-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MFLPcE/UemEcMTj5uFmPJp0d/bPbaekwq144XQn9zjMF/3+YEnWENOcTEjMZNNh/ 3rqWIqvxmZAfp/Ereo7ZYQ== 0000899652-04-000109.txt : 20040513 0000899652-04-000109.hdr.sgml : 20040513 20040513150257 ACCESSION NUMBER: 0000899652-04-000109 CONFORMED SUBMISSION TYPE: U-1 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20040513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CINERGY CORP CENTRAL INDEX KEY: 0000899652 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 311385023 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U-1 SEC ACT: 1935 Act SEC FILE NUMBER: 070-10228 FILM NUMBER: 04802593 BUSINESS ADDRESS: STREET 1: 139 E FOURTH ST CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5132872644 MAIL ADDRESS: STREET 1: 139 E FOURTH STREET STREET 2: P.O BOX 960 CITY: CINCINATI STATE: OH ZIP: 45202 U-1 1 u1.txt As filed with the Securities and Exchange Commission on May 13, 2004. File No. 070-______ SECURITIES AND EXCHANGE COMMISSION 450 FIFTH STREET WASHINGTON, D.C. 20549 ------------------------------------------ FORM U-1 APPLICATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 -------------------------------------------- CINERGY SERVICES, INC. 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) Lynn J. Good Vice President and Controller Cinergy Corp. 139 East Fourth Street Cincinnati, Ohio 45202 (Names and address of agent for service) The Commission is requested to mail copies of all orders and notices and otherwise direct any other communications in connection with this matter to: George Dwight II Barry F. Blackwell Associate General Counsel Director, Management Reporting Cinergy Corp & Cost Accounting 139 E. 4th Str., 25AT2 Cinergy Corp. Cincinnati, Ohio 45202 1000 East Main Str. 513-287-2643 Plainfield, Indiana 46168 513-287-3810 (f) 317-838-6993 gdwight@cinergy.com 317-838-4092 (f) - ------------------- bblackwell@cinergy.com William C. Weeden Skadden Arps Slate Meagher & Flom Washington, D.C. 20005 202-371-7877 (ph) 202-371-7012 (f) wweeden@skadden.com ------------------- Item 1. Description of Proposed Transactions A. Introduction Cinergy Services, Inc. ("Cinergy Services"), a service company subsidiary of Cinergy Corp. ("Cinergy"), a registered holding company under the Public Utility Holding Company Act of 1935, as amended (the "Act"), hereby requests a waiver with respect to Rule 93 under the Act and the Commission's Uniform System of Accounts for Mutual Service Companies and Subsidiary Service Companies promulgated thereunder, 17 C.F.R. ss. 256 (the "SEC System of Accounts"), so that Cinergy Services may utilize the chart of accounts ("FERC Chart of Accounts") specified in the Federal Energy Regulatory Commission's ("FERC") Uniform System of Accounts Prescribed for Public Utilities and Licensees Subject to Provisions of the Federal Power Act, 18 C.F.R. ss. 101 ("FERC System of Accounts"), in lieu of utilizing the respective accounts ("SEC Chart of Accounts") specified in the SEC System of Accounts. Cinergy Services also requests authorization to amend its existing service agreements to make conforming textual revisions. Except to the limited extent described in the preceding paragraph, Cinergy Services will continue fully to comply with the requirements of Rule 93 and the SEC System of Accounts as well as all other applicable requirements under the Act. As explained below, Cinergy Services' proposed adoption of the FERC Chart of Accounts -- which contain additional accounts relevant to Cinergy Services' functions not included within the SEC Chart of Accounts -- will permit the Cinergy holding company system to realize process improvements and efficiencies in its accounting system. The Commission has granted similar authority with respect to numerous other registered holding company systems.1 B. Cinergy Services; Reasons for Proposed Change Cinergy Services was formed and received Commission authorization to act as a service company subsidiary for the Cinergy holding company system in connection with the merger that created that holding company system (the "Cinergy System" or "System").2 Cinergy Services renders its services pursuant to separate Commission-approved service agreements with Cinergy's utility and nonutility subsidiaries, respectively (the "Utility Services Agreement" and the "Nonutility Services Agreement;" collectively, the "Service Agreements").3 The Cinergy System intends to implement a new accounting and reporting system in early 2005. In connection therewith, the multiple charts of accounts now in use throughout the System would be consolidated into a single chart of accounts. Currently, the System maintains multiple charts of account, including the FERC Chart of Accounts (for certain of Cinergy's FERC-jurisdictional companies) and the SEC Chart of Accounts (for Cinergy Services). The decision to consolidate the various chart of accounts into a single chart of accounts reflects Cinergy's view of industry "best practices" and is expected to yield a number of System benefits, including (i) internal process improvements, (ii) standardization and streamlining of processes, and (iii) enhancement of reporting system performance. The SEC System of Accounts requires that mutual service companies and subsidiary service companies (collectively, "service companies") use the SEC Chart of Accounts for record keeping and reporting. For example, the SEC System of Accounts requires all operating and maintenance expenses to be recorded in accounts 920 to 932 (Administrative and General ("A&G") Expenses). The FERC System of Accounts requires that public utilities subject to the jurisdiction of the FERC and licensees holding licenses issued by the FERC use the FERC Chart of Accounts for record keeping and reporting. While the FERC System of Accounts generally includes the same A&G accounts as the SEC, the FERC Chart of Accounts is much broader, including, for example, "functionalized" operation and maintenance accounts (e.g., accounts 500 to 515 (Electric Production - Steam), 560 to 574 (Electric Transmission), 580 to 598 (Electric Distribution), 870 to 894 (Gas Distribution), 901 to 905(Customer Accounts), 906 to 910 (Customer Service), 911 to 917 (Sales), etc.). Service companies traditionally provided administrative and support services, the costs of which would fall into the category of A&G expenses. However, based on the economies and efficiencies to be gained by pooling various functions into one entity, service companies today often provide other non-A&G services. In the present case, Cinergy Services provides its associate companies both administrative services (e.g., executive, accounting, legal, etc.) and non-administrative services (e.g., customer relations (including call center, billing, etc.) and engineering (including production, transmission and distribution)). Due to the requirements of the SEC System of Accounts (to record and report costs in A&G accounts for service companies) and those of the FERC System of Accounts (to record and report functionalized costs in non-A&G accounts for FERC-jurisdictional entities covered thereby), the Cinergy System currently maintains a duplicative set of account rollup structures in order to facilitate proper reporting for both SEC and FERC purposes. As discussed above, Cinergy Services' proposed utilization of the FERC Chart of Accounts, in replacement of its use of the SEC Chart of Accounts, will enable the Cinergy System, among other benefits, to streamline its accounting processes and reduce multiple accounting system rollup structures. This proposed change is an account-record keeping and reporting presentation change only (no additional functions or costs will be processed through Cinergy Services as a result thereby) and will provide greater transparency in regard to SEC and FERC regulated accounting presentations.4 Included herewith as Exhibit H are examples of the current and proposed account rollup structure for four different types of costs that will be impacted by the proposed change. Reference is also made to Exhibit I for a comparative income statement indicating in illustrative form the changes these examples would have had on Cinergy Services' comparative income statement included in its Form U-13-60 Annual Report for the year ended December 31, 2003. C. Requested Authorization Cinergy Services requests Commission authorization to utilize the FERC Chart of Accounts, instead of the SEC Chart of Accounts, for all purposes for which Cinergy Services would otherwise use the SEC Chart of Accounts (e.g., recording and reporting costs of Cinergy Services' operations) and to that end requests a waiver under Rule 93 and the SEC System of Accounts. Except as noted in the preceding sentence, Cinergy Services will continue fully to comply with the requirements of Rule 93 and the SEC System of Accounts and all other applicable requirements under the Act. Cinergy Services also requests authorization to amend the Service Agreements to make conforming language changes.5 Item 2. Fees, Commissions and Expenses The fees, commissions and expenses paid or incurred, or to be paid or incurred, directly or indirectly, by Cinergy Services or any associate company thereof in connection with the proposed transactions are estimated not to exceed approximately $3,000, consisting chiefly of fees for outside legal counsel. Item 3. Applicable Statutory Provisions Section 13 of the Act and Rules 54 and 93 thereunder are 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 exempt wholesale generator ("EWG") or a foreign utility company ("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 if paragraphs (a), (b) and (c) of Rule 53 are satisfied. Cinergy's aggregate investment in EWGs and FUCOs currently exceeds the "safe harbor" afforded by Rule 53(a). At March 31, 2004, Cinergy's "aggregate investment" (as defined in Rule 53(a)(1)) was approximately $818 million. At March 31, 2004, Cinergy's "consolidated retained earnings" (also as defined in Rule 53(a)(1)) were approximately $1,536 million. Accordingly, at March 31, 2004, Cinergy's aggregate investment exceeded 50% of its consolidated earnings, the "safe harbor" limitation contained in Rule 53(a). However, the Commission issued an order in May 2001 (HCAR No. 27400, May 18, 2001 (the "May 2001 Order")) authorizing Cinergy to increase its aggregate investment to an amount equal to the sum of (1) 100% of consolidated retained earnings plus (2) $2,000,000,000, excluding certain restructuring investments as provided therein.6 Accordingly, at March 31, 2004, Cinergy had all requisite authority under the Act for an aggregate investment totaling $3,536 million. Therefore, although Cinergy's aggregate investment at such date exceeded the 50% "safe harbor" limitation of Rule 53, it is well within the higher investment level of the May 2001 Order. With respect to capitalization, there has been no material adverse impact on Cinergy's consolidated capitalization resulting from Cinergy's investments in EWGs and FUCOs. At December 31, 2000, the most recent period for which financial statement information was evaluated in the May 2001 Order, Cinergy's consolidated capitalization consisted of 40.4% equity and 59.6% debt. At March 31, 2004, Cinergy's consolidated capitalization consisted of 41.3% equity and 58.7% debt. Further, at December 31, 2003, Cinergy's senior unsecured debt was rated "investment grade" by all the major rating agencies. Under the June 2000 Cinergy Financing Order, Cinergy has committed to maintain a 30% consolidated common equity ratio (subject to certain qualifications), and the proposed transactions will have no adverse impact on Cinergy's ability to meet that commitment. At March 31, 2004, Cinergy's consolidated common equity ratio was 42.0%. Cinergy satisfies all of the other conditions of paragraphs (a) and (b) of Rule 53. With reference to Rule 53(a)(2), Cinergy maintains books and records in conformity with, and otherwise adheres to, the requirements thereof. With reference to Rule 53(a)(3), no more than 2% of the employees of Cinergy's domestic public utility companies render services, at any one time, directly or indirectly, to EWGs or FUCOs in which Cinergy directly or indirectly holds an interest. With reference to Rule 53(a)(4), Cinergy will concurrently provide a copy of this application to each regulator referred to therein, and will otherwise comply with the requirements thereof concerning the furnishing of information. With reference to Rule 53(b), none of the circumstances enumerated in subparagraphs (1), (2) and (3) thereunder have occurred. Item 4. Regulatory Approval No state or federal commission, other than this Commission, has jurisdiction over the proposed transactions.7 Item 5. Procedure Applicant requests that the Commission publish the public notice with respect to this application as soon as practicable and issue an order as soon as practicable following expiration of the public notice period granting and permitting this Application to become effective. Applicant 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-1 Inapplicable B-1 Form of Proposed Amended Utility Service Agreement B-2 Form of Proposed Amended Nonutility Service Agreement C Inapplicable D Inapplicable E Inapplicable F Preliminary opinion of counsel G Form of public notice H Cost Examples I Pro Forma Comparative Income Statement of Cinergy Services (b) Financial Statements - Not applicable Item 7. Information as to Environmental Effects (a) The Commission's action in this matter will not constitute any 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. SIGNATURE Pursuant to the requirements of the Act, the undersigned company has duly caused this application to be signed on its behalf by the undersigned thereunto duly authorized. Dated: May 13, 2004 CINERGY SERVICES, INC. By: /s/Lynn J. Good Lynn J. Good Vice President and Controller - -------- 1 See Energy East Corp., et al., HCAR No. 27729, Sept. 30, 2003; Great Plains Energy Inc., et al., HCAR No. 27662, March 31, 2003; CP&L Energy, Inc., HCAR No. 27284, Nov. 27, 2004. 