10-K

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INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
TABLE OF CONTENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

(x)    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2000
or

(  )   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                 to               

Commision File Number	Registrant, State of Incorporation, Address and Telephone Number	I.R.S. Employer Identification No.
1-11377	CINERGY CORP. (A Delaware Corporation) 139 East Fourth Street Cincinnati, Ohio 45202 (513) 287-1099	31-1385023
1-1232	THE CINCINNATI GAS & ELECTRIC COMPANY (An Ohio Corporation) 139 East Fourth Street Cincinnati, Ohio 45202 (513) 287-1099	31-0240030
1-3543	PSI ENERGY, INC. (An Indiana Corporation) 1000 East Main Street Plainfield, Indiana 46168 (513) 287-1099	35-0594457
2-7793	THE UNION LIGHT, HEAT AND POWER COMPANY (A Kentucky Corporation) 139 East Fourth Street Cincinnati, Ohio 45202 (513) 287-1099	31-0473080

Each of the following classes or series of securities registered pursuant to Section 12(b) of the Act is registered on the New York Stock Exchange:

Registrant	Title of each class
Cinergy Corp.	Common Stock
The Cincinnati Gas & Electric Company	Cumulative Preferred Stock	4	%
	Junior Subordinated Debentures	8.28	%
PSI Energy, Inc.	Cumulative Preferred Stock	4.32	%
	Cumulative Preferred Stock	4.16	%
	Cumulative Preferred Stock	6-7/8	%

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that such registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants' knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (  )

Requirements pursuant to Item 405 of Regulation S-K are not applicable for The Union Light, Heat and Power Company.

The Union Light, Heat and Power Company meets the conditions set forth in General Instruction I (1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K with the reduced disclosure format specified in General Instruction I (2) of Form 10-K.

As of January 31, 2001, the aggregate market value of the common equity of Cinergy Corp. held by nonaffiliates (shareholders who are not directors or executive officers) was $4.8 billion. All of the common stock of The Cincinnati Gas & Electric Company and PSI Energy, Inc. is owned by Cinergy Corp., and all of the common stock of The Union Light, Heat and Power Company is owned by The Cincinnati Gas & Electric Company. As of January 31, 2001, each registrant had the following shares of common stock outstanding:

Registrant	Description	Shares
Cinergy Corp.	Par value $.01 per share	158,980,363
The Cincinnati Gas & Electric Company	Par value $8.50 per share	89,663,086
PSI Energy, Inc.	Without par value, stated value $.01 per share	53,913,701
The Union Light, Heat and Power Company	Par value $15.00 per share	585,333

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement of Cinergy Corp. and the Information Statement of PSI Energy, Inc. filed, or to be filed, with the Securities and Exchange Commission are incorporated by reference into Part III of this report.

This combined Form 10-K is separately filed by Cinergy Corp., The Cincinnati Gas & Electric Company, PSI Energy, Inc., and The Union Light, Heat and Power Company. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to registrants other than itself.

TABLE OF CONTENTS

Item Number
	Cautionary Statements Regarding Forward-Looking Information
	PART I
1	Business
	Organization
	Current Trends
	Business Units
	Other Developments
	Future Expectations/Trends
2	Properties
	Commodities
	Delivery
	Cinergy Investments
	International
	General Information
3	Legal Proceedings
	New Source Review and Notices of Violation
	Manufactured Gas Plant Sites
	M Metals Superfund Site
4	Submission of Matters to a Vote of Security Holders
	PART II
5	Market for Registrant's Common Equity and Related Stockholder Matters
6	Selected Financial Data
7	Management's Discussion and Analysis of Financial Condition and Results of Operations
	Introduction
	Organization
	Liquidity
	Capital Resources
	2000 Results of Operations-Historical
	1999 Results of Operations-Historical
	Results of Operations-Future
7A	Quantitative and Qualitative Disclosures About Market Risk
	Index to Financial Statements and Financial Statement Schedules
8	Financial Statements and Supplementary Data
9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
	PART III
10	Directors and Executive Officers of the Registrants
	Board of Directors
	Executive Officers
11	Executive Compensation
12	Security Ownership of Certain Beneficial Owners and Management
13	Certain Relationships and Related Transactions

	PART IV
14	Exhibits, Financial Statement Schedules, and Reports on Form 8-K
	Financial Statements and Schedules
	Reports on Form 8-K
	Exhibits
	Signatures

    In this report Cinergy (which includes Cinergy Corp. and all of our regulated and non-regulated subsidiaries) is, at times, referred to in the first person as "we", "our", or "us".

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

    In this report we discuss various matters that may make management's corporate vision of the future clearer for you. This report outlines management's goals and projections for the future. These goals and projections are considered forward-looking statements and are based on management's beliefs and assumptions.

    Forward-looking statements involve risks and uncertainties that may cause actual results to be materially different from the results predicted. Factors that could cause actual results to differ are often presented with forward-looking statements. In addition, other factors could cause actual results to differ materially from those indicated in any forward-looking statement. These include:

•

Factors affecting operations, such as:

  (1)  unusual weather conditions;
  (2)  catastrophic weather-related damage;
  (3)  unscheduled generation outages;
  (4)  unusual maintenance or repairs;
  (5)  unanticipated changes in fossil fuel costs, gas supply costs, or availability constraints;
  (6)  environmental incidents; and
  (7)  electric transmission or gas pipeline system constraints.

•

Legislative and regulatory initiatives regarding deregulation of the industry, including potential deregulation legislation in Indiana, and potential national deregulation legislation.



•

The timing and extent of the entry of additional competition in electric or gas markets and the effects of continued industry consolidation through the pursuit of mergers, acquisitions, and strategic alliances.



•

Regulatory factors such as changes in the policies or procedures that set rates; changes in our ability to recover capital expenditures for environmental compliance, purchased power costs and investments made under traditional regulation through rates; and changes to the frequency and timing of rate increases.



•

Financial or regulatory accounting principles or policies imposed by governing bodies.



•

Political, legal, and economic conditions and developments in the United States (U.S.) and the foreign countries in which we have a presence. This would include inflation rates and monetary fluctuations.



•

Changing market conditions and other factors related to physical energy and financial trading activities. These would include price, basis, credit, liquidity, volatility, capacity, transmission, currency exchange rates, interest rates, and warranty risks.



•

The performance of projects undertaken by our non-regulated businesses and the success of efforts to invest in and develop new opportunities.



•

Availability of, or cost of, capital.



•

Employee workforce factors, including changes in key executives, collective bargaining agreements with union employees, and work stoppages.



•

Legal and regulatory delays and other obstacles associated with mergers, acquisitions, and investments in joint ventures.

•

Costs and effects of legal and administrative proceedings, settlements, investigations, and claims. Examples can be found in Note 12 of the "Notes to Financial Statements" in "Part I. Financial Information".



•

Changes in international, federal, state, or local legislative requirements, such as changes in tax laws, tax rates, and environmental laws and regulations.

    Unless we otherwise have a duty to do so, the Securities and Exchange Commission's (SEC) rules do not require forward-looking statements to be revised or updated (whether as a result of changes in actual results, changes in assumptions, or other factors affecting the statements). Our forward-looking statements reflect our best beliefs as of the time they are made and may not be updated for subsequent developments.

PART I.

ITEM 1.  BUSINESS

ORGANIZATION

Cinergy Corp., a Delaware corporation created in October 1994, owns all outstanding common stock of The Cincinnati Gas & Electric Company (CG&E) and PSI Energy, Inc. (PSI), both of which are public utility subsidiaries. As a result of this ownership, we are considered a utility holding company. Because we are a holding company whose utility subsidiaries operate in multiple states, we are registered with and are subject to regulation by the SEC under the Public Utility Holding Company Act of 1935, as amended (PUHCA). Our other principal subsidiaries are:

        •    Cinergy Services, Inc. (Services);
        •    Cinergy Investments, Inc. (Investments);
        •    Cinergy Global Resources, Inc. (Global Resources);
        •    Cinergy Technologies, Inc. (Technologies); and
        •    Cinergy Wholesale Energy, Inc. (CWE).

CG&E, an Ohio corporation, is a combination electric and gas public utility company that provides service in the southwestern portion of Ohio and, through its subsidiaries, in nearby areas of Kentucky and Indiana. It has three wholly-owned utility subsidiaries and two wholly-owned non-utility subsidiaries. CG&E's principal utility subsidiary, The Union Light, Heat and Power Company (ULH&P), is a Kentucky corporation that provides electric and gas service in northern Kentucky. CG&E's other subsidiaries are insignificant to its results of operations.

PSI, an Indiana corporation, is an electric utility that provides service in north central, central, and southern Indiana. The following table presents further information related to the operations of our domestic utility companies (our operating companies):

	Principal Line(s) of Business	Major Cities Served	Approximate Population Served
CG&E and subsidiaries	•  Generation, transmission,    distribution, and sale of    electricity •  Sale and/or transportation of    natural gas	Cincinnati, OH Middletown, OH Covington, KY Florence, KY Newport, KY Lawrenceburg, IN	2,017,000
PSI	•  Generation, transmission,    distribution, and sale of    electricity	Bloomington, IN Columbus, IN Kokomo, IN Lafayette, IN New Albany, IN Terre Haute, IN	2,202,000
ULH&P	•  Transmission, distribution,    and sale of electricity •  Sale and transportation of    natural gas	Covington, KY Florence, KY Newport, KY	330,000

    Services is a service company that provides our regulated and non-regulated subsidiaries with a variety of centralized administrative, management, and support services. Investments holds most of our domestic non-regulated, energy-related businesses and investments. Global Resources holds our international businesses and investments and directs our renewable energy investing activities (for example, wind farms). Technologies primarily holds our portfolio of technology-related investments. In

November 2000, CWE was formed to act as a holding company for Cinergy's energy commodity businesses, including production, as the generation assets eventually become unbundled from the utility subsidiaries. See Note 18 of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data" for a discussion on Ohio deregulation.

    We have collective bargaining agreements with the International Brotherhood of Electrical Workers (IBEW), the United Steelworkers of America (USWA), the Independent Utilities Union (IUU), and various international union organizations.

    The following table indicates the number of employees by classification at December 31, 2000:

	Regulated				Non-Regulated
Classification	CG&E(4)	PSI	ULH&P	Total Regulated	Domestic(5)	International	Total Non- Regulated	Cinergy Total(6)
IBEW(1)	1,098	1,319	61	2,478	315	—	315	2,793
USWA(2)	297	—	87	384	—	—	—	384
IUU(3)	464	—	63	527	393	—	393	920
Various Union Organizations	—	—	—	—	17	492	509	509
Non-Bargaining	376	600	20	996	2,341	419	2,760	3,756
	2,235	1,919	231	4,385	3,066	911	3,977	8,362

(1)   IBEW #1347 contract will expire on April 1, 2006, and IBEW #1393 will expire on April 30, 2002.
(2)   Contract will expire May 15, 2002.
(3)   Contract will expire April 1, 2002.
(4)   CG&E and subsidiaries excluding ULH&P.
(5)   Includes Services' employees who provide services to both regulated and non-regulated operations.
(6)   On January 1, 2001, 1,448 of our employees were transferred to a non-regulated domestic subsidiary of CWE. For
        more information on "Ohio deregulation" see Note 18 of the "Notes to Financial Statements" in "Item 8. Financial
        Statements and Supplementary Data".

CURRENT TRENDS

    The structure of the electric industry in our service territory and throughout the U.S. has been relatively stable for many years. In recent years, however, there have been both federal and state developments aimed at industry restructuring and increasing competition. This process is leading to an industry model whereby the generating assets become deregulated and the transmission and distribution systems remain under some type of regulation. The underlying belief, which we share, is that over the long-term, deregulation of wholesale generation markets will, through increased competition, result in lower commodity prices than would otherwise be achieved. However, in recent months, unprecedented high prices, extreme price volatility, a lack of market liquidity, and inadequate generation supply led to customer blackouts in California, demonstrating the necessity for a constructive approach to deregulation. Within our service territory, Ohio is the first state to implement electric deregulation legislation. See the "Retail Market Developments" section in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of key elements of Ohio deregulation, which became effective January 1, 2001. Ohio's situation is different than California's in many respects, including the following:

•

In California, demand for electricity has risen sharply over the last decade, with no new increased generating capacity; however, within Ohio, demand has risen more steadily, with increased capacity being added. For example, according to statistics reported by the Public Utilities Commission of Ohio (PUCO), 1,230 megawatts (MW, the basic unit of electric energy equal to one million watts) of generating capacity was added during this past year in Ohio;

another 1,330 MW is planned for service during 2001. By comparison, California, which is estimated at about three times Ohio's population, has added minimal capacity over the last several years.

•

California's restructuring plan required utilities to divest their generation assets and prohibited the utilities from entering into long term contracts for supply; this forced the utilities to rely on the spot market to meet demand. Ohio's restructuring plan does not require utilities to divest their generation assets and allows for utilities to negotiate long-term commodity supply contracts at fixed prices for commodity purchases.



•

Existing transmission constraints limit the amount of electricity California can access from outside its borders. Ohio, however, shares interconnections with such states as Indiana, Kentucky, Michigan, Pennsylvania, and West Virginia.



•

California's generation is largely dependent on natural gas, the cost of which has increased dramatically in recent months, and also on hydroelectric production, which has been reduced due to drought conditions. Generation in Ohio, however, is largely fueled by coal, which has been more stable in price.

    Twenty-four states and the District of Columbia have adopted deregulation plans. In response to the situation in California, some of these states, while not having similar experiences as California, are considering delaying or altering terms of implementation. A number of the remaining states are reconsidering their deregulation timetables. While we believe the situation in Ohio, as described above, and generally within the Midwest are different than California, we cannot predict the consequences, if any, on efforts to deregulate the remaining markets within our service territory. Indiana and Kentucky have not yet approved legislation.

BUSINESS UNITS

    We conduct operations through our subsidiaries, and manage through the following four business units:

        •    Energy Commodities Business Unit (Commodities);
        •    Energy Delivery Business Unit (Delivery);
        •    Cinergy Investments Business Unit (Cinergy Investments); and
        •    International Business Unit (International).

    The following section describes the activities of our business units as of December 31, 2000. As the utility industry continues to evolve, Cinergy will continue to analyze its operating structure and make modifications as appropriate. In early 2001, we announced certain organizational changes, which further aligned the business units consistent with Cinergy's strategic vision. The revised structure reflects three business units, as follows:

•

Energy Merchant—will operate power plants, both domestically and abroad, and conduct all wholesale energy marketing, trading, origination, and risk management services;


•

Regulated Businesses—will operate all gas and electric transmission and distribution services, both domestically and abroad, and will be responsible for all regulatory planning for the regulated utility businesses of CG&E, PSI, and ULH&P; and


•

Power Technology and Infrastructure Services—will originate and manage a portfolio of emerging energy businesses.

    See Note 15 of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data" for financial information by business segment.

Commodities

    Commodities operates and maintains our domestic regulated and non-regulated electric generating plants and some of our jointly-owned plants. As of December 31, 2000, the total winter electric capability (including our portion of the total capacity for the jointly-owned plants) of these generating plants was 11,889 MW. These plants are mostly coal-fired. In December 2000, Cinergy announced its intent to acquire an additional 998 MW of natural-gas fired generation. See "Item 2. Properties" for a further discussion of the generating facilities. Commodities also conducts the following activities:

        •    wholesale energy marketing and trading;
        •    energy risk management;
        •    financial restructuring services; and
        •    proprietary arbitrage activities.

    See the "Market Risk Sensitive Instruments and Positions" section of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for information on risks associated with these activities.

    Fuel Supply  Each year, through CG&E and PSI, we purchase approximately 27 million tons of coal to generate electricity. The majority of this coal is obtained through long-term coal supply agreements. The remaining coal is purchased either on the spot market or through short-term supply agreements. We receive our coal supply primarily from mines located in Indiana, West Virginia, Ohio, Kentucky, Pennsylvania, and Illinois.

    Commodities monitors alternative sources of coal to assure a continuing availability of economical fuel supplies. As such, it will maintain its practice of purchasing a portion of coal requirements on the spot market and will continue to investigate least-cost coal options to comply with new and existing environmental requirements.

    Both CG&E and PSI believe that they can continue to obtain enough coal to meet future needs. However, future environmental requirements may significantly impact the availability and price of coal.

    Purchased Power  At times we purchase power to meet the energy needs of our wholesale customers and to meet the requirements of our retail native load customers (end-use customers within our operating companies' franchise territory). Factors that could cause Cinergy to purchase power for retail native load customers include generating plant outages, extreme weather conditions, growth, and other factors associated with supplying full requirements electricity. We believe we can obtain enough purchased power to meet future needs. However, during periods of excessive demand, such as those which occurred in the summers of 1998 and 1999, the price and availability of these purchases may be significantly impacted. See the "Significant Rate Developments" section of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information on PSI's Purchased Power Tracker.

    Environmental Matters  In December 2000, Cinergy reached an agreement in principle with the U.S. Environmental Protection Agency (EPA) and various parties, that may serve as the basis for a negotiated resolution of the Clean Air Act (CAA) claims and other related matters brought against coal-fired power plants owned and operated by Cinergy's operating companies. The estimated cost for these capital expenditures is expected to be approximately $700 million. These capital expenditures are in addition to our previously announced commitment to install nitrogen oxide (NO_X) controls over the next five years at an estimated cost of approximately $700 million. In 2000, we spent $75 million for NO_X and other environmental compliance as compared to $16 million in 1999. Forecasted expenditures for NO_X and other environmental compliance (in nominal dollars) are $210 million for 2001 and $789 million for 2001-2005. See the "Environmental Issues" and "Construction and Other Commitments" sections of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for further information.

Delivery

    Delivery plans, constructs, operates, and maintains our operating companies' transmission and distribution systems and provides gas and electric energy to customers. Delivery operated approximately 45,800 circuit miles (the total length in miles of separate circuits) of electric lines to provide regulated transmission and distribution service to 1.5 million customers as of December 31, 2000. Delivery operated approximately 7,550 miles of gas mains (gas distribution lines that serve as a common source of supply for more than one service line) and service lines to provide regulated transmission and distribution service to approximately 489,000 customers as of December 31, 2000. See "Item 2. Properties" for a further discussion of the transmission and distribution lines owned by our operating companies.

    Electric Operations  Delivery (through our operating companies) and other non-affiliated utilities in an eight-state region participate in the East Central Area Reliability Coordination Agreement (ECAR Agreement). The ECAR Agreement coordinates the planning and operation of generation and transmission facilities, which provides for maximum reliability of regional bulk power supply.

    Midwest ISO  As part of the effort to create a competitive wholesale power marketplace, the Federal Energy Regulatory Commission (FERC) approved the formation of the Midwest Independent Transmission System Operator, Inc. (Midwest ISO) during 1998. In that same year, Cinergy agreed to join the Midwest ISO in preparation for meeting anticipated changes in the FERC regulations and future deregulation requirements. The Midwest ISO was established as a non-profit organization to maintain functional control over the combined transmission systems of its members. The organization was expected to begin operations in November 2001.

    In the fall of 2000, three transmission owners announced their intent to leave the Midwest ISO and join the proposed Alliance Regional Transmission Organization (Alliance RTO) by the end of 2001. The Alliance RTO is a planned for-profit transmission company involving various utilities which have transmission systems that cover parts of Michigan, Ohio, Indiana, West Virginia, and Virginia.

    On December 13, 2000, six additional transmission owners, including Cinergy, announced a plan for conditional withdrawal from the Midwest ISO if the other three withdrawing members left the organization.

    On January 24, 2001, the FERC issued an order providing 30 days of confidential settlement talks between the Alliance RTO and the Midwest ISO and its stakeholders, in an effort to resolve issues related to such withdrawals. Cinergy actively participated in the settlement process. On February 23, 2001, the settlement judge reported to the FERC that settlement talks produced a unanimous comprehensive settlement between all related parties. Specific details of this settlement are yet to be finalized and will need approval by the FERC. The definitive settlement agreement language is to be filed with the FERC on March 19, 2001. If approved, the settlement agreement is not expected to present any material adverse impacts to the company.

    The following map illustrates the interconnections between our electric systems and other electric systems.

    Electricity Supply  Delivery currently receives all of its electricity from Commodities at a transfer price based upon current regulatory ratemaking methodology. With the implementation of electric deregulation in Ohio, effective January 1, 2001, Delivery continues to acquire its electricity requirements through Commodities for those retail customers who do not switch suppliers. For further details on electricity supply of CG&E refer to Note 18 of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data".

ULH&P purchases its energy from CG&E pursuant to a FERC-approved contract that is due to expire on December 31, 2001. Currently the contract is under negotiation with the involvement of the Kentucky Public Service Commission. The Ultimate supplier(s) of ULH&P's energy and the pricing of electric commodity requirements contained in any new arrangement could reflect a market-based approach. At the current time we are unable to predict the outcome of this matter.

    Gas Supply  Delivery is responsible for the purchase and the subsequent delivery of natural gas to native load customers. Delivery's procurement strategy is to buy firm gas supplies and firm interstate pipeline capacity during the winter season (November through March) and buy spot supply and capacity during the non-heating season (April through October). This strategy allows Delivery to assure reliable gas supply for its high priority (non-curtailable) customers during peak winter conditions and provides Delivery the flexibility to reduce its contract commitments if customers choose alternate gas suppliers. In 2000, firm supply (gas intended to be available at all times) purchase commitment agreements provided approximately 55% of the natural gas supply. The remaining gas was purchased on the spot market. These firm supply agreements feature two levels of gas supply, specifically (1) base load, which is a continuous supply to meet normal demand requirements, and (2) swing load, which is gas available on a daily basis to accommodate changes in demand. Delivery pays reservation charges for base load and swing load supplies. These charges secure delivery from the supplier during periods of extreme weather or high demand. See the "Gas Industry" section of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for further information.

    Interstate pipelines either (1) transport gas purchased directly to the distribution systems or (2) inject gas purchased into pipeline storage facilities for future withdrawal and delivery. The majority of the gas supply comes from the Gulf of Mexico coastal areas of Texas and Louisiana. In addition, a limited supply comes from the mid-continent (Arkansas-Oklahoma) basin. Also, industrial transportation customers behind Cinergy's city gate (point where the distribution system connects to an interstate gas pipeline) are obtaining methane gas recovered locally from an Ohio landfill. Delivery expects the natural gas market will remain competitive in future years. However, short-term price fluctuations could occur as a result of weather conditions, availability of supply, changes in demand, and storage inventories. The market price of natural gas has increased significantly in 2000, which has caused CG&E and ULH&P to pay more for the gas they deliver to customers. Under the gas cost recovery mechanism that is mandated under state law, gas commodity cost is passed through directly to the customer dollar-for-dollar. It is expected that gas commodity prices will remain at these historically high levels well into 2001.

    Revenue Data and Customer Base  The percent of operating revenues derived from electricity sales and from the sale and/or transportation of natural gas for the years ended December 31 were as follows:

	Operating Revenues
	2000		1999		1998
Registrant	Electric %	Gas %	Electric %	Gas %	Electric %	Gas %
Cinergy(1)	64	36	73	27	81	19
CG&E and subsidiaries	85	15	85	15	86	14
PSI	100	—	100	—	100	—
ULH&P	71	29	75	25	75	25

(1)

The results of Cinergy also include amounts related to non-registrants.

    Electric and gas sales are seasonal. Electricity usage in our service territory peaks during the summer and gas usage peaks during the winter. Air conditioning increases electricity demand and heating increases the demand for electricity and gas.

    The service territory of CG&E and its utility subsidiaries, including ULH&P, is heavily populated and is characterized by a stable residential customer base and a diverse mix of industrial customers. The territory served by PSI is composed of residential, agricultural, and widely diversified industrial customers. No single customer provides more than ten percent of operating revenues (electric or gas) for any of our operating companies.

Cinergy Investments

    Cinergy Investments manages the development, marketing, and sales of our domestic non-regulated, and non-wholesale energy and energy-related products and services. This is accomplished through various subsidiaries and joint ventures. These products and services include the following:

•

providing energy management-consulting services and infrastructure solutions to government, industrial, and commercial customers that operate retail facilities;



•

providing various utility services to utilities (for example, providing underground locating and construction services for utilities);



•

providing telecommunication services including dark fiber, high capacity service, internet service, local phone service, and long distance service;



•

leasing of space on wireless telecommunication towers and the purchase and construction of such towers;



•

providing various engineering, procurement, construction, operation, and maintenance functions such as designing and constructing turnkey gas pipelines, electric transmission and distribution lines, substations for industrial and large commercial customers, and fiber optic telecommunication cables;



•

providing information, systems, and services to multi-site national chains in retail industries to optimize their energy, telecommunications, and other facility-wide costs;



•

building, owning, operating, and maintaining combined heat and power facilities; and



•

pursuing technology equity investments and running technology pilots.

International

    International primarily directs and manages our international business holdings. These holdings include wholly-owned and jointly-owned companies in ten foreign countries. In addition, International directs our renewable energy investing activities (for example, wind farms) which include investments within the U.S. as well as abroad.

    In 1999, we sold our 50% ownership interest in Midlands Electricity plc (Midlands). Prior to the sale, Midlands had provided the majority of International's earnings. See Note 10 of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data" for further information on the sale of our ownership interest in Midlands.

    During the fourth quarter of 2000, a joint venture between a subsidiary of Cinergy and a subsidiary of Royal Dutch Petroleum (Shell) was awarded a 49% interest and operational control of the gas distribution business in Athens, Greece. We expect this transaction to close during the first half of 2001. International's plans for 2001 include development of the Greek gas business itself and other opportunities which may arise in the Greek market. In addition, International expects to continue its development of, and investment in, renewable energy projects in both the U.S. and Europe. The timing of International's investments depends on changing market conditions and regulatory approvals. Our international investments present certain risks, including foreign exchange risk. See the "Market Risk Sensitive Instruments and Positions" section of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for further information on these risks and how we address our exposure to them. See Note 15 of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data" for further information on revenues from foreign operations and long-lived assets.

OTHER DEVELOPMENTS

    Our ability to invest in growth initiatives, such as Exempt Wholesale Generators (EWG) and Foreign Utility Companies (FUCO) is limited by certain legal and regulatory requirements, including the PUHCA. An EWG is a special-purpose entity that owns or operates domestic or foreign electric generating facilities whose power is sold entirely at wholesale. FUCOs are companies whose utility assets and operations are located entirely outside the U.S. and which are used for the generation, transmission, or distribution of electric energy for sale, or the distribution of gas at retail. In late 1999, we filed a request with the SEC under the PUHCA for an additional $5 billion in authority to invest in EWGs and FUCOs. On June 23, 2000, the SEC issued an interim order granting us authority to invest a total of $1.7 billion in EWGs and FUCOs, replacing an earlier order capping our investment authority under PUHCA at an amount equal to Cinergy's average retained earnings from time to time. As of December 31, 2000, we had invested or committed to invest $1.4 billion of the $1.7 billion available.

    In January 2001, Cinergy modified its request to the SEC for additional investment authority, proposing a new investment limitation capped at $4 billion, subject to various terms and conditions. This request is pending before the SEC. While we currently cannot predict the outcome of this request, the existing limits could restrict our ability to invest in future transactions.

FUTURE EXPECTATIONS/TRENDS

    See the information appearing under the same caption in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for discussion of "Future Expectations/Trends."

ITEM 2.  PROPERTIES

COMMODITIES

Regulated

    Our operating companies' total winter electric capabilities reflected in MW as of December 31, 2000, are shown in the table that follows. Our electric generating plants are located in Ohio, Kentucky, and Indiana and are wholly-owned and jointly-owned facilities.

Registrant(1)	Stations	Coal MW	Natural Gas MW	Oil MW	Hydro MW	Total MW
CG&E	9	4,186	736	323	—	5,245
PSI	8	5,578	120	261	45	6,004
Total	17	9,764	856	584	45	11,249

(1)

This table includes only our portion of the total capacity for the jointly-owned plants. Refer to Note 13 of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data" for a discussion of the jointly-owned plants.

    During 2000, our electric generating plants operated reliably, as evidenced by our annual capacity factor of 73% (excluding natural gas peaking stations), and a utilization factor of greater than 86%. A capacity factor is a percentage that indicates how much of a power plant's capacity is used over time.

    During August, we experienced peak loads of 4,731 MW for CG&E and 5,410 MW for PSI. At times we purchase power to meet the energy needs of our wholesale customers and to meet the requirements of our retail native load customers. Factors that could cause Cinergy to purchase power for retail native load customers include outages, extreme weather conditions, growth, and other factors associated with supplying full requirements electricity. We believe we can obtain enough purchased power to meet future needs.

    Promptly after receipt of all required regulatory approvals and third-party consents, CG&E anticipates transferring its generating stations and their related assets and obligations to one or more non-regulated corporate subsidiary(ies). Subsequent to this transfer CG&E will continue operations as a transmission and distribution company. To facilitate this transfer, the generation assets of CG&E as of August 2000, were released from the first mortgage indenture lien allowing them to move un-encumbered to the non-regulated subsidiary. Generating assets added after August 2000, remain subject to the lien of CG&E's first mortgage bond indenture and will require release at some future date prior to being transferred. For a further discussion on Ohio deregulation see Note 18 of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data".

Non-Regulated

    During 1999, one of our non-regulated subsidiaries formed a partnership (each party having a 50% ownership) with Duke Energy North America LLC (Duke). The partnership was formed for the purpose of jointly constructing and owning three wholesale generating facilities located in southwestern Ohio, and east central and western Indiana. Two of these properties became fully operational in June 2000. The total capacity of these plants is 1,280 MW. Construction of the third facility, with a capacity of 129 MW, has been suspended by order of the Indiana Utility Regulatory Commission (IURC). For further information on the IURC's order, see the "Wholesale Market Developments" section of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations".

    In December 2000, Cinergy announced that one of its non-regulated subsidiaries entered into a definitive agreement to acquire two natural gas-fired merchant electric generating facilities from Enron. The facilities are located in Tennessee and Mississippi and have a total combined capacity of 998 MW. It is anticipated that this transaction will close in the second quarter of 2001.

DELIVERY

Electric

    Metrics for our operating companies' electric transmission and distribution systems (excluding our proportionate share of jointly-owned facilities) are estimated as follows:

Registrant		Electric Transmission Systems	Electric Distribution Systems	Substation Combined Capacity
		(circuit miles)	(circuit miles)	(kilovolt-amperes)(1)
CG&E		1,641	15,315	20,518,621
	ULH&P	105	2,646	1,115,298
	Other subsidiaries	40	10	—
CG&E and subsidiaries		1,786	17,971	21,633,919
PSI		5,515	20,557	28,946,637
Total		7,301	38,528	50,580,556

(1)

Kilovolt-amperes (1,000 volt-amperes) are a broad measure of our substation transformer capacity.

    At the end of 1999 our operating companies' electric systems were interconnected with thirteen other utilities. An additional interconnection was completed in 2000 between Cinergy and a new generation-only area established by Enron bringing the total number of interconnections to fourteen.

    Our electric transmission and distribution systems are designed and constructed to further the goal of providing reliable service to our customers. Every effort is made to ensure that sufficient facilities are in service to meet this goal without installing facilities beyond what is required to operate reliably and within design or designed parameters. Through our ongoing review of these systems, enhancements are developed and constructed to meet our planning, loading, and reliability guidelines. This process allows us to prudently invest in capacity additions only when and where they are required.

Gas

    As of December 31, 2000, the natural gas transmission and distribution systems of CG&E and its subsidiaries had approximately 7,500 miles of mains and service lines located in southwestern Ohio, southeastern Indiana, and northern Kentucky. CG&E and its subsidiaries also own three underground caverns with a total storage capacity of 23 million gallons of liquid propane. As of December 31, 2000, we had 17 million gallons of liquid propane in storage. This liquid propane is used in the three propane/air peak shaving plants located in Ohio and Kentucky. These plants convert liquid propane into natural gas to be used only during peak demand periods and emergencies. During 2000, CG&E and its subsidiaries' natural gas transmission and distribution systems operated reliably, at a load factor of 34%, and at satisfactory levels of utilization. Load factor is used to indicate the percentage of capacity of an energy facility, such as gas distribution, that is utilized at a given period of time.

CINERGY INVESTMENTS

    In 1997, Cinergy and Trigen Energy Corporation formed a joint venture company, Trigen-Cinergy Solutions LLC, to build, own, operate, and maintain combined heat and power facilities for large

industrial customers. As of December 31, 2000, we have an ownership interest and/or operating control in nine domestic cogeneration (simultaneous production of two or more forms of useable energy from a single fuel source) plants producing 294 MW of electricity through our various joint ventures. During 2001-2002, we anticipate completing construction of three new cogeneration plants, which will produce an additional 40 MW of electricity.

    In 2000, Cinergy formed a new wholly-owned subsidiary, Cinergy Solutions, Inc. (Cinergy Solutions), to develop, acquire, own, and operate energy-related projects. In October 2000, Cinergy Solutions agreed to form a partnership with British Petroleum to construct, own, and operate two new cogeneration plants located in Texas that, with existing facilities to be acquired by the partnership, will produce more than 800 MW of electricity. The operation of these two new cogeneration projects will coincide with the decommissioning of older, less efficient energy facilities. This agreement was finalized in late January 2001.

INTERNATIONAL

    As of December 31, 2000, International had ownership interests in generating plants located in 11 countries, including the U.S., producing a total of 1,626 MW of electricity. Five of these plants are district heating plants in the Czech Republic, of which we own four and have a minority interest in the fifth, that in total provide 1,094 MW of thermal steam capacity, which may be used to produce 149 MW of electricity. We also own interests in 1,975 miles of gas and electric transmission and distribution systems through jointly-owned investments. International serves 51,140 transmission and distribution customers, 518 retail district heating and district electric customers, and 106 wholesale heating and electric customers.

    During 2000, Cinergy invested or acquired the right to invest in two gas distribution businesses, both of which are located in major international markets and both of which will require development over the next several years in order to add customers. Specifically, in August 2000, together with a South African minority partner (5%), Cinergy acquired Egoli Gas, which has the right to develop and operate the gas distribution business in the Greater Johannesburg, South Africa market. Also, during the fourth quarter of 2000, a joint venture between a subsidiary of Cinergy and a subsidiary of Shell was awarded a 49% interest and operational control of a gas distribution business in Athens, Greece. We expect this transaction to close during the first half of 2001.

GENERAL INFORMATION

    In August 2000, the generation assets of CG&E were released from the first mortgage indenture lien. CG&E's transmission assets, distribution assets, and any generating assets added after August 2000, remain subject to the lien of the first mortgage bond indenture. The utility property of PSI is also subject to the lien of its first mortgage bond indenture.

ITEM 3.  LEGAL PROCEEDINGS

NEW SOURCE REVIEW AND NOTICES OF VIOLATION

    See Notes 12(c) and (d) of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data" for a discussion of the lawsuit and notices of violation filed by the EPA against Cinergy, CG&E, and PSI.

MANUFACTURED GAS PLANT SITES

    See Note 12(f) of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data" for a discussion of manufactured gas plant sites as they relate to our operating companies.

M METALS SUPERFUND SITE

    On July 6, 2000, the EPA identified PSI and Indianapolis Power and Light Company (IPL) as Potentially Responsible Parties for the release of hazardous substances at the M Metals Superfund Site (Site) located in Indianapolis, Indiana. The EPA advised that it had taken response actions relating to the Site and had incurred costs of approximately $500,000. The EPA has demanded reimbursement of these costs incurred related to the Site and has encouraged PSI and IPL to work out an allocation between themselves for the payment of the costs. However, PSI and IPL will be held jointly and severally liable for the costs. PSI is communicating with the EPA and is in the process of reviewing EPA documentation of the cleanup in preparation of entering into settlement discussions. Resolution of this matter is not expected to materially impact our results of operations or financial condition.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    No matters were submitted to a vote of security holders for Cinergy, CG&E, or PSI during the fourth quarter of 2000.

PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS

Cinergy Corp.'s common stock is listed on the New York Stock Exchange. The high and low stock prices for each quarter for the past two years are indicated below:

	High		Low
2000
First Quarter	$	25.88	$	20.00
Second Quarter		28.13		21.19
Third Quarter		33.25		25.56
Fourth Quarter		35.25		28.50
1999
First Quarter	$	34.88	$	27.38
Second Quarter		34.63		27.44
Third Quarter		33.00		27.31
Fourth Quarter		29.63		23.44

Cinergy Corp. holds all outstanding CG&E and PSI common stock, and CG&E holds all ULH&P common stock. Therefore, no public trading market exists for the common stock of CG&E, PSI, and ULH&P.

    As of January 29, 2001, the most recent dividend record date, we had 61,049 common stockholders of record.

Cinergy Corp. declared dividends on common stock of $.45 per share for each quarter of 1999 and 2000. The dividends
paid to Cinergy Corp. by CG&E and PSI and to CG&E by ULH&P for the past two years were as follows:

Registrant	Quarter	2000		1999
		(in thousands)
CG&E	First	$	53,600	$	71,400
	Second		53,600		71,500
	Third		53,600		53,600
	Fourth		71,534		53,600
PSI	First	$	18,000	$	—
	Second		18,000		—
	Third		18,000		17,900
	Fourth		—		18,000
ULH&P	First	$	—	$	—
	Second		4,974		4,976
	Third		—		—
	Fourth		4,683		4,683

    See Note 2(b) of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data" for a brief description of the registrants' common stock dividend restrictions.

ITEM 6.  SELECTED FINANCIAL DATA

			2000(1)		1999(1)		1998(2)		1997			1996
			(in millions, except per share amounts)
Cinergy
Operating revenues			$	8,422	$	5,938	$	5,911	$	4,387		$	3,276
Net income before extraordinary item				399		404		261		363			335
Net income				399		404		261		253	(3)		335
Common stock
	Earnings per share (EPS)
		Net income before extraordinary item		2.51		2.54		1.65		2.30			2.00
		Net income		2.51		2.54		1.65		1.61	(3)		2.00
	EPS—assuming dilution
		Net income before extraordinary item		2.50		2.53		1.65		2.28			1.99
		Net income		2.50		2.53		1.65		1.59	(3)		1.99
	Dividends declared per share			1.80		1.80		1.80		1.80			1.74
Total assets				12,330		9,617		9,687		8,858			8,725
Long-term debt				2,876		2,989		2,604		2,151			2,326
Long-term debt due within one year				41		31		136		85			140
CG&E
Operating revenues			$	3,230	$	2,551	$	2,856	$	2,452		$	1,976
Net income				267		234		216		239			227
Total assets				5,987		4,917		5,154		4,914			4,844
Long-term debt				1,205		1,206		1,220		1,324			1,381
Long-term debt due within one year				1		—		130		—			130
PSI
Operating revenues			$	2,684	$	2,136	$	2,403	$	1,960		$	1,332
Net income				135		117		52		132			126
Total assets				4,630		3,835		3,584		3,406			3,295
Long-term debt				1,074		1,212		1,026		826			945
Long-term debt due within one year				38		31		6		85			10

(1)

See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations", and the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data" for factors affecting earnings and discussion of material uncertainties for Cinergy, CG&E, and PSI.

(2)

See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations".

(3)

Included in net income for 1997 was a one-time extraordinary charge of $110 million ($.69 per share basic and diluted) for the windfall profits tax levied against our 50% ownership interest in Midlands. In the third quarter of 1999, we sold our ownership interest in Midlands.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

    In this report Cinergy (which includes Cinergy Corp. and all of our regulated and non-regulated subsidiaries) is, at times, referred to in the first person as "we", "our", or "us".

INTRODUCTION

    In Management's Discussion and Analysis (MD&A), we explain our general operating environment, as well as our liquidity, capital resources, and results of operations. Specifically, we discuss the following:

•

factors affecting current and future operations;

•

why revenues and expenses changed from period to period;

•

how the above items affect our overall financial condition;

•

what our expenditures for construction and other commitments were during 2000, and what we expect them to be in 2001-2005; and

•

potential sources of cash for future capital expenditures.

ORGANIZATION

Cinergy Corp., a Delaware corporation created in October 1994, owns all outstanding common stock of The Cincinnati Gas & Electric Company (CG&E) and PSI Energy, Inc. (PSI), both of which are public utility subsidiaries. As a result of this ownership, we are considered a utility holding company. Because we are a holding company whose utility subsidiaries operate in multiple states, we are registered with and are subject to regulation by the Securities and Exchange Commission (SEC) under the Public Utility Holding Company Act of 1935, as amended (PUHCA). Our other principal subsidiaries are:

•

Cinergy Services, Inc. (Services);

•

Cinergy Investments, Inc. (Investments);

•

Cinergy Global Resources, Inc. (Global Resources);

•

Cinergy Technologies, Inc. (Technologies); and

•

Cinergy Wholesale Energy, Inc. (CWE).

CG&E, an Ohio corporation, is a combination electric and gas public utility company that provides service in the southwestern portion of Ohio and, through its subsidiaries, in nearby areas of Kentucky and Indiana. It has three wholly-owned utility subsidiaries and two wholly-owned non-utility subsidiaries. CG&E's principal utility subsidiary, The Union Light, Heat and Power Company (ULH&P), is a Kentucky corporation that provides electric and gas service in northern Kentucky. CG&E's other subsidiaries are insignificant to its results of operations.

PSI, an Indiana corporation, is an electric utility that provides service in north central, central, and southern Indiana.

    The following table presents further information related to the operations of our domestic utility companies (our operating companies):

Principal Line(s) of Business
CG&E and subsidiaries	•	Generation, transmission, distribution, and sale of electricity
	•	Sale and/or transportation of natural gas
PSI	•	Generation, transmission, distribution, and sale of electricity
ULH&P	•	Transmission, distribution, and sale of electricity
	•	Sale and transportation of natural gas

    Services is a service company that provides our regulated and non-regulated subsidiaries with a variety of centralized administrative, management, and support services. Investments holds most of our domestic non-regulated, energy-related businesses and investments. Global Resources holds our international businesses and investments and directs our renewable energy investing activities (for example, wind farms). Technologies primarily holds our portfolio of technology-related investments. In November 2000, CWE was formed to act as a holding company for Cinergy's energy commodity businesses, including production, as the generation assets eventually become unbundled from the utility subsidiaries. See Note 18 of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data" for a discussion on Ohio deregulation.

    The majority of our operating revenues are derived from the sale of electricity and the sale and/or transportation of natural gas.

    We conduct operations through our subsidiaries, and we manage through the following four business units:

•

Energy Commodities Business Unit (Commodities);

•

Energy Delivery Business Unit (Delivery);

•

Cinergy Investments Business Unit; and

•

International Business Unit.

    As the utility industry continues to evolve, Cinergy will continue to analyze its operating structure and make modifications as appropriate. In early 2001, we announced certain organizational changes which further aligned the business units to reflect Cinergy's strategic vision. The revised structure reflects three business units, as follows:

•

Energy Merchant—will operate power plants, both domestically and abroad, and conduct all wholesale energy marketing, trading, origination and risk management services;

•

Regulated Businesses—will operate all gas and electric transmission and distribution services, both domestically and abroad, and will be responsible for all regulatory planning for the regulated utility businesses of CG&E, PSI, and ULH&P; and

•

Power Technology and Infrastructure Services—will originate and manage a portfolio of emerging energy businesses.

    See Note 15 of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data" for financial information by business unit.

LIQUIDITY

    In the "Liquidity" section, we discuss 2000 cash flows, environmental issues, construction, and other investing activities as they relate to our current and future cash needs. In the "Capital Resources" section we discuss how we intend to meet these capital requirements.

2000 Cash Flows

Operating Activities

    For the year ended December 31, 2000, Cinergy's and PSI's cash from operating activities increased $229  million and $331 million, respectively, compared to 1999, primarily due to the cash requirement for the purchase of the remainder of Dynegy, Inc.'s 25 year contract for coal gasification services in 1999. CG&E's cash provided from operating activities during 2000 decreased $111 million for the year ended December 31, 2000, as compared to last year, due primarily to a net increase in receivables less payables pertaining to customer accounts and power marketing and trading activities. ULH&P's cash from operating activities increased $17 million primarily due to changes in working capital and deferred income taxes.

Financing Activities

Cinergy's net cash provided by financing activities increased $514 million in 2000, as compared to the prior year. This change is primarily attributable to an increase in short-term borrowings which is partially offset by a decrease in the issuance of long-term debt. CG&E's net cash used in financing activities decreased $206 million compared to 1999. This comparative decrease is primarily a result of the redemption of $164 million in long-term debt that occurred during 1999. PSI's net cash provided by financing activities decreased $258 million over the prior year due to a decrease in the net issuance of long-term debt. This decrease was partially offset by an increase in short-term borrowings. ULH&P reduced its short-term borrowings during 2000, as compared to 1999, which accounts for the decrease in net cash provided by financing activities of $14 million.

Investing Activities

    For the year ended December 31, 2000, Cinergy's net cash used in investing activities increased $714 million as compared to the prior year. This change primarily reflects the proceeds of $690 million received in 1999 from the sale of our 50% ownership interest in Midlands Electricity plc (Midlands). CG&E's and PSI's net cash used in investing activities increased $66 million and $70 million, respectively, as compared to 1999, as a result of an increase in construction expenditures.

    For further detail regarding the classification of these items, see our Consolidated Statements of Cash Flows in "Item 8. Financial Statements and Supplementary Data".

Environmental Issues

    In the "Environmental Issues" section, we discuss the ozone transport rulemaking, ambient air standards, regional haze, global climate change, mercury, new source review, W.C. Beckjord Generating Station (Beckjord Station) Notices of Violations (NOV), United States (U.S.) Environmental Protection Agency (EPA) Agreement, and manufactured gas plants sites as they relate to us and our operating companies.

    Ozone Transport Rulemaking  In June 1997, the Ozone Transport Assessment Group, which consisted of 37 states, made a wide range of recommendations to the EPA to address the impact of ozone transport on serious non-attainment areas (geographic areas defined by the EPA as non-compliant with ozone standards) in the Northeast, Midwest, and South. Ozone transport refers to wind-blown movement of ozone and ozone-causing materials across city and state boundaries. In late 1997, the EPA published a proposed call for revisions to State Implementation Plans (SIPs). SIP is an acronym for a state's implementation plan for achieving emissions reductions to address air quality concerns. The EPA must approve all SIPs.

Nitrogen Oxide (NO_X ) SIP Call  In October 1998, the EPA finalized its ozone transport rule, also known as the NO_X SIP Call. It applied to 22 states in the eastern half of the U.S., including the three states in which our electric utilities operate, and also proposed a model NO_X emission allowance trading program. This rule recommended states reduce NO_X emissions primarily from industrial and utility sources to a certain level by May 2003. The EPA gave the affected states until September 30, 1999, to incorporate NO_X reductions and, at the discretion of the state, a NO_X trading program into their SIPs. The EPA proposed to implement a federal plan to accomplish the equivalent NO_X reductions by May 2003, if states failed to revise their SIPs.

    Ohio, Indiana, a number of other states, and various industry groups (some of which we are a member), filed legal challenges to the NO_X SIP Call in late 1998. On May 25, 1999, the U.S. Circuit Court of Appeals for the District of Columbia (Court of Appeals) granted a request for a deferral of the rule and indefinitely suspended the September 30 filing deadline, pending further review by the Court of Appeals.

    In March 2000, the Court of Appeals substantially upheld the EPA's rule. On April 11, 2000, the EPA asked the Court of Appeals to remove its May 25, 1999 suspension of the rule and also directed states to submit SIP revisions by September 1, 2000. On April 17, 2000, various states and industry groups (some of which we are a member) filed a request with the Court of Appeals for a rehearing of the NO_X SIP Call decisions. On April 24, 2000, the same group filed a request with the Court of Appeals to require a rulemaking and a comment period to determine a new compliance date. The states also filed a request to obtain more time to file their SIPs. On June 23, 2000, the Court of Appeals denied both requests and directed the states to submit their SIP revisions by October 30, 2000. The states of Indiana, Kentucky, and Ohio subsequently submitted letters stating their intent to revise their SIPs in response to the NO_X SIP Call.

    In August 2000, the Court of Appeals extended the May 1, 2003 deadline for NO_X reductions to May 31, 2004. The states and other groups appealed the Court of Appeals ruling to the U.S. Supreme Court (Supreme Court).

    On September 25, 2000, Cinergy announced a plan to invest approximately $700 million in pollution control equipment and other methods to reduce NO_X emissions. This expected investment includes the following:

•

install up to 11 selective catalytic reduction units (SCRs) at several different generating stations;

•

install other pollution control technologies, including new computer software, at all generating stations;

•

make combustion improvements; and

•

utilize market opportunities to buy and sell NO_X allowances.

    SCRs are the most proven technology currently available for reducing NO_X emissions produced in coal-fired generating stations.

    Section 126 Petitions  In February 1998, the northeast states filed petitions seeking the EPA's assistance in reducing ozone in the eastern U.S. under Section 126 of the Clean Air Act (CAA). The EPA believes that Section 126 petitions allow a state to claim that sources in another state are contributing to its air quality problem and request that the EPA require the upwind sources to reduce their emissions.

    In December 1999, the EPA granted four Section 126 petitions relating to NO_X emissions. This ruling affected all of our Ohio and Kentucky facilities, as well as some of our Indiana facilities, and requires us to reduce our NO_X emissions to a certain level by May 2003. The EPA's action granting the Section 126 petitions was appealed to the Court of Appeals. Oral arguments were held in this case on December 15, 2000. A final decision is expected some time within the next few months.

    State Ozone Plans  On November 15, 1999, the State of Indiana and the Commonwealth of Kentucky (along with Jefferson County, Kentucky) jointly filed an amendment to their attainment demonstration on how they intend to bring the greater Louisville area, including Floyd and Clark Counties in Indiana, into attainment with the one-hour ozone standard. The SIP amendments call for, among other things, statewide NO_X reductions from utilities in Indiana, Kentucky, and surrounding states which are less stringent than the EPA's NO_X SIP Call. Indiana and Kentucky committed to adopt utility NO_X control rules by December 2000 that would require controls be installed by May 2003. However, Indiana halted the rulemaking for NO_X controls at this level, but continues to develop NO_X SIP Call level reduction regulations. Kentucky did complete their rulemaking, but has issued a notice of intent to revise the rules to change the compliance deadline to mirror the NO_X SIP Call (May 31, 2004).

    See "EPA Agreement" below for a discussion of the tentative EPA settlement, which relates to matters discussed herein.

    Ambient Air Standards  During 1997, the EPA revised the National Ambient Air Quality Standards for ozone and fine particulate matter. Fine particulate matter refers to very small solid or liquid particles in the air. It was anticipated that utility NO_X reductions called for in the EPA's final NO_X SIP Call would address both the pre-existing one-hour ozone standard and the new eight-hour ozone standard. With the recent challenges to the NO_X SIP Call and the eight-hour ozone standard (discussed below), it is unclear to what extent additional NO_X reductions will be required of utilities to address eight-hour ozone non-attainment issues.

    The EPA estimates it will take up to five years to collect sufficient ambient air monitoring data to determine fine particulate matter non-attainment areas. The states will then determine the sources of the particulates and determine a regional emission reduction plan. We currently cannot predict the exact amount and timing of required reductions.

    On May 14, 1999, the Court of Appeals ruled that both the new eight-hour ozone standard and the fine particulate matter standard were questionable and were determined to be unenforceable by the EPA. In June 1999, the EPA appealed the decision. On October 29, 1999, the full Court of Appeals rejected the EPA's request for reconsideration. In January 2000, the EPA appealed to the Supreme Court and oral arguments were held on November 17, 2000, with a ruling expected any time, but no later than July 2001. We currently cannot determine the outcome of the appeals process and the effects on future emissions reduction requirements.

    Regional Haze  The EPA published the final regional haze rule on July 1, 1999. This rule established planning and emission reduction timelines for states to use to improve visibility in national parks throughout the U.S. The ultimate effect of the new regional haze rule could be requirements for (1) newer and cleaner technologies and additional controls on conventional particulates, and (2) reductions in sulfur dioxide (SO₂) and NO_X emissions from utility sources. If more utility emissions reductions are required, the compliance cost could be significant. In August 1999, several industry groups (some of which we are a member) filed a challenge to the regional haze rules with the Court of Appeals. In addition, several industry groups (some of which we are a member) have petitioned the new administration to reconsider its approach to regional haze, including possible modifications to the rule and/or settlement of the lawsuit. We currently cannot determine the outcome or effects of the EPA's, courts', or states' determinations.

    Global Climate Change  In December 1997, delegates to the United Nations' climate summit in Japan adopted an agreement, the Kyoto Protocol, to address global warming. The Kyoto Protocol establishes legally binding greenhouse gas emission (man-made pollutants thought to be artificially warming the earth's atmosphere) targets for developed nations. On November 12, 1998, the U.S. signed the Kyoto Protocol, however, it will not be effective in the U.S. until it is approved by a two-thirds vote of the U.S. Senate, which is currently deemed unlikely. In November 2000, another Conference of the Parties was held to negotiate the details of administrating the Kyoto Protocol. On November 25, 2000, the delegation failed to reach an agreement and suspended any further discussion until 2001.

    Because of a lack of support for the Kyoto Protocol or similar legislation, significant uncertainty exists about how and when greenhouse gas emissions reductions will be required. Our plan for managing the potential risk and uncertainty of regulations relating to climate change includes the following:

•

implementing cost-effective greenhouse gas emission reduction and offsetting activities;

•

funding research of more efficient and alternative electric generating technologies;

•

funding research to better understand the causes and consequences of climate change;

•

encouraging a global discussion of the issues and how best to manage them; and

•

advocating comprehensive legislation for fossil-fired power plants.

    Mercury  The air toxics provisions of the CAA delayed possible air toxics regulation of fossil-fueled steam utility plants until the EPA completed a study. The final report, issued in February 1998, confirmed that utility air toxic emissions pose little risk to public health. It stated that mercury is the pollutant of the greatest concern and requires further study. A Mercury Study Report, issued in December 1997, stated that mercury is not a risk to the average American and expressed uncertainty about whether reductions in current domestic sources would reduce human mercury exposure. U.S. utilities are a large domestic source, but they are insignificant when compared to global mercury emissions. The EPA was unable to show a feasible mercury control technology for coal-fired utility plants.

    In November 1998, the EPA finalized its mercury Information Collection Request (ICR). The ICR required all generating units to provide detailed information about coal use and mercury content during 1999. The EPA also selected about 100 generating units for one-time stack sampling. We completed testing at the Gibson Generating Station Unit No. 3 and the Wabash River Repowering Project in October 1999.

