-----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, PjnUKu1pnr7tsd7hSCYUBov8kkEIRAAAtZX0yvJaVCu6Rc+8hItWuzd6TMYrlzFR oKSl9APuedV1MySB0bo5eA== 0000899652-99-000012.txt : 19990205 0000899652-99-000012.hdr.sgml : 19990205 ACCESSION NUMBER: 0000899652-99-000012 CONFORMED SUBMISSION TYPE: U-1 PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19990204 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: SEC FILE NUMBER: 070-09449 FILM NUMBER: 99521557 BUSINESS ADDRESS: STREET 1: 139 E FOURTH ST CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5134219500 MAIL ADDRESS: STREET 1: 139 E FOURTH STREET CITY: CINCINATI STATE: OH ZIP: 45202 U-1 1 FORM U-1 File No. 70- SECURITIES AND EXCHANGE COMMISSION 450 FIFTH STREET, N.W. WASHINGTON, D.C. 20549 __________________________________________ FORM U-1 DECLARATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ____________________________________________ Cinergy Corp. 139 East Fourth Street Cincinnati, Ohio 45202 (Name of company filing this statement and address of principal executive offices) Cinergy Corp. (Name of top registered holding company parent) William L. Sheafer Vice President and Treasurer Cinergy Corp. (address above) (Name and address of agent of service) The Commission is requested to direct all notices, orders and communications in this matter to: George Dwight II/Senior Counsel William T. Baker, Jr. Cinergy Corp. Thelen Reid & Priest LLP 139 East Fourth Street, 25 Atrium 2 40 West 57th Street Cincinnati, Ohio 45202 New York, New York 10019 513-287-2643 212-603-2106 513-287-3810 (fax) 212-603-2182 (fax) gdwight@cinergy.com wbaker@thelenreid.com Item 1. Description of Proposed Transactions A. Service Agreements between Utilities and Domestic Nonutility Affiliates On behalf of the proposed parties thereto, Cinergy Corp., a registered holding company under the Public Utility Holding Company Act of 1935, as amended (the "Act"), requests authorization for its domestic public utility subsidiaries to enter into service agreements with their domestic nonutility affiliates under which, subject to the terms and conditions thereof, the utility subsidiaries may provide a range of services to the nonutility affiliates, and vice versa, priced at "cost" as determined pursuant to Rule 91 under the Act. Cinergy requests authorization for each of its utility subsidiaries to enter into a separate but substantially similar contract ("Service Agreement" or "Agreement") with all of Cinergy's domestic nonutility subsidiaries, including those formed after the date of the Commission's order herein, but excluding exempt telecommunications companies as defined in the Act ("ETCs"). Cinergy's two principal utility subsidiaries, each of which is a direct, wholly-owned subsidiary of Cinergy, are The Cincinnati Gas & Electric Company, an Ohio electric and gas utility ("CG&E"), and PSI Energy, Inc., an Indiana electric utility ("PSI"), which are subject to state utility regulation by the Public Utilities Commission of Ohio ("PUCO") and the Indiana Utility Regulatory Commission ("IURC"), respectively. Pursuant to provisions regarding affiliate contracts contained in settlement agreements dating from the 1994 merger that created Cinergy,/1/ CG&E and PSI submitted identical proposed forms of Service Agreements to the PUCO and the IURC staff in August 1998 for their review prior to review by this Commission. In late January 1999 the PUCO and the IURC staff completed their review and, based upon certain modifications made to the CG&E Service Agreement and assurances regarding certain costs that may arise under the PSI Service Agreement (see letter from PSI filed as Exhibit D-4), cleared the CG&E and PSI Service Agreements for filing with this Commission in the forms submitted herewith./2/ The letters from the PUCO and IURC staff are included as Exhibits D-2 and D-5. The proposed Service Agreements with the remaining utility subsidiaries of Cinergy, all of whom are direct, wholly-owned subsidiaries of CG&E (collectively, with CG&E and PSI, the "Operating Companies") - The Union Light, Heat and Power Company, a Kentucky electric and gas utility ("ULH&P"), Lawrenceburg Gas Company, an Indiana gas utility ("Lawrenceburg"), The West Harrison Gas and Electric Company, an Indiana electric utility ("West Harrison"), and Miami Power Corporation ("Miami"), an electric utility by virtue of its ownership of certain transmission assets - do not require prior state commission review. Except in regard to prior state commission review of amendments thereto, the proposed Service Agreement for each CG&E utility subsidiary conforms in all material respects to the CG&E Service Agreement, including the additional protections incorporated as a result of the PUCO's review. The proposed Service Agreements for CG&E, PSI and CG&E's utility subsidiaries are filed as Exhibits B-1, B-2 and B-3, respectively. B. Parties to Service Agreements The parties to the Service Agreements will be the Operating Companies and Cinergy's domestic nonutility subsidiaries excluding ETCs. Cinergy has five direct subsidiaries all of whom are wholly-owned: CG&E, PSI, Cinergy Investments, Inc. ("Cinergy Investments"), which holds all of Cinergy's domestic nonutility businesses and interests (with certain minor exceptions),/3/ Cinergy Global Resources, Inc., which holds all of Cinergy's foreign businesses and interests, and Cinergy Services, Inc., Cinergy's service company subsidiary which provides a variety of support services to its utility and nonutility affiliates. The Operating Companies generate, transmit, distribute and sell electricity and transport and sell natural gas to approximately 1.4 million customers in southwestern Ohio, most of Indiana and northern Kentucky. PSI produces, transmits, distributes and sells electricity in north central, central and southern Indiana, serving an estimated population of 2.1 million people located in 69 of the state's 92 counties including the cities of Bloomington, Columbus, Kokomo, Lafeyette, New Albany and Terre Haute. At and for the year ended December 31, 1997, PSI had total consolidated assets of approximately $3.4 billion and operating revenues of approximately $1.9 billion. CG&E and its utility subsidiaries provide electric and gas service in the southwestern portion of Ohio and adjacent areas in Kentucky and Indiana. The area served with electricity, gas or both covers approximately 3,000 square miles and has an estimated population of 1.8 million. CG&E is engaged in the production, transmission, distribution and sale of electricity and the sale and transportation of natural gas in the southwestern portion of Ohio, serving an estimated population of 1.5 million people in 10 of the state's 88 counties including the cities of Cincinnati and Middletown. ULH&P, which is subject to state utility regulation by the KPSC, is engaged in the production, transmission, distribution and sale of electricity and the sale and transportation of natural gas in northern Kentucky, serving an estimated population of 299,000 people in a 500 square-mile area encompassing six counties and including the cities of Newport and Covington. Lawrenceburg sells and transports natural gas to approximately 20,000 people in a 60 square-mile area in southeastern Indiana. West Harrison sells electricity over a 3-square mile area with a population of approximately 1,000 in West Harrison, Indiana and bordering rural areas. Lawrenceburg and West Harrison are subject to state utility regulation by the IURC. Miami owns a 138 kV transmission line running from the Miami Fort Power Station in Ohio to a point near Madison, Indiana. Miami is regulated by the Federal Energy Regulatory Commission under the Federal Power Act, but is not subject to state utility regulation. At and for the year ended December 31, 1997, CG&E had total consolidated assets of approximately $4.9 billion and operating revenues of approximately $2.4 billion ($1.9 billion electric and $500 million gas). For more information regarding the Operating Companies, see Cinergy's Annual Report on Form 10-K for the year ended December 31, 1997 and quarterly reports on Form 10-Q for the quarters ended March 31, June 30 and September 30, 1998, as well as Cinergy's Annual Report on Form U5S. Cinergy Investments holds all of Cinergy's domestic nonutility businesses, except for those held by CG&E and PSI. At December 31, 1998, Cinergy Investments had 11 direct wholly-owned subsidiaries (see the chart filed as Exhibit I): Cinergy-Cadence, Inc., an "energy-related company" within the meaning of Rule 58 under the Act (a "Rule 58 Company" or "Rule 58 Subsidiary") which has a one-third ownership interest in its Rule 58 Subsidiary, Cadence Network LLC, which markets various energy management services to multi-site retail establishments; Cinergy Capital & Trading, Inc., a Rule 58 Company devoted to energy marketing and trading that has eight subsidiaries, each devoted to energy marketing or ownership or operation of EWGs; Cinergy Communications, Inc., an ETC; Cinergy Engineering, Inc., a Rule 58 Company devoted to utility-related engineering and other technical services; Cinergy-Centrus, Inc., an ETC; Cinergy-Centrus Communications, Inc., an ETC that holds a one-third ownership interest in Centrus LLP, also an ETC; Cinergy Resources, Inc., a Rule 58 Company devoted to energy marketing and trading; Cinergy Solutions, Inc./4/, which, together with its 12 partly- and wholly-owned subsidiaries, primarily markets energy management services and engages in development, ownership and operation of district cooling and heating systems and qualifying facilities under the Public Utility Regulatory Policies Act of 1978, principally through a joint venture with a non-affiliate, Trigen Energy Corporation; Cinergy Supply Network, Inc., a Rule 58 Company, which engages in utility materials brokering services and, through its one-third-owned Rule 58 Subsidiary, Reliant Services, LLC, proposes to engage in underground utility facilities location and construction services; Cinergy Technology, Inc., which is devoted to commercialization of utility technologies and related investments;/5/ and Enertech Associates, Inc., an inactive Rule 58 Company. For more information concerning Cinergy Investments and its subsidiaries, including financial information, see Cinergy's Annual Report on Form U5S for the year ended December 31, 1997, quarterly reports on Form U-9C-3 and quarterly notification certificates in File No. 70-8933 (relating to Cinergy Solutions) for March 31, June 30 and September 30, 1998 and the application-declaration as amended in File No. 70-9319. C. Terms of Service Agreements 1. Terms Common to All Service Agreements In general, the Service Agreements authorize the provision of services, including loans of employees, from the Operating Companies to the domestic nonutility companies, excluding ETCs ("Nonutility Companies"), and from the Nonutility Companies to the Operating Companies, priced at "cost," pursuant to a written service request procedure. The Agreements include provisions regarding liability and indemnification, as well as provisions to protect the interests of Cinergy's state utility regulators and the retail customers of the Operating Companies. More specifically, upon receipt by a party to the Agreement of a written service request (adhering to the form thereof attached to the Agreement) requesting such services as are specified therein, including if applicable use of any related equipment, facilities, properties or other resources ("Services"), the receiving party shall provide the requested Services at the time and for the period sought, if in its sole discretion it can do so without impairing its normal business operations. Services may include, but are not limited to, engineering and construction; operations and maintenance; equipment testing; information services; monitoring, surveying, inspecting, constructing, locating and marking of overhead and underground utility facilities; meter reading; materials management; vegetation management; and marketing and customer relations. In addition to the exclusion of transactions involving affiliated ETCs and FUCOs, affiliate transactions involving sales, leases, or other transfers of assets, goods, energy commodities (including electricity, gas, coal and other combustible fuels) or thermal energy products are outside the scope of the Service Agreements. (Article 1) Any loans of employees by the company providing Services shall likewise be at the service provider's sole discretion. While performing work on behalf of the client company, any such loaned employees shall be under its supervision and control, and the client company shall be responsible for their actions. All requests for Services shall be in writing consistent with the form thereof appended to the Agreement. Accordingly, each service request must identify the client company and proposed service provider, be authorized by an appropriate individual at both the client company and the service provider, include a detailed description of the proposed services and estimated costs, and specify the scheduled start date and completion date. In addition, all Services shall be assigned to applicable activities, projects, programs or on other appropriate bases to enable specific work to be properly assigned. The client company may amend service requests from time to time, subject to certain conditions. (Article 2) All Services shall be rendered at the full cost thereof, as computed in accordance with applicable rules, regulations and accounting standards including Rules 90 and 91 under the Act. As soon as practicable after the close of each month, any company providing Services shall render to each client company a statement reflecting the billing information necessary to identify the costs charged for that month. The client company is required to pay all amounts billed within 30 days after receipt thereof. (Article 3) The sole and exclusive responsibility of a company providing Services for any asserted deficiency will be to correct or repair the deficiency or re-perform the Services, at no additional cost to the client company. The service provider disclaims any additional warranties or remedies, and each client company agrees to accept Services on that basis. In addition, any company receiving Services agrees to indemnify the company providing those Services (including each of its officers, directors, employees and agents) from any losses, liabilities or claims arising from or in connection with the provision of such Services. The indemnity applies regardless of negligence, willful misconduct, or breach of warranty by the company that provided the Services or any of its officers, directors, employees or agents. (Article 4) The final article of each Service Agreement contains provisions regarding ratemaking, amending the Agreement, additional parties, regulatory requirements and miscellaneous "boilerplate." With respect to ratemaking, the Agreement provides (Section 5.1) that: Operating Company shall not seek to overturn, reverse, set aside, change or enjoin, whether through appeal or the initiation or maintenance of any action in any forum, a decision or order of the [applicable state commission - PUCO, IURC or KPSC] which pertains to recovery, disallowance, deferral or ratemaking treatment of any expense, charge, cost or allocation incurred or accrued by Operating Company in or as a result of this Agreement (or any amendment hereto) on the basis that this Agreement and any such expense, charge, cost or allocation was filed with or approved by the SEC. Any amendment to the Agreement must be in writing executed by all of the parties. In addition, the CG&E and PSI Service Agreements (but not the form of Service Agreement for CG&E's utility subsidiaries) provide that any amendment to either of those Agreements, before being submitted to this Commission for its review, must first be submitted to the PUCO and the IURC staff for their review, and submitted to certain other interested parties for informational purposes (see Section 5.2) - in other words, the same "pre-SEC filing and review" procedure applicable to the instant Service Agreements for CG&E and PSI. As with CG&E's and PSI's entry into these contracts, the PUCO and the IURC staffs have effective veto power over any proposed amendment to those contracts. Cinergy is precluded from seeking Commission approval of the contract or amendment, or must withdraw it, and may not put it into effect as to CG&E or PSI, if the PUCO or IURC staff disapprove it or find it unreasonable. This protection - as with the ratemaking "hold-harmless" in Section 5.1 - is a linchpin of the 1994 settlements as they concern matters relating to the Act. Additional Nonutility Companies may become parties to any Service Agreement after the original execution thereof by executing appropriate signature pages. In the absence of any changes to the terms of the Agreement, merely adding new Nonutility Companies as signatories is not deemed an amendment, including for purposes of the prior state review just described. (Section 5.4) The provision of Services pursuant to the Agreement shall in all cases, and notwithstanding anything to the contrary, be subject to any limitations or restrictions contained in any applicable orders or authorizations, statutory provisions, rules or regulations, tariffs, or agreements, whether now in existence or hereinafter promulgated, of regulatory or governmental agencies having jurisdiction over the parties to the Agreement, including the Commission, the applicable state commission and the Federal Energy Regulatory Commission. To the extent, if any, that at any time any provision of the Agreement conflicts with any limitation or restriction of any such regulatory agency, the latter controls. (Section 5.6) The foregoing provisions are included in each proposed Service Agreement, with the sole exception that the provision (Section 5.2) granting the state commission or its staff the right to prior review of proposed amendments is included in the CG&E and PSI Service Agreements, but not the Service Agreements to be entered into by the CG&E utility subsidiaries. This difference is consistent with the terms of the 1994 merger accommodations with the PUCO, IURC and the KPSC. 2. Additional Terms Resulting from PUCO Review The PUCO's review in Case No. 98-1183-GE-CMT resulted in the incorporation of certain additional provisions in the CG&E Service Agreement (which are reflected in the form filed herewith). There are two principal substantive provisions./6/ The first is directed at potential unfair competition and stipulates that none of the Services "may include the provision of information or other services by the Operating Company that may result in an undue or unreasonable competitive advantage under law to any Nonutility Company." (Section 1.1(b), last sentence.) The second principal substantive provision is intended to protect confidential information of customers of the Operating Companies, and thus imposes "certain prohibitions related to the access, sharing, and release of customer information and customer information databases." (See Section 5.11 of CG&E Service Agreement.) Specifically, this provision requires, except as otherwise expressly permitted therein, that: 1. No employee of a Nonutility Company may access CG&E's customer database or release CG&E customer information without the written consent of the customer specifying the type of information to be released. 