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Midwest Hub of Enron, Peoples Takes Form

Midwest Hub of Enron, Peoples Takes Form

The Midwest Energy Hub, a previously announced joint partnership between Peoples Energy and Enron North America designed to expand Peoples' existing market hub, is now up and running. Despite still waiting for approval from the Illinois Commerce Commission (ICC), the new company began offering services to Chicago-area customers last week. The original agreement between the two companies was forged last October (see NGI, Oct. 10).

In addition to being the marketing agent for the Peoples hub, the new Chicago-based company offers a range of services, including balancing and fuel management for gas-fired power generators, hourly winter and summer peaking services, seasonal arbitrage products, management for 10 to 20 Bcf/year of storage capacity, location swaps to and from the Chicago area, pooling and title transfer capabilities.

The partnership said it believes there is demand for these offerings in the 1.1 Tcf Chicago market. It expects approval from the ICC soon and does not foresee any problems. The need for gas management and balancing abilities is growing in Chicago, Midwest Energy Hub said, because of regional pipeline expansion and an increasing number of merchant gas-fired power plants being constructed in the region. The Peoples hub interconnects with international pipelines, six major interstate pipelines and Peoples' Mahomet Pipeline.

"Midwest Energy Hub combines Enron's transactional and marketing expertise with Peoples Energy's assets and local infrastructure in this key regional market," said Tom Patrick, COO of Peoples Energy. "Enron has assembled an excellent team, drawn from both companies. We are confident that this venture is positioned for success."

The new company will not be limited to gas-related services. It will also be very active in the Chicago-area electric generation arena. Through this partnership, Peoples and Enron have agreed to develop a portfolio of at least 800 MW. There is already a project underway, as plans have been laid out to build a 245 MW, $100 million plant called Calumet Power LLC.

The generation deal marks a new direction for Peoples Energy. The only Chicago-area generation asset in Peoples' current possession is a 50% ownership in a 600 MW facility in Elwood, IL. The Enron partnership, combined with a plan to double the output from the Elwood plant, would improve People's portfolio from involvement in 600 MW to 2000 MW.

The partnership strengthens the Midwest bond between the two companies. Enron is the main gas supplier to Peoples' two main utilities, Peoples Gas and North Shore Gas. Last October, the two agreed to a five-year 100 Bcf/year supply contract. The deals represent two-thirds of the utilities' gas needs.

John Norris

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