    On December 14, 2000, the EPA made its regulatory determination on the need for additional regulation of mercury emissions from coal-fired power plants. The EPA is expected to issue draft regulations in 2003 and final rules by 2004, with reductions required before 2010. We currently cannot predict the outcome or effects of the EPA's determination and subsequent regulation.

    New Source Review (NSR)  The CAA's NSR provisions require that a company obtain a pre-construction permit if it plans to build a new stationary source of pollution or make a major change to an existing facility unless the changes are exempt. In July 1998, the EPA requested comments on proposed revisions to the NSR rules that would change NSR applicability by eliminating exemptions contained in the current regulation.

    Since July 1999, CG&E and PSI have received requests from the EPA (Region 5), under Section 114 of the CAA, seeking documents and information regarding capital and maintenance expenditures at several of their respective generating stations. These activities were part of an industry-wide investigation assessing compliance with the NSR and the New Source Performance Standards (NSPS) of the CAA at electric generating stations.

    On September 15, 1999, November 3, 1999, and February 2, 2001, the Attorney General's of New York, Connecticut, and New Jersey, respectively, issued letters notifying Cinergy and CG&E of their

intent to sue under the citizens' suit provisions of the CAA. These states allege violations of the CAA by constructing and continuing to operate a major change to CG&E's Beckjord Station without obtaining the required NSR pre-construction permits.

    On November 3, 1999, the EPA sued a number of holding companies and electric utilities, including Cinergy, CG&E, and PSI, in various U.S. District Courts. The Cinergy, CG&E, and PSI suit alleged violations of the CAA at two of our generating stations relating to NSR and NSPS requirements. The suit sought (1) injunctive relief to require installation of pollution control technology on each of the generating units at Beckjord Station and PSI's Cayuga Generating Station (Cayuga Station), and (2) civil penalties in amounts of up to $27,500 per day for each violation.

    On March 1, 2000, the EPA filed an amended complaint against Cinergy, CG&E, and PSI. The amended complaint added the alleged violations of the NSR requirements of the CAA at two of our generating stations contained in an NOV filed by the EPA on November 3, 1999. It also added claims for relief of alleged violations of nonattainment NSR, Indiana and Ohio SIPs, and particulate matter emission limits (as discussed below in the "Beckjord Station NOV" section).

    The amended complaint sought (1) injunctive relief to require installation of pollution control technology on each of the generating units at Beckjord Station, Cayuga Station, and PSI's Wabash River and Gallagher Generating Stations, and such other measures as necessary, and (2) civil penalties in amounts of up to $27,500 per day for each violation.

    On March 1, 2000, the EPA also filed an amended complaint in a separate lawsuit alleging violations of the CAA relating to NSR, Prevention of Significant Deterioration (PSD), and Ohio SIP requirements regarding a generating station operated by the Columbus Southern Power Company (CSP) and jointly-owned by CSP, the Dayton Power and Light Company (DP&L), and CG&E. The EPA is seeking injunctive relief and civil penalties of up to $27,500 per day for each violation. This suit is being defended by CSP.

    On June 28, 2000, the EPA issued an NOV to Cinergy, CG&E, and PSI for alleged violations of NSR, PSD, and SIP requirements at CG&E's Miami Fort Station and PSI's Gibson Station. In addition, Cinergy and CG&E have been informed by DP&L, the operator of J.M. Stuart Station (Stuart Station), that on June 30, 2000, the EPA issued an NOV for alleged violations of NSR, PSD, and SIP requirements at this station. CG&E owns 39% of Stuart Station. The NOVs indicated that the EPA may (1) issue an order requiring compliance with the requirements of the SIP, or (2) bring a civil action seeking injunctive relief and civil penalties of up to $27,500 per day for each violation.

    See "EPA Agreement" below for a discussion of the tentative EPA settlement, which relates to matters discussed herein.

    Beckjord Station NOV  On November 30, 1999, the EPA filed an NOV against Cinergy and CG &E alleging that emissions of particulate matter at the Beckjord Station exceeded the allowable limit. The NOV indicated that the EPA may (1) issue an administrative penalty order, or (2) file a civil action seeking injunctive relief and civil penalties of up to $27,500 per day for each violation. The allegations contained in this NOV were incorporated within the March 1, 2000 amended complaint, as discussed in the "New Source Review" section. On June 22, 2000, the EPA issued an NOV and a Finding of Violation (FOV) alleging additional particulate emission violations at Beckjord Station and offered us an opportunity to meet and discuss the allegations and corrective measures. The NOV/FOV indicated the EPA may issue an administrative compliance order, issue an administrative penalty order, or bring a civil or criminal action.

    See "EPA Agreement" below for a discussion of the tentative EPA settlement, which relates to matters discussed herein.

    EPA Agreement  On December 21, 2000, Cinergy, CG&E, and PSI reached an agreement in principle with the EPA, the U.S. Department of Justice, three northeast states, and two environmental groups that could serve as the basis for a negotiated resolution of CAA claims and other related matters brought against coal-fired power plants owned and operated by Cinergy's operating subsidiaries. The complete resolution of these issues is contingent upon establishing a final agreement with the EPA and other parties. If a final agreement is reached with these parties, this would resolve past claims of the NSR as well as the Beckjord Station NOVs/FOV discussed above.

    Under the terms of the tentative agreement, the EPA and the other plaintiffs have agreed to drop all challenges of past maintenance and repair activities at our coal-fired generation plants. In addition, the intent of the tentative agreement is that we would be allowed to continue on-going activities to maintain reliability and availability without subjecting the plants to future litigation regarding federal permitting requirements.

    In return for resolution of past claims, future operational certainty, and protection of system wide demand growth, we have tentatively agreed to:

•

shut down or repower with natural gas nine small coal-fired boilers at three power plants beginning in 2004;

•

build four additional SO₂ scrubbers, the first of which must be operational by December 31, 2007;

•

upgrade existing pollution control systems;

•

phase in the operation of NO_X reduction technology year-round starting in 2004;

•

retire 50,000 tons of SO₂ allowances between 2001 and 2005 and reduce our SO₂ cap by 35% in 2013;

•

pay a civil penalty of $8.5 million to the U.S. government; and

•

implement $21.5 million in environmental mitigation projects.

    The estimated cost for these capital expenditures is expected to be approximately $700 million. These capital expenditures are in addition to our previously announced commitment to install NO_X controls over the next five years at an estimated cost of approximately $700 million as previously discussed in "Ozone Transport Rulemaking."

    In reaching the tentative agreement, we did not admit any wrongdoing and remain free to continue our current maintenance practices, as well as implement future projects for improved reliability. If the settlement is not completed, we believe the allegations contained in the amended complaint are without merit, and we would defend the suit vigorously in court. In such an event, it is not possible at this time to determine the likelihood that the plaintiffs would prevail on their claims or whether resolution of this matter would have a material effect on our financial condition or results of operations.

    Manufactured Gas Plant (MGP) SitesPSI received claims from Indiana Gas Company, Inc. (IGC) in 1994, and from Northern Indiana Public Service Company (NIPSCO) in 1995, as more fully discussed in Note 12(f)(ii) of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data". The basis of these claims was that PSI is a Potentially Responsible Party with respect to certain MGP sites under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). The claims further asserted that PSI is legally responsible for the costs of investigating and remediating the sites. In August 1997, NIPSCO filed suit against PSI in federal court claiming recovery (pursuant to CERCLA) of NIPSCO's past and future costs of investigating and remediating MGP-related contamination at the Goshen MGP site.

    In November 1998, NIPSCO, IGC, and PSI entered into a Site Participation and Cost Sharing Agreement. This agreement allocated CERCLA liability for past and future costs at seven MGP sites in Indiana among the three companies. As a result of the agreement, NIPSCO's lawsuit against PSI was dismissed. The parties have assigned lead responsibility for managing further investigation and

remediation activities at each of the sites to one of the parties. Similar agreements were reached between IGC and PSI that allocate CERCLA liability at 14 MGP sites with which NIPSCO was not involved. These agreements conclude all CERCLA and similar claims between the three companies related to MGP sites. The parties continue to investigate and remediate the sites, as appropriate under the agreements and applicable laws. The Indiana Department of Environmental Management (IDEM) oversees investigation and cleanup of some of the sites.

PSI notified its insurance carriers of the claims related to MGP sites raised by IGC, NIPSCO, and the IDEM. In April 1998, PSI filed suit in Hendricks County Circuit Court in the State of Indiana (Court) against its general liability insurance carriers. Among other matters, PSI requested a declaratory judgment that would obligate its insurance carriers to (1) defend MGP claims against PSI, or (2) pay PSI's costs of defense and compensate PSI for its costs of investigating, preventing, mitigating, and remediating damage to property and paying claims related to MGP sites. Recently, the trial date for the case was moved from May 2001 to January 2002. In addition, the Court has ordered the parties to submit the case to mediation. The parties have selected a mediator and scheduled mediation sessions in early 2001. PSI cannot predict the outcome of this litigation. Recently, PSI has been involved in settlement discussions with some of the insurance carriers. At the present time, PSI cannot predict either the progress or outcome of these discussions.

PSI has accrued costs for the sites related to investigation, remediation, and groundwater monitoring to the extent such costs are probable and can be reasonably estimated. PSI does not believe it can provide an estimate of the reasonably possible total remediation costs for any site before a remedial investigation/feasibility study has been completed. To the extent remediation is necessary, the timing of the remediation activities impacts the cost of remediation. Therefore, PSI currently cannot determine the total costs that may be incurred in connection with the remediation of all sites, to the extent that remediation is required. According to current information, these future costs at the 21 Indiana MGP sites are not material to our financial condition or results of operations. As further investigation and remediation activities are performed at these sites, the potential liability for the 21 Indiana MGP sites could be material to our financial position or results of operations.

CG&E and its utility subsidiaries are aware of potential sites where MGP activities have occurred at some time in the past. None of these sites is known to present a risk to the environment. CG&E and its utility subsidiaries have begun preliminary site assessments to obtain information about some of these MGP sites.

Construction and Other Commitments

    Actual construction and other committed expenditures for 2000 and forecasted construction and other committed expenditures for the year 2001 and for the five-year period 2001-2005 (in nominal dollars) are presented in the table below:

	Actual Expenditures		Forecasted Expenditures
	2000		2001		2001-2005
	(in millions)
Cinergy(1)	$	778	$	1,467	$	4,635
CG&E and subsidiaries		265		423		1,676
PSI		261		406		2,264
ULH&P		28		37		178

(1)

The results of Cinergy also include amounts related to non-registrants.

    This forecast includes an estimate of expenditures in accordance with the companies' plans regarding NO_X emission control standards and other environmental compliance (excluding

implementation of the tentative EPA Agreement), as discussed in the "Environmental Issues" section. Approximately $210 million is estimated to be spent in 2001 and approximately $789 million is estimated to be spent between 2001 and 2005. This forecast also includes expenditures for the pending purchase of two natural gas-fired merchant electric generating facilities from Enron North America (Enron) with a total combined capacity of 998 megawatts (MW), the acquisition of an interest in a gas distribution business in Athens, Greece, and other committed investments.

    All forecasted amounts reflect the following assumptions relating to the factors below, which may change significantly:

•

the general economy;

•

capital markets;

•

construction programs;

•

legislative and regulatory actions;

•

frequency and timing of rate proceedings; and

•

other related factors.

Other Investing Activities

    Our goal is to pursue a market leadership position in our regional Midwest market and at the same time extend that market leadership position to neighboring areas. In pursuit of this goal, we have entered into various growth initiatives including:

•

"new market" energy merchant businesses;

•

industrial infrastructure cogeneration and combined heat and power businesses; and

•

power technology and infrastructure businesses.

    We are consistently working towards maximizing the value of existing assets and operations. We will continue to explore and implement the use of mergers, acquisitions, strategic combinations, and internal expansions if they enhance our ability to achieve our goal of creating a competitive advantage.

    Our ability to invest in growth initiatives is limited by certain legal and regulatory requirements, including the PUHCA. The PUHCA restricts the amount which can be invested in non-utility businesses. Also, the timing and amount of investments in the non-utility businesses is dependent on the development and favorable evaluations of opportunities. Under the PUHCA regulations, we are allowed to invest or commit to invest in certain non-utility businesses, including:

1.

Exempt Wholesale Generators (EWG) and Foreign Utility Companies (FUCO)

An EWG is a special purpose entity that owns or operates domestic or foreign electric generating facilities whose power is sold entirely at wholesale. A FUCO is a company all of whose utility assets and operations are located outside the U.S. and which are used for the generation, transmission, or distribution of electric energy for sale, or the distribution of gas at retail.

In late 1999, we filed a request with the SEC under the PUHCA for an additional $5 billion in authority to invest in EWGs and FUCOs. On June 23, 2000, the SEC issued an interim order granting us authority to invest a total of $1.7 billion in EWGs and FUCOs, replacing an earlier order capping our investment authority under PUHCA at an amount equal to Cinergy's average retained earnings from time to time. As of December 31, 2000, we had invested or committed to invest $1.4 billion of the $1.7 billion available.

In January 2001, Cinergy modified its request to the SEC for additional investment authority, proposing a new investment limitation capped at $4 billion, subject to various terms and conditions. This request is pending before the SEC. While we currently cannot predict the outcome of this request, the existing limits could restrict our ability to invest in future transactions.

2.

Qualifying Facilities and Energy-Related Non-utility Entities

SEC regulations under the PUHCA permit Cinergy to invest and/or guarantee an amount equal to 15% of consolidated capitalization (consolidated capitalization is the sum of Notes payable and other short-term obligations, Long-term debt (including amounts due within one year), Cumulative preferred stock of subsidiaries, and total Common stock equity) in domestic qualifying cogeneration and small power production plants (qualifying facilities) and certain other domestic energy-related non-utility entities. At December 31, 2000, 15% of Cinergy's consolidated capitalization was approximately $1 billion, and we had invested approximately $.7 billion, leaving $.3 billion available for additional investing.

CAPITAL RESOURCES

    During 2000, we met our capital requirements through a combination of internally generated funds and debt issuances. We expect to meet our future capital needs through a combination of internally and externally generated funds, including the issuance of debt and/or equity securities.

    In early 2000, Cinergy Corp. filed a request with the SEC under the PUHCA for an amendment to its certificate of incorporation authorizing the issuance of preferred securities in addition to common stock. We also requested SEC authority to solicit proxies for shareholder approval of this amendment. In June 2000, we received the authorization from the SEC. At this time, it is not known whether shareholder approval will be granted or, if granted, whether or when any preferred stock will be issued.

Internally Generated Funds

    As of December 31, 2000, a significant portion of our revenues and corresponding cash flows were derived from our regulated subsidiaries. With the passage of customer choice legislation in several states, we believe it is likely the generation component of the electric utility industry will ultimately be deregulated. (Within our own utility jurisdictions, only Ohio is currently in the process of transitioning to a deregulated environment. Refer to the "Retail Market Developments" section.) As a low cost provider of energy service, we believe we will be successful in this competitive environment. However, as the industry becomes more competitive, future cash flows from operations could be subject to a higher degree of volatility than under our present regulatory structure. In 2001, we believe revenues provided by our regulated operations will continue as a major source of funds.

Debt

    We are required to secure authority to issue debt from the SEC under the PUHCA and the state utility commissions of Ohio, Kentucky, and Indiana. The SEC under the PUHCA regulates the issuance of debt for Cinergy Corp. Our three state utility commissions regulate the issuance of debt for our operating companies. On June 23, 2000, the SEC issued an order under the PUHCA authorizing Cinergy Corp. to increase its total capitalization at December 31, 1999, (excluding retained earnings and accumulated other comprehensive income) by an additional $5 billion, through issuance of any combination of equity and debt securities. This increased authorization is subject to certain conditions, including, among others, that common equity comprises at least 30% of Cinergy Corp.'s consolidated capital structure and that Cinergy Corp., under certain circumstances, maintains an investment grade rating on its senior debt obligations. This increased authority is intended to provide Cinergy Corp. flexibility to respond quickly and efficiently to financing needs and available conditions in capital markets.

    Short-term Debt  In connection with the current SEC authorization, Cinergy Corp. has $795 million established lines of credit. As of December 31, 2000, Cinergy Corp. had $157 million unused and available on its established lines. In early 2001, Cinergy Corp. successfully placed a new $400 million, 364-day revolving credit facility. This new facility will support an expansion of our commercial paper program and is not included in the lines of credit discussed above.

    Our operating companies have regulatory authority to borrow up to a total of $853 million in short-term debt ($453 million for CG&E and its subsidiaries including $50 million for ULH&P, and $400 million for PSI). In connection with this authority, we have established lines of credit for CG&E and PSI, $120 million and $185 million, respectively, of which, $40 million and $80 million, respectively, remained unused and available at December 31, 2000.

    Also, certain of our non-regulated subsidiaries have established lines of credit. As of December 31, 2000, $1.9 million was unused and available on these established lines. Our non-regulated subsidiaries have the availability of funds from Cinergy Corp. if the need arises.

    As of December 31, 2000, the commercial paper (debt instruments exchanged between companies) program is limited to a maximum outstanding principal amount of $400 million for Cinergy Corp. As of December 31, 2000, Cinergy Corp. had issued $216 million in commercial paper. Additionally, CG&E and PSI have the capacity to issue commercial paper, which must be supported by available committed lines of the respective company. The maximum outstanding principal amount for CG&E is $200 million and for PSI is $100 million. Neither CG&E nor PSI issued commercial paper in 2000 or 1999.

    In early 2001, Cinergy Corp. expanded the commercial paper program to a maximum outstanding principal amount of $800 million and reduced the established lines of credit at CG&E and PSI. The expansion of the commercial paper program at the Cinergy Corp. level will, in part, support the short-term borrowing needs of CG&E and PSI and will eliminate the need for commercial paper programs at CG&E and PSI. The Cinergy Corp. commercial paper program expansion is supported by the new $400 million, 364-day revolving credit facility as discussed above.

    For a detailed discussion of the registrants' short-term indebtedness, refer to Note 5 of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data".

    Long-term Debt  Under the PUHCA authorization mentioned above, we are able to issue and sell long-term debt at the parent holding company level. As of December 31, 2000, Cinergy Corp. had $400 million of long-term debt outstanding.

    Currently, our operating companies have outstanding long-term debt in the form of First Mortgage Bonds and Other Secured Notes, and Senior and Junior Unsecured Debt. Under our existing authority, the remaining authorized but unissued debt, as of December 31, 2000, is reflected in the following table:

Authorizing Agency	CG&E		PSI		ULH&P
	(in millions)
Applicable State Utility Commission (Secured or Unsecured Debt)	$	200	$	346	$	30

    We may, at any time, request additional long-term debt authorization. This request is subject to regulatory approval, which may or may not be granted.

    As of December 31, 2000, through shelf registrations filed with the SEC under the Securities Act of 1933, we could issue the following amounts of debt securities:

	CG&E		PSI		ULH&P
	(in millions)
First Mortgage Bonds and Other Secured Notes	$	300	$	265	$	20
Senior or Junior Unsecured Debt		50		400		30

    Capital Leases  We are able to enter into capital leases subject to the authorization limitations of the applicable state utility commissions. We may, at any time, request the applicable state utility commission to increase our limits. Any request may or may not be granted. As of December 31, 2000, unused capital lease authority is $80 million for CG&E, $88 million for PSI, and $25 million for ULH&P.

Common Stock

    In addition to the authority to issue common stock pursuant to the SEC's June 23, 2000 order permitting Cinergy Corp. to increase its total capitalization by $5 billion (as previously discussed), Cinergy Corp. has SEC authority to issue an additional 50 million shares of common stock for our various stock-based plans. We also have the option of purchasing shares of common stock on the open market to satisfy the obligations of our various stock-based plans. The proceeds from any new issuances will be used for general corporate purposes.

    The following table reflects the number of shares purchased and issued for our various stock-based plans:

	2000	1999	1998
	(in thousands)
Purchased Shares	2,299	748	861
Issued Shares	77	291	194

    See Note 2(a) of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data" for additional information on issued shares.

Dividend Restrictions

    For a discussion of dividend restrictions, refer to Note 2(b) of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data".

Securities Ratings

    As of January 31, 2001, the major credit rating agencies rated our securities as follows:

		Fitch(1)	Moody's(2)	S&P(3)
Cinergy Corp.
	Corporate Credit	BBB+	Baa2	BBB+/A-2
	Senior Unsecured Debt	BBB+	Baa2	BBB+
	Commercial Paper	F-2	P-2	A-2
CG&E
	Senior Secured Debt	A-	A3	A-
	Senior Unsecured Debt	BBB+	Baa1	BBB+
	Junior Unsecured Debt	BBB	Baa2	BBB
	Preferred Stock	BBB	baa1	BBB
	Commercial Paper	F-2	P-2	Not Rated
PSI
	Senior Secured Debt	A-	A3	A-
	Senior Unsecured Debt	BBB+	Baa1	BBB+
	Junior Unsecured Debt	BBB	Baa2	BBB
	Preferred Stock	BBB	baa1	BBB
	Commercial Paper	F-2	P-2	Not Rated
ULH&P
	Senior Unsecured Debt	Not Rated	Baa1	BBB+

(1)

During 2000, Fitch IBCA, Inc. and Duff & Phelps Credit Rating Co. merged, and are now known as Fitch, thereby combining their ratings of Cinergy Corp. and its affiliates.

(2)

Moody's Investors Service (Moody's)

(3)

Standard & Poor's Ratings Services (S&P)

    On December 12, 2000, S&P placed its ratings of Cinergy Corp. and its operating affiliates, CG&E and PSI, on CreditWatch with negative implications. On January 22, 2001, Moody's announced it had assigned negative outlooks to the debt and preferred stock securities of Cinergy Corp. and all of its subsidiaries. These actions are primarily in response to Cinergy's announcement regarding one of its

non-regulated subsidiaries entering into a definitive agreement to acquire two natural gas-fired merchant electric generating facilities from Enron (as further discussed in the "Wholesale Market Developments" section of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations"). Other items of concern include (1) the announcement that Cinergy Corp., CG&E, and PSI have reached an agreement in principle with the EPA; (2) the continuing uncertainty surrounding CG&E's post-deregulation corporate and financial structure; (3) the absence of restructuring legislation and stranded investment resolution in Indiana; and (4) Cinergy's emphasis on higher-risk non-regulated activities.

    These securities ratings may be revised or withdrawn at any time, and each rating should be evaluated independently of any other rating.

Guarantees

    We are subject to a SEC order under the PUHCA, which limits the amounts Cinergy Corp. can have outstanding under guarantees (promises to pay by one party in the event of default by another party) at any one time to $2 billion. As of December 31, 2000, we had $1.4 billion outstanding under the guarantees issued. This amount represents Cinergy Corp.'s guarantees of liabilities and commitments of our consolidated subsidiaries, unconsolidated subsidiaries, and joint ventures.

Sale of Accounts Receivable

    For the detailed discussion of our sales of accounts receivable, refer to Note 6 of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data".

    The Results of Operations discussions for Cinergy, CG&E, and PSI are combined within this section.

2000 RESULTS OF OPERATIONS

SUMMARY OF RESULTS

    Electric and gas margins and net income for Cinergy, CG&E, and PSI for the years ended December 31, 2000, and 1999, were as follows:

	Cinergy(1)				CG&E				PSI
	2000		1999		2000		1999		2000		1999
	(in thousands)
Electric gross margin	$	2,229,869	$	2,052,602	$	1,183,816	$	1,108,371	$	959,541	$	922,053
Gas gross margin		267,304		212,153		224,633		204,016		—		—
Net income		399,466		403,641		266,820		233,576		135,398		117,199

(1)

The results of Cinergy also include amounts related to non-registrants.

    Our diluted earnings per share (EPS) for the year ended December 31, 2000, were $2.50 per share, as compared to $2.53 per share for the year ended December 31, 1999, mainly due to a decrease in contributions from our international operations, offset by increased earnings in our regulated business.

    The contribution to earnings of our international operations decreased $.70 per share for the year ended December 31, 2000, as compared to last year, primarily due to the loss of equity earnings and resulting gain from the sale of our share of Midlands, which took place in July 1999. For further details regarding this transaction, refer to Note 10 of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data". Earnings from our regulated operations had a net increase of $.66 per share for the year 2000 compared with 1999. This increase was primarily attributable to growth in electric margins and continued improvement in our commodity supply business. Growth in residential, commercial, and industrial customer bases, along with improvements in cost of sales, were somewhat offset by the effects of milder weather experienced during 2000.

    Partially offsetting the overall increase in regulated operations were one-time charges totaling $.11 per share related to a tentative agreement with the EPA and a limited early retirement program offered in 2000 as part of a corporate restructuring initiative.

    The explanations below follow the line items on the Statements of Income for Cinergy, CG&E, and PSI. However, only the line items that varied significantly from prior periods are discussed.

ELECTRIC OPERATING REVENUES

		Cinergy(1)						CG&E					PSI
		2000		1999		% Change		2000		1999		% Change	2000		1999		% Change
		(in millions)
Retail		$	2,692	$	2,725	(1	)	$	1,482	$	1,468	1	$	1,210	$	1,258	(4	)
Wholesale			2,464		1,455	69			1,226		687	78		1,443		840	72
Other			228		133	71			31		20	55		31		38	(18	)
	Total	$	5,384	$	4,313	25		$	2,739	$	2,175	26	$	2,684	$	2,136	26

(1)

The results of Cinergy also include amounts related to non-registrants.

Electric operating revenues for Cinergy, CG&E, and PSI increased for the year ended December 31, 2000, as compared to 1999, mainly due to an increase in volumes and the average price per megawatt hour (MWh) realized on non-firm wholesale transactions related to the commodities supply business. Non-firm power is power without a guaranteed commitment for physical delivery.

    The increase in other electric operating revenues for Cinergy primarily reflects marketing activities of Cinergy Capital and Trading, Inc., a Cinergy non-regulated affiliate.

GAS OPERATING REVENUES

	Cinergy(1)					CG&E and subsidiaries
	2000		1999		% Change	2000		1999		% Change
	(in millions)
Non-regulated	$	2,452	$	1,221	101	$	—	$	—	—
Retail		429		320	34		429		320	34
Transportation		56		51	10		56		51	10
Other		5		4	25		6		5	20
Total	$	2,942	$	1,596	84	$	491	$	376	31

(1)

The results of Cinergy also include amounts related to non-registrants.

Gas operating revenues for Cinergy increased in 2000, when compared to 1999, primarily as a result of a higher price realized per thousand cubic feet (mcf) sold by our commodity supply business.

CG&E's retail gas revenues increased primarily due to a higher price realized per mcf sold. Transportation revenues increased due to the continued trend of full-service customers (customers who purchase gas and utilize the transportation services of CG&E) purchasing gas directly from other suppliers.

    The market price of natural gas has increased significantly in 2000, which has caused CG&E to pay more for the gas they deliver to customers. The wholesale gas commodity cost is passed directly to the retail customer dollar-for-dollar under the gas cost recovery mechanism that is mandated under state law.

OTHER REVENUES

Other operating revenues for Cinergy increased $67 million for 2000, when compared to 1999, primarily due to revenues resulting from the acquisition of an energy-related services affiliate in late 1999.

OPERATING EXPENSES

	Cinergy(1)					CG&E and subsidiaries						PSI
	2000		1999		% Change	2000		1999		% Change		2000		1999		% Change
	(in millions)
Fuel	$	773	$	761	2	$	344	$	341	1		$	407	$	397	3
Purchased and exchanged    power		2,382		1,499	59		1,211		726	67			1,318		817	61
Gas purchased		2,674		1,384	93		266		172	55			—		—	—
Operation and maintenance		1,089		981	11		463		416	11			462		461	—
Depreciation and    amortization		374		354	6		210		204	3			143		136	5
Taxes other than income    taxes		268		266	1		208		212	(2	)		57		53	8
Total	$	7,560	$	5,245	44	$	2,702	$	2,071	30		$	2,387	$	1,864	28

(1)

The results of Cinergy also include amounts related to non-registrants.

Fuel

Fuel represents the cost of coal, natural gas, and oil that is used to generate electricity. The following table details the changes to fuel expense from 1999 to 2000:

	Cinergy(1)			CG&E and subsidiaries			PSI
	(in millions)
1999 fuel expense	$	761		$	341		$	397
Increase (Decrease) due to changes in:
Price of fuel		(14	)		(12	)		(2	)
Deferred fuel cost		(17	)		9			(26	)
MWh generation		44			6			38
Other		(1	)		—			—
2000 fuel expense	$	773		$	344		$	407

(1)

The results of Cinergy also include amounts related to non-registrants.

Purchased and Exchanged Power

Purchased and exchanged power expense increased for Cinergy, CG&E, and PSI for 2000, when compared to 1999. This increase was primarily due to an increase in purchases of non-firm wholesale power as a result of an increase in sales volumes from our commodity supply business.

Gas Purchased

Gas purchased expense increased for Cinergy in 2000, when compared to 1999, primarily due to increased gas commodity trading activity of one of its non-regulated subsidiaries and, for both Cinergy and CG&E, an increase in the average cost per mcf of gas purchased.

Operation and Maintenance

Cinergy's Operation and maintenance expenses increased in 2000, in comparison to 1999, primarily due to a full year's realization of operating expenses resulting from the acquisition of an energy-related

services affiliate in late 1999. Additionally for 2000, operation expenses increased for Cinergy, CG&E, and PSI as a result of one-time charges related to a tentative agreement reached with the EPA and a limited early retirement plan offered as part of a corporate restructuring initiative.

Depreciation and Amortization

Cinergy's, CG&E's, and PSI's Depreciation and amortization costs increased in 2000, as compared to 1999, due to additions to depreciable plant.

EQUITY IN EARNINGS OF UNCONSOLIDATED SUBSIDIARIES

Cinergy's Equity in earnings of unconsolidated subsidiaries decreased $53 million in 2000, as compared to 1999. This decrease is primarily due to the loss in earnings resulting from the July 1999 sale of our 50% ownership interest in Midlands. For further information see Note 10 of the "Notes to the Financial Statements" in "Item 8. Financial Statements and Supplementary Data".

INTEREST

PSI's Interest expense decreased $8 million in 2000, as compared to 1999. This decrease is primarily due to PSI's net redemption of approximately $130 million of long-term debt during the year, which was slightly offset by an increase in average short-term interest rates.

ULH&P

    The Results of Operations discussion for ULH&P is presented only for the year ended December 31, 2000, in accordance with General Instructions I(2)(a).

    Electric and gas margins and net income for ULH&P for the years ended December 31, 2000, and 1999 were as follows:

	ULH&P
	2000		1999
	(in thousands)
Electric gross margin	$	65,686	$	51,678
Gas gross margin		40,359		36,038
Net income		24,632		12,274

    The increase in electric gross margin is primarily due to the effects of a Federal Energy Regulatory Commission (FERC) wholesale rate case that became effective during 2000. For further information see Note 12 of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data". Gas gross margin increased primarily as a result of an increase in volumes sold.

    The increase in Operation and maintenance costs for the year ended December 31, 2000, as compared to 1999, was primarily the result of expenses related to a water main break in Newport, Kentucky, on October 5, 2000, that resulted in damage to our gas main.

    The increase in Depreciation for the year ended December 31, 2000, as compared to 1999, was due to additions to depreciable plant.

1999 RESULTS OF OPERATIONS

SUMMARY OF RESULTS

    Electric and gas margins and net income for Cinergy, CG&E, and PSI for the years ended December 31, 1999, and 1998, were as follows:

	Cinergy(1)				CG&E				PSI
	1999		1998		1999		1998		1999		1998
	(in thousands)
Electric gross margin	$	2,052,602	$	1,909,423	$	1,108,371	$	1,045,556	$	922,053	$	855,527
Gas gross margin		212,153		204,684		204,016		203,748		—		—
Net income		403,641		260,968		233,576		215,812		117,199		52,038

(1)

The results of Cinergy also include amounts related to non-registrants.

    Our 1999 diluted EPS increased to $2.53 from $1.65 per share for 1998.

    The overall increase in EPS for 1999 was mainly due to our international operations and our regulated electric operations. The contribution to earnings of our international operations increased $.36 per share for the year ended December 31, 1999, compared with 1998, primarily the result of the sale of our 50% ownership interest in Midlands. Earnings from regulated operations had a net increase of $.55 per share for the year ended December 31, 1999, compared with a year earlier. The increase was primarily due to an overall return to more normal weather in 1999 and growth in retail electric revenues. This retail revenue growth reflected an increase in residential and commercial customers and growth in the industrial market. Included in this overall increase was a $.36 per share reduction related to energy marketing and trading losses experienced in July 1999. Our electric margins were positively impacted $12 million or $.07 per share (net of fuel and income taxes) as a result of a change in estimate of PSI's utility services delivered but unbilled at month end which occurred during the third quarter of 1999.

    The 1999 increase in earnings from regulated operations was also impacted by the following 1998 charges:

•

a reduction of $.14 per share for the effects of milder than normal weather;

•

a charge of $.32 per share related to a settlement with Wabash Valley Power Association, Inc. (WVPA). See Note 17 of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data" for a discussion of the WVPA settlement; and

•

total charges of $.54 per share due to losses related to our energy marketing and trading activity.

    The explanations below follow the line items on the Statements of Income for Cinergy, CG&E, and PSI. However, only the line items that varied significantly from prior periods are discussed.

ELECTRIC OPERATING REVENUES

	Cinergy(1)						CG&E						PSI
	1999		1998		% Change		1999		1998		% Change		1999		1998		% Change
	(in millions)
Retail	$	2,725	$	2,553	7		$	1,468	$	1,392	5		$	1,258	$	1,161	8
Wholesale		1,455		2,140	(32	)		687		1,046	(34	)		840		1,206	(30	)
Other		133		70	90			20		15	33			38		36	6
Total	$	4,313	$	4,763	(9	)	$	2,175	$	2,453	(11	)	$	2,136	$	2,403	(11	)

(1)

The results of Cinergy also include amounts related to non-registrants.

Electric operating revenues for Cinergy, CG&E, and PSI decreased for 1999, as compared to 1998, due to a decrease in volumes on non-firm wholesale transactions related to energy marketing and trading activity. Partially offsetting the decline was an increase in the average price per MWh realized for non-firm power transactions and higher firm wholesale MWh sales. Non-firm power is power without a guaranteed commitment for physical delivery. Retail MWh sales also increased as a result of new residential and commercial customers, growth in the industrial market, and an overall return to more normal weather. Our electric margins were positively impacted $12 million or $.07 per share (net of fuel and income taxes) as a result of a change in estimate of PSI's utility services delivered but unbilled at month end which occurred during the third quarter of 1999.

GAS OPERATING REVENUES

	Cinergy(1)						CG&E and subsidiaries
	1999		1998		% Change		1999		1998		% Change
	(in millions)
Non-regulated	$	1,221	$	698	75		$	—	$	—	—
Retail		320		357	(10	)		320		357	(10	)
Transportation		51		41	24			51		41	24
Other		4		4	—			5		5	—
Total	$	1,596	$	1,100	45		$	376	$	403	(7	)

(1)

The results of Cinergy also include amounts related to non-registrants.

Gas operating revenues for Cinergy increased in 1999, when compared to 1998. This increase reflected a full year's realization of the gas operating revenues of Cinergy Marketing and Trading, LLC (Marketing & Trading), an indirect subsidiary of Cinergy that was acquired in June 1998. Based on the actual results of Marketing & Trading for 1998, if we had owned it for all of 1998, our 1999 revenues, as compared to 1998, would have increased due to a higher price received per mcf sold.

CG&E's retail gas revenues decreased due to a decline in mcf sales. This resulted primarily from milder weather experienced during the first quarter of 1999. This decline was partially offset by an increase in transportation revenues due to the continued progression of full-service customers (customers who purchase gas and utilize the transportation services of CG&E) purchasing gas directly from suppliers and using transportation services provided by CG&E.

OPERATING EXPENSES

	Cinergy(1)						CG&E and subsidiaries						PSI
	1999		1998		% Change		1999		1998		% Change		1999		1998		% Change
	(in millions)
Fuel	$	761	$	730	4		$	341	$	339	1		$	397	$	382	4
Purchased and exchanged    power		1,499		2,124	(29	)		726		1,068	(32	)		817		1,166	(30	)
Gas purchased		1,384		895	55			172		200	(14	)		—		—	—
Operation and    maintenance		981		976	—			416		393	6			461		509	(9	)
Depreciation and    amortization		354		326	9			204		191	7			136		131	4
Taxes other than income    taxes		266		275	(3	)		212		217	(2	)		53		54	(2	)
Total	$	5,245	$	5,326	(2	)	$	2,071	$	2,408	(14	)	$	1,864	$	2,242	(17	)

(1)

The results of Cinergy also include amounts related to non-registrants.

Fuel

Fuel represents the cost of coal, natural gas, and oil that is used to generate electricity. The following table details the changes to fuel expense from 1998 to 1999:

	Cinergy(1)			CG&E and subsidiaries			PSI
				(in millions)
1998 fuel expense	$	730		$	339		$	382
Increase (Decrease) due to changes in:
Price of fuel		—			4			(5	)
Deferred fuel cost		(10	)		(15	)		5
MWh generation		28			13			15
Other		13			—			—
1999 fuel expense	$	761		$	341		$	397

(1)

The results of Cinergy also include amounts related to non-registrants.

Purchased and Exchanged Power

Purchased and exchanged power is the electricity that is bought to be sold through our energy marketing and trading activities. Purchased and exchanged power is also occasionally purchased for PSI's and CG&E's retail customers. This expense decreased for Cinergy, CG&E, and PSI in 1999. This decrease was primarily due to a reduction in purchases of non-firm wholesale power as a result of a decline in sales volume in the energy marketing and trading operations.

    Included in purchased and exchanged power are additional costs related to energy marketing and trading losses experienced in July 1999, as previously indicated above in "Summary of Results", as well as losses related to our 1998 energy marketing and trading activity.

Gas Purchased

Gas purchased expense increased for Cinergy in 1999, when compared to 1998. This increase primarily reflected a full year's Gas purchased volumes for Marketing & Trading in 1999, as previously indicated above in "Gas Operating Revenues".

CG&E's Gas purchased expense decreased for 1999, as compared to 1998. This decline was mainly due to decreased sales volumes as previously indicated above in "Gas Operating Revenues".

Operation and Maintenance

PSI's Operation costs decreased in 1999, in comparison to 1998. This decrease was the result of a one-time charge of $80 million in 1998 for the implementation of the 1989 settlement with WVPA. See Note 17 of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data" for a discussion of the WVPA settlement.

Cinergy's, CG&E's, and PSI's Maintenance costs increased in 1999, as compared to 1998, primarily as a result of planned outages and repairs at certain production facilities. These activities represented a return to a more normal level of maintenance expenditures.

Depreciation and Amortization

Cinergy's, CG&E's, and PSI's Depreciation and amortization costs increased in 1999, as compared to 1998. These increases were the result of additions to depreciable plant. Additionally, Cinergy's and CG&E's increases also included the amortization of phase-in deferrals reflecting the Public Utilities Commission of Ohio (PUCO)-approved phase-in plan for CG&E's William H. Zimmer Station.

EQUITY IN EARNINGS OF UNCONSOLIDATED SUBSIDIARIES

Cinergy's Equity in earnings of unconsolidated subsidiaries increased $7 million in 1999, as compared to 1998. This increase was primarily driven by the earnings of our non-regulated domestic and international subsidiaries. Included in Equity in earnings of unconsolidated subsidiaries was $58 million for 1999, and $57 million for 1998, related to our 50% ownership interest in Midlands. For further information see Note 10 of the "Notes to the Financial Statements" in "Item 8. Financial Statements and Supplementary Data".

GAIN ON SALE OF INVESTMENT IN UNCONSOLIDATED SUBSIDIARY

    On July 15, 1999, we sold our 50% ownership interest in Midlands, as previously indicated above in "Summary of Results." The sale resulted in a net contribution to earnings of approximately $.43 per share (basic and diluted). For a further discussion of this transaction, see Note 10 of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data".

PREFERRED DIVIDEND REQUIREMENTS

Cinergy's Preferred dividend requirements of subsidiaries and PSI's Preferred dividend requirement each decreased $1 million for 1999, as compared to 1998. These decreases were attributable to PSI's redemption of all outstanding shares of its 7.44% Series Cumulative Preferred Stock on March 1, 1998.

FUTURE EXPECTATIONS/TRENDS

    In the "Future Expectations/Trends" section, we discuss electric and gas industry developments, market risk sensitive instruments and positions, accounting changes, and the shareholder rights plan. Each of these discussions will address the current status and potential future impact on our results of operations and financial condition.

ELECTRIC INDUSTRY

    The utility industry has traditionally operated as a regulated monopoly but is transitioning to an environment of increased wholesale and retail competition. Regulatory and legislative decisions being made at the federal and state levels are aimed at promoting customer choice and are shaping this transition. Customer choice provides the customer the ability to select an energy supplier (the company that generates or supplies the commodity) in an open and competitive marketplace. This emerging environment presents significant challenges, which are discussed below.

Wholesale Market Developments

    In 1996, the FERC issued orders to open the wholesale electric markets to competition. Competitors within the wholesale market include both utilities and non-utilities such as exempt wholesale generators, independent power producers, and power marketers. We are involved in wholesale power marketing and trading through Commodities.

    In late June 1998, and again in late July 1999, Midwest wholesale electric power markets experienced record price spikes. These spikes were caused by a number of factors including unseasonably hot weather, unplanned generating unit outages, transmission constraints, and increased electric commodity market volatility. These simultaneous events created temporary but extreme prices in the Midwest electricity markets. In response to these events, we have aggressively adopted a model that is focused on a balance of customers and supply.

    Supply-side Actions  On September 30, 1999, one of our non-regulated subsidiaries formed a partnership (each party having a 50 percent ownership) with Duke Energy North America LLC (Duke), to increase the available generating capacity for use during peak demand periods. The partnership was formed for the purpose of jointly constructing and owning three wholesale generating facilities.

    On March 9, 2000, the Indiana Utility Regulatory Commission (IURC) issued an order, requiring the partnership to immediately suspend all construction activities at the site located near Cadiz, (Henry County) Indiana (a peaking plant with a total capacity of 129 MW, of which we own 65 MW). In making this decision the IURC found that it needed additional information related to the project before issuing a final decision. The IURC requested the Henry County Planning Commission and/or the Henry County Commissioners to supply additional information, which was provided on June 1, 2000. The issues raised were air quality, water supply, noise control, landscaping, plant abandonment, and emergency services training. During the third quarter of 2000, the partnership filed responses to the issues indicating how it would address these concerns. The IURC held a hearing on this matter on November 17, 2000, and a ruling is expected in the first half of 2001. Although we expect a favorable ruling from the IURC, at this time Cinergy cannot predict the outcome of this matter.

    The remaining two facilities became fully operational in June 2000. The total capacity of these operational plants is approximately 1,280 MW.

    On December 12, 2000, Cinergy announced that one of its non-regulated affiliates entered into a definitive agreement with Enron to acquire two natural gas-fired merchant electric generating facilities. The acquisition will consist of a 494 MW facility in Tennessee and a 504 MW facility in Mississippi.

Cinergy's portfolio of natural gas-fired peaking stations has increased due to the partnership with Duke and the pending consummation of the acquisition of the Enron units. CG&E and PSI also have an additional 856 MW of capacity that are natural gas-fired. These units are used to meet the demand for electric commodity in periods of high electric use by our customers. In the latter part of 2000 natural gas was selling at record prices. If it is necessary for Cinergy to call upon the use of our natural gas-fired peakers, the cost of natural gas will directly affect Cinergy's cost to supply the electric commodity to our customers.

    Demand-side Actions  Demand (the amount of electric power that can be used at a point in time) on our system is expected to be reduced in future years as a result of the expiration of existing wholesale contractual obligations and peak load management initiatives which we have recently developed. Also, Ohio's recently enacted customer choice legislation contemplates that 20% of CG&E's retail load will switch to alternative suppliers by December 2003. In its approved transition plan, CG&E indicated that it currently has no plans to replace these customers by acquiring new retail customers, although CG&E reserved the flexibility to replace load in the wholesale market to the extent it chooses. For a further discussion on Ohio deregulation, see Note 18 of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data".

Retail Market Developments

    Currently, regulatory and legislative initiatives shaping the transition to a competitive retail market are the responsibilities of the individual states. Many states, including Ohio, have enacted electric utility deregulation legislation. In general, these initiatives have sought to separate the electric utility service into its basic components (generation, transmission, and distribution) and offer each component separately for sale. This separation is referred to as unbundling of the integrated services. Under the customer choice initiatives, we will continue to transmit and distribute electricity; however, the customer can purchase electricity from any available supplier and we will be compensated by a charge to use our transmission assets. The following sections further discuss the current status of deregulation legislation in the states of Ohio, Indiana, and Kentucky, each of which includes a portion of our service territory.

    Federal Update  The Clinton Administration and Congress made attempts to legislate comprehensive electric industry restructuring during the past four years. After attempting to reach a consensus on comprehensive electric restructuring legislation, the U.S. Senate, on June 30, 2000, approved S. 2071, the Electric Reliability 2000 Act. The S. 2071 would have authorized the establishment of a North American Electric Reliability Organization and did not legislate on additional issues surrounding the restructuring of the electric industry. President Bush has indicated that legislation addressing the energy security needs of America, deserves prompt consideration. The start of a new congressional session and presidential administration makes comprehensive electric industry deregulation uncertain in the near future.

    Ohio  On July 6, 1999, Ohio Governor Robert Taft signed Amended Substitute Senate Bill No. 3 (Electric Restructuring Bill), beginning the transition to electric deregulation and customer choice for the state of Ohio. The Electric Restructuring Bill created a competitive electric retail service market effective January 1, 2001. The legislation provided for a market development period that began January 1, 2001, and ends no later than December 31, 2005. Ohio electric utilities have an opportunity to recover PUCO-approved transition costs during a transition period. The legislation also froze retail electric rates during the market development period, at the rates in effect on October 4, 1999, except for a five-percent reduction in the generation component of residential rates. Furthermore, the legislation contemplated that 20% of the current electric retail customers will switch suppliers no later than December 31, 2003.

    On May 8, 2000, CG&E reached a stipulated agreement with the PUCO staff and various other interested parties with respect to its proposal to implement electric customer choice in Ohio effective January 1, 2001. On August 31, 2000, the PUCO approved CG&E's stipulation agreement. The major features of this agreement include:

•

Residential customer rates will be frozen through December 31, 2005;

•

Residential customers will receive a five-percent reduction in the generation portion of their electric rates, effective January 1, 2001;

•

CG&E has agreed to provide four million dollars over the next five years in support of energy efficiency and weatherization services for low income customers;

•

The creation of a Regulatory Transition Charge, designed to recover CG&E's regulatory assets and other transition costs over a ten-year period;

•

Authority for CG&E to transfer its generation assets to one or more separate, non-regulated corporate subsidiary(ies) to provide flexibility to manage its generation asset portfolio in a manner that enhances opportunities in a competitive marketplace;

•

Authority for CG&E to apply the proceeds of transition cost recovery to costs incurred during the transition period including implementation costs and purchased power costs that may be incurred by CG&E to maintain an operating reserve margin sufficient to provide reliable service to its customers;

•

CG&E will provide standard offer default supplier service (i.e., CG&E will be the supplier of last resort, so that no customer will be without an electric supplier); and

•

CG &E has agreed to provide shopping credits to switching customers.

    With regard to the PUCO's order, two parties filed applications for rehearing with the PUCO. On October 18, 2000, the PUCO denied these applications. One of the parties appealed to the Ohio Supreme Court in the fourth quarter of 2000 and CG&E subsequently intervened in that case. CG&E is unable to predict the outcome of this appeal.

    As previously discussed, the August 31, 2000 order authorizes CG&E to transfer its generation assets to one or more non-regulated corporate subsidiary(ies). This transfer may require the approval or consent of one or more of the following: the IURC, the Kentucky Public Service Commission (KPSC), the FERC, the SEC under the PUHCA, and various third parties. As the transfer is contingent upon the company receiving various consents and approvals, the timing and receipt of which are unknown, the completion date of the transfer of generation assets to a non-regulated subsidiary is uncertain. See Note 1(c) of the "Notes to the Financial Statements" in "Item 8. Financial Statements and Supplementary Data" regarding the effects of the transition order.

    In connection with its approved stipulation agreement, CG&E discontinued the application of Statement of Financial Accounting Standards No. 71, Accounting for the Effects of Certain Types of Regulation (Statement 71), for the generation portion of its business and adopted Statement of Financial Accounting Standards No. 101, Regulated Enterprises—Accounting for Discontinuation of Application of FASB Statement No. 71, with no material financial statement impact. Pursuant to Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, our analysis indicates future revenues will be sufficient to recover the costs of our generating assets over their estimated remaining lives.

Indiana Due to a "short session" in 2000, the Indiana General Assembly did not consider any electric deregulation initiatives. Electric industry deregulation is not expected to be addressed by the 2001 Indiana General Assembly. We will continue to work with the other Indiana investor-owned utilities in an effort to draft acceptable customer choice legislation. The outcome of this effort remains uncertain.

    Kentucky  Throughout 1999, a special Kentucky Electricity Restructuring Task Force (Task Force), convened by the Kentucky legislature, studied the issues of electric deregulation. In January 2000, the Task Force issued a final report to Kentucky Governor Paul Patton recommending that lawmakers wait until the 2002 General Assembly before considering any deregulation legislation that would open the state's electric industry to competition.

    Other States  Twenty-four states and the District of Columbia have adopted deregulation plans. In response to the situation in California, some of these states, while not having similar experiences as California, are considering delaying or altering terms of implementation. A number of the remaining states are reconsidering their deregulation timetables. While we believe the situation in Ohio, as

described above, and generally within the Midwest are different than California, we cannot predict the consequences, if any, to efforts to deregulate the remaining markets within our service territory. Indiana and Kentucky have not yet approved legislation.

Other

    Under generally accepted accounting principles, PSI, CG&E, and ULH&P apply the provisions of Statement 71 to the applicable rate-regulated portions of their businesses. The provisions of Statement 71 allow PSI, CG&E, and ULH&P to capitalize (record as a deferred asset) costs that would normally be charged to expense. These costs are classified as regulatory assets in the accompanying financial statements and the majority have been approved by regulators for future recovery from customers through our rates. As of December 31, 2000, PSI, CG&E, and ULH&P, have $977 million of net regulatory assets, of which $938 million have been approved for recovery.

    Except with respect to the generation assets of CG&E, as of December 31, 2000, PSI, CG&E, and ULH&P continue to meet each of the criteria required for the use of Statement 71. However, as other states implement deregulation legislation, the application of Statement 71 will need to be reviewed. Based on our operating companies' current regulatory orders and the regulatory environment in which they currently operate, the future recovery of regulatory assets recognized in the accompanying Balance Sheets as of December 31, 2000, is probable. The effect of future discontinuance of Statement 71 on the results of operations, cash flows, or statements of position cannot be determined until deregulation legislation plans have been approved by each state in which we do business. See Note 1(c) of the "Notes to Financial Statements" in "Item 8. Financial Statements and Supplementary Data" for a further discussion of our regulatory assets.

Midwest ISO

    As part of the effort to create a competitive wholesale power marketplace, the FERC approved the formation of the Midwest Independent Transmission System Operator, Inc. (Midwest ISO) during 1998. In that same year, Cinergy agreed to join the Midwest ISO in preparation for meeting anticipated changes in the FERC regulations and future deregulation requirements. The Midwest ISO was established as a non-profit organization to maintain functional control over the combined transmission systems of its members. The organization was expected to begin operations in November 2001.

    In the fall of 2000, three transmission owners announced their intent to leave the Midwest ISO and join the proposed Alliance Regional Transmission Organization (Alliance RTO) by the end of 2001. The Alliance RTO is a planned for-profit transmission company involving various utilities which have transmission systems that cover parts of Michigan, Ohio, Indiana, West Virginia, and Virginia.

    On December 13, 2000, six additional transmission owners, including Cinergy, announced a plan for conditional withdrawal from the Midwest ISO, if the other three withdrawing members left the organization.

    On January 24, 2001, the FERC issued an order providing 30 days of confidential settlement talks between the Alliance RTO and the Midwest ISO and its stakeholders, in an effort to resolve issues related to such withdrawals. Cinergy actively participated in the settlement process. On February 23, 2001, the settlement judge reported to the FERC that settlement talks produced a unanimous comprehensive settlement between all related parties. Specific details of this settlement are yet to be finalized and will need approval by the FERC. The definitive settlement agreement language is to be filed with the FERC on March 19, 2001. If approved, the settlement agreement is not expected to present any material adverse impacts to the company.

Repeal of PUHCA

    Early in 2001, the 107th Congress introduced S.206, a bill to repeal the PUHCA, in the U.S. Senate. It has been referred to the Senate Banking, Housing and Urban Affairs Committee for action. Various proposals to repeal or amend the PUHCA were considered by the previous Congress. In February 1999, the Senate Banking, Housing and Urban Affairs Committee reported out of committee S.313, a bill to repeal the PUHCA. In June 1999, H.R.2363, a bill to repeal the PUHCA, was introduced in the U.S. House of Representatives as a companion to S.313. At the end of the 106th Congress, no action was taken on passage of either of these bills.

    During the Clinton Administration, legislation was introduced which would have repealed the PUHCA as part of a broader restructuring of the electricity industry. At the end of the Clinton Administration, no action was taken on this legislation. President Bush has identified the need for the repeal of the PUHCA as a priority of the federal energy legislation. We support the repeal of the PUHCA either as part of broader restructuring of the electricity industry or as separate legislation.

Significant Rate Developments

    Purchased Power Tracker  On May 28, 1999, PSI filed a petition with the IURC seeking approval of a purchased power tracking mechanism (Tracker). This request was designed to provide for the recovery of costs related to purchases of power necessary to meet native load requirements to the extent such costs are not sought through the existing fuel adjustment clause. The Tracker applies to a limited number of purchases made for the purpose of ensuring adequate power reserves to meet peak retail native load requirements, which in recent years, have coincided with periods of extreme price volatility. The Tracker only applies to capacity purchases, which are presented for review and approval by the IURC as reasonable under the circumstances. On May 31, 2000, the IURC approved the Tracker for the summer of 2000, subject to a review of the summer of 2000 purchases. The IURC subsequently established a procedural schedule. In the first quarter of 2001, a hearing is scheduled to review PSI's 2000 purchases and rule on its associated request for recovery of costs. The IURC will also determine whether it is appropriate for PSI to continue the tracking mechanism for future periods. Amounts relating to PSI's 2000 purchases (approximately $20 million) have been deferred for subsequent recovery.

