Exhibit B-1
UTILITY SERVICE AGREEMENT
This Amended and Restated Service Agreement is made and entered into as
of this _____ day of _______, 2004 (the "Amended Service Agreement") by and
among The Cincinnati Gas & Electric Company, an Ohio corporation ("CG&E"), PSI
Energy, Inc., an Indiana corporation ("PSI"), The Union Light, Heat and Power
Company, a Kentucky corporation ("ULH&P"), Lawrenceburg Gas Company ("LGC"),
Miami Power Corporation, an Indiana corporation ("Miami"), and Cinergy Services,
Inc., a Delaware corporation and service company (the "Service Company"), and
amends and restates in its entirety that certain Service Agreement dated as of
March 2, 1994 (the "Original Service Agreement"), by and among such parties .
CG&E, PSI, ULH&P, LGC and Miami are sometimes hereinafter referred to
individually as a "Client Company" and collectively as the "Client Companies."
WITNESSETH
WHEREAS, The Securities and Exchange Commission (hereinafter referred
to as the "SEC") has approved and authorized as meeting the requirements of
Section 13(b) of the Public Utility Holding Company Act of 1935 (hereinafter
referred to as the "Act"), the organization and conduct of the business of the
Service Company in accordance herewith, as a wholly owned subsidiary service
company of Cinergy Corp.; and
WHEREAS, the Service Company and the Client Companies have entered into
this Service Agreement whereby the Service Company agrees to provide and the
Client Companies agree to accept and pay for various services as provided herein
at cost, determined in accordance with applicable rules and regulations under
the Act, which require the Service Company to fairly and equitably allocate
costs among all associate companies to which it renders services, including the
Client Companies and other associate companies which are not a party to this
Service Agreement; and
WHEREAS, any services provided to companies other than Client Companies
will be provided for charges not less than the cost of providing such services
such that there will be no subsidization of the other associate companies
through the Service Company or the Client Companies; and
WHEREAS, economies and efficiencies benefiting the Client Companies
will result from the performance by Service Company of services as herein
provided; and
WHEREAS, the parties hereto desire to amend the Original Service
Agreement such that, subject to receipt of all applicable regulatory approvals,
all accounts and records of the Service Company shall continue to be kept in
accordance with the General Rules and Regulations promulgated by the SEC
pursuant to the Act, except that the Service Company shall be entitled to
utilize the chart of accounts prescribed by the Uniform System of Accounts of
the Federal Energy Regulatory Commission; and
WHEREAS, except as provided in the preceding clause, the parties do not
propose to make any other changes to the Original Service Agreement, which
agreement remains in full force and effect as amended and restated hereby.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties to this Amended and Restated Service
Agreement covenant and agree as follows:
ARTICLE 1 - SERVICES
Section 1.1 The Service Company shall furnish to the Client Companies,
upon the terms and conditions hereinafter set forth, such of the services
described in Appendix A hereto, at such times, for such periods and in such
manner as the Client Companies may from time to time request and which the
Service Company concludes it is equipped to perform. The Service Company shall
also provide Client Companies with such special services, in addition to those
services described in Appendix A hereto, as may be requested by a Client Company
and which the Service Company concludes it is equipped to perform. In supplying
such services, the Service Company may arrange, where it deems appropriate, for
the services of such experts, consultants, advisers and other persons with
necessary qualifications as are required for or pertinent to the rendition of
such services.
Section 1.2 Each of the Client Companies shall take from the Service
Company such of the services described in Section 1.1 and such additional
general or special services, whether or not now contemplated, as are requested
from time to time by the Client Companies and which the Service Company
concludes it is equipped to perform.
Section 1.3 The services described herein shall be directly assigned,
distributed or allocated by activity, project, program, work order or other
appropriate basis. A Client Company shall have the right from time to time to
amend, alter or rescind any activity, project, program or work order provided
that (i) any such amendment or alteration which results in a material change in
the scope of the services to be performed or equipment to be provided is agreed
to by the Service Company, (ii) the cost for the services covered by the
activity, project, program or work order shall include any expense incurred by
the Service Company as a direct result of such amendment, alteration or
rescission of the activity, project, program or work order, and (iii) no
amendment, alteration or rescission of an activity, project, program or work
order shall release a Client Company from liability for all costs already
incurred by or contracted for by the Service Company pursuant to the activity,
project, program or work order, regardless of whether the services associated
with such costs have been completed.