2. No employee of CG&E may release CG&E customer information to a Nonutility Company without the written consent of the customer specifying the type of information to be released. 3. CG&E shall keep a log when the CG&E customer database is accessed by or CG&E customer information is released to a Nonutility Company. Such log shall include customer name, date(s) when CG&E's customer database was accessed or CG&E customer information was released, the type(s) of information accessed or released, and the employee and entity requesting access to the database or release of information. 4. CG&E customer information released to a Nonutility Company may not be shared or supplied by that Nonutility Company with or to another CG&E affiliate or Cinergy subsidiary. Both of these provisions - concerning unfair competitive advantages and safeguarding customer information - have also been included in the form of Service Agreement for each CG&E utility subsidiary and thus will apply in respect of service transactions under those agreements as well. Although these provisions are not part of the express terms of the PSI Service Agreement, Cinergy will ensure that PSI and the Nonutility Companies party to that agreement abide by these restrictions. As noted, the PSI Service Agreement underwent its own review by the IURC staff pursuant to the 1994 merger settlements; based on its review and certain assurances given by PSI, the staff requested no changes to the proposed agreement. Item 2. Fees, Commissions and Expenses The fees, commissions and expenses to be incurred, directly or indirectly, by Cinergy or any associate company thereof in connection with the proposed transactions are estimated at $15,000, including legal fees and expenses of Thelen Reid & Priest LLP of approximately $10,000. Item 3. Applicable Statutory Provisions Sections 12(f) and 13(b) and Rules 54, 80, 81, 86, 87, 89, 90 and 91 are or may be applicable to the proposed transactions. Rule 54 provides that in determining whether to approve the issue or sale of a security by a registered holding company for purposes other than the acquisition of an EWG or FUCO, or other transactions by such registered holding company or its subsidiaries other than with respect to EWGs or FUCOs, the Commission shall not consider the effect of the capitalization or earnings of any subsidiary which is an EWG or a FUCO upon the registered holding company system if the conditions of rule 53(a), (b) and (c) are satisfied. Cinergy currently does not meet the conditions of rule 53(a). At December 31, 1998, Cinergy's "aggregate investment," as defined in rule 53(a)(1), in EWGs and FUCOs (including related project parents) was approximately $617 million. This amount equals approximately 65% of Cinergy's "consolidated retained earnings," also as defined in rule 53(a)(1) (approximately $949 million), which exceeds the 50% "safe harbor" limitation contained in rule 53(a). By order dated March 23, 1998 (HCAR No. 26848) ("100% Order"), the Commission authorized Cinergy to increase its total investments in EWGs and FUCOs to 100% of consolidated retained earnings. Accordingly, although Cinergy's aggregate investment exceeds the 50% safe harbor, such additional level of investment is expressly permitted under the 100% Order. At September 30, 1997, the most recent period for which financial statement information was evaluated in the 100% Order, Cinergy's consolidated capitalization consisted of 44.1% equity and 55.9% debt; at such date, Cinergy's pro forma consolidated capitalization, taking into account the entire amount of non-recourse debt allocable to Cinergy's ownership interest in EWGs and FUCOs (i.e., $949 million) was 38.2% equity and 61.8% debt. As shown in Exhibit H filed herewith, Cinergy's pro forma consolidated capitalization at December 31, 1998 consisted of 42% equity and 58% debt; also as shown in Exhibit H, even if the entire amount of then-outstanding non-recourse debt of EWGs and FUCOs allocable to Cinergy's ownership interest therein were consolidated (i.e., $1.2 billion), equity would still comprise 35.5% of the overall capital structure. The proposed transactions would have no impact on Cinergy's capitalization. With respect to earnings, the 100% Order stated that Cinergy did not report a full-year operating loss attributable to its investments in EWGs and FUCOs for any year 1992 through 1996. That order also stated that Midlands Electricity plc ("Midlands"), a FUCO in the United Kingdom in which Cinergy has a 50% ownership interest, recorded a one-time extraordinary charge in the third quarter of 1997 as a result of a windfall profits tax imposed by the authorities in the United Kingdom, of which $109 million was allocable to Cinergy. However, the 100% Order noted that Midland's credit ratings by Standard and Poor's remained unchanged following the charge. Since the date of the 100% Order (as disclosed in the quarterly notification certificates in File No. 70-9011), Cinergy's investments in EWGs and FUCOs have continued to make a positive contribution to Cinergy's earnings. With respect to the remaining conditions of rule 54, Cinergy has complied and will continue to comply with the record-keeping requirements of rule 53(a)(2), the limitation under rule 53(a)(3) on the use of operating company personnel in rendering services to EWGs and FUCOs, and the requirements of rule 53(a)(4) concerning submission of specified filings under the Act to retail rate regulatory agencies. In addition, none of the conditions in rule 53(b) has occurred. Item 4. Regulatory Approval OHIO: Pursuant to the 1994 merger-related settlements and conditions referred to in Item 1, the PUCO has jurisdiction to review in advance for a 60-day period prior to any filing thereof with this Commission, and to approve or disapprove, certain affiliate contracts to which CG&E proposes to be a party, including the proposed CG&E Service Agreement. On August 24, 1998 CG&E filed the contract with the PUCO initiating Case No.98-1183-GE-CMT (see Exhibit D-1); pursuant to the merger settlement procedures, CG&E has also provided copies of the contract to certain other interested parties. On January 25, 1999, the PUCO's assistant attorney general issued a letter (Exhibit D-2) addressed to the Assistant Director of the Commission's Office of Public Utility Regulation, stating that: By a vote on January 20, 1999, the [PUCO] has authorized me to inform you that, pursuant to procedures agreed to in the 1994 merger which created Cinergy Corp., [CG&E] has filed a proposed Utility-Nonutility Services Agreement for PUCO review. This letter is to inform you that the PUCO and its staff has completed its review and has no objections to the Services Agreement as filed with the PUCO. INDIANA: Likewise, pursuant to the 1994 merger settlements, on August 21, 1998 PSI filed the proposed PSI Service Agreement with the staff of the IURC (and provided copies to certain other interested parties), initiating a 60-day pre-SEC filing review period by the IURC's staff. (See Exhibit D-3.) As required by the merger settlement, PSI also published a notice with respect to the Service Agreement in two local newspapers. On December 21, 1998, PSI submitted a letter to the IURC (Exhibit D-4) confirming, in connection with the Service Agreement, that should PSI "be required to re-perform any services (or to correct or repair any deficiencies) under section 4.1 of that agreement, the costs of any such re-performance, correction or repair shall not be allocated or charged to PSI's retail customers." On January 14, 1999, partly on the basis of these assurances, the IURC's staff issued a letter to PSI (Exhibit D-5) stating that the staff had "completed its preliminary review of the [PSI Service Agreement] and the contract is now cleared for filing with the IURC and the SEC." Under state law and the 1994 merger-related settlement agreement with the IURC, PSI, following completion of the staff's review, is required to file the contract with the IURC (and has done so concurrently with the filing of this application with the Commission), although that filing will not initiate any proceeding before the IURC and the IURC is not required to take any action on the contract (beyond its staff's earlier review)./7/ KENTUCKY: The KPSC does not have a right to prior review of the proposed Service Agreement for ULH&P, pursuant to the conditions agreed to by Cinergy in connection with the KPSC's approval of the Cinergy merger in 1994 or otherwise. As noted however, the ULH&P Service Agreement will conform in all material respects to the CG&E Service Agreement (but for the provisions concerning prior state review of proposed amendments to the agreement), including the additional substantive provisions springing from the PUCO's review. In September 1998, the KPSC initiated a proceeding (Administrative Case No. 369) proposing for comment draft cost allocation and affiliate transaction guidelines and a code of conduct for jurisdictional utilities with nonregulated activities or affiliates. The matter is pending. Other than as described above, no state or federal regulatory agency other than the Commission under the Act has jurisdiction over the proposed transactions. Item 5. Procedure Cinergy requests that the Commission issue and publish as soon as practicable the requisite notice under Rule 23 with respect to the filing of this application, and that the Commission issue an order granting the authority requested herein as soon as practicable after expiration of the public notice period. Cinergy waives a recommended decision by a hearing officer or other responsible officer of the Commission; consents that the Staff of the Division of Investment Management may assist in the preparation of the Commission's order; and requests that there be no waiting period between the issuance of the Commission's order and its effectiveness. Item 6. Exhibits and Financial Statements (a) Exhibits: A Not applicable B-1 Form of CG&E Service Agreement B-2 Form of PSI Service Agreement B-3 Form of Service Agreement for each CG&E Utility Subsidiary C Not applicable D-1 Application to PUCO submitting CG&E Service Agreement for review (excluding exhibits) D-2 Letter from PUCO Staff to SEC clearing CG&E Service Agreement for filing D-3 Application to IURC Staff submitting PSI Service Agreement for review (excluding exhibits) D-4 Letter from PSI to IURC Staff providing certain assurances regarding PSI Service Agreement D-5 Letter from IURC Staff to PSI clearing PSI Service Agreement for filing F-1 Preliminary opinion of counsel G Form of Federal Register notice H Pro Forma Consolidated Capitalization at December 31, 1998 I Chart Showing Cinergy Investments and Subsidiaries at December 31, 1998 (b) Financial Statements: FS-1 Cinergy Pro Forma Consolidated Financial Statements, dated December 31, 1998 (to be filed by amendment) FS-2 Cinergy Pro Forma Financial Statements, dated December 31, 1998 (to be filed by amendment) FS-3 Cinergy Consolidated Financial Data Schedule (included as part of electronic submission only) (to be filed by amendment) FS-4 Cinergy Financial Data Schedule (included as part of electronic submission only) (to be filed by amendment) Item 7. Information as to Environmental Effects (a) The Commission's action in this matter will not constitute major federal action significantly affecting the quality of the human environment. (b) No other federal agency has prepared or is preparing an environmental impact statement with regard to the proposed transactions. SIGNATURE Pursuant to the requirements of the Act, the undersigned company has duly caused this statement to be signed on its behalf by the undersigned thereunto duly authorized. Dated: February 4, 1999 CINERGY CORP. By: /s/ Jerome A. Vennemann Assistant Secretary ENDNOTES /1/ These merger-related settlement agreements with the PUCO and the IURC (and other interested parties), as well as conditions agreed to by Cinergy in connection with related merger proceedings before the Kentucky Public Service Commission ("KPSC"), were noted by the Commission in its October 21, 1994 order approving the Cinergy merger and related transactions (HCAR No. 35-26146 in File No. 70-8427). Copies of the relevant documents were submitted by Cinergy in File No. 70-8427 and summarized in the application-declaration in that proceeding. In addition, in connection with the Commission's March 23, 1998 order (HCAR No. 26848) granting Cinergy authority to invest financing proceeds up to 100% of consolidated retained earnings in exempt wholesale generators ("EWGs") and foreign utility companies ("FUCOs"), Cinergy provided a detailed summary of the merger-related arrangements with the PUCO, IURC and KPSC in the application-declaration in that proceeding. /2/ Concurrently with this filing, PSI is submitting the proposed PSI Service Agreement to the IURC. That submission will initiate no proceeding before the IURC and neither requires or seeks any approval or other action by the IURC (beyond the clearance previously issued by its staff). /3/ CG&E has two nonutility subsidiaries - Tri-State Improvement Company, which acquires and holds property in support of the businesses of CG&E and its utility subsidiaries, and KO Transmission Company, a gas pipeline company. CG&E also holds limited partnership interests in several local venture capital and community development funds. PSI has one nonutility subsidiary, South Construction Company, which holds title to real estate not used and useful in PSI's business. PSI also holds limited partnership interests in several local venture capital and community development funds. For more information concerning the nonutility businesses and interests of CG&E and PSI, see the post-effective amendments in File No. 70-8427 in which Cinergy requests an order releasing Commission jurisdiction over Cinergy's continued retention, through CG&E and PSI, of these nonutility businesses and interests. /4/ Cinergy Solutions was formed pursuant to HCAR No. 35-26662, February 7,l997. /5/ Cinergy has pending a request in File No. 70-8427 for an order releasing Commission jurisdiction over Cinergy's continued retention of this entity. /6/ The additional provisions, beyond the two provisions described in the text, consist of certain preliminary recitals (i.e., the fifth through seventh "Whereas" clauses), acknowledgements of exiting obligations to which CG&E is already and will remain subject (i.e., second and third paragraphs of Section 5.6) and notification requirements with respect to the addition of new Nonutility Companies to the Service Agreement (last sentence of Section 5.4). /7/ Similarly, pursuant to requirements of state law, the proposed Service Agreements with Lawrenceburg and West Harrison - each of which is a public utility under Indiana law subject to IURC jurisdiction - will also be filed with the IURC, although such filing will neither initiate any proceeding before the IURC nor require the IURC to take any action in respect of those contracts. EX-99.B-1 2 EXHIBIT B-1 Exhibit B-1 SERVICES AGREEMENT THIS SERVICES AGREEMENT, made and entered into as of _________, 1999 by and among PSI Energy, Inc., an Indiana corporation ("Operating Company"), and the respective associate companies listed on the signature pages hereto (each, a "Nonutility Company"). W I T N E S S E T H: WHEREAS, Operating Company is a direct subsidiary of Cinergy Corp. ("Cinergy"), a registered holding company under the Public Utility Holding Company Act of 1935, as amended ("PUHCA"), and a "public-utility company" as therein defined; and WHEREAS, each of the Nonutility Companies is a direct or indirect subsidiary of Cinergy and, within the meaning of PUHCA or applicable rules, regulations or administrative precedent of the Securities and Exchange Commission ("SEC") thereunder, is a "nonutility company" (but not an "exempt telecommunications company" ("ETC") or a "foreign utility company" ("FUCO")), being neither a "public-utility company," "holding company" nor "subsidiary service company"; and WHEREAS, in the ordinary course of their businesses, Operating Company and Nonutility Companies maintain organizations of employees with technical expertise in matters affecting public utility companies and related businesses and own or acquire related equipment, facilities, properties and other resources; and WHEREAS, pursuant to applicable law or otherwise, and subject to the terms and conditions herein provided, the Indiana Utility Regulatory Commission ("IURC") has authorized Operating Company to enter into this Agreement; and WHEREAS, pursuant to the applicable provisions of PUHCA and the rules and regulations thereunder, and subject to the terms and conditions herein set forth, the SEC has authorized the parties hereto to enter into this Agreement; and WHEREAS, subject to the terms and conditions herein set forth, and taking into consideration the parties' utility responsibilities or primary business operations, as the case may be, the parties hereto are willing, upon request from time to time, to perform such services, and in connection therewith to make available such equipment, facilities, properties and other resources, as they shall request from each other; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties agree as follows: ARTICLE 1. PROVISION OF SERVICES; LOANED EMPLOYEES Section 1.1 Provision of Services. (a) Upon receipt by a party hereto (in such capacity, a "Service Provider") of a written request in substantially the form attached hereto as Exhibit A (a "Service Request") from another party hereto (in such capacity, a "Client Company") for the provision to such Client Company of such services as are specified therein, including if applicable use of any related equipment, facilities, properties or other resources (collectively, "Services"), the Service Provider, if in its sole discretion it has available the personnel or other resources needed to perform the Service Request without impairment of its utility responsibilities or business operations, as the case may be, shall furnish such Services to the Client Company at such times, for such periods and in such manner as the Client Company shall have so requested and otherwise in accordance with the provisions hereof. (b) For purposes of this Agreement, "Services" may include, but shall not be limited to: (I) in the case of Services that may be provided by Operating Company hereunder, services in such areas as engineering and construction; operations and maintenance; and equipment testing; and (ii) in the case of Services that may be provided by Nonutility Companies hereunder, services in such areas as information services; monitoring, surveying, inspecting, constructing, locating and marking of overhead and underground utility facilities; meter reading; materials management; vegetation management; and marketing and customer relations. Affiliate transactions involving sales or other transfers of assets, goods, energy commodities (including electricity, gas, coal and other combustible fuels) or thermal energy products are outside the scope of this Agreement. Likewise, affiliate transactions involving services to or from ETCs or FUCOs are outside the scope of this Agreement. Section 1.2 Loaned Employees. (a) If specifically requested in connection with the provision of Services, Service Provider shall loan one or more of its employees to such Client Company, provided that such loan shall not, in the sole discretion of Service Provider, interfere with or impair Service Provider's utility responsibilities or business operations, as the case may be. After the commencement thereof, any such loaned employees may be withdrawn by Service Provider from tasks duly assigned by Client Company, prior to completion thereof as contemplated in the associated Service Request, only with the consent of Client Company (which shall not be unreasonably withheld or delayed), except in the event of a demonstrable emergency requiring the use of any such employees in another capacity for Service Provider. (b) While performing work on behalf of Client Company, any such loaned employees shall be under its supervision and control, and Client Company shall be responsible for their actions to the same extent as though such persons were its employees (it being understood that such persons shall nevertheless remain employees of Service Provider and nothing herein shall be construed as creating an employer-employee relationship between any Client Company and any loaned employees). Accordingly, for the duration of any such loan, Service Provider shall continue to provide its loaned employees with the same payroll, pension, savings, tax withholding, unemployment, bookkeeping and other personnel support services then being provided by Service Provider to its other employees. ARTICLE 2. SERVICE REQUESTS Section 2.1 Procedure. All Services (including any loans of employees) (I) shall be performed in accordance with Service Requests issued by or on behalf of Client Company and accepted by Service Provider and (ii) shall be assigned to applicable activities, projects, programs or on other appropriate bases to enable specific work to be properly assigned. Service Requests shall be as specific as practicable in defining the Services requested. Client Company shall have the right from time to time to amend or rescind any Service Request, provided that (a) Service Provider consents to any amendment that results in a material change in the scope of Services to be provided, (b) the costs associated with an amended or rescinded Service Request shall include the costs incurred by Service Provider as a result of such amendment or rescission, and no amendment or rescission of a Service Request shall release Client Company from any liability for costs already incurred or contracted for by Service Provider pursuant to the original Service Request, regardless of whether any labor or the furnishing of any property or other resources has been commenced or completed. ARTICLE 3. COMPENSATION FOR SERVICES Section 3.1 Cost of Services. Except as may be required pursuant to Section 5.6 (with respect to regulatory requirements), as compensation for any Services rendered to it pursuant to this Agreement, Client Company shall pay to Service Provider the full cost thereof as computed in accordance with applicable rules, regulations and accounting standards, including Rules 90 and 91 under PUHCA. As soon as practicable after the close of each month, Service Provider shall render to each Client Company a statement reflecting the billing information necessary to identify the costs charged for that month. All amounts so billed shall be paid by Client Company within 30 days after receipt thereof. ARTICLE 4. LIMITATION OF LIABILITY; INDEMNIFICATION Section 4.1 Limitation of Liability/Services. In performing Services pursuant to Section 1.1 hereof, Service Provider will exercise due care to assure that the Services are performed in a workmanlike manner in accordance with the specifications set forth in the applicable Service Request and consistent with any applicable legal standards. The sole and exclusive responsibility of Service Provider for any deficiency therein shall be promptly to correct or repair such deficiency or to re-perform such Services, in either case at no additional cost to Client Company, so that the Services fully conform to the standards described in the first sentence of this Section 4.1. No Service Provider makes any other warranty with respect to the provision of Services, and each Client Company agrees to accept any Services without further warranty of any nature. Section 4.2 Limitation of Liability/Loaned Employees. In furnishing Services under Section 1.2 hereof (i.e., involving loaned employees), neither the Service Provider, nor any officer, director, employee or agent thereof, shall have any responsibility whatever to any Client Company receiving such Services, and Client Company specifically releases Service Provider and such persons, on account of any claims, liabilities, injuries, damages or other consequences arising in connection with the provision of such Services under any theory of liability, whether in contract, tort (including negligence or strict liability) or otherwise, it being understood and agreed that any such loaned employees are made available without warranty as to their suitability or expertise. Section 4.3 Disclaimer. WITH RESPECT TO ANY SERVICES PROVIDED UNDER THIS AGREEMENT, THE SERVICE PROVIDER THEREOF MAKES NO WARRANTY OR REPRESENTATION OTHER THAN AS SET FORTH IN SECTION 4.1, AND THE PARTIES HERETO HEREBY AGREE THAT NO OTHER WARRANTY, WHETHER STATUTORY, EXPRESS OR IMPLIED (INCLUDING BUT NOT LIMITED TO ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND WARRANTIES ARISING FROM COURSE OF DEALING OR USAGE OF TRADE), SHALL BE APPLICABLE TO THE PROVISION OF ANY SUCH SERVICES. THE PARTIES FURTHER AGREE THAT THE REMEDIES STATED HEREIN ARE EXCLUSIVE AND SHALL CONSTITUTE THE SOLE AND EXCLUSIVE REMEDY OF ANY PARTY HERETO FOR A FAILURE BY ANY OTHER PARTY HERETO TO COMPLY WITH ITS WARRANTY OBLIGATIONS. Section 4.4 Indemnification. In respect of any Services provided under this Agreement, any Client Company that issued the Service Request requesting such Services shall defend, indemnify and hold harmless the Service Provider thereof, and each of its officers, directors, employees and agents, from and against, and shall pay the full amount of, any loss, liability, claim, damage, expense (including costs of investigation and defense and reasonable attorneys' fees), whether or not involving a third-party claim (collectively, "Damages"), arising, directly or indirectly, from or in connection with the provision of such Services. Such indemnity shall apply regardless of whether the Claims result from any asserted or actual negligence or willful misconduct of, or breach of warranty by, the Service Provider or any of its officers, directors, employees or agents. Such indemnity shall not apply, however, to the extent that Service Provider receives insurance proceeds in respect of any such Claim. Section 4.5 Procedure for Indemnification. Within 10 days after receipt by Service Provider of notice of any claim or the commencement of any action, suit, litigation or other proceeding against it (a "Proceeding") with respect to which it is eligible for indemnification hereunder, Service Provider shall notify the applicable Client Company thereof (it being understood that failure so to notify Client Company shall not relieve the latter of its indemnification obligation, unless Client Company establishes that defense thereof has been prejudiced by such failure). Thereafter, Client Company shall be entitled to participate in such Proceeding and, at its election upon notice to Service Provider, to assume the defense of such Proceeding. If Service Provider has given timely notice to Client Company of the commencement of such Proceeding, but Client Company has not, within 10 days after receipt of such notice, given notice to Service Provider of its election to assume the defense thereof, Client Company shall be bound by any determination made in such Proceeding or any compromise or settlement made by Service Provider. A claim for indemnification for any matter not involving a third-party claim may be asserted by notice from Service Provider to the applicable Client Company. ARTICLE 5. MISCELLANEOUS Section 5.1 Ratemaking. Operating Company shall not seek to overturn, reverse, set aside, change or enjoin, whether through appeal or the initiation or maintenance of any action in any forum, a decision or order of the IURC which pertains to recovery, disallowance, deferral or ratemaking treatment of any expense, charge, cost or allocation incurred or accrued by Operating Company in or as a result of this Agreement (or any amendment hereto) on the basis that this Agreement and any such expense, charge, cost or allocation was filed with or approved by the SEC. Section 5.2 Amendments in Writing; State Review. (a) Any amendments to this Agreement shall be in writing executed by each of the parties hereto. (b) In the event the parties hereto execute an amendment hereto, the parties shall fulfill the following obligations, where applicable: (I) Prior to filing any amendment with the SEC, the parties shall file with the IURC and provide to the Indiana Utility Consumer Counselor (and, provide, upon request, to other appropriate parties) a copy of such amendment. (ii) In the event that the amendment is finally rejected or disapproved or found to be unreasonable by the IURC prior to filing with the SEC, the amendment shall not become effective and the parties shall not request SEC approval of the amendment. (iii)In the event that the amendment is rejected or disapproved or found to be unreasonable by IURC after it has been filed with but before it has been approved by the SEC, the amendment shall be terminated and the parties agree to request withdrawal of the filing. (iv) Notwithstanding "(ii)" and "(iii)" immediately above, in the event that the amendment is rejected, disapproved or found to be unreasonable by IURC before it has been approved by the SEC, the parties shall have the right to request further revisions of the amendment in order to cure or remove the cause of the IURC's rejection, disapproval or finding of unreasonableness. Upon request by a party hereto, the other parties shall agree promptly to negotiate in good faith to revise the amendment and thereafter to file for any necessary regulatory authorization of the renegotiated amendment. If the parties are unable to reach agreement satisfactory to each of them and to the IURC after good faith negotiations, then "(ii)" or "(iii)" immediately above, as applicable, shall apply. (v) In the event that the IURC has previously approved the amendment prior to SEC approval, "(vi)" immediately below shall not apply. (vi) In the event that an amendment has become effective and is subsequently rejected, disapproved or found to be unreasonable by IURC, the parties shall make a good faith effort to terminate, amend or modify the amendment in a manner which remedies the IURC's adverse findings without adverse impact on any of the parties. The parties shall request to meet with representatives of the IURC and make a good faith attempt to resolve any differences regarding the subject amendment. If agreement can be reached to terminate the amendment or amend or modify the amendment in a manner satisfactory to the parties hereto and to the representatives of the IURC, then the parties shall file such amendment with the appropriate state and federal regulatory agencies, seeking all necessary regulatory authorizations. If the parties are unable to reach agreement satisfactory to each of them and to the IURC after good faith negotiations, then they shall be under no further obligation to amend the amendment. Nothing in this Section 5.2 is intended to detract from the authority of the SEC under PUHCA. Section 5.3 Effective Date; Term. This Agreement shall become effective as of the day and year first above written and shall continue in full force and effect as to each party until terminated by any party, as to itself only, upon not less than 30 days prior written notice to the other parties hereto. Any such termination of parties shall not be deemed an amendment and shall not require adherence to the procedures set forth in Section 5.2(b). Section 5.4 Additional Parties. After the effective date of this Agreement, additional Nonutility Companies may become parties to this Agreement by executing appropriate signature pages, whereupon any such additional signatory shall be deemed a "party" hereto all purposes hereof and shall thereupon become bound by the terms and conditions of this Agreement as if an original party hereto. The addition of any such further signatories, in the absence of any changes to the terms of this Agreement, shall not be deemed an amendment hereto and shall not be subject to the procedures described in Section 5.2(b). Section 5.5 Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes any prior or concurrent understandings with respect thereto. Any oral or written statements, representations, promises, negotiations or agreements, whether prior hereto or concurrently herewith, are superseded by and merged into this Agreement. Section 5.6 Severability; Regulatory Requirements. If any provision of this Agreement or any application thereof shall be determined to be invalid or unenforceable, the remainder of this Agreement and any other application thereof shall not be affected thereby. Without limiting the generality of the foregoing, the provision of Services pursuant to this Agreement shall in all cases, and notwithstanding anything herein to the contrary, be subject to any limitations or restrictions contained in any applicable orders or authorizations, statutory provisions, rules or regulations, or agreements, whether now in existence or hereinafter promulgated, of those regulatory or governmental agencies, including without limitation the IURC, SEC and Federal Energy Regulatory Commission, having jurisdiction over any of the parties hereto. To the extent, if any, that at any time any provision of this Agreement conflicts with any such limitation or restriction of any such other regulatory agencies, such limitation shall control. Section 5.7 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the parties hereto, provided that a Service Provider shall not be entitled to assign or subcontract to any third party any of Service Provider's obligations under this Agreement or under any Service Request issued hereunder without the prior approval of each affected Client Company. Section 5.8 Governing Law. This Agreement shall be construed and enforced under and in accordance with the laws of the State of Indiana, without regard to conflicts of laws principles. Section 5.9 Captions, etc. The captions and headings used in this Agreement are for convenience of reference only and shall not affect the construction to be accorded any of the provisions hereof. As used in this Agreement, "hereof," "hereunder," "herein," "hereto," and words of like import refer to this Agreement as a whole and not to any particular section or other paragraph or subparagraph thereof. Section 5.10 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed a duplicate original hereof, but all of which shall be deemed one and the same Agreement. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed on its behalf by an appropriate officer thereunto duly authorized, as of the respective dates set forth below. PSI Energy, Inc. Date:____________ By:______________________ Name: Title: Cinergy Investments, Inc. Date:___________ By:_____________________ Name: Title: KO Transmission Company Date:___________ By:_____________________ Name: Title: Tri-State Improvement Company Date:___________ By:____________________ Name: Title: South Construction Company, Inc. Date:___________ By:____________________ Name: Title: Cinergy-Cadence, Inc. Date:___________ By:____________________ Name: Title: Cadence Network LLC Date:___________ By:____________________ Name: Title: Cinergy Capital & Trading, Inc. Date:___________ By:____________________ Name: Title: CinCap IV, LLC Date:___________ By:____________________ Name: Title: CinCap V, LLC Date:___________ By:____________________ Name: Title: CinPower I, LLC Date:____________ By:____________________ Name: Title: Producers Energy Marketing, LLC Date:___________ By:____________________ Name: Title: Cinergy Engineering, Inc. Date:___________ By:____________________ Name: Title: Cinergy Resources, Inc. Date:___________ By:____________________ Name: Title: Cinergy Solutions, Inc. Date:___________ By:____________________ Name: Title: Cinergy Business Solutions, Inc. Date:___________ By:____________________ Name: Title: Trigen-Cinergy Solutions LLC Date:___________ By:____________________ Name: Title: Trigen-Cinergy Solutions of Illinois L.L.C. Date:___________ By:____________________ Name: Title: Trigen-Cinergy Solutions of Orlando LLC Date:___________ By:____________________ Name: Title: Cinergy Supply Network, Inc. Date:___________ By:____________________ Name: Title: Reliant Services, LLC Date:___________ By:____________________ Name: Title: Cinergy Technology, Inc. Date:___________ By:____________________ Name: Title: Enertech Associates, Inc. Date:___________ By:____________________ Name: Title: Exhibit A FORM OF SERVICE REQUEST Client Company: Approved By: Name: Title: Proposed Service Provider/ Description of Proposed Services: Estimated Costs (provide basis): Scheduled Start Date: Scheduled Completion Date: Service Provider: Approved By: Name: Title: EX-99.B-2 3 EXHIBIT B-2 Exhibit B-2 SERVICES AGREEMENT THIS SERVICES AGREEMENT, made and entered into as of _________, 1999 by and among The Cincinnati Gas & Electric Company, an Ohio corporation ("Operating Company" or "CG&E"), and the respective associate companies listed on the signature pages hereto (each, a "Nonutility Company"). W I T N E S S E T H: WHEREAS, Operating Company is a direct subsidiary of Cinergy Corp. ("Cinergy"), a registered holding company under the Public Utility Holding Company Act of 1935, as amended ("PUHCA"), and a "public-utility company" as therein defined; and WHEREAS, each of the Nonutility Companies is a direct or indirect subsidiary of Cinergy and, within the meaning of PUHCA or applicable rules, regulations or administrative precedent of the Securities and Exchange Commission ("SEC") thereunder, is a "nonutility company" (but not an "exempt telecommunications company" ("ETC") or a "foreign utility company" ("FUCO")), being neither a "public-utility company," "holding company" nor "subsidiary service company"; and WHEREAS, in the ordinary course of their businesses, Operating Company and Nonutility Companies maintain organizations of employees with technical expertise in matters affecting public utility companies and related businesses and own or acquire related equipment, facilities, properties and other resources; and WHEREAS, CG&E will follow the Cinergy Services, Inc. Accounting and Cost Assignment Procedures for all transactions occurring under this Service Agreement; and WHEREAS, CG&E has previously agreed under certain conditions to make available to the Public Utilities Commission of Ohio ("PUCO") and its staff all books, records, employees, and officers of CG&E and any Nonutility Company necessary to permit the PUCO to carry out its statutory and regulatory obligations, the terms and conditions of Article III, F of the Ohio Joint Stipulation and Agreement, FERC Docket No. EC96-6, shall apply to transactions occurring under this Service Agreement; and WHEREAS, CG&E will continue to be subject to all rules, regulations, orders, entries, and directives of the PUCO relating to billing and customer relations; and WHEREAS, pursuant to applicable law or otherwise, and subject to the terms and conditions herein provided, the PUCO has authorized Operating Company to enter into this Agreement; and WHEREAS, pursuant to the applicable provisions of PUHCA and the rules and regulations thereunder, and subject to the terms and conditions herein set forth, the SEC has authorized the parties hereto to enter into this Agreement; and WHEREAS, subject to the terms and conditions herein set forth, and taking into consideration the parties' utility responsibilities or primary business operations, as the case may be, the parties hereto are willing, upon request from time to time, to perform such services, and in connection therewith to make available such equipment, facilities, properties and other resources, as they shall request from each other; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties agree as follows: ARTICLE 1. PROVISION OF SERVICES; LOANED EMPLOYEES Section 1.1 Provision of Services. (a) Upon receipt by a party hereto (in such capacity, a "Service Provider") of a written request in substantially the form attached hereto as Exhibit A (a "Service Request") from another party hereto (in such capacity, a "Client Company") for the provision to such Client Company of such services as are specified therein, including if applicable use of any related equipment, facilities, properties or other resources (collectively, "Services"), the Service Provider, if in its sole discretion it has available the personnel or other resources needed to perform the Service Request without impairment of its utility responsibilities or business operations, as the case may be, shall furnish such Services to the Client Company at such times, for such periods and in such manner as the Client Company shall have so requested and otherwise in accordance with the provisions hereof. (b) For purposes of this Agreement, "Services" may include, but shall not be limited to: (I) in the case of Services that may be provided by Operating Company hereunder, services in such areas as engineering and construction; operations and maintenance; and equipment testing; and (ii) in the case of Services that may be provided by Nonutility Companies hereunder, services in such areas as information services; monitoring, surveying, inspecting, constructing, locating and marking of overhead and underground utility facilities; meter reading; materials management; vegetation management; and marketing and customer relations. No such transaction may include the provision of information or other services by the Operating Company that may result in an undue or unreasonable competitive advantage under law to any Nonutility Company. Affiliate transactions involving sales, leases, or other transfers of assets, goods, energy commodities (including electricity, gas, coal and other combustible fuels) or thermal energy products are outside the scope of this Agreement. Likewise, affiliate transactions involving services to or from ETCs or FUCOs are outside the scope of this Agreement. Section 1.2 Loaned Employees. (a) If specifically requested in connection with the provision of Services, Service Provider shall loan one or more of its employees to such Client Company, provided that such loan shall not, in the sole discretion of Service Provider, interfere with or impair Service Provider's utility responsibilities or business operations, as the case may be. After the commencement thereof, any such loaned employees may be withdrawn by Service Provider from tasks duly assigned by Client Company, prior to completion thereof as contemplated in the associated Service Request, only with the consent of Client Company (which shall not be unreasonably withheld or delayed), except in the event of a demonstrable emergency requiring the use of any such employees in another capacity for Service Provider. (b) While performing work on behalf of Client Company, any such loaned employees shall be under its supervision and control, and Client Company shall be responsible for their actions to the same extent as though such persons were its employees (it being understood that such persons shall nevertheless remain employees of Service Provider and nothing herein shall be construed as creating an employer-employee relationship between any Client Company and any loaned employees). Accordingly, for the duration of any such loan, Service Provider shall continue to provide its loaned employees with the same payroll, pension, savings, tax withholding, unemployment, bookkeeping and other personnel support services then being provided by Service Provider to its other employees. ARTICLE 2. SERVICE REQUESTS Section 2.1 Procedure. All Services (including any loans of employees) (I) shall be performed in accordance with Service Requests issued by or on behalf of Client Company and accepted by Service Provider and (ii) shall be assigned to applicable activities, projects, programs or on other appropriate bases to enable specific work to be properly assigned. Service Requests shall be as specific as practicable in defining the Services requested. Client Company shall have the right from time to time to amend or rescind any Service Request, provided that (a) Service Provider consents to any amendment that results in a material change in the scope of Services to be provided, (b) the costs associated with an amended or rescinded Service Request shall include the costs incurred by Service Provider as a result of such amendment or rescission, and no amendment or rescission of a Service Request shall release Client Company from any liability for costs already incurred or contracted for by Service Provider pursuant to the original Service Request, regardless of whether any labor or the furnishing of any property or other resources has been commenced or completed. ARTICLE 3. COMPENSATION FOR SERVICES Section 3.1 Cost of Services. Except as may be required pursuant to Section 5.6 (with respect to regulatory requirements), as compensation for any Services rendered to it pursuant to this Agreement, Client Company shall pay to Service Provider the full cost thereof as computed in accordance with applicable rules, regulations and accounting standards, including Rules 90 and 91 under PUHCA. As soon as practicable after the close of each month, Service Provider shall render to each Client Company a statement reflecting the billing information necessary to identify the costs charged for that month. All amounts so billed shall be paid by Client Company within 30 days after receipt thereof. ARTICLE 4. LIMITATION OF LIABILITY; INDEMNIFICATION Section 4.1 Limitation of Liability/Services. In performing Services pursuant to Section 1.1 hereof, Service Provider will exercise due care to assure that the Services are performed in a workmanlike manner in accordance with the specifications set forth in the applicable Service Request and consistent with any applicable legal standards. The sole and exclusive responsibility of Service Provider for any deficiency therein shall be promptly to correct or repair such deficiency or to re-perform such Services, in either case at no additional cost to Client Company, so that the Services fully conform to the standards described in the first sentence of this Section 4.1. No Service Provider makes any other warranty with respect to the provision of Services, and each Client Company agrees to accept any Services without further warranty of any nature. Section 4.2 Limitation of Liability/Loaned Employees. In furnishing Services under Section 1.2 hereof (i.e., involving loaned employees), neither the Service Provider, nor any officer, director, employee or agent thereof, shall have any responsibility whatever to any Client Company receiving such Services, and Client Company specifically releases Service Provider and such persons, on account of any claims, liabilities, injuries, damages or other consequences arising in connection with the provision of such Services under any theory of liability, whether in contract, tort (including negligence or strict liability) or otherwise, it being understood and agreed that any such loaned employees are made available without warranty as to their suitability or expertise. Section 4.3 Disclaimer. WITH RESPECT TO ANY SERVICES PROVIDED UNDER THIS AGREEMENT, THE SERVICE PROVIDER THEREOF MAKES NO WARRANTY OR REPRESENTATION OTHER THAN AS SET FORTH IN SECTION 4.1, AND THE PARTIES HERETO HEREBY AGREE THAT NO OTHER WARRANTY, WHETHER STATUTORY, EXPRESS OR IMPLIED (INCLUDING BUT NOT LIMITED TO ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND WARRANTIES ARISING FROM COURSE OF DEALING OR USAGE OF TRADE), SHALL BE APPLICABLE TO THE PROVISION OF ANY SUCH SERVICES. THE PARTIES FURTHER AGREE THAT THE REMEDIES STATED HEREIN ARE EXCLUSIVE AND SHALL CONSTITUTE THE SOLE AND EXCLUSIVE REMEDY OF ANY PARTY HERETO FOR A FAILURE BY ANY OTHER PARTY HERETO TO COMPLY WITH ITS WARRANTY OBLIGATIONS. Section 4.4 Indemnification. In respect of any Services provided under this Agreement, any Client Company that issued the Service Request requesting such Services shall defend, indemnify and hold harmless the Service Provider thereof, and each of its officers, directors, employees and agents, from and against, and shall pay the full amount of, any loss, liability, claim, damage, expense (including costs of investigation and defense and reasonable attorneys' fees), whether or not involving a third-party claim (collectively, "Damages"), arising, directly or indirectly, from or in connection with the provision of such Services. Such indemnity shall apply regardless of whether the Claims result from any asserted or actual negligence or willful misconduct of, or breach of warranty by, the Service Provider or any of its officers, directors, employees or agents. Such indemnity shall not apply, however, to the extent that Service Provider receives insurance proceeds in respect of any such Claim. Section 4.5 Procedure for Indemnification. Within 10 days after receipt by Service Provider of notice of any claim or the commencement of any action, suit, litigation or other proceeding against it (a "Proceeding") with respect to which it is eligible for indemnification hereunder, Service Provider shall notify the applicable Client Company thereof (it being understood that failure so to notify Client Company shall not relieve the latter of its indemnification obligation, unless Client Company establishes that defense thereof has been prejudiced by such failure). Thereafter, Client Company shall be entitled to participate in such Proceeding and, at its election upon notice to Service Provider, to assume the defense of such Proceeding. If Service Provider has given timely notice to Client Company of the commencement of such Proceeding, but Client Company has not, within 10 days after receipt of such notice, given notice to Service Provider of its election to assume the defense thereof, Client Company shall be bound by any determination made in such Proceeding or any