    Purchased Power AgreementULH&P purchases its energy from CG&E pursuant to a FERC-approved contract that is due to expire on December 31, 2001. Currently the contract is under negotiation with the involvement of the KPSC. The ultimate supplier(s) of ULH&P's energy and the pricing of electric commodity requirements contained in any new arrangement could reflect a market-based approach. At the current time, we are unable to predict the outcome of this matter.

MARKET RISK SENSITIVE INSTRUMENTS AND POSITIONS

Energy Commodities Sensitivity

    The transactions associated with Commodities' energy marketing and trading activities give rise to various risks, including market risk. Market risk represents the potential risk of loss from adverse changes in the market price of electricity or other energy commodities. As Commodities continues to develop its energy marketing and trading business (and due to its substantial investment in generation assets), its exposure to movements in the price of electricity and other energy commodities may become greater. As a result, we may be subject to increased future earnings volatility.

    The energy marketing and trading activities of Commodities principally consist of CG&E's and PSI's power marketing and trading operations. These operations market and trade over-the-counter (an informal market where the buying/selling of commodities occurs) contracts for the purchase and sale of electricity primarily in the Midwest region of the U.S. The power marketing and trading operation consists of both physical and trading activities. Transactions are designated as a physical activity when there is intent and ability to physically deliver the power from company-owned generation. All other transactions are considered trading activities. Substantially all of the contracts in both the physical and trading portfolios commit us to purchase or sell electricity at fixed prices in the future. Commodities also markets and trades over-the-counter option contracts. Substantially all of the contracts in the physical portfolio require settlement by physical delivery of electricity. Contracts within the trading portfolio generally require settlement by physical delivery or are netted out in accordance with industry trading standards. The use of these types of physical commodity instruments is designed to allow Commodities to:

•

manage and economically hedge contractual commitments;

•

reduce exposure relative to the volatility of cash market prices; and

•

take advantage of selected arbitrage opportunities.

    Commodities structures and modifies its net position to capture the following:

•

expected changes in future demand;

•

seasonal market pricing characteristics;

•

overall market sentiment; and

•

price relationships between different time periods and trading regions.

    At times, a net open position is created or is allowed to continue when Commodities believes future changes in prices and market conditions may possibly result in profitable positions. Position imbalances can also occur due to the basic lack of liquidity in the wholesale power market. The existence of net open positions can potentially result in an adverse impact on our financial condition or results of operations. This potential adverse impact could be realized if the market price of electric power does not react in the manner or direction expected.

    Commodities measures the market risk inherent in the trading portfolio employing value-at-risk analysis and other methodologies, which utilize forward price curves in electric power markets to quantify estimates of the magnitude and probability of potential future losses related to open contract positions. Value-at-risk is a statistical measure used to quantify the potential loss in fair value of the trading portfolio over a particular period of time, with a specified likelihood of occurrence, due to an adverse market movement. Because most of the contracts in the physical portfolio require physical delivery of electricity and generally do not allow for net cash settlement, these contracts are not included in the value-at-risk analysis.

    Our value-at-risk is reported as a percentage of operating income, based on a 95% confidence interval, utilizing one-day holding periods. This means that on a given day (one-day holding period) there is a 95% chance (confidence interval) that our trading portfolio will lose less than the stated

percentage of operating income. We disclose our value-at-risk for power activities as a percent of consolidated operating income for a one-day basis at December 31, the average one-day basis at the end of each quarter, and the daily basis at December 31 of each year. On a one-day basis as of December 31, 2000, the value-at-risk for the power trading activity was less than 1% of 2000 consolidated operating income and as of December 31, 1999, was less than 1% of 1999 consolidated operating income. On a one-day basis at the end of each quarter, the value-at-risk for the power trading activity was less than 1% of consolidated operating income in 2000, and less than 1% in 1999. The daily value-at-risk for the power trading portfolio as of December 31, 1999, was less than 1% of 2000 consolidated operating income and as of December 31, 1998, was also less than 1% of 1999 consolidated operating income. The value-at-risk model uses the variance-covariance statistical modeling technique and historical volatilities and correlations over the past 200-day period. The estimated market prices used to value these transactions for value-at-risk purposes reflect the use of established pricing models and various factors including quotations from exchanges and over-the-counter markets, price volatility factors, the time value of money, and location differentials.

    Commodities, through some of our non-regulated subsidiaries, actively markets physical natural gas and actively trades derivative commodity instruments which are usually settled in cash including: forwards, futures, swaps, and options. The aggregated value-at-risk amounts associated with these other trading and hedging activities were less than one million dollars as of December 31, 2000, and less than two million dollars at December 31, 1999. The market risk exposures of these non-regulated trading activities is not considered significant to our financial condition or results of operations.

    Concentrations of Credit Risk  Credit risk is the exposure to economic loss that would occur as a result of nonperformance by counterparties, pursuant to the terms of their contractual obligations. Specific components of credit risk include counterparty default risk, collateral risk, concentration risk, and settlement risk.

    Trade Receivables and Physical Power Portfolio  Our concentration of credit risk with respect to Delivery's trade accounts receivable from electric and gas retail customers is limited. The large number of customers and diversified customer base of residential, commercial, and industrial customers significantly reduces our credit risk. Contracts within the physical portfolio of Commodities' power marketing and trading operations are primarily with the traditional electric cooperatives and municipalities and other investor-owned utilities. At December 31, 2000, we do not believe we had significant exposure to credit risk with our trade accounts receivable within Delivery or our physical portfolio within Commodities.

    Power-Trading  Contracts within the trading portfolio of the power marketing and trading operations are primarily with power marketers and other investor-owned utilities. As of December 31, 2000, approximately 60% of the activity within the total trading portfolio was with ten counterparties. The majority of these contracts are for terms of one year or less. Electric power prices can be extremely volatile, and the market can, at times, lack liquidity. Because of these issues, credit risk is generally greater than with other commodity trading, especially when dealing with new market entrants. Credit discounts are included in the determination of fair value for all open positions in the power-trading portfolio.

    During the last quarter of 2000, the Western U.S., primarily California, began experiencing unprecedented price levels for wholesale electricity. Because of the nature of deregulation in California, the utilities have been unable to pass these price increases on to customers. Consequently, California's two largest utilities have accumulated significant unpaid obligations and are having difficulty obtaining capital. While we maintain a balanced Western U.S. portfolio and have no unrealized gain positions directly with these utilities, a large portion of such positions are with less than five power marketers. If prices continue at elevated levels or should these utilities be unable to fund their unpaid obligations, credit failures by power marketers could result. Given these issues, the fair values of our positions in

the Western U.S. have been adjusted to reflect a higher level of credit discount. We have also been actively pursuing other forms of credit enhancement including, but not limited to, parent company guarantees and letters of credit from counterparties. In determining fair value for all derivative instruments, we consider the credit quality of each counterparty, contractual netting arrangements for longs and shorts with the same counterparty, and any security obtained. A significant portion of our Energy risk management assets and Energy risk management liabilities —current are with counterparties in the Western U.S. Nonperformance by any of the Western U.S. counterparties could have a material effect on the operating results of Cinergy, CG&E, and PSI.

    Gas Trading  As of December 31, 2000, approximately 50% of the activity within the physical gas marketing and trading portfolio represented commitments with 20 counterparties. Credit risk losses related to gas and other physical commodity and trading operations have not been significant. At December 31, 2000, the credit risk within the gas and commodity trading portfolios was not believed to be significant because of the characteristics of counterparties and customers with which transactions are executed.

    Financial Derivatives  Potential exposure to credit risk also exists from our use of financial derivatives such as currency swaps, foreign exchange forward contracts, and interest rate swaps. Because these financial instruments are transacted only with highly rated financial institutions, we do not anticipate nonperformance by any of the counterparties.

    Risk Management  We manage, on a portfolio basis, the market risks in our energy marketing and trading transactions subject to parameters established by our Risk Policy Committee. Our market and credit risks are monitored by the risk management and credit functions to ensure compliance with stated risk management policies and procedures. The risk management and credit functions operate independently from the business units and other corporate functions, which originate and actively manage the market and credit risk exposures. The policies and procedures are periodically reviewed and monitored to ensure their responsiveness to changing market and business conditions. In addition, efforts are ongoing to develop systems to improve the timeliness and quality of market and credit risk information. Some of the policies and procedures include requiring parent company guarantees, various forms of collateral, and the use of mutual netting/closeout agreements.

Exchange Rate Sensitivity

    From time to time, we may utilize foreign exchange forward contracts and currency swaps to hedge foreign currency denominated purchase and sale commitments and certain of our net investments in foreign operations against currency exchange rate fluctuations.

Cinergy has exposure to fluctuations in exchange rates between the U.S. dollar and the currencies of foreign countries where we have investments. When it is appropriate we will hedge our exposure to cash flow transactions, such as a dividend payment by one of our foreign subsidiaries. As of December 31, 2000, we do not believe we had a material exposure to the currency risk attributable to these investments.

Interest Rate Sensitivity

    Our exposure to changes in interest rates consists of short-term debt instruments, pollution control debt, sales of accounts receivable, and capital leases. The following table reflects the different instruments used and the method of benchmarking interest rates, as of December 31, 2000, and 1999:

		Interest Benchmark		2000		1999
				(in millions)
Short-term Bank Loans/Commercial Paper	•	Short-term Money Market	Cinergy	$	862	$	283
	•	LIBOR(1)	CG&E		80		51
			PSI		105		150
Pollution Control Debt	•	Daily Market	Cinergy		267		267
			CG&E		184		184
			PSI		83		83
Sales of Accounts Receivable	•	Short-term Money Market	Cinergy		257		257
			CG&E		156		157
			ULH&P		26		21
			PSI		101		100
Variable Rate Capital Leases	•	LIBOR(1)	Cinergy		31		22
			CG&E		31		22

(1)

London Inter-Bank Offered Rate (LIBOR)

    The weighted-average interest rates on the above instruments at December 31, 2000, and 1999, were as follows:

	2000		1999
Short-term Bank Loans/Commercial Paper	7.0	%	6.2	%
Pollution Control Debt	4.5	%	4.1	%
Sales of Accounts Receivable	6.6	%	6.1	%
Variable Rate Capital Leases	7.5	%	5.3	%

    At December 31, 2000, forward yield curves project a decrease in applicable short-term interest rates over the next five years.

    The following table presents principal cash repayments by maturity date and other selected information for each registrant's long-term fixed-rate debt, other debt, and capital lease obligations as of December 31, 2000:

		Expected Maturity Date
Liabilities		2001			2002			2003			2004			2005			There- after			Total			Fair Value
		(in millions)
Cinergy
Long-term Debt(1)		$	90	(4)	$	124		$	177	(5)	$	311		$	51	(6)	$	2,126		$	2,879		$	2,901
	Weighted-average interest rate(2)		5.2	%		7.3	%		6.2	%		6.2	%		6.5	%		7.0	%		6.8	%
Other(3)		$	1.0		$	21.0		$	8.2		$	1.8		$	1.6		$	15.0		$	48.6		$	49.2
	Weighted-average interest rate(2)		7.2	%		7.4	%		7.4	%		7.2	%		7.2	%		7.2	%		7.3	%
Capital Leases
	Fixed rate leases	$	1.8		$	1.9		$	2.1		$	2.2		$	2.4		$	14.5		$	24.9		$	24.9
	Interest rate		6.5	%		6.5	%		6.5	%		6.5	%		6.5	%		6.5	%		6.5	%
	Variable rate leases	$	22.9		$	0.9		$	0.9		$	0.9		$	0.9		$	4.6		$	31.1		$	31.1
	Weighted-average interest rate(2)		7.5	%		8.3	%		8.3	%		8.3	%		8.3	%		8.3	%		7.5	%
CG&E and subsidiaries
Long-term Debt(1)		$	1		$	100		$	120	(5)	$	110		$	—		$	878		$	1,209		$	1,203
	Weighted-average interest rate(2)		9.8	%		7.3	%		6.3	%		6.5	%		—			6.9	%		6.8	%
Capital Leases
	Fixed rate leases	$	1.0		$	1.0		$	1.1		$	1.2		$	1.3		$	7.9		$	13.5		$	13.5
	Interest rate		6.5	%		6.5	%		6.5	%		6.5	%		6.5	%		6.5	%		6.5	%
	Variable rate leases	$	22.9		$	0.9		$	0.9		$	0.9		$	0.9		$	4.6		$	31.1		$	31.1
	Weighted-average interest rate(2)		7.5	%		8.3	%		8.3	%		8.3	%		8.3	%		8.3	%		7.5	%
PSI
Long-term Debt(1)		$	89	(4)	$	24		$	57		$	1		$	51	(6)	$	898		$	1,120		$	1,136
	Weighted-average interest rate(2)		5.2	%		7.6	%		5.9	%		6.0	%		6.5	%		7.3	%		7.0	%
Capital Lease
	Fixed rate leases	$	0.8		$	0.9		$	1.0		$	1.0		$	1.1		$	6.5		$	11.3		$	11.3
	Interest rate		6.5	%		6.5	%		6.5	%		6.5	%		6.5	%		6.5	%		6.5	%

ULH&P
Long-term Debt(1)			—			—		$	20			—			—		$	55		$	75		$	76
	Weighted-average interest rate(2)		—			—			6.1	%		—			—			7.3	%		7.0	%
Capital Lease
	Fixed rate leases	$	0.3		$	0.4		$	0.4		$	0.4		$	0.4		$	2.8		$	4.7		$	4.7
	Interest rate		6.5	%		6.5	%		6.5	%		6.5	%		6.5	%		6.5	%		6.5	%

(1)

All long-term debt is fixed rate and includes amounts reflected as long-term debt due within one year.

(2)

The weighted-average interest rate is calculated as follows: (1) for long-term debt obligations, the weighted-average interest rate is based on the coupon rates of the debt that is maturing in the year reported; (2) for the variable rate capital leases, the interest rate is based on a spread over 3-month LIBOR, and averaged to be approximately 7.5% in 2000; (3) for the fixed rate capital leases, the interest rate is fixed at approximately 6.50% with an amortizing principal structure; and (4) for the Global Resources investment, the interest rate is based on a spread over 6- and 12-month LIBOR.

(3)

Variable rate debt related to an investment under Global Resources.

(4)

6.00% Debentures due December 14, 2016, reflected as maturing in 2001, as the interest rate resets on December 14, 2001.

(5)

6.35% Debentures due June 15, 2038, reflected as maturing in 2003, as the interest rate resets on June 15, 2003.

(6)

6.50% Debentures due in 2026, reflected as maturing in 2005, as the interest rate resets on August 1, 2005.

    Our current policy in managing exposure to fluctuations in interest rates is to maintain approximately 25% of the total amount outstanding debt in floating interest rate debt instruments. To help maintain this level of exposure, we have previously, and will consider in the future, entering into interest rate swaps. Under these swaps, we agree with other parties to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts calculated on an agreed notional amount. PSI had an interest rate swap agreement that expired on November 15, 2000, which had a notional amount of $100 million. CG&E has an outstanding interest rate swap agreement that decreased the percentage of floating rate debt. Under the seven year agreement, which has a notional amount of $100 million, CG&E pays a fixed rate and receives a floating rate. This swap qualifies as a cash flow hedge under the provisions of Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (Statement 133). As the terms of the swap agreement mirror the terms of the debt agreement that it is hedging, we anticipate that this swap will be effective as a hedge. Future changes in fair value of this swap will be recorded in Accumulated other comprehensive income (loss), beginning with our adoption of Statement 133 effective January 1, 2001. In the future, we will continually monitor market conditions to evaluate whether to increase, or decrease, our level of exposure to fluctuations in interest rates.

GAS INDUSTRY

    Customer Choice  In 1997, the state of Ohio commenced a customer choice program for the gas utility industry. This voluntary program gives residential and small commercial customers the opportunity to select their own gas supplier. Approximately two-thirds of the gas customers in the state of Ohio are eligible to participate. This program excludes large industrial, commercial, and educational institution customers because they already have the ability to select their own gas supplier.

    Although the gas supplier may vary by customer, CG&E continues to provide gas transportation services for substantially all customers within its franchise territory.

    In early 2001, an alternative gas supplier within CG&E's franchise territory was removed from participating in the Ohio Gas Customer Choice program as a result of numerous violations of the terms and conditions of the program. CG&E has filed a complaint with the PUCO requesting a finding that it complied with the terms and conditions of the Ohio Gas Customer Choice program in terminating the supplier from the program. CG&E is also requesting reimbursement of its costs incurred to date in connection with this matter. CG&E estimates that the financial statement exposure is immaterial.

    In early 2001, Cinergy, CG&E, and Cinergy Resources, Inc. (a former subsidiary of Investments which was sold in January 2000) were named as defendants in two class action lawsuits. These lawsuits are in connection with the above referenced alternative gas supplier's removal from the Ohio Gas Customer Choice program and its failure to deliver gas supply to its customers. At the present time, Cinergy and CG&E cannot predict the outcome of this litigation.

    Gas Prices  The market price of natural gas has increased significantly in 2000, which has caused CG&E and ULH&P to pay more for the gas they deliver to customers. Neither CG&E nor ULH&P profit from changes in the cost of gas. This cost is passed directly through to the customer—dollar-for-dollar—under the gas cost recovery mechanisms that are applicable in Ohio and Kentucky. In addition to regularly scheduled filings, both CG&E and ULH&P made several interim filings during 2000 for increased gas cost recovery rates with the PUCO and the KPSC, respectively, in order to keep the rates passed through to customers as current as possible. In January 2001, the KPSC ordered all gas distribution companies in Kentucky, including ULH&P, to begin filing and revising their gas cost recovery rate every month until further notice. We believe that the commissions will continue to allow recovery of prudently incurred gas costs.

INFLATION

    We believe that the recent inflation rates do not materially impact our financial condition. However, under existing regulatory practice for all of PSI, and ULH&P, and the non-generating portion of CG&E, only the historical cost of plant is recoverable from customers. As a result, cash flows designed to provide recovery of historical plant costs may not be adequate to replace plant in future years.

ACCOUNTING CHANGES

    During 1998, the Financial Accounting Standards Board (FASB) issued Statement 133. This standard is effective for fiscal years beginning after June 15, 2000, and requires companies to record derivative instruments as assets or liabilities, measured at fair value. Changes in the derivative's fair value must be recognized currently in earnings unless specific hedge accounting criteria are met. Gains and losses on derivatives that qualify as hedges can offset related fair value changes on the hedged item in the income statement for fair value hedges or be recorded in other comprehensive income for cash flow hedges.

    We will reflect the adoption of this standard in financial statements issued beginning in the first quarter of 2001. Since many of the existing relevant contracts and financial instruments are currently required to use mark-to-market accounting, we anticipate the effects of implementation to be immaterial. These effects do not reflect the potential effects of applying mark-to-market accounting to selected call options and forwards we use to hedge peak period exposure to electricity demand. We have not historically marked these instruments to market because they are intended as hedges of peak period exposure and are not considered trading instruments. Our intent is to classify these types of instruments as normal purchases under Statement 133. However, the FASB-sponsored Derivatives Implementation Group has yet to issue its final guidance on these types of instruments. There are currently viewpoints that range from allowing them as normal purchases to not allowing hedge accounting under Statement 133. Given these issues, there is the possibility that these instruments will require mark-to-market accounting. This could create additional volatility in future earnings. At December 31, 2000, the fair value of these instruments was not material.

SHAREHOLDER RIGHTS PLAN

    On July 19, 2000, Cinergy Corp.'s board of directors approved a Shareholder Rights Plan, (the Plan) which subsequently received SEC authorization under the PUHCA on October 6, 2000.

    Under the Plan, each shareholder of record on October 30, 2000, received, as a dividend, a right to purchase from Cinergy Corp. one share of common stock at a price of $100. Initially, the rights will not be represented by separate certificates and will not trade separately from Cinergy Corp. shares of common stock. The rights would separate from the common stock ten days after either of the following occurred:

•

the public announcement of an acquisition of ten percent or more of the company's common stock, or

•

the commencement of a tender offer or exchange offer by which a person or group would acquire ten percent or more of the common stock of Cinergy Corp.

    The rights become exercisable if one of these events occurs and the rights are no longer redeemable by the board of directors. If the rights become exercisable after someone has acquired ten percent or more of the company's common stock, holders of the rights will have the right to purchase the common stock of Cinergy Corp. at a 50% discount. However, any rights held by the acquirer would not be exercisable.

    In addition, if the rights become exercisable and Cinergy Corp. engages in a merger or consolidation in which it is not the surviving corporation or in which all or part of its common stock is changed or exchanged, or if 50% or more of the company's assets are sold, each holder of a right would have the right to acquire common stock of the acquirer at a 50% discount.

    The board of directors may direct Cinergy Corp. to redeem the rights at $.01 per right at any time before the tenth day following the acquisition of ten percent or more of Cinergy Corp.'s common stock. The rights will expire in October of 2010 unless earlier redeemed or extended by the company.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK

    Reference is made to the "Market Risk Sensitive Instruments and Positions" section of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations".

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

FINANCIAL STATEMENTS
Report of Independent Public Accountants
Cinergy Corp. and Subsidiaries
	Consolidated Statements of Income for the three years ended December 31, 2000
	Consolidated Balance Sheets at December 31, 2000, and 1999
	Consolidated Statements of Changes in Common Stock Equity for the three years ended December 31, 2000
	Consolidated Statements of Cash Flows for the three years ended December 31, 2000
The Cincinnati Gas & Electric Company and Subsidiaries
	Consolidated Statements of Income for the three years ended December 31, 2000
	Consolidated Balance Sheets at December 31, 2000, and 1999
	Consolidated Statements of Changes in Common Stock Equity for the three years ended December 31, 2000
	Consolidated Statements of Cash Flows for the three years ended December 31, 2000
	Consolidated Statements of Capitalization at December 31, 2000, and 1999
PSI Energy, Inc. and Subsidiary
	Consolidated Statements of Income for the three years ended December 31, 2000
	Consolidated Balance Sheets at December 31, 2000, and 1999
	Consolidated Statements of Changes in Common Stock Equity for the three years ended December 31, 2000
	Consolidated Statements of Cash Flows for the three years ended December 31, 2000
	Consolidated Statements of Capitalization at December 31, 2000, and 1999
The Union Light, Heat and Power Company
	Statements of Income for the three years ended December 31, 2000
	Balance Sheets at December 31, 2000, and 1999
	Statements of Changes in Common Stock Equity for the three years ended December 31, 2000
	Statements of Cash Flows for the three years ended December 31, 2000
	Statements of Capitalization at December 31, 2000, and 1999
Notes to Financial Statements
FINANCIAL STATEMENT SCHEDULES
	Schedule II—Valuation and Qualifying Accounts
		Cinergy
		CG&E
		PSI
		ULH&P

    The information required to be submitted in schedules other than those indicated above has been included in the Balance Sheets, the Statements of Income, related schedules, the notes thereto, or omitted as not required by the Rules of Regulation S-X.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of Cinergy Corp., The Cincinnati Gas & Electric Company, PSI Energy, Inc., and The Union Light, Heat and Power Company:

    We have audited the financial statements of Cinergy Corp. (a Delaware Corporation), The Cincinnati Gas & Electric Company (an Ohio Corporation), PSI Energy, Inc. (an Indiana Corporation) and The Union Light, Heat and Power Company (a Kentucky Corporation), as of December 31, 2000 and 1999, and for each of the three years in the period ended December 31, 2000, as listed on the index. These financial statements and the schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

    We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cinergy Corp., The Cincinnati Gas & Electric Company, PSI Energy, Inc., and The Union Light, Heat and Power Company as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States.

    Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the index pursuant to Item 14, are presented for purposes of complying with the Securities and Exchange Commission's Rules of 1934 and are not part of the basic financial statements. The schedules have been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

Arthur Andersen LLP
Cincinnati, Ohio
January 23, 2001

CINERGY CORP.
AND SUBSIDIARY COMPANIES

CINERGY CORP.

CONSOLIDATED STATEMENTS OF INCOME

			2000		1999		1998
			(dollars in thousands, except per share amounts)
Operating Revenues
	Electric		$	5,384,082	$	4,312,899	$	4,763,289
	Gas			2,941,753		1,596,146		1,099,629
	Other			96,129		28,843		48,373
		Total Operating Revenues		8,421,964		5,937,888		5,911,291
Operating Expenses
	Fuel and purchased and exchanged power			3,154,213		2,260,297		2,853,866
	Gas purchased			2,674,449		1,383,993		894,945
	Operation and maintenance			1,089,363		981,054		976,289
	Depreciation and amortization			373,965		353,820		326,492
	Taxes other than income taxes			268,346		265,501		274,635
		Total Operating Expenses		7,560,336		5,244,665		5,326,227
Operating Income				861,628		693,223		585,064
Equity in Earnings of Unconsolidated Subsidiaries				5,048		58,021		51,484
Gain on Sale of Investment in Unconsolidated Subsidiary (Note 10)				—		99,272		—
Miscellaneous—Net				13,391		2,031		(8,289	)
Interest				224,459		234,778		243,587
Income Before Taxes				655,608		617,769		384,672
Income Taxes (Note 11)				251,557		208,671		117,187
Preferred Dividend Requirements of Subsidiaries				4,585		5,457		6,517
Net Income			$	399,466	$	403,641	$	260,968
Average Common Shares Outstanding				158,938		158,863		158,238
Earnings Per Common Share (Note 16)
	Net Income		$	2.51	$	2.54	$	1.65
Earnings Per Common Share—Assuming Dilution (Note 16)
	Net Income		$	2.50	$	2.53	$	1.65
Dividends Declared Per Common Share			$	1.80	$	1.80	$	1.80

The accompanying notes as they relate to Cinergy Corp. are an
integral part of these consolidated financial statements.

CINERGY CORP.

CONSOLIDATED BALANCE SHEETS

					December 31
ASSETS					2000		1999
					(dollars in thousands)
Current Assets
	Cash and cash equivalents				$	93,054	$	81,919
	Restricted deposits					4,195		628
	Notes receivable					35,945		481
	Accounts receivable less accumulated provision for doubtful accounts of $29,951 at December 31, 2000, and $26,811 at December 31, 1999 (Note 6)					1,623,402		706,068
	Materials, supplies, and fuel—at average cost					159,340		205,749
	Prepayments and other					129,666		77,701
	Energy risk management current assets (Note 1(j))					1,413,281		131,145
				Total Current Assets		3,458,883		1,203,691
Utility Plant—Original Cost
	In service
		Electric				9,698,128		9,414,744
		Gas				865,303		824,427
		Common				211,424		189,124
			Total			10,774,855		10,428,295
	Accumulated depreciation					4,555,614		4,259,877
			Total			6,219,241		6,168,418
	Construction work in progress					411,183		249,054
				Total Utility Plant		6,630,424		6,417,472
Other Assets
	Regulatory assets (Note 1(c))					976,614		1,055,012
	Investments in unconsolidated subsidiaries					538,322		358,853
	Energy risk management non-current assets (Note 1(j))					37,228		26,624
	Other					688,257		555,296
				Total Other Assets		2,240,421		1,995,785
Total Assets					$	12,329,728	$	9,616,948

The accompanying notes as they relate to Cinergy Corp. are an
integral part of these consolidated financial statements.

CINERGY CORP.

CONSOLIDATED BALANCE SHEETS

			December 31
LIABILITIES AND SHAREHOLDERS' EQUITY			2000			1999
			(dollars in thousands)
Current Liabilities
	Accounts payable		$	1,496,494		$	734,937
	Accrued taxes			247,006			219,266
	Accrued interest			47,351			49,354
	Notes payable and other short-term obligations (Note 5)			1,128,657			550,194
	Long-term debt due within one year (Note 4)			40,545			31,000
	Energy risk management current liabilities (Note 1(j))			1,456,375			126,682
	Other			106,679			76,774
		Total Current Liabilities		4,523,107			1,788,207
Non-Current Liabilities
	Long-term debt (Notes 4 and 17)			2,876,367			2,989,242
	Deferred income taxes (Note 11)			1,185,968			1,174,818
	Unamortized investment tax credits			137,965			147,550
	Accrued pension and other postretirement benefit costs (Note 9)			411,361			355,917
	Energy risk management non-current liabilities (Note 1(j))			97,507			132,041
	Other			245,658			282,855
		Total Non-Current Liabilities		4,954,826			5,082,423
Total Liabilities				9,477,933			6,870,630
Cumulative Preferred Stock of Subsidiaries (Note 3)
	Not subject to mandatory redemption			62,834			92,597
Common Stock Equity (Note 2)
	Common Stock—$.01 par value; authorized shares—600,000,000; outstanding shares—158,967,661 at December 31, 2000, and 158,923,399 at December 31, 1999			1,590			1,589
	Paid-in capital			1,619,153			1,597,554
	Retained earnings			1,179,113			1,064,319
	Accumulated other comprehensive income (loss)			(10,895	)		(9,741	)
		Total Common Stock Equity		2,788,961			2,653,721
Commitments and Contingencies (Note 12)
Total Liabilities and Shareholders' Equity			$	12,329,728		$	9,616,948

The accompanying notes as they relate to Cinergy Corp. are an
integral part of these consolidated financial statements.

CINERGY CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY

			Common Stock			Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Common Stock Equity
			(dollars in thousands)
1998
Beginning balance			$	1,577		$	1,573,064		$	967,420		$	(2,861	)	$	2,539,200
Comprehensive income:
	Net income			—			—			260,968			—			260,968
	Other comprehensive income (loss), net of tax effect of $(1,815)
		Foreign currency translation adjustment		—			—			—			2,160			2,160
		Minimum pension liability adjustment		—			—			—			(106	)		(106	)
	Total comprehensive income			—			—			—			—			263,022
Issuance of 919,874 shares of common stock—net				10			30,225			—			—			30,235
Treasury shares purchased				(3	)		(8,205	)		—			—			(8,208	)
Treasury shares reissued				3			12,455			—			—			12,458
Dividends on common stock				—			—			(284,703	)		—			(284,703	)
Other				—			(12,302	)		1,529			—			(10,773	)
Ending balance			$	1,587		$	1,595,237		$	945,214		$	(807	)	$	2,541,231
1999
Comprehensive income:
	Net income			—			—			403,641			—			403,641
	Other comprehensive income (loss), net of tax effect of $5,289
		Foreign currency translation adjustment		—			—			—			(9,781	)		(9,781	)
		Minimum pension liability adjustment		—			—			—			(1,239	)		(1,239	)
		Unrealized gain (loss) on grantor and rabbi trusts		—			—			—			2,086			2,086
	Total comprehensive income			—			—			—			—			394,707
Issuance of 258,867 shares of common stock—net				2			6,720			—			—			6,722
Treasury shares purchased				—			(233	)		—			—			(233	)
Treasury shares reissued				—			3,660			—			—			3,660
Dividends on common stock				—			—			(284,545	)		—			(284,545	)
Other				—			(7,830	)		9			—			(7,821	)
Ending balance			$	1,589		$	1,597,554		$	1,064,319		$	(9,741	)	$	2,653,721
2000
Comprehensive income:
	Net income			—			—			399,466			—			399,466
	Other comprehensive income (loss), net of tax effect of $2,755
		Foreign currency translation adjustment		—			—			—			2,074			2,074
		Minimum pension liability adjustment		—			—			—			(1,099	)		(1,099	)
		Unrealized gain (loss) on grantor and rabbi trusts		—			—			—			(2,129	)		(2,129	)
	Total comprehensive income			—			—			—			—			398,312
Issuance of 44,262 shares of common stock—net				1			1,769			—			—			1,770
Treasury shares purchased				—			(3,969	)		—			—			(3,969	)
Treasury shares reissued				—			16,264			—			—			16,264
Dividends on common stock				—			—			(285,242	)		—			(285,242	)
Other				—			7,535			570			—			8,105
Ending balance			$	1,590		$	1,619,153		$	1,179,113		$	(10,895	)	$	2,788,961

The accompanying notes as they relate to Cinergy Corp. are an
integral part of these consolidated financial statements.

CINERGY CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

					2000			1999			1998
					(dollars in thousands)
Operating Activities
	Net income				$	399,466		$	403,641		$	260,968
	Items providing or (using) cash currently:
		Depreciation and amortization				373,965			353,820			326,492
		Wabash Valley Power Association, Inc. settlement				—			—			80,000
		Deferred income taxes and investment tax credits—net				47,404			96,067			(107,835	)
		Gain on sale of investment in unconsolidated subsidiary				—			(99,272	)		—
		Unrealized (gain) loss from energy risk management activities				2,419			(47,192	)		135,000
		Equity in earnings of unconsolidated subsidiaries				(5,048	)		(44,904	)		(45,374	)
		Allowance for equity funds used during construction				(5,813	)		(3,633	)		(1,668	)
		Regulatory assets — net				(6,805	)		(203,224	)		46,856
		Changes in current assets and current liabilities:
			Restricted deposits			(3,567	)		2,959			(1,268	)
			Accounts and notes receivable, net of reserves on receivables sold			(963,309	)		(118,561	)		(45,811	)
			Materials, supplies, and fuel			46,409			(3,002	)		(33,484	)
			Accounts payable			761,557			61,590			44,535
			Accrued taxes and interest			25,737			(11,406	)		46,371
		Other items—net				(51,811	)		4,543			(7,876	)
				Net cash provided by operating activities		620,604			391,426			696,906
Financing Activities
	Change in short-term debt					578,463			(353,506	)		(245,413	)
	Issuance of long-term debt					126,420			829,948			785,554
	Redemption of long-term debt					(234,247	)		(553,191	)		(384,520	)
	Retirement of preferred stock of subsidiaries					(29,393	)		(34	)		(85,299	)
	Issuance of common stock					1,770			6,722			3,724
	Dividends on common stock					(285,242	)		(285,925	)		(283,884	)
				Net cash provided by (used in) financing activities		157,771			(355,986	)		(209,838	)
Investing Activities
	Construction expenditures (less allowance for equity funds used during construction)					(519,574	)		(386,293	)		(368,609	)
	Acquisition of businesses (net of cash acquired)					—			(24,500	)		(63,412	)
	Investments in unconsolidated subsidiaries					(171,298	)		(284,343	)		(35,305	)
	Miscellaneous investments					(76,368	)		(48,808	)		27,102
	Sale of investment in unconsolidated subsidiary					—			690,269			—
				Net cash used in investing activities		(767,240	)		(53,675	)		(440,224	)
Net increase (decrease) in cash and cash equivalents						11,135			(18,235	)		46,844
Cash and cash equivalents at beginning of period						81,919			100,154			53,310
Cash and cash equivalents at end of period					$	93,054		$	81,919		$	100,154
Supplemental Disclosure of Cash Flow Information
	Cash paid during the year for:
		Interest (net of amount capitalized)			$	223,666		$	232,019		$	236,982
		Income taxes			$	216,556		$	130,179		$	179,677

The accompanying notes as they relate to Cinergy Corp. are an
integral part of these consolidated financial statements.

THE CINCINNATI GAS &
ELECTRIC COMPANY
AND SUBSIDIARY COMPANIES

THE CINCINNATI GAS & ELECTRIC COMPANY

CONSOLIDATED STATEMENTS OF INCOME

			2000			1999			1998
			(dollars in thousands)
Operating Revenues
	Electric		$	2,738,775		$	2,174,861		$	2,452,692
	Gas			490,972			376,013			403,431
		Total Operating Revenues		3,229,747			2,550,874			2,856,123
Operating Expenses
	Fuel and purchased and exchanged power			1,554,959			1,066,490			1,407,136
	Gas purchased			266,339			171,997			199,683
	Operation and maintenance			462,601			416,257			392,841
	Depreciation and amortization			209,922			204,468			191,109
	Taxes other than income taxes			208,385			212,193			217,691
		Total Operating Expenses		2,702,206			2,071,405			2,408,460
Operating Income				527,541			479,469			447,663
Miscellaneous—Net				(2,119	)		(2,480	)		(1,291	)
Interest				99,204			99,737			102,238
Income Before Taxes				426,218			377,252			344,134
Income Taxes (Note 11)				159,398			143,676			128,322
Net Income			$	266,820		$	233,576		$	215,812
Preferred Dividend Requirement				847			856			858
Net Income Applicable to Common Stock			$	265,973		$	232,720		$	214,954

The accompanying notes as they relate to The Cincinnati Gas & Electric Company are an
integral part of these consolidated financial statements.

THE CINCINNATI GAS & ELECTRIC COMPANY

CONSOLIDATED BALANCE SHEETS

					December 31
ASSETS					2000		1999
					(dollars in thousands)
Current Assets
	Cash and cash equivalents				$	20,637	$	9,554
	Restricted deposits					160		132
	Notes receivable from affiliated companies					91,732		—
	Accounts receivable less accumulated provision for doubtful accounts of $19,044 at December 31, 2000, and $16,740 at December 31, 1999 (Note 6)					494,501		279,591
	Accounts receivable from affiliated companies					26,743		12,718
	Materials, supplies, and fuel—at average cost					99,061		98,999
	Prepayments and other					39,320		35,527
	Energy risk management current assets (Note 1(j))					697,488		63,926
				Total Current Assets		1,469,642		500,447
Utility Plant—Original Cost
	In service
		Electric				4,999,038		4,875,633
		Gas				865,303		824,427
		Common				211,424		189,124
			Total			6,075,765		5,889,184
	Accumulated depreciation					2,444,867		2,279,587
			Total			3,630,898		3,609,597
	Construction work in progress					220,410		153,229
				Total Utility Plant		3,851,308		3,762,826
Other Assets
	Regulatory assets (Note 1(c))					502,328		536,224
	Energy risk management non-current assets (Note 1(j))					7,000		7,368
	Other					156,692		109,753
				Total Other Assets		666,020		653,345
Total Assets					$	5,986,970	$	4,916,618

The accompanying notes as they relate to The Cincinnati Gas & Electric Company are an
integral part of these consolidated financial statements.

THE CINCINNATI GAS & ELECTRIC COMPANY

CONSOLIDATED BALANCE SHEETS

			December 31
LIABILITIES AND SHAREHOLDER'S EQUITY			2000			1999
			(dollars in thousands)
Current Liabilities
	Accounts payable		$	543,006		$	253,115
	Accounts payable to affiliated companies			23,927			65,256
	Accrued taxes			152,750			136,118
	Accrued interest			17,645			17,375
	Notes payable and other short-term obligations (Note 5)			264,000			234,702
	Notes payable to affiliated companies			163,478			60,360
	Long-term debt due within one year (Note 4)			1,200			—
	Energy risk management current liabilities (Note 1(j))			717,902			60,478
	Other			37,603			25,468
		Total Current Liabilities		1,921,511			852,872
Non-Current Liabilities
	Long-term debt (Note 4)			1,205,061			1,205,916
	Deferred income taxes (Note 11)			735,799			720,168
	Unamortized investment tax credits			98,624			104,655
	Accrued pension and other postretirement benefit costs (Note 9)			164,901			154,718
	Energy risk management non-current liabilities (Note 1(j))			26,337			57,644
	Other			118,421			140,794
		Total Non-Current Liabilities		2,349,143			2,383,895
Total Liabilities				4,270,654			3,236,767
Cumulative Preferred Stock (Note 3)
	Not subject to mandatory redemption			20,486			20,686
Common Stock Equity (Note 2)
	Common Stock—$8.50 par value; authorized shares—120,000,000; outstanding shares—89,663,086 at December 31, 2000, and December 31, 1999			762,136			762,136
	Paid-in capital			565,777			562,851
	Retained earnings			368,911			335,144
	Accumulated other comprehensive income (loss)			(994	)		(966	)
		Total Common Stock Equity		1,695,830			1,659,165
Commitments and Contingencies (Note 12)
Total Liabilities and Shareholder's Equity			$	5,986,970		$	4,916,618

The accompanying notes as they relate to The Cincinnati Gas & Electric Company are an
integral part of these consolidated financial statements.

THE CINCINNATI GAS & ELECTRIC COMPANY

CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY

			Common Stock		Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Common Stock Equity
			(dollars in thousands)
1998
Beginning balance			$	762,136	$	534,649	$	314,553		$	(750	)	$	1,610,588
Comprehensive income:
	Net income			—		—		215,812			—			215,812
	Other comprehensive income (loss), net of tax effect of $201
		Minimum pension liability adjustment		—		—		—			(374	)		(374	)
	Total comprehensive income			—		—		—			—			215,438
Dividends on preferred stock				—		—		(859	)		—			(859	)
Dividends on common stock				—		—		(178,000	)		—			(178,000	)
Contribution from parent company for reallocation of taxes				—		19,253		—			—			19,253
Other				—		24		(1	)		—			23
Ending balance			$	762,136	$	553,926	$	351,505		$	(1,124	)	$	1,666,443
1999
Comprehensive income:
	Net income			—		—		233,576			—			233,576
	Other comprehensive income (loss), net of tax effect of $(85)
		Minimum pension liability adjustment		—		—		—			158			158
	Total comprehensive income			—		—		—			—			233,734
Dividends on preferred stock				—		—		(856	)		—			(856	)
Dividends on common stock				—		—		(250,100	)		—			(250,100	)
Contribution from parent company for reallocation of taxes				—		8,920		—			—			8,920
Other				—		5		1,019			—			1,024
Ending balance			$	762,136	$	562,851	$	335,144		$	(966	)	$	1,659,165
2000
Comprehensive income:
	Net income			—		—		266,820			—			266,820
	Other comprehensive income (loss), net of tax effect of $15
		Minimum pension liability adjustment		—		—		—			(28	)		(28	)
	Total comprehensive income			—		—		—			—			266,792
Dividends on preferred stock				—		—		(847	)		—			(847	)
Dividends on common stock				—		—		(232,334	)		—			(232,334	)
Contribution from parent company for reallocation of taxes				—		2,894		—			—			2,894
Other				—		32		128			—			160
Ending balance			$	762,136	$	565,777	$	368,911		$	(994	)	$	1,695,830

The accompanying notes as they relate to The Cincinnati Gas & Electric Company are an
integral part of these consolidated financial statements.

THE CINCINNATI GAS & ELECTRIC COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

					2000			1999			1998
					(dollars in thousands)
Operating Activities
	Net income				$	266,820		$	233,576		$	215,812
	Items providing or (using) cash currently:
		Depreciation and amortization				209,922			204,468			191,109
		Deferred income taxes and investment tax credits—net				36,238			2,366			(27,045	)
		Unrealized (gain) loss from energy risk management activities				(7,077	)		(27,245	)		73,000
		Allowance for equity funds used during construction				(4,459	)		(2,565	)		(1,647	)
		Regulatory assets—net				(17,623	)		14,325			4,606
		Changes in current assets and current liabilities:
			Restricted deposits			(28	)		1,040			—
			Accounts and notes receivable, net of reserves on receivables sold			(326,826	)		17,676			(55,788	)
			Materials, supplies, and fuel			(62	)		16,295			(7,327	)
			Accounts payable			248,562			22,462			35,550
			Accrued taxes and interest			16,902			(18,533	)		(2,533	)
		Other items—net				(50,226	)		19,501			35,423
				Net cash provided by operating activities		372,143			483,366			461,160
Financing Activities
	Change in short-term debt					132,416			88,759			(94,950	)
	Issuance of long-term debt					—			19,818			243,186
	Redemption of long-term debt					—			(164,264	)		(220,409	)
	Retirement of preferred stock					(168	)		(26	)		(52	)
	Dividends on preferred stock					(847	)		(856	)		(859	)
	Dividends on common stock					(232,334	)		(250,100	)		(178,000	)
				Net cash used in financing activities		(100,933	)		(306,669	)		(251,084	)
Investing Activities
	Construction expenditures (less allowance for equity funds used during construction)					(260,127	)		(194,132	)		(185,436	)
				Net cash used in investing activities		(260,127	)		(194,132	)		(185,436	)
Net increase (decrease) in cash and cash equivalents						11,083			(17,435	)		24,640
Cash and cash equivalents at beginning of period						9,554			26,989			2,349
Cash and cash equivalents at end of period					$	20,637		$	9,554		$	26,989
Supplemental Disclosure of Cash Flow Information
	Cash paid during the year for:
		Interest (net of amount capitalized)			$	99,009		$	101,264		$	107,419
		Income taxes			$	121,158		$	159,241		$	125,704

The accompanying notes as they relate to The Cincinnati Gas & Electric Company are an
integral part of these consolidated financial statements.

THE CINCINNATI GAS & ELECTRIC COMPANY

CONSOLIDATED STATEMENTS OF CAPITALIZATION

					December 31
					2000			1999
					(dollars in thousands)
Long-term Debt (excludes current portion)
	CG&E
		First Mortgage Bonds:
			71/4 % Series due September 1, 2002		$	100,000		$	100,000
			6.45% Series due February 15, 2004			110,000			110,000
			7.20% Series due October 1, 2023			265,500			265,500
			5.45% Series due January 1, 2024 (Pollution Control)			46,700			46,700
			51/2 % Series due January 1, 2024 (Pollution Control)			48,000			48,000
				Total first mortgage bonds		570,200			570,200
		Pollution Control Notes:
			6.50% due November 15, 2022			12,721			12,721
		Other Long-term Debt:
			Liquid Asset Notes with Coupon Exchange (LANCE) due October 1, 2007 (Executed interest rate swap set at 6.87% through maturity commencing at October 2, 2000)			100,000			100,000
			6.40% Debentures due April 1, 2008			100,000			100,000
			6.90% Debentures due June 1, 2025 (Redeemable at the option of the holders on June 1, 2005)			150,000			150,000
			8.28% Junior Subordinated Debentures due July 1, 2025			100,000			100,000
			6.35% Debentures due June 15, 2038 (Interest rate resets June 15, 2003)			100,000			100,000
				Total other long-term debt		550,000			550,000
		Unamortized Premium and Discount—Net				(2,449	)		(2,762	)
		Total long-term debt				1,130,472			1,130,159
	ULH&P
		Other Long-term Debt:
			6.11% Debentures due December 8, 2003			20,000			20,000
			6.50% Debentures due April 30, 2008			20,000			20,000
			7.65% Debentures due July 15, 2025			15,000			15,000
			7.875% Debentures due September 15, 2009			20,000			20,000
				Total other long-term debt		75,000			75,000
		Unamortized Premium and Discount—Net				(411	)		(443	)
		Total long-term debt				74,589			74,557
	Lawrenceburg Gas Company
		First Mortgage Bonds:
			93/4% Series due October 1, 2001			—			1,200
		Total CG&E Consolidated long-term debt			$	1,205,061		$	1,205,916

Cumulative Preferred Stock

Par/Stated Value		Authorized Shares	Shares Outstanding at December 31, 2000	Series	Mandatory Redemption
$	100	6,000,000	204,859	4% - 43/4%	No	$	20,486	$	20,686

Common Stock Equity
	Common Stock—$8.50 par value; authorized shares—120,000,000; outstanding shares—89,663,086 at December 31, 2000, and December 31, 1999			$	762,136		$	762,136
	Paid-in capital				565,777			562,851
	Retained earnings				368,911			335,144
	Accumulated other comprehensive income (loss)				(994	)		(966	)
		Total common stock equity			1,695,830			1,659,165
			Total Capitalization	$	2,921,377		$	2,885,767

The accompanying notes as they relate to The Cincinnati Gas & Electric Company are an
integral part of these consolidated financial statements.

PSI ENERGY, INC.
AND SUBSIDIARY COMPANY

PSI ENERGY, INC.

CONSOLIDATED STATEMENTS OF INCOME

			2000		1999		1998
			(dollars in thousands)
Operating Revenues
	Electric		$	2,684,197	$	2,135,706	$	2,403,038
Operating Expenses
	Fuel and purchased and exchanged power			1,724,656		1,213,653		1,547,511
	Operation and maintenance			462,577		460,707		509,138
	Depreciation and amortization			142,584		136,402		130,604
	Taxes other than income taxes			56,908		52,920		54,541
		Total Operating Expenses		2,386,725		1,863,682		2,241,794
Operating Income				297,472		272,024		161,244
Miscellaneous—Net				4,723		655		3,300
Interest				78,250		86,265		89,359
Income Before Taxes				223,945		186,414		75,185
Income Taxes (Note 11)				88,547		69,215		23,147
Net Income			$	135,398	$	117,199	$	52,038
Preferred Dividend Requirement				3,738		4,601		5,659
Net Income Applicable to Common Stock			$	131,660	$	112,598	$	46,379

The accompanying notes as they relate to PSI Energy, Inc. are an
integral part of these consolidated financial statements.

PSI ENERGY, INC.

CONSOLIDATED BALANCE SHEETS

				December 31
ASSETS				2000		1999
				(dollars in thousands)
Current Assets
	Cash and cash equivalents			$	1,311	$	8,842
	Restricted deposits				341		—
	Notes receivable				3		481
	Notes receivable from affiliated companies				12,798		60,360
	Accounts receivable less accumulated provision for doubtful accounts of $9,317 at December 31, 2000, and $9,934 at December 31, 1999 (Note 6)				464,930		253,022
	Accounts receivable from affiliated companies				5,385		42,715
	Materials, supplies, and fuel—at average cost				53,838		103,490
	Prepayments and other				49,049		36,173
	Energy risk management current assets (Note 1(j))				697,488		63,927
			Total Current Assets		1,285,143		569,010
Electric Utility Plant—Original Cost
	In service				4,699,090		4,539,111
	Accumulated depreciation				2,110,747		1,980,290
		Total			2,588,343		2,558,821
	Construction work in progress				190,773		95,825
			Total Electric Utility Plant		2,779,116		2,654,646
Other Assets
	Regulatory assets (Note 1(c))				474,286		518,788
	Energy risk management non-current assets (Note 1(j))				7,000		7,368
	Other				84,230		85,024
			Total Other Assets		565,516		611,180
Total Assets				$	4,629,775	$	3,834,836

The accompanying notes as they relate to PSI Energy, Inc. are an
integral part of these consolidated financial statements.

PSI ENERGY, INC.

CONSOLIDATED BALANCE SHEETS

			December 31
LIABILITIES AND SHAREHOLDER'S EQUITY			2000			1999
			(dollars in thousands)
Current Liabilities
	Accounts payable		$	392,206		$	241,072
	Accounts payable to affiliated companies			32,448			6,762
	Accrued taxes			80,995			93,056
	Accrued interest			23,708			26,989
	Notes payable and other short-term obligations (Note 5)			188,391			232,597
	Notes payable to affiliated companies			146,381			6,707
	Long-term debt due within one year (Note 4)			38,325			31,000
	Energy risk management current liabilities (Note 1(j))			717,902			60,478
	Other			12,748			1,986
		Total Current Liabilities		1,633,104			700,647
Non-Current Liabilities
	Long-term debt (Notes 4 and 17)			1,074,255			1,211,552
	Deferred income taxes (Note 11)			458,593			460,748
	Unamortized investment tax credits			39,341			42,895
	Accrued pension and other postretirement benefit costs (Note 9)			150,135			129,103
	Energy risk management non-current liabilities (Note 1(j))			26,337			57,645
	Other			71,967			104,638
		Total Non-Current Liabilities		1,820,628			2,006,581
		Total Liabilities		3,453,732			2,707,228
Cumulative Preferred Stock (Note 3)
	Not subject to mandatory redemption			42,348			71,911
Common Stock Equity (Note 2)
	Common Stock—without par value; $.01 stated value; authorized shares—60,000,000; outstanding shares—53,913,701 at December 31, 2000, and December 31, 1999			539			539
	Paid-in capital			413,523			411,198
	Retained earnings			720,153			642,569
	Accumulated other comprehensive income (loss)			(520	)		1,391
		Total Common Stock Equity		1,133,695			1,055,697
Commitments and Contingencies (Note 12)
Total Liabilities and Shareholder's Equity			$	4,629,775		$	3,834,836

The accompanying notes as they relate to PSI Energy, Inc. are an
integral part of these consolidated financial statements.

PSI ENERGY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY

			Common Stock		Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Common Stock Equity
			(dollars in thousands)
1998
Beginning balance			$	539	$	400,893	$	637,814		$	(1,586	)	$	1,037,660
Comprehensive income:
	Net income			—		—		52,038			—			52,038
	Other comprehensive income (loss), net of tax effect of $(666)
		Minimum pension liability adjustment		—		—		—			1,091			1,091
	Total comprehensive income			—		—		—			—			53,129
Dividends on preferred stock				—		—		(6,187	)		—			(6,187	)
Dividends on common stock				—		—		(106,800	)		—			(106,800	)
Non-cash dividend on common stock				—		—		(11,999	)		—			(11,999	)
Contribution from parent company for reallocation of taxes				—		9,823		—			—			9,823
Other				—		23		(1	)		—			22
Ending balance			$	539	$	410,739	$	564,865		$	(495	)	$	975,648
1999
Comprehensive income:
	Net income			—		—		117,199			—			117,199
	Other comprehensive income (loss), net of tax effect of $(418)
		Minimum pension liability adjustment		—		—		—			(163	)		(163	)
		Unrealized gain (loss) on grantor trust		—		—		—			2,049			2,049
	Total comprehensive income			—		—		—			—			119,085
Dividends on preferred stock				—		—		(4,601	)		—			(4,601	)
Dividends on common stock				—		—		(35,900	)		—			(35,900	)
Contribution from parent company for reallocation of taxes				—		457		—			—			457
Other				—		2		1,006			—			1,008
Ending balance			$	539	$	411,198	$	642,569		$	1,391		$	1,055,697
2000
Comprehensive income:
	Net income			—		—		135,398			—			135,398
	Other comprehensive income (loss), net of tax effect of $584
		Minimum pension liability adjustment		—		—		—			(47	)		(47	)
		Unrealized gain (loss) on grantor trust		—		—		—			(1,864	)		(1,864	)
	Total comprehensive income			—		—		—			—			133,487
Dividends on preferred stock				—		—		(3,738	)		—			(3,738	)
Dividends on common stock				—		—		(54,000	)		—			(54,000	)
Contribution from parent company for reallocation of taxes				—		1,989		—			—			1,989
Other				—		336		(76	)		—			260
Ending balance			$	539	$	413,523	$	720,153		$	(520	)	$	1,133,695

The accompanying notes as they relate to PSI Energy, Inc. are an
integral part of these consolidated financial statements.

