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
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.
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