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Macquarie, Constellation Urge FERC to Enable Sale

Macquarie Cook Energy LLC and Constellation Energy Commodities Group Inc.(CECG) have urged FERC to grant their request for a 90-day waiver of capacity release rules so the companies can complete the first part of the sale of the Constellation trading group to Macquarie on or about Feb. 23. The companies asked the Commission to put aside for later discussion Dominion's petition for a policy review regarding waivers.

"CECG's prompt sale of its wholesale natural gas trading portfolio to MCE is critical to the restructuring of the Constellation Energy Group," the companies told the Federal Energy Regulatory Commission (FERC) (see NGI, Feb. 9). The sale includes an integrated package of interstate natural gas transportation and storage agreements, as well as natural gas purchase and supply agreements, data systems and technology. Also, "most of CECG's wholesale natural gas employees are expected to move to MCE as a result of this sale."

The transfer of the business "as is" is essential to insure uninterrupted supply and service to customers and continuous employment to personnel making the switch.

Dominion earlier had filed a petition asking for an overall review of the Commission waiver policy. FERC set the question for discussion in a rulemaking docket RM09-1. After Macquarie and Constellation's request for a waiver, Dominion asked that their specific waiver request be included in an overall discussion of waiver policy.

The two companies objected to Dominion's claim that their waiver request did not include an adequate description of the process leading up to the sale of CECG to Macquarie. CECG said it initially opened a data room and contacted 46 parties about its proposed sale, a group that included prominent domestic and international energy marketers and financial institutions. Eighteen parties reviewed the data and were given a presentation. Eight of those indicated their interest in a first round of bids due Nov. 21, 2008. Four parties then participated in a second round of due diligence and two submitted final bids on Dec. 17, 2008.

"MCE was selected as the winning bidder because its bid was determined to be the best overall bid...Clearly, CECG's sale process was broad, fair and transparent," the companies said.

The companies said any forced disaggregation of CECG's numerous jurisdictional and nonjurisdictional transportation and storage, purchase and supply contracts "risks disruption to CECG's integrated wholesale natural gas commodity trading business and the stranding of assets." The trading business is being sold as a going concern and disaggregation would undermine its continued operation.

Responding to Dominion's question as to the party that will succeed to CECG's wholesale gas commodity trading business, MCE said it is the purchase and is in the process of determining, based on commercial and regulatory considerations whether it an/or one of more of its affiliates will ultimately hold assets to be transferred.

The waiver is necessary for a limited period of time so the companies will not inadvertently violate FERC rules in making the transfer of the integrated business on an "as is" basis. The companies said a list of the transportation and storage providers involved in the capacity release contracts was included in the sale data room. Pipelines involved were notified and two of them supported the MCE/CECG waiver request.

MCE indicated it is important to hit the ground running to carry out its plan "to broaden its participation in the U.S. natural gas trading business as soon as possible." The companies suggested the Commission can conduct a general discussion of the capacity release waiver process in the rulemaking docket it has assigned to Dominion's petition.

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