PSI ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

				2000			1999			1998
				(dollars in thousands)
Operating Activities
	Net income			$	135,398		$	117,199		$	52,038
	Items providing or (using) cash currently:
		Depreciation and amortization			142,584			136,402			130,604
		Wabash Valley Power Association, Inc. settlement			—			—			80,000
		Deferred income taxes and investment tax credits—net			(6,582	)		102,878			(57,130	)
		Unrealized (gain) loss from energy risk management activities			(7,077	)		(27,245	)		62,000
		Allowance for equity funds used during construction			(1,354	)		(1,068	)		(21	)
		Regulatory assets—net			10,818			(217,549	)		42,250
		Changes in current assets and current liabilities:
			Restricted deposits		(341	)		2,414			(1,268	)
			Accounts and notes receivable, net of reserves on receivables sold		(130,891	)		(118,183	)		(16,850	)
			Materials, supplies, and fuel		49,652			(23,045	)		(25,256	)
			Accounts payable		176,820			(270	)		(7,086	)
			Accrued taxes and interest		(15,342	)		32,809			(3,437	)
		Other items—net			23,695			42,491			1,044
			Net cash provided by operating activities		377,380			46,833			256,888
Financing Activities
	Change in short-term debt				95,468			(36,804	)		69,073
	Issuance of long-term debt				53,075			589,225			200,228
	Redemption of long-term debt				(187,097	)		(379,484	)		(164,111	)
	Retirement of preferred stock				(29,225	)		(8	)		(85,247	)
	Dividends on preferred stock				(3,738	)		(4,601	)		(6,187	)
	Dividends on common stock				(54,000	)		(35,900	)		(106,800	)
		Net cash provided by (used in) financing activities			(125,517	)		132,428			(93,044	)
Investing Activities
	Construction expenditures (less allowance for equity funds used during construction)				(259,394	)		(189,207	)		(163,225	)
		Net cash used in investing activities			(259,394	)		(189,207	)		(163,225	)
Net increase (decrease) in cash and cash equivalents					(7,531	)		(9,946	)		619
Cash and cash equivalents at beginning of period					8,842			18,788			18,169
Cash and cash equivalents at end of period				$	1,311		$	8,842		$	18,788
Supplemental Disclosure of Cash Flow Information
	Cash paid (received) during the year for:
		Interest (net of amount capitalized)		$	80,854		$	86,256		$	80,712
		Income taxes		$	112,210		$	(54,099	)	$	63,957

The accompanying notes as they relate to PSI Energy, Inc. are an
integral part of these consolidated financial statements.

PSI ENERGY, INC.

CONSOLIDATED STATEMENTS OF CAPITALIZATION

					December 31
					2000			1999
					(dollars in thousands)
Long-term Debt (excludes current portion)
	First Mortgage Bonds:
		Series TT, 73/8%, due March 15, 2012 (Pollution Control)			$	—		$	10,000
		Series UU, 71/2%, due March 15, 2015 (Pollution Control)				—			14,250
		Series YY, 5.60%, due February 15, 2023 (Pollution Control)				—			29,945
		Series ZZ, 53/4%, due February 15, 2028 (Pollution Control)				50,000			50,000
		Series AAA, 71/8%, due February 1, 2024				30,000			30,000
		Series BBB, 8.0%, due July 15, 2009				124,665			124,665
		Series CCC, 8.85%, due January 15, 2022				53,055			53,055
		Series DDD, 8.31%, due September 1, 2032				38,000			38,000
			Total first mortgage bonds			295,720			349,915
	Secured Medium-term Notes:
		Series A, 7.61% to 8.81%, due January 2, 2002 to June 1, 2022				57,300			75,800
		Series B, 5.93% to 8.24%, due September 17, 2003 to August 22, 2022				126,000			126,000
			(Series A and B, 7.105% weighted average interest rate and 9 year weighted average remaining life)
				Total secured medium-term notes		183,300			201,800
	Other Long-term Debt:
		Series 2000A, Pollution Control Revenue Refunding Bond, due May 1, 2035				44,025			—
		Series 2000B, Pollution Control Revenue Refunding Bond, due April 1, 2022				10,000			—
		Series 1994A Promissory Note, non-interest bearing, due January 3, 2001				—			19,825
		6.35% Debentures due November 15, 2006				50			100,000
		6.00% Debentures due December 14, 2016 (The interest rate resets on December 14, 2001)				50,000			50,000
		6.50% Synthetic Putable Yield Securities due August 1, 2026				50,000			50,000
		7.25% Junior Maturing Principal Securities due March 15, 2028				2,658			2,658
		6.00% Rural Utilities Service (RUS) Obligation payable in annual installments (Note 17)				83,927			84,798
		6.52% Senior Notes due March 15, 2009				97,342			97,342
		7.85% Debentures due October 15, 2007				265,000			265,000
			Total other long-term debt			603,002			669,623
	Unamortized Premium and Discount—Net					(7,767	)		(9,786	)
	Total long-term debt					1,074,255			1,211,552

	Cumulative Preferred Stock
Par/Stated Value		Authorized Shares	Shares Outstanding at December 31, 2000	Series	Mandatory Redemption
$	100	5,000,000	347,592	31/2%—6.875%	No	$	34,759	$	63,963
$	25	5,000,000	303,544	4.16%—4.32%	No		7,589		7,948

Total preferred stock			42,348			71,911
Common Stock Equity
	Common Stock—without par value; $0.01 stated value; authorized    shares—60,000,000; outstanding shares—53,913,701 at    December 31, 2000, and December 31, 1999	$	539		$	539
	Paid-in capital		413,523			411,198
	Retained earnings		720,153			642,569
	Accumulated other comprehensive income (loss)		(520	)		1,391
	Total common stock equity		1,133,695			1,055,697
	Total Capitalization	$	2,250,298		$	2,339,160

The accompanying notes as they relate to PSI Energy, Inc. are an
integral part of these consolidated financial statements.

THE UNION LIGHT, HEAT
AND POWER COMPANY

THE UNION LIGHT, HEAT AND POWER COMPANY

STATEMENTS OF INCOME

			2000			1999			1998
			(dollars in thousands)
Operating Revenues
	Electric		$	225,601		$	210,234		$	191,359
	Gas			91,950			70,728			65,454
		Total Operating Revenues		317,551			280,962			256,813
Operating Expenses
	Electricity purchased from parent company for resale			159,915			158,556			142,567
	Gas purchased			51,591			34,690			32,804
	Operation and maintenance			40,699			38,611			37,131
	Depreciation and amortization			15,685			14,830			13,148
	Taxes other than income taxes			3,938			4,136			3,993
		Total Operating Expenses		271,828			250,823			229,643
Operating Income				45,723			30,139			27,170
Miscellaneous—Net				(982	)		(1,567	)		(1,242	)
Interest				6,308			6,114			4,604
Income Before Taxes				38,433			22,458			21,324
Income Taxes (Note 11)				13,801			10,184			7,774
Net Income			$	24,632		$	12,274		$	13,550

The accompanying notes as they relate to The Union Light, Heat and Power Company are an
integral part of these financial statements.

THE UNION LIGHT, HEAT AND POWER COMPANY

BALANCE SHEETS

					December 31
ASSETS					2000		1999
					(dollars in thousands)
Current Assets
	Cash and cash equivalents				$	6,460	$	3,641
	Accounts receivable less accumulated provision for doubtful accounts of $1,492 at December 31, 2000, and $1,513 at December 31, 1999 (Note 6)					28,518		17,786
	Accounts receivable from affiliated companies					2,279		775
	Materials, supplies, and fuel—at average cost					6,300		7,654
	Prepayments and other					274		219
				Total Current Assets		43,831		30,075
Utility Plant—Original Cost
	In service
		Electric				234,482		222,035
		Gas				184,878		173,011
		Common				44,603		42,351
			Total			463,963		437,397
	Accumulated depreciation					169,403		154,607
			Total			294,560		282,790
	Construction work in progress					15,069		13,761
				Total Utility Plant		309,629		296,551
Other Assets
	Regulatory assets (Note 1(c))					10,177		10,639
	Other					5,110		5,000
				Total Other Assets		15,287		15,639
Total Assets					$	368,747	$	342,265

The accompanying notes as they relate to The Union Light, Heat and Power Company are an
integral part of these financial statements.

THE UNION LIGHT, HEAT AND POWER COMPANY

BALANCE SHEETS

			December 31
LIABILITIES AND SHAREHOLDER'S EQUITY			2000			1999
			(dollars in thousands)
Current Liabilities
	Accounts payable		$	24,249		$	8,487
	Accounts payable to affiliated companies			20,192			20,122
	Accrued taxes			(5,760	)		739
	Accrued interest			1,215			1,298
	Notes payable to affiliated companies			29,403			37,752
	Other			11,669			4,062
		Total Current Liabilities		80,968			72,460
Non-Current Liabilities
	Long-term debt (Note 4)			74,589			74,557
	Deferred income taxes (Note 11)			35,822			23,000
	Unamortized investment tax credits			3,684			3,961
	Accrued pension and other postretirement benefit costs (Note 9)			13,041			12,333
	Amounts due to customers—income taxes			7,439			11,308
	Other			6,016			12,596
		Total Non-Current Liabilities		140,591			137,755
Total Liabilities				221,559			210,215
Common Stock Equity (Note 2)
	Common Stock—$15.00 par value; authorized shares—1,000,000; outstanding shares—585,333 at December 31, 2000, and December 31, 1999			8,780			8,780
	Paid-in capital			20,305			20,142
	Retained earnings			118,103			103,128
		Total Common Stock Equity		147,188			132,050
Commitments and Contingencies (Note 12)
Total Liabilities and Shareholder's Equity			$	368,747		$	342,265

The accompanying notes as they relate to The Union Light, Heat and Power Company are an
integral part of these financial statements.

THE UNION LIGHT, HEAT AND POWER COMPANY

STATEMENTS OF CHANGES IN COMMON STOCK EQUITY

	Common Stock		Paid-in Capital			Retained Earnings			Total Common Stock Equity
	(dollars in thousands)
1998
Beginning balance	$	8,780	$	18,683		$	95,450		$	122,913
Net income		—		—			13,550			13,550
Dividends on common stock		—		—			(8,487	)		(8,487	)
Contribution from parent for reallocation of taxes		—		843			—			843
Other		—		(1	)		—			(1	)
Ending balance	$	8,780	$	19,525		$	100,513		$	128,818
1999
Net income		—		—			12,274			12,274
Dividends on common stock		—		—			(9,659	)		(9,659	)
Contribution from parent for reallocation of taxes		—		617			—			617
Ending balance	$	8,780	$	20,142		$	103,128		$	132,050
2000
Net income		—		—			24,632			24,632
Dividends on common stock		—		—			(9,657	)		(9,657	)
Contribution from parent for reallocation of taxes		—		163			—			163
Ending balance	$	8,780	$	20,305		$	118,103		$	147,188

The accompanying notes as they relate to The Union Light, Heat and Power Company are an
integral part of these financial statements.

THE UNION LIGHT, HEAT AND POWER COMPANY

STATEMENTS OF CASH FLOWS

					2000			1999			1998
					(dollars in thousands)
Operating Activities
	Net income				$	24,632		$	12,274		$	13,550
	Items providing or (using) cash currently:
		Depreciation and amortization				15,685			14,830			13,148
		Deferred income taxes and investment tax credits—net				8,926			(738	)		(261	)
		Allowance for equity funds used during construction				(61	)		(36	)		(142	)
		Regulatory assets—net				259			138			3
		Changes in current assets and current liabilities:
			Accounts and notes receivable, net of reserves on receivables sold			(14,269	)		(5,099	)		(4,820	)
			Materials, supplies, and fuel			1,354			615			(2,175	)
			Accounts payable			15,832			7,720			(9,920	)
			Accrued taxes and interest			(6,582	)		(3,138	)		(2,443	)
		Other items—net				3,482			5,971			3,228
				Net cash provided by operating activities		49,258			32,537			10,168
Financing Activities
	Change in short-term debt					(8,349	)		5,935			8,330
	Issuance of long-term debt					—			19,818			40,066
	Redemption of long-term debt					—			(20,000	)		(10,118	)
	Dividends on common stock					(9,657	)		(9,659	)		(8,487	)
				Net cash provided by (used in) financing activities		(18,006	)		(3,906	)		29,791
Investing Activities
	Construction expenditures (less allowance for equity funds used during construction)					(28,433	)		(28,234	)		(37,261	)
				Net cash used in investing activities		(28,433	)		(28,234	)		(37,261	)
Net increase in cash and cash equivalents						2,819			397			2,698
Cash and cash equivalents at beginning of period						3,641			3,244			546
Cash and cash equivalents at end of period					$	6,460		$	3,641		$	3,244
Supplemental Disclosure of Cash Flow Information
	Cash paid during the year for:
		Interest (net of amount capitalized)			$	6,534		$	6,691		$	4,257
		Income taxes			$	11,760		$	12,794		$	11,305

The accompanying notes as they relate to The Union Light, Heat and Power Company are an
integral part of these financial statements.

THE UNION LIGHT, HEAT AND POWER COMPANY

STATEMENTS OF CAPITALIZATION

					December 31
					2000			1999
					(dollars in thousands)
Long-term Debt (excludes current portion)
	Other Long-term Debt:
		6.11% Debentures due December 8, 2003			$	20,000		$	20,000
		6.50% Debentures due April 30, 2008				20,000			20,000
		7.65% Debentures due July 15, 2025				15,000			15,000
		7.875% Senior Unsecured Debentures due September 15, 2009				20,000			20,000
			Total other long-term debt			75,000			75,000
	Unamortized Premium and Discount—Net					(411	)		(443	)
	Total long-term debt					74,589			74,557
Common Stock Equity
	Common Stock—$15.00 par value; authorized shares—1,000,000; outstanding shares—585,333 at December 31, 2000, and December 31, 1999				$	8,780		$	8,780
	Paid-in capital					20,305			20,142
	Retained earnings					118,103			103,128
			Total common stock equity			147,188			132,050
				Total Capitalization	$	221,777		$	206,607

The accompanying notes as they relate to The Union Light, Heat and Power Company are an
integral part of these financial statements.

NOTES TO FINANCIAL STATEMENTS

    In this report Cinergy (which includes Cinergy Corp. and all of our regulated and non-regulated subsidiaries) is, at times, referred to in the first person as "we", "our", or "us".

1.  Summary of Significant Accounting Policies

    (a)  Nature of OperationsCinergy Corp., a Delaware corporation created in October 1994, owns all outstanding common stock of The Cincinnati Gas & Electric Company (CG&E) and PSI Energy, Inc. (PSI), both of which are public utility subsidiaries. As a result of this ownership, we are considered a utility holding company. Because we are a holding company whose utility subsidiaries operate in multiple states, we are registered with and are subject to regulation by the Securities and Exchange Commission (SEC) under the Public Utility Holding Company Act of 1935, as amended (PUHCA). Our other principal subsidiaries are:

•

Cinergy Services, Inc. (Services);

•

Cinergy Investments, Inc. (Investments);

•

Cinergy Global Resources, Inc. (Global Resources);

•

Cinergy Technologies, Inc. (Technologies); and

•

Cinergy Wholesale Energy, Inc. (CWE).

CG&E, an Ohio corporation, is a combination electric and gas public utility company that provides service in the southwestern portion of Ohio and, through its subsidiaries, in nearby areas of Kentucky and Indiana. It has three wholly-owned utility subsidiaries and two wholly-owned non-utility subsidiaries. CG&E's principal utility subsidiary, The Union Light, Heat and Power Company (ULH&P), is a Kentucky corporation that provides electric and gas service in northern Kentucky. CG&E's other subsidiaries are insignificant to its results of operations.

PSI, an Indiana corporation, is an electric utility that provides service in north central, central, and southern Indiana.

    The following table presents further information related to the operations of our domestic utility companies (our operating companies):

Principal Line(s) of Business
CG&E and subsidiaries	•	Generation, transmission, distribution, and sale of electricity
	•	Sale and/or transportation of natural gas
PSI	•	Generation, transmission, distribution, and sale of electricity
ULH&P	•	Transmission, distribution, and sale of electricity
	•	Sale and transportation of natural gas

    Services is a service company that provides our regulated and non-regulated subsidiaries with a variety of centralized administrative, management, and support services. Investments holds most of our domestic non-regulated, energy-related businesses and investments. Global Resources holds our international businesses and investments and directs our renewable energy investing activities (for example, wind farms). Technologies primarily holds our portfolio of technology-related investments. In November 2000, CWE was formed to act as a holding company for Cinergy's energy commodity businesses, including production, as the generation assets eventually become unbundled from utility subsidiaries. See Note 18 for a discussion on Ohio deregulation.

    We conduct operations through our subsidiaries, and we manage through the following four business units:

•

Energy Commodities Business Unit (Commodities);

•

Energy Delivery Business Unit (Delivery);

•

Cinergy Investments Business Unit (Cinergy Investments); and

•

International Business Unit (International).

    As the utility industry continues to evolve, Cinergy will continue to analyze its operating structure and make modifications as appropriate. In early 2001, we announced certain organizational changes which further aligned the business units consistent with Cinergy's strategic vision. The revised structure reflects three business units, as follows:

•

Energy Merchant—will operate power plants, both domestically and abroad, and conduct all wholesale energy marketing, trading, origination and risk management services;

•

Regulated Businesses—will operate all gas and electric transmission and distribution services, both domestically and abroad, and will be responsible for all regulatory planning for the regulated utility businesses of CG&E, PSI, and ULH&P; and

•

Power Technology and Infrastructure Services—will originate and manage a portfolio of emerging energy businesses.

    See Note 15 for financial information by business unit.

    (b)  Presentation  We use two different methods to report investments in subsidiaries or other companies: the consolidation method and the equity method. Additionally, we use estimates and have reclassified certain amounts in the preparation of the financial statements.

    Consolidation Method  We use the consolidation method when we own a majority of the voting stock of or have the ability to control a subsidiary. We eliminate all significant intercompany transactions when we consolidate these accounts. Our consolidated financial statements include the accounts of Cinergy, CG&E, and PSI, and their wholly-owned subsidiaries.

    Equity Method  We use the equity method to report investments, joint ventures, partnerships, subsidiaries and affiliated companies in which we do not have control, but have the ability to exercise influence over operating and financial policies (generally, 20% to 50% ownership). Under the equity method, we report:

•

our investment in the entity as Investments in unconsolidated subsidiaries  in our Consolidated Balance Sheets; and

•

our percentage share of the earnings from the entity as Equity in earnings of unconsolidated subsidiaries  in our Consolidated Statements of Income.

    Use of Estimate  Management makes estimates and assumptions when preparing financial statements under generally accepted accounting principles (GAAP). Actual results could differ, as these estimates and assumptions involve judgment. These estimates and assumptions affect various matters, including:

•

the reported amounts of assets and liabilities in our Balance Sheets at the dates of the financial statements;

•

the disclosure of contingent assets and liabilities at the dates of the financial statements; and

•

the reported amounts of revenues and expenses in our Statements of Income during the reporting periods.

    Reclassifications  We have reclassified certain prior-year amounts in the financial statements of Cinergy, CG&E, PSI, and ULH&P to conform to current presentation.

    (c)  Regulation  Our operating companies and certain of our non-utility subsidiaries must comply with the rules prescribed by the SEC under the PUHCA. Our operating companies must also comply with the rules prescribed by the Federal Energy Regulatory Commission (FERC) and the state utility commissions of Ohio, Indiana, and Kentucky.

    Our operating companies use the same accounting policies and practices for financial reporting purposes as non-regulated companies under GAAP. However, sometimes actions by the FERC and the state utility commissions result in accounting treatment different from that used by non-regulated companies. When this occurs, we apply the provisions of Statement of Financial Accounting Standards No. 71, Accounting for the Effects of Certain Types of Regulation (Statement 71). In accordance with Statement 71, we record regulatory assets and liabilities (expenses deferred for future recovery from customers or obligations to be refunded to customers) on our Balance Sheets.

    Comprehensive electric deregulation legislation was passed in Ohio on July 6, 1999. As required by the legislation,
CG&E filed its Proposed Transition Plan for approval by the Public Utilities Commission of Ohio (PUCO) on December 28,
1999. On August 31, 2000, the PUCO approved a stipulation agreement relating to CG&E's transition plan. This plan creates
a Regulatory Transition Charge (RTC), designed to recover CG&E's generation-related regulatory assets and transition costs
over a ten year period. Accordingly, Statement 71 was discontinued for the generation portion of CG&E's business and
Statement of Financial Accounting Standards No. 101, Regulated Enterprises—Accounting for Discontinuation of
Application of FASB Statement No. 71 (Statement 101) was applied. The effect of this change to the financial statements was
immaterial. Except with respect to the generation assets of CG&E, as of December 31, 2000, PSI, CG&E, and
ULH&P continue to meet each of the criteria required for the use of Statement 71. However, as other states implement deregulation legislation, the application of Statement 71 will need to be reviewed. Based on our operating companies' current regulatory orders and the regulatory environment in which they currently operate, the future recovery of regulatory assets recognized in the accompanying Balance Sheets as of December 31, 2000, is probable. The effect of future discontinuance of Statement 71 on results of operations, cash flows, or statement of position cannot be determined until deregulation legislation plans have been approved by each state in which we do business. For a further discussion of Ohio Deregulation see Note 18.

    Our regulatory assets and amounts authorized for recovery through regulatory orders at December 31, 2000, and 1999, are as follows:

		CG&E(1)		2000 PSI		Cinergy		CG&E(1)		1999 PSI		Cinergy
		(in millions)
Amounts due from customers—income taxes(2)		$	53	$	20	$	73	$	276	$	18	$	294
Gasification services agreement buyout costs(3)			—		251		251		—		250		250
Post-in-service carrying costs and deferred operating expenses			—		41		41		121		42		163
Coal contract buyout cost(4)			—		53		53		—		77		77
Deferred demand-side management (DSM)			—		—		—		38		11		49
Phase-in deferred return and depreciation			—		—		—		54		—		54
Deferred merger costs			7		60		67		15		65		80
Unamortized costs of reacquiring debt			11		31		42		31		30		61
Coal gasification services expenses			—		12		12		—		16		16
RTC recoverable assets(5)			432		—		432		—		—		—
Other			—		6		6		1		10		11
	Total regulatory assets	$	503	$	474	$	977	$	536	$	519	$	1,055
	Authorized for recovery(6)	$	494	$	444	$	938	$	467	$	489	$	956

(1)

Includes $10 million at December 31, 2000, and $11 million at December 31, 1999, related to ULH&P (for deferred merger costs, unamortized costs of reacquiring debt and other regulatory assets). Of these amounts, $3 million at December 31, 2000, and $4 million at December 31, 1999, have been authorized for recovery.

(2)

The various regulatory commissions overseeing the regulated business operations of our operating companies regulate income tax provisions reflected in customer rates. In accordance with the provisions of Statement 71, we have recorded net regulatory assets for CG&E and PSI and a regulatory liability for ULH&P.

(3)

PSI reached an agreement with Dynegy, Inc. to purchase the remainder of its 25-year contract for coal gasification services. In accordance with an order from the Indiana Utility Regulatory Commission (IURC), PSI began recovering this asset over an 18-year period that commenced upon the termination of the gas services agreement in 2000.

(4)

In August 1996, PSI entered into a coal supply agreement, which expired December 31, 2000. The agreement provided for a buyout charge, which is being recovered through the fuel adjustment clause through December 2002.

(5)

In August 2000, CG&E's deregulation transition plan was approved. Effective January 1, 2001, an RTC went into effect and provides for recovery of all then existing generation-related regulatory assets and various transition costs over a ten year period. Because a separate charge provides for recovery, these assets were aggregated and are included as a single amount in the 2000 presentation. The classification of all transmission and distribution related regulatory assets has remained the same.

(6)

At December 31, 2000, these amounts were being recovered through rates charged to customers over a period ranging from 1 to 23 years for CG&E, 1 to 32 years for PSI, and 3 to 21 years for ULH&P.

    (d)  Statements of Cash Flows  We define Cash equivalents as investments with maturities of three months or less when acquired. See Note 17 for information concerning non-cash financing transactions.

    (e)  Operating Revenues and Fuel Costs  Our operating companies record Operating revenues for electric and gas service, including unbilled revenues and the associated expenses, when they provide the service to the customers. The associated expenses include:

•

the fuel used to generate electricity;

•

electricity purchased from others;

•

natural gas purchased from others; and

•

the transportation costs associated with the purchase of fuel, electricity, and natural gas.

    These expenses are shown in our Statements of Income as Fuel and purchased and exchanged power and Gas purchased. Any portion of these costs that are recoverable or refundable to customers in future periods is deferred in either Accounts receivable or Accounts payable in our Balance Sheets.

    Indiana law limits the amount of fuel costs that PSI can recover to an amount that will not result in earning a return in excess of that allowed by the Indiana Utility Regulatory Commission (IURC).

    (f)  Utility Plant  Utility plant includes the utility business property and equipment that is in use, being held for future use, or under construction. We report our utility plant at its original cost, which includes:

•

materials;

•

salaries;

•

payroll taxes;

•

fringe benefits;

•

an allowance for funds used during construction (described below in (h)); and

•

other miscellaneous amounts.

    In August 2000, the generation assets of CG&E were released from the first mortgage indenture lien. CG&E's transmission assets, distribution assets, and any generating assets added after August 2000, remain subject to the lien of the first mortgage bond indenture. The utility property of PSI is also subject to the lien of its first mortgage bond indenture.

    (g)  Depreciation  We determine the provisions for depreciation expense using the straight-line method. The depreciation rates are based on periodic studies of the estimated useful lives (the number of years we expect to be able to use the properties) and the cost to remove the properties. The average depreciation rates for utility plant, excluding software, are presented in the table below.

		2000		1999		1998
CG&E and subsidiaries
	Electric	2.9	%	2.9	%	2.9	%
	Gas	2.9		2.9		2.9
	Common	3.3		2.7		2.6
ULH&P
	Electric	3.3		3.3		3.4
	Gas	3.1		3.1		3.1
	Common	5.1		5.2		5.0
PSI		3.0		3.0		3.0

    (h)  Allowance for Funds Used During Construction (AFUDC)  Our operating companies finance construction projects with borrowed funds and equity funds. Regulatory authorities allow us to record the costs of these funds as part of the cost of construction projects. AFUDC is calculated using a

methodology authorized by the regulatory authorities. AFUDC rates are compounded semi-annually and are as follows:

	2000		1999		1998
Cinergy average	8.0	%	7.3	%	6.6	%
CG&E and subsidiaries average	8.4		8.0		7.1
ULH&P average	6.6		5.3		6.1
PSI average	7.4		6.5		5.6

    The borrowed funds component of AFUDC, which is recorded on a pre-tax basis, is as follows:

	2000		1999		1998
	(in millions)
Cinergy	$	8.2	$	5.6	$	7.5
CG&E and subsidiaries		5.0		3.4		5.5
ULH&P		0.4		0.2		0.6
PSI		3.2		2.2		2.0

    With the deregulation of CG&E's generation assets, the AFUDC method will no longer be used to capitalize the cost of funds used during generation-related construction at CG&E. Instead, accounting principles require the application of Statement of Financial Accounting Standards No. 34, Capitalization of Interest Cost (Statement 34). The primary differences in methodologies are that Statement 34 does not include a component for equity funds and does not emphasize short-term borrowings over long-term borrowings.

    (i)  Federal and State Income Taxes  Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, requires an asset and liability approach for financial accounting and reporting of income taxes. The tax effects of differences between the financial reporting and tax basis of accounting are reported as Deferred income tax assets or liabilities in our Balance Sheets and are based on currently enacted income tax rates.

    Investment tax credits, which have been used to reduce our federal income taxes payable, have been deferred for financial reporting purposes. These deferred investment tax credits are being amortized over the useful lives of the property to which they are related. For a further discussion of income taxes see Note 11.

    (j)  Energy Marketing and Trading  We market and trade electricity, natural gas, and other energy-related products. We designate transactions as physical or trading at the time they are originated. Physical refers to our intent and projected ability to fulfill substantially all obligations from company-owned assets. We sell generation to third parties when it is not required to meet native load requirements (end-use customers within our operating companies' franchise service territory). We account for physical transactions on a settlement basis and trading transactions using the mark-to-market method of accounting. Under the mark-to-market method of accounting, trading transactions are shown at fair value in our Consolidated Balance Sheets as Energy risk management assets—and Energy risk management liabilities—current and long-term. We reflect changes in fair value resulting in unrealized gains and losses in Fuel and purchased and exchanged power and Gas purchased. We record the revenues and costs for all transactions in our Consolidated Statements of Income when the contracts are settled. We recognize revenues in Operating revenues; costs are recorded in Fuel and purchased and exchanged power and Gas purchased.

    Although we intend to settle physical contracts with company-owned generation, there are times when we have to settle these contracts with power purchased on the open trading markets. The cost of these purchases could be in excess of the associated revenues. We recognize the gains or losses on

these transactions as the power is delivered. Open market purchases may occur for the following reasons:

•

generating station outages;

•

least-cost alternative;

•

native load requirements; and

•

extreme weather.

    We value contracts in the trading portfolio using end-of-the-period market prices, utilizing the following factors (as applicable):

•

closing exchange prices (that is, closing prices for standardized electricity products traded on an organized exchange such as the New York Mercantile Exchange);

•

broker dealer and over-the-counter price quotations; and

•

model pricing (which considers time value and historical volatility factors of electricity pricing underlying any options and contractual commitments).

    We anticipate that some of these obligations, even though considered trading contracts, will ultimately be settled using company-owned generation. The cost of this generation is usually below the market price at which the trading portfolio has been valued. We expect earnings volatility from period to period due to the risks associated with marketing and trading electricity, natural gas, and other energy-related products.

    Commodities, through Cinergy Marketing & Trading, LLC, and International, through Cinergy Global Trading Limited, market and trade natural gas and other energy-related products.

    (k)  Financial Derivatives  We use derivative financial instruments to manage:

•

funding costs;

•

exposures to fluctuations in interest rates; and

•

exposures to foreign currency exchange rates.

    To qualify for hedge accounting, these financial instruments must be designated as a hedge (for example, an offset of foreign exchange or interest rate risks) at the inception of the contract and must be effective at reducing the risk associated with the hedged item. Accordingly, changes in the fair values or cash flows of instruments designated as hedges must be highly correlated with changes in the fair values or cash flows of the related hedged items.

    From time to time, we may utilize foreign exchange forward contracts (for example, a contract obligating one party to buy, and the other to sell, a specified quantity of a foreign currency for a fixed price at a future date) and currency swaps (for example, a contract whereby two parties exchange principal and interest cash flows denominated in different currencies) to hedge foreign currency denominated purchase and sale commitments and certain of our net investments in foreign operations against currency exchange rate fluctuations. At December 31, 2000, no such instruments were held.

    We also use interest rate swaps (an agreement by two parties to exchange fixed-interest rate cash flows for floating-interest rate cash flows). Through December 31, 2000, we utilized the accrual method to account for these interest rate swaps. Accordingly, gains and losses were calculated based on the difference between the fixed-rate and the floating-rate interest amounts, using agreed upon notional amounts. These gains and losses are recognized in our Consolidated Statements of Income as a component of Interest over the life of the agreement. Effective with our adoption of Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (Statement 133) in the first quarter of 2001, we will begin accounting for interest rate swaps using mark-to-market accounting and will assess the effectiveness of any swaps used in hedging activities. See Note 1(l) below for further discussion of Statement 133.

    (l)  Accounting Changes  During 1998, the Financial Accounting Standards Board (FASB) issued Statement 133. This standard is effective for fiscal years beginning after June 15, 2000, and requires companies to record derivative instruments as assets or liabilities, measured at fair value. Changes in the derivative's fair value must be recognized currently in earnings unless specific hedge accounting criteria are met. Gains and losses on derivatives that qualify as hedges can offset related fair value changes on the hedged item in the income statement for fair value hedges or be recorded in other comprehensive income for cash flow hedges.

    We will reflect the adoption of this standard in financial statements issued beginning in the first quarter of 2001. Since many of the existing relevant contracts and financial instruments are currently required to use mark-to-market accounting, we anticipate the effects of implementation to be immaterial. These effects do not reflect the potential effects of applying mark-to-market accounting to selected call options and forwards we use to hedge peak period exposure to electricity demand. We have not historically marked these instruments to market because they are intended as hedges of peak period exposure and are not considered trading instruments. Our intent is to classify these types of instruments as normal purchases under Statement 133. However, the FASB-sponsored Derivatives Implementation Group has yet to issue its final guidance on these types of instruments. There are currently viewpoints that range from allowing them as normal purchases to not allowing hedge accounting under Statement 133. Given these issues, there is the possibility that these instruments will require mark-to-market accounting. This could create additional volatility in future earnings. At December 31, 2000, the fair value of these instruments was not material.

    (m)  Translation of Foreign Currency  We translate the assets and liabilities of foreign subsidiaries, whose functional currency (generally that is the local currency of the country in which the subsidiary is located) is not the United States (U.S.) dollar, using the appropriate exchange rate as of the end of the year. We translate income and expense items using the average exchange rate prevailing during the month the respective transaction occurs. We record translation gains and losses in Accumulated other comprehensive income (loss), which is a component of common stock equity.

    (n)  Related Party Transactions  Services provides our regulated and non-regulated subsidiaries with a variety of centralized administrative, management, and support services in accordance with agreements approved by the SEC under the PUHCA. The cost of these services are charged to our operating companies on a direct basis or, for general costs which cannot be directly attributed, based on predetermined allocation factors, including the following:

•

sales ratio;

•

electric peak load ratio;

•

number of employees ratio;

•

number of customers ratio;

•

construction expenditures ratio; and

•

other statistical information ratios.

    These costs were as follows for the years ended December 31:

	2000		1999		1998
	(in millions)
CG&E and its subsidiaries	$	250	$	208	$	207
PSI		187		168		183
ULH&P		25		23		24

    At December 31, 2000, and 1999, the Balance Sheets of our operating companies included the following amounts payable to Services:

	2000		1999
	(in millions)
CG&E and its subsidiaries	$	23	$	23
PSI		15		7
ULH&P		2		2

2. Common Stock

    (a)  Changes In Common Stock Outstanding  The following table reflects selected information related to our shares of common stock reserved for stock-based plans.

	Shares Reserved at Dec. 31, 2000	Shares Issued
		2000	1999	1998
Cinergy Corp. 1996 Long-term Incentive Compensation Plan (LTIP)	6,956,386	—	—	—
Cinergy Corp. Stock Option Plan	4,035,787	77,042	255,828	192,591
Cinergy Corp. Employee Stock Purchase and Savings Plan	1,930,904	208	266	1,006
Cinergy Corp. UK Sharesave Scheme	75,000	—	—	—
Cinergy Corp. Retirement Plan for Directors	175,000	—	—	—
Cinergy Corp. Directors' Equity Compensation Plan	75,000	—	—	—
Cinergy Corp. Directors' Deferred Compensation Plan	200,000	—	—	—
Cinergy Corp. 401(k) Plans	6,469,373	—	—	—
Cinergy Corp. Dividend Reinvestment and Stock Purchase Plan	1,798,486	—	—	—
Cinergy Corp. Performance Shares Plan	736,751	—	34,550	—

    We retired 32,988 shares of common stock in 2000; 31,777 shares in 1999; and 44,981 shares in 1998, mainly representing shares tendered as payment for the exercise of previously granted stock options.

    In 1998, Cinergy Corp. issued 771,258 shares of new common stock to acquire Cinergy Marketing and Trading, LLC.

    Cinergy Corp.  owns all of the common stock of CG&E and PSI. All of ULH&P's common stock is held by CG&E.

    (b)  Dividend RestrictionsCinergy Corp.'s ability to pay dividends to holders of its common stock is principally dependent on the ability of CG&E and PSI to pay Cinergy Corp. common dividends. CG&E and PSI cannot purchase or otherwise acquire for value or pay dividends on their common stock if preferred stock dividends are in arrears. The amount of common stock dividends that each company can pay is also limited by certain capitalization and earnings requirements under CG&E's and

PSI's credit instruments. Currently, these requirements do not impact the ability of either company to pay dividends on its common stock.

    (c)  Stock-based Compensation Plans  We currently have the following stock-based compensation plans:

•

LTIP;

•

Stock Option Plan;

•

Employee Stock Purchase and Savings Plan;

•

UK Sharesave Scheme;

•

Retirement Plan for Directors;

•

Directors' Equity Compensation Plan; and

•

Directors' Deferred Compensation Plan.

    The LTIP, the Stock Option Plan, and the Employee Stock Purchase and Savings Plan are discussed below. The activity in 2000 for the remaining stock-based compensation plans was not significant.

    We account for our stock-based compensation plans under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. In 2000, 1999, and 1998, we recognized compensation cost related to stock-based compensation plans, before income taxes, of $12.8 million, $(7) million and $1 million, respectively, in the Consolidated Statements of Income. The $7 million reduction in 1999 was a result of our revised estimates for the performance-based shares accrued under the LTIP plan for Performance Cycle (Cycle) I. For further discussion see section (i) below.

    Net income for 2000, 1999, and 1998, assuming compensation cost for these plans had been determined at fair value, consistent with the provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (Statement 123), would have been decreased by $4.4 million for 2000, $3.0 million for 1999 and $2.4 million for 1998. Earnings per share (EPS) would have been decreased by $.03 basic and diluted for 2000, $.02 basic and diluted for 1999, and $.02 basic and $.03 diluted for 1998.

    In estimating the pro forma amounts, the fair value method of accounting was not applied to options granted prior to January 1, 1995. This is in accordance with the provisions of Statement 123. As a result, the pro forma effect on net income and EPS may not be representative of future years. In addition, the pro forma amounts reflect certain assumptions used in estimating fair values. These fair value assumptions are described, as applicable, below.

        (i)  LTIP  The LTIP was originally adopted in 1996. Under this plan, certain key employees may be granted stock options and the opportunity to earn performance-based shares. For each Cycle, stock options are granted to participants at fair market value on the date of grant. The number of shares of common stock issuable under the LTIP is limited to a total of 7,000,000 shares.

    LTIP stock option activity for 2000, 1999, and 1998 is summarized as follows:

		Shares Subject to Option		Weighted Average Exercise Price
Balance at December 31, 1997		369,600		$	33.60
	Options granted	471,400			38.19
	Options forfeited	(68,000	)		36.06
Balance at December 31, 1998		773,000			36.19
	Options granted	2,713,600			25.45
	Options forfeited	(59,500	)		35.65
Balance at December 31, 1999		3,427,100			27.69
	Options granted	1,329,800			24.59
	Options forfeited	(357,200	)		26.47
Balance at December 31, 2000		4,399,700		$	26.85
Options Exercisable:
	At December 31, 1998	11,600		$	36.05
	At December 31, 1999	88,600		$	35.78
	At December 31, 2000	1,033,020		$	28.35

    The weighted average fair value of options granted was $2.78 in 2000, $2.56 in 1999, and $4.68 in 1998. The fair values of options granted were estimated as of the date of grant using the Black-Scholes option-pricing model and the following assumptions:

	2000	1999	1998
Risk-free interest rate	6.5%	6.1%	5.6%
Expected dividend yield	7.2%	7.2%	4.8%
Expected lives	5.6 yrs.	5.6 yrs.	5.6 yrs.
Expected common stock variance	4.1%	3.8%	1.8%

    Price ranges, along with certain other information, for the options outstanding under the LTIP at December 31, 2000, were as follows:

	Outstanding				Exercisable
Exercise Price Range	Number of Shares	Weighted Average Exercise Price		Weighted Average Contractual Life	Number of Shares	Weighted Average Exercise Price
$23.66 - $24.38	3,266,000	$	24.00	9.0 yrs.	598,920	$	23.87
$27.28 - $33.88	345,600	$	32.68	6.7 yrs.	277,900	$	33.50
$34.13 - $38.59	788,100	$	36.12	7.5 yrs.	156,200	$	36.34

    Entitlement to performance based shares is based on Cinergy's Total Shareholder Return (TSR) over designated Cycles as measured against a peer group. Target grants of performance based shares were made for the following Cycles:

Cycle	Grant Date	Performance Period	Target Grant of Shares
			(in thousands)
III	1/2000	2000-2001	241
IV	1/2000	2000-2002	362
V	1/2001	2001-2003	287

    Potential awards for Cycle III are prorated for the length of the cycle. Participants may earn additional performance shares if Cinergy's TSR exceeds that of the peer group. The Cycle II award of 122,820 shares for calendar year 2000 was distributed in January 2001.

        (ii)  Stock Option Plan  The Stock Option Plan is designed to align executive compensation with shareholder interests. Under the Stock Option Plan, incentive and non-qualified stock options, stock appreciation rights (SARs), and SARs in tandem with stock options may be granted to key employees, officers, and outside directors. The activity under this plan has predominantly consisted of the issuance of stock options. Options are granted at the fair market value of the shares on the date of grant. Options generally vest over five years at a rate of 20% per year, beginning on the date of grant, and expiring 10 years from the date of grant. The total number of shares of common stock issuable under the Stock Option Plan may not exceed 5,000,000 shares. No stock options may be granted under the plan after October 24, 2004.

    Stock Option Plan activity for 2000, 1999, and 1998 is summarized as follows:

		Shares Subject to Option		Weighted Average Exercise Price
Balance at December 31, 1997		2,954,475		$	23.79
	Options granted	480,000			36.88
	Options exercised	(430,961	)		21.62
	Options forfeited	(100,000	)		26.92
Balance at December 31, 1998		2,903,514			26.17
	Options granted	152,500			24.66
	Options exercised	(259,865	)		21.51
	Options forfeited	(36,000	)		25.89
Balance at December 31, 1999		2,760,149			26.53
	Options exercised	(123,978	)		23.50
	Options forfeited	(45,000	)		28.34
Balance at December 31, 2000		2,591,171		$	26.64
Options Exercisable:
	At December 31, 1998	1,535,514		$	23.61
	At December 31, 1999	1,898,149			24.67
	At December 31, 2000	2,162,171			25.17

    The weighted average fair value of options granted was $2.40 in 1999 and $4.53 in 1998 (no options were granted in 2000). The fair values of options granted in 1999 and 1998 were estimated as of the date of grant using the Black-Scholes option-pricing model and the following assumptions:

	1999	1998
Risk-free interest rate	6.2%	5.6%
Expected dividend yield	7.3%	4.8%
Expected lives	6.5 yrs.	6.5 yrs.
Expected common stock variance	3.9%	2.0%

    Price ranges, along with certain other information, for options outstanding under the Stock Option Plan at December 31, 2000, were as follows:

	Outstanding				Exercisable
Exercise Price Range	Number of Shares	Weighted Average Exercise Price		Weighted Average Contractual Life	Number of Shares	Weighted Average Exercise Price
$17.35 - $23.81	911,747	$	22.90	4.5 yrs.	831,747	$	22.81
$24.31 - $24.63	933,451	$	24.32	4.1 yrs.	933,451	$	24.32
$25.19 - $36.88	745,973	$	34.12	6.5 yrs.	396,973	$	32.12

        (iii)  Employee Stock Purchase and Savings Plan  The Employee Stock Purchase and Savings Plan allows essentially all full-time, regular employees to purchase shares of common stock pursuant to a stock option feature. Under the Employee Stock Purchase and Savings Plan, after-tax funds are withheld from a participant's compensation during a 26-month offering period and are deposited in an interest-bearing account. At the end of the offering period, participants may apply amounts deposited in the account, plus interest, toward the purchase of shares of common stock. The purchase price is equal to 95% of the fair market value of a share of common stock on the first date of the offering period. Any funds not applied toward the purchase of shares are returned to the participant. A participant may elect to terminate participation in the plan at any time. Participation also will terminate if the participant's employment ceases. Upon termination of participation, all funds, including interest, are returned to the participant without penalty. The third (current) offering period began March 1, 1999, and ends April 30, 2001. The purchase price for all shares under this offering is $27.73. The second offering period ended February 28, 1999. At the end of the second offering of the plan, the market price was below the established share price; therefore, in accordance with the plan provisions, all participants in the plan at February 28, 1999, were distributed cash funds in March 1999. The total number of shares of common stock issuable under the Employee Stock Purchase and Savings Plan may not exceed 2,000,000.

    Employee Stock Purchase and Savings Plan activity for 2000, 1999, and 1998 is summarized as follows:

		Shares Subject to Option		Weighted Average Exercise Price
Balance at December 31, 1997		326,367		$	31.83
	Options exercised	(3,342	)		31.83
	Options forfeited	(25,651	)		31.83
Balance at December 31, 1998		297,374			31.83
	Options granted	368,889			27.73
	Options exercised	(266	)		27.73
	Options forfeited	(306,692	)		27.73
Balance at December 31, 1999		359,305			27.73
	Options exercised	(2,718	)		27.73
	Options forfeited	(76,261	)		27.73
Balance at December 31, 2000		280,326		$	27.73

    The weighted average fair value of options granted was $3.97 in 1999 (no options were granted in 1998 or 2000). The fair values of options granted were estimated as of the date of grant using the Black-Scholes option-pricing model and the following assumptions:

	1999
Risk-free interest rate	5.0%
Expected dividend yield	6.2%
Expected lives	2.0 yrs.
Expected common stock variance	5.2%

    (d)  Director, Officer and Key Employee Stock Purchase Program  In December 1999, Cinergy Corp. adopted the Director, Officer, and Key Employee Stock Purchase Program (the Program). The purpose of the Program is to facilitate the purchase and ownership of Cinergy Corp.'s common stock by its directors, officers and key employees, thereby further aligning their interests with those of its shareholders.

    In February 2000, Cinergy Corp. purchased approximately 1.6 million shares of common stock on behalf of the participants at an average price of $24.82 per share.

    Participants had the option of financing the purchases through a five-year credit facility arranged by Cinergy Corp. with a bank. Each participant is obligated to repay the bank any loan principal, interest, and prepayment fees, and each has assigned his or her dividend rights on the purchased shares to the bank to be applied to interest payments as due on the loan.

    Services, and in part, Cinergy Corp., have guaranteed repayment to the bank of 100% of each participant's loan obligations and the associated interest, and each participant has agreed to indemnify the guarantor for any payments made by it under the guaranty on the participant's behalf. A participant's obligations to the bank are unsecured, and no restrictions are placed on the participant's ability to sell, pledge or otherwise encumber or dispose of his or her purchased shares.

3. Change in Preferred Stock of Subsidiaries

    In 2000, PSI redeemed 289,250 shares of its $100 par value, 6.875% Series preferred stock for $29 million. In 1998, PSI redeemed approximately 3.4 million shares of its $25 par value, 7.44% Series preferred stock for $85 million. All other classes of preferred stock redeemed from 1998 to 2000 were immaterial for CG&E and PSI. Refer to the Consolidated Statements of Capitalization for detailed information for CG&E and PSI.

4. Long-Term Debt

    Refer to the Statements of Capitalization for detailed information for CG&E, PSI, and ULH&P. In addition, Cinergy Corp. and Global Resources also have the following total long-term debt (excluding Long-term debt due within one year, which is reflected in Current liabilities in the Consolidated Balance Sheets):

				December 31
				2000			1999
				(in thousands)
Cinergy Corp.
	Other Long-term Debt
		6.53% Debentures due December 16, 2008		$	200,000		$	200,000
		6.125% Debentures due April 15, 2004			200,000			200,000
			Total Other Long-term Debt		400,000			400,000
	Unamortized Discount				(265	)		(333	)
			Total—Cinergy Corp.	$	399,735		$	399,667
Global Resources
	Other Long-term Debt
		6.20% Debentures due November 3, 2008		$	150,000		$	150,000
		Variable interest rate of London Inter-Bank Offered Rate (LIBOR) plus 1.75%, due July 2015			14,156			15,300
		Variable interest rate of LIBOR plus 2.5%, due July 2015			6,323			7,100
		Variable interest rates ranging between the 3 month Prague Inter-Bank Offered Rate plus 0.55% to the 3 month Euro Inter-Bank Offered Rate plus 4.12%, maturing April 30, 2002 to June 20, 2004			8,314			—
		7.4% interest rate, due May 30, 2003			18,783			—
			Total Other Long-term Debt		197,576			172,400
	Unamortized Discount				(260	)		(293	)
			Total—Global Resources	$	197,316		$	172,107
Operating Companies
	CG&E and its subsidiaries			$	1,205,061		$	1,205,916
	PSI				1,074,255			1,211,552
			Total—Operating Companies	$	2,279,316		$	2,417,468
Total—Cinergy				$	2,876,367		$	2,989,242

    The following table reflects the long-term debt maturities for the next five years, excluding any redemptions due to the exercise of call or put provisions. Callable means the issuer has the right to buy

back a given security from the holder at a specified price before maturity. Putable means the holder has the right to sell a given security back to the issuer at a specified price before maturity.

	Cinergy and Subsidiaries(1)			CG&E and Subsidiaries(1)			PSI(1)
	(in millions)
2001	$	41	(2)	$	1		$	39
2002		145			100			24
2003		85			20	(3)		57
2004		313			110			1
2005		3			—			1
	$	587		$	231		$	122

(1)

Excludes capital leases.

(2)

Excludes $27 million of Long-term debt due within one year for a subsidiary of Global Resources, which is classified as Notes payable and other short-term obligations.

(3)

CG&E and subsidiaries includes ULH&P's  $20 million maturing in 2003.

    Maintenance and replacement fund provisions contained in PSI's first mortgage bond indenture require: (1) cash payments, (2) bond retirements, or (3) pledges of unfunded property additions each year based on an amount related to PSI's net revenues.

5. Notes Payable and Other Short-term Obligations

    Short-term obligations may include:

•

short-term notes;

•

commercial paper;

•

variable rate pollution control notes; and

•

money pooling.

    Short-term Notes  Short-term borrowings mature within one year from the date of issuance. We primarily use unsecured revolving lines of credit for short-term borrowings. A portion of each company's committed lines is used to provide credit support for commercial paper (discussed below). When committed lines are reserved for commercial paper or backing letters of credit, they are not available for additional borrowings. The fees we paid to secure short-term notes were immaterial during the period from 1998 to 2000.

    At December 31, 2000, Cinergy Corp. had $157 million remaining unused and available relating to its authorized $795 million revolving and uncommitted lines. Early in 2001, Cinergy Corp. successfully placed a new $400 million, 364-day revolving credit facility. This new facility will support an expansion of our commercial paper program and is not included in the lines of credit discussed above.

    Commercial Paper  As of December 31, 2000, the commercial paper (debt instruments exchanged between companies) program is limited to a maximum outstanding principal amount of $400 million for Cinergy Corp. As of December 31, 2000, Cinergy Corp. had issued $216 million in commercial paper. Additionally, CG&E and PSI have the capacity to issue commercial paper, which must be supported by available committed lines of the respective company. The maximum outstanding principal amount for CG&E is $200 million and for PSI is $100 million. Neither CG&E nor PSI issued commercial paper in 2000 or 1999.

    In early 2001, Cinergy Corp. expanded the commercial paper program to a maximum outstanding principal amount of $800 million and reduced the established lines of credit at CG&E and PSI. The expansion of the commercial paper program at the Cinergy Corp. level will, in part, support the short-term borrowing needs of CG&E and PSI and will eliminate the need for commercial paper

programs at CG&E and PSI. The Cinergy Corp. commercial paper program expansion is supported by the new $400 million, 364-day revolving credit facility as discussed above.

    Variable Rate Pollution Control NotesCG&E and PSI have issued variable rate pollution control notes (tax-exempt notes obtained to finance equipment or land development to control pollution). Because the holders of these notes have the right to redeem their notes on any business day, they are reflected in Notes payable and other short-term obligations in the Consolidated Balance Sheets for Cinergy, for CG&E, and for PSI.

    The following tables summarize our Notes payable and other short-term obligations, but exclude Notes payable to affiliated companies.

Cinergy

			December 31, 2000						December 31, 1999
			Established Lines		Outstanding		Weighted Average Rate		Established Lines		Outstanding		Weighted Average Rate
					(in millions)						(in millions)
Cinergy Corp.
	Committed lines
		Revolving lines	$	750	$	359	6.84	%	$	600	$	—	—	%
	Uncommitted line			45		12	7.25			45		—	—
	Commercial paper			400		216	7.06			—		—	—
	Operating companies
	Committed lines			180		180	7.18			195		120	6.68
	Uncommitted lines			125		5	7.00			300		81	6.44
	Pollution control notes			N/A		267	4.52			N/A		267	4.10
	Non-regulated subsidiaries
	Revolving lines			13		11	5.86			14		13	6.26
	Short-term debt			79		79	6.77			69		69	6.86
Cinergy Total					$	1,129	6.38	%			$	550	5.41	%

CG&E

	December 31, 2000						December 31, 1999
	Established Lines		Outstanding		Weighted Average Rate		Established Lines		Outstanding		Weighted Average Rate
			(in millions)						(in millions)
Committed lines	$	80	$	80	7.06	%	$	65	$	30	6.27	%
Uncommitted line		40		—	—			130		21	6.42
Pollution control notes		N/A		184	4.61			N/A		184	4.08
Total			$	264	5.35	%			$	235	4.57	%

PSI

	December 31, 2000						December 31, 1999
	Established Lines		Outstanding		Weighted Average Rate		Established Lines		Outstanding		Weighted Average Rate
			(in millions)						(in millions)
Committed lines	$	100	$	100	7.27	%	$	130	$	90	6.81	%
Uncommitted line		85		5	7.00			170		60	6.44
Pollution control notes		N/A		83	4.34			N/A		83	4.15
Total			$	188	5.97	%			$	233	5.77	%

    Money PoolCinergy Corp., Services, and our operating companies and their subsidiaries participate in a money pool arrangement to better manage cash and working capital requirements. Under this arrangement, those companies with surplus short-term funds provide short-term loans to others. This surplus cash may be from internal or external sources. The amounts outstanding under this money pool arrangement are shown as Notes receivable from affiliated companies or Notes payable to affiliated companies on the Consolidated Balance Sheets for CG&E and PSI, and on the Balance Sheets for ULH&P.

6. Sale of Accounts Receivable

CG&E, PSI, and ULH&P have an agreement to sell, on a revolving basis, undivided percentage interests in certain of their accounts receivable and the related collections up to an aggregate maximum of $350 million. CG&E retains servicing responsibilities for its role as a collection agent of the amounts due on the sold receivables. However, the purchaser assumes the risk of collection on the sold receivables without recourse to CG&E, PSI, or ULH&P in the event of a loss. Proceeds from a portion of the sold receivables are held back as a reserve to reduce the purchaser's credit risk. CG&E, PSI, and ULH&P do not retain any ownership interest in the sold receivables, but do retain undivided interests in their remaining balances of accounts receivable. The recorded amounts of the retained interests are measured at net realizable value.

    The Accounts receivable on the Consolidated Balance Sheets of Cinergy, CG&E and PSI and on the Balance Sheets of
ULH&P are net of the amounts sold at December 31, 2000, and 1999. The following table shows the receivables sold, the associated reserves held back, and the net amounts received as of December 31, 2000, and 1999, as well as the losses on the sales of accounts receivable for the years ended December 31, 2000, and 1999:

	Receivables Sold		Reserves		Net Amount		Loss on Sale(1)
			(in millions)
2000
Cinergy	$	316	$	59	$	257	$	17
CG&E and subsidiaries		192		36		156		11
PSI		124		23		101		6
ULH&P		32		6		26		1
1999
Cinergy	$	306	$	49	$	257	$	15
CG&E and subsidiaries		187		30		157		10
PSI		119		19		100		5
ULH&P		25		4		21		1

(1)

Represents monthly fees payable to the purchaser.

