Peoples Energy Eyes Alternative Project to Wisconsin

Peoples Energy Chairman Richard E. Terry indicated last week his company was talking with potential partners about building an alternative pipeline project that would extend from the Chicago hub to serve the southern Wisconsin market.

"Basically at this point we're talking with Northern Border [Pipeline] and others," he told NGI, adding that "we really haven't identified publicly the other partners." He provided scant specifics about the project, explaining that it was still in the "planning stage." A spokeswoman for Northern Border, an Enron pipeline, confirmed it has discussed a possible project with Peoples Energy, but added it wasn't clearly "identified" at this point.

Such a project, if realized, would be a "modification and alternative" to the 650 MMcf/d Illinois-Wisconsin Express Project, which has been placed on temporary hold, Terry said. While the fate of the project hangs in the balance, the sponsors of the Express Project - Peoples Energy, Northern Border, El Paso and Enron - are allowed to pursue other opportunities in the Wisconsin market on their own. And that is what Peoples Energy and Northern Border appear to be doing with this latest project. El Paso said it was not involved.

The Express Project, if it gets moving again, proposes to provide takeaway capacity from the Chicago hub to a point west of Milwaukee, WI. With the alternative project, "we would be basically building a pipe probably off the Northern Border system" to a termination point still yet "undefined" in southern Wisconsin. "That's what we're reconsidering. Where we want to terminate would depend on who all would be customers etc."

Peoples Energy's alternative project would be the third attempt - behind the failed 1 Bcf/d Voyageur Pipeline project and the on-hold Express Project - by a company or coalition of companies to build a pipeline from northern Illinois to southern Wisconsin to compete with the existing ANR Pipeline, which has a lock on transportation along that route. Reportedly neither Voyageur nor the Express Project were attractive enough options to entice LDC customers to commit to long-term capacity contracts.

Separately, Terry said FERC at its scheduled conference on retail unbundling in February should send a strong message that unbundling is a state matter. "...I think it's really a state issue, and it has to be decided state by state. Different states are in different circumstances. The LDCs are in different positions in different states...So for the FERC to try to do something [in a] cookie-cutter approach across the country, I think, is wrong," he said at a luncheon sponsored by the American Gas Association in Washington D.C. Terry will be AGA's chairman in 1999.

He also thinks that the Commission's mega-notice of proposed rulemaking, which calls for the auctioning of short-term capacity, could be a roadblock to unbundling. "It could be a problem in some states," Terry told reporters. "I don't see it as a a company like ourselves where we can basically go out and negotiate our own deals."

Susan Parker

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