflicts of laws principles.
Section 5.9 Captions, etc.
The captions and headings used in this Agreement are for convenience
of reference only and shall not affect the construction to be accorded
any of the provisions hereof. As used in this Agreement, "hereof,"
"hereunder," "herein," "hereto," and words of like import refer to this
Agreement as a whole and not to any particular section or other paragraph
or subparagraph thereof.
Section 5.10 Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed a duplicate original hereof, but all of which shall
be deemed one and the same Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf by an appropriate officer
thereunto duly authorized, as of the respective dates set forth below.
PSI Energy, Inc.
Date:____________ By:______________________
Name:
Title:
Cinergy Investments, Inc.
Date:___________ By:_____________________
Name:
Title:
KO Transmission Company
Date:___________ By:_____________________
Name:
Title:
Tri-State Improvement Company
Date:___________ By:____________________
Name:
Title:
South Construction Company, Inc.
Date:___________ By:____________________
Name:
Title:
Cinergy-Cadence, Inc.
Date:___________ By:____________________
Name:
Title:
Cadence Network LLC
Date:___________ By:____________________
Name:
Title:
Cinergy Capital & Trading, Inc.
Date:___________ By:____________________
Name:
Title:
CinCap IV, LLC
Date:___________ By:____________________
Name:
Title:
CinCap V, LLC
Date:___________ By:____________________
Name:
Title:
CinPower I, LLC
Date:____________ By:____________________
Name:
Title:
Producers Energy Marketing, LLC
Date:___________ By:____________________
Name:
Title:
Cinergy Engineering, Inc.
Date:___________ By:____________________
Name:
Title:
Cinergy Resources, Inc.
Date:___________ By:____________________
Name:
Title:
Cinergy Solutions, Inc.
Date:___________ By:____________________
Name:
Title:
Cinergy Business Solutions, Inc.
Date:___________ By:____________________
Name:
Title:
Trigen-Cinergy Solutions LLC
Date:___________ By:____________________
Name:
Title:
Trigen-Cinergy Solutions of Illinois L.L.C.
Date:___________ By:____________________
Name:
Title:
Trigen-Cinergy Solutions of Orlando LLC
Date:___________ By:____________________
Name:
Title:
Cinergy Supply Network, Inc.
Date:___________ By:____________________
Name:
Title:
Reliant Services, LLC
Date:___________ By:____________________
Name:
Title:
Cinergy Technology, Inc.
Date:___________ By:____________________
Name:
Title:
Enertech Associates, Inc.
Date:___________ By:____________________
Name:
Title:
<PAGE>
Exhibit A
FORM OF SERVICE REQUEST
Client Company: Approved By:
Name:
Title:
Proposed Service Provider/ Description of Proposed Services:
Estimated Costs (provide basis):
Scheduled Start Date: Scheduled Completion Date:
Service Provider: Approved By:
Name:
Title:
Exhibit B-2
SERVICES AGREEMENT
THIS SERVICES AGREEMENT, made and entered into as of _________, 1999
by and among The Cincinnati Gas & Electric Company, an Ohio corporation
("Operating Company" or "CG&E"), and the respective associate companies
listed on the signature pages hereto (each, a "Nonutility Company").
W I T N E S S E T H:
WHEREAS, Operating Company is a direct subsidiary of Cinergy Corp.
("Cinergy"), a registered holding company under the Public Utility
Holding Company Act of 1935, as amended ("PUHCA"), and a "public-utility
company" as therein defined; and
WHEREAS, each of the Nonutility Companies is a direct or indirect
subsidiary of Cinergy and, within the meaning of PUHCA or applicable
rules, regulations or administrative precedent of the Securities and
Exchange Commission ("SEC") thereunder, is a "nonutility company" (but not
an "exempt telecommunications company" ("ETC") or a "foreign utility
company" ("FUCO")), being neither a "public-utility company," "holding
company" nor "subsidiary service company"; and
WHEREAS, in the ordinary course of their businesses, Operating
Company and Nonutility Companies maintain organizations of employees with
technical expertise in matters affecting public utility companies and
related businesses and own or acquire related equipment, facilities,
properties and other resources; and
WHEREAS, CG&E will follow the Cinergy Services, Inc. Accounting and
Cost Assignment Procedures for all transactions occurring under this
Service Agreement; and
WHEREAS, CG&E has previously agreed under certain conditions to
make available to the Public Utilities Commission of Ohio ("PUCO") and its
staff all books, records, employees, and officers of CG&E and any
Nonutility Company necessary to permit the PUCO to carry out its statutory
and regulatory obligations, the terms and conditions of Article III, F of
the Ohio Joint Stipulation and Agreement, FERC Docket No. EC96-6, shall
apply to transactions occurring under this Service Agreement; and
WHEREAS, CG&E will continue to be subject to all rules, regulations,
orders, entries, and directives of the PUCO relating to billing and
customer relations; and
WHEREAS, pursuant to applicable law or otherwise, and subject to the
terms and conditions herein provided, the PUCO has authorized Operating
Company to enter into this Agreement; and
WHEREAS, pursuant to the applicable provisions of PUHCA and the
rules and regulations thereunder, and subject to the terms and conditions
herein set forth, the SEC has authorized the parties hereto to enter into
this Agreement; and
WHEREAS, subject to the terms and conditions herein set forth, and
taking into consideration the parties' utility responsibilities or
primary business operations, as the case may be, the parties hereto are
willing, upon request from time to time, to perform such services, and in
connection therewith to make available such equipment, facilities,
properties and other resources, as they shall request from each other;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
ARTICLE 1. PROVISION OF SERVICES; LOANED EMPLOYEES
Section 1.1 Provision of Services.
(a) Upon receipt by a party hereto (in such capacity, a "Service
Provider") of a written request in substantially the form attached hereto
as Exhibit A (a "Service Request") from another party hereto (in such
capacity, a "Client Company") for the provision to such Client Company of
such services as are specified therein, including if applicable use of
any related equipment, facilities, properties or other resources
(collectively, "Services"), the Service Provider, if in its sole discretion
it has available the personnel or other resources needed to perform the
Service Request without impairment of its utility responsibilities or
business operations, as the case may be, shall furnish such Services to the
Client Company at such times, for such periods and in such manner as the
Client Company shall have so requested and otherwise in accordance with the
provisions hereof.
(b) For purposes of this Agreement, "Services" may include, but
shall not be limited to: (I) in the case of Services that may be provided
by Operating Company hereunder, services in such areas as engineering and
construction; operations and maintenance; and equipment testing; and (ii)
in the case of Services that may be provided by Nonutility Companies
hereunder, services in such areas as 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. No such
transaction 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.
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 this Agreement. Likewise, affiliate transactions
involving services to or from ETCs or FUCOs are outside the scope of this
Agreement.
Section 1.2 Loaned Employees.
(a) If specifically requested in connection with the provision of
Services, Service Provider shall loan one or more of its employees to
such Client Company, provided that such loan shall not, in the sole
discretion of Service Provider, interfere with or impair Service Provider's
utility responsibilities or business operations, as the case may be. After
the commencement thereof, any such loaned employees may be withdrawn by
Service Provider from tasks duly assigned by Client Company, prior to
completion thereof as contemplated in the associated Service Request, only
with the consent of Client Company (which shall not be unreasonably
withheld or delayed), except in the event of a demonstrable emergency
requiring the use of any such employees in another capacity for Service
Provider.