2 See Cinergy Corp., HCAR No. 26146, Oct. 21, 1994 (the "Merger Order"). Cinergy directly or indirectly owns all the outstanding common stock of five public utility companies, the most significant of which are PSI Energy, Inc. ("PSI"), an Indiana electric utility, and The Cincinnati Gas & Electric Company ("CG&E"), a combination Ohio electric and gas utility and holding company. PSI and CG&E (including the utility subsidiaries of CG&E, the most significant of which is The Union Light, Heat and Power Company, a Kentucky combination electric and gas utility) collectively provide electric and gas service to approximately 1.6 million retail and wholesale customers in parts of Indiana, Ohio and Kentucky. (One of those public utility subsidiaries, Lawrenceburg Gas Company, is in the process of being sold to a non-affiliate. See File No. 70-10224.) The Cinergy System also includes numerous nonutility subsidiaries engaged in energy-related businesses and other nonutility businesses authorized under the Act, by Commission order or otherwise. 3 The Service Agreements were approved by the Commission in the Merger Order. In 1997, the Commission authorized an amendment to the Nonutility Services Agreement pursuant to which Cinergy Services was authorized to provide an expanded roster of services to nonutility associate companies (see Cinergy Corp., et al., HCAR No. 26662, Feb. 7, 1997). 4 By implementing this change, the Cinergy System's FERC reporting will not change; rather, Cinergy Services' reporting will be modified to include FERC functionalized accounts. 5 Included herewith as Exhibits B-1 and B-2 are proposed forms of the amended Utility and Nonutility Service Agreements (see Section 4.1 of each Agreement, which has been revised to implement the proposed transactions). 6 The May 2001 Order reserved jurisdiction over, and excluded from the aggregate investment limitation described in the text, Cinergy's proposal regarding the potential transfer of CG&E's and PSI's generating assets to one or more EWG affiliates and Cinergy's proposed aggregate investment therein, which would not exceed the net book value of such generating assets at the time of transfer. 7 Pursuant to Section 8-1-2-49 of the Indiana Code (concerning certain contracts between Indiana utilities and affiliates), PSI filed with the Indiana Utility Regulatory Commission ("IURC") the proposed form of amendment to the Utility Service Agreement relating to the proposed transactions. Although the proposed amendment was required to be filed with the IURC before becoming effective, no IURC action to approve the amended contract is required or anticipated. EX-99 2 exhibitg.txt Exhibit G Form of Notice Securities and Exchange Commission (Release No. 35-_________) Cinergy Services, Inc., a Delaware corporation ("Cinergy Services" or "Applicant"), with offices located at 139 East Fourth Street, Cincinnati, Ohio 45202, has filed an application ("Application") with the Commission under Section 13 of the Act and Rules 54 and 93 thereunder. As described below, Cinergy Services requests a waiver with respect to Rule 93 under the Act and the Commission's Uniform System of Accounts for Mutual Service Companies and Subsidiary Service Companies promulgated thereunder, 17 C.F.R. ss. 256 (the "SEC System of Accounts"), so that it may utilize the chart of accounts ("FERC Chart of Accounts") specified in the Federal Energy Regulatory Commission's ("FERC") Uniform System of Accounts Prescribed for Public Utilities and Licensees Subject to Provisions of the Federal Power Act, 18 C.F.R. ss. 101 ("FERC System of Accounts"), in lieu of utilizing the respective accounts ("SEC Chart of Accounts") specified in the SEC System of Accounts. Cinergy Services also requests authorization to amend its existing service agreements to make conforming textual revisions. 1. Background Cinergy Services was formed and received Commission authorization to act as a service company subsidiary for the Cinergy Corp. ("Cinergy") holding company system in connection with the merger that created that holding company system (the "Cinergy System" or "System").1 Cinergy Services renders its services pursuant to separate Commission-approved service agreements with Cinergy's utility and nonutility subsidiaries, respectively (the "Utility Services Agreement" and the "Nonutility Services Agreement;" collectively, the "Service Agreements").2 Applicant states that the Cinergy System intends to implement a new accounting and reporting system in early 2005. In connection therewith, the multiple charts of accounts now in use throughout the System would be consolidated into a single chart of accounts. Currently, the System maintains multiple charts of account, including the FERC Chart of Accounts (for certain of Cinergy's FERC-jurisdictional companies) and the SEC Chart of Accounts (for Cinergy Services). The decision to consolidate the various chart of accounts into a single chart of accounts reflects Cinergy's view of industry "best practices" and is expected to yield a number of System benefits, including (i) internal process improvements, (ii) standardization and streamlining of processes, and (iii) enhancement of reporting system performance. The SEC System of Accounts requires that mutual service companies and subsidiary service companies (collectively, "service companies") use the SEC Chart of Accounts for record keeping and reporting. For example, the SEC System of Accounts requires all operating and maintenance expenses to be recorded in accounts 920 to 932 (Administrative and General ("A&G") Expenses). The FERC System of Accounts requires that public utilities subject to the jurisdiction of the FERC and licensees holding licenses issued by the FERC use the FERC Chart of Accounts for record keeping and reporting. While the FERC System of Accounts generally includes the same A&G accounts as the SEC, the FERC Chart of Accounts is much broader, including, for example, "functionalized" operation and maintenance accounts (e.g., accounts 500 to 515 (Electric Production - Steam), 560 to 574 (Electric Transmission), 580 to 598 (Electric Distribution), 870 to 894 (Gas Distribution), 901 to 905(Customer Accounts), 906 to 910 (Customer Service), 911 to 917 (Sales), etc.). According to Applicant, service companies traditionally provided administrative and support services, the costs of which would fall into the category of A&G expenses. However, based on the economies and efficiencies to be gained by pooling various functions into one entity, service companies today often provide other non-A&G services. In the present case, Cinergy Services provides its associate companies both administrative services (e.g., executive, accounting, legal, etc.) and non-administrative services (e.g., customer relations (including call center, billing, etc.) and engineering (including production, transmission and distribution)). Due to the requirements of the SEC System of Accounts (to record and report costs in A&G accounts for service companies) and those of the FERC System of Accounts (to record and report functionalized costs in non-A&G accounts for FERC-jurisdictional entities covered thereby), the Cinergy System currently maintains a duplicative set of account rollup structures in order to facilitate proper reporting for both SEC and FERC purposes. As noted above, Cinergy Services' proposed utilization of the FERC Chart of Accounts, in replacement of its use of the SEC Chart of Accounts, is intended to enable the Cinergy System, among other benefits, to streamline its accounting processes and reduce multiple accounting system rollup structures. Applicant observes that this proposed change is an account-record keeping and reporting presentation change only (no additional functions or costs will be processed through Cinergy Services as a result thereby) and will provide greater transparency in regard to SEC and FERC regulated accounting presentations.3 2. Requested Authorization; Etc. Cinergy Services requests Commission authorization to utilize the FERC Chart of Accounts, instead of the SEC Chart of Accounts, for all purposes for which Cinergy Services would otherwise use the SEC Chart of Accounts (e.g., recording and reporting costs of Cinergy Services' operations) and to that end requests a waiver under Rule 93 and the SEC System of Accounts. Except as noted in the preceding sentence, Cinergy Services will continue fully to comply with the requirements of Rule 93 and the SEC System of Accounts and all other applicable requirements under the Act. Cinergy Services also requests authorization to amend the Service Agreements to make conforming language changes.4 The fees, commissions and expenses paid or incurred, or to be paid or incurred, directly or indirectly, by Applicant or any associate company thereof in connection with the proposed transactions are estimated not to exceed approximately $3,000, consisting chiefly of fees for outside legal counsel. No state or federal commission, other than this Commission, has jurisdiction over the proposed transactions.5 For the Commission, by the Division of Investment Management, pursuant to delegated authority. - -------- 1 See Cinergy Corp., HCAR No. 26146, Oct. 21, 1994 (the "Merger Order"). Cinergy directly or indirectly owns all the outstanding common stock of five public utility companies, the most significant of which are PSI Energy, Inc. ("PSI"), an Indiana electric utility, and The Cincinnati Gas & Electric Company ("CG&E"), a combination Ohio electric and gas utility and holding company. PSI and CG&E (including the utility subsidiaries of CG&E, the most significant of which is The Union Light, Heat and Power Company, a Kentucky combination electric and gas utility) collectively provide electric and gas service to approximately 1.6 million retail and wholesale customers in parts of Indiana, Ohio and Kentucky. (One of those public utility subsidiaries, Lawrenceburg Gas Company, is in the process of being sold to a non-affiliate. See File No. 70-10224.) The Cinergy System also includes numerous nonutility subsidiaries engaged in energy-related businesses and other nonutility businesses authorized under the Act, by Commission order or otherwise. 2 The Service Agreements were approved by the Commission in the Merger Order. In 1997, the Commission authorized an amendment to the Nonutility Services Agreement pursuant to which Cinergy Services was authorized to provide an expanded roster of services to nonutility associate companies (see Cinergy Corp., et al., HCAR No. 26662, Feb. 7, 1997). 3 By implementing this change, the Cinergy System's FERC reporting will not change; rather, Cinergy Services' reporting will be modified to include FERC functionalized accounts. 4 Included herewith as Exhibits B-1 and B-2 are proposed forms of the amended Utility and Nonutility Service Agreements (see Section 4.1 of each Agreement, which has been revised to implement the proposed transactions). 