7. Leases

    (a)  Operating Leases  We have entered into operating lease agreements for various facilities and properties such as computer, communication and transportation equipment, and office space. Total rental payments on operating leases for each of the past three years are detailed in the table below. This table also shows future minimum lease payments required for operating leases with remaining non-cancelable lease terms in excess of one year as of December 31, 2000:

	Actual Payments						Estimated Minimum Payments
	1998		1999		2000		2001		2002		2003		2004		2005		After 2005		Total
	(in millions)						(in millions)
Cinergy(1)	$	42	$	50	$	56	$	41	$	31	$	23	$	17	$	15	$	68	$	195
CG&E and subsidiaries		21		27		30		10		9		7		5		5		18		54
PSI		21		21		21		9		8		7		6		5		25		60
ULH&P(2)		3		4		4		—		—		—		—		—		—		—

(1)

The results of Cinergy also include amounts related to non-registrants.

(2)

Estimated minimum lease payments are immaterial.

    (b)  Capital Leases  In 2000 and 1999, CG&E, PSI, and ULH &P entered into capital lease arrangements to fund the purchase of gas and electric meters. The lease terms are for 120 months commencing December 2000 and December 1999, respectively, with early buyout options at 48, 72, and 105 months. Since the objective is to own the meters indefinitely, the companies plan to exercise the buyout option at month 105. The lease rate used to determine the monthly payments is 6.385% and 6.71% for 2000 and 1999, respectively. The meters are depreciated at the same rate as if they were owned by the companies. CG&E, PSI, and ULH&P each recorded a capital lease obligation, included in Non-current liabilities—other.

    Effective October 2000, CG&E entered into a capital lease agreement with a lease term of 120 months, to fund the purchase of equipment for the William H. Zimmer Station. The lease rate used to determine the monthly payments is a variable rate that is based upon the applicable LIBOR rate and was 8.275% at December 31, 2000. LIBOR is the rate at which the highest rated banks offer to lend to one another. Interest rates are frequently quoted as a spread to LIBOR. The equipment under the capital lease is depreciated at the same rate as if it was owned by CG&E. CG&E recorded a capital lease obligation, included in Current liabilities—other for $.9 million and Non-current liabilities—other for $8.4 million, which is the book value of the equipment at the beginning of the lease. The title to all equipment will transfer to CG&E at the end of the lease term. The capitalized lease obligation is amortized over the term of the lease.

    The total minimum lease payments and the present values for these capital lease items are shown below:

	Total Minimum Lease Payments
	Cinergy			CG&E and subsidiaries			PSI			ULH&P
				(in millions)
Total minimum lease payments(1)	$	46		$	31		$	15		$	6
Less: amount representing interest		(12	)		(8	)		(4	)		(1	)
Present value of minimum lease payments	$	34		$	23		$	11		$	5

(1)

Annual minimum lease payments are immaterial.

    In 1996, CG&E entered into a sale-leaseback agreement for certain equipment at Woodsdale Generating Station. The lease is a capital lease with an initial lease term of five years, which expires on October 31, 2001. At the end of this term, the lease may be renewed at mutually agreeable terms or CG&E may purchase the equipment at the original sale amount. The monthly lease payment is interest only and is based on the applicable LIBOR rate. The capital lease obligation will not be reduced over the initial lease term. The equipment under the capital lease is depreciated at the same rate as if it was owned by CG&E. CG&E recorded a capital lease obligation, included in Non-current liabilities—other for $22 million, which is the book value of the equipment at the beginning of the lease.

8. Financial Instruments

    (a)  Financial Derivatives  We have entered into financial derivative contracts for the purposes described below.

            (i)  Interest Rate Risk Management  Our current policy in managing exposure to fluctuations in interest rates is to maintain approximately 25% of the total outstanding debt in floating interest rate debt instruments. To help maintain this level of exposure, we have previously and will consider in the future entering into interest rate swaps. Under these swaps, we have agreed with other parties to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated on an agreed notional amount. PSI had an interest rate swap agreement that expired on November 15, 2000, which had a notional amount of $100 million. CG&E has an outstanding interest rate swap agreement that decreased the percentage of floating rate debt. Under the seven-year agreement, which has a notional amount of $100 million, CG&E pays a fixed rate and receives a floating rate. This swap will qualify as a cash flow hedge under the provisions of Statement 133. As the terms of the swap agreement mirror the terms of the debt agreement that it is hedging, we anticipate that this swap will be effective as a hedge. Future changes in fair value of this swap will be recorded in Accumulated other comprehensive income (loss), beginning with our adoption of Statement 133 effective January 1, 2001. In the future, we will continually monitor market conditions to evaluate whether to increase, or decrease, our level of exposure to fluctuations in interest rates. See Note 1(l) on page 107 for further discussion of Statement 133.

            (ii)  Foreign Exchange Hedging Activity  From time to time, we may utilize foreign exchange forward contracts and currency swaps to hedge foreign currency denominated purchase and sale commitments and certain of our net investments in foreign operations. These contracts and swaps allow us to potentially hedge our position against currency exchange rate fluctuations and would qualify as derivatives.

Cinergy has exposure to fluctuations in exchange rates between the U.S. dollar and the currencies of foreign countries where we have investments. When it is appropriate we will hedge our exposure to cash flow transactions, such as a dividend payment by one of our foreign subsidiaries. As of December 31, 2000, we do not believe we had a material exposure to the currency risk attributable to these investments and have no outstanding foreign currency derivatives.

    (b)  Fair Value of Other Financial Instruments  The estimated fair values of other financial instruments were as follows (this information does not claim to be a valuation of the companies as a whole):

	December 31, 2000				December 31, 1999
Financial Instruments	Carrying Amount		Fair Value		Carrying Amount		Fair Value
			(in millions)
Cinergy
First mortgage bonds and other long-term debt (includes amounts reflected as long-term debt due within one year)	$	2,917	$	2,950	$	3,020	$	2,820
CG&E and subsidiaries
First mortgage bonds and other long-term debt (includes amounts reflected as long-term debt due within one year)	$	1,206	$	1,203	$	1,206	$	1,065
PSI
First mortgage bonds and other long-term debt (includes amounts reflected as long-term debt due within one year)	$	1,113	$	1,136	$	1,243	$	1,215
ULH&P
Other long-term debt	$	75	$	76	$	75	$	71

    The following methods and assumptions were used to estimate the fair values of each major class of instruments:

    Cash and cash equivalents, Restricted deposits, and Notes payable and other short-term obligations  Due to the short period to maturity, the carrying amounts reflected on the Balance Sheets approximate fair values.

    Long-term debt  The fair values of long-term debt issues were estimated based on the latest quoted market prices or, if not listed on the New York Stock Exchange, on the present value of future cash flows. The discount rates used approximate the incremental borrowing costs for similar instruments.

    (c)  Concentrations of Credit Risk  Credit risk is the exposure to economic losses that would occur as a result of nonperformance by counterparties, pursuant to the terms of their contractual obligations. Specific components of credit risk include counterparty default risk, collateral risk, concentration risk, and settlement risk.

            (i)  Trade Receivables and Physical Power Portfolio  Our concentration of credit risk with respect to Delivery's trade accounts receivable from electric and gas retail customers is limited. The large number of customers and diversified customer base of residential, commercial, and industrial customers significantly reduces our credit risk. Contracts within the physical portfolio of Commodities' power marketing and trading operations are primarily with the traditional electric cooperatives and municipalities and other investor-owned utilities. At December 31, 2000, we do not believe we had significant exposure to credit risk with our trade accounts receivable within Delivery or our physical portfolio within Commodities.

            (ii)  Power-Trading  Contracts within the trading portfolio of the power marketing and trading operations are primarily with power marketers and other investor-owned utilities. As of December 31, 2000, approximately 60% of the activity within the total trading portfolio was with 10 counterparties. The majority of these contracts are for terms of one year or less. Electric power prices can be extremely volatile, and the market can, at times, lack liquidity. Because of these issues, credit

risk is generally greater than with other commodity trading, especially when dealing with new market entrants. Credit discounts are included in the determination of fair value for all open positions in the power-trading portfolio.

    During the last quarter of 2000, the Western U.S., primarily California, began experiencing unprecedented price levels for wholesale electricity. Because of the nature of deregulation in California, the utilities have been unable to pass these price increases on to customers. Consequently, California's two largest utilities have accumulated significant unpaid obligations and are having difficulty obtaining capital. While we maintain a balanced Western U.S. portfolio and have no unrealized gain positions directly with these utilities, a large portion of such positions are with less than five power marketers. If prices continue at elevated levels or should these utilities be unable to fund their unpaid obligations, credit failures by power marketers could result. Given these issues, the fair values of our positions in the Western U.S. have been adjusted to reflect a higher level of credit discount. We have also been actively pursuing other forms of credit enhancement including, but not limited to, parent company guarantees and letters of credit from counterparties. In determining fair value for all derivative instruments, we consider the credit quality of each counterparty, contractual netting arrangements for longs and shorts with the same counterparty, and any security obtained. A significant portion of our Energy risk management assets and Energy risk management liabilities—current are with counterparties in the Western U.S. Nonperformance by any of the Western U.S. counterparties could have a material effect on the operating results of Cinergy, CG&E, and PSI.

            (iii)  Gas-Trading  As of December 31, 2000, approximately 50% of the activity within the physical gas marketing and trading portfolio represented commitments with 20 counterparties. Credit risk losses related to gas and other physical commodity and trading operations have not been significant. At December 31, 2000, the credit risk within the gas and commodity trading portfolios was not believed to be significant because of the characteristics of counterparties and customers with which transactions are executed.

            (iv)  Financial Derivatives  Potential exposure to credit risk also exists from our use of financial derivatives such as currency swaps, foreign exchange forward contracts, and interest rate swaps. Because these financial instruments are transacted only with highly rated financial institutions, we do not anticipate nonperformance by any of the counterparties.

9. Pension and Other Postretirement Benefits

    We provide benefits to retirees in the form of pensions and other postretirement benefits.

    Our defined benefit pension plans cover substantially all U.S. employees meeting certain minimum age and service requirements. A final average pay formula determines plan benefits. These plan benefits are based on:

•

years of participation;

•

age at retirement; and

•

the applicable average Social Security wage base or benefit amount.

    Our pension plan funding policy for U.S. employees is to contribute at least the amount required by the Employee Retirement Income Security Act of 1974, and up to the amount deductible for income tax purposes. The pension plans' assets consist of investments in equity and fixed income securities.

    We provide certain health care and life insurance benefits to retired U.S. employees and their eligible dependents. These benefits are subject to minimum age and service requirements. The health care benefits include medical coverage, dental coverage, and prescription drugs and are subject to certain limitations, such as deductibles and co-payments. Neither CG&E nor ULH&P pre-fund their obligations for these postretirement benefits. In 1999, PSI began pre-funding its obligations through a grantor trust as authorized by the IURC.

    In 2000, Cinergy offered early retirement plans to certain individuals under a Limited Early Retirement Program (LERP). In accordance with Statement of Financial Accounting Standards No. 88, Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits (Statement 88), Cinergy recognized a one-time expense of $12.8 million in 2000.

    Our benefit plans' costs for the past three years, as well as the actuarial assumptions used in determining these costs, included the following components:

		Pension Benefits									Other Postretirement Benefits
		2000			1999			1998			2000			1999			1998
								(in millions)
Service cost		$	27.4		$	24.8		$	21.8		$	3.4		$	3.5		$	4.1
Interest cost			73.0			70.8			71.6			17.0			16.2			16.1
Expected return on plans' assets			(77.0	)		(72.0	)		(66.9	)		—			—			—
Amortization of transition (asset) obligation			(1.3	)		(1.3	)		(1.3	)		5.0			5.0			5.0
Amortization of prior service cost			4.5			4.5			4.4			—			—			—
Recognized actuarial (gain) loss			(2.4	)		0.6			—			—			0.8			0.4
LERP Statement 88 cost			11.9			—			—			—			—			—
Net periodic benefit cost		$	36.1		$	27.4		$	29.6		$	25.4		$	25.5		$	25.6
Actuarial assumptions:
	Discount rate		7.50	%		7.50	%		6.75	%		7.50	%		7.50	%		6.75	%
	Rate of future compensation increase		4.50			4.50			3.75			N/A			N/A			N/A
	Rate of return on plans' assets		9.00			9.00			9.00			N/A			N/A			N/A

    For measurement purposes, we assumed an eight percent annual rate of increase in the per capita cost of covered health care benefits for 2001. It was assumed that the rate would decrease gradually to five percent in 2008 and remain at that level thereafter.

    The following table provides a reconciliation of the changes in the plans' benefit obligations and fair value of assets over the two-year period ended December 31, 2000, and a statement of the funded status as of December 31 of both years.

	Pension Benefits						Other Postretirement Benefits
	2000			1999			2000			1999
				(in millions)
Change in benefit obligation
Benefit obligation at beginning of period	$	1,002.0		$	1,052.1		$	234.4		$	246.5
Service cost		27.4			24.8			3.4			3.5
Interest cost		73.0			70.8			17.0			16.2
Amendments(1)		13.1			1.1			—			—
Actuarial (gain) loss		12.0			(90.3	)		6.7			(18.4	)
Benefits paid		(63.0	)		(56.5	)		(14.4	)		(13.4	)
Benefit obligation at end of period		1,064.5			1,002.0			247.1			234.4
Change in plan assets
Fair value of plan assets at beginning of period		946.1			865.3			—			—
Actual return on plan assets		160.5			137.3			—			—
Employer contribution		—			—			14.4			13.4
Benefits paid		(63.0	)		(56.5	)		(14.4	)		(13.4	)
Fair value of plan assets at end of period		1,043.6			946.1			—			—
Funded status		(20.9	)		(55.9	)		(247.1	)		(234.4	)
Unrecognized prior service cost		36.6			39.9			—			—
Unrecognized net actuarial (gain) loss		(249.6	)		(180.6	)		26.6			20.1
Unrecognized net transition (asset) obligation		(4.5	)		(5.8	)		55.8			60.8
Accrued benefit cost at December 31	$	(238.4	)	$	(202.4	)	$	(164.7	)	$	(153.5	)

(1)

The 2000 Amendments balance contains $11.9 million of LERP expenses in accordance with Statement 88 as previously discussed.

    Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects:

	One-Percentage- Point Increase		One-Percentage- Point Decrease
	(in millions)
Effect on total of service and interest cost components	$	3.1	$	(2.7	)
Effect on postretirement benefit obligation		33.8		(29.2	)

    In addition, we sponsor non-qualified pension plans (plans that do not meet the criteria for tax benefits) that cover officers, certain other key employees, and non-employee directors. We began funding certain of these non-qualified plans through a rabbi trust in 1999.

    The pension benefit obligations and pension cost under these plans were as follows:

	2000		1999
	(in millions)
Pension benefit obligation	$	67.0	$	37.0
Pension cost	$	8.3	$	4.0

10. Disposition of Unconsolidated Subsidiary

    On July 15, 1999, we sold our 50% ownership interest in Midlands Electricity plc (Midlands) to GPU, Inc. In exchange for our interest in Midlands, we received 452.5 million pounds sterling (approximately $700 million). As a result of the transaction, we realized a net contribution to earnings of approximately $.43 per share (basic and diluted), after deducting financing, transaction, and currency costs.

    The pro forma information presented below reflects Cinergy's net income and EPS without the investment in Midlands for 1999 and 1998.

		Year Ended December 31
		1999					1998
		Net Income			EPS(1)		Net Income			EPS(2)
		(in millions, except for earnings per share)
Reported results		$	404		$	2.54	$	261		$	1.65
Pro forma adjustments:
	Equity in earnings of Midlands		(58	)				(57	)
	Gain on sale of investment in Midlands		(99	)				—
	Interest		21					43
	Income taxes		40					(18	)
Pro forma results		$	308		$	1.94	$	229		$	1.45

(1)

Represents basic EPS. Actual diluted EPS were $2.53, and pro forma diluted EPS were $1.93.

(2)

Both basic and diluted.

11. Income Taxes

    The following table shows the significant components of Cinergy's, CG&E's, and PSI's net deferred income tax liabilities as of December 31, 2000, and 1999:

		Cinergy(1)				CG&E and subsidiaries				PSI
		2000		1999		2000		1999		2000		1999
		(in millions)				(in millions)				(in millions)
Deferred Income Tax Liability
	Utility plant	$	1,135.9	$	1,130.4	$	703.0	$	696.0	$	432.8	$	434.4
	Unamortized costs of reacquiring debt		18.2		20.9		8.1		10.5		10.1		10.4
	Deferred operating expenses and carrying costs		60.2		43.5		40.7		26.9		19.5		16.6
	Amounts due from customers—income taxes		96.2		95.6		91.2		91.6		5.0		4.0
	Gasification services agreement buyout costs		94.8		94.9		—		—		94.8		94.9
	Other		60.9		55.7		37.0		23.3		9.0		6.8
Total Deferred Income Tax Liability			1,466.2		1,441.0		880.0		848.3		571.2		567.1
Deferred Income Tax Asset
	Unamortized investment tax credits		56.1		53.6		42.8		37.3		13.2		16.3
	Accrued pension and other benefit costs		137.7		88.0		67.5		34.3		39.8		26.9
	Net energy risk management liabilities		24.6		32.3		6.1		11.5		18.5		20.9
	Rural Utilities Service (RUS) obligation		28.2		30.7		—		—		28.2		30.7
	Other		33.6		61.6		27.8		45.0		12.9		11.6
Total Deferred Income Tax Asset			280.2		266.2		144.2		128.1		112.6		106.4
Net Deferred Income Tax Liability		$	1,186.0	$	1,174.8	$	735.8	$	720.2	$	458.6	$	460.7

(1)

Cinergy's net deferred income tax liability also includes the effects of foreign non-registrant subsidiaries' activity.

    We will file a consolidated federal income tax return for the year ended December 31, 2000. The current tax liability is allocated among the members of the Cinergy consolidated group pursuant to a tax sharing agreement filed with the SEC under the PUHCA.

    The following table summarizes federal and state income taxes charged (credited) to income for Cinergy, CG&E, and PSI:

			Cinergy									CG&E and subsidiaries									PSI
			2000			1999			1998			2000			1999			1998			2000			1999			1998
			(in millions)									(in millions)									(in millions)
Current Income Taxes
	Federal		$	187.3		$	114.0		$	209.0		$	121.5		$	137.3		$	151.7		$	84.4		$	(30.6	)	$	69.8
	State			16.9			(1.5	)		16.9			1.6			4.0			3.9			10.8			(3.1	)		10.5
Total Current Income Taxes				204.2			112.5			225.9			123.1			141.3			155.6			95.2			(33.7	)		80.3
Deferred Income Taxes
	Federal
		Depreciation and other utility plant-related items		26.1			24.0			25.3			19.0			13.8			14.7			7.1			10.2			10.7
		Pension and other benefit costs		(21.3	)		(10.5	)		(3.3	)		(7.5	)		(5.3	)		5.0			(11.5	)		(5.0	)		(1.9	)
		RUS obligations		—			—			(22.5	)		—			—			—			—			—			(22.5	)
		Unrealized energy risk management losses		10.9			(5.1	)		(49.4	)		5.6			(11.6	)		(25.2	)		2.0			6.5			(24.2	)
		Fuel costs		28.7			4.3			(1.0	)		26.7			2.7			(1.5	)		2.0			1.6			.5
		Gasification services agreement buyout costs		(0.1	)		83.6			—			—			—			—			(0.1	)		83.6			—
		Other items—net		11.0			(5.1	)		(40.8	)		(3.0	)		8.3			(13.7	)		(1.2	)		(4.5	)		(10.6	)
Total Deferred Federal Income Taxes				55.3			91.2			(91.7	)		40.8			7.9			(20.7	)		(1.7	)		92.4			(48.0	)
		State		1.7			14.2			(7.4	)		1.5			.6			(.4	)		(1.4	)		13.6			(5.8	)
Total Deferred Income Taxes				57.0			105.4			(99.1	)		42.3			8.5			(21.1	)		(3.1	)		106.0			(53.8	)
Investment Tax Credits—Net				(9.6	)		(9.2	)		(9.6	)		(6.0	)		(6.1	)		(6.2	)		(3.6	)		(3.1	)		(3.4	)
Total Income Taxes			$	251.6		$	208.7		$	117.2		$	159.4		$	143.7		$	128.3		$	88.5		$	69.2		$	23.1

    The following table presents a reconciliation of federal income taxes (which are calculated by multiplying the statutory federal income tax rate by book income before federal income tax) to the

federal income tax expense reported in the Consolidated Statements of Income for Cinergy, CG&E, and PSI.

		Cinergy									CG&E and subsidiaries									PSI
		2000			1999			1998			2000			1999			1998			2000			1999			1998
					(in millions)									(in millions)									(in millions)
Statutory federal income tax provision		$	221.3		$	209.9		$	129.0		$	148.1		$	130.4		$	119.2		$	75.1		$	61.6		$	24.7
Increases (Reductions) in taxes resulting from:
	Amortization of investment tax credits		(9.6	)		(9.2	)		(9.6	)		(6.0	)		(6.1	)		(6.2	)		(3.6	)		(3.1	)		(3.4	)
	Depreciation and other utility plant-related differences		17.7			14.4			10.4			14.0			11.6			9.0			3.6			2.8			1.5
	Preferred dividend requirements of subsidiaries		1.6			1.9			2.3			—			—			—			—			—			—
	Foreign tax adjustments		—			(15.5	)		(20.0	)		—			—			—			—			—			—
Other—net			2.0			(5.5	)		(4.4	)		0.2			3.2			2.8			4.0			(2.6	)		(4.4	)
Federal income tax expense		$	233.0		$	196.0		$	107.7		$	156.3		$	139.1		$	124.8		$	79.1		$	58.7		$	18.4

    The following table shows the significant components of ULH&P's net deferred income tax liability as of December 31, 2000, and 1999:

		ULH&P
		2000		1999
		(in thousands)
Deferred Income Tax Liability
	Utility plant	$	32,674	$	34,903
	Unamortized costs of reacquiring debt		747		1,356
	Deferred fuel costs		6,934		—
	Other		3,620		2,062
Total Deferred Income Tax Liability			43,975		38,321
Deferred Income Tax Asset
	Unamortized investment tax credits		1,309		1,608
	Amounts due to customers—income taxes		2,627		4,618
	Deferred fuel costs		—		949
	Accrued pension and other benefit costs		2,660		2,282
	Other		1,557		5,864
Total Deferred Income Tax Asset			8,153		15,321
Net Deferred Income Tax Liability		$	35,822	$	23,000

    The following table summarizes federal and state income taxes charged (credited) to income for ULH&P:

			ULH&P
			2000			1999			1998
			(in thousands)
Current Income Taxes
	Federal		$	5,003		$	8,668		$	6,699
	State			(129	)		2,253			1,336
Total Current Income Taxes				4,874			10,921			8,035
Deferred Income Taxes
	Federal
		Depreciation and other utility plant-related items		1,059			831			420
		Pension and other benefit costs		(605	)		40			319
		Fuel costs		8,564			(1,385	)		820
		Unamortized costs of reacquiring debt		(30	)		(39	)		(58	)
		Service company allocations		251			324			(1,376	)
		Other items-net		(338	)		(155	)		(415	)
Total Deferred Federal Income Taxes				8,901			(384	)		(290	)
Deferred State Income Taxes				303			(76	)		308
Total Deferred Income Taxes				9,204			(460	)		18
Investment Tax Credits—Net				(277	)		(277	)		(279	)
Total Income Taxes			$	13,801		$	10,184		$	7,774

    The following table presents a reconciliation of federal income taxes (which are calculated by multiplying the statutory federal income tax rate by book income before federal income tax) to the federal income tax expense reported in the Statement of Income for ULH&P.

		ULH&P
		2000			1999			1998
		(in thousands)
Statutory federal income tax provision		$	13,391		$	7,098		$	6,937
Increases (Reductions) in taxes resulting from:
	Amortization of investment tax credits		(277	)		(277	)		(279	)
	Depreciation and other utility plant-related differences		830			94			(168	)
	Other—net		(317	)		1,092			(360	)
Federal income tax expense		$	13,627		$	8,007		$	6,130

12. Commitments and Contingencies

    (a)  Construction and Other Commitments  Forecasted construction and other committed expenditures for the year 2001 and for the five-year period 2001-2005 (in nominal dollars) are presented in the table below:

	2001		2001-2005
	(in millions)
Cinergy(1)	$	1,467	$	4,635
CG&E and subsidiaries		423		1,676
PSI		406		2,264
ULH&P		37		178

(1)

The results of Cinergy also include amounts related to non-registrants.

    This forecast includes an estimate of expenditures in accordance with the companies' plans regarding nitrogen oxide (NO_X) emission control standards and other environmental compliance (excluding implementation of the tentative EPA Agreement), as discussed below. Approximately $210 million is estimated to be spent in 2001 and approximately $789 million is estimated to be spent between 2001 and 2005. This forecast also includes expenditures for the pending purchase of two natural gas-fired merchant electric generating facilities from Enron North America with a total combined capacity of 998 megawatts (MW), the acquisition of an interest in a gas distribution business in Athens, Greece, and other committed investments.

    (b)  Ozone Transport Rulemaking  In June 1997, the Ozone Transport Assessment Group, which consisted of 37 states, made a wide range of recommendations to the U.S. Environmental Protection Agency (EPA) to address the impact of ozone transport on serious non-attainment areas (geographic areas defined by the EPA as non-compliant with ozone standards) in the Northeast, Midwest, and South. Ozone transport refers to wind-blown movement of ozone and ozone-causing materials across city and state boundaries. In late 1997, the EPA published a proposed call for revisions to State Implementation Plans (SIPs). SIP is an acronym for a state's implementation plan for achieving emissions reductions to address air quality concerns. The EPA must approve all SIPs.

    NO_X SIP Call  In October 1998, the EPA finalized its ozone transport rule, also known as the NO_X SIP Call. It applied to 22 states in the eastern half of the U.S., including the three states in which our electric utilities operate, and also proposed a model NO_X emission allowance trading program. This rule recommended states reduce NO_X emissions primarily from industrial and utility sources to a certain level by May 2003. The EPA gave the affected states until September 30, 1999 to incorporate NO_X reductions and, at the discretion of the state, a NO_X trading program into their SIPs. The EPA proposed to implement a federal plan to accomplish the equivalent NO_X reductions by May 2003 if states failed to revise their SIPs.

    Ohio, Indiana, a number of other states, and various industry groups (some of which we are a member), filed legal challenges to the NO_X SIP Call in late 1998. On May 25, 1999, the U.S. Circuit Court of Appeals for the District of Columbia (Court of Appeals) granted a request for a deferral of the rule and indefinitely suspended the September 30 filing deadline, pending further review by the Court of Appeals.

    In March 2000, the Court of Appeals substantially upheld the EPA's rule. On April 11, 2000, the EPA asked the Court of Appeals to remove its May 25, 1999, suspension of the rule and also directed states to submit SIP revisions by September 1, 2000. On April 17, 2000, various states and industry groups (some of which we are a member) filed a request with the Court of Appeals for a rehearing of the NO_X SIP Call decisions. On April 24, 2000, the same group filed a request with the Court of Appeals to require a rulemaking and a comment period to determine a new compliance date. The

states also filed a request to obtain more time to file their SIPs. On June 23, 2000, the Court of Appeals denied both requests and directed the states to submit their SIP revisions by October 30, 2000. The states of Indiana, Kentucky, and Ohio subsequently submitted letters stating their intent to revise their SIPs in response to the NO_X SIP Call.

    In August 2000, the Court of Appeals extended the May 1, 2003 deadline for NO_X reductions to May 31, 2004. The states and other groups appealed the Court of Appeals ruling to the U.S. Supreme Court.

    On September 25, 2000, Cinergy announced a plan to invest approximately $700 million in pollution control equipment and other methods to reduce NO_X emissions. This expected investment includes the following:

•

install up to 11 selective catalytic reduction units (SCRs) at several different generating stations;

•

install other pollution control technologies, including new computer software, at all generating stations;

•

make combustion improvements; and

•

utilize market opportunities to buy and sell NO_X allowances.

    SCRs are the most proven technology currently available for reducing NO_X emissions produced in coal-fired generating stations.

    Section 126 Petitions  In February 1998, the northeast states filed petitions seeking the EPA's assistance in reducing ozone in the eastern U.S. under Section 126 of the Clean Air Act (CAA). The EPA believes that Section 126 petitions allow a state to claim that sources in another state are contributing to its air quality problem and request that the EPA require the upwind sources to reduce their emissions.

    In December 1999, the EPA granted four Section 126 petitions relating to NO_X emissions. This ruling affected all of our Ohio and Kentucky facilities, as well as some of our Indiana facilities, and requires us to reduce our NO_X emissions to a certain level by May 2003. The EPA's action granting the Section 126 petitions was appealed to the Court of Appeals. Oral arguments were held in this case on December 15, 2000. A final decision is expected some time within the next few months.

    State Ozone Plans  On November 15, 1999, the State of Indiana and the Commonwealth of Kentucky (along with Jefferson County, Kentucky) jointly filed an amendment to their attainment demonstration on how they intend to bring the greater Louisville area, including Floyd and Clark Counties in Indiana, into attainment with the one-hour ozone standard. The SIP amendments call for, among other things, statewide NO_X reductions from utilities in Indiana, Kentucky, and surrounding states which are less stringent than the EPA's NO_X SIP Call. Indiana and Kentucky committed to adopt utility NO_X control rules by December 2000, that would require controls be installed by May 2003. However, Indiana, halted the rulemaking for NO_X controls at this level, but continues to develop NO_X SIP Call level reduction regulations. Kentucky did complete their rulemaking, but has issued a notice of intent to revise the rules to change the compliance deadline to mirror the NO_X SIP Call (May 31, 2004).

    See section (e) below for a discussion of the tentative EPA settlement, which relates to matters discussed within this note.

    (c)  New Source Review (NSR)  The CAA's NSR provisions require that a company obtain a pre-construction permit if it plans to build a new stationary source of pollution or make a major change to an existing facility unless the changes are exempt. In July 1998, the EPA requested comments on proposed revisions to the NSR rules that would change NSR applicability by eliminating exemptions contained in the current regulation.

    Since July 1999, CG&E and PSI have received requests from the EPA (Region 5), under Section 114 of the CAA, seeking documents and information regarding capital and maintenance expenditures at several of their respective generating stations. These activities were part of an industry-wide investigation assessing compliance with the NSR and the New Source Performance Standards (NSPS) of the CAA at electric generating stations.

    On September 15, 1999, November 3, 1999, and February 2, 2001, the Attorney General's of New York, Connecticut, and New Jersey, respectively, issued letters notifying Cinergy and CG&E of their intent to sue under the citizens' suit provisions of the CAA. These states alleged violations of the CAA by constructing and continuing to operate a major change to CG&E's W.C. Beckjord Station (Beckjord Station) without obtaining the required NSR pre-construction permits.

    On November 3, 1999, the EPA sued a number of holding companies and electric utilities, including Cinergy, CG&E, and PSI, in various U.S. District Courts. The Cinergy, CG&E, and PSI suit alleged violations of the CAA at two of our generating stations relating to NSR and NSPS requirements. The suit sought (1) injunctive relief to require installation of pollution control technology on each of the generating units at Beckjord Station and PSI's Cayuga Generating Station (Cayuga Station), and (2) civil penalties in amounts of up to $27,500 per day for each violation.

    On March 1, 2000, the EPA filed an amended complaint against Cinergy, CG&E, and PSI. The amended complaint added alleged violations of the NSR requirements of the CAA at two of our generating stations contained in a notice of violation (NOV) filed by the EPA on November 3, 1999. It also added claims for relief of alleged violations of nonattainment NSR, Indiana and Ohio SIPs, and particulate matter emission limits (as discussed below in the "Beckjord Station NOV" section).

    The amended complaint sought (1) injunctive relief to require installation of pollution control technology on each of the generating units at Beckjord Station, Cayuga Station, and PSI's Wabash River and Gallagher Generating Stations, and such other measures as necessary, and (2) civil penalties in amounts of up to $27,500 per day for each violation.

    On March 1, 2000, the EPA also filed an amended complaint in a separate lawsuit alleging violations of the CAA relating to the NSR, Prevention of Significant Deterioration (PSD), and Ohio SIP requirements regarding a generating station operated by the Columbus Southern Power Company (CSP) and jointly-owned by CSP, The Dayton Power and Light Company (DP&L), and CG&E. The EPA is seeking injunctive relief and civil penalties of up to $27,500 per day for each violation. This suit is being defended by CSP.

    On June 28, 2000, the EPA issued an NOV to Cinergy, CG&E, and PSI for alleged violations of NSR, PSD, and SIP requirements at CG&E's Miami Fort Station and PSI's Gibson Station. In addition, Cinergy and CG&E have been informed by DP&L, the operator of Stuart Station, that on June 30, 2000, the EPA issued an NOV for alleged violations of NSR, PSD, and SIP requirements at this station. CG&E owns 39% of Stuart Station. The NOVs indicated that the EPA may (1) issue an order requiring compliance with the requirements of the SIP, or (2) bring a civil action seeking injunctive relief and civil penalties of up to $27,500 per day for each violation.

    See section (e) below for a discussion of the tentative EPA settlement, which relates to matters discussed within this note.

    (d)  Beckjord Station NOV  On November 30, 1999, the EPA filed an NOV against Cinergy and CG&E alleging that emissions of particulate matter at the Beckjord Station exceeded the allowable limit. The NOV indicated that the EPA may (1) issue an administrative penalty order, or (2) file a civil action seeking injunctive relief and civil penalties of up to $27,500 per day for each violation. The allegations contained in this NOV were incorporated within the March 1, 2000 amended complaint, as discussed in section (c). On June 22, 2000, the EPA issued an NOV and a Finding of Violation (FOV) alleging additional particulate emission violations at Beckjord Station and offered us an opportunity to

meet and discuss the allegations and corrective measures. The NOV/FOV indicated the EPA may issue an administrative compliance order, issue an administrative penalty order, or bring a civil or criminal action.

    See section (e) below for a discussion of the tentative EPA settlement, which relates to matters discussed within this note.

    (e)  EPA Agreement  On December 21, 2000, Cinergy, CG&E, and PSI reached an agreement in principle with the EPA, the U.S. Department of Justice, three northeast states, and two environmental groups that could serve as the basis for a negotiated resolution of CAA claims and other related matters brought against coal-fired power plants owned and operated by Cinergy's operating subsidiaries. The complete resolution of these issues is contingent upon establishing a final agreement with the EPA and other parties. If a final agreement is reached with these parties, this would resolve past claims of the NSR as well as the Beckjord Station NOVs/FOV discussed above.

    Under the terms of the tentative agreement, the EPA and the other plaintiffs have agreed to drop all challenges of past maintenance and repair activities at our coal-fired generation plants. In addition, the intent of the tentative agreement is that we would be allowed to continue on-going activities to maintain reliability and availability without subjecting the plants to future litigation regarding federal permitting requirements.

    In return for resolution of past claims, future operational certainty, and protection of system wide demand growth, we have tentatively agreed to:

•

shut down or repower with natural gas nine small coal-fired boilers at three power plants beginning in 2004;

•

build four additional SO₂ scrubbers, the first of which must be operational by December 31, 2007;

•

upgrade existing pollution control systems;

•

phase in the operation of NO_X reduction technology year-round starting in 2004;

•

retire 50,000 tons of SO₂ allowances between 2001 and 2005 and reduce our SO₂ cap by 35% in 2013;

•

pay a civil penalty of $8.5 million to the U.S. government; and

•

implement $21.5 million in environmental mitigation projects.

    The estimated cost for these capital expenditures is expected to be approximately $700 million. These capital expenditures are in addition to our previously announced commitment to install NO_X controls over the next five years at an estimated cost of approximately $700 million as previously discussed in "Ozone Transport Rulemaking".

    In reaching the tentative agreement, we did not admit any wrongdoing and remain free to continue our current maintenance practices, as well as implement future projects for improved reliability. If the settlement is not completed, we believe the allegations contained in the amended complaint are without merit, and we would defend the suit vigorously in court. In such an event, it is not possible at this time to determine the likelihood that the plaintiffs would prevail on their claims or whether resolution of this matter would have a material effect on our financial condition or results of operations.

    (f)  Manufactured Gas Plant (MGP) Sites

       (i)  General  Prior to the 1950s, gas was produced at MGP sites through a process that involved the heating of coal and/or oil. The gas produced from this process was sold for residential, commercial, and industrial uses.

      (ii)  PSI  Coal tar residues, related hydrocarbons, and various metals associated with MGP sites have been found at former MGP sites in Indiana, including at least 21 sites which PSI or its predecessors previously owned. PSI acquired four of the sites from Northern Indiana Public Service

Company (NIPSCO) in 1931. At the same time, PSI sold NIPSCO the sites located in Goshen and Warsaw, Indiana. In 1945, PSI sold 19 of these sites (including the four sites it acquired from NIPSCO) to the predecessor of the Indiana Gas Company, Inc. (IGC). IGC later sold the site located in Rochester, Indiana, to NIPSCO.

    IGC (in 1994) and NIPSCO (in 1995) both made claims against PSI. The basis of these claims was that PSI is a Potentially Responsible Party with respect to the 21 MGP sites under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). The claims further asserted that PSI is legally responsible for the costs of investigating and remediating the sites. In August 1997, NIPSCO filed suit against PSI in federal court claiming recovery (pursuant to CERCLA) of NIPSCO's past and future costs of investigating and remediating MGP-related contamination at the Goshen MGP site.

    In November 1998, NIPSCO, IGC, and PSI entered into a Site Participation and Cost Sharing Agreement. This agreement allocated CERCLA liability for past and future costs at seven MGP sites in Indiana among the three companies. As a result of the agreement, NIPSCO's lawsuit against PSI was dismissed. The parties have assigned lead responsibility for managing further investigation and remediation activities at each of the sites to one of the parties. Similar agreements were reached between IGC and PSI that allocate CERCLA liability at 14 MGP sites with which NIPSCO was not involved. These agreements conclude all CERCLA and similar claims between the three companies related to MGP sites. The parties continue to investigate and remediate the sites, as appropriate under the agreements and applicable laws. The Indiana Department of Environmental Management (IDEM) oversees investigation and cleanup of some of the sites.

PSI notified its insurance carriers of the claims related to MGP sites raised by IGC, NIPSCO, and the IDEM. In April 1998, PSI filed suit in Hendricks County Circuit Court in the State of Indiana (Court) against its general liability insurance carriers. Among other matters, PSI requested a declaratory judgment that would obligate its insurance carriers to (1)  defend MGP claims against PSI, or (2) pay PSI's costs of defense and compensate PSI for its costs of investigating, preventing, mitigating, and remediating damage to property and paying claims related to MGP sites. Recently, the trial date for the case was moved from May 2001 to January 2002. In addition, the Court has ordered the parties to submit the case to mediation. The parties have selected a mediator and scheduled mediation sessions in early 2001. PSI cannot predict the outcome of this litigation. Recently, PSI has been involved in settlement discussions with some of the insurance carriers. At the present time, PSI cannot predict either the progress or outcome of these discussions.

PSI has accrued costs for the sites related to investigation, remediation, and groundwater monitoring to the extent such costs are probable and can be reasonably estimated. PSI does not believe it can provide an estimate of the reasonably possible total remediation costs for any site before a remedial investigation/feasibility study has been completed. To the extent remediation is necessary, the timing of the remediation activities impacts the cost of remediation. Therefore, PSI currently cannot determine the total costs that may be incurred in connection with the remediation of all sites, to the extent that remediation is required. According to current information, these future costs at the 21 Indiana MGP sites are not material to our financial condition or results of operations. As further investigation and remediation activities are performed at these sites, the potential liability for the 21 Indiana MGP sites could be material to our financial position or results of operations.

      (iii)  CG&ECG&E and its utility subsidiaries are aware of potential sites where MGP activities have occurred at some time in the past. None of these sites is known to present a risk to the environment. CG&E and its utility subsidiaries have begun preliminary site assessments to obtain information about some of these MGP sites.

    (g)  Other  In compliance with an electric wholesale rate case settlement adopted by the FERC effective February 2000, CG&E reduced the cost of fuel reflected in its wholesale base rates and revised its wholesale fuel adjustment factor. Beginning March 1, 2000, ULH&P began passing through to retail customers the fuel costs incurred pursuant to the revised wholesale fuel adjustment factor. The company believes it is not required to synchronize the cost of fuel reflected in retail base rates with the reduced cost of fuel reflected in wholesale base rates, outside of a general rate proceeding. As a result, in 2000, ULH&P recovered and recognized as revenue approximately $14 million more in costs than it incurred. This issue is currently before the Kentucky Public Service Commission (KPSC). While ULH&P believes its position is consistent with applicable rate regulations, it is possible that the KPSC might require rate synchronization prospectively or disallow recovery of the $14 million recognized as revenue during 2000. ULH&P currently cannot predict the outcome of this matter.

13. Jointly-Owned Plant

CG&E, CSP, and DP&L jointly own electric generating units and related transmission facilities. PSI is also a joint-owner of Gibson Station Unit No. 5 with Wabash Valley Power Association, Inc. (WVPA), and Indiana Municipal Power Agency (IMPA). Additionally, PSI is a joint-owner with WVPA and IMPA of certain transmission property and local facilities. These facilities constitute part of the integrated transmission and distribution systems, which are operated and maintained by PSI. The Consolidated Statements of Income reflect CG&E's and PSI's portions of all operating costs associated with the jointly-owned facilities.

CG&E's and PSI's investments in jointly-owned plant or facilities are as follows:

			Ownership Share		Utility Plant in Service		Accumulated Depreciation		Construction Work in Progress
			(in millions)
CG&E
	Production:
		Miami Fort Station (Units 7 and 8)	64.00	%	$	227	$	134	$	17
		Beckjord Station (Unit 6)	37.50			42		29		1
		Stuart Station(1)	39.00			280		146		21
		Conesville Station (Unit 4)(1)	40.00			77		44		—
		Zimmer Station	46.50			1,241		348		9
		East Bend Station	69.00			336		190		13
		Killen Station(1)	33.00			187		101		1
	Transmission		Various			65		34		6
PSI
	Production:
		Gibson Station (Unit 5)	50.05			214		112		1
	Transmission and local facilities		94.94			2		1		—

(1)

Station is not operated by CG&E.

14. Quarterly Financial Data (unaudited)

		Cinergy					CG&E					PSI
Quarter Ended		2000		1999			2000		1999			2000		1999
		(in millions, except per share amounts)
March 31
	Operating Revenues	$	1,583	$	1,402		$	716	$	645		$	534	$	482
	Operating Income		274		234			181		155			102		86
	Net Income		138		127			96		80			50		40
	Basic EPS		.87		.80			N/A		N/A			N/A		N/A
	Diluted EPS		.87		.80			N/A		N/A			N/A		N/A
June 30
	Operating Revenues	$	1,770	$	1,275		$	707	$	531		$	620	$	463
	Operating Income		167		137			113		88			49		61
	Net Income		75		59			56		39			19		26
	Basic EPS		.47		.37			N/A		N/A			N/A		N/A
	Diluted EPS		.47		.37			N/A		N/A			N/A		N/A
September 30
	Operating Revenues	$	2,300	$	1,782		$	840	$	738		$	804	$	707
	Operating Income		196		137	(2)		81		104	(2)		63		47	(2)
	Net Income		94		122	(1,2)		39		48	(2)		31		16	(2)
	Basic EPS		.59		.77	(1,2)		N/A		N/A			N/A		N/A
	Diluted EPS		.58		.76	(1,2)		N/A		N/A			N/A		N/A
December 31
	Operating Revenues	$	2,769	$	1,479		$	967	$	637		$	726	$	484
	Operating Income		225		185			153		132			83		78
	Net Income		92		96			76		67			35		35
	Basic EPS		.58		.60			N/A		N/A			N/A		N/A
	Diluted EPS		.58		.60			N/A		N/A			N/A		N/A
Total
	Operating Revenues	$	8,422	$	5,938		$	3,230	$	2,551		$	2,684	$	2,136
	Operating Income		862		693			528		479			297		272
	Net Income		399		404			267		234			135		117
	Basic EPS		2.51		2.54			N/A		N/A			N/A		N/A
	Diluted EPS		2.50		2.53			N/A		N/A			N/A		N/A

(1)

In the third quarter of 1999, we realized a net contribution to earnings of approximately $.43 per share (basic and diluted) when we sold our 50% ownership interest in Midlands.

(2)

In the third quarter of 1999, through CG&E and PSI, we experienced extreme weather conditions which resulted in a reduction in net income of $57 million ($16 million for CG&E, $41 million for PSI) after tax or $.36 per share (basic and diluted).

15. Financial Information by Business Segment

    During 1998, we adopted the requirements of Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information (Statement 131). Statement 131 requires disclosures about reportable operating segments in annual and interim condensed financial statements based on the following:

•

products and services;

•

geography;

•

legal structure;

•

management structure; or

•

any other manner in which management divides a company.

    Our business units were initially formed during the second half of 1996 and began operating as separately identifiable business units in 1997. As of December 31, 2000, each business unit has its own management structure, headed by a business unit president. As discussed in Note 1(a), during 2000 our business units were Commodities, Delivery, Cinergy Investments, and International. Each business unit and its responsibilities as of this date, are described below.

    Commodities operates and maintains our domestic regulated and non-regulated electric generating plants and some of our jointly-owned plants. It also conducts the following activities:

•

wholesale energy marketing and trading;

•

energy risk management;

•

financial restructuring services; and

•

proprietary arbitrage activities.

    Commodities earns revenues from external customers from its marketing, trading, and risk management activities. Commodities earns intersegment revenues from the sale of electric power to Delivery.

    Delivery plans, constructs, operates, and maintains our operating companies' transmission and distribution systems and provides gas and electric energy to consumers. Delivery earns revenues from wholesale customers primarily by transmitting electric power through our transmission system. Delivery currently receives all of its electricity from Commodities at a transfer price based upon current regulatory ratemaking methodology.

    Cinergy Investments manages the development, marketing, and sales of our domestic non-regulated and non-wholesale energy and energy-related products and services. This is accomplished through various subsidiaries and joint ventures. These products and services include the following:

•

providing energy management-consulting services and infrastructure solutions to government, industrial, and commercial customers that operate retail facilities;

•

providing various utility services to utilities (for example, providing underground locating and construction services for utilities);

•

providing telecommunication services including dark fiber, high capacity service, internet service, local phone service, and long distance service;

•

leasing of space on wireless telecommunication towers and the purchase and construction of such towers;

•

providing various engineering, procurement, construction, operation and maintenance functions such as designing and constructing turnkey gas pipelines, electric transmission and distribution lines, substations for industrial and large commercial customers, and fiber optic telecommunication cables;

•

providing information, systems, and services to multi-site national chains in retail industries to optimize their energy, telecommunications, and other facility-wide costs;

•

building, owning, operating, and maintaining combined heat and power facilities; and

•

pursuing technology equity investments and running technology pilots.

    International primarily directs and manages our international business holdings. These holdings include wholly-owned and jointly-owned companies in ten foreign countries. In addition, International directs our renewable energy investing activities (for example, wind farms), which includes investments within the U.S. as well as abroad. International earns (1) revenues from consolidated subsidiaries, and (2) equity earnings from unconsolidated companies primarily from energy-related businesses.

    As the utility industry continues to evolve, Cinergy will continue to analyze its operating structure and make modifications as appropriate. In early 2001, we announced certain organizational changes which further aligned the business units consistent with Cinergy's strategic vision. The revised structure reflects three business units, as follows:

•

Energy Merchant—will operate power plants, both domestically and abroad, and conduct all wholesale energy marketing, trading, origination and risk management services;

•

Regulated Businesses—will operate all gas and electric transmission and distribution services, both domestically and abroad, and will be responsible for all regulatory planning for the regulated utility businesses of CG&E, PSI, and ULH&P; and

•

Power Technology and Infrastructure Services—will originate and manage a portfolio of emerging energy businesses.

    Financial information by (1) business units, (2) products and services, and (3) geographic areas and long-lived assets for the years ending December 31, 2000, 1999, and 1998, are as follows:

Business Units

		2000
		Cinergy Business Units
		Commodities			Delivery		Cinergy Investments			International			Total		All Other(1)		Reconciling Eliminations(2)			Consolidated
		(in millions)
Operating revenues—
	External customers	$	4,923		$	3,333	$	83		$	83		$	8,422	$	—	$	—		$	8,422
	Intersegment revenues		1,889			—		—			—			1,889		—		(1,889	)		—
Depreciation and amortization(3)			212			146		3			13			374		—		—			374
Equity in earnings of unconsolidated subsidiaries			(8	)		—		4			9			5		—		—			5
Interest(4)			99			92		11			22			224		—		—			224
Income taxes			159			109		(6	)		(10	)		252		—		—			252
Segment profit (loss)(5)			254			168		(11	)		(12	)		399		—		—			399
Total segment assets			7,084			4,413		283			508			12,288		42		—			12,330
Investments in unconsolidated subsidiaries			364			—		79			95			538		—		—			538
Total expenditures for long-lived assets			260			265		(1	)		—			524		1		—			525

(1)

The All Other category represents miscellaneous corporate items which are not allocated to business units for purposes of segment profit measurement.

(2)

The Reconciling Eliminations category eliminates the intersegment revenues of Commodities.

(3)

The components of depreciation and amortization include depreciation of fixed assets, amortization of intangible assets, amortization of phase-in deferrals, and amortization of post-in-service deferred operating expenses.

(4)

Interest income is deemed immaterial.

(5)

Management utilizes segment profit (loss) after taxes to evaluate segment profitability.

Business Units (cont.)

		1999
		Cinergy Business Units
		Commodities			Delivery		Cinergy Investments			International		Total		All Other(1)		Reconciling Eliminations(2)			Consolidated
		(in millions)
Operating revenues—
	External customers	$	2,586		$	3,232	$	59		$	61	$	5,938	$	—	$	—		$	5,938
	Intersegment revenues		1,857			—		—			—		1,857		—		(1,857	)		—
Depreciation and amortization(3)			209			138		—			7		354		—		—			354
Equity in earnings of unconsolidated subsidiaries			(2	)		—		—			60		58		—		—			58
Gain on sale of investment in unconsolidated subsidiary			—			—		—			99		99		—		—			99
Interest(4)			96			102		4			32		234		1		—			235
Income taxes			70			120		(6	)		25		209		—		—			209
Segment profit (loss)(5)			136			184		(9	)		93		404		—		—			404
Total segment assets			5,042			4,058		130			340		9,570		47		—			9,617
Investments in unconsolidated subsidiaries			257			—		25			77		359		—		—			359
Total expenditures for long-lived assets			131			256		3			—		390		—		—			390

(1)

The All Other category represents miscellaneous corporate items which are not allocated to business units for purposes of segment profit measurement.

(2)

The Reconciling Eliminations category eliminates the intersegment revenues of Commodities.

(3)

The components of depreciation and amortization include depreciation of fixed assets, amortization of intangible assets, amortization of phase-in deferrals, and amortization of post-in-service deferred operating expenses.

(4)

Interest income is deemed immaterial.

(5)

Management utilizes segment profit (loss) after taxes to evaluate segment profitability.

Business Units (cont.)

		1998
		Cinergy Business Units
		Commodities			Delivery		Cinergy Investments			International			Total		All Other(1)			Reconciling Eliminations(2)			Consolidated
		(in millions)
Operating revenues—
	External customers	$	2,726		$	3,090	$	52		$	43		$	5,911	$	—		$	—		$	5,911
	Intersegment revenues		1,782			—		—			—			1,782		—			(1,782	)		—
Depreciation and amortization(3)			197			127		—			2			326		—			—			326
Equity in earnings of unconsolidated subsidiaries			(1	)		—		(4	)		56			51		—			—			51
Interest(4)			95			91		—			51			237		7			—			244
Income taxes			57			90		(6	)		(17	)		124		(7	)		—			117
Segment profit (loss)(5)			94			157		(11	)		32			272		(11	)		—			261
Total segment assets			4,863			3,987		42			752			9,644		43			—			9,687
Investments in unconsolidated subsidiaries			—			—		8			566			574		—			—			574
Total expenditures for long-lived assets			108			242		3			—			353		17			—			370

(1)

The All Other category represents miscellaneous corporate items which are not allocated to business units for purposes of segment profit measurement.

(2)

The Reconciling Eliminations category eliminates the intersegment revenues of Commodities.

(3)

The components of depreciation and amortization include depreciation of fixed assets, amortization of intangible assets, amortization of phase-in deferrals, and amortization of post-in-service deferred operating expenses.

(4)

Interest income is deemed immaterial.

(5)

Management utilizes segment profit (loss) after taxes to evaluate segment profitability.

Products and Services

	Revenues
	Utility						Energy Marketing and Trading
Year	Electric		Gas		Total		Electric		Gas		Total		Other		Consolidated
	(in millions)
2000	$	2,932	$	503	$	3,435	$	2,452	$	2,439	$	4,891	$	96	$	8,422
1999		2,938		420		3,358		1,375		1,176		2,551		29		5,938
1998		2,707		441		3,148		2,056		659		2,715		48		5,911

    Our products and services focus on providing utility services (the supply of electric energy and gas) and energy marketing and trading services.

Geographic Areas and Long-Lived Assets

	Revenues
			International
Year	Domestic		United Kingdom (UK)(1)		All Other(2)		Total		Consolidated
	(in millions)
2000	$	8,339	$	—	$	83	$	83	$	8,422
1999		5,877		—		61		61		5,938
1998		5,868		—		43		43		5,911

	Long-Lived Assets
			International
Year	Domestic		United Kingdom (UK)(1)		All Other(2)		Total		Consolidated
2000	$	8,267	$	—	$	328	$	328	$	8,595
1999		7,841		2		277		279		8,120
1998		7,375		501		209		710		8,085

(1)

As discussed in Note 10, on July 15, 1999, we sold our 50% ownership interest in Midlands. Prior to the sale, Midlands had provided the majority of International's earnings.

(2)

International revenues are primarily from assets which we own in the Czech Republic, the majority of which are four district heating plants that provide 1,094 MW of thermal steam capacity which may be used to produce 149 MW of electricity. The Czech assets and results of operations are consolidated into our financial statements.