(b) While performing work on behalf of Client Company, any such
loaned employees shall be under its supervision and control, and Client
Company shall be responsible for their actions to the same extent as
though such persons were its employees (it being understood that such
persons shall nevertheless remain employees of Service Provider and nothing
herein shall be construed as creating an employer-employee relationship
between any Client Company and any loaned employees). Accordingly, for the
duration of any such loan, Service Provider shall continue to provide its
loaned employees with the same payroll, pension, savings, tax
withholding, unemployment, bookkeeping and other personnel support services
then being provided by Service Provider to its other employees.
ARTICLE 2. SERVICE REQUESTS
Section 2.1 Procedure.
All Services (including any loans of employees) (I) shall be
performed in accordance with Service Requests issued by or on behalf of
Client Company and accepted by Service Provider and (ii) shall be assigned
to applicable activities, projects, programs or on other appropriate bases
to enable specific work to be properly assigned. Service Requests shall
be as specific as practicable in defining the Services requested. Client
Company shall have the right from time to time to amend or rescind any
Service Request, provided that (a) Service Provider consents to any
amendment that results in a material change in the scope of Services to
be provided, (b) the costs associated with an amended or rescinded Service
Request shall include the costs incurred by Service Provider as a result
of such amendment or rescission, and no amendment or rescission of a
Service Request shall release Client Company from any liability for costs
already incurred or contracted for by Service Provider pursuant to the
original Service Request, regardless of whether any labor or the
furnishing of any property or other resources has been commenced or
completed.
ARTICLE 3. COMPENSATION FOR SERVICES
Section 3.1 Cost of Services.
Except as may be required pursuant to Section 5.6 (with respect to
regulatory requirements), as compensation for any Services rendered to it
pursuant to this Agreement, Client Company shall pay to Service Provider
the full cost thereof as computed in accordance with applicable rules,
regulations and accounting standards, including Rules 90 and 91 under
PUHCA. As soon as practicable after the close of each month, Service
Provider shall render to each Client Company a statement reflecting the
billing information necessary to identify the costs charged for that
month. All amounts so billed shall be paid by Client Company within 30
days after receipt thereof.
ARTICLE 4. LIMITATION OF LIABILITY; INDEMNIFICATION
Section 4.1 Limitation of Liability/Services.
In performing Services pursuant to Section 1.1 hereof, Service
Provider will exercise due care to assure that the Services are performed
in a workmanlike manner in accordance with the specifications set forth
in the applicable Service Request and consistent with any applicable legal
standards. The sole and exclusive responsibility of Service Provider for
any deficiency therein shall be promptly to correct or repair such
deficiency or to re-perform such Services, in either case at no
additional cost to Client Company, so that the Services fully conform to
the standards described in the first sentence of this Section 4.1. No
Service Provider makes any other warranty with respect to the provision of
Services, and each Client Company agrees to accept any Services without
further warranty of any nature.
Section 4.2 Limitation of Liability/Loaned Employees.
In furnishing Services under Section 1.2 hereof (i.e., involving
loaned employees), neither the Service Provider, nor any officer,
director, employee or agent thereof, shall have any responsibility whatever
to any Client Company receiving such Services, and Client Company
specifically releases Service Provider and such persons, on account of any
claims, liabilities, injuries, damages or other consequences arising in
connection with the provision of such Services under any theory of
liability, whether in contract, tort (including negligence or strict
liability) or otherwise, it being understood and agreed that any such
loaned employees are made available without warranty as to their
suitability or expertise.
Section 4.3 Disclaimer.
WITH RESPECT TO ANY SERVICES PROVIDED UNDER THIS AGREEMENT,
THE SERVICE PROVIDER THEREOF MAKES NO WARRANTY OR REPRESENTATION
OTHER THAN AS SET FORTH IN SECTION 4.1, AND THE PARTIES HERETO HEREBY
AGREE THAT NO OTHER WARRANTY, WHETHER STATUTORY, EXPRESS OR IMPLIED
(INCLUDING BUT NOT LIMITED TO ALL WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE AND WARRANTIES ARISING FROM COURSE OF
DEALING OR USAGE OF TRADE), SHALL BE APPLICABLE TO THE PROVISION OF ANY
SUCH SERVICES. THE PARTIES FURTHER AGREE THAT THE REMEDIES STATED HEREIN
ARE EXCLUSIVE AND SHALL CONSTITUTE THE SOLE AND EXCLUSIVE REMEDY OF ANY
PARTY HERETO FOR A FAILURE BY ANY OTHER PARTY HERETO TO COMPLY
WITH ITS WARRANTY OBLIGATIONS.
Section 4.4 Indemnification.
In respect of any Services provided under this Agreement, any Client
Company that issued the Service Request requesting such Services shall
defend, indemnify and hold harmless the Service Provider thereof, and
each of its officers, directors, employees and agents, from and against,
and shall pay the full amount of, any loss, liability, claim, damage,
expense (including costs of investigation and defense and reasonable
attorneys' fees), whether or not involving a third-party claim
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with the provision of such Services. Such indemnity shall apply
regardless of whether the Claims result from any asserted or actual
negligence or willful misconduct of, or breach of warranty by, the Service
Provider or any of its officers, directors, employees or agents. Such
indemnity shall not apply, however, to the extent that Service Provider
receives insurance proceeds in respect of any such Claim.
Section 4.5 Procedure for Indemnification.
Within 10 days after receipt by Service Provider of notice of any
claim or the commencement of any action, suit, litigation or other
proceeding against it (a "Proceeding") with respect to which it is
eligible for indemnification hereunder, Service Provider shall notify the
applicable Client Company thereof (it being understood that failure so to
notify Client Company shall not relieve the latter of its indemnification
obligation, unless Client Company establishes that defense thereof has
been prejudiced by such failure). Thereafter, Client Company shall be
entitled to participate in such Proceeding and, at its election upon
notice to Service Provider, to assume the defense of such Proceeding. If
Service Provider has given timely notice to Client Company of the
commencement of such Proceeding, but Client Company has not, within 10 days
after receipt of such notice, given notice to Service Provider of its
election to assume the defense thereof, Client Company shall be bound by
any determination made in such Proceeding or any compromise or settlement
made by Service Provider. A claim for indemnification for any matter not
involving a third-party claim may be asserted by notice from Service
Provider to the applicable Client Company.
ARTICLE 5. MISCELLANEOUS
Section 5.1 Ratemaking.
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 PUCO 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.
Section 5.2 Amendments in Writing; State Review.
(a) Any amendments to this Agreement shall be in writing executed
by each of the parties hereto.
(b) In the event the parties hereto execute an amendment hereto,
the parties shall fulfill the following obligations, where applicable:
(I) Prior to filing any amendment with the SEC, the parties
shall file with the PUCO and provide to the Ohio Consumers' Counsel
(and, provide, upon request, to other appropriate parties) a copy of such
amendment.
(ii) In the event that the amendment is finally rejected or
disapproved or found to be unreasonable by the PUCO prior to filing with
the SEC, the amendment shall not become effective and the parties shall
not request SEC approval of the amendment.
(iii) In the event that the amendment is rejected or
disapproved or found to be unreasonable by PUCO after it has been filed
with but before it has been approved by the SEC, the amendment shall be
terminated and the parties agree to request withdrawal of the filing.
