Columbia Energy Group announced last Friday it is stripping off another of its unregulated assets prior to its merger with NiSource Inc., with a definitive agreement to sell its retail energy mass marketing operations to The New Power Company, a retail venture recently launched by Enron, with help from IBM and America Online (see NGI, May 22).

It is the second bite at the apple for Enron, whose Enron NorthAmerica unit purchased Columbia’s much reduced wholesale tradingoperation in January for $38.3 million. In that deal Enron becamethe primary wholesale provider to Columbia’s retail operations andthe primary buyer of Columbia Natural Resources’ Appalachianproduction into early 2001. Also included was a package of gasalready in storage and most of the division’s contracts for gas,power, storage, transportation, and asset management.

Under the terms of the new agreement, The New Power Company willacquire Columbia’s retail gas and power, mass marketing business,and Columbia will maintain a small, minority equity interest in thebusiness. Columbia’s mass marketing operations currently serveapproximately 300,000 retail energy customers in eight states. Thetransaction is expected to be completed by late summer or earlyfall.

The New Power Company was publicly launched May 16 as a nationalresidential and small business energy provider serving marketswhere natural gas and electricity are deregulated. Strategicpartners and investors in the venture include Enron Corp., IBM andAmerica Online, Inc. Enron is expected to have about a 60% stake inthe company through value-in-kind investments, such as providingenergy commodity pricing, risk management and government regulatoryaffairs. IBM is building the corporate infrastructure and websiteand will man the call center. AOL will give the New Power Co.access to its 22 million customers for six years.

The Columbia retail operations will provide the new company witha base of retail customers. Enron had virtually abandoned its earlyretail customer efforts as utilities and state governmentssucceeded in slowing the deregulation process, making it uneconomicfor outside marketers in many states. Columbia’s main retailsuccess has been in Ohio where it has a large distribution company,Columbia Gas of Ohio, which opened up its market.

Oliver G. Richard III, CEO of Columbia Energy Group, said thatalthough the company is selling the non-regulated retail marketingoperations, reflecting its decision to concentrate on other aspectsof the energy business, Columbia remains focused on providingcustomer choice programs for residential and small businesscustomers in its distribution territories.

Since 1995, Columbia’s local natural gas distribution companieshave worked in a collaborative process with regulators and consumergroups to create customer choice programs. Of Columbia’s 2.1million distribution customers, customer choice programs arecurrently available to nearly 1.7 million, with nearly 640,000customers enrolled. By the fall of 2000, customer choice will beavailable to some 1.9 million customers in all five of Columbia’slocal distribution states.

Columbia Energy Group is on track for a merger with NiSource Inc., which was approved by the shareholders of both companies in early June and is expected to be completed by the end of the year (see NGI, June 5).

In the last two months Columbia has sold its expanding Cove Point LNG facilities to Williams for $150 million, and put Columbia Propane Corp. and Columbia Petroleum up for sale (see NGI, May 29).

Ellen Beswick

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