Amid the merger frenzy that has gripped the energy industry thisweek, CMS Energy Chairman and CEO William McCormick said he doesn’tenvision his company – whose goal is to be the third largest energyconcern in the world – being swallowed up by a competitor. Instead,he sees CMS Energy continuing in its aggressive role as a buyer ofassets.

“Up until now, we have been the acquirer,” he said, referring tothe company’s recent purchases of Panhandle Eastern Pipeline,Trunkline Gas, midstream gas companies and assets, oil and gasreserves and power plants in the U.S. “And we would expect thatthat would continue.” But, he conceded, “one never knows in thefuture what will happen.”

In the past three years, CMS Energy has more than doubled itsenergy asset base in U.S. and foreign markets to $15 billion from$7 billion, and has set its sights on $18 billion by 2003. “We’renot trying to become big just to become big. We’re trying to becomebigger to become better,” McCormick said, adding that his companyis “pretty selective” in its choice of acquisitions. “We feel todaywe’re already competitive with the biggest and best in the world.”

CMS Energy has grown from a Michigan-based electric and gasutility into a global diversified energy concern – whose asset baseinclude gas pipelines, storage facilities, midstream operations,exploration and production, energy marketing and trading, powergeneration and international operations. In addition to the U.S.and Canada, it has energy properties in South America, Europe,Africa, the Middle East, Asia and Australia.

Domestically, CMS Energy is counting on the 3.1 Bcf/dPanhandle/Trunkline system – which McCormick referred to as a”terrific asset” – to provide a “platform” for growth in the gasand power markets in the years ahead. President and COO VictorFryling called it the “spinal cord” that connects the company’sassets in its Michigan market area with production and gathering inOklahoma and Texas, provides it with the ability to supplygas-fired generation up and down the pipeline’s system, makes”low-cost” Michigan storage accessible to new markets, and opens upnew markets for its marketing and trading services.

“…[W]e think that it’s a great thing to kind of hang ornamentson as we grow going forward with power production and marketing,”Fryling told energy reporters during a press briefing in WashingtonD.C. on Wednesday. CMS Energy purchased the 10,400-milePanhandle/Trunkline system from Duke Energy last March for $2.2billion. McCormick is particularly optimistic that the pipelinesystem will be a “key supplier” of gas to the new generationfacilities planned for the Midwest market.

He further said CMS Energy is looking to the Tristate Pipelineand Guardian Pipeline projects to further augment its growth. TheTristate project, in which CMS owns a 67% interest, would supplybetween 0.3-1 Bcf/d to the U.S. Northeast market via aChicago-to-Canada route. The Guardian project, where CMS has aone-third interest, would deliver 750 MMcf/d into thecapacity-constrained Wisconsin market.

The Tristate project has run into problems at the Federal EnergyRegulatory Commission, causing it to lag behind competitor VectorPipeline in the race to serve Northeast gas loads. But McCormickremains undeterred. “First of all, we think Tristate will getbuilt. We have had a disagreement with the FERC on some proceduraland technical matters. The fact of the matter is that we believethat FERC should continue to act to allow a marketplace todetermine which project is best. And that means that our projectought to be allowed to go forward. We think FERC will allow it…”

The estimated cost of the two pipeline projects is $630 million.But that’s only a fraction of the $10 billion worth of energyprojects in which CMS Energy is currently involved, according tothe company. It put the company’s share of the funding for theprojects at $5.7 billion.

On the electric front, McCormick said that even though CMSEnergy and Detroit Edison plan to bring on an additional 900 MWs ofgeneration capacity, “it’s still going to be a really…..tightsituation in the Midwest this summer.” And, he expects thesituation to continue at least for another two to three years.

He’s equally as pessimistic about the availability oftransmission capacity. “One of the biggest problems we’ve got in myjudgment is the fact that transmission needs expansion. Everybody’sfocusing on RTOs, ISOs, transcos and all that. But the mere factthat you have those is not going to change the transmissioncapacity one iota.”

He said federal lawmakers need to enact transmission sitinglegislation that would enable utility companies to buildtransmission lines more quickly. Also, he noted there needs to be”proper incentives” for people to invest in transmission projects.”My own personal feeling is that our regulators at the federallevel particularly aren’t really focusing on these two issues,”McCormick said.

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