Cinergy Corp. CEO James Rogers told analysts this week the companymay exit the power supply business altogether, including nonregulatedtrading and marketing, and regulated sales, as a result of the hugelosses suffered in the power market in July (see Daily GPI Aug. 9, Aug. 11). Cinergy’s board intends to make adecision on the matter this fall. The company also plans to considerspinning off its generation business into a separate subsidiary.

Experiencing record heat and power demand on its system andexorbitant power prices in the hourly wholesale market in lateJuly, Cinergy cut interruptible customers, declared force majeureon power marketing agreements with eight marketers and called forvoluntary power usage reductions. The drastic measures wererequired, Rogers said, in order to prevent blackouts from occurringin Cinergy’s territory. He blamed part of Cinergy’s problems onrestricted access to Columbus, OH-based American Electric PowerCo.’s (AEP) transmission system.

Cinergy took a $57 million loss, or $0.36/share, because of thecost of maintaining deliveries to core wholesale customers withpower purchased on a market that registered $9,000/MWh. Inaddition, its defaults on power marketing agreements are expectedto costs the company $16 million, or $0.10/share, in settlementcharges.

For the time being, Cinergy will remain in marketing and tradingand will look for ways of mitigating the risks involved, such asadding generation and shedding some longstanding sales agreementsthat were at below-market rates. But if it decides to exit powermarketing, its regulated sales business to 1.4 million customers inOhio, Indiana and Kentucky will have to go with it, saidspokeswoman Angeline Protogere.

“The supply business, we believe, is intrinsically linked withtrading. We necessarily have to trade power to serve customers. If[we] can’t fix these problems, [we] may look at exiting thebusiness entirely. But say we made a decision to do that. We stillhave our foot in the regulated world. It would take two to threeyears to be able to exit that business because we would have tohave regulatory approval,” she noted.

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