UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 22, 1999
CILCORP Inc.
(Exact name of registrant as specified in its charter)
Illinois 1-8946 37-1169387
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
300 Hamilton Blvd., Suite 300, Peoria, Illinois 61602
(Address of principal executive offices)
Registrant's telephone number, including area code (309) 675-8810
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Item 5. Other Events
YEAR 2000
The Company is continuing its progress toward making its computer
systems and operations ready for the year 2000. CILCO began
evaluating its information technology systems in 1996. Systems
were reviewed and a schedule was developed for the analysis of
all computer application code and for the replacement or
modification of those systems that were identified as obsolete
and/or having potential Year 2000 (Y2K) issues. Replacement of
several major computer systems with Y2K issues began in 1997. A
Y2K team was established in March 1998, consisting of personnel
from each operating division of CILCO. In conjunction with the
formation of the Y2K team, an outside firm specializing in Y2K
projects was retained to assist CILCO with its overall Y2K
project plans. CILCO has also worked with an independent audit
team to evaluate the status of the Y2K project. The project was
divided into three phases, as follows:
Phase I tasks included an inventory of all present systems for
embedded chips having potential Y2K issues, contacting all
manufacturers of embedded chip devices for the Y2K status of
these devices, identifying and surveying all critical suppliers,
and conducting an inventory of all information technology
hardware and software for analysis of Y2K problems. Phase I was
completed in August 1998.
Phase II is currently in progress. This phase includes Y2K
compliance testing of all suspect embedded chip devices
identified in Phase I in the power plants, service centers, and
business offices. In addition, two separate groups of outside
consultants evaluated all mainframe application code to identify
specific instances of date problems in each application program
for systems that are not being replaced. Phase II has been
completed except for the testing of power plant embedded chip
devices. This testing will occur during scheduled power plant
outages in 1999.
Phase III is also in progress and includes the
upgrade/replacement and re-testing of embedded chip devices found
not to be Y2K compliant during Phase II. This phase includes
completion of mainframe computer operating software upgrades to
current Y2K compliant versions and defining Y2K contingency plans
for each business unit. Computer application code that was
determined to have Y2K date related problems during Phase II will
be corrected. Testing of all applications which have undergone
Y2K upgrades/modifications, testing of operating system software,
and development and testing of contingency plans through
simulation or actual tests, where practical, will complete Phase
III, which is expected to be completed by October 1999. Systems
identified as critical to the continued provision of utility
services will be of particular focus during the testing portion
of Phase III. These critical systems are generating station
equipment, electric transmission and distribution control
systems, gas delivery control systems, and telecommunications
systems.
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An estimated $2 million (historical and future costs) will be
spent for embedded chip analysis, vendor management, application
code scanning, remediation, testing and contingency planning at
CILCO. Approximately $30.7 million will have been spent prior to
the year 2000 for system replacements or hardware upgrades
initiated for business purposes other than solely for Y2K
compliance.
QST Environmental is scheduled to complete the upgrade of its
billing and project accounting system to a Y2K compliant version
by June 1999. Replacement of this system will cost approximately
$1 million, $624,000 of which was spent in 1998.
CILCO is working both internally and with utility industry
groups, including the Mid-America Interconnected Network (MAIN)
and the North American Electric Reliability Council (NERC), to
identify and plan for all identified risks associated with the
Y2K issue. While these groups are modeling potential worst case
scenarios, the probability of extreme disruptions due to Y2K
issues is considered extremely low. CILCO's Y2K team has
identified the most likely worst case scenario to be an
interruption in service by a critical supplier. Consequently,
alternate sources for supplies have been identified and the need
for CILCO to stock additional inventories of critical items is
being evaluated.
CILCO is also following the contingency planning process
recognized by MAIN and NERC. Accordingly, CILCO has established
a Y2K contingency planning team that has received training in
contingency planning techniques and goals. The team is
collecting data and contingency planning began in March 1999.
Within this structure, CILCO is required to submit its
contingency plans to MAIN by March 31, 1999. MAIN is then
required to submit plans to NERC by June 30, 1999. This
contingency planning process is expected to continue through the
fourth quarter 1999, and will include CILCO's participation in
the NERC industry-wide drills during the spring and fall of 1999.
The Company currently believes it will be able to achieve Y2K
compliance, as discussed above, through a combination of
modifications of certain existing programs and systems, the
replacement of others with new software that is Y2K compliant,
and the development of contingency plans. If such modifications
and conversions are not made, however, or are not made in a
timely manner, the Y2K issue could have a material impact on the
Company's operations. In addition, management cannot predict the
nature or impact on operations of third-party noncompliance with
Y2K requirements beyond the assurances given during critical
vendor assessments.
Certain of the foregoing statements regarding the Company's
readiness to handle Y2K issues may constitute forward-looking
information as contemplated by the Private Securities Litigation
Reform Act of 1995. The Company cautions that its predictions of
the extent of potential problems and the effectiveness of measures
designed to address them are based on numerous assumptions, like
those regarding the accuracy of statements or certifications from
critical third parties and vendors, the ability to identify and
remediate or replace embedded computer chips in affected equipment,
and resource availability, among other things, and readers should be
aware that actual results might differ materially from those discussed
above.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CILCORP Inc.
(Registrant)
Date March 22, 1999 ________________________
J.G. Sahn
Vice President, Secretary
and Treasurer
Date March 22, 1999 ________________________
T. D. Hutchinson
Controller
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