(iv) Notwithstanding "(ii)" and "(iii)" immediately above, in
the event that the amendment is rejected, disapproved or found to be
unreasonable by PUCO before it has been approved by the SEC, the parties
shall have the right to request further revisions of the amendment in
order to cure or remove the cause of the PUCO's rejection, disapproval or
finding of unreasonableness. Upon request by a party hereto, the other
parties shall agree promptly to negotiate in good faith to revise the
amendment and thereafter to file for any necessary regulatory authorization
of the renegotiated amendment. If the parties are unable to reach
agreement satisfactory to each of them and to the PUCO after good faith
negotiations, then "(ii)" or "(iii)" immediately above, as applicable,
shall apply.
(v) In the event that the PUCO has previously approved the
amendment prior to SEC approval, "(vi)" immediately below shall not
apply.
(vi) In the event that an amendment has become effective and is
subsequently rejected, disapproved or found to be unreasonable by PUCO,
the parties shall make a good faith effort to terminate, amend or modify
the amendment in a manner which remedies the PUCO's adverse findings
without adverse impact on any of the parties. The parties shall request to
meet with representatives of the PUCO and make a good faith attempt to
resolve any differences regarding the subject amendment. If agreement
can be reached to terminate the amendment or amend or modify the amendment
in a manner satisfactory to the parties hereto and to the representatives
of the PUCO, then the parties shall file such amendment with the
appropriate state and federal regulatory agencies, seeking all necessary
regulatory authorizations. If the parties are unable to reach agreement
satisfactory to each of them and to the PUCO after good faith negotiations,
then they shall be under no further obligation to amend the amendment.
Nothing in this Section 5.2 is intended to detract from the
authority of the SEC under PUHCA.
Section 5.3 Effective Date; Term.
This Agreement shall become effective as of the day and year first
above written and shall continue in full force and effect as to each
party until terminated by any party, as to itself only, upon not less than
30 days prior written notice to the other parties hereto. Any such
termination of parties shall not be deemed an amendment and shall not
require adherence to the procedures set forth in Section 5.2(b).
Section 5.4 Additional Parties.
After the effective date of this Agreement, additional Nonutility
Companies may become parties to this Agreement by executing appropriate
signature pages, whereupon any such additional signatory shall be deemed
a "party" hereto all purposes hereof and shall thereupon become bound by
the terms and conditions of this Agreement as if an original party hereto.
The addition of any such further signatories, in the absence of any changes
to the terms of this Agreement, shall not be deemed an amendment hereto and
shall not be subject to the procedures described in Section 5.2(b). CG&E
shall notify the PUCO within 45 days after any Nonutility Company is
added as a party to this Services Agreement.
Section 5.5 Entire Agreement.
This Agreement contains the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes any prior
or concurrent understandings with respect thereto. Any oral or written
statements, representations, promises, negotiations or agreements,
whether prior hereto or concurrently herewith, are superseded by and
merged into this Agreement.
Section 5.6 Severability; Regulatory Requirements.
If any provision of this Agreement or any application thereof shall
be determined to be invalid or unenforceable, the remainder of this
Agreement and any other application thereof shall not be affected thereby.
Without limiting the generality of the foregoing, the provision of Services
pursuant to this Agreement shall in all cases, and notwithstanding
anything herein 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 those regulatory or
governmental agencies, including without limitation the PUCO, SEC and
Federal Energy Regulatory Commission, having jurisdiction over any of the
parties hereto. To the extent, if any, that at any time any provision of
this Agreement conflicts with any such limitation or restriction of any
such other regulatory agencies, such limitation shall control. CG&E has
waived the U.S. Securities and Exchange Commission ( SEC ) preemption so
that SEC approval of this Services Agreement (including any amendments
thereto) would not preempt, preclude, delay or otherwise affect PUCO
review of the Services Agreement and transactions under the Services
Agreement. Further, with the waiver of SEC preemption, the PUCO may, by
order, entry or directive, require accounting treatment(s), codes of
conduct, guidelines, performance criteria, and rules and regulations
relating to the Services Agreement and/or transactions under the Services
Agreement.
CG&E has and shall continue to have ultimate responsibility under
Title 49 of the Ohio Revised Code, PUCO rules and orders with respect to:
CG&E customer inquiries, complaints, and customer relations; billing
services, metering services, information services, and other utility
services presently regulated by the Public Utility Commission of Ohio,
and inquires and complaints thereto, regardless of whether such services
are provided by an affiliate or by any other arrangement.
Section 5.7 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of the parties hereto, provided that a Service
Provider shall not be entitled to assign or subcontract to any third
party any of Service Provider's obligations under this Agreement or under
any Service Request issued hereunder without the prior approval of each
affected Client Company.
Section 5.8 Governing Law.
This Agreement shall be construed and enforced under and in
accordance with the laws of the State of Ohio, without regard to conflicts
of laws principles.
Section 5.9 Captions, etc.
The captions and headings used in this Agreement are for convenience
of reference only and shall not affect the construction to be accorded
any of the provisions hereof. As used in this Agreement, "hereof,"
"hereunder," "herein," "hereto," and words of like import refer to this
Agreement as a whole and not to any particular section or other paragraph
or subparagraph thereof.
Section 5.10 Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed a duplicate original hereof, but all of which shall
be deemed one and the same Agreement.
Section 5.11 Customer Information Disclosure.
CG&E and the Nonutility Companies agree to certain prohibitions
related to the access, sharing, and release of customer information and
customer information databases. For purposes of carrying out the
Services Agreement and all Service Requests pursuant thereto:
(a) 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.
(b) 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.
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.
(d) Notwithstanding Paragraphs (a), (b), and above, when a
Nonutility Company provides or assists in providing utility service (like
billing) regulated by the PUCO as an agent of or on behalf of CG&E:
(I) CG&E may release information for such utility services to
such Nonutility Company without the customer's consent;
(ii) CG&E may access the customer database or so release CG&E
customer information without keeping a log of each access or release of
information.
(e) 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.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf by an appropriate officer
thereunto duly authorized, as of the respective dates set forth below.
The Cincinnati Gas & Electric Company
Date:____________ By:______________________
Name:
Title:
Cinergy Investments, Inc.
Date:___________ By:____________________
Name:
Title:
KO Transmission Company
Date:___________ By:____________________
Name:
Title:
Tri-State Improvement Company
Date:___________ By:____________________
Name:
Title:
South Construction Company, Inc.
Date:___________ By:____________________
Name:
Title:
Cinergy-Cadence, Inc.
Date:___________ By:____________________
Name:
Title:
Cadence Network LLC
Date:___________ By:____________________
Name:
Title:
Cinergy Capital & Trading, Inc.
Date:___________ By:____________________
Name:
Title:
CinCap IV, LLC
Date:___________ By:____________________
Name:
Title:
CinCap V, LLC
Date:___________ By:____________________
Name:
Title:
CinPower I, LLC
Date:___________ By:____________________
Name:
Title:
Producers Energy Marketing, LLC
Date:___________ By:____________________
Name:
Title:
Cinergy Engineering, Inc.
Date:___________ By:____________________
Name:
Title:
Cinergy Resources, Inc.
Date:___________ By:____________________
Name:
Title:
Cinergy Solutions, Inc.
Date:___________ By:____________________
Name:
Title:
Cinergy Business Solutions, Inc.
Date:___________ By:____________________
Name:
Title:
Trigen-Cinergy Solutions LLC
Date:___________ By:____________________
Name:
Title:
Trigen-Cinergy Solutions of Illinois L.L.C.
Date:___________ By:____________________
Name:
Title:
Trigen-Cinergy Solutions of Orlando LLC
Date:___________ By:____________________
Name:
Title:
Cinergy Supply Network, Inc.