compromise or settlement made by Service Provider. A claim for indemnification for any matter not involving a third-party claim may be asserted by notice from Service Provider to the applicable Client Company. ARTICLE 5. MISCELLANEOUS Section 5.1 Ratemaking. Operating Company shall not seek to overturn, reverse, set aside, change or enjoin, whether through appeal or the initiation or maintenance of any action in any forum, a decision or order of the PUCO which pertains to recovery, disallowance, deferral or ratemaking treatment of any expense, charge, cost or allocation incurred or accrued by Operating Company in or as a result of this Agreement (or any amendment hereto) on the basis that this Agreement and any such expense, charge, cost or allocation was filed with or approved by the SEC. Section 5.2 Amendments in Writing; State Review. (a) Any amendments to this Agreement shall be in writing executed by each of the parties hereto. (b) In the event the parties hereto execute an amendment hereto, the parties shall fulfill the following obligations, where applicable: (I) Prior to filing any amendment with the SEC, the parties shall file with the PUCO and provide to the Ohio Consumers' Counsel (and, provide, upon request, to other appropriate parties) a copy of such amendment. (ii) In the event that the amendment is finally rejected or disapproved or found to be unreasonable by the PUCO prior to filing with the SEC, the amendment shall not become effective and the parties shall not request SEC approval of the amendment. (iii) In the event that the amendment is rejected or disapproved or found to be unreasonable by PUCO after it has been filed with but before it has been approved by the SEC, the amendment shall be terminated and the parties agree to request withdrawal of the filing. (iv) Notwithstanding "(ii)" and "(iii)" immediately above, in the event that the amendment is rejected, disapproved or found to be unreasonable by PUCO before it has been approved by the SEC, the parties shall have the right to request further revisions of the amendment in order to cure or remove the cause of the PUCO's rejection, disapproval or finding of unreasonableness. Upon request by a party hereto, the other parties shall agree promptly to negotiate in good faith to revise the amendment and thereafter to file for any necessary regulatory authorization of the renegotiated amendment. If the parties are unable to reach agreement satisfactory to each of them and to the PUCO after good faith negotiations, then "(ii)" or "(iii)" immediately above, as applicable, shall apply. (v) In the event that the PUCO has previously approved the amendment prior to SEC approval, "(vi)" immediately below shall not apply. (vi) In the event that an amendment has become effective and is subsequently rejected, disapproved or found to be unreasonable by PUCO, the parties shall make a good faith effort to terminate, amend or modify the amendment in a manner which remedies the PUCO's adverse findings without adverse impact on any of the parties. The parties shall request to meet with representatives of the PUCO and make a good faith attempt to resolve any differences regarding the subject amendment. If agreement can be reached to terminate the amendment or amend or modify the amendment in a manner satisfactory to the parties hereto and to the representatives of the PUCO, then the parties shall file such amendment with the appropriate state and federal regulatory agencies, seeking all necessary regulatory authorizations. If the parties are unable to reach agreement satisfactory to each of them and to the PUCO after good faith negotiations, then they shall be under no further obligation to amend the amendment. Nothing in this Section 5.2 is intended to detract from the authority of the SEC under PUHCA. Section 5.3 Effective Date; Term. This Agreement shall become effective as of the day and year first above written and shall continue in full force and effect as to each party until terminated by any party, as to itself only, upon not less than 30 days prior written notice to the other parties hereto. Any such termination of parties shall not be deemed an amendment and shall not require adherence to the procedures set forth in Section 5.2(b). Section 5.4 Additional Parties. After the effective date of this Agreement, additional Nonutility Companies may become parties to this Agreement by executing appropriate signature pages, whereupon any such additional signatory shall be deemed a "party" hereto all purposes hereof and shall thereupon become bound by the terms and conditions of this Agreement as if an original party hereto. The addition of any such further signatories, in the absence of any changes to the terms of this Agreement, shall not be deemed an amendment hereto and shall not be subject to the procedures described in Section 5.2(b). CG&E shall notify the PUCO within 45 days after any Nonutility Company is added as a party to this Services Agreement. Section 5.5 Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes any prior or concurrent understandings with respect thereto. Any oral or written statements, representations, promises, negotiations or agreements, whether prior hereto or concurrently herewith, are superseded by and merged into this Agreement. Section 5.6 Severability; Regulatory Requirements. If any provision of this Agreement or any application thereof shall be determined to be invalid or unenforceable, the remainder of this Agreement and any other application thereof shall not be affected thereby. Without limiting the generality of the foregoing, the provision of Services pursuant to this Agreement shall in all cases, and notwithstanding anything herein to the contrary, be subject to any limitations or restrictions contained in any applicable orders or authorizations, statutory provisions, rules or regulations, tariffs, or agreements, whether now in existence or hereinafter promulgated, of those regulatory or governmental agencies, including without limitation the PUCO, SEC and Federal Energy Regulatory Commission, having jurisdiction over any of the parties hereto. To the extent, if any, that at any time any provision of this Agreement conflicts with any such limitation or restriction of any such other regulatory agencies, such limitation shall control. CG&E has waived the U.S. Securities and Exchange Commission ( SEC ) preemption so that SEC approval of this Services Agreement (including any amendments thereto) would not preempt, preclude, delay or otherwise affect PUCO review of the Services Agreement and transactions under the Services Agreement. Further, with the waiver of SEC preemption, the PUCO may, by order, entry or directive, require accounting treatment(s), codes of conduct, guidelines, performance criteria, and rules and regulations relating to the Services Agreement and/or transactions under the Services Agreement. CG&E has and shall continue to have ultimate responsibility under Title 49 of the Ohio Revised Code, PUCO rules and orders with respect to: CG&E customer inquiries, complaints, and customer relations; billing services, metering services, information services, and other utility services presently regulated by the Public Utility Commission of Ohio, and inquires and complaints thereto, regardless of whether such services are provided by an affiliate or by any other arrangement. Section 5.7 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the parties hereto, provided that a Service Provider shall not be entitled to assign or subcontract to any third party any of Service Provider's obligations under this Agreement or under any Service Request issued hereunder without the prior approval of each affected Client Company. Section 5.8 Governing Law. This Agreement shall be construed and enforced under and in accordance with the laws of the State of Ohio, without regard to conflicts of laws principles. Section 5.9 Captions, etc. The captions and headings used in this Agreement are for convenience of reference only and shall not affect the construction to be accorded any of the provisions hereof. As used in this Agreement, "hereof," "hereunder," "herein," "hereto," and words of like import refer to this Agreement as a whole and not to any particular section or other paragraph or subparagraph thereof. Section 5.10 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed a duplicate original hereof, but all of which shall be deemed one and the same Agreement. Section 5.11 Customer Information Disclosure. CG&E and the Nonutility Companies agree to certain prohibitions related to the access, sharing, and release of customer information and customer information databases. For purposes of carrying out the Services Agreement and all Service Requests pursuant thereto: (a) No employee of a Nonutility Company may access CG&E's customer database or release CG&E customer information without the written consent of the customer specifying the type of information to be released. (b) No employee of CG&E may release CG&E customer information to a Nonutility Company without the written consent of the customer specifying the type of information to be released. CG&E shall keep a log when the CG&E customer database is accessed by or CG&E customer information is released to a Nonutility Company. Such log shall include customer name, date(s) when CG&E's customer database was accessed or CG&E customer information was released, the type(s) of information accessed or released, and the employee and entity requesting access to the database or release of information. (d) Notwithstanding Paragraphs (a), (b), and above, when a Nonutility Company provides or assists in providing utility service (like billing) regulated by the PUCO as an agent of or on behalf of CG&E: (I) CG&E may release information for such utility services to such Nonutility Company without the customer's consent; (ii) CG&E may access the customer database or so release CG&E customer information without keeping a log of each access or release of information. (e) CG&E customer information released to a Nonutility Company may not be shared or supplied by that Nonutility Company with or to another CG&E Affiliate or Cinergy Subsidiary. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed on its behalf by an appropriate officer thereunto duly authorized, as of the respective dates set forth below. The Cincinnati Gas & Electric Company Date:____________ By:______________________ Name: Title: Cinergy Investments, Inc. Date:___________ By:____________________ Name: Title: KO Transmission Company Date:___________ By:____________________ Name: Title: Tri-State Improvement Company Date:___________ By:____________________ Name: Title: South Construction Company, Inc. Date:___________ By:____________________ Name: Title: Cinergy-Cadence, Inc. Date:___________ By:____________________ Name: Title: Cadence Network LLC Date:___________ By:____________________ Name: Title: Cinergy Capital & Trading, Inc. Date:___________ By:____________________ Name: Title: CinCap IV, LLC Date:___________ By:____________________ Name: Title: CinCap V, LLC Date:___________ By:____________________ Name: Title: CinPower I, LLC Date:___________ By:____________________ Name: Title: Producers Energy Marketing, LLC Date:___________ By:____________________ Name: Title: Cinergy Engineering, Inc. Date:___________ By:____________________ Name: Title: Cinergy Resources, Inc. Date:___________ By:____________________ Name: Title: Cinergy Solutions, Inc. Date:___________ By:____________________ Name: Title: Cinergy Business Solutions, Inc. Date:___________ By:____________________ Name: Title: Trigen-Cinergy Solutions LLC Date:___________ By:____________________ Name: Title: Trigen-Cinergy Solutions of Illinois L.L.C. Date:___________ By:____________________ Name: Title: Trigen-Cinergy Solutions of Orlando LLC Date:___________ By:____________________ Name: Title: Cinergy Supply Network, Inc. Date:___________ By:____________________ Name: Title: Reliant Services, LLC Date:___________ By:____________________ Name: Title: Cinergy Technology, Inc. Date:___________ By:____________________ Name: Title: Enertech Associates, Inc. Date:___________ By:____________________ Name: Title: Exhibit A FORM OF SERVICE REQUEST Client Company: Approved By: Name: Title: Proposed Service Provider/ Description of Proposed Services: Estimated Costs (provide basis): Scheduled Start Date: Scheduled Completion Date: Service Provider: Approved By: Name: Title: EX-99.B-3 4 EXHIBIT B-3 Exhibit B-3 SERVICES AGREEMENT/1/ THIS SERVICES AGREEMENT, made and entered into as of _________, 1999 by and among The Union Light, Heat and Power Company, a Kentucky corporation ("Operating Company" or "ULH&P"), and the respective associate companies listed on the signature pages hereto (each, a "Nonutility Company"). W I T N E S S E T H: WHEREAS, Operating Company is an indirect subsidiary of Cinergy Corp. ("Cinergy"), a registered holding company under the Public Utility Holding Company Act of 1935, as amended ("PUHCA"), and a "public-utility company" as therein defined; and WHEREAS, each of the Nonutility Companies is a direct or indirect subsidiary of Cinergy and, within the meaning of PUHCA or applicable rules, regulations or administrative precedent of the Securities and Exchange Commission ("SEC") thereunder, is a "nonutility company" (but not an "exempt telecommunications company" ("ETC") or a "foreign utility company" ("FUCO")), being neither a "public-utility company," "holding company" nor "subsidiary service company"; and WHEREAS, in the ordinary course of their businesses, Operating Company and Nonutility Companies maintain organizations of employees with technical expertise in matters affecting public utility companies and related businesses and own or acquire related equipment, facilities, properties and other resources; and WHEREAS, ULH&P has previously agreed under certain conditions to make available to the Kentucky Public Service Commission ("KYPSC") and its staff all books, records, employees, and officers of ULH&P and any Nonutility Company necessary to permit the KYPSC to carry out its statutory and regulatory obligations, the terms and conditions of the May 13, 1994 Order in Case No. 94-104, shall apply to transactions occurring under this Service Agreement; and WHEREAS, pursuant to the applicable provisions of PUHCA and the rules and regulations thereunder, and subject to the terms and conditions herein set forth, the SEC has authorized the parties hereto to enter into this Agreement; and WHEREAS, subject to the terms and conditions herein set forth, and taking into consideration the parties' utility responsibilities or primary business operations, as the case may be, the parties hereto are willing, upon request from time to time, to perform such services, and in connection therewith to make available such equipment, facilities, properties and other resources, as they shall request from each other; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties agree as follows: ARTICLE 1. PROVISION OF SERVICES; LOANED EMPLOYEES Section 1.1 Provision of Services. (a) Upon receipt by a party hereto (in such capacity, a "Service Provider") of a written request in substantially the form attached hereto as Exhibit A (a "Service Request") from another party hereto (in such capacity, a "Client Company") for the provision to such Client Company of such services as are specified therein, including if applicable use of any related equipment, facilities, properties or other resources (collectively, "Services"), the Service Provider, if in its sole discretion it has available the personnel or other resources needed to perform the Service Request without impairment of its utility responsibilities or business operations, as the case may be, shall furnish such Services to the Client Company at such times, for such periods and in such manner as the Client Company shall have so requested and otherwise in accordance with the provisions hereof. (b) For purposes of this Agreement, "Services" may include, but shall not be limited to: (I) in the case of Services that may be provided by Operating Company hereunder, services in such areas as engineering and construction; operations and maintenance; and equipment testing; and (ii) in the case of Services that may be provided by Nonutility Companies hereunder, services in such areas as information services; monitoring, surveying, inspecting, constructing, locating and marking of overhead and underground utility facilities; meter reading; materials management; vegetation management; and marketing and customer relations. No such transaction may include the provision of information or other services by the Operating Company that may result in an undue or unreasonable competitive advantage under law to any Nonutility Company. Affiliate transactions involving sales, leases, or other transfers of assets, goods, energy commodities (including electricity, gas, coal and other combustible fuels) or thermal energy products are outside the scope of this Agreement. Likewise, affiliate transactions involving services to or from ETCs or FUCOs are outside the scope of this Agreement. Section 1.2 Loaned Employees. (a) If specifically requested in connection with the provision of Services, Service Provider shall loan one or more of its employees to such Client Company, provided