Climate Challenge Participation Accord

DOE's Energy Partnerships for a Strong Economy

This Participation Accord describes the commitments that CINergy Corp. ("CINergy") and its utility subsidiaries, PSI Energy, Inc. ("PSI") and The Cincinnati Gas & Electric Company ("CG&E"), and the U.S. Department of Energy ("DOE") have made to participate in the Climate Challenge Program in pursuit of the President's goals for reducing greenhouse gas emissions. CINergy, PSI and CG&E are hereinafter sometimes referred to collectively as the "CINergy Companies."

The Climate Challenge Program is a joint, voluntary effort of DOE and the electric utility industry to reduce, avoid or sequester greenhouse gas emissions. The framework of the Climate Challenge Program was established in the Climate Challenge Program Memorandum of Understanding and exhibits thereto dated April 20, 1994 (the "Climate Challenge Program MOU") (see Attachment A to this Participation Accord).

I. The CINergy Companies' Commitments

A. The CINergy Companies affirm their continued commitment to play a leadership role in the President's Climate Challenge Program which has as its goal reducing greenhouse gas emissions to 1990 levels by the year 2000. The CINergy Companies commit to work with their customers and other stakeholders to develop and implement a voluntary program of comprehensive and flexible least-cost activities to reduce, avoid, or sequester greenhouse gas emissions to return the CINergy Companies' emissions to 1990 levels by the year 2000. Consistent with paragraph II.B.1 of the Climate Challenge Program MOU, the CINergy Companies make the following commitments to achieve the aforementioned goal:

i.
The CINergy Companies commit to assume a leadership role in the public policy debate;

ii.
Consistent with the CINergy Companies' Environmental Leadership Pledge, they commit to work with stakeholders to investigate least-cost activities for achieving the target level reductions as described in Attachment B;

iii.
The CINergy Companies commit to work with stakeholders to gain agreement on an implementation strategy for the emission reductions;

iv.
The CINergy Companies commit to work with stakeholders to jointly develop resources to be used to support emission reduction efforts in light of rate moratorium commitments which certain CINergy Companies have made to regulatory commissions.

(1)
In pursuit of this goal, the CINergy Companies have undertaken or will continue to undertake the following activities which are already planned or in place, through which the CINergy Companies expect to attain reductions of 1.85 million tons of CO₂ equivalents:
• Demand-side Management Programs (including participation by CG&E and PSI in EPA's Greenlights Program)
  
• Landfill Methane Gas Recovery (CG&E and PSI are participants in EPA's Landfill Methane Outreach Program)
  
• heat Rate Improvement Projects, and
  
• Coal Post Combustion By-product Utilization,
  
as further described in Section I of Attachment B;

(2)

expect greenhouse gas reductions of up to 5 million tons of CO₂ equivalents from activities which could be implemented to achieve other business goals, including:

• new Demand Side-Management Programs,
  
• Landfill Methane Gas Recovery,
  
• Power Plant Efficiency Programs,
  
• Wabash River Coal Gasification Repowering Project,
  
• Biomass Fuel Programs,
  
• Natural Gas Air Conditioning Programs,
  
• Compressed Natural Gas and Electric Vehicles,
  
• Coal Post Combustion By-Product Utilization,
  
• International Projects,
  
• Recycling (office paper and metals),
  
• CFC Recycling Programs,
  
• Employee Ride Share Programs,
  
• EEI Geothermal Heat Pump Initiative, and
  
• Fuel Cells,

as further described in Section II of Attachment B; and

(3)

the CINergy Companies will evaluate implementation of activities in order to achieve up to an additional 4.1 million tons of CO₂ equivalents including:
• new Demand-Side Management Programs,
  
• Landfill Methane Gas Recovery,
  
• Coal Mine Methane Gas Recovery,
  
• Urban Tree Planing Programs,
  
• Coal Mine Reclamation Tree Replanting Program,
  
• Rural Forestation,
  
• Foreign Forestation Programs,
  
• EEI Utility Forest Carbon Management Program,
  
• Heat Rate Improvements,
  
• Research and Development Programs, and
  
• EEI International Utility Efficiency Program,
  
as described in Section III of Attachment B.