Section 1.4 The Service Company shall maintain a staff trained and
experienced in the design, construction, operation, maintenance and management
of public utility properties.
ARTICLE II - COMPENSATION
Section 2.1 As compensation for the services to be rendered hereunder,
each of the Client Companies shall pay to the Service Company all costs which
reasonably can be identified and related to particular services performed by the
Service Company for or on its behalf. Where more than one Client Company is
involved in or has received benefits from a service performed, costs will be
directly assigned, distributed or allocated, as set forth in Appendix A hereto,
between or among such companies on a basis reasonably related to the service
performed to the extent reasonably practicable.
Section 2.2 The method of assignment, distribution or allocation of
costs described in Appendix A shall be subject to review annually, or more
frequently if appropriate. Such method of assignment, distribution or allocation
of costs may be modified or changed by the Service Company without the necessity
of an amendment to this Service Agreement provided that in each instance, all
services rendered hereunder shall be at actual cost thereof, fairly and
equitably assigned, distributed or allocated, all in accordance with the
requirements of the Act and any orders promulgated thereunder. The Service
Company shall advise the Client Companies and the Indiana Utility Regulatory
Commission (hereinafter referred to as "IURC"), The Public Utilities Commission
of Ohio (hereinafter referred to as "PUCO"), the Kentucky Public Service
Commission (hereinafter referred to as "KPSC") and the SEC from time to time of
any material changes in such method of assignment, distribution or allocation.
Section 2.3 The Service Company shall render a monthly statement to
each Client Company which shall reflect the billing information necessary to
identify the costs charged for that month. By the twentieth (20th) day of each
month, each Client Company shall remit to the Service Company all charges billed
to it.
Section 2.4 It is the intent of this Amended and Restated Service
Agreement that the payment for services rendered by the Service Company to the
Client Companies shall cover all the costs of its doing business (less the cost
of services provided to affiliated companies not a party to this Amended and
Restated Service Agreement and to other non-affiliated companies, and credits
for any miscellaneous income items), including, but not limited to, salaries and
wages, office supplies and expenses, outside services employed, property
insurance, injuries and damages, employee pensions and benefits, miscellaneous
general expenses, rents, maintenance of structures and equipment, depreciation
and amortization and compensation for use of capital as permitted by Rule 91 of
the SEC under the Act.
ARTICLE III - TERM
Section 3.1 This Amended and Restated Service Agreement is entered into
as of the date set forth above, and shall continue in force with respect to a
Client Company until terminated by the Service Company with respect to such
Client Company or until terminated by unanimous agreement of all Client
Companies, in each case upon not less than one year's prior written notice to
all other parties. This Amended and Restated Service Agreement shall also be
subject to termination or modification at any time, without notice, if and to
the extent performance under this Amended and Restated Service Agreement may
conflict with the Act or with any rule, regulation or order of the SEC adopted
before or after the date of this Amended and Restated Service Agreement.
ARTICLE IV - MISCELLANEOUS
Section 4.1 All accounts and records of the Service Company shall be
kept in accordance with the General Rules and Regulations promulgated by the SEC
pursuant to the Act, except that the Service Company shall be entitled to
utilize the chart of accounts prescribed by the Uniform System of Accounts of
the Federal Energy Regulatory Commission.
Section 4.2 Each Client Company shall cause all of its direct or
indirect domestic utility subsidiaries which may come into existence after the
effective date of this Amended and Restated Service Agreement to become an
additional Client Company (collectively, the "New Client Companies") subject to
this Amended and Restated Service Agreement. In addition, the parties hereto
shall make such changes in the scope and character of the services to be
rendered and the method of assigning, distributing or allocating costs of such
services among the Client Companies and the New Client Companies under this
Amended and Restated Service Agreement as may become necessary.
Section 4.3 The Service Company shall permit a Client Company's
regulatory commission, statutory utility consumer representative, and others as
required under applicable rule or regulation access to its accounts and records,
including the basis and computation of allocations, necessary for the regulatory
commission to review a Client Company's operating results.