that such loan shall not, in the sole discretion of Service Provider, interfere with or impair Service Provider's utility responsibilities or business operations, as the case may be. After the commencement thereof, any such loaned employees may be withdrawn by Service Provider from tasks duly assigned by Client Company, prior to completion thereof as contemplated in the associated Service Request, only with the consent of Client Company (which shall not be unreasonably withheld or delayed), except in the event of a demonstrable emergency requiring the use of any such employees in another capacity for Service Provider. (b) While performing work on behalf of Client Company, any such loaned employees shall be under its supervision and control, and Client Company shall be responsible for their actions to the same extent as though such persons were its employees (it being understood that such persons shall nevertheless remain employees of Service Provider and nothing herein shall be construed as creating an employer-employee relationship between any Client Company and any loaned employees). Accordingly, for the duration of any such loan, Service Provider shall continue to provide its loaned employees with the same payroll, pension, savings, tax withholding, unemployment, bookkeeping and other personnel support services then being provided by Service Provider to its other employees. ARTICLE 2. SERVICE REQUESTS Section 2.1 Procedure. All Services (including any loans of employees) (I) shall be performed in accordance with Service Requests issued by or on behalf of Client Company and accepted by Service Provider and (ii) shall be assigned to applicable activities, projects, programs or on other appropriate bases to enable specific work to be properly assigned. Service Requests shall be as specific as practicable in defining the Services requested. Client Company shall have the right from time to time to amend or rescind any Service Request, provided that (a) Service Provider consents to any amendment that results in a material change in the scope of Services to be provided, (b) the costs associated with an amended or rescinded Service Request shall include the costs incurred by Service Provider as a result of such amendment or rescission, and no amendment or rescission of a Service Request shall release Client Company from any liability for costs already incurred or contracted for by Service Provider pursuant to the original Service Request, regardless of whether any labor or the furnishing of any property or other resources has been commenced or completed. ARTICLE 3. COMPENSATION FOR SERVICES Section 3.1 Cost of Services. Except as may be required pursuant to Section 5.6 (with respect to regulatory requirements), as compensation for any Services rendered to it pursuant to this Agreement, Client Company shall pay to Service Provider the full cost thereof as computed in accordance with applicable rules, regulations and accounting standards, including Rules 90 and 91 under PUHCA. As soon as practicable after the close of each month, Service Provider shall render to each Client Company a statement reflecting the billing information necessary to identify the costs charged for that month. All amounts so billed shall be paid by Client Company within 30 days after receipt thereof. ARTICLE 4. LIMITATION OF LIABILITY; INDEMNIFICATION Section 4.1 Limitation of Liability/Services. In performing Services pursuant to Section 1.1 hereof, Service Provider will exercise due care to assure that the Services are performed in a workmanlike manner in accordance with the specifications set forth in the applicable Service Request and consistent with any applicable legal standards. The sole and exclusive responsibility of Service Provider for any deficiency therein shall be promptly to correct or repair such deficiency or to re-perform such Services, in either case at no additional cost to Client Company, so that the Services fully conform to the standards described in the first sentence of this Section 4.1. No Service Provider makes any other warranty with respect to the provision of Services, and each Client Company agrees to accept any Services without further warranty of any nature. Section 4.2 Limitation of Liability/Loaned Employees. In furnishing Services under Section 1.2 hereof (i.e., involving loaned employees), neither the Service Provider, nor any officer, director, employee or agent thereof, shall have any responsibility whatever to any Client Company receiving such Services, and Client Company specifically releases Service Provider and such persons, on account of any claims, liabilities, injuries, damages or other consequences arising in connection with the provision of such Services under any theory of liability, whether in contract, tort (including negligence or strict liability) or otherwise, it being understood and agreed that any such loaned employees are made available without warranty as to their suitability or expertise. Section 4.3 Disclaimer. WITH RESPECT TO ANY SERVICES PROVIDED UNDER THIS AGREEMENT, THE SERVICE PROVIDER THEREOF MAKES NO WARRANTY OR REPRESENTATION OTHER THAN AS SET FORTH IN SECTION 4.1, AND THE PARTIES HERETO HEREBY AGREE THAT NO OTHER WARRANTY, WHETHER STATUTORY, EXPRESS OR IMPLIED (INCLUDING BUT NOT LIMITED TO ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND WARRANTIES ARISING FROM COURSE OF DEALING OR USAGE OF TRADE), SHALL BE APPLICABLE TO THE PROVISION OF ANY SUCH SERVICES. THE PARTIES FURTHER AGREE THAT THE REMEDIES STATED HEREIN ARE EXCLUSIVE AND SHALL CONSTITUTE THE SOLE AND EXCLUSIVE REMEDY OF ANY PARTY HERETO FOR A FAILURE BY ANY OTHER PARTY HERETO TO COMPLY WITH ITS WARRANTY OBLIGATIONS. Section 4.4 Indemnification. In respect of any Services provided under this Agreement, any Client Company that issued the Service Request requesting such Services shall defend, indemnify and hold harmless the Service Provider thereof, and each of its officers, directors, employees and agents, from and against, and shall pay the full amount of, any loss, liability, claim, damage, expense (including costs of investigation and defense and reasonable attorneys' fees), whether or not involving a third-party claim (collectively, "Damages"), arising, directly or indirectly, from or in connection with the provision of such Services. Such indemnity shall apply regardless of whether the Claims result from any asserted or actual negligence or willful misconduct of, or breach of warranty by, the Service Provider or any of its officers, directors, employees or agents. Such indemnity shall not apply, however, to the extent that Service Provider receives insurance proceeds in respect of any such Claim. Section 4.5 Procedure for Indemnification. Within 10 days after receipt by Service Provider of notice of any claim or the commencement of any action, suit, litigation or other proceeding against it (a "Proceeding") with respect to which it is eligible for indemnification hereunder, Service Provider shall notify the applicable Client Company thereof (it being understood that failure so to notify Client Company shall not relieve the latter of its indemnification obligation, unless Client Company establishes that defense thereof has been prejudiced by such failure). Thereafter, Client Company shall be entitled to participate in such Proceeding and, at its election upon notice to Service Provider, to assume the defense of such Proceeding. If Service Provider has given timely notice to Client Company of the commencement of such Proceeding, but Client Company has not, within 10 days after receipt of such notice, given notice to Service Provider of its election to assume the defense thereof, Client Company shall be bound by any determination made in such Proceeding or any compromise or settlement made by Service Provider. A claim for indemnification for any matter not involving a third-party claim may be asserted by notice from Service Provider to the applicable Client Company. ARTICLE 5. MISCELLANEOUS Section 5.1 Ratemaking. Operating Company shall not seek to overturn, reverse, set aside, change or enjoin, whether through appeal or the initiation or maintenance of any action in any forum, a decision or order of the KYPSC which pertains to recovery, disallowance, deferral or ratemaking treatment of any expense, charge, cost or allocation incurred or accrued by Operating Company in or as a result of this Agreement (or any amendment hereto) on the basis that this Agreement and any such expense, charge, cost or allocation was filed with or approved by the SEC. Section 5.2 Amendments in Writing. (a) Any amendments to this Agreement shall be in writing executed by each of the parties hereto. (b) A copy of any amendment hereto shall be provided to the KYPSC at the time it is filed with the SEC. Nothing in this Section 5.2 is intended to detract from the authority of the SEC under PUHCA. Section 5.3 Effective Date; Term. This Agreement shall become effective as of the day and year first above written and shall continue in full force and effect as to each party until terminated by any party, as to itself only, upon not less than 30 days prior written notice to the other parties hereto. Any such termination of parties shall not be deemed an amendment and shall not require adherence to the procedures set forth in Section 5.2(b). Section 5.4 Additional Parties. After the effective date of this Agreement, additional Nonutility Companies may become parties to this Agreement by executing appropriate signature pages, whereupon any such additional signatory shall be deemed a "party" hereto all purposes hereof and shall thereupon become bound by the terms and conditions of this Agreement as if an original party hereto. The addition of any such further signatories, in the absence of any changes to the terms of this Agreement, shall not be deemed an amendment hereto and shall not be subject to the procedures described in Section 5.2(b). Section 5.5 Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes any prior or concurrent understandings with respect thereto. Any oral or written statements, representations, promises, negotiations or agreements, whether prior hereto or concurrently herewith, are superseded by and merged into this Agreement. Section 5.6 Severability; Regulatory Requirements. If any provision of this Agreement or any application thereof shall be determined to be invalid or unenforceable, the remainder of this Agreement and any other application thereof shall not be affected thereby. Without limiting the generality of the foregoing, the provision of Services pursuant to this Agreement shall in all cases, and notwithstanding anything herein to the contrary, be subject to any limitations or restrictions contained in any applicable orders or authorizations, statutory provisions, rules or regulations, tariffs, or agreements, whether now in existence or hereinafter promulgated, of those regulatory or governmental agencies, including without limitation the KYPSC, SEC and Federal Energy Regulatory Commission, having jurisdiction over any of the parties hereto. To the extent, if any, that at any time any provision of this Agreement conflicts with any such limitation or restriction of any such other regulatory agencies, such limitation shall control. ULH&P has waived SEC preemption so that SEC approval of this Services Agreement (including any amendments thereto) would not preempt, preclude, delay or otherwise affect KYPSC review of this Agreement and transactions under this Agreement. Further, with the waiver of SEC preemption, the KYPSC may, by order, entry or directive, require accounting treatment(s), codes of conduct, guidelines, performance criteria, and rules and regulations relating to this Agreement and/or transactions under this Agreement. Section 5.7 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the parties hereto, provided that a Service Provider shall not be entitled to assign or subcontract to any third party any of Service Provider's obligations under this Agreement or under any Service Request issued hereunder without the prior approval of each affected Client Company. Section 5.8 Governing Law. This Agreement shall be construed and enforced under and in accordance with the laws of the Commonwealth of Kentucky, without regard to conflicts of laws principles. Section 5.9 Captions, etc. The captions and headings used in this Agreement are for convenience of reference only and shall not affect the construction to be accorded any of the provisions hereof. As used in this Agreement, "hereof," "hereunder," "herein," "hereto," and words of like import refer to this Agreement as a whole and not to any particular section or other paragraph or subparagraph thereof. Section 5.10 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed a duplicate original hereof, but all of which shall be deemed one and the same Agreement. Section 5.11 Customer Information Disclosure. ULH&P and the Nonutility Companies agree to certain prohibitions related to the access, sharing, and release of customer information and customer information databases. For purposes of carrying out this Services Agreement and all Service Requests pursuant hereto: (a) No employee of a Nonutility Company may access ULH&P's customer database or release ULH&P customer information without the written consent of the customer specifying the type of information to be released. (b) No employee of ULH&P may release ULH&P customer information to a Nonutility Company without the written consent of the customer specifying the type of information to be released. ULH&P shall keep a log when the ULH&P customer database is accessed by or ULH&P customer information is released to a Nonutility Company. Such log shall include customer name, date(s) when ULH&P's customer database was accessed or ULH&P customer information was released, the type(s) of information accessed or released, and the employee and entity requesting access to the database or release of information. (d) Notwithstanding Paragraphs (a), (b), and above, when a Nonutility Company provides or assists in providing utility service (like billing) regulated by the KYPSC as an agent of or on behalf of ULH&P: (I) ULH&P may release information for such utility services to such Nonutility Company without the customer's consent; (ii) ULH&P may access the customer database or so release ULH&P customer information without keeping a log of each access or release of information. (e) ULH&P customer information released to a Nonutility Company may not be shared or supplied by that Nonutility Company with or to another ULH&P affiliate or Cinergy subsidiary. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed on its behalf by an appropriate officer thereunto duly authorized, as of the respective dates set forth below. The Union Light, Heat and Power Company Date:____________ By:______________________ Name: Title: Cinergy Investments, Inc. Date:___________ By:____________________ Name: Title: KO Transmission Company Date:___________ By:____________________ Name: Title: Tri-State Improvement Company Date:___________ By:____________________ Name: Title: South Construction Company, Inc. Date:___________ By:____________________ Name: Title: Cinergy-Cadence, Inc. Date:___________ By:____________________ Name: Title: Cadence Network LLC Date:___________ By:____________________ Name: Title: Cinergy Capital & Trading, Inc. Date:___________ By:____________________ Name: Title: CinCap IV, LLC Date:___________ By:____________________ Name: Title: CinCap V, LLC Date:___________ By:____________________ Name: Title: CinPower I, LLC Date:___________ By:____________________ Name: Title: Producers Energy Marketing, LLC Date:___________ By:____________________ Name: Title: Cinergy Engineering, Inc. Date:___________ By:____________________ Name: Title: Cinergy Resources, Inc. Date:___________ By:____________________ Name: Title: Cinergy Solutions, Inc. Date:___________ By:____________________ Name: Title: Cinergy Business Solutions, Inc. Date:___________ By:____________________ Name: Title: Trigen-Cinergy Solutions LLC Date:___________ By:____________________ Name: Title: Trigen-Cinergy Solutions of Illinois L.L.C. Date:___________ By:____________________ Name: Title: Trigen-Cinergy Solutions of Orlando LLC Date:___________ By:____________________ Name: Title: Cinergy Supply Network, Inc. Date:___________ By:____________________ Name: Title: Reliant Services, LLC Date:___________ By:____________________ Name: Title: Cinergy Technology, Inc. Date:___________ By:____________________ Name: Title: Enertech Associates, Inc. Date:___________ By:____________________ Name: Title: Exhibit A FORM OF SERVICE REQUEST Client Company: Approved By: Name: Title: Proposed Service Provider/ Description of Proposed Services: Estimated Costs (provide basis): Scheduled Start Date: Scheduled Completion Date: Service Provider: Approved By: Name: Title: ENDNOTES /1/ Note: For illustrative purposes this exhibit has been prepared for execution by ULH&P; substantially identical, separate Service Agreements would be executed by each of the other CG&E utility subsidiaries (Lawrenceburg Gas Company, The West Harrison Gas and Electric Company and Miami Power Corporation). EX-99.D-1 5 EXHIBIT D-1 Exhibit D-1 BEFORE THE PUBLIC UTILITIES COMMISSION OF OHIO In the Matter of the Application of ) The Cincinnati Gas & Electric Company ) for Authority to Enter into a Services ) Case No. 98-1183-GE-CMT Agreement to Permit Sale and Purchase ) of Services with Affiliated Companies ) APPLICATION TO THE HONORABLE PUBLIC UTILITIES COMMISSION OF OHIO: The Cincinnati Gas & Electric Company (CG&E), a public utility as defined by the Ohio Revised Code, respectfully represents the following: 1. CG&E seeks the necessary consent and authority of this Commission to implement a Services Agreement permitting CG&E to purchase from or sell to affiliated Non-Utility Companies (Non-Utility) services pursuant to the terms contained therein. The Agreement lists the existing Non-Utility Companies that will be parties to the Agreement, but additional non-utility companies affiliated with CG&E may become parties to the Services Agreement in the future. The Services Agreement that CG&E intends to enter is attached as Exhibit A. 2. The Services Agreement must be approved by the Securities and Exchange Commission (SEC), as required by the Public Utility Holding Company Act of 1935 (PUHCA). 