Tiny Energy Co-Op Sues Cinergy Corp. (CIN) for $26 Million, Alleging Conspiracy to Scuttle Choice Program

Apr 03, 2001, 01:00 ET from The Energy Cooperative, Inc.

    NEWARK, Ohio, April 3 /PRNewswire/ -- Even while negotiating to sell a
 subsidiary company supplying natural gas to approximately 20,000 Cincinnati
 Gas & Electric Co. customers, the powerful, $12 billion Cinergy Corp. (CIN)
 was secretly plotting changes in its gas program that would assure the
 company's demise, a lawsuit filed in Licking County Common Pleas Court
 alleges.
     The Energy Cooperative, Inc. of Newark, which was unaware of the coming
 changes when it took over the doomed subsidiary, Cinergy Resources, Inc. last
 year, is demanding at least $26.1 million in actual damages from the utility
 giant, as well as unspecified punitive damages. The suit charges Cinergy and
 its affiliates, CG&E and Cinergy Investments, Inc., with civil conspiracy,
 breach of contract, conversion, and unjust enrichment.
     Cinergy Resources, Inc. had signed up approximately 20,000 CG&E customers
 as part of the parent company's Gas Customer Choice program, under which
 consumers may choose their own supplier.
     "Cinergy's clear motive in changing the rules of the game was to destroy
 the Gas Customer Choice program, thereby denying consumers an option to which
 they are entitled under Ohio law," said John Manczak of TEC. "Now, CG&E
 residential customers effectively have no choice at all."
     According to the TEC complaint, Cinergy officials failed to disclose
 during negotiations that CG&E was drafting a new tariff and operating
 procedures that would materially alter the terms of the customer agreements,
 and that these changes would have a "devastating impact" on TEC's ability to
 profitably operate the newly-acquired company.
     "In fact, Cinergy, CG&E and Cinergy Investments knew that the new tariff
 would eliminate and destroy the Gas Customer Choice program because it
 effectively precluded renewals of those contracts," the lawsuit states.
     The new rules required that TEC obtain a new, signed contract from each
 customer it wished to renew. Under the old tariff, the contracts could be
 automatically renewed from year to year unless specifically canceled by the
 customer.
     "This material change dramatically increased TEC's costs of operating the
 Gas Customer Choice program to the point that Cinergy, CG&E, and Cinergy
 Investments knew it would no longer be profitable for TEC to operate the ...
 program," the lawsuit states.
     In addition to $23 million for damages caused by the new tariff, TEC is
 also seeking at least $3.1 million for natural gas TEC delivered to Choice
 customers, but for which it did not receive payment from CG&E. The suit also
 alleges that Cinergy/CG&E has refused to reimburse TEC for surplus gas
 deliveries, and has converted the surplus gas to its own use.
     The lawsuit states that TEC, in agreeing to purchase Cinergy Resources,
 relied upon assertions by Cinergy that it was seeking a "long-term
 relationship" with the new supplier.
     "This representation was false because Cinergy, CG&E and Cinergy
 Investments had already decided to kill the Gas Customer Choice program," the
 lawsuit states. "(They) knew that the statement was false at the time it was
 made and each of them intended that it would be relied upon by TEC."
 
 

SOURCE The Energy Cooperative, Inc.
    NEWARK, Ohio, April 3 /PRNewswire/ -- Even while negotiating to sell a
 subsidiary company supplying natural gas to approximately 20,000 Cincinnati
 Gas & Electric Co. customers, the powerful, $12 billion Cinergy Corp. (CIN)
 was secretly plotting changes in its gas program that would assure the
 company's demise, a lawsuit filed in Licking County Common Pleas Court
 alleges.
     The Energy Cooperative, Inc. of Newark, which was unaware of the coming
 changes when it took over the doomed subsidiary, Cinergy Resources, Inc. last
 year, is demanding at least $26.1 million in actual damages from the utility
 giant, as well as unspecified punitive damages. The suit charges Cinergy and
 its affiliates, CG&E and Cinergy Investments, Inc., with civil conspiracy,
 breach of contract, conversion, and unjust enrichment.
     Cinergy Resources, Inc. had signed up approximately 20,000 CG&E customers
 as part of the parent company's Gas Customer Choice program, under which
 consumers may choose their own supplier.
     "Cinergy's clear motive in changing the rules of the game was to destroy
 the Gas Customer Choice program, thereby denying consumers an option to which
 they are entitled under Ohio law," said John Manczak of TEC. "Now, CG&E
 residential customers effectively have no choice at all."
     According to the TEC complaint, Cinergy officials failed to disclose
 during negotiations that CG&E was drafting a new tariff and operating
 procedures that would materially alter the terms of the customer agreements,
 and that these changes would have a "devastating impact" on TEC's ability to
 profitably operate the newly-acquired company.
     "In fact, Cinergy, CG&E and Cinergy Investments knew that the new tariff
 would eliminate and destroy the Gas Customer Choice program because it
 effectively precluded renewals of those contracts," the lawsuit states.
     The new rules required that TEC obtain a new, signed contract from each
 customer it wished to renew. Under the old tariff, the contracts could be
 automatically renewed from year to year unless specifically canceled by the
 customer.
     "This material change dramatically increased TEC's costs of operating the
 Gas Customer Choice program to the point that Cinergy, CG&E, and Cinergy
 Investments knew it would no longer be profitable for TEC to operate the ...
 program," the lawsuit states.
     In addition to $23 million for damages caused by the new tariff, TEC is
 also seeking at least $3.1 million for natural gas TEC delivered to Choice
 customers, but for which it did not receive payment from CG&E. The suit also
 alleges that Cinergy/CG&E has refused to reimburse TEC for surplus gas
 deliveries, and has converted the surplus gas to its own use.
     The lawsuit states that TEC, in agreeing to purchase Cinergy Resources,
 relied upon assertions by Cinergy that it was seeking a "long-term
 relationship" with the new supplier.
     "This representation was false because Cinergy, CG&E and Cinergy
 Investments had already decided to kill the Gas Customer Choice program," the
 lawsuit states. "(They) knew that the statement was false at the time it was
 made and each of them intended that it would be relied upon by TEC."
 
 SOURCE  The Energy Cooperative, Inc.