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Chicago Focused on Major Cast Iron NatGas Pipe Replacement

As an offshoot of the upcoming acquisition of Integrys Energy by Wisconsin Energy (WE), a major natural gas pipeline infrastructure project in Chicago will continue unabated with the goal of eliminating any remnants of cast iron distribution pipe, WE CFO Pat Keyes said Wednesday at the Credit Suisse annual Energy Summit in Vail, CO.

"Chicago has very old gas pipes, some dating back to the 1870s," he said. The Illinois legislature passed legislation to enable an accelerated mains replacement begun by the Integrys gas utility serving the Windy City, Keyes said.

This has created a 20-year program, which over the next five years will amount to a $350 million capital investment program that will be rolled into the merged company, WEC Energy Group Inc. The legislature separately established a fast-track rate-basing system allowing costs of the main replacements to begin earning returns within a month of the money being spent, Keyes said.

"The [process] is in effect for the first 10 years of the presumed 20-year program," the CFO said.

Milwaukee-based WE said last June it was acquiring Chicago-based Integrys Energy Group Inc. in a cash and stock deal worth $9.1 billion, including debt, to create a Midwest natural gas and power utility giant, WEC Energy (see Daily GPI, June 23, 2014).

Subsequently, WE senior executives such as Keyes and CEO Gale Klappa have emphasized the growth opportunities for the new WEC company in the natural gas utility area (see Daily GPI, Aug. 1, 2014).

Keyes said the merged company will double the annual capital expenditures of the two individual utility holding companies to a total of about $1.4 billion annually, including the accelerated mains replacement in Chicago.

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