(4)

If all of the reductions are realized, the CINergy Companies will be returned to their 1990 emission levels by the end of 2000. This estimate is based on CINergy's Long-Term Electric Forecast and Integrated Resource Plan which is submitted to the Public Utility Commission of Ohio, the Indiana Utility Regulatory Commission and the Kentucky Public Service Commission. The estimated number of CO₂ equivalent tons may change due to decreases or increases in CINergy's actual 2000 energy generation requirements (based upon the Intergovernmental Panel on Climate Change (IPCC)).

C. The Climate Challenge Program representative for the CINergy Companies is Mr. Dave Hoffman, General Manager, Environmental Services, 1000 East Main Street, Plainfield, IN 46168. The CINergy Companies agree to notify DOE prior to or, in any event, no later than 30 days after any change in the contact.

D. The CINergy Companies will confer with DOE on or before June 30, 1997, (and biennially, subject to paragraph F below). The conferences will be used to evaluate jointly the CINergy Companies' progress in achieving their Climate Challenge Program goals, and to discuss possible adjustments to their voluntary commitments.

E. The CINergy Companies will undertake to include in their annual environmental report, which will be made available to the public, a description of their progress in meeting their commitments under this Participation Accord.

F. The CINergy Companies' commitments to undertake the actions described in paragraphs I.A. and D. above and Attachment B are specifically premised and contingent upon the factors described in this paragraph F.

1.

Achievement of the approximately 1.85 million tons reductions of CO₂ equivalents described in Section I of Attachment B are premised and contingent upon, among other things, the following:
(i) the achievement or continuation of a consensus, between CINergy and its stakeholders, on the appropriateness of the implementation of least cost greenhouse gas emission reduction activities;

(ii) creation or continuation of acceptable funding mechanisms for the implementation of least cost greenhouse gas emission reduction activities described in Section I of Attachment B;

(iii) the receipt by the CINergy Companies from the applicable federal and state regulatory commissions of satisfactory rate treatment and timely recovery of the costs necessary for such activity and funding commitments, as well as their lost revenues resulting from such commitments, all as determined by the CINergy Companies;

(iv) the determination by the CINergy Companies that such commitments are and continue to be cost- effective;

(v) the successful implementation, as determined by the CINergy Companies, of any Climate Challenge or Climate Change Action Plan industry programs and agency actions in which they have committed to participate;

(vi) the non- occurrence of extraordinary weather events, acts of God, and political uprisings which would adversely affect their performance or achievement of such commitments, all as determined by the CINergy Companies;

(vii) the absence of unacceptable legislation or regulation, as determined by the CINergy Companies, whether federal, state or local, relating in any way to the emission of greenhouse gases; and

(viii) the absence, as determined by the CINergy Companies, of environmental legislation or regulation, whether federal, state or local, which would adversely affect the CINergy Companies' performance or achievement of such commitments.

2.
Achievement of the approximately 5 million tons reductions of CO₂ equivalents through the undertaking or implementation of any activities such as those described in Section II of Attachment B are premised and contingent upon, among other things, the following:
(i) the achievement of a consensus, between CINergy and its stakeholders, on the appropriateness of the implementation of the least cost greenhouse gas emission reduction activities described in Section II of Attachment B;

(ii) creation of acceptable funding mechanisms for the implementation of the least cost greenhouse gas emission reduction activities described in Section II of Attachment B;

(iii) the receipt by the CINergy Companies from the applicable federal and state regulatory commissions of satisfactory rate treatment and timely recovery of the costs necessary for such activity and funding commitments, as well as their lost revenues resulting from such commitments, all as determined by the CINergy Companies;

(iv) the determination by the CINergy Companies, in its discretion, that such commitments are and continue to be cost- effective;

(v) the successful implementation, as determined by the CINergy Companies, of any Climate Challenge or Climate Change Action Plan industry programs and agency actions in which they have committed to participate;

(vi) the non- occurrence of extraordinary weather events, acts of God, and political uprisings which would adversely affect their performance or achievement of such commitments, all as determined by the CINergy Companies;

(vii) the absence of unacceptable legislation or regulation, as determined by the CINergy Companies, whether federal, state or local, relating in any way to the emission of greenhouse gases; and

(viii) the absence, as determined by the CINergy Companies, of environmental legislation or regulation, whether federal, state or local, which would adversely affect the CINergy Companies' performance or achievement of such commitments.

