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SEC Allows Cinergy to Keep Gas Distribution

SEC Allows Cinergy to Keep Gas Distribution

After a four-year wait, Cincinnati Gas &amp Electric Co. and PSI Resources finally received unconditional approval of their merger into Cinergy Corp. from the Securities and Exchange Commission. A final decision on the merger was held up by potential Congressional action on the Public Utility Holding Company Act.

The gas and electric operations of the two companies are not integrated under PUHCA, and the companies risked having to divest the gas distribution operations of Cincinnati Gas &amp Electric Co. But the SEC put off a decision on the matter because of expected changes or repeal of PUHCA by Congress. Legislation, however, was never passed.

Cinergy filed an updated merger study with the SEC in February of this year showing that divestiture of gas distribution would result in a $52 million increase in operating costs, attributable to duplication of meter reading, customer service and administrative personnel and operations. That was enough to convince the SEC the merger was in the public interest.

"Consolidation and convergence in the energy industry should not be artificially restrained by regulations designed to address issues of a bygone era," said Cinergy CEO James E. Rogers. "The SEC demonstrated that logic will prevail in the marketplace."

"We were never really that worried about it," said a Cinergy spokesman. "I think we felt pretty confident that we could prove divestiture would lead to increased costs." The gas distribution unit represents only about 8% of corporate revenues.

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