5 Applicant states that pursuant to Section 8-1-2-49 of the Indiana Code (concerning certain contracts between Indiana utilities and affiliates), PSI filed with the Indiana Utility Regulatory Commission ("IURC") the proposed form of amendment to the Utility Service Agreement relating to the proposed transactions. Although the proposed amendment was required to be filed with the IURC before becoming effective, Applicant further states that no IURC action to approve the amended contract is required or anticipated. EX-99 3 exhibitb2.txt Exhibit B-2 NONUTILITY SERVICE AGREEMENT This Service Agreement (the "Service Agreement"), amended and restated effective as of ___________ 2004, is by and among Cinergy Corp. ("Cinergy"), Cinergy Services, Inc., a service company subsidiary of Cinergy (the "Service Company"), and the other companies listed on the signature pages hereto (each such other company, together with Cinergy Corp., a "Client Company", and collectively, the "Client Companies"). WITNESSETH WHEREAS, the Securities and Exchange Commission (the "SEC") has approved and authorized as meeting the requirements of Section 13(b) of the Public Utility Holding Company Act of 1935, as amended (the "Act"), the organization and conduct of the business of the Service Company in accordance herewith, as a subsidiary service company of Cinergy; and WHEREAS, the Service Company and the then-existing Client Companies executed the original version of the Service Agreement on October 20, 1995, retroactive to October 25, 1994, pursuant to which the Service Company agrees to provide and the Client Companies agree to accept and pay for various services as provided herein determined in accordance with applicable rules and regulations under the Act, which require the Service Company to fairly and equitably allocate costs among all associate companies to which it renders services, including the Client Companies and other associate companies which are not a party to this Service Agreement; and WHEREAS, the SEC issued an order under the Act on February 7, 1997, in File No. 70-8933 (Release No. 35-26662) authorizing, among other things, an amendment to this Service Agreement solely for the purpose of replacing Appendix A thereto as then in effect with the superseding version thereof annexed hereto (which superseding version provides, among other things, for a broader range of services to be made available from the Service Company to the Client Companies), and following issuance of such order, the Service Company and the Client Companies executed a corresponding amendment and restatement of the Service Agreement; WHEREAS, the parties hereto desire to further amend and restate the Service Agreement such that, subject to receipt of all applicable regulatory approvals, all accounts and records of the Service Company shall continue to be kept in accordance with the General Rules and Regulations promulgated by the SEC pursuant to the Act, except that the Service Company shall be entitled to utilize the chart of accounts prescribed by the Uniform System of Accounts of the Federal Energy Regulatory Commission; and WHEREAS, except as provided in the preceding clause, the parties do not propose to make any other changes to the Service Agreement, which agreement remains in full force and effect as amended and restated hereby. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties to this Service Agreement covenant and agree as follows: ARTICLE I - SERVICES Section 1.1 The Service Company shall furnish to a Client Company, as requested by a Client Company, upon the terms and conditions hereinafter set forth, such of the services described in Appendix A hereto, at such times, for such periods and in such manner as the Client Company may from time to time request and which the Service Company concludes it is equipped to perform. The Service Company shall also provide a Client Company with such special services, in addition to those services described in Appendix A hereto, as may be requested by a Client Company and which the Service Company concludes it is equipped to perform. In supplying such services, the Service Company may arrange, where it deems appropriate, for the services of such experts, consultants, advisers and other persons with necessary qualifications as are required for or pertinent to the rendition of such services. Section 1.2 Each Client Company shall take from the Service Company such of the services described in Section 1.1, and such additional general or special services, whether or not now contemplated, as are requested from time to time by such Client Company and which the Service Company concludes it is equipped to perform. Section 1.3 The services described herein shall be directly assigned, distributed or allocated by activity, project, program, work order or other appropriate basis. A Client Company shall have the right from time to time to amend, alter or rescind any activity, project, program or work order provided that (i) any such amendment or alteration which results in a material change in the scope of the services to be performed or equipment to be provided is agreed to by the Service Company, (ii) the cost for the services covered by the activity, project, program or work order shall include any expense incurred by the Service Company as a direct result of such amendment, alteration or rescission of the activity, project, program or work order, and (iii) no amendment, alteration or rescission of an activity, project, program or work order shall release a Client Company from liability for all costs already incurred by or contracted for by the Service Company pursuant to the activity, project, program or work order, regardless of whether the services associated with such costs have been completed. ARTICLE II - COMPENSATION Section 2.1. As compensation for the services to be rendered hereunder, each Client Company (other than companies exempted in whole or in part from the standards established by Section 13(b) of the Act pursuant to SEC Rule 83 or otherwise ("Cinergy Foreign Associate Companies")) shall pay to the Service Company the cost of such services, determined in accordance with Rule 90 and other applicable rules and regulations under the Act, and each Cinergy Foreign Associate Company shall pay to the Service Company the fair market value of such services, but in any event no less than the cost of such services. Where more than one Client Company is involved in or has received benefits from a service performed, costs will be directly assigned, distributed or allocated, as set forth in Appendix A hereto, between or among such companies on a basis reasonably related to the service performed to the extent reasonably practicable. Section 2.2. The method of assignment, distribution or allocation of costs described in Appendix A shall be subject to review annually, or more frequently if appropriate. Such method of assignment, distribution or allocation of costs may be modified or changed by the Service Company without the necessity of an amendment to this Service Agreement provided that in each instance, costs of all services rendered hereunder shall be fairly and equitably assigned, distributed or allocated, all in accordance with the requirements of the Act and any orders promulgated thereunder. The Service Company shall advise the Client Companies from time to time of any material changes in such method of assignment, distribution or allocation. Section 2.3. The Service Company shall render a monthly statement to each Client Company which shall reflect the billing information necessary to identify the costs charged for that month. By the twentieth (20th) day of each month, each Client Company shall remit to the Service Company all charges billed to it. Section 2.4. It is the intent of this Service Agreement that the payment for services rendered by the Service Company to the Client Companies under this Service Agreement shall cover all the costs of its doing business (less the cost of services provided to affiliated companies not a party to this Service Agreement and to other non-affiliated companies, and credits for miscellaneous income items), including, but not limited to, salaries and wages, office supplies and expenses, outside services employed, property insurance, injuries and damages, employee pensions and benefits, miscellaneous general expenses, rents, maintenance of structures and equipment, depreciation and amortization, profit and compensation for use of capital as permitted by Rule 91 of the SEC under the Act. ARTICLE III - TERM Section 3.1. This Service Agreement shall become effective as of the 25th day of October, 1994, and shall continue in force with respect to a Client Company until terminated by the Service Company with respect to such Client Company or until terminated by unanimous agreement of all Client Companies, in each case upon not less than one year's prior written notice to all other parties. This Service Agreement shall also be subject to termination or modification at any time, without notice, if and to the extent performance under this Service Agreement may conflict with the Act or with any rule, regulation or order of the SEC adopted before or after the date of this Service Agreement. ARTICLE IV - MISCELLANEOUS Section 4.1. All accounts and records of the Service Company shall be kept in accordance with the General Rules and Regulations promulgated by the SEC pursuant to the Act, in particular, the Uniform System of Accounts for Mutual Service Companies and Subsidiary Service Companies, except that the Service Company shall be entitled to utilize the chart of accounts prescribed by the Uniform System of Accounts of the Federal Energy Regulatory Commission. Section 4.2. New direct or indirect non-utility subsidiaries of Cinergy Corp., which may come into existence after the effective date of this Service Agreement, may become additional Client Companies (collectively, the "New Client Companies") subject to this Service Agreement. In addition, the parties hereto shall make such changes in the scope and character of the services to be rendered and the method of assigning, distributing or allocating costs of such services among the Client Companies and the New Client Companies under this Service Agreement as may become necessary. Section 4.3. The Service Company shall permit a Client Company's access to its accounts and records, including the basis and computation of allocations. IN WITNESS WHEREOF, the parties hereto have caused this amended and restated Service Agreement to be executed as of the date and year first above written. BSPE, L.P. (By: BSPE General, LLC its general partner) By: _______________________ Authorized Representative BSPE GENERAL, LLC By________________________ Authorized Representative BSPE HOLDINGS, LLC By:_______________________ Authorized Representative BSPE LIMITED, LLC By: ________________________ Authorized Representative BROWNSVILLE POWER I, LLC By: ________________________ Treasurer CADENCE NETWORK, INC. By__________________________ President, CEO and Treasurer CALEDONIA POWER I, LLC By_____________________________ Treasurer CINCAP IV, LLC By____________________________ Treasurer CINCAP V, LLC By___________________________ Treasurer CINERGY CANADA, INC. By: __________________________ Acting Treasurer CINERGY CAPITAL & TRADING, INC. By___________________________ Treasurer CINERGY-CADENCE, INC. By___________________________ Treasurer CINERGY-CENTRUS, INC. By___________________________ Treasurer CINERGY-CENTRUS COMMUNICATIONS, INC. By: _____________________________ Treasurer CINERGY CORP. By_______________________________ Treasurer CINERGY ENERGY SOLUTIONS, INC. By: _______________________ Treasurer CINERGY EPCOM LLC By_______________________________ Treasurer CINERGY EPCOM COLLEGE PARK LLC By__________________________ Treasurer CINERGY E-SUPPLY NETWORK, LLC By: _________________________ Treasurer CINERGY ENGINEERING, INC. By: __________________________ Treasurer CINERGY GASCO SOLUTIONS, LLC By: __________________________ Treasurer CINERGY GLOBAL CHANDLER HOLDING, INC. By_____________________________ Treasurer CINERGY GLOBAL CHANDLER I, INC. By: ____________________________ Treasurer CINERGY GLOBAL ELY, INC. By_____________________________ Vice President CINERGY GLOBAL FOOTE CREEK IV, INC. By______________________________ President CINERGY GLOBAL