Date:___________ By:____________________
Name:
Title:
Reliant Services, LLC
Date:___________ By:____________________
Name:
Title:
Cinergy Technology, Inc.
Date:___________ By:____________________
Name:
Title:
Enertech Associates, Inc.
Date:___________ By:____________________
Name:
Title:
Exhibit A
FORM OF SERVICE REQUEST
Client Company: Approved By:
Name:
Title:
Proposed Service Provider/ Description of Proposed Services:
Estimated Costs (provide basis):
Scheduled Start Date: Scheduled Completion Date:
Service Provider: Approved By:
Name:
Title:
Exhibit B-3
SERVICES AGREEMENT/1/
THIS SERVICES AGREEMENT, made and entered into as of _________, 1999
by and among The Union Light, Heat and Power Company, a Kentucky
corporation ("Operating Company" or "ULH&P"), and the respective
associate companies listed on the signature pages hereto (each, a
"Nonutility Company").
W I T N E S S E T H:
WHEREAS, Operating Company is an indirect subsidiary of Cinergy
Corp. ("Cinergy"), a registered holding company under the Public Utility
Holding Company Act of 1935, as amended ("PUHCA"), and a "public-utility
company" as therein defined; and
WHEREAS, each of the Nonutility Companies is a direct or indirect
subsidiary of Cinergy and, within the meaning of PUHCA or applicable
rules, regulations or administrative precedent of the Securities and
Exchange Commission ("SEC") thereunder, is a "nonutility company" (but not
an "exempt telecommunications company" ("ETC") or a "foreign utility
company" ("FUCO")), being neither a "public-utility company," "holding
company" nor "subsidiary service company"; and
WHEREAS, in the ordinary course of their businesses, Operating
Company and Nonutility Companies maintain organizations of employees with
technical expertise in matters affecting public utility companies and
related businesses and own or acquire related equipment, facilities,
properties and other resources; and
WHEREAS, ULH&P has previously agreed under certain conditions to
make available to the Kentucky Public Service Commission ("KYPSC") and its
staff all books, records, employees, and officers of ULH&P and any
Nonutility Company necessary to permit the KYPSC to carry out its statutory
and regulatory obligations, the terms and conditions of the May 13, 1994
Order in Case No. 94-104, shall apply to transactions occurring under
this Service Agreement; and
WHEREAS, pursuant to the applicable provisions of PUHCA and the
rules and regulations thereunder, and subject to the terms and conditions
herein set forth, the SEC has authorized the parties hereto to enter into
this Agreement; and
WHEREAS, subject to the terms and conditions herein set forth, and
taking into consideration the parties' utility responsibilities or
primary business operations, as the case may be, the parties hereto are
willing, upon request from time to time, to perform such services, and in
connection therewith to make available such equipment, facilities,
properties and other resources, as they shall request from each other;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
ARTICLE 1. PROVISION OF SERVICES; LOANED EMPLOYEES
Section 1.1 Provision of Services.
(a) Upon receipt by a party hereto (in such capacity, a "Service
Provider") of a written request in substantially the form attached hereto
as Exhibit A (a "Service Request") from another party hereto (in such
capacity, a "Client Company") for the provision to such Client Company of
such services as are specified therein, including if applicable use of
any related equipment, facilities, properties or other resources
(collectively, "Services"), the Service Provider, if in its sole discretion
it has available the personnel or other resources needed to perform the
Service Request without impairment of its utility responsibilities or
business operations, as the case may be, shall furnish such Services to the
Client Company at such times, for such periods and in such manner as the
Client Company shall have so requested and otherwise in accordance with the
provisions hereof.
(b) For purposes of this Agreement, "Services" may include, but
shall not be limited to: (I) in the case of Services that may be provided
by Operating Company hereunder, services in such areas as engineering and
construction; operations and maintenance; and equipment testing;
and (ii) in the case of Services that may be provided by Nonutility
Companies hereunder, services in such areas as 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.
No such transaction 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.
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 this Agreement. Likewise, affiliate transactions
involving services to or from ETCs or FUCOs are outside the scope of this
Agreement.
Section 1.2 Loaned Employees.
(a) If specifically requested in connection with the provision of
Services, Service Provider shall loan one or more of its employees to
such Client Company, provided that such loan shall not, in the sole
discretion of Service Provider, interfere with or impair Service Provider's
utility responsibilities or business operations, as the case may be. After
the commencement thereof, any such loaned employees may be withdrawn by
Service Provider from tasks duly assigned by Client Company, prior to
completion thereof as contemplated in the associated Service Request, only
with the consent of Client Company (which shall not be unreasonably
withheld or delayed), except in the event of a demonstrable emergency
requiring the use of any such employees in another capacity for Service
Provider.
(b) While performing work on behalf of Client Company, any such
loaned employees shall be under its supervision and control, and Client
Company shall be responsible for their actions to the same extent as
though such persons were its employees (it being understood that such
persons shall nevertheless remain employees of Service Provider and nothing
herein shall be construed as creating an employer-employee relationship
between any Client Company and any loaned employees). Accordingly, for the
duration of any such loan, Service Provider shall continue to provide its
loaned employees with the same payroll, pension, savings, tax
withholding, unemployment, bookkeeping and other personnel support services
then being provided by Service Provider to its other employees.
ARTICLE 2. SERVICE REQUESTS
Section 2.1 Procedure.
All Services (including any loans of employees) (I) shall be
performed in accordance with Service Requests issued by or on behalf of
Client Company and accepted by Service Provider and (ii) shall be assigned
to applicable activities, projects, programs or on other appropriate bases
to enable specific work to be properly assigned. Service Requests shall
be as specific as practicable in defining the Services requested. Client
Company shall have the right from time to time to amend or rescind any
Service Request, provided that (a) Service Provider consents to any
amendment that results in a material change in the scope of Services to
be provided, (b) the costs associated with an amended or rescinded Service
Request shall include the costs incurred by Service Provider as a result
of such amendment or rescission, and no amendment or rescission of a
Service Request shall release Client Company from any liability for costs
already incurred or contracted for by Service Provider pursuant to the
original Service Request, regardless of whether any labor or the
furnishing of any property or other resources has been commenced or
completed.
ARTICLE 3. COMPENSATION FOR SERVICES
Section 3.1 Cost of Services.
Except as may be required pursuant to Section 5.6 (with respect to
regulatory requirements), as compensation for any Services rendered to it
pursuant to this Agreement, Client Company shall pay to Service Provider
the full cost thereof as computed in accordance with applicable rules,
regulations and accounting standards, including Rules 90 and 91 under
PUHCA. As soon as practicable after the close of each month, Service
Provider shall render to each Client Company a statement reflecting the
billing information necessary to identify the costs charged for that
month. All amounts so billed shall be paid by Client Company within 30
days after receipt thereof.
ARTICLE 4. LIMITATION OF LIABILITY; INDEMNIFICATION
Section 4.1 Limitation of Liability/Services.
In performing Services pursuant to Section 1.1 hereof, Service
Provider will exercise due care to assure that the Services are performed
in a workmanlike manner in accordance with the specifications set forth
in the applicable Service Request and consistent with any applicable legal
standards. The sole and exclusive responsibility of Service Provider for
any deficiency therein shall be promptly to correct or repair such
deficiency or to re-perform such Services, in either case at no
additional cost to Client Company, so that the Services fully conform to
the standards described in the first sentence of this Section 4.1. No
Service Provider makes any other warranty with respect to the provision of
Services, and each Client Company agrees to accept any Services without
further warranty of any nature.