16. Earnings Per Common Share

    A reconciliation of basic EPS to earnings per common share assuming dilution (diluted EPS) is presented below:

		Income		Shares	EPS
		(in millions, except per share amounts)
2000
Basic EPS:
	Net income	$	399	159	$	2.51
Effect of dilutive securities:
	Common stock options			1
Diluted EPS:
	Net income plus assumed conversions	$	399	160	$	2.50
1999
Basic EPS:
	Net income	$	404	159	$	2.54
Effect of dilutive securities:
	Common stock options			—
Diluted EPS:
	Net income plus assumed conversions	$	404	159	$	2.53
1998
Basic EPS:
	Net income	$	261	158	$	1.65
Effect of dilutive securities:
	Common stock options			1
Diluted EPS:
	Net income plus assumed conversions	$	261	159	$	1.65

    Options to purchase shares of common stock are excluded from the calculation of diluted EPS when the exercise prices of these options are greater than the average market price of the common shares during the period. For 2000, 1999, and 1998, approximately two million, two million, and one million shares, respectively, were excluded from the diluted EPS calculation.

    The Employee Stock Purchase and Savings Plan was also excluded from the diluted EPS calculation in 2000, 1999, and 1998 since the purchase price was greater than the average market price during this period. This plan allows all full-time, regular employees to purchase shares of common stock pursuant to a stock option feature.

17. WVPA Settlement

    In February 1989, PSI and WVPA entered into a settlement agreement to resolve all claims related to Marble Hill, a nuclear project canceled in 1984. Implementation of the settlement was contingent on a number of events. During 1998, PSI reached agreement on all matters with the relevant parties and, as a result, recorded a liability to the RUS. PSI will repay the obligation to the RUS with interest over a 35-year term. The net proceeds from a 35-year power sales agreement with WVPA will be used to fund the principal and interest on the obligation to the RUS. Assumption of the liability (recorded as Long-term debt in the Consolidated Balance Sheet) resulted in a charge against earnings of $80 million ($50 million after tax or $.32 per share basic and diluted) in the second quarter of 1998.

18. Ohio Deregulation

    On July 6, 1999, Ohio Governor Robert Taft signed Amended Substitute Senate Bill No. 3 (Electric Restructuring Bill), beginning the transition to electric deregulation and customer choice for the state of Ohio. The Electric Restructuring Bill created a competitive electric retail service market effective January 1, 2001. The legislation provided for a market development period that began January 1, 2001, and ends no later than December 31, 2005. Ohio electric utilities have an opportunity to recover PUCO approved transition costs during a transition period. The legislation also froze retail electric rates during the market development period, at the rates in effect on October 4, 1999, except for a five-percent reduction in the generation component of residential rates. Furthermore, the legislation contemplated that 20% of the current electric retail customers will switch suppliers no later than December 31, 2003.

    On May 8, 2000, CG&E reached a stipulated agreement with the PUCO staff and various other interested parties with respect to its proposal to implement electric customer choice in Ohio effective January 1, 2001. On August 31, 2000, the PUCO approved CG&E's stipulation agreement. The major features of this agreement include:

•

Residential customer rates will be frozen through December 31, 2005;

•

Residential customers will receive a five-percent reduction in the generation portion of their electric rates, effective January 1, 2001;

•

CG&E has agreed to provide four million dollars over the next five years in support of energy efficiency and weatherization services for low income customers;

•

The creation of an RTC designed to recover CG&E's regulatory assets and other transition costs over a ten-year period;

•

Authority for CG&E to transfer its generation assets to one or more separate, non-regulated corporate subsidiary(ies) to provide flexibility to manage its generation asset portfolio in a manner that enhances opportunities in a competitive marketplace;

•

Authority for CG&E to apply the proceeds of transition cost recovery to costs incurred during the transition period including implementation costs and purchased power costs that may be incurred by CG&E to maintain an operating reserve margin sufficient to provide reliable service to its customers;

•

CG&E will provide standard offer default supplier service (i.e., CG&E will be the supplier of last resort, so that no customer will be without an electric supplier); and

•

CG &E has agreed to provide shopping credits to switching customers.

    With regard to the PUCO's order, two parties filed applications for rehearing with the PUCO. On October 18, 2000, the PUCO denied these applications. One of the parties appealed to the Ohio Supreme Court in the fourth quarter of 2000 and CG&E subsequently intervened in that case. CG&E is unable to predict the outcome of the appeal.

    As indicated above, the August 31, 2000 order authorizes CG&E to transfer its generation assets to one or more non-regulated corporate subsidiary(ies). This transfer may require the approval or consent of one or more of the following: the IURC, the Kentucky Public Service Commission, the FERC, the SEC under the PUHCA, and various third parties. As the transfer is contingent upon the company receiving various consents and approvals, the timing and receipt of which are unknown, the completion date of the transfer of generation assets to a non-regulated subsidiary is uncertain. See Note 1(c) regarding the effects of the transition order.

    In connection with the approval of the stipulation agreement, CG&E discontinued the application of Statement 71 for the generation portion of its business and adopted Statement 101, with no material financial statement impact. Pursuant to Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of our analysis indicates future revenues will be sufficient to recover the costs of our generating assets over their estimated remaining lives.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

    None.

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS

BOARD OF DIRECTORS

    Information regarding Cinergy Corp.'s directors is incorporated by reference from its definitive Proxy Statement for the 2001 Annual Meeting of Shareholders.

    The directors of The Cincinnati Gas & Electric Company (CG&E) at January 31, 2001, are as follows:

•

J. Joseph Hale, Jr.—Mr. Hale, age 51, is President of CG&E, a position he has held since July 2000. He has served as a director of CG&E  since December 2000. His current term as director expires April 30, 2001.

•

James E. Rogers—Mr. Rogers, age 53, is Chairman of the Board and Chief Executive Officer of CG&E. He has served as a director of CG&E since 1994. His current term as director expires April 30, 2001.

•

James L. Turner—Mr. Turner, age 41, is Vice President of CG&E, a position he has held since July 2000. He has served as a director of CG&E  since February 15, 1999. His current term as director expires April 30, 2001.

    Additional information on each of the directors of CG&E is presented in and incorporated in the following "Executive Officers" section.

    Information regarding PSI Energy, Inc.'s (PSI) directors is incorporated by reference from its 2001 Information Statement.

EXECUTIVE OFFICERS

    The names of the executive officers of each registrant, their ages (as of December 31, 2000), the positions they hold, held, or have been elected to as of this report filing date, and their business experience during the past five years is included in the chart below.

		Positions and Length of Service
Name	Age	Cinergy Corp.	CG&E	PSI
Vicky A. Bailey(1)	48			President 2/00 - present
John Bryant(2)	54	Vice President 1/98 - present President, International Business Unit 7/00 - 2/01

Michael J. Cyrus(3)	45	Executive Vice President 2/01 - present Chief Executive Officer, Energy Merchant Business Unit 2/01 - present President, Energy Commodities Business Unit 3/99 - 2/01 Vice President 4/98 - present Chief Operating Officer, Energy Commodities Business Unit 11/98 - 3/99	Executive Vice President 2/01 - present Vice President 4/99 - 2/01	Executive Vice President 2/01 - present Vice President 4/99 - 2/01
R. Foster Duncan(4)	46	Executive Vice President and Chief Financial Officer 2/01 - present	Executive Vice President and Chief Financial Officer 2/01 - present	Executive Vice President and Chief Financial Officer 2/01 - present
Lisa D. Gamblin(5)	37	Vice President and Treasurer 10/00 - present Vice President and Chief Financial Officer, Energy Delivery Business Unit 3/99 - 10/00 Vice President and Chief Financial Officer, International Business Unit 2/98 - 3/99 Manager, Corporate Development 5/97 - 2/98	Vice President and Treasurer 10/00 - present	Vice President and Treasurer 10/00 - present

William J. Grealis(6)	55	Executive Vice President 2/01 - present Chief Executive Officer, Regulated Businesses Business Unit 2/01 - present Executive Vice President and Chief of Staff 7/00 - 2/01 Vice President, Corporate Services, and Chief Strategic Officer 8/98 - 7/00 Vice President 1/95 - 8/98	Executive Vice President 2/01 - present Executive Vice President and Chief of Staff 7/00 - 2/01 Vice President, Corporate Services, and Chief Strategic Officer 8/98 - 7/00 Vice President 4/98 - 8/98 President 1/95 - 3/98	Executive Vice President 2/01 - present Executive Vice President and Chief of Staff 7/00 - 2/01 Vice President, Corporate Services, and Chief Strategic Officer 8/98 - 7/00 Vice President 4/98 - 8/98
J. Joseph Hale, Jr.(7)	51	Vice President 12/96 - present	President 7/00 - present Vice President 8/98 - 7/00 General Manager, Marketing Operations 1/95 - 8/98	Vice President 2/00 - 7/00 Interim President 6/99 - 2/00 Vice President 8/98 - 6/99
M. Stephen Harkness(8)	52	Vice President 12/96 - present General Manager, Corporate Development and Financial Services 10/94 - 12/96
Donald B. Ingle, Jr.(9)	51	President, Power Technology and Infrastructure Services Business Unit 2/01 - present President, Cinergy Investments Business Unit 3/99 - 2/01 Vice President 10/97 - present	Vice President 10/97 - 3/99	Vice President 10/97 - 3/99

Julia S. Janson	36	Secretary 7/00 - present Senior Counsel 7/98 - present Counsel 5/96 - 7/98 Manager, Investor Relations 1/95 - 5/96	Assistant Secretary 7/00 - present Senior Counsel 7/98 - present Counsel 5/96 - 7/98 Manager, Investor Relations 1/95 - 5/96	Secretary 7/00 - present Senior Counsel 7/98 - present Counsel 5/96 - 7/98 Manager, Investor Relations 1/95 - 5/96
Bernard F. Roberts	48	Vice President and Comptroller 3/99 - present Vice President and Chief Financial Officer, Energy Commodities Business Unit 7/96 - 3/99 Assistant Treasurer 12/94 - 7/96	Vice President and Comptroller 3/99 - present Assistant Treasurer 1/95 - 7/96	Vice President and Comptroller 3/99 - present Assistant Treasurer 12/94 - 7/96
James E. Rogers	53	Chairman of the Board, President and Chief Executive Officer 12/00 - present Vice Chairman, President and Chief Executive Officer 12/95 - 12/00	Chairman of the Board and Chief Executive Officer 12/00 - present Vice Chairman and Chief Executive Officer 12/95 - 12/00	Chairman of the Board and Chief Executive Officer 12/00 - present Vice Chairman and Chief Executive Officer 12/95 - 12/00

Larry E. Thomas(10)	55	Executive Vice President 2/01 - present Chief Executive Officer, Power Technology and Infrastructure Services Business Unit 2/01 - present Group President 7/00 - 2/01 Vice President 4/97 - 7/00 President, Energy Delivery Business Unit 5/96 - 7/00 Group Vice President and Chief Transformation Officer 9/95 - 4/97	Executive Vice President 2/01 - present Group President 7/00 - 2/01 Vice President 4/97 - 7/00 Group Vice President and Chief Transformation Officer 9/95 - 4/97	Executive Vice President 2/01 - present Group President 7/00 - 2/01 Vice President 4/97 - 7/00 Group Vice President and Chief Transformation Officer 9/95 - 4/97
James L. Turner(11)	41	President, Regulated Businesses Business Unit 2/01 - present President, Energy Delivery Business Unit 7/00 - 2/01 Vice President 4/99 - present Senior Counsel 6/95 - 3/97	Vice President 7/00 - present President 2/99 - 7/00	Vice President 7/00 - present
Jerome A. Vennemann	50	Vice President and General Counsel 1/00 - present Acting General Counsel 3/99 - 1/00 Assistant Secretary 12/94 - present Associate General Counsel 2/96 - 3/99 Senior Counsel 10/94 - 2/96	Vice President and General Counsel 1/00 - present Acting General Counsel 3/99 - 1/00 Secretary 4/98 - present Associate General Counsel 2/96 - 3/99 Assistant Secretary 1/95 - 4/98 Senior Counsel 10/94 - 2/96	Vice President and General Counsel 1/00 - present Acting General Counsel 3/99 - 1/00 Assistant Secretary 12/94 - present Associate General Counsel 2/96 - 3/99 Senior Counsel 10/94 - 2/96

Timothy J. Verhagen(12)	54	Vice President 1/01 - present
Charles J. Winger	55	Vice President 2/01 - present Vice President and Acting Chief Financial Officer 6/00 - 2/01 Vice President 3/99 - 6/00 Vice President and Chief Financial Officer 4/98 - 3/99 Vice President 8/97 - 4/98 Vice President and Comptroller 4/97 - 8/97 Comptroller 12/94 - 4/97	Vice President and Acting Chief Financial Officer 6/00 - 2/01 Vice President and Chief Financial Officer 4/98 - 3/99 Vice President and Comptroller 4/97 - 8/97 Comptroller 1/95 - 4/97	Vice President and Acting Chief Financial Officer 6/00 - 2/01 Vice President and Chief Financial Officer 4/98 - 3/99 Vice President and Comptroller 4/97 - 8/97 Comptroller 3/84 - 4/97

    None of the officers are related in any manner. Our executive officers hold the offices set opposite their names until the next annual meeting of the Board of Directors and until their successors have been elected and qualified.

(1)

Prior to joining PSI, Ms. Bailey served as Commissioner of the Federal Energy Regulatory Commission, a position she had held since 1993.

(2)

Mr. Bryant also serves as the President of Cinergy Global Resources, Inc. and Cinergy Global Power, Inc., and as the Managing Director of Cinergy Global Power Services Limited, Cinergy's (which includes Cinergy Corp. and all of our regulated and non-regulated subsidiaries) international project development subsidiary from 1997 to present. Previously, he served as the Executive Generation Director of Midlands Electricity plc (Midlands; a non-affiliate of Cinergy) from 1996 to 1997, and Generation Director of Midlands from 1992 to 1996.

(3)

Prior to joining Cinergy, Mr. Cyrus was Senior Vice President of Trading and Operations with Electric Clearinghouse, Inc. (a non-affiliate of Cinergy), the power subsidiary of Natural Gas Clearinghouse (NGC; a non-affiliate of Cinergy) in Houston, Texas, a position he had held since 1997. Prior to that, Mr. Cyrus was President of NGC Canada and Executive Vice President of Novagas Clearinghouse, Ltd. Previously, Mr. Cyrus held various executive positions involving energy trading, marketing, and risk management with NGC since 1993.

(4)

Prior to joining Cinergy, Mr. Duncan was Executive Vice President and Chief Financial Officer of LG&E Energy Corporation (LG&E; a non-affiliate of Cinergy) in Louisville, Kentucky since December 1998. Prior to that, he was Executive Vice President of Planning and Corporate Development at LG&E from January 1998 to December 1998. Prior to joining LG&E, in January 1998, he was Vice President and Treasurer of Freeport-McMoRan, Inc. and Freeport-McMoRan Copper & Gold (non-affiliates of Cinergy), global natural resource companies headquartered in New Orleans, Louisiana since May 1994.

(5)

From October 1995 to May 1997, Ms. Gamblin served as Assistant to the Chief Executive Officer, where she had responsibility for a wide range of projects, including venture capital analysis, merger and acquisition analysis, international projects and general strategy.

(6)

As Executive Vice President and Chief of Staff, Mr. Grealis had responsibility for all shared service functions, including legal, external communications, human resources, creative services, information technology, budgets and certain accounting functions. Mr. Grealis served as President of Cinergy Investments, Inc. (Investments) from 1995 to March 1999. Mr. Grealis also served as President of the former Energy Services Business Unit from 1996 to May 1997.

(7)

Since 1992, Mr. Hale has served as President of Cinergy Foundation, Inc., a Cinergy affiliate that is organized and operated exclusively for charitable purposes.

(8)

Mr. Harkness also serves as President and Chief Operating Officer of Cinergy Solutions, Inc.

(9)

From 1995 to March 1999, Mr. Ingle served as Contract Consultant for Investments. Mr. Ingle also served as President of the former Energy Services Business Unit from 1997 to March 1999.

(10)

As Group President, Mr. Thomas had responsibility for Cinergy's new technology initiatives and energy delivery. Effective January 10, 2000, Cinergy's Economic Development, Community Affairs, State Regulatory Affairs and State Governmental Affairs were merged into the former Energy Delivery Business Unit.

(11)

In March 1997, Mr. Turner was appointed Vice President of Cinergy Services, Inc., (Services) having responsibility for the coordination of transition issues across all corporate subsidiaries in the move for full customer choice. Beginning in April 1998 until January 2000, Mr. Turner had full responsibility for Cinergy's Government and Regulatory Affairs Department. Mr. Turner served as Vice President of Customer Services from January 2000 until July 2000.

(12)

Prior to joining Cinergy, Mr. Verhagen served as Senior Vice President, Human Resources and Administration of United Dominion Industries Ltd. (United Dominion; a non-affiliate of Cinergy), a diversified manufacturer of industrial test equipment in Charlotte, North Carolina, from 1998 to 2000. From 1993 to 1998 he served as Vice President, Human Resources of United Dominion.

ITEM 11.  EXECUTIVE COMPENSATION

    Information in response to this item for Cinergy Corp. and CG&E is incorporated by reference from its definitive Proxy Statement for the 2001 Annual Meeting of Shareholders.

    All CG&E directors currently are employees of Cinergy Corp. or CG&E, and receive no compensation for their services as directors.

    Information in response to this item for PSI executive compensation is incorporated by reference from PSI's 2001 Information Statement.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

    Information in response to this item for Cinergy Corp. is incorporated by reference from its definitive Proxy Statement for the 2001 Annual Meeting of Shareholders.

Cinergy Corp. owns all outstanding shares of common stock of CG&E, CG&E's only voting security. Pursuant to Section 13(d) of the Securities Exchange Act of 1934, a beneficial owner of a security is any person who directly or indirectly has or shares voting or investment power over such security. No person or group is known by the management of CG&E to be the beneficial owner of more than 5% of any series of CG&E's class of cumulative preferred stock as of December 31, 2000.

CG&E's directors and executive officers did not beneficially own shares of any series of the class of CG&E's cumulative preferred stock as of January 31, 2001. The beneficial ownership of Cinergy Corp. common stock by each director and named executive officer of CG&E as of January 31, 2001, is set forth in the following table:

Name of Beneficial Owner(1)	Amount and Nature of Beneficial Ownership(2)
Michael J. Cyrus	166,473 shares
William J. Grealis	284,275 shares
J. Joseph Hale, Jr.	56,991 shares
Jackson H. Randolph	270,137 shares
James E. Rogers	988,863 shares
Larry E. Thomas	302,987 shares
James L. Turner	25,268 shares
Charles J. Winger	98,340 shares
All directors and executive officers as a group (11 persons)	2,319,167 shares (representing 1.46% of the class)

(1)

No individual listed beneficially owned more than 0.623% of the outstanding shares of our common stock.

(2)

Includes shares which there is a right to acquire within 60 days pursuant to the exercise of stock options in the following amounts: Mr. Cyrus—54,300; Mr. Grealis—157,796; Mr. Hale—29,221; Mr. Randolph—136,887; Mr. Rogers—696,429; Mr. Thomas—144,945; Mr. Turner—14,600; Mr. Winger—58,617; and all directors and executive officers as a group—1,376,477.

    Information in response to this item for PSI is incorporated by reference from its 2001 Information Statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    Information in response to this item for Cinergy Corp. and CG&E is incorporated by reference from Cinergy Corp.'s definitive Proxy Statement for the 2001 Annual Meeting of Shareholders.

    Information in response to this item for PSI is incorporated by reference from its 2001 Information Statement.

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K

Financial Statements and Schedules

    Refer to the page captioned "Index to Financial Statements and Financial Statement Schedules", for an index of the financial statements and financial statement schedules included in this report.

Reports on Form 8-K

    The following reports on Form 8-K were filed during the quarter ended December 31, 2000:

Date of Report	Registrant(s)	Item Filed
October 16, 2000	Cinergy Corp.	Item 5. Other Events Item 7. Financial Statements and Exhibits.
December 22, 2000	Cinergy Corp. CG&E PSI	Item 5. Other Events Item 7. Financial Statements and Exhibits.

Exhibits

    The documents listed below are being filed or have previously been filed on behalf of Cinergy Corp., CG&E, PSI, and The Union Light, Heat and Power Company (ULH&P) and are incorporated herein by reference from the documents indicated and made a part hereof. Exhibits not identified as previously filed are filed herewith:

Exhibit Designation	Registrant(s)	Nature of Exhibit	Previously Filed as Exhibit to:
Articles of Incorporation /By-laws
3-a	Cinergy Corp.(1)	Certificate of Incorporation of Cinergy Corp., a Delaware corporation.	Cinergy Corp. 1993 Form 10-K.
3-b	Cinergy Corp.	By-Laws of Cinergy Corp., as amended on April 27, 2000.	Cinergy Corp. September 30, 2000, Form 10-Q.
3-c	Cinergy Corp.	By-Laws of Cinergy Corp., as amended on December 14, 2000.
3-d	CG&E(2)	Amended Articles of Incorporation of CG&E effective October 23, 1996.	CG&E September 30, 1996, Form 10-Q.
3-e	CG&E	Regulations of CG&E as amended, April 25, 1996.	CG&E March 31, 1996, Form 10-Q.
3-f	PSI(3)	Amended Articles of Consolidation of PSI, as amended to April 20, 1995.	PSI June 30, 1995, Form 10-Q.
3-g	PSI	Amendment to Article D of the Amended Articles of Consolidation of PSI, effective July 10, 1997.	Cinergy Corp. 1997 Form 10-K.
3-h	PSI	By-Laws of PSI, as amended to December 17, 1996.	PSI March 31, 1997, Form 10-Q.
3-i	ULH&P(4)	Restated Articles of Incorporation made effective May 7, 1976.	ULH&P Form 8-K, May 1976.
3-j	ULH&P	By-Laws of ULH&P as amended, adopted May 8, 1996.	ULH&P March 31, 1996, Form 10-Q.
3-k	ULH&P	Amendment to Restated Articles of Incorporation of ULH&P (Article Third) and Amendment to the By-laws of ULH&P (Article  1), both effective July 24, 1997.	Cinergy Corp. 1997 Form 10-K.
Instruments defining the rights of holders, incl. Indentures
4-a	Cinergy Corp. PSI	Original Indenture (First Mortgage Bonds) dated September 1, 1939, between PSI and The First National Bank of Chicago, as Trustee, and LaSalle National Bank as Successor Trustee.	Exhibit A-Part 3 in File No. 70-258 Supplemental Indenture dated March 30, 1984.

4-b	Cinergy Corp. PSI	Twenty-fifth Supplemental Indenture between PSI and The First National Bank of Chicago dated September 1, 1978.	File No. 2-62543.
4-c	Cinergy Corp. PSI	Thirty-fifth Supplemental Indenture between PSI and The First National Bank of Chicago dated March 30, 1984.	PSI 1984 Form 10-K.
4-d	Cinergy Corp. PSI	Forty-second Supplemental Indenture between PSI and LaSalle National Bank dated August 1, 1988.	PSI 1988 Form 10-K.
4-e	Cinergy Corp. PSI	Forty-fourth Supplemental Indenture between PSI and LaSalle National Bank dated March 15, 1990.	PSI 1990 Form 10-K.
4-f	Cinergy Corp. PSI	Forty-fifth Supplemental Indenture between PSI and LaSalle National Bank dated March 15, 1990.	PSI 1990 Form 10-K.
4-g	Cinergy Corp. PSI	Forty-sixth Supplemental Indenture between PSI and LaSalle National Bank dated June 1, 1990.	PSI 1991 Form 10-K.
4-h	Cinergy Corp. PSI	Forty-seventh Supplemental Indenture between PSI and LaSalle National Bank dated July 15, 1991.	PSI 1991 Form 10-K.
4-i	Cinergy Corp. PSI	Forty-eighth Supplemental Indenture between PSI and LaSalle National Bank dated July 15, 1992.	PSI 1992 Form 10-K.
4-j	Cinergy Corp. PSI	Forty-ninth Supplemental Indenture between PSI and LaSalle National Bank dated February 15, 1993.	PSI 1992 Form 10-K.
4-k	Cinergy Corp. PSI	Fiftieth Supplemental Indenture between PSI and LaSalle National Bank dated February 15, 1993.	PSI 1992 Form 10-K.
4-l	Cinergy Corp. PSI	Fifty-first Supplemental Indenture between PSI and LaSalle National Bank dated February 1, 1994.	PSI 1993 Form 10-K.
4-m	Cinergy Corp. PSI	Fifty-second Supplemental Indenture between PSI and LaSalle National Bank, as Trustee, dated as of April 30, 1999.	PSI March 31, 1999, Form 10-Q.
4-n	Cinergy Corp. PSI	Indenture (Secured Medium-term Notes, Series A), dated July 15, 1991, between PSI and LaSalle National Bank, as Trustee.	PSI Form 10-K/A, Amendment No. 2, dated July 15, 1993.
4-o	Cinergy Corp. PSI	Indenture (Secured Medium-term Notes, Series B), dated July 15, 1992, between PSI and LaSalle National Bank, as Trustee.	PSI Form 10-K/A, Amendment No. 2, dated July 15, 1993.
4-p	Cinergy Corp. PSI	Loan Agreement between PSI and the City of Princeton, Indiana dated as of November 7, 1996.	PSI September 30, 1996, Form 10-Q.
4-q	Cinergy Corp. PSI	Loan Agreement between PSI and the City of Princeton, Indiana dated as of February 1, 1997.	Cinergy Corp. 1996 Form 10-K.
4-r	Cinergy Corp. PSI	Indenture dated November 15, 1996, between PSI and The Fifth Third Bank, as Trustee.	Cinergy Corp. 1996 Form 10-K.
4-s	Cinergy Corp. PSI	First Supplemental Indenture dated November 15, 1996, between PSI and The Fifth Third Bank, as Trustee.	Cinergy Corp. 1996 Form 10-K.
4-t	Cinergy Corp. PSI	Third Supplemental Indenture dated as of March 15, 1998, between PSI and The Fifth Third Bank, as Trustee.	Cinergy Corp. 1997 Form 10-K.
4-u	Cinergy Corp. PSI	Fourth Supplemental Indenture dated as of August 5, 1998, between PSI and The Fifth Third Bank, as Trustee.	PSI June 30, 1998, Form 10-Q.
4-v	Cinergy Corp. PSI	Fifth Supplemental Indenture dated as of December 15, 1998, between PSI and The Fifth Third Bank, as Trustee.	PSI 1998 Form 10-K.
4-w	Cinergy Corp. PSI	Sixth Supplemental Indenture between PSI and Fifth Third Bank, as Trustee, dated as of April 30, 1999.	PSI March 31, 1999, Form 10-Q.
4-x	Cinergy Corp. PSI	Seventh Supplemental Indenture dated as of October 20, 1999, between PSI and Fifth Third Bank as Trustee.	PSI September 30, 1999, Form 10-Q.
4-y	Cinergy Corp. PSI	Unsecured Promissory Note dated October 14, 1998, between PSI and the Rural Utilities Service.	PSI 1998 Form 10-K.
4-z	Cinergy Corp. PSI	Loan Agreement between PSI and the Indiana Development Finance Authority dated as of July 15, 1998.	PSI June 30, 1998, Form 10-Q.
4-aa	Cinergy Corp. PSI	Loan Agreement between PSI and the Indiana Development Finance Authority dated as of May 1, 2000.	PSI June 30, 2000, Form 10-Q.

4-bb	Cinergy Corp. CG&E	Original Indenture (First Mortgage Bonds) between CG&E and The Bank of New York (as Trustee) dated as of August 1, 1936.	CG&E Registration Statement No. 2-2374.
4-cc	Cinergy Corp. CG&E	Fourteenth Supplemental Indenture between CG&E and The Bank of New York dated as of November 2, 1972.	CG&E Registration Statement No. 2-60961.
4-dd	Cinergy Corp. CG&E	Thirty-third Supplemental Indenture between CG&E and The Bank of New York dated as of September 1, 1992.	CG&E Registration Statement No. 33-53578.
4-ee	Cinergy Corp. CG&E	Thirty-fourth Supplemental Indenture between CG&E and The Bank of New York dated as of October 1, 1993.	CG&E September 30, 1993, Form 10-Q.
4-ff	Cinergy Corp. CG&E	Thirty-fifth Supplemental Indenture between CG&E and The Bank of New York dated as of January 1, 1994.	CG&E Registration Statement No. 33-52335.
4-gg	Cinergy Corp. CG&E	Thirty-sixth Supplemental Indenture between CG&E and The Bank of New York dated as of February 15, 1994.	CG&E Registration Statement No. 33-52335.
4-hh	Cinergy Corp. CG&E	Thirty-seventh Supplemental Indenture between CG&E and The Bank of New York dated as of October 14, 1996.	Cinergy Corp. 1996 Form 10-K.
4-ii	Cinergy Corp. CG&E	Loan Agreement between CG&E and the County of Boone, Kentucky dated as of February 1, 1985.	CG&E 1984 Form 10-K.
4-jj	Cinergy Corp. CG&E	Repayment Agreement between CG&E and The Dayton Power and Light Company dated as of December 23, 1992.	CG&E 1992 Form 10-K.
4-kk	Cinergy Corp. CG&E	Loan Agreement between CG&E and the County of Boone, Kentucky dated as of January 1, 1994.	CG&E 1993 Form 10-K.
4-ll	Cinergy Corp. CG&E	Loan Agreement between CG&E and the State of Ohio Air Quality Development Authority dated as of December 1, 1985.	CG&E 1985 Form 10-K.
4-mm	Cinergy Corp. CG&E	Loan Agreement between CG&E and the State of Ohio Air Quality Development Authority dated as of September 13, 1995.	CG&E September 30, 1995, Form 10-Q.
4-nn	Cinergy Corp. CG&E	Loan Agreement between CG&E and the State of Ohio Water Development Authority dated as of January 1, 1994.	CG&E 1993 Form 10-K.
4-oo	Cinergy Corp. CG&E	Loan Agreement between CG&E and the State of Ohio Air Quality Development Authority dated as of January 1, 1994.	CG&E 1993 Form 10-K.
4-pp	Cinergy Corp. CG&E	Original Indenture (Unsecured Debt Securities) between CG&E and The Fifth Third Bank dated as of May 15, 1995.	CG&E Form 8-A dated July 24, 1995.
4-rr	Cinergy Corp. CG&E	First Supplemental Indenture between CG&E and The Fifth Third Bank dated as of June 1, 1995.	CG&E June 30, 1995, Form 10-Q.
4-ss	Cinergy Corp. CG&E	Second Supplemental Indenture between CG&E and The Fifth Third Bank dated as of June 30, 1995.	CG&E Form 8-A dated July 24, 1995.
4-tt	Cinergy Corp. CG&E	Third Supplemental Indenture between CG&E and The Fifth Third Bank dated as of October 9, 1997.	CG&E September 30, 1997, Form 10-Q.
4-uu	Cinergy Corp. CG&E	Fourth Supplemental Indenture between CG&E and The Fifth Third Bank dated as of April 1, 1998.	CG&E March 31, 1998, Form 10-Q.
4-vv	Cinergy Corp. CG&E	Fifth Supplemental Indenture between CG&E and The Fifth Third Bank dated as of June 9, 1998.	CG&E June 30, 1998, Form 10-Q.
4-ww	Cinergy Corp. CG&E ULH&P	Original Indenture (First Mortgage Bonds) between ULH&P and The Bank of New York dated as of February 1, 1949.	ULH&P Registration Statement No. 2-7793.
4-xx	Cinergy Corp. CG&E ULH&P	Fifth Supplemental Indenture between ULH&P and The Bank of New York dated as of January 1, 1967.	CG&E Registration Statement No. 2-60961.
4-yy	Cinergy Corp. CG&E ULH&P	Thirteenth Supplemental Indenture between ULH&P and The Bank of New York dated as of August 1, 1992.	ULH&P 1992 Form 10-K.
4-zz	Cinergy Corp. CG&E ULH&P	Original Indenture (Unsecured Debt Securities) between ULH&P and The Fifth Third Bank dated as of July 1, 1995.	ULH&P June 30, 1995, Form 10-Q.

4-aaa	Cinergy Corp. CG&E ULH&P	First Supplemental Indenture between ULH&P and The Fifth Third Bank dated as of July 15, 1995.	ULH&P June 30, 1995, Form 10-Q.
4-bbb	Cinergy Corp. CG&E ULH&P	Second Supplemental Indenture between ULH&P and The Fifth Third Bank dated as of April 30, 1998.	ULH&P March 31, 1998, Form 10-Q.
4-ccc	Cinergy Corp. CG&E ULH&P	Third Supplemental Indenture between ULH&P and The Fifth Third Bank dated as of December 8, 1998.	ULH&P 1998 Form 10-K.
4-ddd	Cinergy Corp. CG&E ULH&P	Fourth Supplemental Indenture dated as of September 17, 1999, between ULH&P and Fifth Third Bank as Trustee.	ULH&P September 30, 1999 Form 10-Q.
4-eee	Cinergy Corp.	Base Indenture dated as of October 15, 1998, between Cinergy Global Resources, Inc. (Global Resources) and The Fifth Third Bank as Trustee.	Cinergy Corp. September 30, 1998, Form 10-Q.
4-fff	Cinergy Corp.	First Supplemental Indenture dated as of October 15, 1998, between Global Resources and The Fifth Third Bank as Trustee.	Cinergy Corp. September 30, 1998, Form 10-Q.
4-ggg	Cinergy Corp.	Indenture dated as of December 16, 1998, between Cinergy Corp. and The Fifth Third Bank.	Cinergy Corp. 1998 Form 10-K.
4-hhh	Cinergy Corp.	Indenture between Cinergy Corp. and Fifth Third Bank, as Trustee, dated as of April 15, 1999.	Cinergy Corp. March 31, 1999, Form 10-Q.
4-iii	Cinergy Corp.	Rights Agreement between Cinergy Corp. and The Fifth Third Bank, as Rights Agent.	Cinergy Corp. Registration Statement on Form 8-A dated October 16, 2000.
Material contracts
10-a	Cinergy Corp. CG&E PSI	Amended and Restated Employment Agreement dated October 24, 1994, among CG&E (an Ohio corporation), Cinergy Corp. (a Delaware corporation), PSI Resources, Inc., and PSI, and Jackson H. Randolph.	Cinergy Corp. 1994 Form 10-K.
10-b	Cinergy Corp. CG&E PSI	Amended and Restated Employment Agreement dated December 30, 1999, among Services, CG&E, and PSI, and James E. Rogers.	Cinergy Corp. 1999 Form 10-K.
10-c	Cinergy Corp. CG&E PSI	Amended and Restated Employment Agreement dated December 30, 1999, among Cinergy Corp., Services, CG&E, and PSI, and William J. Grealis.	Cinergy Corp. 1999 Form 10-K.
10-d	Cinergy Corp. CG&E PSI	Amended and Restated Employment Agreement dated December 30, 1999, among Cinergy Corp., Services, CG&E, and PSI and Larry E. Thomas.	Cinergy Corp. 1999 Form 10-K.
10-e	Cinergy Corp. CG&E PSI	Amended and Restated Employment Agreement dated December 30, 1999, among Cinergy Corp., Services, CG&E, and PSI, and Donald B. Ingle, Jr.	Cinergy Corp. 1999 Form 10-K.
10-f	Cinergy Corp. CG&E PSI	Amended and Restated Employment Agreement dated December 30, 1999, among Cinergy Corp., Services, CG&E, and PSI, and Michael J. Cyrus.	Cinergy Corp. 1999 Form 10-K.
10-g	Cinergy Corp. CG&E PSI	Employment Agreement dated December 30, 1999 among Cinergy Corp., Services, CG&E, and PSI, and Jerome A. Vennemann.	Cinergy Corp. 1999 Form 10-K.
10-h	Cinergy Corp. CG&E PSI	Amended and Restated Employment Agreement dated December 30, 1999, among Cinergy Corp., Services, CG&E and PSI, and Charles J. Winger.	Cinergy Corp. 1999 Form 10-K.
10-i	Cinergy Corp. PSI	Deferred Compensation Agreement, effective as of January 1, 1992, between PSI and James E. Rogers.	PSI Form 10-K/A, Amendment No. 1, dated April 29, 1993.
10-j	Cinergy Corp. PSI	Split Dollar Life Insurance Agreement, effective as of January 1, 1992, between PSI and James E. Rogers.	PSI Form 10-K/A, Amendment No. 1, dated April 29, 1993.

10-k	Cinergy Corp. PSI	First Amendment to Split Dollar Life Insurance Agreement between PSI and James E. Rogers dated December 11, 1992.	PSI Form 10-K/A, Amendment No. 1, dated April 29, 1993.
10-l	Cinergy Corp. CG&E	Deferred Compensation Agreement between CG&E and Jackson H. Randolph dated January 1, 1992.	CG&E 1992 Form 10-K.
10-m	Cinergy Corp. CG&E	Split Dollar Insurance Agreement, effective as of May 1, 1993, between CG&E and Jackson H. Randolph.	Cinergy Corp. 1994 Form 10-K.
10-n	Cinergy Corp. CG&E	Amended and Restated Supplemental Retirement Income Agreement between CG&E and Jackson H. Randolph.	Cinergy Corp. 1995 Form 10-K.
10-o	Cinergy Corp. CG&E	Amended and Restated Supplemental Executive Retirement Income Agreement between CG&E and certain executive officers.	Cinergy Corp. 1997 Form 10-K.
10-p	Cinergy Corp.	Cinergy Corp. Union Employees' 401(k) Plan as amended and restated effective January 1, 1998, adopted December 18, 1997.	Cinergy Corp. 1999 Form 10-K.
10-q	Cinergy Corp.	Amendment to Cinergy Corp. Union Employees' 401(k) Plan, adopted December 10, 1999, effective December 1, 1999.	Cinergy Corp. 1999 Form 10-K.
10-r	Cinergy Corp.	Cinergy Corp. Non-Union Employees' 401(k) Plan as amended and restated effective January 1, 1998, adopted December 18, 1997.	Cinergy Corp. 1999 Form 10-K.
10-s	Cinergy Corp.	Amendment to Cinergy Corp. Non-Union Employees' 401(k) Plan, adopted December 10, 1999, effective December 1, 1999.	Cinergy Corp. 1999 Form 10-K.
10-t	Cinergy Corp.	Cinergy Corp. Union Employees' Savings Incentive Plan as amended and restated effective January 1, 1998, adopted December 18, 1997.	Cinergy Corp. 1999 Form 10-K.
10-u	Cinergy Corp.	Amendment to Cinergy Corp. Union Employees' Savings Incentive Plan, effective December 1, 1999, adopted December 10, 1999.	Cinergy Corp. 1999 Form 10-K.
10-v	Cinergy Corp.	Cinergy Corp. Supplemental Executive Retirement Plan amended and restated effective January 1, 1999, adopted October 15, 1998.	Cinergy Corp. 1999 Form 10-K.
10-w	Cinergy Corp.	1997 Amendments to Various Compensation and Benefit Plans of Cinergy Corp., adopted January 30, 1997.	Cinergy Corp. 1997 Form 10-K.
10-x	Cinergy Corp.	Cinergy Corp. Stock Option Plan, adopted October 18, 1994, effective October 24, 1994.	Cinergy Corp. Form S-8, filed October 19, 1994.
10-y	Cinergy Corp.	Amendment to Cinergy Corp. Stock Option Plan, amended October 22, 1996, effective November 1, 1996.	Cinergy Corp. September 30, 1996, Form 10-Q.
10-z	Cinergy Corp.	Cinergy Corp. Annual Incentive Plan, adopted October 18, 1994, effective October 24, 1994.	Cinergy Corp. 1994 Form 10-K.
10-aa	Cinergy Corp.	Amendment to Cinergy Corp. Annual Incentive Plan, amended January 25, 1996, effective January 1, 1996.	Cinergy Corp. 1996 Form 10-K.
10-bb	Cinergy Corp.	Cinergy Corp. Employee Stock Purchase and Savings Plan, adopted October 18, 1994, effective October 24, 1994.	Cinergy Corp. Form S-8, filed October 19, 1994.
10-cc	Cinergy Corp.	Amendment to Cinergy Corp. Employee Stock Purchase and Savings Plan, adopted April 26, 1996, effective January 1, 1996.	Cinergy Corp. June 30, 1996, Form 10-Q.
10-dd	Cinergy Corp.	Amendment to Cinergy Corp. Employee Stock Purchase and Savings Plan, adopted October 22, 1996, effective November 1, 1996.	Cinergy Corp. September 30, 1996, Form 10-Q.
10-ee	Cinergy Corp.	Cinergy Corp. UK Sharesave Scheme, adopted and effective December 16, 1999.	Cinergy Corp. 1999 Form 10-K.
10-ff	Cinergy Corp.	Cinergy Corp. Directors' Deferred Compensation Plan, adopted October 18, 1994, effective October 24, 1994.	Cinergy Corp. Form S-8, filed October 19, 1994.
10-gg	Cinergy Corp.	Amendment to Cinergy Corp. Directors' Deferred Compensation Plan, adopted October 22, 1996.	Cinergy Corp. September 30, 1996, Form 10-Q.
10-hh	Cinergy Corp.	Cinergy Corp. Retirement Plan for Directors, adopted October 18, 1994, effective October 24, 1994.	Cinergy Corp. 1994 Form 10-K.

10-ii	Cinergy Corp.	Cinergy Corp. Retirement Plan for Directors, amended and restated effective January 1, 1999, adopted October 15, 1998.	Cinergy Corp. Schedule 14A Definitive Proxy Statement filed March 12, 1999.
10-jj	Cinergy Corp.	Cinergy Corp. Directors' Equity Compensation Plan adopted October 15, 1998, effective January 1, 1999.	Cinergy Corp. Schedule 14A Definitive Proxy Statement filed March 12, 1999.
10-kk	Cinergy Corp.	Cinergy Corp. Executive Supplemental Life Insurance Program adopted October 18, 1994, effective October 24, 1994, consisting of Defined Benefit Deferred Compensation Agreement, Executive Supplemental Life Insurance Program Split Dollar Agreement I, and Executive Supplemental Life Insurance Program Split Dollar Agreement II.	Cinergy Corp. 1994 Form 10-K.
10-ll	Cinergy Corp.	Cinergy Corp. 1996 Long-term Incentive Compensation Plan, adopted April 26, 1996.	Cinergy Corp. Schedule 14A Definitive Proxy Statement filed March 13, 1996.
10-mm	Cinergy Corp.	Amendment to Cinergy Corp. 1996 Long-term Incentive Compensation Plan, adopted October 22, 1996, effective November 1, 1996.	Cinergy Corp. September 30, 1996, Form 10-Q.
10-nn	Cinergy Corp.	Cinergy Corp. 401(k) Excess Plan, effective January 1, 1997, adopted December 17, 1996.	Cinergy Corp. 1996 Form 10-K.
10-oo	Cinergy Corp.	Cinergy Corp. Nonqualified Deferred Incentive Compensation Plan, effective January 1, 1997, adopted December 17, 1996.	Cinergy Corp. 1996 Form 10-K.
10-pp	Cinergy Corp.	Cinergy Corp. Director, Officer and Key Employee Stock Purchase Program, effective January 7, 2000, adopted December 10, 1999.	Cinergy Corp. 1999 Form 10-K.
10-qq	Cinergy Corp.	Cinergy Corp. Non-Union Employees' Pension Plan as amended and restated effective January 1, 1998, adopted December 18, 1997.	Cinergy Corp. 1999 Form 10-K.
10-rr	Cinergy Corp.	Cinergy Corp. Union Employees' Retirement Income Plan as amended and restated effective January 1, 1998, adopted December 18, 1997.	Cinergy Corp. 1999 Form 10-K.
10-ss	Cinergy Corp. CG&E PSI	Employment Agreement dated February 12, 2001, among Cinergy Corp., Services, CG&E, and PSI, and R. Foster Duncan.
Subsidiaries of the registrant
21	Cinergy Corp. CG&E PSI	Subsidiaries of Cinergy Corp., CG&E, and PSI
Consent of experts and counsel
23	Cinergy Corp. CG&E PSI ULH&P	Consent of Independent Public Accountants
Power of attorney
24	Cinergy Corp. CG&E PSI ULH&P	Power of Attorney

(1)

Cinergy Corp. in file number 1-11377

(2)

CG&E in file number 1-1232

(3)

PSI in file number 1-3543

(4)

ULH&P in file number 2-7793

(5)

Each registrant hereby undertakes to furnish to the Commission upon request a copy of any long-term debt instrument not listed above.

CINERGY CORP.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 2000

(in thousands)

Col. A			Col. B		Col. C				Col. D				Col. E
					Additions				Deductions
Description			Balance at Beginning of Period		Charged to Expenses		Charged to Other Accounts		For Purposes for Which Reserves Were Created		Other		Balance at Close of Period
Accumulated Provisions Deducted from Applicable Assets
	Allowance for Doubtful Accounts
		2000	$	26,811	$	22,746	$	4,486	$	24,092	$	—	$	29,951
		1999	$	25,622	$	20,805	$	3,777	$	23,393	$	—	$	26,811
		1998	$	10,382	$	29,430	$	4,022	$	18,212	$	—	$	25,622

THE CINCINNATI GAS & ELECTRIC COMPANY

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 2000

(in thousands)

Col. A			Col. B		Col. C				Col. D				Col. E
					Additions				Deductions
Description			Balance at Beginning of Period		Charged to Expenses		Charged to Other Accounts		For Purposes for Which Reserves Were Created		Other		Balance at Close of Period
Accumulated Provisions Deducted from Applicable Assets
	Allowance for Doubtful Accounts
		2000	$	16,740	$	14,056	$	4,486	$	16,238	$	—	$	19,044
		1999	$	17,607	$	9,754	$	4,017	$	14,638	$	—	$	16,740
		1998	$	9,199	$	16,131	$	4,021	$	11,744	$	—	$	17,607

PSI ENERGY, INC.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 2000

(in thousands)

Col. A			Col. B		Col. C					Col. D				Col. E
					Additions					Deductions
Description			Balance at Beginning of Period		Charged to Expenses		Charged to Other Accounts			For Purposes for Which Reserves Were Created		Other		Balance at Close of Period
Accumulated Provisions Deducted from Applicable Assets
	Allowance for Doubtful Accounts
		2000	$	9,934	$	7,088	$	—		$	7,705	$	—	$	9,317
		1999	$	7,893	$	11,036	$	(240	)	$	8,755	$	—	$	9,934
		1998	$	1,183	$	13,178	$	—		$	6,468	$	—	$	7,893

THE UNION LIGHT, HEAT AND POWER COMPANY

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 2000

(in thousands)

Col. A			Col. B		Col. C				Col. D				Col. E
					Additions				Deductions
Description			Balance at Beginning of Period		Charged to Expenses		Charged to Other Accounts		For Purposes for Which Reserves Were Created		Other		Balance at Close of Period
Accumulated Provisions Deducted from Applicable Assets
	Allowance for Doubtful Accounts
		2000	$	1,513	$	2,555	$	746	$	3,322	$	—	$	1,492
		1999	$	1,248	$	2,169	$	693	$	2,597	$	—	$	1,513
		1998	$	996	$	1,861	$	583	$	2,192	$	—	$	1,248

SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Cinergy Corp., The Cincinnati Gas & Electric Company, PSI Energy, Inc., and The Union Light, Heat and Power Company each duly has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CINERGY CORP.
THE CINCINNATI GAS & ELECTRIC COMPANY
PSI ENERGY, INC.
THE UNION LIGHT, HEAT AND POWER COMPANY
Registrants

Date: February 27, 2001
	By	/s/ JAMES E. ROGERS James E. Rogers Chairman

    Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the indicated registrants and in the capacities and on the dates indicated:

Signature		Title	Date
Cinergy
	Phillip R. Cox	Director
	George C. Juilfs	Director
	Thomas E. Petry	Director
	Jackson H. Randolph	Director
	Mary L. Schapiro	Director
	John J. Schiff, Jr.	Director
	Philip R. Sharp	Director
	Dudley S. Taft	Director
Cinergy and PSI
	James K. Baker	Director
	Michael G. Browning	Director
	John A. Hillenbrand II	Director
CG&E and ULH&P
	James L. Turner	Vice President and Director
CG&E
	J. Joseph Hale, Jr.	President and Director
PSI
	Vicky A. Bailey	President and Director
Cinergy, CG&E, PSI, and ULH&P
/s/ JAMES E. ROGERS James E. Rogers Attorney-in-fact for all the foregoing persons		Chairman, Chief Executive Officer, and Director President of Cinergy (Principal Executive Officer)	February 27, 2001
/s/ CHARLES J. WINGER Charles J. Winger		Vice President and Director of ULH&P (Principal Financial Officer)	February 27, 2001
/s/ BERNARD F. ROBERTS Bernard F. Roberts		Vice President and Comptroller (Principal Accounting Officer)	February 27, 2001

EX-3.C

                                    BY-LAWS


                                      OF

                                 CINERGY CORP.







Adopted:    October 24, 1994
Amended:    January 25, 1996
Amended:    December 18, 1997
Amended:    April 22, 1998
Amended:    October 15, 1998
Amended:    April 21, 1999
Amended:    April 27, 2000
Amended:    December 14, 2000




                              TABLE OF CONTENTS



                                                                                         Page
                                                                                         ----
                                                                                      
                                  ARTICLE I
                          OFFICES AND HEADQUARTERS

Section 1.1 Offices....................................................................    1
        1.2 Headquarters...............................................................    1

                                 ARTICLE II
                                STOCKHOLDERS

Section 2.1 Annual Meeting.............................................................    2
        2.2 Special Meetings...........................................................    4
        2.3 Notice of Meetings.........................................................    4
        2.4 Quorum.....................................................................    6
        2.5 Voting.....................................................................    6
        2.6 Presiding Officer and Secretary............................................    7
        2.7 Proxies....................................................................    8
        2.8 List of Stockholders.......................................................    8

                                 ARTICLE III
                                  DIRECTORS

Section 3.1 Number of Directors........................................................    9
        3.2 Election and Term of Directors.............................................    9
        3.3 Vacancies and Newly Created Directorships..................................   11
        3.4 Resignation................................................................   12
        3.5 Meetings...................................................................   12
        3.6 Quorum and Voting..........................................................   13
        3.7 Written Consent of Directors in Lieu of a Meeting..........................   13
        3.8 Compensation...............................................................   14
        3.9 Contracts and Transactions Involving Directors.............................   14

                                 ARTICLE IV
                    COMMITTEES OF THE BOARD OF DIRECTORS

Section 4.1 Appointment and Powers.....................................................   15

                                  ARTICLE V
                       OFFICERS, AGENTS AND EMPLOYEES

Section 5.1 Appointment and Term of Office.............................................   16
        5.2 The Chairman of the Board..................................................   17



                                       i




                                                                                         Page
                                                                                         ----
                                                                                      
Section 5.3 Vice-Chairman..............................................................   18
        5.4 Chief Executive Officer....................................................   18
        5.5 The President..............................................................   18
        5.6 The Vice-Presidents........................................................   19
        5.7 The Secretary..............................................................   19
        5.8 The Treasurer..............................................................   20
        5.9 The Comptroller............................................................   21
       5.10 Resignation, Compensation and Bond.........................................   21

                                 ARTICLE VI
                              INDEMNIFICATION

Section 6.1 Indemnification of Directors, Officers, Employees and Agents...............   22
        6.2 Advances for Litigation Expenses...........................................   24
        6.3 Indemnification Nonexclusive...............................................   25
        6.4 Indemnity Insurance........................................................   25
        6.5 Definitions................................................................   25


                                 ARTICLE VII
                                COMMON STOCK

Section 7.1 Certificates...............................................................   26
        7.2 Transfers of Stock.........................................................   27
        7.3 Lost, Stolen or Destroyed Certificates.....................................   27
        7.4 Stockholder Record Date....................................................   27
        7.5 Beneficial Owners..........................................................   29

                                ARTICLE VIII
                                    SEAL

Section 8.1 Seal.......................................................................   30

                                 ARTICLE IX
                              WAIVER OF NOTICE

Section 9.1 Waiver of Notice...........................................................   30

                                  ARTICLE X
                                 FISCAL YEAR

Section 10.1 Fiscal Year...............................................................   31



                                      ii




                                                                                         Page
                                                                                         ----
                                                                                      
                                 ARTICLE XI
                           CONTRACTS, CHECKS, ETC.

Section 11.1 Contracts, Checks, etc....................................................   31

                                 ARTICLE XII
                                 AMENDMENTS

Section 12.1 Amendments................................................................   31

                                ARTICLE XIII
                                  DIVIDENDS

Section 13.1 Dividends.................................................................   33



                                      iii




                                   BY-LAWS

                                     OF

                      CINERGY CORP. (THE "CORPORATION")


                                  ARTICLE I

                          OFFICES AND HEADQUARTERS

                  SECTION 1.1 OFFICES. The location of the Corporation's
principal office shall be in the City of Cincinnati, County of Hamilton, State
of Ohio. The Corporation may, in addition to the aforesaid principal office,
establish and maintain an office or offices elsewhere in Delaware, Ohio or
Indiana or in such other states and places as the Board of Directors may from
time to time find necessary or desirable, at which office or offices the books,
documents, and papers of the Corporation may be kept.

                  SECTION 1.2 HEADQUARTERS. Subject to the sentence next
following, the Corporation's headquarters and executive offices, shall be
located in the City of Cincinnati, County of Hamilton, State of Ohio. The
location of the Corporation's headquarters and executive offices may be changed
from the City of Cincinnati, County of Hamilton, State of Ohio only by the
affirmative vote of 80% of the full Board of Directors of the Corporation and
not by the vote of any committee of the Board of Directors. As used in these
By-Laws, the term "the full Board of Directors" shall mean all directors then in
office together with any vacancies, however created. For the avoidance of doubt
and as an example only, if the Board of Directors consists of 17 members and two
vacancies exist, the affirmative vote of 14 of the 15 members of the
Corporation's Board of Directors then in office would be required to authorize a
change in location of the Corporation's headquarters and executive offices. The
headquarters and executive offices of the Corporation's




subsidiary, PSI Energy, Inc., shall be located in the City of Plainfield,
Indiana and the headquarters and executive offices of the Corporation's
subsidiary, The Cincinnati Gas & Electric Company, shall be located in the City
of Cincinnati, Ohio.


                                   ARTICLE II

                                  STOCKHOLDERS

                  SECTION 2.1 ANNUAL MEETING. An annual meeting of stockholders
of the Corporation for the election of directors and for the transaction of any
other proper business shall be held at such time and date in each year as the
Board of Directors may from time to time determine. The annual meeting in each
year shall be held at such hour on said day and at such place within or without
the State of Delaware as may be fixed by the Board of Directors, or if not so
fixed, at the principal business office of the Corporation in the City of
Cincinnati, County of Hamilton, State of Ohio.