HOLDINGS, INC. By______________________________ Vice President CINERGY GLOBAL ONE, INC. By_______________________________ Vice President CINERGY GLOBAL PEETZ TABLE I, INC. By______________________________ Treasurer CINERGY GLOBAL POWER, INC. By______________________________ Treasurer CINERGY GLOBAL POWER SERVICES LIMITED (formerly MPI International Limited) By_______________________________ Assistant Treasurer CINERGY GLOBAL RESOURCES, INC. By: _____________________________ Treasurer CINERGY GLOBAL TRADING LIMITED By: _________________________ Director CINERGY HOLDINGS B. V. By_____________________________ Director CINERGY INVESTMENTS, INC. By: _____________________________ Treasurer CINERGY MARKETING & TRADING, LP (formerly Cinergy Marketing & Trading, LLC) By_____________________________ President CINERGY ONE, INC. By: _____________________________ Treasurer CINERGY ORIGINATION & TRADE, LLC By________________________ Acting Treasurer CINERGY POWER GENERATION SERVICES, LLC By: __________________________ Treasurer CINERGY POWER INVESTMENTS, INC. By: ____________________________ Treasurer CINERGY SERVICES, INC. By_______________________________ Treasurer CINERGY SOLUTIONS, INC. By______________________________ Treasurer CINERGY SOLUTIONS HOLDING COMPANY, INC. (formerly Cinergy Solutions, Inc.) By: ____________________________ Treasurer CINERGY SOLUTIONS OF TUSCOLA, INC. By: _____________________________ Treasurer CINERGY SOLUTIONS PARTNERS, LLC By_______________________________ Treasurer CINERGY SUPPLY NETWORK, INC. By: ____________________________ Treasurer CINERGY TECHNOLOGIES, INC. (formerly Cinergy Ventures Holding Company, Inc.) By: _____________________________ Treasurer CINERGY TECHNOLOGY, INC. By: ______________________________ Treasurer CINERGY TELECOMMUNICATIONS HOLDING CO., INC. (formerly Cinergy Communications, Inc.) By_____________________________ Treasurer CINERGY TRANSPORTATION, LLC By: ___________________________ Treasurer CINERGY TWO, INC. By________________________________ Treasurer CINERGY UK, INC. By: _______________________________ Treasurer CINERGY VENTURES, LLC By: ________________________________ Treasurer CINERGY VENTURES II, LLC By_________________________________ Treasurer CINERGY WHOLESALE ENERGY, INC. By________________________________ Treasurer CINPOWER I, LLC By: ________________________________ Treasurer CINTEC LLC (formerly CinTech LLC) By__________________________ Treasurer CINTEC I LLC (formerly CinTech I LLC) By____________________________ Treasurer CSGP OF SOUTHEAST TEXAS, LLC By: ________________________ Treasurer ENERGY EQUIPMENT LEASING LLC By____________________________ Executive Vice President and Chief Operating Officer EVENT RESOURCES I LLC. (formerly Event Capital I LLC) By: ____________________________ Treasurer GREEN POWER G.P., LLC By: _____________________________ Authorized Representative GREEN POWER HOLDINGS, LLC By: ______________________________ Authorized Representative GREEN POWER LIMITED, LLC By_______________________________ Authorized Representative KO TRANSMISSION CO. By: ________________________________ Treasurer LANSING GRAND RIVER UTILITIES, LLC By: ____________________________ Treasurer LATTICE COMMUNICATIONS, LLC By_______________________________ Treasurer MIDLANDS HYDROCARBONS (BANGLADESH) LIMITED By: ______________________________ Director MORAVSKE TEPLARNY, a.s. By: ________________________________ Chairman of the Board of Directors CINERGY ZAMBIA B.V. (formerly MPII (ZAMBIA) B. V. ) By___________________________________ Director "A" OKLAHOMA ARCADIAN UTILITIES, LLC By__________________________________ Treasurer OWINGS MILLS ENERGY EQUIPMENT LEASING, LLC By: _________________________________ Executive Vice President and Chief Operating Officer RELIANT SERVICES, LLC By___________________________________ Chair CINERGETIKA U/L a.s. (formerly SETUZA energetika, a.s.) By: __________________________________ Chairman of the Board of Directors SHREVEPORT RED RIVER UTILITIES, LLC By: _________________________________ Treasurer SOUTH CONSTRUCTION COMPANY, INC. By: ____________________________ Treasurer SOUTH HOUSTON GREEN POWER, L.P. (formerly Green Power, L.P.) (By: Green Power G.P., LLC its general partner) By______________________________ Authorized Representative ST. PAUL COGENERATION LLC By_______________________________ Treasurer SYNCAP II, LLC By_________________________________ Treasurer TCS-USFOS OF LANSING LLC By_________________________________ Treasurer TRI-STATE IMPROVEMENT CO. By___________________________________ Treasurer TRIGEN-CINERGY SOLUTIONS LLC By: __________________________________ Executive Vice President and Chief Operating Officer TRIGEN-CINERGY SOLUTIONS OF ASHTABULA LLC By: __________________________________ Treasurer CINERGY SOLUTIONS OF BOCA RATON LLC (formerly Trigen-Cinergy Solutions of Boca Raton LLC) By___________________________________ Executive Vice President and Chief Operating Officer CINERGY SOLUTIONS OF CINCINNATI LLC (formerly Trigen-Cinergy Solutions of Cincinnati LLC) By: __________________________________ Executive Vice President and Chief Operating Officer TRIGEN-CINERGY SOLUTIONS OF LANSING LLC By_____________________________________ Treasurer TRIGEN-CINERGY SOLUTIONS OF ORLANDO LLC By________________________________ Executive Vice President and Chief Operating Officer TRIGEN - CINERGY SOLUTIONS OF OWINGS MILLS LLC By__________________________________ Executive Vice President and Chief Operating Officer TRIGEN-CINERGY SOLUTIONS OF ROCHESTER LLC By___________________________________ Treasurer TRIGEN-CINERGY SOLUTIONS OF SILVER GROVE LLC By____________________________________ Treasurer CINERGY SOLUTIONS OF ST PAUL LLC (formerly Trigen-Cinergy Solutions of St. Paul LLC) By: _____________________________________ Executive Vice President and Chief Operating Officer TRIGEN-CINERGY SOLUTIONS OF TUSCOLA LLC By: ______________________________________ Executive Vice President and Chief Operating Officer VESTAR, INC. (formerly Cinergy Business Solutions, Inc.) By: ___________________________________ Treasurer CST LIMITED, LLC By: _________________________________ Acting Treasurer CST GREEN POWER, L.P. By_____________________________________ Acting Treasurer CST GENERAL, LLC By: ________________________________ Acting Treasurer CSGP LIMITED, LLC By: __________________________________ Acting Treasurer CSGP SERVICES, L.P. By__________________________________ Acting Treasurer CSGP GENERAL, LLC By: __________________________________ Acting Treasurer CINERGY SOLUTIONS OF PHILADELPHIA, LLC By: __________________________________ Acting Treasurer TRIGEN-CINERGY SOLUTIONS OF SAN DIEGO, LLC By_____________________________________ Secretary TRIGEN-CINERGY SOLUTIONS OF THE SOUTHEAST LLC By________________________________ Secretary OHIO RIVER VALLEY PROPANE, LLC (formerly Cinergy Propane) By__________________________________ Acting Treasurer CINERGY RETAIL POWER LIMITED, INC. By: __________________________________ Acting Treasurer CINERGY RETAIL POWER GENERAL, INC. By: __________________________________ Acting Treasurer CINERGY RETAIL POWER, L.P. By_____________________________________ Acting Treasurer DELTA TOWNSHIP UTILITIES, LLC By: ________________________________ Secretary CPI ALLOWANCE MANAGEMENT, LLC By: ______________________________ Acting Treasurer CPI INVESTMENTS, LLC By: ________________________________ Acting Treasurer CINERGY LIMITED HOLDINGS, LLC By___________________________________ Acting Treasurer CINERGY GENERAL HOLDINGS, LLC By____________________________________ Acting Treasurer CINERGY RECEIVABLES COMPANY LLC By___________________________________ Secretary CINFUEL RESOURCES, INC. By: _________________________________ Vice President and Comptroller LH1, LLC By: ___________________________________ Vice President and Comptroller Kentucky Data Link, Inc. By____________________________________ President Cinergy Telecommunication Networks - Indiana, Inc. By___________________________________ President Cinergy Telecommunication Networks - Ohio, Inc. By__________________________________ President Cinergy Telecommunication Networks - Kentucky, Inc. By__________________________________ President QCC, Inc. By___________________________________ President Q-Comm Corporation By_________________________________ President OAK MOUNTAIN PRODUCTS, LLC By: _________________________________ Secretary CINERGY SOLUTIONS OPERATING SERVICES OF LANSING, LLC By_____________________________________ Secretary CINERGY SOLUTIONS OPERATING SERVICES OF SHREVEPORT, LLC By: ______________________________ Secretary CINERGY SOLUTIONS OPERATING SERVICES OF OKLAHOMA, LLC By: _________________________________ Secretary CINERGY SOLUTIONS OF NARROWS, LLC By: __________________________________ Assistant Secretary CINERGY SOLUTIONS OF ROCK HILL, LLC By: __________________________________ Assistant Secretary CINERGY SOLUTIONS OF ST. BERNARD, LLC By: _______________________________ Assistant Secretary CINERGY CLIMATE CHANGE INVESTMENTS, LLC By: _______________________________ Assistant Secretary CINERGY BROADBAND, LLC By: _______________________________ Assistant Secretary CINERGY RETAIL SALES, LLC By___________________________________ Assistant Secretary CINERGY SOLUTIONS OF MONACA, LLC By________________________________ Assistant Secretary CINTEC II LLC By________________________________ Assistant Secretary CINERGY MEXICO GENERAL, LLC By: _______________________________ Assistant Secretary CINERGY MEXICO LIMITED, LLC By: _______________________________ Assistant Secretary CINERGY MEXICO HOLDINGS, LP (By: Cinergy Mexico General, LLC its general partner) By: ___________________________________ Assistant Secretary CINERGY MEXICO MARKETING & TRADING, LLC By: ___________________________________ Assistant Secretary CINERGY SOLUTIONS OF SAN DIEGO, INC. (formerly Cinergy Solutions of San Diego, LLC) By: _____________________________________ Assistant Secretary Appendix A to Nonutility Service Agreement DESCRIPTION OF SERVICES AND DETERMINATION OF CHARGES FOR SERVICES I. The Service Company will maintain an accounting system for accumulating all costs on an activity, project, program, work order or other appropriate basis. To the extent practicable, time records of hours worked by Service Company employees will be kept by activity, project, program or work order. Charges for salaries will be determined from such time records and will be computed on the basis of employees' effective hourly rates, including the cost of fringe benefits and payroll taxes. Records of employee-related expenses and other indirect costs will be maintained for each functional group (a "Function") within the Service Company. Where identifiable to a particular activity, project, program or work order, such indirect costs will be directly assigned to such activity, project, program or work order. Where not identifiable to a particular activity, project, program or work order, such indirect costs within a Function will be allocated in relationship to the directly assigned costs of the Function. For purposes of this Appendix A, any costs not directly assigned by the Service Company will be allocated monthly. II. Service Company costs accumulated for each activity, project, program or work order will be directly assigned, distributed or allocated to the Client Companies or other Functions within the Service Company as follows: 1. Costs accumulated in an activity, project, program or work order for services specifically performed for a single Client Company or Function will be directly assigned and charged to such Client Company or Function. 2. Costs accumulated in an activity, project, program or work order for services specifically performed for two or more Client Companies or Functions will be distributed among and charged to such Client Companies or Functions. The appropriate method of distribution will be determined by the Service Company on a case-by-case basis consistent with the nature of the work performed. The distribution method will be provided to each such affected Client Company or Function. 