Section 4.2 Limitation of Liability/Loaned Employees.
In furnishing Services under Section 1.2 hereof (i.e., involving
loaned employees), neither the Service Provider, nor any officer,
director, employee or agent thereof, shall have any responsibility whatever
to any Client Company receiving such Services, and Client Company
specifically releases Service Provider and such persons, on account of any
claims, liabilities, injuries, damages or other consequences arising in
connection with the provision of such Services under any theory of
liability, whether in contract, tort (including negligence or strict
liability) or otherwise, it being understood and agreed that any such
loaned employees are made available without warranty as to their
suitability or expertise.
Section 4.3 Disclaimer.
WITH RESPECT TO ANY SERVICES PROVIDED UNDER THIS AGREEMENT,
THE SERVICE PROVIDER THEREOF MAKES NO WARRANTY OR REPRESENTATION
OTHER THAN AS SET FORTH IN SECTION 4.1, AND THE PARTIES HERETO HEREBY
AGREE THAT NO OTHER WARRANTY, WHETHER STATUTORY, EXPRESS OR IMPLIED
(INCLUDING BUT NOT LIMITED TO ALL WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE AND WARRANTIES ARISING FROM COURSE OF
DEALING OR USAGE OF TRADE), SHALL BE APPLICABLE TO THE PROVISION OF ANY
SUCH SERVICES. THE PARTIES FURTHER AGREE THAT THE REMEDIES STATED HEREIN
ARE EXCLUSIVE AND SHALL CONSTITUTE THE SOLE AND EXCLUSIVE REMEDY OF ANY
PARTY HERETO FOR A FAILURE BY ANY OTHER PARTY HERETO TO COMPLY WITH ITS
WARRANTY OBLIGATIONS.
Section 4.4 Indemnification.
In respect of any Services provided under this Agreement, any Client
Company that issued the Service Request requesting such Services shall
defend, indemnify and hold harmless the Service Provider thereof, and
each of its officers, directors, employees and agents, from and against,
and shall pay the full amount of, any loss, liability, claim, damage,
expense (including costs of investigation and defense and reasonable
attorneys' fees), whether or not involving a third-party claim
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with the provision of such Services. Such indemnity shall apply
regardless of whether the Claims result from any asserted or actual
negligence or willful misconduct of, or breach of warranty by, the Service
Provider or any of its officers, directors, employees or agents. Such
indemnity shall not apply, however, to the extent that Service Provider
receives insurance proceeds in respect of any such Claim.
Section 4.5 Procedure for Indemnification.
Within 10 days after receipt by Service Provider of notice of any
claim or the commencement of any action, suit, litigation or other
proceeding against it (a "Proceeding") with respect to which it is
eligible for indemnification hereunder, Service Provider shall notify the
applicable Client Company thereof (it being understood that failure so to
notify Client Company shall not relieve the latter of its indemnification
obligation, unless Client Company establishes that defense thereof has
been prejudiced by such failure). Thereafter, Client Company shall be
entitled to participate in such Proceeding and, at its election upon
notice to Service Provider, to assume the defense of such Proceeding. If
Service Provider has given timely notice to Client Company of the
commencement of such Proceeding, but Client Company has not, within 10 days
after receipt of such notice, given notice to Service Provider of its
election to assume the defense thereof, Client Company shall be bound by
any determination made in such Proceeding or any compromise or settlement
made by Service Provider. A claim for indemnification for any matter not
involving a third-party claim may be asserted by notice from Service
Provider to the applicable Client Company.
ARTICLE 5. MISCELLANEOUS
Section 5.1 Ratemaking.
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 KYPSC 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.
Section 5.2 Amendments in Writing.
(a) Any amendments to this Agreement shall be in writing executed
by each of the parties hereto.
(b) A copy of any amendment hereto shall be provided to the KYPSC
at the time it is filed with the SEC.
Nothing in this Section 5.2 is intended to detract from the
authority of the SEC under PUHCA.
Section 5.3 Effective Date; Term.
This Agreement shall become effective as of the day and year first
above written and shall continue in full force and effect as to each
party until terminated by any party, as to itself only, upon not less than
30 days prior written notice to the other parties hereto. Any such
termination of parties shall not be deemed an amendment and shall not
require adherence to the procedures set forth in Section 5.2(b).
Section 5.4 Additional Parties.
After the effective date of this Agreement, additional Nonutility
Companies may become parties to this Agreement by executing appropriate
signature pages, whereupon any such additional signatory shall be deemed
a "party" hereto all purposes hereof and shall thereupon become bound by
the terms and conditions of this Agreement as if an original party hereto.
The addition of any such further signatories, in the absence of any changes
to the terms of this Agreement, shall not be deemed an amendment hereto and
shall not be subject to the procedures described in Section 5.2(b).
Section 5.5 Entire Agreement.
This Agreement contains the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes any prior
or concurrent understandings with respect thereto. Any oral or written
statements, representations, promises, negotiations or agreements,
whether prior hereto or concurrently herewith, are superseded by and
merged into this Agreement.
Section 5.6 Severability; Regulatory Requirements.
If any provision of this Agreement or any application thereof shall
be determined to be invalid or unenforceable, the remainder of this
Agreement and any other application thereof shall not be affected thereby.
Without limiting the generality of the foregoing, the provision of Services
pursuant to this Agreement shall in all cases, and notwithstanding
anything herein 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 those regulatory or
governmental agencies, including without limitation the KYPSC, SEC and
Federal Energy Regulatory Commission, having jurisdiction over any of the
parties hereto. To the extent, if any, that at any time any provision of
this Agreement conflicts with any such limitation or restriction of any
such other regulatory agencies, such limitation shall control.
ULH&P has waived SEC preemption so that SEC approval of this
Services Agreement (including any amendments thereto) would not preempt,
preclude, delay or otherwise affect KYPSC review of this Agreement and
transactions under this Agreement. Further, with the waiver of SEC
preemption, the KYPSC may, by order, entry or directive, require accounting
treatment(s), codes of conduct, guidelines, performance criteria, and rules
and regulations relating to this Agreement and/or transactions under this
Agreement.
Section 5.7 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of the parties hereto, provided that a Service
Provider shall not be entitled to assign or subcontract to any third
party any of Service Provider's obligations under this Agreement or under
any Service Request issued hereunder without the prior approval of each
affected Client Company.
Section 5.8 Governing Law.
This Agreement shall be construed and enforced under and in
accordance with the laws of the Commonwealth of Kentucky, without regard to
conflicts of laws principles.
Section 5.9 Captions, etc.
The captions and headings used in this Agreement are for convenience
of reference only and shall not affect the construction to be accorded
any of the provisions hereof. As used in this Agreement, "hereof,"
"hereunder," "herein," "hereto," and words of like import refer to this
Agreement as a whole and not to any particular section or other paragraph
or subparagraph thereof.
Section 5.10 Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed a duplicate original hereof, but all of which shall
be deemed one and the same Agreement.
Section 5.11 Customer Information Disclosure.
ULH&P and the Nonutility Companies agree to certain prohibitions
related to the access, sharing, and release of customer information and
customer information databases. For purposes of carrying out this
Services Agreement and all Service Requests pursuant hereto:
(a) No employee of a Nonutility Company may access ULH&P's customer
database or release ULH&P customer information without the written
consent of the customer specifying the type of information to be released.