3. By stipulation approved by this Commission, CG&E agreed that: Any Affiliate Contract which needs to be filed with the SEC will first be filed with the Commission so long as affiliate contracts are required to be filed with the Indiana Utility Regulatory Commission. Affiliate Contract, except as provided below, is defined as a contract . . . between CG&E and any affiliate, associate, holding, mutual service, or subsidiary company, within the same holding company system, as these terms are defined in 15 U.S.C. Section 79b as subsequently amended, providing for: . . .(ii) the purchase or sale of assets, goods or services to or from an affiliate. . . Stipulation at Paragraph 5.C. The Stipulation further provides that: Prior to filing an Affiliate Contract with the SEC, CG&E will file with the Commission and provide to the OCC , a copy of such Contract or amendment sixty (60) days, or such shorter period as the Commission may approve, before it files said Affiliate Contract with the SEC. Stipulation at Paragraph 5.C. 1. This Stipulation was approved by this Commission in Case No. 91-410-EL-AIR (April 14, 1994). This Application is CG&E's filing in compliance with the Stipulation. The Agreement contains the required language regarding approval by this Commission. Exhibit A, Agreement Section 5.2. 4. The Agreement defines services to include a non-exclusive range of services that could be rendered by CG&E to the Non-Utilities and a non-exclusive range of services that could be rendered by the Non-Utilities to CG&E. The Agreement excludes the sales or other transfers of assets, electricity, coal, natural gas, or other goods. In addition, the Agreement does not cover affiliate transactions involving services to or from Exempt Telecommunications Companies (ETC) and Foreign Utility Companies (FUCO). Exhibit A, Agreement Section 1.1. 5. The Agreement provides for the process and terms and conditions of loaning employees between CG&E and the Non-Utilities and prohibits transfers of employees that would interfere or impair the provision of utility services. Exhibit A, Agreement Section 1.2. 6. A specific process for Service Requests is established to insure that requests are tracked and properly accounted for. Exhibit A, Agreement Section 2.1. 7. The Agreement provides a means for CG&E to engage in purchases and sales of services with Non-Utilities and requires the providing company to be compensated at full cost consistent with the requirements of PUHCA. Exhibit A, Agreement Section 3.1. 8. The Agreement sets forth standards of performance and limitations of liability as between the CG&E and the Non-Utility Companies, which are adequate to protect ratepayers. Exhibit A, Agreement Article 4. 9. The Agreement prohibits CG&E from using SEC approval of this Agreement to overturn, reverse, set aside, change or enjoin, a decision or order of this Commission pertaining to any expense, charge, cost or allocation incurred or accrued by CG&E. Exhibit A, Agreement Section 5.1. WHEREFORE, The Cincinnati Gas & Electric Company requests that this Commission issue an order finding that: (1) Applicant is a public utility as defined in Section 4905.02, Ohio Revised Code, and as such is subject to the jurisdiction of this Commission; (2) the Application is filed pursuant to the Stipulation approved by the Commission in Case Nos. 91-410-EL-AIR (April 14, 1994); and (3) the Agreement in Exhibit A should be approved; and ordering that: 1. The Cincinnati Gas & Electric Company is hereby authorized to enter into the Agreement filed as Exhibit A to the Application. Respectfully submitted, /s/ David T. Musselman, Trial Attorney James B. Gainer, Associate General Counsel The Cincinnati Gas & Electric Company 139 E. Fourth Street, Suite 25 AT II Cincinnati, Ohio 45202 (513) 287-3020 Attorneys for The Cincinnati Gas & Electric Company CERTIFICATE SERVICE I hereby certify that a copy of the foregoing Application was served by first class U.S. Mail, postage prepaid on Robert Tongren, Ohio Consumers' Counsel, 77 S. High Street, Columbus, Ohio 43266-0550 this 21st day of August 1998. /s/David T. Musselman EX-99.D-2 6 EXHIBIT D-2 Exhibit D-2 January 25, 1999 U.S. Securities and Exchange Commission Division of Investment Management Office of Public Utility Regulation Attention: Catherine A. Fisher, Assistant Director 450 Fifth Street, NW Washington, DC 20549 Re: The Cincinnati Gas & Electric Company Utility-Nonutility Services Agreement, SEC File No. 70- Dear Ms. Fisher: By a vote on January 20, 1999, the Public Utilities Commission of Ohio (PUCO) has authorized me to inform you that, pursuant to procedures agreed to in the 1994 merger which created Cinergy Corp., The Cincinnati Gas & Electric Company has filed a proposed Utility-Nonutility Services Agreement for PUCO review. The PUCO understands that CG&E will be filing the Services Agreement, in the form attached as Exhibit A hereto, with the SEC shortly for approval under the Public Utility Holding Company Act of 1935. This letter is to inform you that the PUCO and its staff has completed its review and has no objections to the Services Agreement as filed with the PUCO. Respectfully submitted, /s/Thomas W. McNamee Assistant Attorney General Public Utilities Section 180 E. Broad St., 7th Floor Columbus, OH 43215 (614) 466-4396 (614) 644-8764 cc: James B. Gainer, Associate General Counsel, Cinergy Corp. Enclosure EX-99.D-3 7 EXHIBIT D-3 Exhibit D-3 August 21, 1998 Robert C. Glazier Anne E. Becker Utilities Director Indiana Utility Consumer Counselor Indiana Utility Regulatory Comm. Indiana Government Center North 302 West Washington Street 100 N. Senate Avenue, N501 Room E306 Indianapolis, IN 46204 Indiana Government Center South Indianapolis, IN 46204 Dear Mr. Glazier and Ms. Becker: In accordance with PSI Energy's Affiliate Guidelines, PSI is submitting the enclosed affiliate contract which is required to be filed with and approved by the SEC. Contemporaneously, PSI is in the process of publishing notice of its intent to file this affiliate contract in two newspapers of general circulation in Marion and Hendricks Counties, Indiana. A copy of the public notice is also enclosed for your information. The enclosed affiliate contract provides for the provision of a non-exclusive range of services by PSI to non-utility affiliates, and vice versa. In connection with the provision of services, the contract also provides for loans of employees. The contract specifically excludes the sales or other transfers of assets, electricity, coal, natural gas, or other goods. In addition, the contract does not cover affiliate transactions involving services to or from Exempt Telecommunications Companies (ETCs) or Foreign Utility Companies (FUCOs). The contract sets out a specific process for service requests, to ensure that requests are tracked and properly accounted for. Compensation for services provided under the contract will be at full cost, as computed in accordance with Rules 90 and 91 under PUHCA. I will be calling you soon to discuss this contract. In the interim, feel free to call me if you have any questions. Sincerely, /s/ Kay E. Pashos Senior Counsel Cinergy Corp. Enc. EX-99.D-4 8 EXHIBIT D-4 Exhibit D-4 December 21, 1998 Robert C. Glazier Utilities Director Indiana Utility Regulatory Commission 302 West Washington Street Room E306 Indiana Government Center South Indianapolis, IN 46204 Re: PSI Energy Affiliate Services Agreement, Submitted to IURC Staff on 8/21/98 Dear Mr. Glazier: This letter will confirm that, in connection with the proposed PSI Energy Services Agreement, PSI Energy commits that, should it be required to re-perform any services (or to correct or repair any deficiencies) under section 4.1 of that agreement, the costs of any such re-performance, correction or repair shall not be allocated or charged to PSI's retail customers. This letter will also confirm that, subject to the above commitment, the IURC Staff does not have an objection to the PSI Energy Affiliate Services Agreement, and that PSI may notify the SEC of the IURC Staff's position. Contemporaneous with the filing of this Agreement with the SEC, PSI intends to file the Agreement with the IURC, in accordance with Ind. Code 8-1-2-49 and PSI's Affiliate Guidelines. If you should have any further questions concerning this Agreement, please contact Kay Pashos in our Legal Department. Thank you for your assistance. Sincerely, /s/ John M. Mutz President, PSI Energy, Inc. cc: Kay Pashos EX-99.D-5 9 EXHIBIT D-5 Exhibit D-5 January 14, 1999 Kay Pashos Senior Counsel PSI Energy, Inc. 1000 East Main Street Plainfield, IN 46168 RE: PSI Energy, Inc. Affiliate Guidelines Services Agreement Dear Kay: The Commission's staff has completed its preliminary review of the affiliate contract entitled "Services Agreement" provided to the staff on August 21, 1998 by PSI Energy, and the contract is now cleared for filing with the IURC and the SEC in accordance with PSI Energy's Affiliate Guidelines (see section 5 of PSI's Retail Electric Tariff). The staff has cleared this contract for filing based upon its review of the contract in reliance upon the commitment made by PSI Energy in a letter to me dated December 21, 1998, signed by PSI Energy's President, John Mutz. Very truly yours, /s/Robert C. Glazier Director of Utilities Indiana Utility Regulatory Commission EX-99.F-1 10 EXHIBIT F-1 EXHIBIT F-1 February 4, 1999 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Cinergy Corp./ File No. 70- Ladies and Gentlemen: I am Associate General Counsel of Cinergy Corp. ("Cinergy"), a Delaware corporation and registered holding company under the Public Utility Holding Company Act of 1935, as amended (the "Act"), and I am filing this opinion, pursuant to the rules and regulations of the Commission under the Act, as an exhibit to Cinergy's Declaration on Form U-1 which is being filed concurrently herewith (such Form U-1, including as it may hereinafter be amended, the "Application"). In the Application, Cinergy requests Commission authorization with respect to certain proposed service agreements the parties to which will be Cinergy's domestic public utility subsidiaries and their domestic nonutility affiliates (excluding exempt telecommunications companies). In connection with this opinion, I have reviewed the Application and such exhibits, documents, agreements, instruments and/or other materials as I consider necessary or advisable. I am a member of the Bar of the State of Ohio and do not purport to be an expert on the laws of any other jurisdiction. I have examined the Delaware General Corporation Law ("DGCL") to the extent necessary to express the opinions set forth herein. Such opinions are limited solely to matters governed by the laws of the State of Ohio and the DGCL. Based upon and subject to the foregoing, and assuming that the proposed transactions are carried out in accordance with (I) the Application and the Commission's order(s) to be issued with respect thereto and (ii) all other requisite approvals and authorizations, corporate or otherwise, I am of the opinion that: All state laws applicable to the proposed transactions will have been complied with. The consummation of the proposed transactions will not violate the legal rights of the holders of any securities issued by Cinergy or any associate company thereof. I hereby consent to the use of this opinion in connection with the Application. Very truly yours, /s/Jerome A. Vennemann Associate General Counsel EX-99.G 11 EXHIBIT G Exhibit G FORM OF PUBLIC NOTICE Cinergy Corp. 70- Cinergy Corp., a registered holding company ("Cinergy"), 139 East Fourth Street, Cincinnati, Ohio 45202, has filed a declaration under Sections 12(f) and 13(b) of the Act and Rules 54, 80, 81, 86, 87, 89, 90 and 91 thereunder. On behalf of the proposed parties thereto, Cinergy requests authorization for its domestic public utility subsidiaries to enter into service agreements with their domestic nonutility affiliates under which, subject to the terms and conditions thereof, the utility subsidiaries may provide a range of services to the nonutility affiliates, and vice versa, priced at "cost" as determined pursuant to Rule 91 under the Act. Cinergy requests authorization for each of its utility subsidiaries to enter into a separate but substantially similar contract ("Service Agreement" or "Agreement") with all of Cinergy's domestic nonutility subsidiaries, including those formed after the date of the Commission's order herein, but excluding exempt telecommunications companies as defined in the Act ("ETCs"). Cinergy's two principal utility subsidiaries, each of which is a direct, wholly-owned subsidiary of Cinergy, are The Cincinnati Gas & Electric Company, an Ohio electric and gas utility ("CG&E"), and PSI Energy, Inc., an Indiana electric utility ("PSI"), which are subject to state utility regulation by the Public Utilities Commission of Ohio ("PUCO") and the Indiana Utility Regulatory Commission ("IURC"), respectively. Pursuant to provisions regarding affiliate contracts contained in settlement agreements dating from the 1994 merger that created Cinergy,/1/ CG&E and PSI submitted identical proposed forms of Service Agreements to the PUCO and the IURC staff in August 1998 for their review prior to review by this Commission. In late January 1999 the PUCO and the IURC staff completed their review and, based upon certain modifications made to the CG&E Service Agreement and assurances regarding certain costs that may arise under the PSI Service Agreement, cleared the CG&E and PSI Service Agreements for filing with this Commission./2/ Cinergy states that the proposed Service Agreements with the remaining utility subsidiaries of Cinergy, all of whom are direct, Wholly-owned subsidiaries of CG&E (collectively, with CG&E and PSI, the "Operating Companies") - The Union Light, Heat and Power Company, a Kentucky electric and gas utility ("ULH&P"), Lawrenceburg Gas Company, an Indiana gas utility ("Lawrenceburg"), The West Harrison Gas and Electric Company, an Indiana electric utility ("West Harrison"), and Miami Power Corporation ("Miami"), an electric utility by virtue of its ownership of certain transmission assets - do not require prior state commission review. According to Cinergy, except in regard to prior state commission review of amendments thereto, the proposed Service Agreement for each CG&E utility subsidiary conforms in all material respects to the CG&E Service Agreement, including the additional protections incorporated as a result of the PUCO's review. The Operating Companies generate, transmit, distribute and sell electricity and transport and sell natural gas to approximately 1.4 million customers in southwestern Ohio, most of Indiana and northern Kentucky. PSI produces, transmits, distributes and sells electricity in north central, central and southern Indiana, serving an estimated population of 2.1 million people located in 69 of the state's 92 counties including the cities of Bloomington, Columbus, Kokomo, Lafeyette, New Albany and Terre Haute. At and for the year ended December 31, 1997, PSI had total consolidated assets of approximately $3.4 billion and operating revenues of approximately $1.9 billion. CG&E and its utility subsidiaries provide electric and gas service in the southwestern portion of Ohio and adjacent areas in Kentucky and Indiana. The area served with electricity, gas or both covers approximately 3,000 square miles and has an estimated population of 1.8 million. CG&E is engaged in the production, transmission, distribution and sale of electricity and the sale and transportation of natural gas in the southwestern portion of Ohio, serving an estimated population of 1.5 million people in 10 of the state's 88 counties including the cities of Cincinnati and Middletown. ULH&P, which is subject to state utility regulation by the KPSC, is engaged in the production, transmission, distribution and sale of electricity and the sale and transportation of natural gas in northern Kentucky, serving an estimated population of 299,000 people in a 500 square-mile area encompassing six counties and including the cities of Newport and Covington. Lawrenceburg sells and transports natural gas to approximately 20,000 people in a 60 square-mile area in southeastern Indiana. West