3. Costs accumulated in an activity, project, program or work order for services of a general nature which are applicable to all Client Companies or Functions or to a class or classes of Client Companies or Functions will be allocated among and charged to such Client Companies or Functions by application of one or more of the allocation ratios enumerated in Section III. III. Costs accumulated in an activity, project, program or work order for services of a general nature which are applicable to all Client Companies or Functions or to a class or classes of Client Companies or Functions will be allocated among and charged to such Client Companies or Functions by application of one or more of the following allocation ratios: 1. Revenues: A ratio based on total revenues for the immediately preceding 12 calendar months, the numerator of which is for a Client Company or Service Company Function and the denominator of which is for all Client Companies and/or the Service Company. This ratio will be determined annually or at such time as may be required due to a significant change. 2. Employees. A ratio based on the total number of employees at the end of each month for the immediately preceding 12 calendar months, the numerator of which is for a Client Company or Service Company Function and the denominator of which is for all Client Companies and/or the Service Company. This ratio will be determined annually or at such time as may be required due to a significant change. 3. Construction Expenditures. A ratio based on total construction expenditures for the immediately preceding 12 calendar months, the numerator of which is for a Client Company and the denominator of which is for all Client Companies. This ratio will be determined annually or at such time as may be required due to a significant change. 4. CPU Seconds. A ratio based on the total number of central processing unit seconds expended to execute mainframe computer software applications for the immediately preceding 12 calendar months, the numerator of which is for a Client Company or Service Company Function and the denominator of which is for all Client Companies and/or the Service Company. This ratio will be determined annually or at such time as may be required due to a significant change. IV. A general description of each Function's activities is set forth below. 1. INFORMATION SYSTEMS Provides communications and electronic data processing services. Examples of activities include development and support of mainframe computer software applications; procurement and support of personal computers and related network and software applications; operation of data center; and installation and operation of communications systems. 2. METERS AND TRANSPORTATION Procures and maintains meters, vehicles and similar equipment for Client Companies. Assists Client Companies in rendering purchasing, construction, installation, inspection, maintenance, repair and related services in respect of customer-owned meters, vehicle fleets and similar equipment. 3. HUMAN RESOURCES Establishes and administers policies and supervises compliance with legal requirements in areas of employment, compensation, benefits and employee health and safety. Processes payroll and employee benefit payments. Supervises contract negotiations and relations with labor unions. 4. FACILITIES Operates and maintains office and service buildings. Provides security and housekeeping services for such buildings and procures office furniture and equipment. 5. ACCOUNTING Maintains books and records of Cinergy Corp. and its affiliates, prepares financial and statistical reports, processes payments to vendors, prepares tax filings and supervises compliance with tax and other similar laws and regulations. 6. PUBLIC AFFAIRS Prepares and disseminates information to employees, customers, government officials, communities and media. Provides graphics, reproduction lithography, photography and video services. 7. LEGAL Renders services relating to labor and employment law, litigation, contracts, rates and regulatory affairs, environmental matters, financing, financial reporting, real estate and other legal matters. 8. FINANCE Renders services to Client Companies with respect to investments, financing, cash management, risk management, claims, fire prevention, etc. Prepares reports to SEC, budgets, financial forecasts, economic analyses and other similar finance-related documents. Assists Client Companies in rendering financial-related services to customers, such as development and implementation of "shared savings" arrangements, and in providing financing options to customers (loans, leases, etc.) principally in connection with sales of Client Company goods and services. 9. INTERNAL AUDIT Reviews internal controls and procedures to ensure that assets are safeguarded and that transactions are properly authorized and recorded. 10. INVESTOR RELATIONS Provides communications to investors and financial community, performs transfer agent and shareholder record-keeping functions, administers stock plans and performs stock-related regulatory reporting. 11. STRATEGIC PLANNING Assists in development of business plans; monitoring of trends; gathering and evaluation of information with respect to competitors and customers; evaluation of business opportunities; related strategic matters. 12. EXECUTIVE Provides general administrative and executive management services. 13. ENERGY-RELATED FACILITY MAINTENANCE Assists Client Companies in rendering maintenance and related consulting services in respect of customer-owned utility assets (generation, transmission/transportation and distribution facilities) and other energy-related facilities and equipment, such as cogeneration facilities, fuel systems, chilled/hot water systems, fiber optic/telecommunications facilities, outdoor and street lighting systems, etc. To the extent Client Companies themselves own any such facilities and equipment, such maintenance services may also be provided to any such Client Company. 14. ENGINEERING AND CONSTRUCTION Assists Client Companies in rendering engineering and construction and related consulting services in respect of customer-owned utility assets (generation, transmission/transportation and distribution facilities) and other energy-related facilities and equipment, such as cogeneration facilities, fuel systems, chilled/hot water systems, fiber optic/telecommunications facilities, outdoor and street lighting systems, etc. To the extent Client Companies themselves own any such facilities and equipment, such engineering and construction services may also be provided to any such Client Company. 15. MARKETING AND CUSTOMER RELATIONS Assists Client Companies in designing, implementing and promoting products and services to potential customers and in administering business relationships with existing customers. Activities include assisting Client Companies in connection with (1) advertising, (2) making initial contacts with and designing specific proposals for potential customers; (3) administering business relationships with customers including bill processing and payment collection; and (4) operation of telephone call centers with respect to foregoing matters. 16. MATERIALS MANAGEMENT Provides services in connection with procurement of materials and contract services and management of materials and supply inventories. 17. FUELS Assists Client Companies in procuring fuel supplies (coal, steam, fuel oil, gas, etc.) for customers and, where applicable, Client Companies themselves. 18. ENVIRONMENTAL AFFAIRS Assists Client Companies in providing energy-related environmental services (compliance, studies, testing, licensing, monitoring, employee training, etc.) to customers. Where applicable, such services also provided to Client Companies themselves. 19. RATES Assists Client Companies in connection with customer rate negotiations and risk analysis with respect to utility service. 20. RIGHTS OF WAY Assists in purchase/sale, surveying and recording of interests in real estate, both for Client Companies themselves and customers thereof. 21. ENERGY-RELATED SYSTEM OPERATIONS Assists Client Companies in rendering operational and related consulting services in respect of customer-owned utility assets (generation, transmission/transportation and distribution facilities) and other energy-related facilities and equipment, such as cogeneration facilities, fuel systems, chilled/hot water systems, fiber optic/telecommunications facilities, outdoor and street lighting systems, etc. To the extent Client Companies themselves own any such facilities and equipment, such operational services may also be provided to any such Client Company. This function also includes assistance with respect to matters relating to disposal of associated by-products. EX-99 4 exhibitb1.txt Exhibit B-1 UTILITY SERVICE AGREEMENT This Amended and Restated Service Agreement is made and entered into as of this _____ day of _______, 2004 (the "Amended Service Agreement") by and among The Cincinnati Gas & Electric Company, an Ohio corporation ("CG&E"), PSI Energy, Inc., an Indiana corporation ("PSI"), The Union Light, Heat and Power Company, a Kentucky corporation ("ULH&P"), Lawrenceburg Gas Company ("LGC"), Miami Power Corporation, an Indiana corporation ("Miami"), and Cinergy Services, Inc., a Delaware corporation and service company (the "Service Company"), and amends and restates in its entirety that certain Service Agreement dated as of March 2, 1994 (the "Original Service Agreement"), by and among such parties . CG&E, PSI, ULH&P, LGC and Miami are sometimes hereinafter referred to individually as a "Client Company" and collectively as the "Client Companies." WITNESSETH WHEREAS, The Securities and Exchange Commission (hereinafter referred to as the "SEC") has approved and authorized as meeting the requirements of Section 13(b) of the Public Utility Holding Company Act of 1935 (hereinafter referred to as the "Act"), the organization and conduct of the business of the Service Company in accordance herewith, as a wholly owned subsidiary service company of Cinergy Corp.; and WHEREAS, the Service Company and the Client Companies have entered into this Service Agreement whereby the Service Company agrees to provide and the Client Companies agree to accept and pay for various services as provided herein at cost, determined in accordance with applicable rules and regulations under the Act, which require the Service Company to fairly and equitably allocate costs among all associate companies to which it renders services, including the Client Companies and other associate companies which are not a party to this Service Agreement; and WHEREAS, any services provided to companies other than Client Companies will be provided for charges not less than the cost of providing such services such that there will be no subsidization of the other associate companies through the Service Company or the Client Companies; and WHEREAS, economies and efficiencies benefiting the Client Companies will result from the performance by Service Company of services as herein provided; and WHEREAS, the parties hereto desire to amend the Original Service Agreement such that, subject to receipt of all applicable regulatory approvals, all accounts and records of the Service Company shall continue to be kept in accordance with the General Rules and Regulations promulgated by the SEC pursuant to the Act, except that the Service Company shall be entitled to utilize the chart of accounts prescribed by the Uniform System of Accounts of the Federal Energy Regulatory Commission; and WHEREAS, except as provided in the preceding clause, the parties do not propose to make any other changes to the Original Service Agreement, which agreement remains in full force and effect as amended and restated hereby. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties to this Amended and Restated Service Agreement covenant and agree as follows: ARTICLE 1 - SERVICES Section 1.1 The Service Company shall furnish to the Client Companies, upon the terms and conditions hereinafter set forth, such of the services described in Appendix A hereto, at such times, for such periods and in such manner as the Client Companies may from time to time request and which the Service Company concludes it is equipped to perform. The Service Company shall also provide Client Companies with such special services, in addition to those services described in Appendix A hereto, as may be requested by a Client Company and which the Service Company concludes it is equipped to perform. In supplying such services, the Service Company may arrange, where it deems appropriate, for the services of such experts, consultants, advisers and other persons with necessary qualifications as are required for or pertinent to the rendition of such services. Section 1.2 Each of the Client Companies shall take from the Service Company such of the services described in Section 1.1 and such additional general or special services, whether or not now contemplated, as are requested from time to time by the Client Companies and which the Service Company concludes it is equipped to perform. Section 1.3 The services described herein shall be directly assigned, distributed or allocated by activity, project, program, work order or other appropriate basis. A Client Company shall have the right from time to time to amend, alter or rescind any activity, project, program or work order provided that (i) any such amendment or alteration which results in a material change in the scope of the services to be performed or equipment to be provided is agreed to by the Service Company, (ii) the cost for the services covered by the activity, project, program or work order shall include any expense incurred by the Service Company as a direct result of such amendment, alteration or rescission of the activity, project, program or work order, and (iii) no amendment, alteration or rescission of an activity, project, program or work order shall release a Client Company from liability for all costs already incurred by or contracted for by the Service Company pursuant to the activity, project, program or work order, regardless of whether the services associated with such costs have been completed. Section 1.4 The Service Company shall maintain a staff trained and experienced in the design, construction, operation, maintenance and management of public utility properties. ARTICLE II - COMPENSATION Section 2.1 As compensation for the services to be rendered hereunder, each of the Client Companies shall pay to the Service Company all costs which reasonably can be identified and related to particular services performed by the Service Company for or on its behalf. Where more than one Client Company is involved in or has received benefits from a service performed, costs will be directly assigned, distributed or allocated, as set forth in Appendix A hereto, between or among such companies on a basis reasonably related to the service performed to the extent reasonably practicable. Section 2.2 The method of assignment, distribution or allocation of costs described in Appendix A shall be subject to review annually, or more frequently if appropriate. Such method of assignment, distribution or allocation of costs may be modified or changed by the Service Company without the necessity of an amendment to this Service Agreement provided that in each instance, all services rendered hereunder shall be at actual cost thereof, fairly and equitably assigned, distributed or allocated, all in accordance with the requirements of the Act and any orders promulgated thereunder. The Service Company shall advise the Client Companies and the Indiana Utility Regulatory Commission (hereinafter referred to as "IURC"), The Public Utilities Commission of Ohio (hereinafter referred to as "PUCO"), the Kentucky Public Service Commission (hereinafter referred to as "KPSC") and the SEC from time to time of any material changes in such method of assignment, distribution or allocation. Section 2.3 The Service Company shall render a monthly statement to each Client Company which shall reflect the billing information necessary to identify the costs charged for that month. By the twentieth (20th) day of each month, each Client Company shall remit to the Service Company all charges billed to it. Section 2.4 It is the intent of this Amended and Restated Service Agreement that the payment for services rendered by the Service Company to the Client Companies shall cover all the costs of its doing business (less the cost of services provided to affiliated companies not a party to this Amended and Restated Service Agreement and to other non-affiliated companies, and credits for any miscellaneous income items), including, but not limited to, salaries and wages, office supplies and expenses, outside services employed, property insurance, injuries and damages, employee pensions and benefits, miscellaneous general expenses, rents, maintenance of structures and equipment, depreciation and amortization and compensation for use of capital as permitted by Rule 91 of the SEC under the Act. ARTICLE III - TERM Section 3.1 This Amended and Restated Service Agreement is entered into as of the date set forth above, and shall continue in force with respect to a Client Company until terminated by the Service Company with respect to such Client Company or until terminated by unanimous agreement of all Client Companies, in each case upon not less than one year's prior written notice to all other parties. This Amended and Restated Service Agreement shall also be subject to termination or modification at any time, without notice, if and to the extent performance under this Amended and Restated Service Agreement may conflict with the Act or with any rule, regulation or order of the SEC adopted before or after the date of this Amended and Restated Service Agreement. ARTICLE IV - MISCELLANEOUS Section 4.1 All accounts and records of the Service Company shall be kept in accordance with the General Rules and Regulations promulgated by the SEC pursuant to the Act, except that the Service Company shall be entitled to utilize the chart of accounts prescribed by the Uniform System of Accounts of the Federal Energy Regulatory Commission. Section 4.2 Each Client Company shall cause all of its direct or indirect domestic utility subsidiaries which may come into existence after the effective date of this Amended and Restated Service Agreement to become an additional Client Company (collectively, the "New Client Companies") subject to this Amended and Restated Service Agreement. In addition, the parties hereto shall make such changes in the scope and character of the services to be rendered and the method of assigning, distributing or allocating costs of such services among the Client Companies and the New Client Companies under this Amended and Restated Service Agreement as may become necessary. Section 4.3 The Service Company shall permit a Client Company's regulatory commission, statutory utility consumer representative, and others as required under applicable rule or regulation access to its accounts and records, including the basis and computation of allocations, necessary for the regulatory commission to review a Client Company's operating results. Section 4.4 All contracts, agreements, or agreements of any kind, required to be filed with and/or approved by the SEC pursuant to the Act as subsequently amended, between The Cincinnati Gas & Electric Company, 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. ss.79b as subsequently amended, shall contain and be conditioned upon the following without modification or alteration: The Cincinnati Gas & Electric Company and Cinergy Corp. will 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 Public Utilities Commission of Ohio which pertains to recovery, disallowance, allowance, deferral, or ratemaking treatment of any expense, charge, cost, or allocation incurred or accrued by The Cincinnati Gas & Electric Company in or as a result of a contract, agreement, arrangement, or transaction with any affiliate, associate, holding, mutual service or subsidiary company on the basis that such expense, charge, cost, or allocation has itself been filed with or approved by the SEC, or was incurred pursuant to a contract, arrangement, agreement, or allocation method which was filed with or approved by the SEC. Failure to include the above language in any such contract, agreement, or arrangement shall render the same voidable at the sole discretion of The Public Utilities Commission of Ohio. Should the above language be altered or invalidated by any Court or governmental agency, such contract, agreement, or arrangements shall be voidable at the sole discretion of The Public Utilities Commission of Ohio. The foregoing is conditioned upon the PUCO supporting through the filing of pleading(s) before the SEC, The Cincinnati Gas & Electric Company's efforts to retain its natural gas system. Section 4.5 All contracts, agreements, or arrangements of any kind, required to be filed with and/or approved by the SEC pursuant to The Act as subsequently amended, between PSI Energy, Inc., 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. ss.79b as subsequently amended, shall contain and be conditioned upon the following without modification or alteration: PSI Energy, Inc., and Cinergy Corp. will 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, allowance, deferral, or ratemaking treatment of any expense, charge, cost, or allocation incurred or accrued by PSI Energy, Inc., in or as a result of a contract, agreement, arrangement, or transaction with any affiliate, associate, holding, mutual service or subsidiary company on the basis that such expense, charge, cost, or allocation has itself been filed with or approved by the SEC, or was incurred pursuant to a contract, arrangement, agreement, or allocation method which was filed with or approved by the SEC. Failure to include the above language in any such contract, agreement, or arrangement shall render the same voidable at the sole discretion of the IURC. Should the above language be altered or invalidated by any Court or governmental agency, such contract, agreement, or arrangements shall be voidable at the sole discretion of the IURC. ARTICLE V - AMENDMENTS Section 5.1 Prior to filing any amendment to this Amended and Restated Service Agreement with SEC, the parties will file with the applicable state commissions, as provided by law or stipulation (hereinafter referred to as the "State Commission") and provide to the Indiana and Ohio Utility Consumer Counselors (and, upon request, to appropriate parties), a copy of such amendment. Section 5.2 In the event that an amendment is finally rejected or disapproved or found to be unreasonable by one or more of the State Commissions prior to filing with the SEC, the amendment will not become effective and the parties will not request SEC approval of the amendment. Section 5.3 In the event that an amendment is rejected or disapproved or found to be unreasonable by one or more of the State Commissions after it has been filed with the SEC but before it has been approved by the SEC, the amendment will be terminated and the parties agree to request withdrawal of the filing. Section 5.4 Notwithstanding Sections 5.2 and 5.3 above, in the event that an amendment is rejected, disapproved or found to be unreasonable by one or more of the State Commissions 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 State Commission's rejection, disapproval or finding of unreasonableness. Upon request by a party, the other parties 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 each affected State Commission after good faith negotiations, then Section 5.2 or 5.3 above, as applicable, will apply. Section 5.5 In the event that all the State Commissions have previously approved an amendment prior to the SEC approval, Section 5.6 below shall not apply. Section 5.6 In the event that an amendment has become effective and is subsequently rejected, disapproved or found to be unreasonable by one or more of the State Commissions, the parties will make a good faith effort to terminate, amend or modify the amendment in a manner which remedies the State Commission's adverse findings without adverse impact on any of the parties. The parties will request to meet with representatives of the State Commissions and make a good faith attempt to resolve any differences in the affected states regarding the subject amendment. If agreement can be reached to terminate, amend or modify the amendment in a manner satisfactory to the contracting parties and to the representatives of each State Commission, the parties shall file such amended contract 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 each affected State Commission, after good faith negotiations, then they shall be under no obligation to further amend the amendment. Section 5.7 Nothing in this Article is intended to amend, modify or alter the authority of the SEC under the Act. IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Service Agreement to be executed as of the date and year first above written. CINERGY SERVICES, INC. By: _____________________ Title THE CINCINNATI GAS & ELECTRIC COMPANY By: _______________________ Title: PSI ENERGY, INC. By: _____________________ Title: THE UNION, LIGHT, HEAT AND POWER COMPANY By: _______________________ Title: ___________ LAWRENCEBURG GAS COMPANY By: ________________ Title: MIAMI POWER CORPORATION By: ______________________ Title: Description of Services and Determination of Charges for Services I. The Service Company will maintain an accounting system for accumulating all costs on an activity, project, program, work order, or other appropriate basis. To the extent practicable, time records of hours worked by Service Company employees will be kept by activity, project, program, or work order. Charges for salaries will be determined from such time records and will be computed on the basis of employees' effective hourly rates, including the cost of fringe benefits and payroll taxes. Records of employee-related expenses and other indirect costs will be maintained for each functional group within the Service Company (hereinafter referred to as "Function"). Where identifiable to a particular activity, project, program, or work order, such indirect costs will be directly assigned to such activity, project, program, or work order. Where not identifiable to a particular activity, project, program, or work order, such indirect costs within a Function will be distributed in relationship to the directly assigned costs of the Function. For purposes of this Appendix A, any costs not directly assigned or distributed by the Service Company will be allocated monthly. II. Service Company costs accumulated for each activity, project, program, or work order will be directly assigned, distributed, or allocated to the Client Companies or other Functions within the Service Company as follows: 1. Costs accumulated in an activity, project, program, or work order for services specifically performed for a single Client Company or Function will be directly assigned and charged to such Client Company or Function. 2. Costs accumulated in an activity, project, program, or work order for services specifically performed for two or more Client Companies or Functions will be distributed among and charged to such Client Companies or Functions. The appropriate method of distribution will be determined by the Service Company on a case-by-case basis consistent with the nature of the work performed. The distribution method will be provided to each such affected Client Company or Function. 3. Costs accumulated in an activity, project, program, or work order for services of a general nature which are applicable to all Client Companies or Functions or to a class or classes of Client Companies or Functions will be allocated among and charged to such Client Companies or Functions by application of one or more of the allocation ratios described in paragraphs IV and V of this Appendix A. III. For purposes of this Appendix A, the following definitions or methodologies shall be utilized: 1. Where applicable, the following will be utilized to convert gas sales to equivalent electric sales: 0.303048 cubic feet of gas sales equals 1 kilowatt-hour of electric sales. (Based on electricity at 3412 Btu/kWh and natural gas at 1034 Btu/cubic foot). 2. "Domestic utility" refers to a utility which operates in the contiguous United States of America. 3. The weights utilized in the weighted average ratios in paragraph V of this Appendix A shall represent the percentage relationship of the activities associated with the function for which costs are to be allocated. For example, if an expense item is to be allocated on the weighted average of the Sales Ratio and the Total Construction Expenditures Ratio, and the activity to be allocated is seventy-five (75) percent operations in nature and twenty-five (25) percent construction related, 75 percent of the Sales Ratio would be utilized and 25 percent of the Total Construction Expenditures Ratio would be utilized. To illustrate this application, assuming that the Sales Ratios were 53.75 percent for Company A and 46.25 for Company B, and the Total Construction Expenditures Ratio were 41.25 percent for Company A and 58.75 percent for Company B, the following weighted average ratio would be computed: Company A Company B Activity Company A Weighted Company B Weighted Sales Ratio 5% 53.75% 40.31% 46.25% 34.69% Total Construction 25% 41.25% 10.31% 58.75% 14.69% Expenditures Ratio 100% 50.62% 49.38% IV. The following ratios will be applied, as specified in paragraph V of this Appendix A, to allocate costs for services of a general nature. 1. Sales Ratio A ratio, based on domestic firm kilowatt-hour electric sales (and/or the equivalent cubic feet of gas sales, where applicable), excluding intra-system sales, for the immediately preceding twelve consecutive calendar months, the numerator of which is for a Client Company and the denominator of which is for all domestic utility Client Companies. This ratio will be determined annually, or at such time as may be required due to a significant change. 2. Electric Peak Load Ratio A ratio, based on the sum of the monthly domestic firm electric maximum system demands for the immediately preceding twelve consecutive calendar months, the numerator of which is for a Client Company and the denominator of which is for all domestic utility Client Companies. This ratio will be determined annually, or at such time as may be required due to a significant change. 3. Number of Customers Ratio A ratio, based on the sum of the firm domestic electric customers (and/or gas customers, where applicable) at the end of each month for the immediately preceding twelve consecutive calendar months, the numerator of which is for a Client Company and the denominator of which is for all domestic utility Client Companies. This ratio will be determined annually, or at such time as may be required due to a significant change. 4. Number of Employees Ratio A ratio, based on the sum of the number of employees at the end of each month for the immediately preceding twelve consecutive calendar months, the numerator of which is for a Client Company or Service Company Function and the denominator of which is for all Client Companies (and Cinergy Corp.'s non-utility and non-domestic utility affiliates, where applicable) and/or the Service Company. This ratio will be determined annually, or at such time as may be required due to a significant change. 5. Construction-Expenditures Ratio. A ratio, based on construction expenditures, net of reimbursements, for the immediately preceding twelve consecutive calendar months, the numerator of which is for a Client Company and the denominator of which is for all Client Companies. Separate ratios will be computed for total construction expenditures and appropriate functional plant (i.e., production, transmission, distribution, and general) classifications. This ratio will be determined annually, or at such time as may be required due to a significant change. 6. Circuit Miles of Electric Distribution Lines Ratio A ratio, based on installed circuit miles of domestic electric distribution lines at the end of the immediately preceding calendar year, the numerator of which is for a Client Company and the denominator of which is for all domestic utility Client Companies. This ratio will be determined annually, or at such time as may be required due to a significant change. 7. Number of Central Processing Unit Seconds Ratio A ratio, based on the sum of the number of central processing unit seconds expended to execute mainframe computer software applications for the immediately preceding twelve consecutive calendar months, the numerator of which is for a Client Company or Service Company Function, and the denominator of which is for all Client Companies, (and Cinergy Corp.'s non-utility and non-domestic utility affiliates, where applicable) and/or the Service Company. This ratio will be determined annually, or at such time as may be required due to a significant change. V. A description of each Function's activities which may be modified from time to time by the Service Company, is set forth below in paragraph "a" under each Function. As described in paragraph II, "1" and "2" of this Appendix A, where identifiable, costs will be directly assigned or distributed to Client Companies or to other Functions of the Service Company. For costs accumulated in activities, projects, programs, or work orders which are for services of a general nature that cannot be directly assigned or distributed, as described in paragraph II, "3" of this Appendix A, the method or methods of allocation are set forth below in paragraph "b" under each Function. For any of the functions set forth below other than Information Systems, Transportation, Human Resources or Facilities, costs of a general nature to be allocated pursuant to this Amended and Restated Service Agreement shall exclude costs of a general nature which have been allocated to affiliated companies not a party to this Amended and Restated Service Agreement. Substitution or changes may be made in the methods of allocation hereinafter specified, as may be appropriate, and will be provided to state regulatory agencies and to each Client Company. 1. Information Systems a. Description of Function Provides communications and electronic data processing services. The activities of the Function include: (1) Development and support of mainframe computer software applications. (2) Procurement and support of personal computers and related network and software applications. (3) Operation of data center. (4) Installation and operation of communications systems. b. Method of Allocation (1) Development and support of mainframe computer software applications - allocated between the Client Companies and other Functions of the Service Company based on the number of Central Processing Unit Seconds Ratio and allocated among the Client Companies on a weighted average of the Sales Ratio and the Total Construction Expenditures Ratio. (2) Procurement and support of personal computers and related network and software applications - allocated to the Client Companies and to other Functions of the Service Company based on the Number of Employees Ratio. (3) Operation of data center - allocated to the Client Companies and to other Functions of the Service Company based on the Number of Central Processing Unit Seconds Ratio. (4) Installation and operation of communications systems - allocated to the Client Companies and to other Functions of the Service Company based on the Number of Employees Ratio. 2. Meters and Transportation a. Description of Function Procures and maintains meters, vehicles and equipment. b. Method of Allocation (1) Meters - allocated to the Client Companies based on the Number of Customers Ratio. (2) Transportation - allocated to the Client Companies and to other Functions of the Service Company based on the Number of Employees Ratio. 3. Electric System Maintenance a. Description of Function Coordinates maintenance of Cinergy Corp.'s electric transmission and distribution system. b. Method of Allocation (1) Services related to transmission system - allocated to the Client Companies based on the Electric Peak Load Ratio. (2) Services related to distribution system - allocated to the Client Companies based on the Circuit Miles of Electric Distribution Lines Ratio. 4. Marketing and Customer Relations a. Description of Function Advises the Client Companies in relations with domestic utility customers. The activities of the Function include: (1) Design and administration of sales and demand-side management programs. (2) Customer billing and payment processing. (3) Operation of call center. b. Method of Allocation (1) Design and administration of sales and demand-side management programs - allocated to the Client Companies based on the Sales Ratio. (2) Customer billing and payment processing - allocated to the Client Companies based on the Number of Customers Ratio. (3) Operation of call center - allocated to the Client Companies based on the Number of Customers Ratio. 5. Electric Transmission and Distribution Engineering and Construction a. Description of Function Designs and monitors construction of electric transmission and distribution lines and substations. Prepares cost and schedule estimates, visits construction sites to ensure that construction activities coincide with plans,and administers construction contracts. b. Method of Allocation (1) Transmission engineering and construction allocated to the Client Companies based on the Electric Transmission Plant Construction Expenditures Ratio. (2) Distribution engineering and construction allocated to the Client Companies based on the Electric Distribution Plant Construction Expenditures Ratio. 