The natural gas utility industry may be small when compared toother investment opportunities, but it’s still an extremelyattractive stock play – especially for the small- to medium-sizedinvestor, said a representative of the American Gas Association(AGA) last week.

Utilities have comparatively small market capitalization,ranging from $100 million to $4-$5 billion, said Jay Copan, AGA’ssenior vice president of corporate affairs. Most of the companieson the high end are the combination gas-electric utilities. Butdespite its low capitalization, “this industry has a very strongbalance sheet, [it’s] a very creditworthy industry and the gasutility stocks are generally trading in undervalued areas…”

Other strong selling points are “the growing demand for naturalgas, solid supply base, competitive prices, flexible regulatoryenvironment and solid financial fundamentals,” he told reporters ata briefing at AGA’s headquarters in Rosslyn, VA, last Tuesday.

From an investor standpoint, AGA has found that the “real targetmarket” for utility stocks isn’t Wall Street so much as it is “thesmaller market capitalization value managers,” such as portfoliomanagers and institutional investors, Copan said.

The “biggest thing affecting [utility] stocks right now is theweather.” However, he pointed out that many utilities have beenshielded from the warmer-than-normal temperatures because ofweather normalization clauses in their rates.

Separately, AGA President David Parker dismissed the latestindustry speculation that the gas LDC group is exploring theprospect of combining with its counterpart in the electricindustry, the Edison Electric Institute (EEI).

He emphatically said the AGA was not now in any mergerdiscussions with EEI, nor did it anticipate there would be any suchtalks in the near future. Speculation about a possible union of thetwo trade groups has dogged Parker ever since he joined AGA morethan a year ago due to his previous affiliation with EEI and theincreasingly common membership of the two associations, as well astheir similar legislative and regulatory priorities.

From the outset, “the discussion came up – did I come on boardat AGA to help bring about an amalgamation or a merger…The answeris ‘no,'” Parker said. He acknowledged that he and Thomas R. Kuhn,EEI’s president, are “very good friends” and “work very closely”because “we recognize that we have joint membership,” namelycombination electric and gas utilities. But, he added, neitherassociation’s board of directors has ever discussed aconsolidation.

Parker didn’t preclude the possibility of an AGA-EEI union being”seriously considered” further down the road, however. “[I]f in thestrategic planning process, somebody started thinking that maybethat’s something you ought to look at X years down the road, therecould be some discussions” along those lines.

The LDC group has kicked off a strategic planning process toensure that “AGA [is] responsive to the changing needs of themembers” during 1999 and beyond, he said. Participating in theeffort will be Parker, two high-level AGA officials and theassociation’s board of directors.

Interestingly, AGA plans to remain neutral on the highly-chargedissue of electricity restructuring, Parker said, adding it wouldnot insert itself into “other people’s fights” in Congress. “Ourposition will be to protect the interest of the natural gasutility…Hopefully we will not be involved in those issues thatthey’re dealing with.”

Richard Shelby, senior vice president of public affairs, saidAGA was interested in the current congressional effort toreauthorize the pipeline safety bill, adding the group was”cautiously optimistic” that the measure would move forward without”any difficulty.” Also, he noted that Senate Energy CommitteeChairman Frank Murkowski (R-AK) has indicated Congress may pass astand-alone bill to repeal the Public Utility Holding Company Act.

On an unrelated issue, AGA officials unveiled a new logo for theLDC association, which includes a blue natural gas flame and thegroup’s name in forest green (and less bold) typeface. AGA plans tolaunch the new logo when it moves in mid-March to its new CapitolHill headquarters (400 North Capitol St. NW), which will put itwithin close proximity to Senate and House offices and the FederalEnergy Regulatory Commission.

Also, the group announced the domain name for AGA’s home page onthe World Wide Web will change from to www.aga.orgeffective today (Feb. 15th). It said it originally wanted aga.orgwhen it first created its web site several years ago, but it wasreserved by the Abrasive Grains Association. The addresssince has become available to AGA, and it has sold the rights to a Swedish industrial gas firm – AGA AB.

Those wishing to contact AGA staff members may continue to usetheir current e-mail addresses until March 15th, according to theLDC group.

“It’s time for a fresh look and a fresh start for AGA as we moveout of the offices we’ve occupied in northern Virginia for nearly30 years and relocate to Capitol Hill to enhance our advocacyefforts and outreach activities on behalf of natural gasutilities,” Parker said.

Susan Parker

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