Section 4.4 All contracts, agreements, or agreements of any kind,
required to be filed with and/or approved by the SEC pursuant to the Act as
subsequently amended, between The Cincinnati Gas & Electric Company, and any
affiliate, associate, holding, mutual service, or subsidiary company, within the
same holding company system, as these terms are defined in 15 U.S.C. ss.79b as
subsequently amended, shall contain and be conditioned upon the following
without modification or alteration: The Cincinnati Gas & Electric Company and
Cinergy Corp. will not seek to overturn, reverse, set aside, change or enjoin,
whether through appeal or the initiation or maintenance of any action in any
forum, a decision or order of the Public Utilities Commission of Ohio which
pertains to recovery, disallowance, allowance, deferral, or ratemaking treatment
of any expense, charge, cost, or allocation incurred or accrued by The
Cincinnati Gas & Electric Company in or as a result of a contract, agreement,
arrangement, or transaction with any affiliate, associate, holding, mutual
service or subsidiary company on the basis that such expense, charge, cost, or
allocation has itself been filed with or approved by the SEC, or was incurred
pursuant to a contract, arrangement, agreement, or allocation method which was
filed with or approved by the SEC. Failure to include the above language in any
such contract, agreement, or arrangement shall render the same voidable at the
sole discretion of The Public Utilities Commission of Ohio. Should the above
language be altered or invalidated by any Court or governmental agency, such
contract, agreement, or arrangements shall be voidable at the sole discretion of
The Public Utilities Commission of Ohio. The foregoing is conditioned upon the
PUCO supporting through the filing of pleading(s) before the SEC, The Cincinnati
Gas & Electric Company's efforts to retain its natural gas system.
Section 4.5 All contracts, agreements, or arrangements of any kind,
required to be filed with and/or approved by the SEC pursuant to The Act as
subsequently amended, between PSI Energy, Inc., and any affiliate, associate,
holding, mutual service, or subsidiary company, within the same holding company
system, as these terms are defined in 15 U.S.C. ss.79b as subsequently amended,
shall contain and be conditioned upon the following without modification or
alteration: PSI Energy, Inc., and Cinergy Corp. will not seek to overturn,
reverse, set aside, change or enjoin, whether through appeal or the initiation
or maintenance of any action in any forum, a decision or order of the IURC which
pertains to recovery, disallowance, allowance, deferral, or ratemaking treatment
of any expense, charge, cost, or allocation incurred or accrued by PSI Energy,
Inc., in or as a result of a contract, agreement, arrangement, or transaction
with any affiliate, associate, holding, mutual service or subsidiary company on
the basis that such expense, charge, cost, or allocation has itself been filed
with or approved by the SEC, or was incurred pursuant to a contract,
arrangement, agreement, or allocation method which was filed with or approved by
the SEC. Failure to include the above language in any such contract, agreement,
or arrangement shall render the same voidable at the sole discretion of the
IURC. Should the above language be altered or invalidated by any Court or
governmental agency, such contract, agreement, or arrangements shall be voidable
at the sole discretion of the IURC.
ARTICLE V - AMENDMENTS
Section 5.1 Prior to filing any amendment to this Amended and Restated
Service Agreement with SEC, the parties will file with the applicable state
commissions, as provided by law or stipulation (hereinafter referred to as the
"State Commission") and provide to the Indiana and Ohio Utility Consumer
Counselors (and, upon request, to appropriate parties), a copy of such
amendment.
Section 5.2 In the event that an amendment is finally rejected or
disapproved or found to be unreasonable by one or more of the State Commissions
prior to filing with the SEC, the amendment will not become effective and the
parties will not request SEC approval of the amendment.
Section 5.3 In the event that an amendment is rejected or disapproved
or found to be unreasonable by one or more of the State Commissions after it has
been filed with the SEC but before it has been approved by the SEC, the
amendment will be terminated and the parties agree to request withdrawal of the
filing.
Section 5.4 Notwithstanding Sections 5.2 and 5.3 above, in the event
that an amendment is rejected, disapproved or found to be unreasonable by one or
more of the State Commissions before it has been approved by the SEC, the
parties shall have the right to request further revisions of the amendment in
order to cure or remove the cause of the State Commission's rejection,
disapproval or finding of unreasonableness. Upon request by a party, the other
parties agree promptly to negotiate in good faith to revise the amendment, and
thereafter to file for any necessary regulatory authorization of the
renegotiated amendment. If the parties are unable to reach agreement
satisfactory to each of them and to each affected State Commission after good
faith negotiations, then Section 5.2 or 5.3 above, as applicable, will apply.
