Chicago Mayor Richard M. Daley has joined other state officials in seeking additional details regarding the Peoples Gas-Enron relationship, particularly the use of the Chicago utility’s stored gas in winter 2000/2001 by an unregulated partnership, called Enovate LLC, that was set up by Enron and Peoples Energy, the utility’s parent company.

Citing Enron documents released by the Federal Energy Regulatory Commission, the Citizens Utility Board (CUB) last month alleged that Enovate sold stored utility gas for a profit that was shared by Enron and Peoples Energy, while the utility was forced to replace the gas with higher priced spot supplies in winter of 2000-2001.

Daily Chicago Citygate spot prices in December 2000 averaged $9.56/MMBtu and topped $12. In January 2001, they averaged $8.45 after a $10.93/MMBtu baseload average at Chicago during January bidweek. Meanwhile, daily Chicago spot prices over the storage injection season in 2000 (April 1-Nov.1) averaged only $4.29/MMBtu.

At a news conference last Tuesday at the Navy Pier in Chicago, Daley said that if the Illinois Commerce Commission “determines that the Citizens Utility Board’s allegations are true, we will insist that Peoples refund to its customers all the money it made, at their expense, through their dealings with Enron.” The Chicago Tribune reported that the city will devote several attorneys and retain an expert witness to pursue information uncovered by CUB.

CUB estimated last summer that Peoples Gas ratepayers were overcharged for storage by about $59 million that winter and that total overcharges were about $110 million, but in light of the new information regarding Peoples relationship with Enron and Enovate, the overcharges could be much higher, CUB said last month. CUB has posted a diagram of the alleged Peoples Energy-Enron scandal on its website.

The city of Chicago also said last summer than Peoples Energy should give customers $230 million in refunds for not hedging for cheaper gas supplies that winter.

CUB has filed a new motion with the ICC as part of an ongoing 2001 purchased gas adjustment review, seeking more information from the utility on the Enron relationship. The commission’s staff has backed the motion, and state Attorney General Lisa Madigan is seeking information through a subpoena, according to Peoples Energy filings with the Securities and Exchange Commission.

CUB has been keeping a close watch on the Peoples-Enron relationship since it was first made public in 1999. The joint venture was to formed to “optimize 10 to 20 Bcf/year of Chicago area storage capacity” and related transportation and to provide physical and financial product and service offerings, such as balancing, storage, exchange, and title tracking for Chicago hub customers.

As part of the deal, Peoples also signed a five-year agreement to buy two-thirds of its gas supply, or an average of 100 Bcf/year, from Enron under an index-based purchase transaction (Occidental Petroleum now holds the rights to that part of the deal). However, few details of the complete transaction were made public, and according to CUB, Peoples never explained how it benefited from the agreements.

“We believe that the conclusion of the proceeding will show that the company acted prudently and in the best interest of customers,” Peoples said in a statement issued last month. “We are confident the testimony presented [to the ICC in the PGA case] supports our position.”

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