Columbia Energy Group (CEG) announced yesterday a marketingjoint venture with Metromedia Energy, Inc. (MME). The venture,called Columbia Metromedia Energy, is subject to execution of adefinitive agreement and other conditions and is expected to beoperational by the end of the first quarter of 2000. No financialterms were announced.

The transaction will merge the operations of CEG’s marketingunit, Columbia Energy Services (CES) with the marketing operationsof MME. The new entity will be owned equally by CEG and MME. Itwill market retail gas, power, and energy-related warrantyservices. Plans call for the joint venture to build on the presentretail platform of electricity and natural gas sales to homes andbusinesses, Columbia said.

In addition to the new high growth markets, the venture’sgeographic coverage of 20 states will create a presence in marketsserved by Columbia’s local distribution companies, as well as otherareas where CES or MME currently have residential, small commercialand industrial customers, Columbia said in a statement.

The companies have not yet figured out how this will affect CESemployees. “This is only a letter of intent,” a Columbia spokesmansaid. “There are still details, such as any potential layoffs,which have yet to be worked out.”

Columbia’s marketing segment reported an operating loss of $59million for 1998, versus an operating loss of $13.2 million in1997. Columbia said the 1998 loss stemmed from costs of investmentin infrastructure, a significant investment for customeracquisition and certain trading losses.

During the fourth quarter last year, “certain unusual tradingactivity” (which turned out to be a rogue trader misstating pricesin the forward book) resulted in a loss, which when combined withall other gas trading positions, caused a net loss of $6.5 millionand reduced the gross margin to $42.7 million, Columbia said. Thecompany took “corrective action designed to prevent similarincidents from recurring.” CES’ poor performance caused the companyto put its wholesale trading operations up for sale last August(see Daily GPI, Aug. 31).

A Columbia spokesman said this retail joint venture does notaffect the sale of the wholesale unit. He also said that this movehad nothing to do with CEG’s possible merger with NiSource (seeDaily GPI, Oct. 19).

MME is a private and independent energy marketer servingthousands of customers in 11 states.

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