Section 5.5 In the event that all the State Commissions have previously
approved an amendment prior to the SEC approval, Section 5.6 below shall not
apply.
Section 5.6 In the event that an amendment has become effective and is
subsequently rejected, disapproved or found to be unreasonable by one or more of
the State Commissions, the parties will make a good faith effort to terminate,
amend or modify the amendment in a manner which remedies the State Commission's
adverse findings without adverse impact on any of the parties. The parties will
request to meet with representatives of the State Commissions and make a good
faith attempt to resolve any differences in the affected states regarding the
subject amendment. If agreement can be reached to terminate, amend or modify the
amendment in a manner satisfactory to the contracting parties and to the
representatives of each State Commission, the parties shall file such amended
contract with the appropriate state and federal regulatory agencies, seeking all
necessary regulatory authorizations. If the parties are unable to reach
agreement satisfactory to each of them and to each affected State Commission,
after good faith negotiations, then they shall be under no obligation to further
amend the amendment.
Section 5.7 Nothing in this Article is intended to amend, modify
or alter the authority of the SEC under the Act.
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Service Agreement to be executed as of the date and year first above
written.
CINERGY SERVICES, INC.
By: _____________________
Title
THE CINCINNATI GAS & ELECTRIC COMPANY
By: _______________________
Title:
PSI ENERGY, INC.
By: _____________________
Title:
THE UNION, LIGHT, HEAT AND POWER COMPANY
By: _______________________
Title: ___________
LAWRENCEBURG GAS COMPANY
By: ________________
Title:
MIAMI POWER CORPORATION
By: ______________________
Title:
Description of Services and Determination
of Charges for Services
I. The Service Company will maintain an accounting system for accumulating all
costs on an activity, project, program, work order, or other appropriate basis.
To the extent practicable, time records of hours worked by Service Company
employees will be kept by activity, project, program, or work order. Charges for
salaries will be determined from such time records and will be computed on the
basis of employees' effective hourly rates, including the cost of fringe
benefits and payroll taxes. Records of employee-related expenses and other
indirect costs will be maintained for each functional group within the Service
Company (hereinafter referred to as "Function"). Where identifiable to a
particular activity, project, program, or work order, such indirect costs will
be directly assigned to such activity, project, program, or work order. Where
not identifiable to a particular activity, project, program, or work order, such
indirect costs within a Function will be distributed in relationship to the
directly assigned costs of the Function. For purposes of this Appendix A, any
costs not directly assigned or distributed by the Service Company will be
allocated monthly.
II. Service Company costs accumulated for each activity, project, program, or
work order will be directly assigned, distributed, or allocated to the Client
Companies or other Functions within the Service Company as follows:
1. Costs accumulated in an activity, project, program, or work order
for services specifically performed for a single Client Company or Function will
be directly assigned and charged to such Client Company or Function.
2. Costs accumulated in an activity, project, program, or work order
for services specifically performed for two or more Client Companies or
Functions will be distributed among and charged to such Client Companies or
Functions. The appropriate method of distribution will be determined by the
Service Company on a case-by-case basis consistent with the nature of the work
performed. The distribution method will be provided to each such affected Client
Company or Function.
3. Costs accumulated in an activity, project, program, or work order
for services of a general nature which are applicable to all Client Companies or
Functions or to a class or classes of Client Companies or Functions will be
allocated among and charged to such Client Companies or Functions by application
of one or more of the allocation ratios described in paragraphs IV and V of this
Appendix A.
III. For purposes of this Appendix A, the following definitions or methodologies
shall be utilized:
1. Where applicable, the following will be utilized to convert gas
sales to equivalent electric sales: 0.303048 cubic feet of gas sales equals 1
kilowatt-hour of electric sales. (Based on electricity at 3412 Btu/kWh and
natural gas at 1034 Btu/cubic foot).
2. "Domestic utility" refers to a utility which operates in the
contiguous United States of America.
