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Enron, Peoples Join Forces to Target Chicago Market

Enron, Peoples Join Forces to Target Chicago Market

Enron and Peoples Energy put their Chicago market muscle together last week in a wholesale services partnership and energy asset optimization package that likely will impact the Midwest market for years to come. With the help of Enron, Peoples will beef up its Chicago gas infrastructure and secure about two thirds of its gas supply requirements for the next five years.

The two companies signed a partnership agreement that calls for Enron to optimize a major share of Peoples Gas' and North Shore Gas' gas transportation and to provide an average of 100 Bcf/year of supply. The gas supply contract uses a market-based index, but more details are not being disclosed.

In addition, the companies plan to form a joint entity that will expand and enhance Peoples' existing Chicago Hub and provide marketing services to the 1.1 Tcf/year Chicago marketplace. The new entity will optimize 10 to 20 Bcf/year of Chicago area storage capacity and related transportation and will provide physical and financial product and service offerings, such as balancing, storage, exchange, and title tracking for hub customers.

"By combining Enron's experience in marketing and risk management with Peoples Energy's regional expertise, we have a unique opportunity to develop and offer creative wholesale gas solutions to the Chicago marketplace," said Kenneth L. Lay, Enron CEO.

The Chicago-based entity plans to invest in the area's gas infrastructure to augment the flexibility inherent in Peoples' Chicago Hub. "They're going to be doing things like helping us with certain gate stations and things that serve our hub, different parts of the infrastructure that enhance our hub and allow us to do more from there," said Rodrigo Sierra, a Peoples spokesman. Infrastructure enhancements have not been decided upon, he said, but could include additional storage and pipeline assets. The alliance is expected to be operational early next year.

"This alliance provides for essential asset optimization and the further development of hub services," said Richard E. Terry, CEO of Peoples Energy. "Working with Enron allows us to make significant progress on our long-term strategy of enhancing our utilities and growing our diversified energy businesses."

The companies also signed a letter of intent saying Enron will provide wholesale electricity and risk management services to Peoples Energy Services Corp. (PESC), the retail division of Peoples that markets power to end-use customers in Illinois. PESC will be participating in the retail electric market as one of only six companies certified to do so in Illinois.

Joe Fisher, Houston

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