(b) No employee of ULH&P may release ULH&P customer information to
a Nonutility Company without the written consent of the customer specifying
the type of information to be released.
ULH&P shall keep a log when the ULH&P customer database is
accessed by or ULH&P customer information is released to a Nonutility
Company. Such log shall include customer name, date(s) when ULH&P's
customer database was accessed or ULH&P 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.
(d) Notwithstanding Paragraphs (a), (b), and above, when a
Nonutility Company provides or assists in providing utility service (like
billing) regulated by the KYPSC as an agent of or on behalf of ULH&P:
(I) ULH&P may release information for such utility services to
such Nonutility Company without the customer's consent;
(ii) ULH&P may access the customer database or so release ULH&P
customer information without keeping a log of each access or release of
information.
(e) ULH&P customer information released to a Nonutility Company may
not be shared or supplied by that Nonutility Company with or to another
ULH&P affiliate or Cinergy subsidiary.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf by an appropriate officer
thereunto duly authorized, as of the respective dates set forth below.
The Union Light, Heat and Power Company
Date:____________ By:______________________
Name:
Title:
Cinergy Investments, Inc.
Date:___________ By:____________________
Name:
Title:
KO Transmission Company
Date:___________ By:____________________
Name:
Title:
Tri-State Improvement Company
Date:___________ By:____________________
Name:
Title:
South Construction Company, Inc.
Date:___________ By:____________________
Name:
Title:
Cinergy-Cadence, Inc.
Date:___________ By:____________________
Name:
Title:
Cadence Network LLC
Date:___________ By:____________________
Name:
Title:
Cinergy Capital & Trading, Inc.
Date:___________ By:____________________
Name:
Title:
CinCap IV, LLC
Date:___________ By:____________________
Name:
Title:
CinCap V, LLC
Date:___________ By:____________________
Name:
Title:
CinPower I, LLC
Date:___________ By:____________________
Name:
Title:
Producers Energy Marketing, LLC
Date:___________ By:____________________
Name:
Title:
Cinergy Engineering, Inc.
Date:___________ By:____________________
Name:
Title:
Cinergy Resources, Inc.
Date:___________ By:____________________
Name:
Title:
Cinergy Solutions, Inc.
Date:___________ By:____________________
Name:
Title:
Cinergy Business Solutions, Inc.
Date:___________ By:____________________
Name:
Title:
Trigen-Cinergy Solutions LLC
Date:___________ By:____________________
Name:
Title:
Trigen-Cinergy Solutions of Illinois L.L.C.
Date:___________ By:____________________
Name:
Title:
Trigen-Cinergy Solutions of Orlando LLC
Date:___________ By:____________________
Name:
Title:
Cinergy Supply Network, Inc.
Date:___________ By:____________________
Name:
Title:
Reliant Services, LLC
Date:___________ By:____________________
Name:
Title:
Cinergy Technology, Inc.
Date:___________ By:____________________
Name:
Title:
Enertech Associates, Inc.
Date:___________ By:____________________
Name:
Title:
Exhibit A
FORM OF SERVICE REQUEST
Client Company: Approved By:
Name:
Title:
Proposed Service Provider/ Description of Proposed Services:
Estimated Costs (provide basis):
Scheduled Start Date: Scheduled Completion
Date:
Service Provider: Approved By:
Name:
Title:
ENDNOTES
/1/ Note: For illustrative purposes this exhibit has been prepared for
execution by ULH&P; substantially identical, separate Service Agreements
would be executed by each of the other CG&E utility subsidiaries
(Lawrenceburg Gas Company, The West Harrison Gas and Electric Company and
Miami Power Corporation).
Exhibit D-1
BEFORE
THE PUBLIC UTILITIES COMMISSION OF OHIO
In the Matter of the Application of )
The Cincinnati Gas & Electric Company )
for Authority to Enter into a Services ) Case No. 98-1183-GE-CMT
Agreement to Permit Sale and Purchase )
of Services with Affiliated Companies )
APPLICATION
TO THE HONORABLE PUBLIC UTILITIES
COMMISSION OF OHIO:
The Cincinnati Gas & Electric Company (CG&E), a public utility as
defined by the Ohio Revised Code, respectfully represents the following:
1. CG&E seeks the necessary consent and authority of this Commission to
implement a Services Agreement permitting CG&E to purchase from or
sell to affiliated Non-Utility Companies (Non-Utility) services
pursuant to the terms contained therein. The Agreement lists the
existing Non-Utility Companies that will be parties to the Agreement,
but additional non-utility companies affiliated with CG&E may become
parties to the Services Agreement in the future. The Services
Agreement that CG&E intends to enter is attached as Exhibit A.
2. The Services Agreement must be approved by the Securities and
Exchange Commission (SEC), as required by the Public Utility Holding
Company Act of 1935 (PUHCA).
3. By stipulation approved by this Commission, CG&E agreed that:
Any Affiliate Contract which needs to be filed with the SEC will first
be filed with the Commission so long as affiliate contracts are
required to be filed with the Indiana Utility Regulatory Commission.
Affiliate Contract, except as provided below, is defined as a contract
. . . between CG&E and any affiliate, associate, holding, mutual
service, or subsidiary company, within the same holding company
system, as these terms are defined in 15 U.S.C. Section 79b as
subsequently amended, providing for: . . .(ii) the purchase or sale of
assets, goods or services to or from an affiliate. . .
Stipulation at Paragraph 5.C. The Stipulation further provides that:
Prior to filing an Affiliate Contract with the SEC, CG&E will file
with the Commission and provide to the OCC , a copy of such
Contract or amendment sixty (60) days, or such shorter period as
the Commission may approve, before it files said Affiliate
Contract with the SEC.
Stipulation at Paragraph 5.C. 1. This Stipulation was approved by
this Commission in Case No. 91-410-EL-AIR (April 14, 1994). This
Application is CG&E's filing in compliance with the Stipulation. The
Agreement contains the required language regarding approval by this
Commission. Exhibit A, Agreement Section 5.2.
4. The Agreement defines services to include a non-exclusive range of
services that could be rendered by CG&E to the Non-Utilities and a
non-exclusive range of services that could be rendered by the
Non-Utilities to CG&E. The Agreement excludes the sales or other
transfers of assets, electricity, coal, natural gas, or other goods.
In addition, the Agreement does not cover affiliate transactions
involving services to or from Exempt Telecommunications Companies
(ETC) and Foreign Utility Companies (FUCO). Exhibit A, Agreement
Section 1.1.
5. The Agreement provides for the process and terms and conditions of
loaning employees between CG&E and the Non-Utilities and prohibits
transfers of employees that would interfere or impair the provision
of utility services. Exhibit A, Agreement Section 1.2.
6. A specific process for Service Requests is established to insure that
requests are tracked and properly accounted for. Exhibit A, Agreement
Section 2.1.
7. The Agreement provides a means for CG&E to engage in purchases and
sales of services with Non-Utilities and requires the providing
company to be compensated at full cost consistent with the
requirements of PUHCA. Exhibit A, Agreement Section 3.1.
8. The Agreement sets forth standards of performance and limitations
of liability as between the CG&E and the Non-Utility Companies, which
are adequate to protect ratepayers. Exhibit A, Agreement Article 4.
9. The Agreement prohibits CG&E from using SEC approval of this
Agreement to overturn, reverse, set aside, change or enjoin, a
decision or order of this Commission pertaining to any expense,
charge, cost or allocation incurred or accrued by CG&E. Exhibit A,
Agreement Section 5.1.