3. The weights utilized in the weighted average ratios in paragraph V
of this Appendix A shall represent the percentage relationship of the activities
associated with the function for which costs are to be allocated. For example,
if an expense item is to be allocated on the weighted average of the Sales Ratio
and the Total Construction Expenditures Ratio, and the activity to be allocated
is seventy-five (75) percent operations in nature and twenty-five (25) percent
construction related, 75 percent of the Sales Ratio would be utilized and 25
percent of the Total Construction Expenditures Ratio would be utilized. To
illustrate this application, assuming that the Sales Ratios were 53.75 percent
for Company A and 46.25 for Company B, and the Total Construction Expenditures
Ratio were 41.25 percent for Company A and 58.75 percent for Company B, the
following weighted average ratio would be computed:
Company A Company B
Activity Company A Weighted Company B Weighted
Sales Ratio 5% 53.75% 40.31% 46.25% 34.69%
Total Construction 25% 41.25% 10.31% 58.75% 14.69%
Expenditures Ratio 100% 50.62% 49.38%
IV. The following ratios will be applied, as specified in paragraph V of this
Appendix A, to allocate costs for services of a general nature.
1. Sales Ratio
A ratio, based on domestic firm kilowatt-hour electric sales
(and/or the equivalent cubic feet of gas sales, where applicable), excluding
intra-system sales, for the immediately preceding twelve consecutive calendar
months, the numerator of which is for a Client Company and the denominator of
which is for all domestic utility Client Companies. This ratio will be
determined annually, or at such time as may be required due to a significant
change.
2. Electric Peak Load Ratio
A ratio, based on the sum of the monthly domestic firm
electric maximum system demands for the immediately preceding twelve consecutive
calendar months, the numerator of which is for a Client Company and the
denominator of which is for all domestic utility Client Companies. This ratio
will be determined annually, or at such time as may be required due to a
significant change.
3. Number of Customers Ratio
A ratio, based on the sum of the firm domestic electric
customers (and/or gas customers, where applicable) at the end of each month for
the immediately preceding twelve consecutive calendar months, the numerator of
which is for a Client Company and the denominator of which is for all domestic
utility Client Companies. This ratio will be determined annually, or at such
time as may be required due to a significant change.
4. Number of Employees Ratio
A ratio, based on the sum of the number of employees at the
end of each month for the immediately preceding twelve consecutive calendar
months, the numerator of which is for a Client Company or Service Company
Function and the denominator of which is for all Client Companies (and Cinergy
Corp.'s non-utility and non-domestic utility affiliates, where applicable)
and/or the Service Company. This ratio will be determined annually, or at such
time as may be required due to a significant change.
5. Construction-Expenditures Ratio.
A ratio, based on construction expenditures, net of
reimbursements, for the immediately preceding twelve consecutive calendar
months, the numerator of which is for a Client Company and the denominator of
which is for all Client Companies. Separate ratios will be computed for total
construction expenditures and appropriate functional plant (i.e., production,
transmission, distribution, and general) classifications. This ratio will be
determined annually, or at such time as may be required due to a significant
change.
6. Circuit Miles of Electric Distribution Lines Ratio
A ratio, based on installed circuit miles of domestic electric
distribution lines at the end of the immediately preceding calendar year, the
numerator of which is for a Client Company and the denominator of which is for
all domestic utility Client Companies. This ratio will be determined annually,
or at such time as may be required due to a significant change.
7. Number of Central Processing Unit Seconds Ratio
A ratio, based on the sum of the number of central processing
unit seconds expended to execute mainframe computer software applications for
the immediately preceding twelve consecutive calendar months, the numerator of
which is for a Client Company or Service Company Function, and the denominator
of which is for all Client Companies, (and Cinergy Corp.'s non-utility and
non-domestic utility affiliates, where applicable) and/or the Service Company.
This ratio will be determined annually, or at such time as may be required due
to a significant change.
V. A description of each Function's activities which may be modified from time
to time by the Service Company, is set forth below in paragraph "a" under each
Function. As described in paragraph II, "1" and "2" of this Appendix A, where
identifiable, costs will be directly assigned or distributed to Client Companies
or to other Functions of the Service Company. For costs accumulated in
activities, projects, programs, or work orders which are for services of a
general nature that cannot be directly assigned or distributed, as described in
paragraph II, "3" of this Appendix A, the method or methods of allocation are
set forth below in paragraph "b" under each Function. For any of the functions
set forth below other than Information Systems, Transportation, Human Resources
or Facilities, costs of a general nature to be allocated pursuant to this
Amended and Restated Service Agreement shall exclude costs of a general nature
which have been allocated to affiliated companies not a party to this Amended
and Restated Service Agreement. Substitution or changes may be made in the
methods of allocation hereinafter specified, as may be appropriate, and will be
provided to state regulatory agencies and to each Client Company.
