Enron, Peoples Join Forces to Target Chicago Market
Enron and Peoples Energy put their Chicago market muscle
together last week in a wholesale services partnership and energy
asset optimization package that likely will impact the Midwest
market for years to come. With the help of Enron, Peoples will beef
up its Chicago gas infrastructure and secure about two thirds of
its gas supply requirements for the next five years.
The two companies signed a partnership agreement that calls for
Enron to optimize a major share of Peoples Gas' and North Shore
Gas' gas transportation and to provide an average of 100 Bcf/year
of supply. The gas supply contract uses a market-based index, but
more details are not being disclosed.
In addition, the companies plan to form a joint entity that will
expand and enhance Peoples' existing Chicago Hub and provide
marketing services to the 1.1 Tcf/year Chicago marketplace. The new
entity will optimize 10 to 20 Bcf/year of Chicago area storage
capacity and related transportation and will provide physical and
financial product and service offerings, such as balancing,
storage, exchange, and title tracking for hub customers.
"By combining Enron's experience in marketing and risk
management with Peoples Energy's regional expertise, we have a
unique opportunity to develop and offer creative wholesale gas
solutions to the Chicago marketplace," said Kenneth L. Lay, Enron
The Chicago-based entity plans to invest in the area's gas
infrastructure to augment the flexibility inherent in Peoples'
Chicago Hub. "They're going to be doing things like helping us with
certain gate stations and things that serve our hub, different
parts of the infrastructure that enhance our hub and allow us to do
more from there," said Rodrigo Sierra, a Peoples spokesman.
Infrastructure enhancements have not been decided upon, he said,
but could include additional storage and pipeline assets. The
alliance is expected to be operational early next year.
"This alliance provides for essential asset optimization and the
further development of hub services," said Richard E. Terry, CEO of
Peoples Energy. "Working with Enron allows us to make significant
progress on our long-term strategy of enhancing our utilities and
growing our diversified energy businesses."
The companies also signed a letter of intent saying Enron will
provide wholesale electricity and risk management services to
Peoples Energy Services Corp. (PESC), the retail division of
Peoples that markets power to end-use customers in Illinois. PESC
will be participating in the retail electric market as one of only
six companies certified to do so in Illinois.
Joe Fisher, Houston
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