WHEREFORE, The Cincinnati Gas & Electric Company requests that this
Commission issue an order finding that:
(1) Applicant is a public utility as defined in Section 4905.02, Ohio
Revised Code, and as such is subject to the jurisdiction of this
Commission;
(2) the Application is filed pursuant to the Stipulation approved
by the Commission in Case Nos. 91-410-EL-AIR (April 14, 1994);
and
(3) the Agreement in Exhibit A should be approved; and ordering that:
1. The Cincinnati Gas & Electric Company is hereby authorized to
enter into the Agreement filed as Exhibit A to the Application.
Respectfully submitted,
/s/ David T. Musselman, Trial Attorney
James B. Gainer, Associate General
Counsel
The Cincinnati Gas & Electric Company
139 E. Fourth Street, Suite 25 AT II
Cincinnati, Ohio 45202
(513) 287-3020
Attorneys for The Cincinnati Gas &
Electric Company
CERTIFICATE SERVICE
I hereby certify that a copy of the foregoing Application was
served by first class U.S. Mail, postage prepaid on Robert Tongren, Ohio
Consumers' Counsel, 77 S. High Street, Columbus, Ohio 43266-0550 this
21st day of August 1998.
/s/David T. Musselman
Exhibit D-2
January 25, 1999
U.S. Securities and Exchange Commission
Division of Investment Management
Office of Public Utility Regulation
Attention: Catherine A. Fisher, Assistant Director
450 Fifth Street, NW
Washington, DC 20549
Re: The Cincinnati Gas & Electric Company Utility-Nonutility Services
Agreement, SEC File No. 70-
Dear Ms. Fisher:
By a vote on January 20, 1999, the Public Utilities Commission of
Ohio (PUCO) has authorized me to inform you that, pursuant to procedures
agreed to in the 1994 merger which created Cinergy Corp., The Cincinnati
Gas & Electric Company has filed a proposed Utility-Nonutility Services
Agreement for PUCO review. The PUCO understands that CG&E will be filing
the Services Agreement, in the form attached as Exhibit A hereto, with
the SEC shortly for approval under the Public Utility Holding Company Act
of 1935. 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.
Respectfully submitted,
/s/Thomas W. McNamee
Assistant Attorney General
Public Utilities Section
180 E. Broad St., 7th Floor
Columbus, OH 43215
(614) 466-4396
(614) 644-8764
cc: James B. Gainer, Associate General Counsel, Cinergy Corp.
Enclosure
Exhibit D-3
August 21, 1998
Robert C. Glazier Anne E. Becker
Utilities Director Indiana Utility Consumer Counselor
Indiana Utility Regulatory Comm. Indiana Government Center North
302 West Washington Street 100 N. Senate Avenue, N501
Room E306 Indianapolis, IN 46204
Indiana Government Center South
Indianapolis, IN 46204
Dear Mr. Glazier and Ms. Becker:
In accordance with PSI Energy's Affiliate Guidelines, PSI is submitting
the enclosed affiliate contract which is required to be filed with and
approved by the SEC. Contemporaneously, PSI is in the process of
publishing notice of its intent to file this affiliate contract in two
newspapers of general circulation in Marion and Hendricks Counties,
Indiana. A copy of the public notice is also enclosed for your
information.
The enclosed affiliate contract provides for the provision of a
non-exclusive range of services by PSI to non-utility affiliates, and
vice versa. In connection with the provision of services, the contract
also provides for loans of employees. The contract specifically excludes
the sales or other transfers of assets, electricity, coal, natural gas, or
other goods. In addition, the contract does not cover affiliate
transactions involving services to or from Exempt Telecommunications
Companies (ETCs) or Foreign Utility Companies (FUCOs).
The contract sets out a specific process for service requests, to ensure
that requests are tracked and properly accounted for. Compensation for
services provided under the contract will be at full cost, as computed in
accordance with Rules 90 and 91 under PUHCA.
I will be calling you soon to discuss this contract. In the interim,
feel free to call me if you have any questions.
Sincerely,
/s/ Kay E. Pashos
Senior Counsel
Cinergy Corp.
Enc.
Exhibit D-4
December 21, 1998
Robert C. Glazier
Utilities Director
Indiana Utility Regulatory Commission
302 West Washington Street
Room E306
Indiana Government Center South
Indianapolis, IN 46204
Re: PSI Energy Affiliate Services Agreement, Submitted to IURC Staff on
8/21/98
Dear Mr. Glazier:
This letter will confirm that, in connection with the proposed PSI Energy
Services Agreement, PSI Energy commits that, should it 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.
This letter will also confirm that, subject to the above commitment, the
IURC Staff does not have an objection to the PSI Energy Affiliate
Services Agreement, and that PSI may notify the SEC of the IURC Staff's
position.
Contemporaneous with the filing of this Agreement with the SEC, PSI
intends to file the Agreement with the IURC, in accordance with Ind. Code
8-1-2-49 and PSI's Affiliate Guidelines.
If you should have any further questions concerning this Agreement,
please contact Kay Pashos in our Legal Department.
Thank you for your assistance.
Sincerely,
/s/ John M. Mutz
President, PSI Energy, Inc.
cc: Kay Pashos
Exhibit D-5
January 14, 1999
Kay Pashos
Senior Counsel
PSI Energy, Inc.
1000 East Main Street
Plainfield, IN 46168
RE: PSI Energy, Inc. Affiliate Guidelines Services Agreement
Dear Kay:
The Commission's staff has completed its preliminary review of the
affiliate contract entitled "Services Agreement" provided to the staff on
August 21, 1998 by PSI Energy, and the contract is now cleared for filing
with the IURC and the SEC in accordance with PSI Energy's Affiliate
Guidelines (see section 5 of PSI's Retail Electric Tariff). The staff
has cleared this contract for filing based upon its review of the
contract in reliance upon the commitment made by PSI Energy in a letter to
me dated December 21, 1998, signed by PSI Energy's President, John Mutz.
Very truly yours,
/s/Robert C. Glazier
Director of Utilities
Indiana Utility Regulatory Commission
EXHIBIT F-1
February 4, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Cinergy Corp./ File No. 70-
Ladies and Gentlemen:
I am Associate General Counsel of Cinergy Corp. ("Cinergy"), a
Delaware corporation and registered holding company under the Public
Utility Holding Company Act of 1935, as amended (the "Act"), and I am
filing this opinion, pursuant to the rules and regulations of the
Commission under the Act, as an exhibit to Cinergy's Declaration on Form
U-1 which is being filed concurrently herewith (such Form U-1, including as
it may hereinafter be amended, the "Application").
In the Application, Cinergy requests Commission authorization with
respect to certain proposed service agreements the parties to which will
be Cinergy's domestic public utility subsidiaries and their domestic
nonutility affiliates (excluding exempt telecommunications companies).
In connection with this opinion, I have reviewed the Application
and such exhibits, documents, agreements, instruments and/or other
materials as I consider necessary or advisable.
I am a member of the Bar of the State of Ohio and do not purport to
be an expert on the laws of any other jurisdiction. I have examined the
Delaware General Corporation Law ("DGCL") to the extent necessary to
express the opinions set forth herein. Such opinions are limited solely
to matters governed by the laws of the State of Ohio and the DGCL.
Based upon and subject to the foregoing, and assuming that the
proposed transactions are carried out in accordance with (I) the
Application and the Commission's order(s) to be issued with respect
thereto and (ii) all other requisite approvals and authorizations,
corporate or otherwise, I am of the opinion that:
All state laws applicable to the proposed transactions will have
been complied with.
