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Aquila Signs Major Gas Deal with ComEd

July 19, 1999
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Aquila Signs Major Gas Deal with ComEd

Aquila Energy landed a whopper supply deal last week with Chicago-based ComEd, one of the largest electric utilities in the country. The contract is for up to 625,000 Dth/d and Aquila said it is the largest single natural gas contract that has ever been arranged in the energy industry. Although terms of the one-year transaction were not released, marketing sources and NGI's pricing staff confirmed the deal is tied to NGI's Chicago cash index, one of the most widely used indexes in the industry.

"The players are becoming bigger and bigger, and this is exactly where it's going. There are a lot of these very large contracts out there, but there are not a lot of companies that can serve them," said Aquila's Mark Gurley, senior vice president and general manager.

"There's probably only one or two other companies in the country that we think could come close to performing on a contract like this," he said. Aquila is able to handle a daily delivery of this magnitude - which could be used to generate enough power to heat or cool 17,000 homes - "because of the breadth of our physical trading business with respect to our Gulf Coast, Midcontinent and Canadian volumes. We'll be relying on everything. This contract is going to require us to be extremely liquid and very versatile."

On an average day the deal will require 200,000-400,000 Dth/d to serve ComEd's peaking facilities in the greater Chicago area, principally as swing gas for the 2,698 MW Collins Generating Station, the largest gas/oil fueled generating plant in the country.

"Volumes for volumes sake are not important, but what is important is liquidity and to some extent moving a lot of volume gives you physical liquidity allows you to: one, take advantage of all the arbitrage the market has; and two, to be able to serve large customers with varying demand more efficiently that someone else could with smaller volumes."

Gurley said ComEd's demand had been served by multiple "middle men" suppliers who actually had been relying on Aquila's liquidity. "All we're really doing is taking the middle man out of the picture." A ComEd spokesman said Dynegy previously had supplied most of the gas covered by the Aquila deal.

Aquila is the fourth largest gas marketer based on volume and the second largest power marketer. It serves more than 15,000 industrial, utility and commercial customers across the US and Canada, marketing an average of 10.8 Bcf/d and 44 million MWh in the first quarter of 1999. ComEd provides service to more than 3.4 million customers across Northern Illinois, or 70% of the state's population.

Rocco Canonica

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