Cinergy Exits OH Retail, Slashes Corporate Staff
Cinergy Corp., the owner of Cincinnati Gas & Electric
(CG&E), experienced a corporate makeover recently as it sold
its nonregulated retail gas marketing unit, Cinergy Resources, to
an integrated energy services cooperative called The Energy
Cooperative (TEC) for an undisclosed sum and set plans in motion to
cut its corporate center staff by more than 50%.
The sale of the retail marketing unit will remove Cinergy form
retail operations in its own utility's pilot program. Cinergy said
it will not disclose the number of customers Cinergy Resources
serves. The actual date of the sale was Feb. 1, but the
announcement was delayed because of a "transition period" while the
two companies worked out customer service issues.
"The decision we made [last week] was to exit the retail gas
market and focus on wholesale marketing operations," said Steve
Brash, a Cinergy spokesman. "Quite simply, we believe we can
allocate our resources in more effective areas than retail markets.
When power deregulation hits [CG&E's service territory], we
have already made the decision to not enter the retail power
markets as well."
The decision of Cinergy to pull out of the retail market arena
is the second such decision by a major U.S. energy company in the
past two weeks. In late February, DTE Energy announced it was
closing up shop on its retail marketing efforts (see NGI, Feb. 28).
All of the 23 employees of Cinergy Resources will be given
different jobs at Cinergy, Brash said. The name of the marketing
company will change to The Energy Cooperative as a result of the
For TEC, the purchase gives the company an entrance into
CG&E's deregulating market place. Cinergy Resources had
participated in CG&E's customer choice pilot program, so it has
name recognition in the market. Overall, CG&E has 360,000 gas
customers, all of whom are free to select a supplier of their
TEC is a not-for-profit business owned by its members. Any
profits generated by the business are allocated to its members,
based on patronage. As a result of this purchase, Cinergy
Resources' customers are automatically entitled to the benefits of
ownership and membership in the cooperative, TEC said.
Cinergy is no stranger to exploring the options for one of its
subsidiaries. After a summer in which the power unit defaulted on
some contracts due to excess demand and record heat, Cinergy's top
brass announced it was going to look into selling that portion of
the business. Brash said that the management decided to stay in the
business after a meeting last November (see NGI, Nov. 8).
The company did more than just halt its retail marketing
strategy last week, however. In an unrelated move, Cinergy
announced that its corporate center, which is located in two
different buildings (one in Cincinnati and the other in Plainfield,
IN) will scale back its employment positions by 580. The
restructuring is expected to be completed in June and is estimated
to reduce costs by about $25 million annually.
Under the reorganization, approximately 340 of the current
corporate center positions will be moved to one of Cinergy's
business units. About 240 positions will be eliminated; however,
more than 75 of those positions are currently vacant and about 40
positions are covered under bargaining unit agreements, the company
said. Corporate center activities include accounting, legal, public
relations, human resources and regulatory affairs operations.
"Now that our business units have profit-and-loss
responsibility, it is important for them to have the people who
support them as a part of their team, rather than in another
organization," said James Rogers, Cinergy CEO.
The goal of the reorganization is to create a small core that
provides corporate strategy and governance and a shared services
group that is centralized to provide economies of scale for
functions supporting all business units. Certain functions will be
decentralized into the company's four business units --- energy
commodities, energy delivery, international and Cinergy
The reductions are expected to result in about 45 employees
being displaced. Company placement services will be available to
assist employees in finding another job inside the company or with