The consummation of the proposed transactions will not violate the
legal rights of the holders of any securities issued by
Cinergy or any associate company thereof.
I hereby consent to the use of this opinion in connection with the
Application.
Very truly yours,
/s/Jerome A. Vennemann
Associate General Counsel
Exhibit G
FORM OF PUBLIC NOTICE
Cinergy Corp. 70-
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 public utility subsidiaries to enter into
service agreements with their domestic nonutility affiliates under which,
subject to the terms and conditions thereof, the utility subsidiaries may
provide a range of services to the nonutility affiliates, and vice versa,
priced at "cost" as determined pursuant to Rule 91 under the Act. Cinergy
requests authorization for each of its utility subsidiaries to enter into a
separate but substantially similar contract ("Service Agreement" or
"Agreement") with all of Cinergy's 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").
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,/1/ 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./2/
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./3/ 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./4/, 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;/5/ 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./6/
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
ENDNOTES
/1/ 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).
/2/ 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).
/3/ 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.
/4/ Cinergy Solutions was formed pursuant to HCAR No. 35-26662, February
7, 1997.
/5/ Cinergy has pending a request in File No. 70-8427 for an order
releasing Commission jurisdiction over Cinergy's continued retention of
this entity.
/6/ 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.
Exhibit H
CINERGY CORP. CONSOLIDATED CAPITALIZATION
ACTUAL
DECEMBER 31, 1998
$ Millions Percentage
Common Stock Equity
Common stock $ 2
Paid-in capital 1,595
Retained earnings 945
Accumulated other comprehensive income (loss) (1)
Total common stock equity 2,541 40.5%
Cumulative Preferred Stock of Subsidiaries
Not subject to mandatory redemption 93 1.5%
Debt
Long-term debt 2,554
Long-term debt due within one year 136
Notes payable and other short-term
obligations 954
Total debt 3,644 58.0%
Total capitalization $ 6,278 100.0%
The following table sets forth Cinergy's pro forma capitalization, assuming
that the entire amount of non-recourse debt applicable to Exempt Entities
which is attributable to Cinergy's ownership interest ($1.2 billion) is
consolidated. It should be noted that such consolidation is inconsistent
with the requirements of GAAP, and is being provided to the staff of the
Securities and Exchange Commission solely at its request.
CINERGY CORP. CONSOLIDATED CAPITALIZATION
PRO FORMA
DECEMBER 31, 1998
$ Millions Percentage
Common Stock Equity
Common stock $ 2
Paid-in capital 1,595
Retained earnings 945
Accumulated other comprehensive income (loss) (1)
Total common stock equity 2,541 34.2 %
Cumulative Preferred Stock of Subsidiaries
Not subject to mandatory redemption 93 1.3 %
Debt
Long-term debt 3,513
Long-term debt due within one year 138
Notes payable and other short-term
obligations 1,151
Total debt 4,802 64.5 %
Total capitalization $ 7,436 100.0 %
Exhibit I
CINERGY CORP.
DOMESTIC NON-UTILITY
SUBSIDIARIES AS OF 12/31/98/1/
Cinergy Corp. (Delaware, 06/30/1993)
Cinergy Investments, Inc. (Delaware, 10/24/1994)/2/
Cinergy-Cadence, Inc. (Indiana, 12/27/1989; formerly PSI Power
Resource Operations, Inc.)
Cadence Network LLC (Delaware, 9/3/1997)/3/
Cinergy Capital & Trading, Inc. (Indiana, 10/8/1992; formerly
Wholesale Power Services, Inc.)
CinCap IV, LLC (Delaware, 12/3/1997)/4/
CinCap V, LLC (Delaware, 7/21/98)
CinCap VI, LLC (Delaware, 9/18/98)
CinCap VII, LLC (Delaware, 12/2/98)
CinCap VIII, LLC (Delaware, 12/2/98)
Westwood Operating Company, LLC (Delaware, 10/2/98)
CinPower I, LLC (Delaware, 6/12/1998)
Producers Energy Marketing, LLC (Delaware, 10/27/95)
Cinergy Communications, Inc. (Delaware, 9/20/1996)
Cinergy Engineering, Inc. (Ohio, 3/28/1997)
Cinergy-Centrus, Inc. (Delaware, 4/23/98; formerly Cinergy-Ideon,
Inc.)
Centrus, LLP (Indiana, 7/7/1998)/5/
Cinergy-Centrus Communications, Inc. (Delaware, 7/17/98)
Cinergy Resources, Inc. (Delaware, 1/10/1994; formerly CG&E
Resource Marketing, Inc.)
Cinergy Solutions, Inc. (Delaware, 2/11/1997)
Cinergy Business Solutions, Inc. (Delaware, 4/6/98)
Cinergy Customer Care, Inc. (Delaware, 8/21/98)
Cinergy Solutions of Tuscola, Inc. (Delaware, 10/13/98)
Energy Equipment Leasing LLC (Delaware, 11/12/98)/8/
Trigen-Cinergy Solutions LLC (Delaware, 2/18/1997)/6/
Trigen-Cinergy Solutions of Baltimore LLC (Delaware,
11/10/98)/8/
Trigen-Cinergy Solutions of Boca Raton, LLC (Delaware
9/4/98)/9/
Trigen-Cinergy Solutions of Cincinnati LLC (Ohio,
8/29/1997)/7/
Trigen-Cinergy Solutions of Illinois L.L.C. (Delaware,
4/17/1997)/8/
Trigen-Cinergy Solutions of Orlando LLC (Delaware,
6/12/1998)/9/
Trigen-Cinergy Solutions of St. Paul LLC (Delaware
8/13/98)/8/
Trigen-Cinergy Solutions of Tuscola, LLC (Delaware,
8/21/98)/8/
Cinergy Supply Network, Inc. (Delaware, 1/14/98)
Reliant Services, LLC (Indiana, 6/25/98)/10/
Cinergy Technology, Inc. (Indiana, 12/12/1991; formerly PSI
Environmental Corp.)
Enertech Associates, Inc. (Ohio, 10/26/1992)/11/
ENDNOTES
/1/ Excludes nonutility subsidiaries of CG&E and PSI. Parent-subsidiary
affiliation shown by indentation.
/2/ Some of the subsidiaries listed are not currently engaged in active
business operations.
/3/ Jointly owned 33-1/3% each with Progress Holdings, Inc. and New
Century-Cadence, Inc.
/4/ Cinergy Capital & Trading owns 10% of this entity; the remaining equity
is owned by nonaffiliates.
/5/ Jointly owned 33-1/3% each with New Century-Centrus, Inc. and Progress
Centrus, Inc.
/6/ Jointly owned 50% each with Trigen Solutions, Inc., a subsidiary of
Trigen Energy Corporation.
/7/ Effective August 29, 1997, the former Cinergy Cooling Corp. was merged
with and into Trigen-Cinergy Solutions of Cincinnati LLC, with said LLC
being the surviving company jointly owned 51% by Cinergy Solutions, Inc.
and 49% by Trigen Solutions, Inc.
/8/ Jointly owned 49% by Cinergy Solutions, Inc. and 51% by Trigen
Solutions, Inc.
/9/ Jointly owned 51% by Cinergy Solutions, Inc. and 49% by Trigen
Solutions, Inc.
/10/ Jointly owned 50% each with IGC Energy, Inc.
/11/ Formerly Power International, Inc. and formerly Enertech Associates
International, Inc.
