Utility Workers Union of America
Local 600
AFL-CIO
Representing Office, Clerical, Technical and Residual Employees 

May 29, 2002

Ms. Mary Harthun
President
Utility Workers Union of America
IUU Local 600
P O Box 1757
Cincinnati, Ohio 45202

Re: Job Security

Dear Ms. Harthun:

During the 2002 negotiations, representatives of the Company and the Union discussed Cost Leadership Initiatives (CLI). As a result of the CLI, the Company will be reengineering and eliminating work in several areas. These areas currently include Call Center Services, Billing, Customer Service Offices, Human Resources, Purchasing, Shareholder Services, Information Technology, and Finance and Accounting.

To eliminate the need for layoffs due to these CLI initiatives, the Company is willing to provide certain Union employees in designated areas the opportunity to participate in a Voluntary Employment Reduction Plan (VERP) or Targeted Severance Plan (TSP). The terms of the VERP and TSP designated areas are set forth on attachments A and B, respectively. To receive VERP or TSP benefits, employees must meet the eligibility requirements and sign a waiver of liability.

CLI initiatives could result in the reduction of up to 37 full-time positions. The details of expected job reductions from the CLI initiatives are:

The purchasing process will be reengineered resulting in the elimination of work and the need for three fewer Union positions at 4^{th and Main.}

Automation of many of the manual payments processed today including reduction in payments through third-party payers will result in the need for three fewer Union positions.

In 2003 in conjunction with the implementation of the Customer Management System in the West, the Company will perform all commercial and industrial billing operations in Indiana and all residential billing operations in Ohio. The Company will assign the commercial and industrial billing work to exempt employees. All residential billing will be assigned to Union employees in Ohio. The net result is a reduction of up to three Union positions.

The Company may close the Middletown, Batavia, Fairfield, Florence and Oxford customer service offices. After part-time positions are eliminated, closing these offices would result in a net loss of 15 full-time positions after some of the back-office work is consolidated in other locations.

Because all management employees in Shareholder Services have accepted the Voluntary Early Retirement Program, the Company will outsource this work. Three Union positions will be eliminated.

Due to expected reduced demand for IT services, the Company will eliminate one Union position at 4th and Main. Work related to this position has already been eliminated.

A number of cost leadership initiates will be pursued in Call Center Services. Reengineering within the New Service Contact Center will result in the reduction of up to four positions. Reengineering within East Call Center support functions, through a streamlining of the high-bill escalation process and other clerical functions, will result in a reduction of about five positions. Reengineering within the East Call Center will result in the reduction of 16 call-takers beyond what is expected to be achieved through normal part-time attrition. If involuntary call-taker reductions are required they will come from the part-time workforce. Initiatives within the Call Center include reduced average handle time, increased first-call resolution, implementation of a self-service IVR, promotion of web self-service and a reduction in operator calls. In addition, 15 to 20 call-taker reductions will result from the handling of East move-related calls in the West, as part of the MaketheMove (MTM) partnership. MTM reductions will occur through attrition.