6. Power Engineering and Construction a. Description of Function Prepares specifications and administers contracts for construction of new electric generating units or improvements to existing electric generating units. Prepares cost and schedule estimates and visits construction sites to ensure that construction activities coincide with plans. b. Method of Allocation Allocated to the Client Companies based on the Electric Production Plant Construction Expenditures Ratio. 7. Human Resources a. Description of Function Establishes and administers policies and supervises compliance with legal requirements in the areas of employment, compensation, benefits and employee health and safety. Processes payroll and employee benefit payments. Supervises contract negotiations and relations with labor unions. b. Method of Allocation Allocated to the Client Companies and to other Functions of the Service Company based on the Number of Employees Ratio. 8. Materials Management a. Description of Function Provides services in connection with the procurement of materials and contract services and management of material and supplies inventories. b. Method of Allocation Allocated to the Client Companies on a weighted average of the Sales Ratio and the Total Construction Expenditures Ratio. 9. Facilities a. Description of Function Operates and maintains office and service buildings. Provides security and housekeeping services for such buildings and procures office furniture and equipment. b. Method of Allocation Allocated to other Functions of the Service Company based on the Number of Employees Ratio. 10. Accounting a. Description of Function Maintains the books and records of Cinergy and its affiliates, prepares financial and statistical reports, processes payments to vendors, prepares tax filings and supervises compliance with the laws and regulations. b. Method of Allocation Allocated to the Client Companies based on a weighted average of the Sales Ratio and the Total Construction Expenditures Ratio. 11. Power Planning a. Description of Function Coordinates the planning and operation of Cinergy Corp.'s electric power system. The activities of the Function include: (1) System Planning - planning of additions to Cinergy Corp.'s electric generation, transmission and distribution system. (2) System Control Center - coordination of the operation of Cinergy Corp.'s electric generating units and transmission system. (3) Distribution Control Centers - coordination of Cinergy Corp.'s electric distribution systems. b. Method of Allocation (1) System Planning (a) Generation and transmission planning - allocated to the Client Companies based on the Electric Peak Load Ratio. (b) Distribution planning - allocated to the Client Companies based on the Circuit Miles of Electric Distribution Lines Ratio. (2) System Control Center - allocated to the Client Companies based on the Sales Ratio. (3) Distribution Control Centers - allocated to the Client Companies based on the Circuit Miles of Electric Distribution Lines Ratio. 12. Public Affairs a. Description of Function Prepares and disseminates information to employees, customers, government officials, communities and the media. Provides graphics, reproduction lithography, photography and video services. b. Method of Allocation Allocated to the Client Companies based on the Number of Customers Ratio. 13. Legal a. Description of Function Renders services relating to labor and employment law, litigation, contracts, rates and regulatory affairs, environmental matters, financing, financial reporting, real estate and other legal matters. b. Method of Allocation Allocated to the Client Companies based on a weighted average of the Number of Employees, Number of Customers and Total Construction Expenditures Ratios. 14. Rates a. Description of Function Determines the Client Companies' revenue requirements and rates to electric and gas requirements customers. Administers interconnection and joint ownership agreements. Researches and forecasts customers' usage. b. Method of Allocation Allocated to the Client Companies based on the Sales Ratio. 15. Finance a. Description of Function Renders services to Client Companies with respect to investments, financing, cash management, risk management, claims and fire prevention. Prepares reports to the SEC, budgets, financial forecasts and economic analyses. b. Method of Allocation Allocated to the Client Companies based on a weighted average of the Sales Ratio and the Total Construction Expenditures Ratio. 16. Right of Way a. Description of Function Purchases, surveys, records, and sells real estate interests for Client Companies. b. Method of Allocation (1) Services related to electric distribution system - - allocated to the Client Companies based on the Circuit Miles of Electric Distribution Lines Ratio. (2) Services related to electric generation and transmission system - allocated to the Client Companies based on the Electric Peak Load Ratio. 17. Internal Auditing a. Description of Function Reviews internal controls and procedures to ensure that assets are safeguarded and that transactions are properly authorized and recorded. b. Method of Allocation Allocated to the Client Companies based on the Sales Ratio. 18. Environmental Affairs a. Description of Function Establishes policies and procedures for compliance with environmental laws and regulations. Studies emerging environmental issues, monitors compliance with environmental requirements and provides training to the Client Companies' personnel. b. Method of Allocation Allocated to the Client Companies based on the Sales Ratio. 19. Fuels a. Description of Function Procures coal, gas and oil for the Client Companies. Ensures compliance with price and quality provisions of fuel contracts and arranges for transportation of the fuel to the generating stations. b. Method of Allocation Allocated to the Client Companies based on the Sales Ratio. 20. Investor Relations a. Description of Function Provides communications to investors and the financial community, performs transfer agent and shareholder record keeping functions, administers stock plans and performs stock-related regulatory reporting. b. Method of Allocation Allocated to the Client Companies based on the Sales Ratio. 21. Planning a. Description of Function Facilitates preparation of strategic and operating plans, monitors trends and evaluates business opportunities. b. Method of Allocation Allocated to the Client Companies based on the Sales Ratio. 22. Executive a. Description of Function Provides general administrative and executive management services. b. Method of Allocation Allocated to the Client Companies based on the Sales Ratio. EX-99 5 exhibith.txt Exhibit H Cinergy Services, Inc. Chart of Accounts Proposed Examples of Changes to Account Rollup Structure SEC "PUHCA" Reporting (1) FERC Reporting (2) ----------------------------- -------------------------- Current Proposed Current Proposed Method Method Method Method ----------------------------- -------------------------- Employee working in the Administrative & General Function Accounting Employee Labor 920 920 920 920 Supplies 921 921 921 921 Outside Services 923 923 923 923 Employee working in the Marketing & Customer Relations Function Call Center Employee Labor 920 903 903 903 Supplies 921 903 903 903 Outside Services 923 903 903 903 Employee working in the Transmission and Distribution Engineering & Construction Function Transmission Supervisory Employee Labor 920 568 568 568 Supplies 921 568 568 568 Outside Services 923 568 568 568 Employee working in the Meters & Transportation Function Electric Meter Shop Employee Labor 920 586 586 586 Supplies 921 586 586 586 Outside Services 923 586 586 586 (1) As filed with the SEC pursuant to the Public Utility Holding Company Act of 1935, as amended on Form U-13-60 - Annual Report for Subsidiary Service Companies (2) As filed with the FERC pursuant to the Federal Energy Regulatory Commission on Form 1 - Annual Report of Major electric utilities, licensees and others (e.g., The Cincinnati Gas & Electric Company, PSI Energy, Inc. and The Union Light, Heat and Power Company). EX-99 6 exhibitf.txt EXHIBIT F May 13, 2004 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Cinergy Services, Inc. Application on Form U-1 Ladies and Gentlemen: I am Associate General Counsel for Cinergy Corp., a Delaware corporation, and its subsidiaries including Cinergy Services, Inc., a Delaware corporation ("Cinergy Services"). This opinion letter relates specifically to the transactions proposed in the above-referenced application on Form U-1 being filed today by Cinergy Services (such application, including any amendment thereof prior to receipt of the Commission's order with respect thereto, the "Application") under the Public Utility Holding Company Act of 1935, as amended (the "Act"). In connection with this opinion letter, I have reviewed the Application and such other documents and made such other investigation as I consider appropriate. Based on the foregoing and subject to the other paragraphs hereof, I express the following opinions: 1. All state laws applicable to Cinergy Services' involvement in the proposed transactions will be complied with. 2. The consummation of the proposed transactions will not violate the legal rights of the holders of any securities issued by Cinergy Services or any associate company thereof. The foregoing opinions presume that the proposed transactions will be consummated in accordance with the Application and all legal requirements and authorizations applicable thereto, including, without limitation, the Commission's order requested therein and any internal corporate authorizations. I am admitted to the Bars of the States of New York and Ohio. The foregoing opinions are limited to the laws of such states and the Delaware General Corporation Law. I hereby consent to the Commission's use of this opinion letter in connection with the Application. This opinion letter may not be used for any other purpose or relied on by or furnished to any other party without my prior written consent. Very truly yours, /s/George Dwight II George Dwight II EX-99 7 exhibiti.txt Exhibit I Annual Report of Cinergy Services, Inc. For the Year Ended December 31, 2003 Schedule XV - COMPARATIVE INCOME STATEMENTS December 31, 2003 -------------------------------- Current Presentation -------------------- ACCOUNT DESCRIPTION (unaudited) INCOME 457 Services Rendered to Associate Companies $ 470,467,694 $ 470,467,694 458 Services Rendered to Nonassociate Companies - - 415 Jobbing and Contract Work - - 419 Other Interest Income 1,520,423 1,520,423 Total Income 471,988,117 471,988,117 EXPENSE 568 Maintenance Supervision and Engineering - Transmission N/A 30,000,000 586 Meter Expenses N/A 14,000,000 903 Customer Records and Collection Expenses N/A 12,000,000 920 Salaries and Wages 236,888,670 195,888,670 921 Office Supplies and Expenses 52,820,963 42,820,963 922 Administrative Expenses Transferred - Credit - 923 Outside Services Employed 40,944,914 35,944,914 924 Property Insurance - - 925 Injuries and Damages 2,113,661 2,113,661 926 Employee Pensions and Benefits 61,685,772 61,685,772 928 Regulatory Commission Expense 208,624 208,624 930.1 General Advertising Expenses 400,900 400,900 930.2 Miscellaneous General Expenses 14,705,702 14,705,702 931 Rents 40,557,555 40,557,555 932 Maintenance of Structures and Equipment 5,356,378 5,356,378 403, 404 Depreciation and Amortization Expense 5,430,907 5,430,907 408 Taxes Other Than Income Taxes 13,173,570 13,173,570 409 Income Taxes 1,875,510 1,875,510 410 Provision for Deferred Income Taxes 68,496 68,496 411 Provision for Deferred Income Taxes - Credit (2,022,237) (2,022,237) 411.5 Investment Tax Credit - - 421 Miscellaneous (Income) or Loss (2,223,903) (2,223,903) 426.1 Donations - - 426.5 Other Deductions 2,635 2,635 427 Interest on Long-term Debt - - 430 Interest on Debt to Associate Companies - - 431 Other Interest Expense - - Total Expense $ 471,988,117 $ 471,988,117 NET INCOME or (LOSS) $ - - * Amounts restated for illustrative purposes only. No study has been performed to separate the actual amounts to be reported in functional accounts. N/A - Not Applicable -----END PRIVACY-ENHANCED MESSAGE-----