                  In lieu of the foregoing and at the sole discretion of the
Board of Directors, an annual meeting of stockholders of the Corporation for the
election of directors and for the transaction of any other proper business may
be held by means of remote communication (e.g., via the Internet) to the fullest
extent permitted by Section 211 of the Delaware General Corporation Law.

                  No business may be transacted at an annual meeting of
stockholders, other than business that is either: (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors (or any duly authorized committee thereof); (b) otherwise properly
brought before the annual meeting by or at the direction of the Board of
Directors (or any duly authorized committee thereof); or (c) otherwise properly
brought before the annual meeting by any stockholder of the Corporation: (i) who
is a stockholder of record on the


                                       2


date of the giving of the notice provided for in this Section 2.1 and on the
record date for the determination of stockholders entitled to vote at such
annual meeting; and (ii) who complies with the notice procedures set forth in
this Section 2.1.

                  In addition to any other applicable requirements, for business
to be properly brought before an annual meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written form to the
Secretary of the Corporation.

                  To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than ninety (90) calendar days nor more than one hundred
twenty (120) calendar days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; provided, however, that in the event
that the annual meeting is called for a date that is not within thirty (30)
calendar days before or after such anniversary date, notice by the stockholder
in order to be timely must be so received not later than the close of business
on the tenth (10th) calendar day following the day on which such notice of the
date of the annual meeting was mailed or such public disclosure of the date of
the annual meeting was made, whichever first occurs.

                  To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to bring
before the annual meeting: (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting; (ii) the name and record address of such stockholder;
(iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by such stockholder; (iv)
a description of all arrangements or understandings between such stockholder and
any other person or persons (including their names)


                                       3


in connection with the proposal of such business by such stockholder and any
material interest of such stockholder in such business; and (v) a
representation that such stockholder intends to appear in person or by proxy
at the annual meeting to bring such business before the meeting.

                  Notwithstanding anything to the contrary in the By-Laws, no
business shall be conducted at the annual meeting of stockholders except
business brought before the annual meeting in accordance with the procedures set
forth in this Section 2.1; provided, however, that once business has been
properly brought before the annual meeting in accordance with such procedures,
nothing in this Section 2.1 shall be deemed to preclude discussion by any
stockholder of any such business. If the presiding officer of an annual meeting
determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the presiding officer shall declare to
the meeting that the business was not properly brought before the meeting and
such business shall not be transacted.

                  SECTION 2.2 SPECIAL MEETINGS. A special meeting of the
stockholders of the Corporation entitled to vote on any business to be
considered at any such meeting may be called by the Chairman of the Board or the
President or by a majority of the members of the Board of Directors then in
office, acting with or without a meeting, or by the persons who hold 50% of all
shares outstanding and entitled to vote thereat upon notice in writing, stating
the time, place and purpose of the special meeting. The business transacted at
the special meeting shall be confined to the purposes and objects stated in the
call.

                  SECTION 2.3 NOTICE OF MEETINGS. Whenever stockholders are
required or permitted to take any action at a meeting, unless notice is waived
in writing by all stockholders entitled to vote at the meeting, a written notice
of the meeting shall be given which shall state the place, if


                                       4


any, date and hour of the meeting, the means of remote communication, if any,
by which stockholders and proxy holders may be deemed to be present in person
and vote at such meeting, and, in the case of a special meeting, the purpose
or purposes for which the meeting is called.

                  In lieu of and/or in addition to the foregoing, notice of any
meeting of the stockholders of the Corporation may be given via electronic
transmission, to the fullest extent permitted by Section 232 of the Delaware
General Corporation Law. To be valid, such electronic transmission notice must
be in a form to which the stockholder has consented. Any stockholder can revoke
consent to receive notice by a form of electronic transmission by written notice
to the Corporation. Such consent shall be deemed revoked after two consecutive
electronic transmissions by the Corporation are returned as undeliverable;
provided, however, the inadvertent failure to treat any such undeliverable
notices as a revocation shall not invalidate any meeting or other action.
"Electronic transmission" shall mean any form of communication, not directly
involving the physical transmission of paper, that creates a record and that may
be retained, retrieved, and reviewed by a recipient thereof, and that may be
directly reproduced in paper form by such a recipient through an automated
process.

                  Unless otherwise provided by law, and except as to any
stockholder duly waiving notice, the written notice of any meeting shall be
given personally, by mail, or by a form of electronic transmission consented to
by the stockholder to whom notice is given, not less than 10 days nor more than
60 days before the date of the meeting to each stockholder entitled to vote at
such meeting. If mailed, notice shall be deemed given when deposited in the
mail, postage prepaid, directed to the stockholder at his or her address as it
appears on the records of the Corporation. If by a form of electronic
transmission, notice shall be deemed given when


                                       5


transmitted to the stockholder in accordance with the provisions set forth
herein; provided, however, that if the electronic transmission notice is
posted on an electronic network (e.g., a website or chatroom), notice shall
be deemed given upon the later of (A) such posting and (B) the giving of
separate notice of the posting to the stockholder.

                  When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time, place, if any, thereof,
and the means of remote communications, if any, by which stockholders and proxy
holders may be deemed to be present in person and vote at such adjourned meeting
are announced at the meeting at which the adjournment is taken. At the adjourned
meeting the Corporation may transact any business which might have been
transacted at the original meeting. If, however, the adjournment is for more
than 30 days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.

                  SECTION 2.4 QUORUM. Except as otherwise provided by law or by
the Certificate of Incorporation or by these By-Laws in respect of the vote
required for a specified action, at any meeting of stockholders the holders of a
majority of the outstanding stock entitled to vote thereat, either present, in
person or represented by proxy, shall constitute a quorum for the transaction of
any business, but the stockholders present, although less than a quorum, may
adjourn the meeting to another time or place and, except as provided in the last
paragraph of Section 2.3 of these By-Laws, notice need not be given of the
adjourned meeting.

                  SECTION 2.5 VOTING. Whenever directors are to be elected at a
meeting, they shall be elected by a plurality of the votes of the shares present
in person or represented by proxy at the meeting and entitled to vote thereon.
Whenever any corporate action, other than the election of


                                       6


directors, is to be taken by vote of stockholders at a meeting, it shall,
except as otherwise required by law or by the Certificate of Incorporation or
by these By-Laws, be authorized by the affirmative vote of the majority of
shares present in person or represented by proxy at the meeting and entitled
to vote thereon.

                  Except as otherwise provided by law, or by the Certificate of
Incorporation, each holder of record of stock of the Corporation entitled to
vote on any matter at any meeting of stockholders shall be entitled to one (1)
vote for each share of such stock standing in the name of such holder on the
stock ledger of the Corporation on the record date for the determination of the
stockholders entitled to vote at the meeting.

                  Upon the demand of any stockholder entitled to vote, the vote
for directors or the vote on any other matter at a meeting shall be by written
ballot, but otherwise the method of voting and the manner in which votes are
counted shall be discretionary with the presiding officer at the meeting.

                  SECTION 2.6 PRESIDING OFFICER AND SECRETARY. At every meeting
of stockholders, and where the offices of the Chairman of the Board and the
Chief Executive Officer are held by different individuals, the Chief Executive
Officer, or, in his or her absence, the Chairman of the Board, or, in his or her
absence, the appointee of the meeting, shall preside. The Secretary, or, in his
or her absence, an Assistant Secretary, or if none be present, the appointee of
the presiding officer of the meeting, shall act as secretary of the meeting. The
presiding officer shall have the authority to make all rules regarding the
conduct of any meeting including, but not limited to, setting the agenda and/or
determining the proper order of business, making arrangements with respect to
matters of safety and security, determining reserved seating arrangements for
certain


                                       7


stockholders and/or others in attendance, establishing guidelines or
procedures for participation by stockholders and/or others in attendance, and
making any determination with respect to possible adjournment and/or
postponement.

                  SECTION 2.7 PROXIES. Each stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent to corporate action in
writing without a meeting may authorize another person or persons to act for him
or her by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period. Every proxy
shall be signed by the stockholder or by his duly authorized attorney. A
stockholder may authorize another person or persons to act for him as proxy by
transmitting or authorizing the transmission of a telegram, cablegram, or other
means of electronic transmission to the person who will be the holder of the
proxy or to a proxy solicitation firm, proxy support service organization or
like agent duly authorized by the person who will be the holder of the proxy to
receive such transmission if such transmission is submitted with information
from which it may be determined that the transmission was authorized by the
stockholder.

                  SECTION 2.8 LIST OF STOCKHOLDERS. The officer who has charge
of the stock ledger of the Corporation shall prepare and make, at least 10 days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, for a period of at least 10 days prior
to the meeting: (i) on a reasonably accessible electronic network, provided that
the information required to gain access to such list is provided with the notice
of the meeting, or (ii) during ordinary business hours, at the principal


                                       8


place of business of the Corporation. If the meeting is to be held at a
place, the list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any
stockholder who is present.

                  If any meeting of the Corporation's stockholders is to be held
solely by means of remote communications (e.g., the Internet), the list must be
made available to the stockholders during the entire meeting on a reasonably
accessible electronic network. The notice of meeting must provide information by
which the stockholder can gain access to the electronic list.

                  The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
Section or the books of the Corporation, or to vote in person or by proxy at any
meeting of stockholders.


                                   ARTICLE III

                                    DIRECTORS

                  SECTION 3.1 NUMBER OF DIRECTORS. The Board of Directors shall
consist of a number of directors not less than seven (7) and not more than
twenty-three (23) as determined by a vote of not less than 75% of the full Board
of Directors ("Supermajority Vote"). Any such determination made by the Board of
Directors shall continue in effect unless and until changed by the Board of
Directors by Supermajority Vote, but no such change shall affect the term of any
director then in office.

                  SECTION 3.2 ELECTION AND TERM OF DIRECTORS. Only persons who
are nominated in accordance with the following procedures shall be eligible for
election as directors. Except as may be required by applicable law, no person
who is, at the time of nomination, 70 years of age or older


                                       9


shall be eligible for election as a director. Nominations of persons as
candidates for election as directors of the Corporation may be made at a
meeting of stockholders (i) by or at the direction of the Board of Directors
acting by Supermajority Vote (or by a unanimous vote of the remaining
directors if a Supermajority Vote is not obtainable because the number of
vacancies on the Board of Directors); or (ii) by any stockholder of the
Corporation entitled to vote for the election of directors at such meeting
who complies with the notice procedures set forth herein. Any nomination
other than those governed by clause (i) of the preceding sentence shall be
made pursuant to timely notice in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice shall be delivered to or
mailed and received at the principal office of the Corporation in the State
of Ohio not less than 50 days prior to the meeting; provided, however, that
if less than 60 days' notice or prior public disclosure of the date of the
meeting is given to stockholders or made public, to be timely notice by a
stockholder must be so received not later than the close of business on the
tenth day following the day on which such notice of the date of the meeting
was mailed or such public disclosure was made. Such stockholder's notice to
the Secretary shall set forth: (a) as to each person whom the stockholder
proposes to nominate for election as director: (i) the name, age, business
address, and residence address of such person; (ii) the principal occupation
or employment of such person; (iii) the class and number of any shares of
capital stock of the Corporation that are beneficially owned by such person;
and (iv) any other information relating to such person that is required to be
disclosed in solicitations for proxies for the election of directors pursuant
to any then existing rules or regulations promulgated under the Securities
Exchange Act of 1934, as amended; and (b) as to the stockholder giving
notice: (i) the name and record address of such stockholder; (ii) the class
and number of shares of capital stock of


                                       10


the Corporation that are beneficially owned by such stockholder, and (iii)
the period of time such stockholder has held such shares. The Corporation may
require any proposed nominee to furnish such other information as may
reasonably be required by the Corporation to determine the eligibility of
such proposed nominee to serve as a director. No person otherwise eligible
for election as a director shall be eligible for election as a director
unless nominated as set forth herein.

                  Commencing on October 24, 1994 (the "Classification Date") of
the Board of Directors of the Corporation, the terms of office of the Board of
Directors shall be divided into three (3) classes, Class I, Class II and Class
III, as determined by the Board of Directors. All classes shall be as nearly
equal in number as possible.

                  The terms of office of directors classified shall be as
follows: (1) that of Class I shall expire at the annual meeting of stockholders
that occurs within the first year after the Classification Date, (2) that of
Class II shall expire at the annual meeting of stockholders that occurs within
the second year after the Classification Date, and (3) that of Class III shall
expire at the annual meeting of stockholders that occurs within the third year
after the Classification Date. At each annual meeting of stockholders after the
Classification Date, the successors to directors whose terms shall expire shall
be elected to serve from the time of election and qualification until the third
annual meeting following election and until a successor shall have been elected
and qualified or until his earlier resignation, removal from office or death. As
being under 70 years of age constitutes a continuing qualification for service
on the Board of Directors, any director who reaches the age of 70 years while in
office shall, except as limited by applicable law, promptly resign from the
Corporation's Board of Directors.

                  SECTION 3.3 VACANCIES AND NEWLY CREATED DIRECTORSHIPS.
Vacancies and newly


                                       11



created directorships resulting from any increase in the authorized number of
directors may be filled by election at a meeting of stockholders. Except as
otherwise provided by law, and notwithstanding the provision of Section 3.6,
the remaining directors, whether or not constituting a majority of the whole
authorized number of directors, may, by not less than a Supermajority Vote
(or by a unanimous vote of the remaining directors if a Supermajority Vote is
not obtainable because of the number of vacancies on the Board of Directors)
fill any vacancy in the Board, however arising, for the unexpired term
thereof. Any person elected to fill a vacancy in the Board shall hold office
until the expiration of the term of office for the class to which he or she
is elected and until a successor is elected and qualified or until his or her
earlier resignation, removal from office or death.

                  SECTION 3.4 RESIGNATION. Any director may resign at any time
upon notice given in writing or by electronic transmission to the Corporation.
Any such resignation shall take effect at the time specified therein or, if the
time be not specified, upon receipt thereof, and the acceptance of such
resignation, unless required by the terms thereof, shall not be necessary to
make such resignation effective.

                  SECTION 3.5 MEETINGS. Meetings of the Board of Directors,
regular or special, may be held at any place within or without the State of
Delaware. Members of the Board of Directors, or of any committee designated by
the Board, may participate in a meeting of such Board or committee by means of
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting by such means shall constitute presence in person at such meeting. An
annual meeting of the Board of Directors shall be held within 10 days after each
annual election of directors. If such


                                       12



election occurs at an annual meeting of stockholders, the annual meeting of
the Board of Directors shall be held at such time and place as shall be
specified by the Board, and no notice thereof need be given. The Board of
Directors may fix times and places for regular meetings of the Board and no
notice of such meetings need be given. A special meeting of the Board of
Directors shall be held whenever called by the Chairman of the Board, the
Chief Executive Officer, the President or by the written request of a
majority of the members of the Board of Directors, at such time and place as
shall be specified in the notice or waiver thereof. Notice of each special
meeting shall be given by the Secretary or by a person calling the meeting to
each director in writing, through the mail, or personally served or by
telephone, telecopy, telegram, cablegram or radiogram, or via any form of
electronic transmission, in each such case within such time frame as the
person calling the meeting shall deem appropriate, and such notice shall be
deemed to be given at the time when the same shall be transmitted.

                  SECTION 3.6 QUORUM AND VOTING. A majority of the full Board of
Directors shall constitute a quorum for the transaction of business, but, if
there be less than a quorum at any meeting of the Board of Directors, a majority
of the directors present may adjourn the meeting from time to time, and no
further notice thereof need be given other than announcement at the meeting
which shall be so adjourned. Except as otherwise provided by law, by the
Certificate of Incorporation, or by these By-Laws (including, without
limitation, where any Supermajority Vote or any other vote in excess of a
majority is required), the vote of a majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors.

                  SECTION 3.7 WRITTEN CONSENT OF DIRECTORS IN LIEU OF A MEETING.
Any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee


                                       13



thereof may be taken without a meeting if all members of the Board or of such
committee, as the case may be, consent thereto in writing or by electronic
transmission, and the writing or writings or electronic transmissions are
filed with the minutes of proceedings of the Board or committee.

                  SECTION 3.8 COMPENSATION. Each director of the Corporation
(other than directors who are salaried officers of the Corporation or any of its
subsidiaries) shall be entitled to receive as compensation for services such
reasonable compensation, which may include pension, disability and death
benefits, as may be determined from time to time by the Board of Directors.
Reasonable compensation may also be paid to any person other than a director
officially called to attend any such meeting.

                  SECTION 3.9 CONTRACTS AND TRANSACTIONS INVOLVING DIRECTORS. No
contract or transaction between the Corporation and one or more of its directors
or officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his, her
or their votes are counted for such purpose, if: (1) the material facts as to
his or her relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (2) the material facts as to
his or her relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction


                                       14



is specifically approved in good faith by vote of the stockholders; or (3)
the contract or transaction is fair as to the Corporation as of the time it
is authorized, approved or ratified, by the Board of Directors, a committee
thereof, or the stockholders. Common or interested directors may be counted
in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.

                                   ARTICLE IV

                      COMMITTEES OF THE BOARD OF DIRECTORS

                  SECTION 4.1 APPOINTMENT AND POWERS. The Board of Directors
may, by resolution adopted by a majority of the Board, designate from time to
time (subject to Article V hereof) no less than three (3) and no more than six
(6) of their number to constitute an Executive Committee, and may delegate to
such committee power to authorize the seal of the Corporation to be affixed to
all papers which may require it and to exercise in the intervals between the
meetings of the Board of Directors the powers of the Board in the management of
the business and affairs of the Corporation to the fullest extent permitted by
Section 141(c)(1) of the Delaware General Corporation Law; provided, however,
that the Executive Committee shall not have the power or authority to take any
action for which a Supermajority Vote or other vote in excess of a majority of
the Board of Directors is required. Each member of the Executive Committee shall
continue to be a member thereof only during the pleasure of a majority of the
full Board of Directors.

                  The Executive Committee may act by a majority of its members
at a meeting or by a writing signed by all of its members.

                  All action by the Executive Committee shall be reported to the
Board of Directors at


                                       15



its meeting next succeeding such action.

                  Non-employee members of such Executive Committee shall be
entitled to receive such fees and compensation as the Board of Directors may
determine.

                  The Board of Directors may also appoint a Finance Committee, a
Corporate Governance Committee, an Audit Committee, a Public Policy Committee
and a Compensation Committee and may also appoint such other standing or
temporary committees from time to time as they may see fit, delegating to such
committees all or any part of their own powers (subject to the provisions of
these By-Laws); provided, however, that any compensation or benefits to be paid
to an executive officer who is also a director must be approved by the Board of
Directors. The members of such committees shall be entitled to receive such fees
as the Board may determine.

                  The Board of Directors shall not amend, modify, vary or waive
any of the terms of the Amended and Restated Agreement and Plan of
Reorganization by and among The Cincinnati Gas & Electric Company, PSI
Resources, Inc., PSI Energy, Inc., the Corporation, Cinergy Corp., an Ohio
corporation, and Cinergy Sub, Inc. dated as of December 11, 1992, as amended and
restated as of July 2, 1993 and as of September 10, 1993 and as further amended
as of June 20, 1994, as of July 26, 1994 and as of September 30, 1994 (the
"Merger Agreement") other than by a Supermajority Vote of the Board of
Directors.

                                    ARTICLE V

                         OFFICERS, AGENTS AND EMPLOYEES

                  SECTION 5.1 APPOINTMENT AND TERM OF OFFICE. The executive
officers of the Corporation, shall consist of a Chairman of the Board, a
Vice-Chairman, a Chief Executive


                                       16



Officer, a President, one or more Vice-Presidents, a Secretary, a Treasurer
and a Comptroller, all of whom shall be elected by the Board of Directors by
a Supermajority Vote, and shall hold office for one (1) year and until their
successors are chosen and qualified. Any number of such offices may be held
by the same person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity. Any vacancy occurring in the office of
the Chairman, Chief Executive Officer or President shall be filed by
Supermajority Vote of the Board of Directors. The Chairman, Chief Executive
Officer or President shall be subject to removal without cause only by
Supermajority Vote of the Board of Directors at a special meeting of the
Board of Directors called for that purpose.

                  The Board of Directors may appoint, and may delegate power to
appoint, such other non-executive officers, agents and employees as it may deem
necessary or proper, who shall hold their offices or positions for such terms,
have such authority and perform such duties as may from time to time be
determined by or pursuant to authorization of the Board of Directors.

                  SECTION 5.2 THE CHAIRMAN OF THE BOARD. The Chairman of the
Board shall be a director and shall preside at all meetings of the Board of
Directors and, in the absence or inability to act of the Chief Executive
Officer, meetings of stockholders and shall, subject to the Board's direction
and control, be the Board's representative and medium of communication, and
shall perform such other duties as may from time-to-time be assigned to the
Chairman of the Board by Supermajority Vote of the Board of Directors. The
Chairman of the Board shall direct the long-term strategic planning process of
the Corporation and shall also lend his or her expertise to the President, as
may be requested from time-to-time by the President. The Chairman shall be a
member of the Executive Committee.


                                       17



                  SECTION 5.3 VICE-CHAIRMAN. The Vice-Chairman of the Board
shall be a director and shall preside at meetings of the Board of Directors in
the absence or inability to act of the Chairman of the Board or meetings of
stockholders in the absence or inability to act of the Chief Executive Officer
and the Chairman of the Board. The Vice-Chairman shall perform such other duties
as may from time-to-time be assigned to him or her by Supermajority Vote of the
Board of Directors. The Vice-Chairman shall be a member of the Executive
Committee and may be a member of such other committees of the Board as it shall
from time to time deem appropriate.

                  SECTION 5.4 CHIEF EXECUTIVE OFFICER. The Chief Executive
Officer shall be a director and shall preside at all meetings of the
stockholders, and, in the absence or inability to act of the Chairman of the
Board and the Vice-Chairman, meetings of the Board of Directors, and shall
submit a report of the operations of the Corporation for the fiscal year to the
stockholders at their annual meeting and from time-to-time shall report to the
Board of Directors all matters within his or her knowledge which the interests
of the Corporation may require be brought to their notice. The Chief Executive
Officer shall be the chairman of the Executive Committee and ex officio a member
of all standing committees. Where the offices of President and Chief Executive
Officer are held by different individuals, the President will report directly to
the Chief Executive Officer.

                  SECTION 5.5 THE PRESIDENT. The President shall be the chief
operating officer of the Corporation. The President shall have general and
active management and direction of the affairs of the Corporation, shall have
supervision of all departments and of all officers of the Corporation, shall see
that the orders and resolutions of the Board of Directors and of the Executive
Committee are carried into effect, and shall have the general powers and duties
of supervision and management usually vested in the office of President of a
corporation. All corporate officers and


                                       18



functions except those reporting to the Chairman of the Board or the Chief
Executive Officer shall report directly to the President.

                  SECTION 5.6 THE VICE-PRESIDENTS. The Vice-Presidents shall
perform such duties as the Board of Directors shall, from time to time, require.
In the absence or incapacity of the President, the Vice President designated by
the President or Board of Directors or Executive Committee shall exercise the
powers and duties of the President.

                  SECTION 5.7 THE SECRETARY. The Secretary shall attend all
meetings of the Board of Directors, of the Executive Committee and any other
committee of the Board of Directors and of the stockholders and act as clerk
thereof and record all votes and the minutes of all proceedings in a book to be
kept for that purpose, and shall perform like duties for the standing committees
when required.

                  The Secretary shall keep in safe custody the seal of the
Corporation and, whenever authorized by the Board of Directors or the Executive
Committee, affix the seal to any instrument requiring the same.

                  The Secretary shall see that proper notice is given of all the
meetings of the stockholders of the Corporation and of the Board of Directors
and shall perform such other duties as may be prescribed from time to time by
the Board of Directors, the Chairman, the Chief Executive Officer, or the
President.

                  Assistant Secretaries. At the request of the Secretary, or in
his or her absence or inability to act, the Assistant Secretary or, if there be
more than one, the Assistant Secretary designated by the Secretary, shall
perform the duties of the Secretary and when so acting shall have all the powers
of and be subject to all the restrictions of the Secretary. The Assistant
Secretaries


                                       19



shall perform such other duties as may from time to time be assigned
to them by the President, the Secretary, or the Board of Directors.

                  SECTION 5.8 THE TREASURER. The Treasurer shall be the
financial officer of the Corporation, shall keep full and accurate accounts of
all collections, receipts and disbursements in books belonging to the
Corporation, shall deposit all moneys and other valuables in the name and to the
credit of the Corporation, in such depositories as may be directed by the Board
of Directors, shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, the Chairman, the Chief Executive Officer, or the
President, taking proper vouchers therefor, and shall render to the President,
the Chief Executive Officer, the Chairman, and/or directors at all regular
meetings of the Board, or whenever they may require it, and to the annual
meeting of the stockholders, an account of all his or her transactions as
Treasurer and of the financial condition of the Corporation.

                  The Treasurer shall also perform such other duties as the
Board of Directors, the Chairman, the Chief Executive Officer, or the President
may from time to time require.

                  If required by the Board of Directors the Treasurer shall give
the Corporation a bond in a form and in a sum with surety satisfactory to the
Board of Directors for the faithful performance of the duties of his or her
office and the restoration to the Corporation in the case of his or her death,
resignation or removal from office of all books, papers, vouchers, money and
other property of whatever kind in his or her possession belonging to the
Corporation.

                  Assistant Treasurers. At the request of the Treasurer, or in
his or her absence or inability to act, the Assistant Treasurer or, if there be
more than one, the Assistant Treasurer designated by the Treasurer, shall
perform the duties of the Treasurer and when so acting shall


                                       20



have all the powers of and be subject to all the restrictions of the
Treasurer. The Assistant Treasurers shall perform such other duties as may
from time to time be assigned to them by the President, the Treasurer, or the
Board of Directors.

                  SECTION 5.9 THE COMPTROLLER. The Comptroller shall have
control over all accounts and records of the Corporation pertaining to
moneys, properties, materials and supplies. He or she shall have executive
direction over the bookkeeping and accounting departments and shall have
general supervision over the records in all other departments pertaining to
moneys, properties, materials and supplies. He or she shall have such other
powers and duties as are incident to the office of Comptroller of a
corporation and shall be subject at all times to the direction and control of
the Board of Directors, the Chairman, the Chief Executive Officer, the
President, or a Vice President.

                  Assistant Comptrollers. At the request of the Comptroller,
or in his or her absence or inability to act, the Assistant Comptroller or,
if there be more than one, the Assistant Comptroller designated by the
Comptroller, shall perform the duties of the Comptroller and when so acting
shall have all the powers of and be subject to all the restrictions of the
Comptroller. The Assistant Comptrollers shall perform such other duties as
may from time to time be assigned to them by the President, the Comptroller,
or the Board of Directors.

                  SECTION 5.10 RESIGNATION, COMPENSATION AND BOND. Any
resignation from office by any officer of the Corporation also shall be
deemed, to the extent applicable, to be a resignation from any similar office
held by such resigning officer at any affiliate or subsidiary of the
Corporation, unless otherwise expressly provided for within the resigning
officer's letter of resignation. The compensation of the officers of the
Corporation shall be fixed by the


                                       21



Compensation Committee of the Board of Directors or, in lieu of the
Compensation Committee, by the Board of Directors, but this power may be
delegated to any officer in respect of other officers under his or her
control. The Corporation may secure the fidelity of any or all of its
officers, agents or employees by bond or otherwise.


                                   ARTICLE VI

                                 INDEMNIFICATION

                  SECTION 6.1  INDEMNIFICATION OF DIRECTORS, OFFICERS,
                               EMPLOYEES AND AGENTS.

                  (A) Any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than any action or suit by or in the right of the Corporation) by reason of
the fact that he or she is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise (specifically including employee
benefit plans), shall be indemnified by the Corporation, if, as and to the
extent authorized by applicable law, against expenses (specifically including
attorney's fees), judgments, fines (specifically including any excise taxes
assessed on a person with respect to an employee benefit plan) and amounts
paid in settlement actually and reasonably incurred by him or her in
connection with the defense or settlement of such action, suit or proceeding,
if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Corporation
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his or her conduct was unlawful. The termination of any
action, suit or proceeding by


                                       22



judgment, order, settlement, or conviction, or upon a plea of nolo contendere
or its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner he or she reasonably believed to be
in and not opposed to the best interests of the Corporation and, with respect
to any criminal action or proceeding, he or she had no reasonable cause to
believe his or her conduct was unlawful.

                  (B) The Corporation shall, to the extent not prohibited by
applicable law, indemnify or agree to indemnify any person who was or is a
party, or is threatened to be made a party, to any threatened, pending, or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a
director, officer, employee, or agent of the Corporation or is or was serving
at the request of the Corporation as a director, trustee, officer, employee,
or agent of another corporation, domestic or foreign, non-profit or
for-profit, partnership, joint venture, trust or other enterprise
(specifically including employee benefit plans), against expenses (including
attorneys' fees) actually and reasonably incurred by him or her in connection
with the defense or settlement of such action or suit if he or she acted in
good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the Corporation; provided that, no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the Corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.

                  (C) To the extent that a director or officer of the
Corporation has been successful on

                                       23



the merits or otherwise in defense of any action, suit, or proceeding
referred to in the paragraphs (A) or (B) of this Section, or in defense of
any claim, issue, or matter therein, he or she shall be indemnified against
expenses, specifically including attorneys' fees, actually and reasonably
incurred by him or her in connection therewith.

                  (D) Any indemnification under Paragraphs (A) and (B) of
this Section, unless ordered by a court, shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee, or agent is proper in the
circumstances because he or she has met the applicable standard of conduct
set forth in such Paragraphs (A) and (B). Such determination shall be made as
follows: (1) by a majority vote of the Board of Directors, even if less than
a quorum, consisting of directors who were not parties to such action, suit,
or proceeding; (2) by a committee of such directors designated by a majority
vote of such directors, even if less than a quorum; (3) if the quorum
described in (D)(1) of this Section is not obtainable or, even if obtainable
a quorum of disinterested directors so directs, by independent legal counsel
in a written opinion; or (4) by the stockholders.

                  SECTION 6.2 ADVANCES FOR LITIGATION EXPENSES. Expenses
(including attorneys' fees) incurred by a director, officer, employee, or
agent of the Corporation in defending any civil, criminal, administrative or
investigative action, suit or proceeding, shall be paid by the Corporation as
they are incurred in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director,
officer, employee, or agent: (1) to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article VI; and (2) to cooperate reasonably with the
Corporation concerning the action, suit or proceeding.


                                       24



                  SECTION 6.3 INDEMNIFICATION NONEXCLUSIVE. The indemnification
provided by this Article shall not be exclusive of and shall be in addition to
any other rights granted to those seeking indemnification under the Certificate
of Incorporation, these By-Laws, any agreement, any vote of stockholders or
disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office and
shall continue as to a person who has ceased to be a director, trustee, officer,
employee, or agent and shall inure to the benefit of the heirs, executors, and
administrators of such a person.

                  SECTION 6.4 INDEMNITY INSURANCE. The Corporation may
purchase and maintain insurance or furnish similar protection, including but
not limited to trust funds, letters of credit, or self-insurance, on behalf
of or for any person who is or was a director, officer, employee, or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, trustee, officer, employee or agent of another corporation,
domestic or foreign, nonprofit or for profit, partnership, joint venture,
trust, or other enterprise, against any liability asserted against him or her
and incurred by him or her in any such capacity, or arising out of his or her
status as such, whether or not the Corporation would have the power to
indemnify him or her against such liability under this Article. Insurance may
be purchased from or maintained with a person in which the Corporation has a
financial interest.

                  SECTION 6.5 DEFINITIONS. For purposes of this Article: (1)
a person who acted in good faith and in a manner he or she reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan shall conclusively be deemed to have acted in a manner
"not opposed to the best interests of the Corporation"; (2) a person shall be
deemed to have acted in "good faith" and in a manner he reasonably believed
to be in or not opposed to the best


                                       25



interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was
unlawful, if his action is based on the records or books of account of the
Corporation or another enterprise, or on information supplied to him by the
officers of the Corporation or another enterprise in the course of their
duties, or on the advice of legal counsel for the Corporation or another
enterprise or on information or records given or reports made to the
Corporation or another enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care
by the Corporation or another enterprise; (3) the term "another enterprise"
as used in this Article VI shall mean any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise
of which such person is or was serving at the request of the Corporation as a
director, officer, employee or agent; and (4) references to "the Corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger, which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
employees, and agents.


                                   ARTICLE VII

                                  COMMON STOCK

                  SECTION 7.1 CERTIFICATES. Certificates for stock of the
Corporation shall be in such form as shall be approved by the Board of
Directors and shall be signed in the name of the Corporation by the Chairman
or the President or a Vice President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary. Such certificates may
be sealed with the seal of the Corporation or a facsimile thereof. Any of or
all the signatures on a certificate


                                       26



may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same
effect as if he or she were such officer, transfer agent or registrar at the
date of issue.

                  SECTION 7.2 TRANSFERS OF STOCK. Transfers of stock shall be
made only upon the books of the Corporation by the holder, in person or by
duly authorized attorney, and on the surrender of the certificate or
certificates for such stock properly endorsed. The Board of Directors shall
have the power to make all such rules and regulations, not inconsistent with
the Certificate of Incorporation and these By-Laws and the law, as the Board
of Directors may deem appropriate concerning the issue, transfer and
registration of certificates for stock of the Corporation. The Board of
Directors or the Finance Committee may appoint one (1) or more transfer
agents or registrars of transfers, or both, and may require all stock
certificates to bear the signature of either or both.

                  SECTION 7.3 LOST, STOLEN OR DESTROYED CERTIFICATES. The
Corporation may issue a new stock certificate in the place of any certificate
theretofore issued by it, alleged to have been lost, stolen or destroyed, and
the Corporation may require the owner of the lost, stolen or destroyed
certificate or his or her legal representative to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or
the issuance of any such new certificate. The Board of Directors may require
such owner to satisfy other reasonable requirements.

                  SECTION 7.4 STOCKHOLDER RECORD DATE. (A) In order that the
Corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any


                                       27



adjournment thereof, the Board of Directors may fix a record date, which
record date shall not be more than sixty (60) nor less than ten (10) days
before the date of such meeting.

                  If no record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at
a meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held.

                  A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; providing, however, that the Board of Directors
may fix a new record date for the adjourned meeting.

                  (B) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall not be more
than ten days after the date upon which the resolution fixing the record date
is adopted by the Board of Directors. If no record date has been fixed by the
Board of Directors, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is required by law, shall be the first date
on which a signed written consent setting forth the action taken or proposed
to be taken is delivered to the Corporation by delivery to its registered
office in this State, its principal place of business, or an officer or agent
of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to a corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested. If no record date has been fixed by the Board of Directors


                                       28



and prior action by the Board of Directors is required by law, the record
date for determining stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the day on
which the Board of Directors adopts the resolutions taking such prior action.

                  (C) In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or the stockholders entitled to
exercise any rights in respect of any change, conversion or exchange of
stock, or for the purpose of any other lawful action, the Board of Directors
may fix a record date, which record date shall not precede the date upon
which the resolution fixing the record date is adopted, and which record date
shall be not more than sixty days prior to such action. If no record date is
fixed, the record date for determining stockholders for any such purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.

                  SECTION 7.5 BENEFICIAL OWNERS. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and
to hold liable for calls and assessments a person registered on its books as
the owner of shares, and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except
as otherwise provided by law.







                                       29



                                  ARTICLE VIII

                                      SEAL

                  SECTION 8.1 SEAL. The seal of the Corporation shall be
circular in form and shall bear, in addition to any other emblem or device
approved by the Board of Directors, the name of the Corporation, the year of
its incorporation and the words "Corporate Seal" and "Delaware". The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or in
any other manner reproduced.


                                   ARTICLE IX

                                WAIVER OF NOTICE

                  SECTION 9.1 WAIVER OF NOTICE. Whenever notice is required to
be given by statute, or under any provision of the Certificate of Incorporation
or these By-Laws, a written waiver thereof, signed by the person entitled to
notice, or a waiver by electronic transmission by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. In the case of a stockholder, such waiver of notice may be signed by
such stockholder's attorney or proxy duly appointed in writing. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders,
directors or members of a committee of directors need be specified in any
written waiver of notice or any waiver by electronic transmission.


                                       30



                                    ARTICLE X

                                   FISCAL YEAR

                  SECTION 10.1 FISCAL YEAR. The Fiscal Year of the
Corporation shall begin on the first day of January and terminate on the
thirty-first day of December each year.


                                   ARTICLE XI

                             CONTRACTS, CHECKS, ETC.

                  SECTION 11.1 CONTRACTS, CHECKS, ETC. The Board of Directors
or the Finance Committee may by resolution adopted at any meeting designate
officers of the Corporation who may in the name of the Corporation execute
contracts, checks, drafts, and orders for the payment of money in its behalf
and, in the discretion of the Board of Directors or the Finance Committee,
such officers may be so authorized to sign such contracts or checks singly
without the necessity of counter-signature.


                                   ARTICLE XII

                                   AMENDMENTS

                  SECTION 12.1 AMENDMENTS. Except as set forth below, these
By-Laws may be amended or repealed by the Board of Directors or by the
affirmative vote of the holders of a majority of the issued and outstanding
common stock of the Corporation, or by the unanimous written consent of the
holders of the issued and outstanding common stock of the Corporation.


                                       31



                  Notwithstanding the foregoing paragraph, the affirmative
vote of the holders of at least 80% of the issued and outstanding shares of
common stock of the Corporation shall be required to amend, alter or repeal,
or adopt any provision inconsistent with, the requirements of Section 2.2,
Section 3.1, Section 3.2, Section 3.3 or this paragraph of Section 12.1 of
these By-Laws, in addition to any requirements of law and any provisions of
the Certificate of Incorporation, any By-law, or any resolution of the Board
of Directors adopted pursuant to the Certificate of Incorporation (and
notwithstanding that a lesser percentage may be specified by law, the
Certificate of Incorporation, these By-Laws, such resolution, or otherwise).

                  Notwithstanding any of the foregoing, the affirmative vote
of a majority of the holders of the issued and outstanding common stock of
the Corporation shall be required to amend, alter or repeal, or adopt any
provision inconsistent with (i) any provision of these By-Laws requiring a
Supermajority Vote of the Board of Directors (including this provision of
Section 12.1) or (ii) the responsibilities of the Chief Executive Officer or
President as set forth in Section 5.4 or Section 5.5, and the Board of
Directors shall not recommend any such amendment to such provisions to the
stockholders unless the proposed amendment is approved by the Board of
Directors acting by Supermajority Vote.







                                       32



                                  ARTICLE XIII

                                    DIVIDENDS

                  SECTION 13.1 DIVIDENDS. Dividends upon the capital stock of
the Corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.






























                                       33

EX-10.SS

                              EMPLOYMENT AGREEMENT


         This EMPLOYMENT AGREEMENT is made and entered into as of the 12th day
of February, 2001 (the "Effective Date"), by and between Cinergy and R. Foster
Duncan (the "Executive"). The capitalized words and terms used throughout this
Agreement are defined in Section 11.

                                    RECITALS

         A. The Executive is qualified and available to assume responsibility
for and hold the position of Executive Vice President and Chief Financial
Officer of Cinergy. Cinergy desires to secure the employment of the Executive in
accordance with this Agreement.

         B. The Executive is willing to enter and continue to remain in the
employ of Cinergy, and any successor to Cinergy, on the terms and conditions set
forth in this Agreement.

                                    AGREEMENT

         In consideration of the mutual promises, covenants and agreements set
forth below, the parties agree as follows:

1.       EMPLOYMENT AND TERM

         a.       Cinergy, and any successor to Cinergy, agree to employ the
                  Executive, and the Executive agrees to enter and remain in the
                  employ of Cinergy, in accordance with the terms and provisions
                  of this Agreement, for the Employment Period set forth in
                  Subsection b. The parties agree that the Company will be
                  responsible for carrying out all of the promises, covenants,
                  and agreements of Cinergy set forth in this Agreement.

         b.       The Employment Period of this Agreement will commence as of
                  the Effective Date and continue until December 31, 2003;
                  provided that, commencing on December 31, 2001, and on each
                  subsequent December 31, the Employment Period will be extended
                  for one (1) additional year unless either party gives the
                  other party written notice not to extend this Agreement at
                  least ninety (90) days before the extension would otherwise
                  become effective.

2.       DUTIES AND POWERS OF EXECUTIVE

         a.       POSITION. The Executive will serve Cinergy as Executive Vice
                  President and Chief Financial Officer, and he will have such
                  responsibilities, duties, and authority as are customary for
                  someone of that position and such additional duties,
                  consistent with his position, as may be assigned to him from
                  time to time during the Employment Period by the Board of
                  Directors or the Chief Executive Officer.




         b.       PLACE OF PERFORMANCE. In connection with the Executive's
                  employment, the Executive will be based at the principal
                  executive offices of Cinergy, 221 East Fourth Street,
                  Cincinnati, Ohio, and, except for required business travel to
                  an extent substantially consistent with the present business
                  travel obligations of Cinergy executives who have positions of
                  authority comparable to that of the Executive, the Executive
                  will not be required to relocate to a new principal place of
                  business that is more than thirty (30) miles from Cinergy's
                  current principal executive offices.

3.       COMPENSATION. The Executive will receive the following compensation for
         his services under this Agreement.

         a.       SALARY. The Executive's Annual Base Salary, payable not less
                  often than semi-monthly, will be at the annual rate of not
                  less than $475,000.00. The Board of Directors or its designee
                  may, from time to time, increase the Annual Base Salary as the
                  Board of Directors deems to be necessary or desirable,
                  including without limitation adjustments to reflect increases
                  in the cost of living. Any increase in the Annual Base Salary
                  will not serve to limit or reduce any other obligation of
                  Cinergy under this Agreement. The Annual Base Salary will not
                  be reduced except for across-the-board salary reductions
                  similarly affecting all Cinergy management personnel. If
                  Annual Base Salary is increased during the Employment Period,
                  then the increased salary will be the Annual Base Salary for
                  all purposes under this Agreement.

         b.       RETIREMENT, INCENTIVE, WELFARE BENEFIT PLANS AND OTHER
                  BENEFITS. During the Employment Period, the Executive will be
                  eligible, and Cinergy will take all necessary action to cause
                  the Executive to become eligible, to participate in all
                  short-term and long-term incentive, stock option, restricted
                  stock, performance unit, savings, retirement and welfare
                  plans, practices, policies and programs applicable generally
                  to employees and/or other senior executives of Cinergy who are
                  considered Tier II executives for compensation purposes,
                  except with respect to any plan, practice, policy or program
                  to which the Executive has waived his rights in writing.

                  The Executive will be a participant in the Senior Executive
                  Supplement portion of the Cinergy Corp. Supplemental Executive
                  Retirement Plan and will be fully and immediately vested, as
                  of the Effective Date of this Agreement, in any benefit that
                  he accrues under that plan.

                  Upon his retirement on or after having attained age fifty
                  (50), the Executive will be eligible for comprehensive medical
                  and dental insurance pursuant to the terms of the Retirees'
                  Medical Plan and the Retirees' Dental Plan. The Executive,
                  however, will receive the full subsidy provided by Cinergy to
                  retirees, as of the Effective Date of this Agreement, for
                  purposes of determining the amount of monthly premiums due
                  from the Executive.


                                       -2-



                  The Executive will be a participant in the Annual Incentive
                  Plan, and the Executive will be paid pursuant to that plan an
                  annual benefit of up to ninety percent (90%) of the
                  Executive's Annual Base Salary, with a target of no less than
                  sixty percent (60%) of the Executive's Annual Base Salary (the
                  "Target Annual Bonus"); provided, however, the guaranteed
                  minimum bonus for the years 2001 and 2002 will be no less than
                  $190,000.00 per year.

                  The Executive will be a participant in the Long-Term Incentive
                  Plan (the "LTIP"), and the Executive's annualized target award
                  opportunity under the LTIP will be equal to no less than
                  ninety percent (90%) of his Annual Base Salary (the "Target
                  LTIP Bonus").

                  The Company will grant an option to acquire 200,000 shares of
                  the Company's common stock pursuant to an option granted under
                  the terms of the Company's 1996 Long-Term Incentive
                  Compensation Plan, which options will vest ratably over a five
                  year period from the date of grant with a grant price based on
                  the "fair market value" of a share of the Company's common
                  stock as set forth in the terms of the plan document.

         c.       TRANSITION ALLOWANCE. On the Effective Date or as soon
                  thereafter as administratively feasible, Cinergy will pay to
                  the Executive the sum of $250,000.00 (reduced by applicable
                  federal, state, and local tax withholding), as a transition
                  allowance as consideration for the Executive's decision to
                  accept employment with Cinergy and adhere to the terms of this
                  Agreement.

         d.       FRINGE BENEFITS AND PERQUISITES. During the Employment Period,
                  the Executive will be entitled to the following additional
                  fringe benefits:

                  (i)      Cinergy will furnish to the Executive an automobile
                           and will pay all of the related expenses for
                           gasoline, insurance, maintenance, and repairs.

                  (ii)     Cinergy will pay the initiation fee and the annual
                           dues, assessments, and other membership charges of
                           the Executive for membership in a country club and a
                           luncheon club selected by the Executive.

                  (iii)    Cinergy will provide paid vacation for four (4) weeks
                           per year (or longer if permitted by Cinergy's
                           policy).

                  (iv)     Cinergy will provide benefits under the Executive
                           Supplement Life Program.

                  (v)      Cinergy will pay to relocate the Executive and his
                           immediate family to the Cincinnati, Ohio area under
                           the terms of the Relocation Program.

                  (vi)     Cinergy will furnish to the Executive an annual
                           physical exam and annual financial planning and tax
                           preparation services. In addition, the Executive will
                           be entitled to receive such other fringe benefits in
                           accordance with


                                       -3-



                           Cinergy plans, practices, programs, and policies in
                           effect from time to time, commensurate with his
                           position and at least comparable to those received
                           by other Cinergy senior executives.

         e.       EXPENSES. Cinergy agrees to reimburse the Executive for all
                  expenses, including those for travel and entertainment,
                  properly incurred by him in the performance of his duties
                  under this Agreement in accordance with the policies
                  established from time to time by the Board of Directors.

         f.       RELOCATION BENEFITS. Following termination of the Executive's
                  employment for any reason (other than death), the Executive
                  will be entitled to reimbursement from Cinergy for the
                  reasonable costs of relocating from the Cincinnati, Ohio, area
                  to a new primary residence in the forty-eight contiguous
                  United States in a manner that is consistent with the terms of
                  the Relocation Program.

4.       TERMINATION OF EMPLOYMENT

         a.       DEATH. The Executive's employment will terminate automatically
                  upon the Executive's death during the Employment Period.

         b.       BY CINERGY FOR CAUSE. Cinergy may terminate the Executive's
                  employment during the Employment Period for Cause. For
                  purposes of this Employment Agreement, "Cause" means the
                  following:

                  (i)      The willful and continued failure by the Executive to
                           substantially perform the Executive's duties with
                           Cinergy (other than any such failure resulting from
                           the Executive's incapacity due to physical or mental
                           illness) after the Board of Directors or the Chief
                           Executive Officer has delivered to the Executive a
                           written demand for substantial performance, which
                           demand specifically identifies the manner in which
                           the Executive has not substantially performed his
                           duties. This event will constitute Cause even if the
                           Executive issues a Notice of Termination for Good
                           Reason pursuant to Subsection 4d after the Board of
                           Directors or Chief Executive Officer delivers a
                           written demand for substantial performance.

                  (ii)     The breach by the Executive of the confidentiality
                           provisions set forth in Section 9.

                  (iii)    The conviction of the Executive for the commission of
                           a felony, including the entry of a guilty or nolo
                           contendere plea, or any willful or grossly negligent
                           action or inaction by the Executive that has a
                           materially adverse effect on Cinergy. For purposes of
                           this definition of Cause, no act, or failure to act,
                           on the Executive's part will be deemed "willful"
                           unless it is done, or omitted to be done, by the
                           Executive in bad faith and without reasonable belief
                           that the Executive's act, or failure to act, was in
                           the best interest of Cinergy.


                                    -4-



         c.       BY CINERGY WITHOUT CAUSE. Cinergy may, upon at least 30 days
                  advance written notice to the Executive, terminate the
                  Executive's employment during the Employment Period for a
                  reason other than Cause, but the obligations placed upon
                  Cinergy in Section 5 will apply.

         d.       BY THE EXECUTIVE FOR GOOD REASON. The Executive may terminate
                  his employment during the Employment Period for Good Reason.
                  For purposes of this Agreement, "Good Reason" means the
                  following:

                  (i)      A reduction in the Executive's Annual Base Salary,
                           except for across-the-board salary reductions
                           similarly affecting all Cinergy management personnel,
                           or a reduction in any other benefit or payment
                           described in Section 3 of this Agreement, except for
                           changes to the employee benefits programs affecting
                           all Cinergy management personnel, provided that those
                           changes (either individually or in the aggregate)
                           will not result in a material adverse change with
                           respect to the benefits to which the Executive was
                           entitled as of the Effective Date.

                  (ii)     The material reduction without his consent of the
                           Executive's title, authority, duties, or
                           responsibilities from those in effect immediately
                           prior to the reduction or a material adverse change
                           in the Executive's reporting responsibilities.

                  (iii)    Any breach by Cinergy of any other material provision
                           of this Agreement (including but not limited to the
                           place of performance as specified in Subsection 2b).

                  (iv)     The Executive's disability due to physical or mental
                           illness or injury that precludes the Executive from
                           performing any job for which he is qualified and able
                           to perform based upon his education, training or
                           experience.

                  (v)      A failure by any successor entity to the Company to
                           assume all of the Company's obligations to the
                           Executive under this Agreement.

         e.       BY THE EXECUTIVE WITHOUT GOOD REASON. The Executive may
                  terminate his employment without Good Reason upon prior
                  written notice to the Company.

         f.       NOTICE OF TERMINATION. Any termination of the Executive's
                  employment by Cinergy or by the Executive during the
                  Employment Period (other than a termination due to the
                  Executive's death) will be communicated by a written Notice of
                  Termination to the other party to this Agreement in accordance
                  with Subsection 12b. For purposes of this Agreement, a "Notice
                  of Termination" means a written notice that specifies the
                  particular provision of this Agreement relied upon and that
                  sets forth in reasonable detail the facts and circumstances
                  claimed to provide a basis for terminating the Executive's
                  employment under the


                                   -5-



                  specified provision. The failure by the Executive or
                  Cinergy to set forth in the Notice of Termination any fact
                  or circumstance that contributes to a showing of Good
                  Reason or Cause will not waive any right of the Executive
                  or Cinergy under this Agreement or preclude the Executive
                  or Cinergy from asserting that fact or circumstance in
                  enforcing rights under this Agreement.

5.       OBLIGATIONS OF CINERGY UPON TERMINATION.

         a.       CERTAIN TERMINATIONS.

                  (i)      If a Termination occurs during the Employment Period,
                           Cinergy will pay to the Executive a lump sum amount,
                           in cash, equal to the sum of the following Accrued
                           Obligations:

                           (1)      the Executive's Annual Base Salary through
                                    the Date of Termination to the extent not
                                    previously paid;

                           (2)      an amount equal to the AIP Benefit for the
                                    fiscal year that includes the Date of
                                    Termination multiplied by a fraction, the
                                    numerator of which is the number of days
                                    from the beginning of that fiscal year to
                                    and including the Date of Termination and
                                    the denominator of which is three hundred
                                    and sixty-five (365). The AIP Benefit
                                    component of the calculation will be
                                    determined using a percentage determined by
                                    the Chief Executive Officer, in his
                                    discretion, up to the maximum percentage
                                    specified in Subsection 3b, but no less than
                                    the Target Annual Bonus; and

                           (3)      any vested Deferred Compensation (together
                                    with any accrued interest or earnings) and
                                    any accrued vacation pay, in each case to
                                    the extent not previously paid.

                           The Accrued Obligations described in this Paragraph
                           5a(i) will be paid within thirty (30) days after the
                           Date of Termination. These Accrued Obligations are
                           payable to the Executive regardless of whether a
                           Change in Control has occurred.

                  (ii)     In the event of a Termination prior to, or greater
                           than twenty-four (24) months subsequent to, the
                           occurrence of a Change in Control, and other than by
                           reason of the Executive's death, Cinergy will pay the
                           Accrued Obligations, and Cinergy will have the
                           following obligations:

                           (1)      Cinergy will pay to the Executive a lump sum
                                    amount, in cash, equal to two (2) times the
                                    sum of the Annual Base Salary and the Target
                                    Annual Bonus. For this purpose, the Annual
                                    Base Salary will be at the rate in effect at
                                    the time Notice of Termination is given
                                    (without giving effect to any reduction in
                                    Annual Base


                                   -6-



                                    Salary, if any, prior to the termination).
                                    This lump sum will be paid within thirty
                                    (30) days of the Date of Termination.

                           (2)      Cinergy will pay to the Executive the value
                                    of (A) any Deferred Compensation, beyond
                                    that included in the Accrued Obligations and
                                    (B) any benefits under the Executive
                                    Supplemental Life Program, to the extent
                                    that these amounts are vested and payable
                                    under the terms of the applicable plan or
                                    program as of the Date of Termination.

                           (3)      Except as provided under Clauses (A) and (B)
                                    below, Cinergy will continue, until the end
                                    of the Employment Period, medical and dental
                                    benefits to the Executive and/or the
                                    Executive's family at least equal to those
                                    that would have been provided if the
                                    Executive's employment had not been
                                    terminated (excluding benefits to which the
                                    Executive has waived his rights in writing).
                                    The benefits described in the preceding
                                    sentence will be in accordance with the
                                    medical and welfare benefit plans,
                                    practices, programs, or policies of Cinergy
                                    (the "M&W Plans") as then currently in
                                    effect and applicable generally to other
                                    Cinergy senior executives and their
                                    families.

                                    (A)     If, as of the Executive's Date of
                                            Termination, the Executive meets the
                                            eligibility requirements for
                                            Cinergy's retiree medical and
                                            welfare benefit plans, the provision
                                            of those retiree medical and welfare
                                            benefit plans to the Executive will
                                            satisfy Cinergy's obligation under
                                            this Subparagraph 5a(ii)(3).

