The Midwest Energy Hub, a previously announced joint partnershipbetween Peoples Energy and Enron North America designed to expandPeoples’ existing market hub, is now up and running. Despite stillwaiting for approval from the Illinois Commerce Commission (ICC),the new company began offering services to Chicago-area customerslast week. The original agreement between the two companies wasforged last October (see NGI, Oct. 10).

In addition to being the marketing agent for the Peoples hub,the new Chicago-based company offers a range of services, includingbalancing and fuel management for gas-fired power generators,hourly winter and summer peaking services, seasonal arbitrageproducts, management for 10 to 20 Bcf/year of storage capacity,location swaps to and from the Chicago area, pooling and titletransfer capabilities.

The partnership said it believes there is demand for theseofferings in the 1.1 Tcf Chicago market. It expects approval fromthe ICC soon and does not foresee any problems. The need for gasmanagement and balancing abilities is growing in Chicago, MidwestEnergy Hub said, because of regional pipeline expansion and anincreasing number of merchant gas-fired power plants beingconstructed in the region. The Peoples hub interconnects withinternational pipelines, six major interstate pipelines andPeoples’ Mahomet Pipeline.

“Midwest Energy Hub combines Enron’s transactional and marketingexpertise with Peoples Energy’s assets and local infrastructure inthis key regional market,” said Tom Patrick, COO of Peoples Energy.”Enron has assembled an excellent team, drawn from both companies.We are confident that this venture is positioned for success.”

The new company will not be limited to gas-related services. Itwill also be very active in the Chicago-area electric generationarena. Through this partnership, Peoples and Enron have agreed todevelop a portfolio of at least 800 MW. There is already a projectunderway, as plans have been laid out to build a 245 MW, $100million plant called Calumet Power LLC.

The generation deal marks a new direction for Peoples Energy.The only Chicago-area generation asset in Peoples’ currentpossession is a 50% ownership in a 600 MW facility in Elwood, IL.The Enron partnership, combined with a plan to double the outputfrom the Elwood plant, would improve People’s portfolio frominvolvement in 600 MW to 2000 MW.

The partnership strengthens the Midwest bond between the twocompanies. Enron is the main gas supplier to Peoples’ two mainutilities, Peoples Gas and North Shore Gas. Last October, the twoagreed to a five-year 100 Bcf/year supply contract. The dealsrepresent two-thirds of the utilities’ gas needs.

John Norris

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