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Merger of Gas, Power Associations Eyed

February 21, 2000
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Merger of Gas, Power Associations Eyed

In response to the rapid consolidation of the natural gas and electricity industries, the head of a major gas pipeline association said he plans to initiate talks soon with other Washington D.C.-based energy trade groups about possibly merging into one organization.

Jerald Halvorsen, president of the Interstate Natural Gas Association of America (INGAA), said he will meet with David Parker, president of the American Gas Association (AGA); Thomas Kuhn, president of the Edison Electric Institute (EEI); and Lynne H. Church, executive director of the Electric Power Supply Association (EPSA), in the "next three or four weeks" to broach the idea of merging the energy associations. EEI represents investor-owned utilities, while the EPSA is a national trade group for competitive power suppliers.

The Nuclear Energy Institute (NEI), a trade group for nuclear power generators, "could be part of the puzzle too," he told NGI. But the trade groups representing natural gas producers won't be included, according to Halvorsen. "It would be far too complicated." Any merger effort "would focus on [the trade groups representing] generation, distribution and transmission" companies in both the gas and electricity industries.

The member companies of the energy associations are putting "pressure on us" to move in this direction, Halvorsen noted. "The way the companies are merging, energy associations will either go out of business or consolidate." He believes that merging the associations is "very definitely" and "absolutely" in the cards; the big question is how will this be accomplished.

He sees three possibilities: merging all of these electric and gas associations under one roof; creating two associations --- one for regulated gas and electric companies and the other for unregulated companies; or creating three associations --- one for energy distribution, another for energy generation and a third for energy transmission."

Halvorsen indicated the industry would have to establish a blue-ribbon task force, comprised of representatives from various sectors of the energy business, to investigate each of the alternatives. The associations' "dues payers are going to have to drive the process." Due to the size of the task, he also believes it will be necessary to hire a management consultant.

Halvorsen hopes to have a status report on the merger effort for INGAA's board of directors by April. If AGA, EEI, EPSA and NEI go along with a merger, it would be at least two to three years before it would occur, he said.

INGAA is feeling the pinch of the mergers of major pipeline companies. Earlier this month, it had to cut three executives from its staff in response to the loss of members and dues. Halvorsen said the number of INGAA's pipeline members has been halved in the past five years, dropping to 16 from 32. This represents a staggering financial loss for INGAA, considering that dues for individual pipeline members are capped at $475,000.

He conceded that any merger of the associations could put him and the heads of other energy trade groups out of jobs, but "we're all big boys, we can take it." Susan Parker

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