SEC Allows Cinergy to Keep Gas Distribution
After a four-year wait, Cincinnati Gas & 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 & 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
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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