SIGNPOST #1
THE STATES ARE TAKING ACTION:

• Four states have an overall cap on GHG emissions and two states have a cap on power plant CO₂ emissions.
• Four states require source reporting of CO₂ emissions and three have voluntary reporting programs.
• Eight states regulate GHG emissions.
• 18 states have mandatory renewable energy portfolio standards.
• Eight states have filed suits against Cinergy and four other coal-burning utilities to curb GHG emissions.

SIGNPOST #2
AN INCREASING NUMBER OF U.S. SENATORS ARE EXPRESSING CONCERN ABOUT GLOBAL WARMING:

• In 1997, the U.S. Senate voted 95-0 to reject ratification of the Kyoto Protocol. But in 2003, the McCain-Lieberman Climate Stewardship Act, that would have regulated CO₂ emissions, fell just eight votes short of passing, with two senators not voting. The Act has been reintroduced in the new Congress.
• This may mean the likelihood of passing comprehensive legislation regulating the emission of sulfur dioxide (SO₂), nitrogen oxides (NO_X) and mercury (Hg) from coal-fired power plants is highly uncertain unless CO₂ is also addressed. It has become “the elephant in the room” in the debate on comprehensive environmental legislation.

SIGNPOST #3
THE KYOTO PROTOCOL TO REDUCE GHG WAS APPROVED BY 38 INDUSTRIAL NATIONS AND BECAME LAW ON FEBRUARY 16, 2005:

• Europe wants to accelerate GHG mitigation and develop adaptation measures. Some countries are already focused on what to do after the Kyoto accord expires in 2012 and have already released their draft post-Kyoto strategies.
• British Prime Minister Tony Blair is so focused on the issue of global warming that it will be at the center of the G8 nations’ summit meeting this year. In his recent address at the World Economic Forum meeting in Davos, Switzerland, he said, “The climate debate will be how and on what time scale it is confronted; not whether.”

SIGNPOST #4
A GROWING NUMBER OF INDIVIDUAL SHAREHOLDERS AND SHAREHOLDER GROUPS ARE ASKING COMPANIES, SUCH AS CINERGY, TO QUANTIFY THE RISKS ASSOCIATED WITH GHG EMISSIONS:

• Investors are requesting that companies discuss the climate change issue publicly, disclose their emissions and demonstrate that they are taking proactive steps to plan for a carbon-constrained world.
• The assets of socially responsible mutual funds are growing faster than the mutual fund industry as a whole. Investments in these funds have increased 156 percent in five years to $32 billion, according to recent reports. These funds are stepping up their advocacy efforts. All socially responsible investing has grown seven percent in the last five years to $2.2 trillion.
• The California Public Employees’ Retirement System (Calpers) announced that it will sign on to the Global Carbon Disclosure Project, an international effort to improve the transparency of business risks associated with climate change.

SIGNPOST #5
CO₂ AND GHG EMISSIONS TRADING MARKETS ARE DEVELOPING IN EUROPE AND THE UNITED STATES:

• In January 2005, the European Union initiated its Emissions Trading Scheme, which imposes a mandatory CO₂ emissions cap and facilitates the trading of CO₂ allowances among 12,000 EU industrial installations.
• The Chicago Climate Exchange, which was established in late 2003 as the world’s first multi-national and multi-sector marketplace for trading GHG emissions, has grown from 13 to 85 members.
• A coalition of nine Northeast states has initiated the Regional Greenhouse Gas Initiative, which would create a regional market-based CO₂ cap-and-trade program for these states.

SIGNPOST #6
GLOBAL WARMING IS BECOMING PART OF OUR EVERYDAY CONSCIOUSNESS:

• Global warming was on the covers of BusinessWeek and National Geographic in 2004. National Geographic said “2004 was the year global warming got respect.”
• Last year, global warming was the basis for a major motion picture, a television miniseries and a best-selling novel by Michael Crichton.
• In 2005, a respected industry trade publication, Public Utilities Fortnightly, featured global warming as the cover story for its February issue.

Collectively, these signposts indicate that there is growing concern about global warming and that the regulation of CO₂ is being increasingly considered. We have not been required to curb our emissions of CO₂ or GHG at this time. Yet, we realize that this may change in the future. New CO₂ regulations would probably increase our cost of generating electricity over time and ultimately result in higher prices for our customers. We believe it is prudent to plan for a scenario where CO₂ is regulated in the future, so that we will be able to comply with those regulations in a cost-effective manner for our shareholders and customers.