The State of California’s Department of General Services hasissued Request for Qualifications on Natural Gas Services #9 as itsannual solicitation for 12 months of gas supplies starting July 1,1998 and ending June 30, 1999. DGS estimates it will require alittle more than 14 Bcf going to about 120 public sector agenciesduring that period. Three contracts will be awarded, one for eachof the LDC service areas of Pacific Gas &amp Electric, San DiegoGas &amp Electric and Southern California Gas. DGS is requesting afull-requirements supply contract in each area plus associatedsupply management functions (nominations and imbalance trading).Two separate pricing structures are involved: a monthly fixedvolumes bid at an annual fixed price, and the remaining volumenecessary to meet full requirements at a monthly index price. DGSagain will use NGI’s Gas Price Index for the indexed supplies: thePG&ampE Citygate in PG&ampE’s territory and the Southern Californiaborder index in SoCal Gas’ territory.

FERC last week gave its blessing to the indirect merger of twomidwestern utilities – Wisconsin Public Service and Upper PeninsulaPower. Wisconsin Public Service serves electric and gas customersin northeastern Wisconsin and the southern tip of the MichiganUpper Peninsula. It is a wholly-owned subsidiary of WPS Resources,an exempt public utility holding company. Upper Peninsula Power, asubsidiary of Upper Peninsula Energy, serves power customers withinthe western Upper Peninsula of Michigan. Under the mergeragreement, Upper Peninsula Energy will be merged into WPSResources, with WPS Resources as the surviving corporation. The twoutilities – Wisconsin Public Service and Upper Peninsula Power -will maintain their separate corporate existence as subsidiaries ofWPS Resources. Although they have no immediate plans to mesh theiroperations, the utilities asked that FERC approval of the indirectmerger give them the go-ahead to combine their operations in thefuture, “even in the absence of any additional application for suchapproval.” The Commission indicated there were no market-powerconcerns with the merger.

Union Pacific Resources Group sold its interests in theWattenberg area of Colorado’s Denver-Julesberg Basin toDenver-based United States Exploration Inc. for $41 million. Theproperties, which are in Adams, Arapahoe, Elbert and Weld counties,consist of 336 producing wells, which produced about 5.5 MMcf/d ofgas and 640 barrels of liquids/d in 1997. UPR retained its royaltyinterest in the properties. The transaction closed May 15 and waseffective Jan. 1. “This transaction is the first step towardaccomplishing our previously announced de-leveraging program. Thissale is an encouraging sign as we proceed toward completingadditional property transactions,” said Jack L. Messman, UPR CEO.The companies also executed an exploration agreement, giving UnitedStates Exploration the right to explore and develop certainundeveloped acreage in the Wattenberg area. UPR retains its royaltyinterest in these properties.

Providence Energy Corp. announced that ProvEnergy and SouthernEnergy Inc. have mutually agreed to end their joint efforts todevelop a New England retail business. ProvEnergy said it isnegotiating with Duke Energy Trading and Marketing to providewholesale gas and electricity to support its retail marketingefforts. ProvEnergy already has begun buying gas from Duke for newretail business. ProvEnergy said it is integrating its servicesactivities with its retail oil business “to provide natural gas,oil, electricity and equipment service to New England business andresidential customers.

Bay State Gas shareholders approved the company’s merger withNIPSCO Industries last week. The companies expect the mergerapproval process to conclude this fall. Completion of thetransaction is also subject to approval by regulators inMassachusetts, New Hampshire, Maine, at FERC and at the Securitiesand Exchange Commission.

Southern Company, through its Southern Energy Inc. subsidiary,bought 1,260 MW of electric generating capacity in New England fromsubsidiaries of Commonwealth Energy System and Eastern UtilitiesAssociates for $537 million. The company bought four of the plants(984 MW) for $462 million, or six times book value, fromCommonwealth. “This acquisition gives Southern Energy and SouthernCompany Energy Marketing an excellent portfolio of power plants inNew England, which will significantly benefit our trading andmarketing efforts in that growing market,” said Southern EnergyPresident Tom Boren. “These assets give us the advantages offlexibility in fuel supplies while providing excellentopportunities for cost-effective expansion of our generatingcapacity.”

Shareholders of American Electric Power and Central and SouthWest Corp. approved actions necessary for the companies to completetheir proposed merger. The merger must still receive approvals offederal and state regulatory agencies before it can be completed.

The Massachusetts Department of Telecommunications and Energy(DTE) approved the sale of New England Electric System’s fossil andhydro generating business to PG&ampE Corp.’s affiliate, U.S. GenNew England. NEES is selling its 18 power plants representingalmost 4,000 MW to USGenNE for $1.6 billion. FERC and Rhode Islandalready approved the sale. Only approvals from New Hampshire andVermont remain.

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