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WPS, Peoples Merger Inches Closer to Completion

WPS Resources Corp. and Peoples Energy Corp. said Tuesday that they have made progress toward obtaining the approvals needed to close their proposed $1.52 billion merger, including a resolution of issues with most intervening parties in Illinois. The companies added that the proposed merger remains on track for completion during the first quarter of 2007 (see Daily GPI, July 7, 2006).

On Tuesday, the companies reached an agreement with most of the interveners on the contested issues in the merger application pending before the Illinois Commerce Commission. The agreement is between the companies and the City of Chicago, the Cook County State's Attorney's Office, the attorney general of Illinois, the Citizens Utility Board, the Environmental Law and Policy Center, the Utility Workers Union of America, AFL-CIO, and UWUA Local Union No. 18007 (UWUA Local 18007). The staff of the Illinois Commerce Commission (ICC), which as a general rule does not join in settlement agreements, has signed the agreement to indicate no objections. The companies noted that discussions continue with the remaining intervening parties.

According to the settlement, Peoples Gas' and North Shore Gas' recovery of merger-related costs incurred to achieve the synergy savings will be capped at about $45 million. About $35 million will be recovered through an annual cost recovery of about $7 million, which will be provided through a five-year amortization period included in the 2007 rate case. The remaining costs, to the extent actually incurred, will be eligible for recovery through rates established in a future rate case.

In their next rate cases, Peoples Gas and North Shore Gas will propose energy efficiency programs with an aggregate cost of $7.5 million per year.

Peoples Gas said there will be no reorganization-related layoffs or reorganization-related position reductions among the UWUA Local 18007 employees. In addition, there will be a specific limited number of position upgrades and additions to the current union work force levels.

Last month the Federal Energy Regulatory Commission approved the merger transaction and the shareholders of WPS Resources and Peoples voted overwhelmingly to approve it (see Daily GPI, Dec. 7, 2006; Dec. 27, 2006).

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