ANR Pipeline brought in a big gun this week to mow down theopposition to its proposed Wisconsin expansion project. It hiredformer Wisconsin Public Service Commission Chairman CharlesCicchetti, now a consultant with the Pacific Economics Group and abusiness professor at the University of Southern California, totout its project over others, particularly the competing GuardianPipeline.

Cicchetti conducted a study of the projects that concludedGuardian would be costly and inefficient because it would besponsored by regulated monopoly Wisconsin Gas. “An inefficient newpipeline can only be profitable if it has an affiliate thatcontracts for service and can pass on to its customers the extracost,” the Cicchetti report says. “A new high-cost pipeline thatself-deals with a regulated affiliate can increase its profits solong as regulators allow the regulated monopolist affiliate to passthe excessive pipeline transportation costs through to its captivecustomers. Additionally, this self-dealing is masking the secondproblem related to unneeded capacity that the Guardian Pipelinewould add.”

Guardian is backed by WICOR, CMS Energy and Viking Gas.Wisconsin Gas, the state’s largest LDC, has signed a long-termcontract for 650 MMcf/d of capacity on Guardian. (See Daily GPIMarch 11, 1999).

Not surprisingly, Wisconsin Gas spokesman David Fantle tookissue with the assertion his company was self-dealing in itsinvolvement in Guardian. “The Public Service Commission ofWisconsin regulates Wisconsin Gas. The FERC regulates interstatepipeline projects, such as the proposed Guardian Pipeline. For themto continuously say it’s self-dealing is to infer that theregulatory bodies that oversee these parties aren’t doing theirjob, and we don’t believe that’s the case at all.”

Guardian, expected to cost about $230 million, would add between750 MMcf/d and 1.1 Bcf/d of firm capacity, depending on marketneed, to the southern Wisconsin and northern Illinois market inNovember 2002. It would transport gas from proposedinterconnections with major pipelines at the Chicago hub nearJoliet, IL, to northern Illinois and southeastern Wisconsin,serving new power generation and gas demand growth along the way.Guardian would require 24,000 hp of compression and 147 miles of36-inch diameter pipe from Joliet to Watertown, WI. Wisconsin Gasplans to build a 35-mile service lateral to connect with Guardianat Watertown.

Cicchetti said he found the ANR expansion will cost less thanGuardian. He took published accounts of the cost of the twoprojects and divided them by the volume of gas expected to beshipped and found ANR’s expansion to be less expensive by half,Cicchetti said. The economist said two expansions of the ANR(American Natural Resources) system would cost about $61 million ascompared to about $275 million for Guardian, which includes thecost of the Wisconsin Gas service lateral. “However, thedeliverable capabilities of the American Natural Resources[expansion] would be just under 400,000 MMcf/d versus the 550,000MMcf/d that the Guardian line would deliver to Milwaukee.

“Both the existing and proposed pipelines would source naturalgas from the same market. All that is accomplished is that the samegas quantities are delivered from the same origin point to the samedestination point by two pipelines rather than one pipeline,”Cicchetti said.

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