3.
Achievement of the approximately 4.1 million tons of reductions of CO₂ equivalents through the undertaking or implementation of any activities described in Section III of Attachment B are premised and contingent upon, among other things, the following:
(i) the achievement of a consensus, between CINergy and its stakeholders, on the appropriateness of the implementation of the least cost greenhouse gas emission reduction activities described in Section III of Attachment B;

(ii) creation of acceptable funding mechanisms for the implementation of the least cost greenhouse gas emission reduction activities described in Section III of Attachment B;

(iii) the receipt by the CINergy Companies from the applicable federal and state regulatory commissions of satisfactory rate treatment and timely recovery of the costs necessary for such activity and funding commitments, as well as their lost revenues resulting from such commitments, all as determined by the CINergy Companies;

(iv) the determination by the CINergy Companies, in its discretion, that such commitments are and continue to be cost- effective;

(v) the successful implementation, as determined by the CINergy Companies, of any Climate Challenge or Climate Change Action Plan industry programs and agency actions in which they have committed to participate;

(vi) the non- occurrence of extraordinary weather events, acts of God, and political uprisings which would adversely affect their performance or achievement of such commitments, all as determined by the CINergy Companies;

(vii) the absence of unacceptable legislation or regulation, as determined by the CINergy Companies, whether federal, state or local, relating in any way to the emission of greenhouse gases; and

(viii) the absence, as determined by the CINergy Companies, of environmental legislation or regulation, whether federal, state or local, which would adversely affect the CINergy Companies' performance or achievement of such commitments.

4.
Additionally all commitments contained in this Participation Accord are further conditioned that in the event that the CINergy Companies determine that retail wheeling is occurring, or is scheduled or likely to occur, on the system of one or more of the CINergy Companies' domestic public utility subsidiaries, the CINergy Companies and DOE agree to timely meet and in good faith discuss the impact, if any, of such retail wheeling on the commitments, and the appropriate modifications to such commitments.

II. DOE Commitments

A. DOE's commitments to the CINergy Companies are those set out in section III of the Climate Challenge Program MOU, which are hereby incorporated in this Participation Accord by reference.

B. DOE will consider requests of any of the CINergy Companies to intervene in regulatory proceedings of federal, state and local commissions and boards on issues pertinent to the Climate Challenge Program. Before DOE intervenes in regulatory and other proceedings pertaining to any of the CINergy Companies for purposes of addressing Climate Challenge Program issues, it will provide notice to such company.

C. DOE will provide an annual report to the CINergy Companies describing the actions that it has taken to fulfill its commitments under section III and Exhibit C of the Climate Challenge Program MOU and the results of those actions.

D. The Climate Challenge Program representative for DOE, who will serve as liaison to the CINergy Companies, will be Allan Hoffman, Department of Energy, Room 6B-128 (EE-10), 1000 Independence Avenue SW, Washington, D.C. 20585, (202) 586-1786. DOE agrees to notify the CINergy Companies prior to or, in any event, no later than 30 days after any change in liaison responsibilities or personnel.

III. General Provisions

A. Use of DOE- developed materials by the CINergy Companies will be governed by the provisions of section IV of the Climate Challenge Program MOU, which are hereby incorporated in this Participation Accord by reference.

B. In addition to the foregoing provisions, DOE and the CINergy Companies agree to act in accordance with the principles set out in section I of the Climate Challenge Program MOU and the general provisions set out in subsections V.A- V.D, V.F and V.G of the Climate Challenge Program MOU, which are hereby incorporated by reference.

C. Any party may withdraw from this Participation Accord or any of its activities under the Climate Challenge Program without penalty and without being subject to remedies at law or equity.

(Original signed by)
_________________________________________ Date: ______________
CINergy Corp.
The Cincinnati Gas & Electric Company
PSI Energy, Inc.

(Original signed by)
_________________________________________ Date: ______________
Secretary of Energy
U.S. Department of Energy

Attachment A -- Climate Challenge Program MOU and exhibits

Attachment B -- Greenhouse Gas Reduction Activities

 ACTIVITY                                                            CO2   REDUCTIONS   

                                                                       2000 (tons)      

_____________________________________________________________________________________

Demand-Side Management Programs                                              939,000  

Landfill Methane Gas Recovery                                                730,000  

Heat Rate Improvement Projects                                               100,000  

Coal Post Combustion By-Product Utilization                                   83,000  

_____________________________________________________________________________________

Total CO2 Emission Reductions                                              1,850,000  

ACTIVITY DESCRIPTION

Existing Demand-Side Management Programs

• Programs that have been implemented by CG&E and PSI between 1990 and 1994 which have the effect of reducing CO₂ emissions from power plants by reducing electric energy demand.