1. Information Systems
a. Description of Function
Provides communications and electronic data processing
services. The activities of the Function include:
(1) Development and support of mainframe computer software
applications.
(2) Procurement and support of personal computers and
related network and software applications.
(3) Operation of data center.
(4) Installation and operation of communications systems.
b. Method of Allocation
(1) Development and support of mainframe computer software
applications - allocated between the Client Companies and other Functions of the
Service Company based on the number of Central Processing Unit Seconds Ratio and
allocated among the Client Companies on a weighted average of the Sales Ratio
and the Total Construction Expenditures Ratio.
(2) Procurement and support of personal computers and
related network and software applications - allocated to the Client Companies
and to other Functions of the Service Company based on the Number of Employees
Ratio.
(3) Operation of data center - allocated to the Client
Companies and to other Functions of the Service Company based on the Number of
Central Processing Unit Seconds Ratio.
(4) Installation and operation of communications systems -
allocated to the Client Companies and to other Functions of the Service Company
based on the Number of Employees Ratio.
2. Meters and Transportation
a. Description of Function
Procures and maintains meters, vehicles and equipment.
b. Method of Allocation
(1) Meters - allocated to the Client Companies based on the
Number of Customers Ratio.
(2) Transportation - allocated to the Client Companies and
to other Functions of the Service Company based on the Number of Employees
Ratio.
3. Electric System Maintenance
a. Description of Function
Coordinates maintenance of Cinergy Corp.'s electric
transmission and distribution system.
b. Method of Allocation
(1) Services related to transmission system - allocated to
the Client Companies based on the Electric Peak Load Ratio.
(2) Services related to distribution system - allocated to
the Client Companies based on the Circuit Miles of Electric Distribution Lines
Ratio.
4. Marketing and Customer Relations
a. Description of Function
Advises the Client Companies in relations with domestic
utility customers. The activities of the Function include:
(1) Design and administration of sales and demand-side
management programs.
(2) Customer billing and payment processing.
(3) Operation of call center.
b. Method of Allocation
(1) Design and administration of sales and demand-side
management programs - allocated to the Client Companies based on the Sales
Ratio.
(2) Customer billing and payment processing - allocated to
the Client Companies based on the Number of Customers Ratio.
(3) Operation of call center - allocated to the Client
Companies based on the Number of Customers Ratio.
5. Electric Transmission and Distribution Engineering and
Construction
a. Description of Function
Designs and monitors construction of electric transmission
and distribution lines and substations. Prepares cost and schedule estimates,
visits construction sites to ensure that construction activities coincide with
plans,and administers construction contracts.
b. Method of Allocation
(1) Transmission engineering and construction allocated to
the Client Companies based on the Electric Transmission Plant Construction
Expenditures Ratio.
(2) Distribution engineering and construction allocated to
the Client Companies based on the Electric Distribution Plant Construction
Expenditures Ratio.
6. Power Engineering and Construction
a. Description of Function
Prepares specifications and administers contracts for
construction of new electric generating units or improvements to existing
electric generating units. Prepares cost and schedule estimates and visits
construction sites to ensure that construction activities coincide with plans.
b. Method of Allocation
Allocated to the Client Companies based on the Electric
Production Plant Construction Expenditures Ratio.
7. Human Resources
a. Description of Function
Establishes and administers policies and supervises compliance
with legal requirements in the areas of employment, compensation, benefits and
employee health and safety. Processes payroll and employee benefit payments.
Supervises contract negotiations and relations with labor unions.
b. Method of Allocation
Allocated to the Client Companies and to other Functions of
the Service Company based on the Number of Employees Ratio.
8. Materials Management
a. Description of Function
Provides services in connection with the procurement of
materials and contract services and management of material and supplies
inventories.
b. Method of Allocation
Allocated to the Client Companies on a weighted average of the
Sales Ratio and the Total Construction Expenditures Ratio.
9. Facilities
a. Description of Function
Operates and maintains office and service buildings. Provides
security and housekeeping services for such buildings and procures office
furniture and equipment.
b. Method of Allocation
Allocated to other Functions of the Service Company based on
the Number of Employees Ratio.
