Cinergy Corp., the owner of Cincinnati Gas & Electric(CG&E), experienced a corporate makeover recently as it soldits nonregulated retail gas marketing unit, Cinergy Resources, toan integrated energy services cooperative called The EnergyCooperative (TEC) for an undisclosed sum and set plans in motion tocut its corporate center staff by more than 50%.

The sale of the retail marketing unit will remove Cinergy formretail operations in its own utility’s pilot program. Cinergy saidit will not disclose the number of customers Cinergy Resourcesserves. The actual date of the sale was Feb. 1, but theannouncement was delayed because of a “transition period” while thetwo companies worked out customer service issues.

“The decision we made [last week] was to exit the retail gasmarket and focus on wholesale marketing operations,” said SteveBrash, a Cinergy spokesman. “Quite simply, we believe we canallocate our resources in more effective areas than retail markets.When power deregulation hits [CG&E’s service territory], wehave already made the decision to not enter the retail powermarkets as well.”

The decision of Cinergy to pull out of the retail market arenais the second such decision by a major U.S. energy company in thepast two weeks. In late February, DTE Energy announced it wasclosing up shop on its retail marketing efforts (see NGI, Feb. 28).

All of the 23 employees of Cinergy Resources will be givendifferent jobs at Cinergy, Brash said. The name of the marketingcompany will change to The Energy Cooperative as a result of thetransaction.

For TEC, the purchase gives the company an entrance intoCG&E’s deregulating market place. Cinergy Resources hadparticipated in CG&E’s customer choice pilot program, so it hasname recognition in the market. Overall, CG&E has 360,000 gascustomers, all of whom are free to select a supplier of theirchoice.

TEC is a not-for-profit business owned by its members. Anyprofits generated by the business are allocated to its members,based on patronage. As a result of this purchase, CinergyResources’ customers are automatically entitled to the benefits ofownership and membership in the cooperative, TEC said.

Cinergy is no stranger to exploring the options for one of itssubsidiaries. After a summer in which the power unit defaulted onsome contracts due to excess demand and record heat, Cinergy’s topbrass announced it was going to look into selling that portion ofthe business. Brash said that the management decided to stay in thebusiness after a meeting last November (see NGI, Nov. 8).

The company did more than just halt its retail marketingstrategy last week, however. In an unrelated move, Cinergyannounced that its corporate center, which is located in twodifferent buildings (one in Cincinnati and the other in Plainfield,IN) will scale back its employment positions by 580. Therestructuring is expected to be completed in June and is estimatedto reduce costs by about $25 million annually.

Under the reorganization, approximately 340 of the currentcorporate center positions will be moved to one of Cinergy’sbusiness units. About 240 positions will be eliminated; however,more than 75 of those positions are currently vacant and about 40positions are covered under bargaining unit agreements, the companysaid. Corporate center activities include accounting, legal, publicrelations, human resources and regulatory affairs operations.

“Now that our business units have profit-and-lossresponsibility, it is important for them to have the people whosupport them as a part of their team, rather than in anotherorganization,” said James Rogers, Cinergy CEO.

The goal of the reorganization is to create a small core thatprovides corporate strategy and governance and a shared servicesgroup that is centralized to provide economies of scale forfunctions supporting all business units. Certain functions will bedecentralized into the company’s four business units — energycommodities, energy delivery, international and CinergyInvestments.

The reductions are expected to result in about 45 employeesbeing displaced. Company placement services will be available toassist employees in finding another job inside the company or withanother organization.

John Norris

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