                                    (B)      If, as of the Executive's Date of
                                             Termination, the provision to the
                                             Executive of the M&W Plan benefits
                                             described in this Subparagraph
                                             5a(ii)(3) would either (1) violate
                                             the terms of the M&W Plans or (2)
                                             violate any of the Code's
                                             nondiscrimination requirements
                                             applicable to the M&W Plans, then
                                             Cinergy, in its sole discretion,
                                             may elect to pay the Executive, in
                                             lieu of the M&W Plan benefits
                                             described under this Subparagraph
                                             5a(ii)(3), a lump sum cash payment
                                             equal to the total monthly premiums
                                             that would have been paid by
                                             Cinergy for the Executive under the
                                             M&W Plans from the Date of
                                             Termination through the end of the
                                             Employment Period. Nothing in this
                                             Clause will affect the Executive's
                                             right to elect COBRA continuation
                                             coverage under a M&W Plan in
                                             accordance with applicable law.


                                    -7-



                                    (C)     If the Executive becomes employed by
                                            another employer and is eligible to
                                            receive medical or other welfare
                                            benefits under another
                                            employer-provided plan, any benefits
                                            provided to the Executive under the
                                            M&W Plans will be secondary to those
                                            provided under the other
                                            employer-provided plan during the
                                            Executive's applicable period of
                                            eligibility.

                           (4)      Ownership of the automobile assigned to the
                                    Executive by Cinergy will be transferred to
                                    the Executive within 30 days of the Date of
                                    Termination. The effect of this transfer
                                    will be grossed up for federal and state
                                    income taxes as soon as administratively
                                    feasible after the transfer is effective.

                           (5)      Cinergy will provide tax counseling services
                                    through an agency selected by the Executive,
                                    not to exceed Fifteen Thousand Dollars
                                    ($15,000.00) in cost.

                  (iii)    In the event of Termination upon or during the
                           twenty-four (24) month period after the occurrence of
                           a Change in Control, then in lieu of any further
                           salary payments to the Executive for periods
                           subsequent to the Date of Termination and in lieu of
                           any other benefits payable pursuant to Paragraph
                           5a(ii), Cinergy will have the following obligations:

                           (1)      Cinergy will pay to the Executive a lump sum
                                    severance payment, in cash, equal to three
                                    (3) times the higher of (x) the sum of the
                                    Executive's current Annual Base Salary and
                                    AIP Benefit, or (y) the sum of the Executive
                                    Annual Base Salary in effect immediately
                                    prior to the Change in Control and his AIP
                                    Benefit for the year preceding that in which
                                    the Date of Termination occurs or in the
                                    year preceding that in which the Change in
                                    Control occurs; and

                           (2)     Cinergy will pay to the Executive the value
                                   of (A) any Deferred Compensation, beyond that
                                   included in the Accrued Obligations and (B)
                                   any benefits under the Executive Supplemental
                                   Life Program, to the extent that these
                                   amounts are vested and payable under the
                                   terms of the applicable plan or program as of
                                   the Date of Termination.


                           (3)     For a thirty-six (36) month period after the
                                   Date of Termination, Cinergy will arrange to
                                   provide the Executive with life, disability,
                                   accident, and health insurance benefits
                                   substantially similar to those that the
                                   Executive is receiving immediately prior to
                                   the Notice of Termination (without giving
                                   effect to any reduction in those benefits
                                   subsequent to a Change in Control that
                                   constitutes Good Reason), except for any
                                   benefits that were waived by the Executive in
                                   writing. If Cinergy arranges to provide the
                                   Executive with life,


                                   -8-



                                    disability, accident, and health
                                    insurance benefits, those benefits will
                                    be reduced to the extent comparable
                                    benefits are actually received by or made
                                    available to the Executive without cost
                                    during the thirty-six (36) month period
                                    following the Executive's Date of
                                    Termination. The Executive must report to
                                    Cinergy any such benefits that he
                                    actually receives. In lieu of the
                                    benefits described in the preceding
                                    sentences, Cinergy, in its sole
                                    discretion, may elect to pay to the
                                    Executive a lump sum cash payment equal
                                    to thirty-six (36) times the monthly
                                    premiums that would have been paid by
                                    Cinergy to provide those benefits to the
                                    Executive. Nothing in this Subparagraph
                                    5a(iii)(3) will affect the Executive's
                                    right to elect COBRA continuation
                                    coverage in accordance with applicable
                                    law.

                           (4)      Ownership of the automobile assigned to the
                                    Executive by Cinergy will be transferred to
                                    the Executive within 30 days of the Date of
                                    Termination. The effect of this transfer
                                    will be grossed up for federal and state
                                    income taxes as soon as administratively
                                    feasible after the transfer is effective.


                           (5)      Cinergy will provide tax counseling services
                                    through an agency selected by the Executive,
                                    not to exceed Fifteen Thousand Dollars
                                    ($15,000.00) in cost.

                           For purposes of this Paragraph (iii), the Executive
                           will be deemed to have incurred a Termination
                           following a Change in Control if the Executive's
                           employment is terminated prior to a Change in
                           Control, without Cause at the direction of a Person
                           who has entered into an agreement with Cinergy, the
                           consummation of which will constitute a Change in
                           Control, or if the Executive terminates his
                           employment for Good Reason prior to a Change in
                           Control if the circumstances or event that
                           constitutes Good Reason occurs at the direction of
                           such a Person.

         b.       TERMINATION BY CINERGY FOR CAUSE OR BY THE EXECUTIVE OTHER
                  THAN FOR GOOD REASON. Subject to the provisions of Section 7,
                  and notwithstanding any other provisions of this Agreement, if
                  the Executive's employment is terminated for Cause during the
                  Employment Period, or if the Executive terminates employment
                  during the Employment Period other than a termination for Good
                  Reason, Cinergy will have no further obligations to the
                  Executive under this Agreement other than the obligation to
                  pay to the Executive the Accrued Obligations, plus any other
                  earned but unpaid compensation, in each case to the extent not
                  previously paid.

         c.       CERTAIN TAX CONSEQUENCES.

                  (i)      In the event that any Severance Benefits paid or
                           payable to the Executive or for his benefit pursuant
                           to the terms of this Agreement or otherwise in
                           connection with, or arising out of, his employment
                           with Cinergy or a


                                      -9-



                           change in ownership or effective control of
                           Cinergy or of a substantial portion of its assets
                           (a "Payment" or "Payments") would be subject to
                           any Excise Tax, then the Executive will be
                           entitled to receive an additional payment (a
                           "Gross-Up Payment") in an amount such that after
                           payment by the Executive of all taxes (including
                           any interest, penalties, additional tax, or
                           similar items imposed with respect thereto and the
                           Excise Tax), including any Excise Tax imposed upon
                           the Gross-Up Payment, the Executive retains an
                           amount of the Gross-Up Payment equal to the Excise
                           Tax imposed upon the Payments.

                  (ii)     An initial determination as to whether a Gross-Up
                           Payment is required pursuant to this Agreement and
                           the amount of that Gross-Up Payment will be made at
                           Cinergy's expense by an Accounting Firm selected by
                           the Executive and reasonably acceptable to Cinergy.
                           The Accounting Firm will provide its determination,
                           together with detailed supporting calculations and
                           documentation, to Cinergy and the Executive within 10
                           days after the Date of Termination, or such other
                           time as requested by Cinergy or by the Executive, and
                           if the Accounting Firm determines that no Excise Tax
                           is payable by the Executive with respect to a Payment
                           or Payments, it will furnish the Executive with an
                           opinion reasonably acceptable to the Executive that
                           no Excise Tax will be imposed with respect to any
                           such Payment or Payments. Within 10 days after the
                           Accounting Firm delivers its determination to the
                           Executive, the Executive will have the right to
                           dispute the determination. The Gross-Up Payment, if
                           any, as determined pursuant to this Subsection 5c
                           will be paid by Cinergy to the Executive within five
                           days of the receipt of the Accounting Firm's
                           determination. The existence of a dispute will not in
                           any way affect the Executive's right to receive the
                           Gross-Up Payment in accordance with the
                           determination. If there is no dispute, the
                           determination will be binding, final, and conclusive
                           upon Cinergy and the Executive. If there is a
                           dispute, then Cinergy and the Executive will together
                           select a second Accounting Firm, which will review
                           the determination and the Executive's basis for the
                           dispute and then will render its own determination,
                           which will be binding, final, and conclusive on
                           Cinergy and on the Executive. Cinergy will bear all
                           costs associated with that determination, unless the
                           determination is not greater than the initial
                           determination, in which case all such costs will be
                           borne by the Executive.

                  (iii)    The value of any non-cash benefits or any deferred
                           payment or benefit paid or payable to the Executive
                           will be determined in accordance with the principles
                           of Code paragraphs 280G(d)(3) and (4). For purposes
                           of determining the amount of the Gross-Up Payment,
                           the Executive will be deemed to pay federal income
                           taxes at the highest marginal rate of federal income
                           taxation in the calendar year in which the Gross-Up
                           Payment is to be made and applicable state and local
                           income taxes at the highest marginal rate of taxation
                           in the state and locality of the Executive's


                                 -10-


                           residence on the Date of Termination, net of the
                           maximum reduction in federal income taxes that would
                           be obtained from deduction of those state and local
                           taxes.

                  (iv)     Notwithstanding anything contained in this Agreement
                           to the contrary, in the event that, according to the
                           Accounting Firm's determination, an Excise Tax will
                           be imposed on any Payment or Payments, Cinergy will
                           pay to the applicable government taxing authorities
                           as Excise Tax withholding, the amount of the Excise
                           Tax that Cinergy has actually withheld from the
                           Payment or Payments in accordance with law.

         d.       VALUE CREATION PLAN AND STOCK OPTIONS. Upon the Executive's
                  termination of employment for any reason, the Executive's
                  entitlement to restricted shares and performance shares under
                  the Value Creation Plan and any stock options granted under
                  the Stock Option Plan or the LTIP will be determined under the
                  terms of the appropriate plan and any applicable
                  administrative guidelines and written agreements.

         e.       OTHER FEES AND EXPENSES. Cinergy will also pay to the
                  Executive all legal fees and expenses incurred by the
                  Executive in successfully disputing a Termination that
                  entitles the Executive to Severance Benefits. Payment will be
                  made within five (5) business days after delivery of the
                  Executive's written request for payment accompanied by such
                  evidence of fees and expenses incurred as Cinergy reasonably
                  may require.

6.       NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement will prevent or
         limit the Executive's continuing or future participation in any
         benefit, plan, program, policy, or practice provided by Cinergy and for
         which the Executive may qualify, except with respect to any benefit to
         which the Executive has waived his rights in writing or any plan,
         program, policy, or practice that expressly excludes the Executive from
         participation. In addition, nothing in this Agreement will limit or
         otherwise affect the rights the Executive may have under any other
         contract or agreement with Cinergy entered into after the Effective
         Date. Amounts that are vested benefits or that the Executive is
         otherwise entitled to receive under any benefit, plan, program, policy,
         or practice of, or any contract or agreement entered into after the
         Effective Date with Cinergy, at or subsequent to the Date of
         Termination, will be payable in accordance with that benefit, plan,
         program, policy or practice, or that contract or agreement, except as
         explicitly modified by this Agreement.

7.       FULL SETTLEMENT: MITIGATION. Cinergy's obligation to make the payments
         provided for in this Agreement and otherwise to perform its obligations
         under this Agreement will not be affected by any set-off, counterclaim,
         recoupment, defense, or other claim, right, or action that Cinergy may
         have against the Executive or others. In no event will the Executive be
         obligated to seek other employment or take any other action by way of
         mitigation of the amounts (including amounts for damages for breach)
         payable to the Executive under any of the provisions of this Agreement
         and, except as provided in Subparagraphs 5a(ii)(3)

                                     -11-



         and 5a(iii)(3), those amounts will not be reduced simply because
         the Executive obtains other employment. If the Executive finally
         prevails on the substantial claims brought with respect to any
         dispute between Cinergy and the Executive as to the interpretation,
         terms, validity, or enforceability of (including any dispute about
         the amount of any payment pursuant to) this Agreement, Cinergy
         agrees to pay all reasonable legal fees and expenses that the
         Executive may reasonably incur as a result of that dispute.

8.       ARBITRATION. The parties agree that any dispute, claim, or controversy
         based on common law, equity, or any federal, state, or local statute,
         ordinance, or regulation (other than workers' compensation claims)
         arising out of or relating in any way to the Executive's employment,
         the terms, benefits, and conditions of employment, or concerning this
         Agreement or its termination and any resulting termination of
         employment, including whether such a dispute is arbitrable, shall be
         settled by arbitration. This agreement to arbitrate includes but is not
         limited to all claims for any form of illegal discrimination, improper
         or unfair treatment or dismissal, and all tort claims. The Executive
         will still have a right to file a discrimination charge with a federal
         or state agency, but the final resolution of any discrimination claim
         will be submitted to arbitration instead of a court or jury. The
         arbitration proceeding will be conducted under the employment dispute
         resolution arbitration rules of the American Arbitration Association in
         effect at the time a demand for arbitration under the rules is made.
         The decision of the arbitrator(s), including determination of the
         amount of any damages suffered, will be exclusive, final, and binding
         on all parties, their heirs, executors, administrators, successors and
         assigns. Each party will bear its own expenses in the arbitration for
         arbitrators' fees and attorneys' fees, for its witnesses, and for other
         expenses of presenting its case. Other arbitration costs, including
         administrative fees and fees for records or transcripts, will be borne
         equally by the parties. Notwithstanding anything in this Section to the
         contrary, if the Executive prevails with respect to any dispute
         submitted to arbitration under this Section, Cinergy will reimburse or
         pay all legal fees and expenses that the Executive may reasonably incur
         as a result of the dispute as required by Section 7.

9.       CONFIDENTIAL INFORMATION. The Executive will hold in a fiduciary
         capacity for the benefit of Cinergy, as well as all of Cinergy's
         successors and assigns, all secret, confidential information,
         knowledge, or data relating to Cinergy, and its affiliated businesses,
         that the Executive obtains during the Executive's employment by Cinergy
         or any of its affiliated companies, and that has not been or
         subsequently becomes public knowledge (other than by acts by the
         Executive or representatives of the Executive in violation of this
         Agreement). During the Employment Period and thereafter, the Executive
         will not, without Cinergy's prior written consent or as may otherwise
         by required by law or legal process, communicate or divulge any such
         information, knowledge, or data to anyone other than Cinergy and those
         designated by it. The Executive understands that during the Employment
         Period, Cinergy may be required from time to time to make public
         disclosure of the terms or existence of the Executive's employment
         relationship to comply with various laws and legal requirements. In
         addition to all other remedies available to Cinergy in law and equity,
         this Agreement is subject to termination by Cinergy for Cause under
         Section 4b in the event the Executive violates any provision of this
         Section.

                                     -12-



10.      SUCCESSORS.

         a.       This Agreement is personal to the Executive and, without
                  Cinergy's prior written consent, cannot be assigned by the
                  Executive otherwise than by will or the laws of descent and
                  distribution. This Agreement will inure to the benefit of and
                  be enforceable by the Executive's legal representatives.

         b.       This Agreement will inure to the benefit of and be binding
                  upon Cinergy and its successors and assigns.

         c.       Cinergy will require any successor (whether direct or
                  indirect, by purchase, merger, consolidation or otherwise) to
                  all or substantially all of the business and/or assets of
                  Cinergy to assume expressly and agree to perform this
                  Agreement in the same manner and to the same extent that
                  Cinergy would be required to perform it if no succession had
                  taken place. Cinergy's failure to obtain such an assumption
                  and agreement prior to the effective date of a succession will
                  be a breach of this Agreement and will entitle the Executive
                  to compensation from Cinergy in the same amount and on the
                  same terms as if the Executive were to terminate his
                  employment for Good Reason after a Change in Control, except
                  that, for purposes of implementing the foregoing, the date on
                  which any such succession becomes effective will be deemed the
                  Date of Termination.

11.      DEFINITIONS. As used in this Agreement, the following terms, when
         capitalized, will have the following meanings:

         a.       1934 ACT. "1934 Act" means the Securities Exchange Act of
                  1934.

         b.       ACCOUNTING FIRM. "Accounting Firm" means an accounting firm
                  that is designated as one of the five largest accounting firms
                  in the United States (which may include Cinergy's independent
                  auditors).

         c.       ACCRUED OBLIGATIONS. "Accrued Obligations" means the accrued
                  obligations described in Paragraph 5a(i).

         d.       AGREEMENT. "Agreement" means this Employment Agreement between
                  Cinergy and the Executive.

         e.       AIP BENEFIT. "AIP Benefit" means the Annual Incentive Plan
                  benefit described in Subsection 3b.

         f.       ANNUAL BASE SALARY. "Annual Base Salary" means the annual base
                  salary payable to the Executive pursuant to Subsection 3a.

         g.       ANNUAL INCENTIVE PLAN. "Annual Incentive Plan" means the
                  Cinergy Corp. Annual Incentive Plan or any successor to that
                  plan.

                                     -13-



         h.       BOARD OF DIRECTORS. "Board of Directors" means the board of
                  directors of the Company.

         i.       CAUSE. "Cause" has the meaning set forth in Subsection 4b.

         j.       CHANGE IN CONTROL. A "Change in Control" will be deemed to
                  have occurred if any of the following events occur, after the
                  Effective Date:

                  (i)      Any "person" or "group" (within the meaning of
                           subsection 13(d) and paragraph 14(d)(2) of the 1934
                           Act) is or becomes the beneficial owner (as defined
                           in Rule l3d-3 under the 1934 Act), directly or
                           indirectly, of securities of the Company (not
                           including in the securities beneficially owned by
                           such a Person any securities acquired directly from
                           the Company or its affiliates) representing more than
                           twenty percent (20%) of the combined voting power of
                           the Company's then outstanding securities, excluding
                           any person who becomes such a beneficial owner in
                           connection with a transaction described in Clause (1)
                           of Paragraph (ii) below; or

                  (ii)     There is consummated a merger or consolidation of the
                           Company or any direct or indirect subsidiary of the
                           Company with any other corporation, other than (1) a
                           merger or consolidation that would result in the
                           voting securities of the Company outstanding
                           immediately prior to that merger or consolidation
                           continuing to represent (either by remaining
                           outstanding or by being converted into voting
                           securities of the surviving entity or its parent) at
                           least sixty percent (60%) of the combined voting
                           power of the securities of the Company or the
                           surviving entity or its parent outstanding
                           immediately after the merger or consolidation, or (2)
                           a merger or consolidation effected to implement a
                           recapitalization of the Company (or similar
                           transaction) in which no person is or becomes the
                           beneficial owner, directly or indirectly, of
                           securities of the Company (not including in the
                           securities beneficially owned by such a Person any
                           securities acquired directly from the Company or its
                           affiliates other than in connection with the
                           acquisition by the Company or its affiliates of a
                           business) representing twenty percent (20%) or more
                           of the combined voting power of the Company's then
                           outstanding securities; or

                  (iii)    During any period of two consecutive years,
                           individuals who at the beginning of that period
                           constitute the Board of Directors and any new
                           director (other than a director whose initial
                           assumption of office is in connection with an actual
                           or threatened election contest, including but not
                           limited to a consent solicitation, relating to the
                           election of directors of the Company) whose
                           appointment or election by the Company's shareholders
                           was approved or recommended by a vote of at least
                           two-thirds (2/3) of the directors then still in
                           office who either were directors at the beginning of
                           that period or whose appointment, election, or
                           nomination for election was

                                     -14-



                           previously so approved or recommended cease for
                           any reason to constitute a majority of the Board
                           of Directors; or

                  (iv)     The shareholders of the Company approve a plan of
                           complete liquidation or dissolution of the Company or
                           there is consummated an agreement for the sale or
                           disposition by the Company of all or substantially
                           all of the Company's assets, other than a sale or
                           disposition by the Company of all or substantially
                           all of the Company's assets to an entity, at least
                           sixty percent (60%) of the combined voting power of
                           the voting securities of which are owned by
                           shareholders of the Company in substantially the same
                           proportions as their ownership of the Company
                           immediately prior to the sale.

         k.       CHIEF EXECUTIVE OFFICER. "Chief Executive Officer" means the
                  chief executive officer of the Company.

         l.       CINERGY. "Cinergy" means the Company, its subsidiaries, and/or
                  its affiliates.

         m.       CODE. "Code" means the Internal Revenue Code of 1986, as
                  amended, and interpretive rules and regulations.

         n.       COMPANY.  "Company" means Cinergy Corp.

         o.       DATE OF TERMINATION.  "Date of Termination" means:

                  (i)      if the Executive's employment is terminated by the
                           Company for Cause, or by the Executive with or
                           without Good Reason, the date of receipt of the
                           Notice of Termination or any later date specified in
                           the notice, as the case may be;

                  (ii)     if the Executive's employment is terminated by the
                           Company other than for Cause, thirty (30) days after
                           the date on which the Company notifies the Executive
                           of the termination; and

                  (iii)    if the Executive's employment is terminated by reason
                           of death, the date of death.

         p.       DEFERRED COMPENSATION. "Deferred Compensation" means
                  compensation deferred by the Executive pursuant to the Cinergy
                  Corp. Non-Qualified Deferred Incentive Compensation Plan and
                  employer contributions, if any, credited to the Executive
                  under the terms of that Plan.

         q.       EARNINGS. "Earnings" means the Executive's "Earnings" as
                  defined in the Pension Plan but without regard to the
                  limitation of Code paragraph 401(a)(17).

         r.       EFFECTIVE DATE. "Effective Date" means February 12, 2001.

                                     -15-



         s.       EMPLOYMENT PERIOD. "Employment Period" has the meaning set
                  forth in Subsection 1b.

         t.       EXCISE TAX. "Excise Tax" means any excise tax imposed by Code
                  section 4999, together with any interest, penalties,
                  additional tax or similar items that are incurred by the
                  Executive with respect to the excise tax imposed by Code
                  section 4999.

         u.       EXECUTIVE.  "Executive" means R. Foster Duncan.

         v.       EXECUTIVE RETIREMENT PLANS. The "Executive Retirement Plans"
                  are the Pension Plan, the Supplemental Executive Retirement
                  Plan, and the Cinergy Corp. Excess Pension Plan or any
                  successor to those plans.

         w.       EXECUTIVE SUPPLEMENTAL LIFE PROGRAM. "Executive Supplemental
                  Life Program" means the Cinergy Corp. Executive Supplemental
                  Life Program or any successor to that plan.

         x.       GOOD REASON. "Good Reason" has the meaning set forth in
                  Subsection 4d.

         y.       GROSS-UP PAYMENT. "Gross-Up Payment" has the meaning set forth
                  in Subsection 5c.

         z.       M&W PLANS. "M&W Plans" has the meaning given in Subparagraph
                  5a(ii)(3).

         aa.      LONG-TERM INCENTIVE PLAN. "Long-Term Incentive Plan" means the
                  long-term inventive plan implemented under the Cinergy Corp.
                  1996 Long-Term Incentive Compensation Plan or any successor to
                  that plan.

         bb.      NOTICE OF TERMINATION. "Notice of Termination" has the meaning
                  set forth in Subsection 4e.

         cc.      PAYMENT OR PAYMENTS. "Payment" or "Payments" has the meaning
                  set forth in Subsection 5c.

         dd.      PERSON. "Person" has the meaning set forth in paragraph
                  3(a)(9) of the 1934 Act, as modified and used in subsections
                  13(d) and 14(d) of the 1934 Act; however, a Person will not
                  include the following:

                  (i)      Cinergy or any of its subsidiaries;

                  (ii)     A trustee or other fiduciary holding securities under
                           an employee benefit plan of Cinergy or its
                           subsidiaries;

                                     -16-



                  (iii)    An underwriter temporarily holding securities
                           pursuant to an offering of those securities; or

                  (iv)     A corporation owned, directly or indirectly, by the
                           stockholders of the Company in substantially the same
                           proportions as their ownership of stock of the
                           Company.

         ee.      RELOCATION PROGRAM. "Relocation Program" means the Cinergy
                  Corp. Relocation Program or any successor to that program, as
                  in effect on the date of the Executive's termination of
                  employment.

         ff.      RETIREES' DENTAL PLAN. "Retirees' Dental Plan" means the
                  Cinergy Corp. Retirees' Dental Plan or any successor to that
                  plan.

         gg.      RETIREES' MEDICAL PLAN. "Retirees' Medical Plan" means the
                  Cinergy Corp. Retirees' Medical Plan or any successor to that
                  plan.

         hh.      SEVERANCE BENEFITS. "Severance Benefits" means the payments
                  and benefits payable to the Executive pursuant to Section 5.

         ii.      SPOUSE. "Spouse" means the Executive's lawfully married
                  spouse. For this purpose, common law marriage or a similar
                  arrangement will not be recognized unless otherwise required
                  by federal law.

         jj.      STOCK RELATED DOCUMENTS. "Stock Related Documents" means the
                  LTIP, the Cinergy Corp. Stock Option Plan, and the Value
                  Creation Plan and any applicable administrative guidelines and
                  written agreements relating to those plans.

         kk.      TARGET ANNUAL BONUS. "Target Annual Bonus" has the meaning set
                  forth in Subsection 3b.

         ll.      TARGET LTIP BONUS. "Target LTIP Bonus" has the meaning set
                  forth in Subsection 3b.

         mm.      TERMINATION. "Termination" means (1) the termination by
                  Cinergy of the Executive's employment with Cinergy other than
                  a termination for Cause or (2) the termination by the
                  Executive of the Executive's employment with Cinergy for Good
                  Reason.

         nn.      VALUE CREATION PLAN. "Value Creation Plan" means the Value
                  Creation Plan of the LTIP.

12.      MISCELLANEOUS.

         a.       This Agreement will be governed by and construed in accordance
                  with the laws of the State of Ohio, without reference to
                  principles of conflict of laws. The captions

                                     -17-



                  of this Agreement are not part of its provisions and will
                  have no force or effect. This Agreement may not be
                  amended, modified, repealed, waived, extended, or
                  discharged except by an agreement in writing signed by the
                  party against whom enforcement of the amendment,
                  modification, repeal, waiver, extension, or discharge is
                  sought. Only the Chief Executive Officer or his designee
                  will have authority on behalf of Cinergy to agree to
                  amend, modify, repeal, waive, extend, or discharge any
                  provision of this Agreement.

         b.       All notices and other communications under this Agreement will
                  be in writing and will be given by hand delivery to the other
                  party or by registered or certified mail, return receipt
                  requested, postage prepaid, addressed as follows:

                  IF TO THE EXECUTIVE:
                  R. Foster Duncan
                  Cinergy Corp.
                  221 East Fourth Street
                  P. O. Box 960
                  Cincinnati, Ohio 45201-0960

                  IF TO CINERGY:
                  Cinergy Corp.
                  221 East Fourth Street
                  P. O. Box 960
                  Cincinnati, Ohio  45201-0960
                  Attn: Chief Executive Officer

                  or to such other address as either party has furnished to the
                  other in writing in accordance with this Agreement. All
                  notices and communications will be effective when actually
                  received by the addressee.

         c.       The invalidity or unenforceability of any provision of this
                  Agreement will not affect the validity or enforceability of
                  any other provision of this Agreement.

         d.       Cinergy may withhold from any amounts payable under this
                  Agreement such federal, state, or local taxes as are required
                  to be withheld pursuant to any applicable law or regulation.

         e.       The Executive's or Cinergy's failure to insist upon strict
                  compliance with any provision of this Agreement or the failure
                  to assert any right the Executive or Cinergy may have under
                  this Agreement, including without limitation the right of the
                  Executive to terminate employment for Good Reason pursuant to
                  Subsection 4d or the right of Cinergy to terminate the
                  Executive's employment for Cause pursuant to Subsection 4b,
                  will not be deemed to be a waiver of that provision or right
                  or any other provision or right of this Agreement.

                                     -18-



         f.       This instrument contains the entire agreement of the Executive
                  and Cinergy with respect to the subject matter of this
                  Agreement; and subject to any agreements evidencing stock
                  option or restricted stock grants described in Subsection 3b
                  and the Stock Related Documents, all promises,
                  representations, understandings, arrangements, and prior
                  agreements are merged into this Agreement and accordingly
                  superseded.

         g.       This Agreement may be executed in counterparts, each of which
                  will be deemed to be an original but all of which together
                  will constitute one and the same instrument.

         h.       Cinergy and the Executive agree that Cinergy Services, Inc.
                  will be authorized to act for Cinergy with respect to all
                  aspects pertaining to the administration and interpretation of
                  this Agreement.

         IN WITNESS WHEREOF, the Executive and the Company have caused this
Agreement to be executed as of the Effective Date.

                                         CINERGY SERVICES, INC.


                                         By:_________________________________
                                            James E. Rogers
                                            Chairman and Chief Executive
                                            Officer


                                         EXECUTIVE



                                         By:_________________________________
                                            R. Foster Duncan


                                     -19-

EX-21

                               SUBSIDIARY LISTING

The following is a listing of the subsidiaries of each registrant and their
state of incorporation or organization indented to show degree of remoteness
from registrant.



                                                                                          STATE OR COUNTRY OF
                                                                                            ORGANIZATION OR
                             NAME OF COMPANY                                                 INCORPORATION
                             ---------------                                                 -------------
             (Indentation indicates subsidiary relationship)
                                                                                       
    CINERGY CORP.                                                                             Delaware

       THE CINCINNATI GAS & ELECTRIC COMPANY                                                  Ohio
         Cinergy Beckjord, LLC                                                                Ohio
         Cinergy Conesville, LLC                                                              Ohio
         Cinergy Dicks Creek, LLC                                                             Ohio
         Cinergy East Bend, LLC                                                               Delaware
         Cinergy Killen, LLC                                                                  Ohio
         Cinergy Miami Fort, LLC                                                              Ohio
         Cinergy Stuart, LLC                                                                  Ohio
         Cinergy Woodsdale, LLC                                                               Ohio
         Cinergy Zimmer, LLC                                                                  Ohio
         Cinergy Power Investments, Inc.                                                      Ohio
         The Union Light, Heat and Power Company                                              Kentucky
         Tri-State Improvement Company                                                        Ohio
         Lawrenceburg Gas Company                                                             Indiana
         The West Harrison Gas and Electric Company                                           Indiana
         Miami Power Corporation                                                              Indiana
         KO Transmission Company                                                              Kentucky

       PSI ENERGY, INC.                                                                       Indiana
         South Construction Company, Inc.                                                     Indiana

       CINERGY SERVICES, INC.                                                                 Delaware

       CINTEC LLC                                                                             Delaware
         CinTec I LLC                                                                         Delaware
           eVent Resources I LLC                                                              Delaware

       CINERGY TECHNOLOGIES, INC.                                                             Delaware
         Cinergy Ventures, LLC                                                                Delaware
         Cinergy Ventures II, LLC                                                             Delaware
         Cinergy e-Supply Network, LLC                                                        Delaware
         Cinergy One, Inc.                                                                    Delaware
         Cinergy Two, Inc.                                                                    Delaware

       CINERGY WHOLESALE ENERGY, INC.                                                         Ohio
         Cinergy Power Generation Services, LLC                                               Delaware

       CINERGY INVESTMENTS, INC.                                                              Delaware
         CINERGY-CADENCE, INC.                                                                Indiana
           Cadence Network, Inc.                                                              Delaware
         CINERGY CAPITAL & TRADING, INC.                                                      Indiana
           CinCap MVC OpCo, LLC                                                               Delaware
           CinCap IV, LLC                                                                     Delaware
           CinCap V, LLC                                                                      Delaware
           CINCAP VIII, LLC                                                                   Delaware
             VMC Generating Company                                                           Texas
               CinCap VII, LLC                                                                Delaware
               Duke Energy Madison, LLC                                                       Delaware
               Duke Energy Vermillion, LLC                                                    Delaware
           SynCap II, LLC                                                                     Delaware
           Cinergy Transportation, LLC                                                        Delaware


                                                                      Exhibit 21



                                                                                          STATE OR COUNTRY OF
                                                                                            ORGANIZATION OR
                             NAME OF COMPANY                                                 INCORPORATION
                             ---------------                                                 -------------
             (Indentation indicates subsidiary relationship)
                                                                                       

           CinPower I, LLC                                                                    Delaware
           CinCap X, LLC                                                                      Delaware
           CinCap IX, LLC                                                                     Delaware
           Westwood Operating Company, LLC                                                    Delaware
           SynCap I, LLC                                                                      Delaware
           Cinergy Marketing & Trading, LLC                                                   Delaware
         CINERGY TELECOMMUNICATIONS HOLDING COMPANY, INC.                                     Delaware
           Q-Comm Corporation                                                                 Neveda
           Lattice Communications, LLC                                                        Delaware
         Cinergy Engineering, Inc.                                                            Ohio
         CINERGY-CENTRUS, INC.                                                                Delaware
           Centrus, LLP                                                                       Indiana
         Cinergy-Centrus Communications, Inc.                                                 Delaware
         CINERGY SOLUTIONS HOLDING COMPANY, INC.                                              Delaware
           1388368 ONTARIO INC.                                                               Ontario
             Cinergy Solutions Limited Partnership                                            Ontario
           3036243 NOVA SCOTIA COMPANY                                                        Nova Scotia
             Cinergy Solutions Limited Partnership                                            Ontario
           VESTAR, INC.                                                                       Delaware
             Vestar Limited                                                                   Ontario
              Optimira Controls, Inc.                                                         Ontario
              Keen Rose Technology Group Limited                                              Ontario
           Cinergy EPCOM, LLC                                                                 Delaware
           Cinergy EPCOM College Park, LLC                                                    Delaware
           CINERGY SOLUTIONS, INC.                                                            Delaware
              Cinergy Energy Solutions, Inc.                                                  Delaware
              Cinergy GASCO Solutions, LLC                                                    Delaware
              Cinergy Solutions Partners, LLC                                                 Delaware
              GREEN POWER HOLDINGS, LLC                                                       Delaware
                Green Power G.P., LLC                                                         Texas
                Green Power Limited, LLC                                                      Delaware
              Lansing Grand River Utilities, LLC                                              Delaware
              Oklahoma Arcadian Utilities, LLC                                                Delaware
              Shreveport Red River Utilities, LLC                                             Delaware
           Energy Equipment Leasing LLC                                                       Delaware
           Trigen-Solutions Solutions LLC                                                     Delaware
           Cinergy Solutions of Boca Raton, LLC                                               Delaware
           Cinergy Solutions of Tuscola, Inc.                                                 Delaware
           Trigen-Cinergy Solutions of Ashtabula LLC                                          Delaware
           Trigen-Cinergy Solutions of Baltimore LLC                                          Delaware
           Trigen-Cinergy Solutions of Boca Raton, LLC                                        Delaware
           Trigen-Cinergy Solutions of Cincinnati LLC                                         Ohio
           Trigen-Cinergy Solutions of College Park, LLC                                      Delaware
           Trigen-Cinergy Solutions of Danville LLC                                           Delaware
           Trigen-Cinergy Solutions of Elmgrove, LLC                                          Delaware
           Trigen-Cinergy Solutions of Illinois L.L.C.                                        Delaware
           TRIGEN-CINERGY SOLUTIONS OF LANSING LLC                                            Delaware
             Trigen/Cinergy - USFOS of Lansing LLC                                            Delaware
           Trigen-Cinergy Solutions of Orlando LLC                                            Delaware
           Trigen-Cinergy Solutions of Owings Mills LLC                                       Delaware
           Trigen-Cinergy Solutions of Owings Mills Energy Equipment Leasing, LLC             Delaware
           Trigen-Cinergy Solutions of St. Paul LLC                                           Delaware
             St. Paul Cogeneration LLC                                                        Minnesota
           Trigen-Cinergy Solutions of Rochester LLC                                          Delaware
           Trigen-Cinergy Solutions of Silver Grove LLC                                       Delaware
           Trigen-Cinergy Solutions of Tuscola, LLC                                           Delaware
         CINERGY SUPPLY NETWORK, INC.                                                         Delaware
           Reliant Services, LLC                                                              Indiana
             MPI Acquisitions                                                                 Indiana
               Miller Pipeline Corporation                                                    Indiana
         Cinergy Technology, Inc.                                                             Indiana
       CINERGY GLOBAL RESOURCES, INC.                                                         Delaware





                                                                                          STATE OR COUNTRY OF
                                                                                            ORGANIZATION OR
                             NAME OF COMPANY                                                 INCORPORATION
                             ---------------                                                 -------------
             (Indentation indicates subsidiary relationship)
                                                                                       
         CINERGY GLOBAL POWER, INC.                                                           Delaware
           CINERGY GLOBAL CHANDLER HOLDING, INC.                                              Delaware
              Cinergy Global Chandler I, Inc.                                                 Delaware
           CINERGY GLOBAL ELY, INC.                                                           Delaware
             EPR ELY POWER LIMITED                                                            England
               EPR Ely Limited                                                                England
                 Ely Power Limited                                                            England
                 Anglian Straw Limited                                                        England
              Anglian Ash Limited                                                             England
           CINERGY GLOBAL FOOTE CREEK, INC.                                                   Delaware
             Foote Creek III, LLC                                                             Delaware
           CINERGY GLOBAL FOOTE CREEK II, INC.                                                Delaware
             Foote Creek II, LLC                                                              Delaware
           CINERGY GLOBAL FOOTE CREEK IV, INC.                                                Delaware
           CINERGY GLOBAL POWER SERVICES LIMITED                                              England
             Cinergy Global Power Limited                                                     England
             MPI International Limited                                                        England
           CINERGY GLOBAL POWER (UK) LIMITED                                                  England
             CINERGY GLOBAL TRADING LIMITED                                                   England
               Commercial Electricity Supplies Limited                                        England
               Renewable Trading Limited                                                      England
                UK Electric Power Limited                                                     England
           CINERGY GLOBAL SAN GORGONIO, INC.                                                  Delaware
             San Gorgonio Westwinds II, LLC                                                   California
           CINERGY GLOBAL HOLDINGS, INC.                                                      Delaware
             CINERGY HOLDINGS B.V.                                                            The Netherlands
               CINERGY ZAMBIA B.V.                                                            The Netherlands
                 Copperbelt Energy Corporation PLC                                            Republic of Zambia
               CINERGY TURBINES B.V.                                                          The Netherlands
                 EOS PAX I S.L.                                                               Spain
                 EOS PAX IIa S.L.                                                             Spain
               CINERGY HYDRO B.V.                                                             The Netherlands
                Cinergy Renovables Ibericas, S.A.                                             Spain
                   AGE INVERSIONES EN MEDIO AMBIENTE, S.L.                                    Spain
                     AGRUPACION RUBI, SA                                                      Spain
                       Rubi Tractament Termic Eficient, SA                                    Spain
                   CINERGY GLOBAL POWER IBERIA, S.A.                                          Spain
                     Escambeo, S.L.                                                           Spain
                   Parque Eolico de Ascoy, S.A.                                               Spain
                   Tractaments de Juneda, S.A.                                                Spain
                   Ventoabrego, S.L.                                                          Spain
                    Sinergia Andaluza, S.L.                                                   Spain
                    CORPORACION EOLICA, S.L.                                                  Spain
                      Corporacion Eolica Aragonesa, S.A.                                      Spain
                    Compania Productora de Energia para
                     Consumo Interno, S.L.                                                    Spain
                    EoloCrisa, S.L.                                                           Spain
                 Vendresse Limited                                                            Isle of Man
                 CINERGY 1 B.V.                                                               The Netherlands
                    CINERGY EESTI OU                                                          Estonia
                     Startekor Investeeringute OU                                             Estonia
                        Aktsiaselts Narva Elektrivork                                         Estonia
                 CINERGY GLOBAL RESOURCES 1 B.V.                                              The Netherlands
                   Moravske Teplarny a.s.                                                     Czech Republic
                   Plzenska Energetika a.s.                                                   Czech Republic
                   Cinergy Global Polska Sp. Z.o.o.                                           Poland
                   Cinergy Global Resources 1 Sp. Z.o.o.                                      Poland
                   Cinergy Global Resources a.s.                                              Czech Republic
                   Cinergetika U/L a.s.                                                       Czech Republic
                   Energetika Chropyne a.s.                                                   Czech Republic
                   Teplarna Otrokovice a.s.                                                   Czech Republic
                   Energy Customer Services, s.r.o.                                           Czech Republic
                 CINERGY 2 B.V.                                                               The Netherlands





                                                                                          STATE OR COUNTRY OF
                                                                                            ORGANIZATION OR
                             NAME OF COMPANY                                                 INCORPORATION
                             ---------------                                                 -------------
             (Indentation indicates subsidiary relationship)
                                                                                       
                   Desarrollo Eolico del Ebro S.A.                                            Spain
                   Northeolic Pico Gallo, S.L.                                                Spain
                   Desarrollos Eolico El Aguila, S.A.                                         Spain
                   Sinergia Aragonesa, S.L.                                                   Spain
               BAGHABARI I B.V.                                                               The Netherlands
                 Baghabari Power Company Limited                                              Bangladesh
                BAGHABARI II B.V.                                                             The Netherlands
                 Baghabari Power Company Limited                                              Bangladesh
               CINERGY SOUTH AFRICA INVESTMENTS 1 B.V.                                        Netherlands
                  Egoli Gas (Proprietary) Limited                                             South Africa
               Cinergy Global 4 B.V.                                                          The Netherlands
               Cinergy Global 5 B.V.                                                          The Netherlands
           CINERGY GLOBAL (CAYMAN) HOLDINGS, INC.                                             Cayman Islands
             Cinergy Global Hydrocarbons Pakistan                                             Cayman Islands
             CINERGY GLOBAL TSAVO POWER                                                       Cayman Islands
               IPS-CINERGY POWER LIMITED                                                      Kenya
                 Tsavo Power Company Limited                                                  Kenya
             Cinergy Global Maranho                                                           Cayman Islands
             Cinergy MPI V, Inc.                                                              Cayman Islands
             Cinergy MPI VI, Inc.                                                             Cayman Islands
             Cinergy MPI VII, Inc.                                                            Cayman Islands
             Cinergy MPI VIII, Inc.                                                           Cayman Islands
             Cinergy MPI IX, Inc.                                                             Cayman Islands
             Cinergy MPI X, Inc.                                                              Cayman Islands
           CINERGY GLOBAL ONE, INC.                                                           Delaware
             CZECHPOL ENERGY SPOL, S.R.O.                                                     Czech Republic
               Dneproline                                                                     Ukraine
               E-line                                                                         Switzerland
               S-line                                                                         Slovakia
               U-line                                                                         Ukraine
               Czechpol Invest                                                                Ukraine
               MEAS Brno, a.s.                                                                Czech Republic
               PEAS Praha, a.s.                                                               Czech Republic
               Moravia Energo                                                                 Czech Republic
               SK Invest a.s.                                                                 Slovakia
           Midlands Hydrocarbons (Bangladesh) Limited                                         England
           Powermid No. 1                                                                     England
           Cinergy Global Power Africa (Proprietary) Limited                                  South Africa
         CINERGY UK, INC.                                                                     Delaware

EX-23

                                                                      Exhibit 23

Consent of Independent Public Accountants


As independent public accountants, we hereby consent to the incorporation by
reference of our report, dated January 23, 2001, included in this Annual
Report on Form 10-K for the year ended December 31, 2000, into (i) Cinergy
Corp.'s previously filed Registration Statement Nos. 33-55267, 33-55291,
33-55293, 33-55713, 33-56067, 33-56089, 33-56091, 33-56093, 33-56095,
333-17531, 333-51484, 333-83461, 333-83467 and 333-94281; (ii) PSI Energy,
Inc.'s previously filed Registration Statement Nos. 33-48612 and 33-57064;
(iii) The Cincinnati Gas & Electric Company's previously filed Registration
Statement Nos. 33-45116, 33-52335 and 33-58967; and (iv) The Union Light,
Heat and Power Company's previously filed Registration Statement No. 33-40245.

Arthur Andersen LLP
Cincinnati, Ohio,
February 23, 2001

EX-24

                                                                      Exhibit 24

                                POWER OF ATTORNEY


         KNOW ALL BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints James E. Rogers, R. Foster Duncan, Charles J. Winger, and each of them,
with full power to act without the other, the undersigned's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, to execute for and on behalf of the undersigned, in the
undersigned's capacity as a director of Cinergy Corp., the Form 10-K Annual
Report of said corporation for the fiscal year ended December 31, 2000, and to
deliver said Form 10-K Annual Report so signed for filing with the Securities
and Exchange Commission.

         The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, and each of them, shall lawfully do by virtue
hereof.

         IN WITNESS WHEREOF, the undersigned has hereunto caused this Power of
Attorney to be executed on this 16th day of February, 2001.






                                       /s/ Jackson H. Randolph
                                       -----------------------
                                       Jackson H. Randolph



                                POWER OF ATTORNEY


         KNOW ALL BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints James E. Rogers, R. Foster Duncan, Charles J. Winger, and each of them,
with full power to act without the other, the undersigned's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, to execute for and on behalf of the undersigned, in the
undersigned's capacity as a director of PSI Energy, Inc., the Form 10-K Annual
Report of said corporation for the fiscal year ended December 31, 2000, and to
deliver said Form 10-K Annual Report so signed for filing with the Securities
and Exchange Commission.

         The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, and each of them, shall lawfully do by virtue
hereof.

         IN WITNESS WHEREOF, the undersigned has hereunto caused this Power of
Attorney to be executed on this 16th day of February, 2001.





                                       /s/ Vicky A. Bailey
                                       -------------------
                                       Vicky A. Bailey



                                POWER OF ATTORNEY


         KNOW ALL BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints James E. Rogers, R. Foster Duncan, Charles J. Winger, and each of them,
with full power to act without the other, the undersigned's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, to execute for and on behalf of the undersigned, in the
undersigned's capacity as a director of Cinergy Corp., the Form 10-K Annual
Report of said corporation for the fiscal year ended December 31, 2000, and to
deliver said Form 10-K Annual Report so signed for filing with the Securities
and Exchange Commission.

         The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, and each of them, shall lawfully do by virtue
hereof.

         IN WITNESS WHEREOF, the undersigned has hereunto caused this Power of
Attorney to be executed on this 16th day of February, 2001.






                                       /s/ Dudley S. Taft
                                       ------------------
                                       Dudley S. Taft



                                POWER OF ATTORNEY


         KNOW ALL BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints James E. Rogers, R. Foster Duncan, Charles J. Winger, and each of them,
with full power to act without the other, the undersigned's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, to execute for and on behalf of the undersigned, in the
undersigned's capacity as a director of Cinergy Corp., the Form 10-K Annual
Report of said corporation for the fiscal year ended December 31, 2000, and to
deliver said Form 10-K Annual Report so signed for filing with the Securities
and Exchange Commission.

         The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, and each of them, shall lawfully do by virtue
hereof.

         IN WITNESS WHEREOF, the undersigned has hereunto caused this Power of
Attorney to be executed on this 20th day of February, 2001.





                                       /s/ Philip R. Sharp
                                       -------------------
                                       Philip R. Sharp



                                POWER OF ATTORNEY


         KNOW ALL BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints James E. Rogers, R. Foster Duncan, Charles J. Winger, and each of them,
with full power to act without the other, the undersigned's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, to execute for and on behalf of the undersigned, in the
undersigned's capacity as a director of Cinergy Corp., the Form 10-K Annual
Report of said corporation for the fiscal year ended December 31, 2000, and to
deliver said Form 10-K Annual Report so signed for filing with the Securities
and Exchange Commission.

         The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, and each of them, shall lawfully do by virtue
hereof.

         IN WITNESS WHEREOF, the undersigned has hereunto caused this Power of
Attorney to be executed on this 16th day of February, 2001.






                                       /s/ John J. Schiff, Jr.
                                       -----------------------
                                       John J. Schiff, Jr.



                                POWER OF ATTORNEY


         KNOW ALL BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints James E. Rogers, R. Foster Duncan, Charles J. Winger, and each of them,
with full power to act without the other, the undersigned's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, to execute for and on behalf of the undersigned, in the
undersigned's capacity as a director of Cinergy Corp., the Form 10-K Annual
Report of said corporation for the fiscal year ended December 31, 2000, and to
deliver said Form 10-K Annual Report so signed for filing with the Securities
and Exchange Commission.

         The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, and each of them, shall lawfully do by virtue
hereof.

         IN WITNESS WHEREOF, the undersigned has hereunto caused this Power of
Attorney to be executed on this 16th day of February, 2001.






                                       /s/ Mary L. Schapiro
                                       --------------------
                                       Mary L. Schapiro



                                POWER OF ATTORNEY


         KNOW ALL BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints James E. Rogers, R. Foster Duncan, Charles J. Winger, and each of them,
with full power to act without the other, the undersigned's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, to execute for and on behalf of the undersigned, in the
undersigned's capacity as a director of Cinergy Corp., the Form 10-K Annual
Report of said corporation for the fiscal year ended December 31, 2000, and to
deliver said Form 10-K Annual Report so signed for filing with the Securities
and Exchange Commission.

         The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, and each of them, shall lawfully do by virtue
hereof.

         IN WITNESS WHEREOF, the undersigned has hereunto caused this Power of
Attorney to be executed on this 16th day of February, 2001.






                                       /s/ Thomas E. Petry
                                       -------------------
                                       Thomas E. Petry



                                POWER OF ATTORNEY


         KNOW ALL BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints James E. Rogers, R. Foster Duncan, Charles J. Winger, and each of them,
with full power to act without the other, the undersigned's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, to execute for and on behalf of the undersigned, in the
undersigned's capacity as a director of Cinergy Corp., the Form 10-K Annual
Report of said corporation for the fiscal year ended December 31, 2000, and to
deliver said Form 10-K Annual Report so signed for filing with the Securities
and Exchange Commission.

         The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, and each of them, shall lawfully do by virtue
hereof.

         IN WITNESS WHEREOF, the undersigned has hereunto caused this Power of
Attorney to be executed on this 19th day of February, 2001.






                                       /s/ George C. Juilfs
                                       --------------------
                                       George C. Juilfs



                                POWER OF ATTORNEY


         KNOW ALL BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints James E. Rogers, R. Foster Duncan, Charles J. Winger, and each of them,
with full power to act without the other, the undersigned's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, to execute for and on behalf of the undersigned, in the
undersigned's capacity as a director of Cinergy Corp., the Form 10-K Annual
Report of said corporation for the fiscal year ended December 31, 2000, and to
deliver said Form 10-K Annual Report so signed for filing with the Securities
and Exchange Commission.

         The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, and each of them, shall lawfully do by virtue
hereof.

         IN WITNESS WHEREOF, the undersigned has hereunto caused this Power of
Attorney to be executed on this 16th day of February, 2001.






                                       /s/ Phillip R. Cox
                                       ------------------
                                       Phillip R. Cox



                                POWER OF ATTORNEY


         KNOW ALL BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints James E. Rogers, R. Foster Duncan, Charles J. Winger, and each of them,
with full power to act without the other, the undersigned's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, to execute for and on behalf of the undersigned, in the
undersigned's capacity as a director of each of Cinergy Corp. and PSI Energy,
Inc., the Form 10-K Annual Report of each corporation for the fiscal year ended
December 31, 2000, and to deliver said Form 10-K Annual Reports so signed for
filing with the Securities and Exchange Commission.

         The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, and each of them, shall lawfully do by virtue
hereof.

         IN WITNESS WHEREOF, the undersigned has hereunto caused this Power of
Attorney to be executed on this 22nd day of February, 2001.





                                       /s/ John A. Hillenbrand II
                                       --------------------------
                                       John A. Hillenbrand II



                                POWER OF ATTORNEY


         KNOW ALL BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints James E. Rogers, R. Foster Duncan, Charles J. Winger, and each of them,
with full power to act without the other, the undersigned's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, to execute for and on behalf of the undersigned, in the
undersigned's capacity as a director of each of Cinergy Corp. and PSI Energy,
Inc., the Form 10-K Annual Report of each corporation for the fiscal year ended
December 31, 2000, and to deliver said Form 10-K Annual Reports so signed for
filing with the Securities and Exchange Commission.

         The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, and each of them, shall lawfully do by virtue
hereof.

         IN WITNESS WHEREOF, the undersigned has hereunto caused this Power of
Attorney to be executed on this 19th day of February, 2001.





                                       /s/ Michael G. Browning
                                       -----------------------
                                       Michael G. Browning



                                POWER OF ATTORNEY


         KNOW ALL BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints James E. Rogers, R. Foster Duncan, Charles J. Winger, and each of them,
with full power to act without the other, the undersigned's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, to execute for and on behalf of the undersigned, in the
undersigned's capacity as a director of each of Cinergy Corp. and PSI Energy,
Inc., the Form 10-K Annual Report of each corporation for the fiscal year ended
December 31, 2000, and to deliver said Form 10-K Annual Reports so signed for
filing with the Securities and Exchange Commission.

         The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, and each of them, shall lawfully do by virtue
hereof.

         IN WITNESS WHEREOF, the undersigned has hereunto caused this Power of
Attorney to be executed on this 24th day of February, 2001.





                                       /s/ James K. Baker
                                       ------------------
                                       James K. Baker



                                POWER OF ATTORNEY


         KNOW ALL BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints James E. Rogers, R. Foster Duncan, Charles J. Winger, and each of them,
with full power to act without the other, the undersigned's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, to execute for and on behalf of the undersigned, in the
undersigned's capacity as a director of each of The Cincinnati Gas & Electric
Company and The Union Light, Heat and Power Company, the Form 10-K Annual Report
of each corporation for the fiscal year ended December 31, 2000, and to deliver
said Form 10-K Annual Reports so signed for filing with the Securities and
Exchange Commission.

         The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, and each of them, shall lawfully do by virtue
hereof.

         IN WITNESS WHEREOF, the undersigned has hereunto caused this Power of
Attorney to be executed on this 16th day of February, 2001.





                                       /s/ James L. Turner
                                       -------------------
                                       James L. Turner



                                POWER OF ATTORNEY


         KNOW ALL BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints James E. Rogers, R. Foster Duncan, Charles J. Winger, and each of them,
with full power to act without the other, the undersigned's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, to execute for and on behalf of the undersigned, in the
undersigned's capacity as a director of The Cincinnati Gas & Electric Company,
the Form 10-K Annual Report of said corporation for the fiscal year ended
December 31, 2000, and to deliver said Form 10-K Annual Report so signed for
filing with the Securities and Exchange Commission.

         The undersigned does hereby ratify and confirm all that said
attorneys-in-fact and agents, and each of them, shall lawfully do by virtue
hereof.

         IN WITNESS WHEREOF, the undersigned has hereunto caused this Power of
Attorney to be executed on this 22nd day of February, 2001.





                                       /s/ J. Joseph Hale, Jr.
                                       -----------------------
                                       J. Joseph Hale, Jr.