  CG&E and PSI are participants in EPA's Greenlights Program.

  Landfill Methane Gas Recovery

• CG&E is purchasing methane gas recovered from the Rumpke Landfill in northwestern Hamilton County, Ohio. The recovered landfill gas is blended with natural gas in CG&E's natural gas system and delivered to CG&E's natural gas customers. CG&E receives an average of 2,500 mcf per day from the landfill.

  CG&E and PSI are participants in EPA's Landfill Methane Outreach Program.

• PSI is purchasing electricity generated with recovered landfill gas at the Twin Bridges Recycling & Disposal Facility near Danville, Indiana. The landfill is recovering an average of 1,300 mcf per day.

  Coal Post Combustion By-Product Utilization

• CG&E has developed a program to reuse a portion of the fly ash that results from the combustion of coal in its boilers to generate electricity. The fly ash is used as a substitute for cement in various construction projects in the Cincinnati area. Also, CG&E has developed a flowable fill product using various proportions of fly ash and portland cement which is used to fill ditches and other excavations.

  Heat Rate Improvement Programs

• CG&E and PSI have implemented programs which increase the efficient use of coal at our power plants to generate electricity. Since less fuel is required to produce the same amount of electricity, fuel emissions are reduced.

 ACTIVITY                                                          CO2   REDUCTIONS    

                                                                     IN 2000 (tons)       

_____________________________________________________________________________________

New Demand-Side Management Programs                                           737,000  

Landfill Methane Gas Recovery                                                 950,000  

Power Plant Efficiency Programs                                               480,000  

Coal Gasification Project                                                     300,000  

Biomass Fuel Program                                                          120,000  

Natural Gas Air Conditioning Programs                                         500,000  

Compressed Natural Gas and Electric Vehicles                                    5,000  

Coal Post Combustion By-Product Utilization                                   167,000  

International Projects                                                        150,000  

Recycling (office paper and metals)                                            10,000  

CFC Recycling Programs                                                      1,579,000  

Employee Ride Share Programs                                                    1,000  

EEI Geothermal Heat Pump Initiative                                            15,000  

Fuel Cells                                                                      5,000  

_____________________________________________________________________________________

Total CO2 Emission Reductions                                               5,017,000  

ACTIVITY DESCRIPTION

New Demand-Side Management Programs

• CG&E and PSI will evaluate and implement new demand-side management programs that are cost effective, meet the needs of our customers, and meet our corporate objectives.

  Landfill Methane Gas Recovery

• CG&E is proposing to accept an increased amount of methane gas from the Rumpke Landfill.

  Power Plant Efficiency Programs

• Various power plant efficiency programs are proposed that will reduce the amount of coal that is burned to produce electric energy. These programs need to be studied to determine their cost effectiveness. As a result of merging, CG&E and PSI power plants will be centrally dispatched resulting in a more efficient use of the power plants and an energy savings.

  Wabash River Coal Gasification Repowering Project

• PSI will operate a coal gas-fired combined cycle power plant that will emit less CO₂ than a comparable coal fired power plant. This project is funded as part of the Department of Energy's Clean Coal Technology program.

  Natural Gas Air Conditioning Program

• CG&E is investigating the use of natural gas fired air conditioners to replace electric cooling devices to take advantage of its combined energy services, natural gas and electricity.

  Compressed Natural Gas (CNG) and Electric Vehicles

• CG&E is replacing a portion of its gasoline fueled fleet vehicles with CNG vehicles. CG&E is working with other vehicle fleet owners to convert their fleets to CNG fuel. CG&E is constructing several CNG filling stations in its service territory and a vehicle conversion facility. Some of the filling stations will be available for use by the public.

  PSI is studying the possibility of converting a portion of its vehicle fleet to electric and/or CNG fueled vehicles.

  Coal Post Combustion By-Product Utilization

• CG&E and PSI are investigating ways to expand the use of coal combustion by-products to replace cement and other innovative ways to reduce CO₂ emissions.

  International Projects

• CG&E and PSI are actively pursuing electric generation, transmission, distribution, gas technology, and other energy projects in foreign countries. Some of these projects may involve improvement in utility plant efficiencies which will reduce CO₂ emissions.