10. Accounting
a. Description of Function
Maintains the books and records of Cinergy and its affiliates,
prepares financial and statistical reports, processes payments to vendors,
prepares tax filings and supervises compliance with the laws and regulations.
b. Method of Allocation
Allocated to the Client Companies based on a weighted average
of the Sales Ratio and the Total Construction Expenditures Ratio.
11. Power Planning
a. Description of Function
Coordinates the planning and operation of Cinergy Corp.'s
electric power system. The activities of the Function include:
(1) System Planning - planning of additions to
Cinergy Corp.'s electric generation, transmission and
distribution system.
(2) System Control Center - coordination of the
operation of Cinergy Corp.'s electric generating units and
transmission system.
(3) Distribution Control Centers - coordination of
Cinergy Corp.'s electric distribution systems. b. Method of
Allocation
(1) System Planning
(a) Generation and transmission planning -
allocated to the Client Companies based on the
Electric Peak Load Ratio.
(b) Distribution planning - allocated to the
Client Companies based on the Circuit Miles of
Electric Distribution Lines Ratio.
(2) System Control Center - allocated to the Client
Companies based on the Sales Ratio. (3) Distribution
Control Centers - allocated to the Client Companies
based on the Circuit Miles of
Electric Distribution Lines Ratio.
12. Public Affairs
a. Description of Function
Prepares and disseminates information to employees, customers,
government officials, communities and the media. Provides graphics, reproduction
lithography, photography and video services.
b. Method of Allocation
Allocated to the Client Companies based on the Number of
Customers Ratio.
13. Legal
a. Description of Function
Renders services relating to labor and employment law,
litigation, contracts, rates and regulatory affairs, environmental matters,
financing, financial reporting, real estate and other legal matters.
b. Method of Allocation
Allocated to the Client Companies based on a weighted average
of the Number of Employees, Number of Customers and Total Construction
Expenditures Ratios.
14. Rates
a. Description of Function
Determines the Client Companies' revenue requirements and
rates to electric and gas requirements customers. Administers interconnection
and joint ownership agreements. Researches and forecasts customers' usage.
b. Method of Allocation
Allocated to the Client Companies based on the Sales Ratio.
15. Finance
a. Description of Function
Renders services to Client Companies with respect to
investments, financing, cash management, risk management, claims and fire
prevention. Prepares reports to the SEC, budgets, financial forecasts and
economic analyses.
b. Method of Allocation
Allocated to the Client Companies based on a weighted average
of the Sales Ratio and the Total Construction Expenditures Ratio.
16. Right of Way
a. Description of Function
Purchases, surveys, records, and sells real estate interests
for Client Companies.
b. Method of Allocation
(1) Services related to electric distribution system
- allocated to the Client Companies based on the
Circuit Miles of Electric Distribution Lines Ratio.
(2) Services related to electric generation and
transmission system - allocated to the Client Companies
based on the Electric Peak Load Ratio.
17. Internal Auditing
a. Description of Function
Reviews internal controls and procedures to ensure that assets
are safeguarded and that transactions are properly authorized and recorded.
b. Method of Allocation
Allocated to the Client Companies based on the Sales Ratio.
18. Environmental Affairs
a. Description of Function
Establishes policies and procedures for compliance with
environmental laws and regulations. Studies emerging environmental issues,
monitors compliance with environmental requirements and provides training to the
Client Companies' personnel.
b. Method of Allocation
Allocated to the Client Companies based on the Sales Ratio.
19. Fuels
a. Description of Function
Procures coal, gas and oil for the Client Companies. Ensures
compliance with price and quality provisions of fuel contracts and arranges for
transportation of the fuel to the generating stations.
b. Method of Allocation
Allocated to the Client Companies based on the Sales Ratio.
20. Investor Relations
a. Description of Function
Provides communications to investors and the financial
community, performs transfer agent and shareholder record keeping functions,
administers stock plans and performs stock-related regulatory reporting.
b. Method of Allocation
Allocated to the Client Companies based on the Sales Ratio.
21. Planning
a. Description of Function
Facilitates preparation of strategic and operating plans,
monitors trends and evaluates business opportunities.
b. Method of Allocation
Allocated to the Client Companies based on the Sales Ratio.
22. Executive
a. Description of Function
Provides general administrative and executive management
services.
b. Method of Allocation
Allocated to the Client Companies based on the Sales Ratio.