Harrison sells electricity over a 3-square mile area with a population of approximately 1,000 in West Harrison, Indiana and bordering rural areas. Miami owns a 138 kV transmission line running from the Miami Fort Power Station in Ohio to a point near Madison, Indiana. At and for the year ended December 31, 1997, CG&E had total consolidated assets of approximately $4.9 billion and operating revenues of approximately $2.4 billion ($1.9 billion electric and $500 million gas). Cinergy Investments holds all of Cinergy's domestic nonutility businesses, except for certain minor interests held by CG&E and PSI./3/ At December 31, 1998, Cinergy Investments had 11 direct wholly-owned subsidiaries: Cinergy-Cadence, Inc., an "energy-related company" within the meaning of Rule 58 under the Act (a "Rule 58 Company" or "Rule 58 Subsidiary") which has a one-third ownership interest in its Rule 58 Subsidiary, Cadence Network LLC, which markets various energy management services to multi-site retail establishments; Cinergy Capital & Trading, Inc., a Rule 58 Company devoted to energy marketing and trading that has eight subsidiaries, each devoted to energy marketing or ownership or operation of EWGs; Cinergy Communications, Inc., an ETC; Cinergy Engineering, Inc., a Rule 58 Company devoted to utility-related engineering and other technical services; Cinergy-Centrus, Inc., an ETC; Cinergy-Centrus Communications, Inc., an ETC that holds a one-third ownership interest in Centrus LLP, also an ETC; Cinergy Resources, Inc., a Rule 58 Company devoted to energy marketing and trading; Cinergy Solutions, Inc./4/, which, together with its 12 partly- and wholly-owned subsidiaries, primarily markets energy management services and engages in development, ownership and operation of district cooling and heating systems and qualifying facilities under the Public Utility Regulatory Policies Act of 1978, principally through a joint venture with a non-affiliate, Trigen Energy Corporation; Cinergy Supply Network, Inc., a Rule 58 Company, which engages in utility materials brokering services and, through its One-third-owned Rule 58 Subsidiary, Reliant Services, LLC, proposes to engage in underground utility facilities location and construction services; Cinergy Technology, Inc., which is devoted to commercialization of utility technologies and related investments;/5/ and Enertech Associates, Inc., an inactive Rule 58 Company. In general, the Service Agreements authorize the provision of services, including loans of employees, from the Operating Companies to the domestic nonutility companies, excluding ETCs ("Nonutility Companies"), and from the Nonutility Companies to the Operating Companies, priced at "cost," pursuant to a written service request procedure. The Agreements include provisions regarding liability and indemnification, as well as provisions to protect the interests of Cinergy's state utility regulators and the retail customers of the Operating Companies. More specifically, upon receipt by a party to the Agreement of a written service request (adhering to the form thereof attached to the Agreement) requesting such services as are specified therein, including if applicable use of any related equipment, facilities, properties or other resources ("Services"), the receiving party shall provide the requested Services at the time and for the period sought, if in its sole discretion it can do so without impairing its normal business operations. Services may include, but are not limited to, engineering and construction; operations and maintenance; equipment testing; information services; monitoring, surveying, inspecting, constructing, locating and marking of overhead and underground utility facilities; meter reading; materials management; vegetation management; and marketing and customer relations. In addition to the exclusion of transactions involving affiliated ETCs and FUCOs, affiliate transactions involving sales, leases, or other transfers of assets, goods, energy commodities (including electricity, gas, coal and other combustible fuels) or thermal energy products are outside the scope of the Service Agreements. Any loans of employees by the company providing Services shall likewise be at the service provider's sole discretion. While performing work on behalf of the client company, any such loaned employees shall be under its supervision and control, and the client company shall be responsible for their actions. All service requests shall be in writing consistent with the form thereof appended to the Agreement. Therefore each service request must identify the client company and proposed service provider, be authorized by an appropriate individual at both the client company and the service provider, include a detailed description of the proposed services and estimated costs, and specify the scheduled start date and completion date. In addition, all Services shall be assigned to applicable activities, projects, programs or on other appropriate bases to enable specific work to be properly assigned. The client company may amend service requests from time to time, subject to certain conditions. All Services shall be rendered at the full cost thereof, as computed in accordance with applicable rules, regulations and accounting standards including Rules 90 and 91 under the Act. As soon as practicable after the close of each month, any company providing Services shall render to each client company a statement reflecting the billing information necessary to identify the costs charged for that month. The client company is required to pay all amounts billed within 30 days after receipt thereof. The sole and exclusive responsibility of a company providing Services for any asserted deficiency will be to correct or repair the deficiency or re-perform the Services, at no additional cost to the client company. The service provider disclaims any additional warranties or remedies, and each client company agrees to accept Services on that basis. In addition, any company receiving Services agrees to indemnify the company providing those Services (including each of its officers, directors, employees and agents) from any losses, liabilities or claims arising from or in connection with the provision of such Services. The indemnity applies regardless of negligence, willful misconduct, or breach of warranty by the company that provided the Services or any of its officers, directors, employees or agents. Each Service Agreement also contains provisions regarding ratemaking, amending the Agreement, additional parties, regulatory requirements and miscellaneous "boilerplate." With respect to ratemaking, each agreement provides that: Operating Company shall not seek to overturn, reverse, set aside, change or enjoin, whether through appeal or the initiation or maintenance of any action in any forum, a decision or order of the [applicable state commission - PUCO, IURC or KPSC] which pertains to recovery, disallowance, deferral or ratemaking treatment of any expense, charge, cost or allocation incurred or accrued by Operating Company in or as a result of this Agreement (or any amendment hereto) on the basis that this Agreement and any such expense, charge, cost or allocation was filed with or approved by the SEC. Any amendment to a Service Agreement must be in writing executed by all of the parties. In addition, the CG&E and PSI Service Agreements (but not the form of Service Agreement for CG&E's utility subsidiaries) provide that any amendment to either of those Agreements, before being submitted to the Commission for its review, must first be submitted to the PUCO and the IURC staff for their review (and submitted to certain other interested parties for informational purposes). As with the original CG&E and PSI Service Agreements, then, the PUCO and the IURC staffs have effective veto power over any proposed amendment. Cinergy is precluded from seeking Commission approval of the contract or amendment, or must withdraw it, and may not put it into effect with respect to CG&E or PSI, if the PUCO or IURC staff disapprove it or find it unreasonable. Additional Nonutility Companies may become parties to the Service Agreement after the original execution thereof by executing appropriate signature pages. In the absence of any changes to the terms of the Agreement, merely adding new Nonutility Companies as signatories shall not be considered an amendment, including for purposes of any prior state review. Finally, the provision of Services shall in all cases, and notwithstanding anything to the contrary in the Agreement, be subject to any limitations or restrictions contained in any applicable orders or authorizations, statutory provisions, rules or regulations, tariffs, or agreements, whether now in existence or hereinafter promulgated, of regulatory or governmental agencies having jurisdiction over the parties to the Agreement, including the Commission, the applicable state commission and the Federal Energy Regulatory Commission. To the extent, if any, that at any time any provision of the Agreement conflicts with any limitation or restriction of any such regulatory agency, such limitation shall control. The foregoing provisions are common to each of the Service Agreements, with the sole exception that the provision granting the state commission or its staff the right to prior review of proposed amendments is included in the CG&E and PSI Service Agreements but not the Service Agreements to be entered into by the CG&E utility subsidiaries. Cinergy states that the presence of this provision in the CG&E and PSI Service Agreements and its absence from the Service Agreements for the CG&E utility subsidiaries is consistent with the terms of the 1994 merger accommodations with the PUCO, IURC and the KPSC. Cinergy further states that the PUCO's review of the proposed CG&E Service Agreement, pursuant to the merger-related settlement agreements , resulted in the incorporation of certain additional provisions in that contract, including two principal substantive provisions. The first addresses concerns relating to unfair competition and stipulates that none of the Services may result in an undue or unreasonable competitive advantage under law to any affiliated nonutility company that receives such Services. The second is intended to protect confidential information of customers of the Operating Companies and imposes certain prohibitions relating to the access, sharing, and release of customer information and customer information databases./6/ For the Commission, by the Division of Investment Management, pursuant to delegated authority. ENDNOTES /1/ These merger-related settlement agreements with the PUCO and the IURC (and other interested parties), as well as conditions agreed to by Cinergy in connection with related merger proceedings before the Kentucky Public Service Commission ("KPSC"), were noted by the Commission in its October 21, 1994 order approving the Cinergy merger and related transactions (HCAR No. 35-26146). /2/ Cinergy states that, concurrently with the filing of this application, PSI is submitting the proposed PSI Service Agreement to the IURC. According to Cinergy, that submission was not to initiate any proceeding before the IURC and did not seek any approval or other action by the IURC (beyond the clearance previously issued by its staff). /3/ CG&E has two nonutility subsidiaries - Tri-State Improvement Company, which acquires and holds property in support of the businesses of CG&E and its utility subsidiaries, and KO Transmission Company, a gas pipeline company. CG&E also holds limited partnership interests in several local venture capital and community development funds. PSI has one nonutility subsidiary, South Construction Company, which holds title to real estate not used and useful in PSI's business. PSI also holds limited partnership interests in several local venture capital and community development funds. Cinergy has pending a request in File No. 70-8427 for an order releasing Commission jurisdiction over Cinergy's continued retention, through CG&E and PSI, of these nonutility businesses and interests. /4/ Cinergy Solutions was formed pursuant to HCAR No. 35-26662, February 7, 1997. /5/ Cinergy has pending a request in File No. 70-8427 for an order releasing Commission jurisdiction over Cinergy's continued retention of this entity. /6/ Both of these provisions are included in the form of Service Agreement for each CG&E utility subsidiary. Cinergy also represents that, although these provisions have not been incorporated into the proposed PSI Service Agreement, Cinergy will assure that PSI abides by them. EX-99.H 12 EXHIBIT H Exhibit H CINERGY CORP. CONSOLIDATED CAPITALIZATION ACTUAL DECEMBER 31, 1998 $ Millions Percentage Common Stock Equity Common stock $ 2 Paid-in capital 1,595 Retained earnings 945 Accumulated other comprehensive income (loss) (1) Total common stock equity 2,541 40.5% Cumulative Preferred Stock of Subsidiaries Not subject to mandatory redemption 93 1.5% Debt Long-term debt 2,554 Long-term debt due within one year 136 Notes payable and other short-term obligations 954 Total debt 3,644 58.0% Total capitalization $ 6,278 100.0% The following table sets forth Cinergy's pro forma capitalization, assuming that the entire amount of non-recourse debt applicable to Exempt Entities which is attributable to Cinergy's ownership interest ($1.2 billion) is consolidated. It should be noted that such consolidation is inconsistent with the requirements of GAAP, and is being provided to the staff of the Securities and Exchange Commission solely at its request. CINERGY CORP. CONSOLIDATED CAPITALIZATION PRO FORMA DECEMBER 31, 1998 $ Millions Percentage Common Stock Equity Common stock $ 2 Paid-in capital 1,595 Retained earnings 945 Accumulated other comprehensive income (loss) (1) Total common stock equity 2,541 34.2 % Cumulative Preferred Stock of Subsidiaries Not subject to mandatory redemption 93 1.3 % Debt Long-term debt 3,513 Long-term debt due within one year 138 Notes payable and other short-term obligations 1,151 Total debt 4,802 64.5 % Total capitalization $ 7,436 100.0 % EX-99.I 13 EXHIBIT I Exhibit I CINERGY CORP. DOMESTIC NON-UTILITY SUBSIDIARIES AS OF 12/31/98/1/ Cinergy Corp. (Delaware, 06/30/1993) Cinergy Investments, Inc. (Delaware, 10/24/1994)/2/ Cinergy-Cadence, Inc. (Indiana, 12/27/1989; formerly PSI Power Resource Operations, Inc.) Cadence Network LLC (Delaware, 9/3/1997)/3/ Cinergy Capital & Trading, Inc. (Indiana, 10/8/1992; formerly Wholesale Power Services, Inc.) CinCap IV, LLC (Delaware, 12/3/1997)/4/ CinCap V, LLC (Delaware, 7/21/98) CinCap VI, LLC (Delaware, 9/18/98) CinCap VII, LLC (Delaware, 12/2/98) CinCap VIII, LLC (Delaware, 12/2/98) Westwood Operating Company, LLC (Delaware, 10/2/98) CinPower I, LLC (Delaware, 6/12/1998) Producers Energy Marketing, LLC (Delaware, 10/27/95) Cinergy Communications, Inc. (Delaware, 9/20/1996) Cinergy Engineering, Inc. (Ohio, 3/28/1997) Cinergy-Centrus, Inc. (Delaware, 4/23/98; formerly Cinergy-Ideon, Inc.) Centrus, LLP (Indiana, 7/7/1998)/5/ Cinergy-Centrus Communications, Inc. (Delaware, 7/17/98) Cinergy Resources, Inc. (Delaware, 1/10/1994; formerly CG&E Resource Marketing, Inc.) Cinergy Solutions, Inc. (Delaware, 2/11/1997) Cinergy Business Solutions, Inc. (Delaware, 4/6/98) Cinergy Customer Care, Inc. (Delaware, 8/21/98) Cinergy Solutions of Tuscola, Inc. (Delaware, 10/13/98) Energy Equipment Leasing LLC (Delaware, 11/12/98)/8/ Trigen-Cinergy Solutions LLC (Delaware, 2/18/1997)/6/ Trigen-Cinergy Solutions of Baltimore LLC (Delaware, 11/10/98)/8/ Trigen-Cinergy Solutions of Boca Raton, LLC (Delaware 9/4/98)/9/ Trigen-Cinergy Solutions of Cincinnati LLC (Ohio, 8/29/1997)/7/ Trigen-Cinergy Solutions of Illinois L.L.C. (Delaware, 4/17/1997)/8/ Trigen-Cinergy Solutions of Orlando LLC (Delaware, 6/12/1998)/9/ Trigen-Cinergy Solutions of St. Paul LLC (Delaware 8/13/98)/8/ Trigen-Cinergy Solutions of Tuscola, LLC (Delaware, 8/21/98)/8/ Cinergy Supply Network, Inc. (Delaware, 1/14/98) Reliant Services, LLC (Indiana, 6/25/98)/10/ Cinergy Technology, Inc. (Indiana, 12/12/1991; formerly PSI Environmental Corp.) Enertech Associates, Inc. (Ohio, 10/26/1992)/11/ ENDNOTES /1/ Excludes nonutility subsidiaries of CG&E and PSI. Parent-subsidiary affiliation shown by indentation. /2/ Some of the subsidiaries listed are not currently engaged in active business operations. /3/ Jointly owned 33-1/3% each with Progress Holdings, Inc. and New Century-Cadence, Inc. /4/ Cinergy Capital & Trading owns 10% of this entity; the remaining equity is owned by nonaffiliates. /5/ Jointly owned 33-1/3% each with New Century-Centrus, Inc. and Progress Centrus, Inc. /6/ Jointly owned 50% each with Trigen Solutions, Inc., a subsidiary of Trigen Energy Corporation. /7/ Effective August 29, 1997, the former Cinergy Cooling Corp. was merged with and into Trigen-Cinergy Solutions of Cincinnati LLC, with said LLC being the surviving company jointly owned 51% by Cinergy Solutions, Inc. and 49% by Trigen Solutions, Inc. /8/ Jointly owned 49% by Cinergy Solutions, Inc. and 51% by Trigen Solutions, Inc. /9/ Jointly owned 51% by Cinergy Solutions, Inc. and 49% by Trigen Solutions, Inc. /10/ Jointly owned 50% each with IGC Energy, Inc. /11/ Formerly Power International, Inc. and formerly Enertech Associates International, Inc. -----END PRIVACY-ENHANCED MESSAGE-----