The D.C. Circuit Court of Appeals remanded Friday a FERCdecision approving a 20-year cap on bids for Tennessee Gas Pipelinecapacity that are considered under the net-present-value approach.The Process Gas Consumers Group (PGC), which includes industrialgas users, challenged the Commission order, arguing that it failedto engage in “reasoned decision-making” by allowing the cap on theNPV bids. “…..[W]e find FERC’s reasoning on the cap to beunpersuasive and largely conclusory,” the court opined [No.98-1075]. The court said it didn’t “quarrel” with the goal behindthe Commission’s approval of the NPV capacity-allocation method forTennessee, “but [we] remind FERC of its admitted need to balancethe goal with its duty to prevent exploitation of Tennessee’smonopoly power. FERC appears to have forgotten the latter…..” PGCalso took issue with FERC’s decision allowing Tennessee to applyNPV to shippers attempting to change primary receipt and deliverypoints, and the court agreed with industrials on this point. Thecourt ordered the Commission to “better explain or modify” itsapproval of both issues.

Coastal Corp.’s exploration and production unit, Coastal Oil andGas Corp., announced Friday the acquisition of 31,000 net acres inSouth Texas, Louisiana and Wyoming from an undisclosed seller. Intotal the properties have a combined 98 wells that produce 26MMcf/d. Most of the acreage is in South Texas. Added with Coastal’srecent purchase of Titan’s Gulf of Mexico assets (see Daily GPI,May 21), Dave Arledge, CEO of Coastal, said the company hasincreased daily gas production by 7% over last year’s figures.

Dominion Resources and Consolidated Natural Gas said an amendedjoint proxy statement reflecting the revised terms of the mergeragreement was filed last Thursday with the Securities and ExchangeCommission. Dominion amended the terms of the original mergeragreement May 11, offering a mixture of stock and cash to provideshareholders of Consolidated Natural Gas $66.60 in value. Theoriginal transaction that had been agreed to in February offeredonly stock. In addition, special meetings for both companies’shareholders to approve the merger have been set for June 30. Thejoint proxy also notes the post-merger business plan projects thatearnings per share for Dominion will increase 9%/year from anestimated $3.31 in 2000 to $4.66 in 2004 for the combined entity.The current annual dividend for Dominion is $2.58 per share.Dominion’s targeted payout ratio of dividends to earnings is70%-75% and is expected to be achieved within two years after themerger is completed.

Potomac Electric Power announced a reorganization of itsnon-regulated subsidiaries into two major operating groups toaggressively compete for new market share in the telecommunication,electric, natural gas and energy services industries. As part ofthe reorganization, a new unregulated company, Pepco Holdings,Inc., was created as the parent of Potomac Capital Investment Corp.and Pepco Energy Services, Inc. John McCallum, 49, was promoted toCEO and President of Potomac Capital Investment Corp. Edward R.Mayberry, 51, was promoted to CEO and President of Pepco EnergyServices, a newly created company that will serve as the parent forPepco Services and Pepco Connections, as well as three other newlyorganized companies to be known as Pepco PowerChoice, PepcoBuilding Services and Pepco Gas Services. This group of companieswill market energy products (electricity and natural gas) andservices (including energy efficiency contracting, consultingservices, construction management, and facilities operation andmaintenance) to current Pepco customers and to businesses andinstitutions throughout the mid-Atlantic region.

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