  Recycling

• PSI owns a recycling company that recycles white office paper and metals from its facilities and other businesses in Indiana. CG&E is developing a similar recycling facility in Ohio and is implementing recycling in its facilities.

  CFC Recycling Program

• CG&E and PSI are investigating the possibility of replacing cooling units which contain CFC's at its facilities and at customer facilities with non-CFC cooling units. CG&E and PSI are currently capturing and recycling CFC's from its vehicle fleet. CG&E and PSI will study the feasibility of recycling refrigerators through their recycling companies and capturing the CFC's.

  Employee Ride Share Programs

• CG&E is designing and will promote an employee ride share program in conjunction with the Ohio-Kentucky-Indiana Regional Council of Governments. This program is high profile and intended to encourage employees to join carpools and vanpools to reduce CO₂ emissions.

  EEI Geothermal Heat Pump Initiative

• PSI has committed to participate in the Edison Electric Institute (EEI) Geothermal Heat Pump Initiative, and CG&E is studying the possibility of participating in the program.

  Fuel Cells

• PSI is participating in the development of fuel cells and intends to implement a pilot program.

  Other Programs

• CG&E and PSI will continue to investigate, implement and modify other programs between now and the year 2000. The CINergy Companies will monitor these programs for potential greenhouse gas emission reductions.

 ACTIVITY                                                          CO2  REDUCTIONS    

                                                                     IN 2000 (tons)      

_____________________________________________________________________________________

New Demand-Side Management Programs                                           23,000  

Landfill Methane Gas Recovery                                                244,000  

Coal Mine Methane Gas Recovery                                               500,000  

Urban Tree Planting Programs                                                  15,000  

Coal Mine Reclamation Tree Planting Program                                   30,000  

Rural Forestation Programs                                                   402,000  

Foreign Forestation Programs                                               2,000,000  

EEI Utility Forest Carbon Management Program                                  20,000  

Heat Rate Improvements                                                       200,000  

Research and Development Programs                                                  0  

EEI International Utility Efficiency Program                                 700,000  

_____________________________________________________________________________________

Total CO2 Emission Reductions                                              4,132,000  

ACTIVITY DESCRIPTION

New Demand-Side Management Programs

• CG&E and PSI will investigate new demand-side management projects which fall just short of being cost effective when measured by the standard cost benefit tests, but may become cost effective.

  Landfill Methane Gas Recovery

• CG&E and PSI will study the possibility of expanding the recovery of methane gas from other landfills within their service territories.

  Coal Mine Methane Gas Recovery

• CG&E and PSI will study the possibility of developing a pilot project(s) to capture and utilize coal mine methane gas.

  Urban Tree Planting Programs

• CG&E will consider the possibility of being a sponsor for the Urban Forest Program with the City of Cincinnati Parks and Recreation Department and the Hamilton County Parks Department.

  CG&E will investigate the benefits of participating in DOE's Cool Communities Program.

  CG&E will study the possibility of developing a program to reduce heating and cooling loads of residential and commercial structures through the planting of trees to act as shade and wind breaks.

  Coal Mine Reclamation Tree Planting Program

• CG&E and PSI will investigate opportunities to work with coal companies that supply coal to their power plants to replant trees on reclaimed strip mines.

  Rural Forestation Programs

• CG&E and PSI will investigate the possibilities of developing rural forestation projects to sequester CO₂.

  Foreign Forestation Programs

• CG&E and PSI will investigate foreign forestry management and forestation projects in areas that will produce high quantities of carbon sequestration at lower costs than domestic projects.

  EEI Utility Forest Carbon Management Program Initiative

• CG&E and PSI have committed to participate in the Edison Electric Institute (EEI) Utility Forest Carbon Management Program (UFCMP).

  Heat Rate Improvements

• CG&E and PSI will investigate heat rate improvement projects that may be marginal under existing company criteria but may become cost effective.

  Research and Development

• CG&E and PSI will consider the possibility of committing additional money to their research and development programs to develop CO₂ reducing technologies. This money would be leveraged with other utility companies, private industry, organizations, and government agencies for the research and development of clean coal technologies, biomass fuels, fuel cells, and alternative forms of electric energy. Emission reductions associated with research and development programs can not be quantified at this time.

  EEI International Utility Efficiency Program

• CG&E and PSI have committed to participate in the Edison Electric Institute (EEI) International Utility Efficiency Program (IUEP).

Please send comments to:
Lawrence.Mansueti@hq.doe.gov