The Federal Energy Regulatory Commission approved an expansion of Columbia Gas Transmission Corp.’s pipeline to provide 125,000 Dth/d of additional capacity for a new power plant at the Pennsylvania-Delaware border. The project will provide service to FPL Energy’s 750 MW Marcus Hook power plant. The plant would be built in both New Castle County, DE, and Delaware County, PA. The $22.3 million pipeline expansion project, which is expected to be completed this fall, would involve adding an extension from the company’s mainline to the plant and upgrading compressor stations. Two 6,000 hp compressors will be added to the Eagle and Downingtown stations on its mainline in Chester County, PA, and 1.3 miles of 20-inch diameter lateral will be added from Columbia’s Delmarva meter station on Line 1-345 in New Castle County DE. FERC said Columbia could roll in the expansion and replacement project costs with it existing rates, given that this will result in a reduction in rates for existing customers. The replacement phase of the project calls for Columbia to remove two aged compressors at its Downingtown station.

Dynegy Inc. subsidiary Illinova Corp. wants to buy all of the outstanding preferred stock of another Dynegy subsidiary, Illinois Power Co., for $46 million in a move to make the transmission and distribution company private. Illinois Power serves 650,000 natural gas and electricity customers in a 15,000-square-mile territory across Illinois. The tender offer began Feb. 25 and expires on March 22. Illinois Power also is soliciting written consents, in exchange for a special cash payment of $1 a share of preferred stock to shareholders of record as of Feb. 20, 2002, for a proposal to amend its articles of incorporation. Illinois Power, which makes up the transmission and distribution segment of Dynegy, saw recurring net income of $55 million in 2001, the same as for 2000. Segment results reflected “lower weather-driven demand offset by reduced operating costs.” In the fourth quarter, Illinois Power announced a restructuring program to reduce costs and to improve customer service. It also recognized a $15 million pre-tax severance charge related to the restructuring program. Along with Illinois Power, Dynegy will add earnings from Northern Natural Gas Co., the pipeline subsidiary it obtained from Enron Corp., to its transmission and distribution earnings segment this year. Dynegy closed on its NNG purchase in January, and Enron will have the option to repurchase the pipeline by June 30, 2002.

Coal bed methane (CBM) development could speed up in Montana after state and federal officials issued a draft environmental impact statement (EIS) concerning development in the southern part of the state. The Department of Interior’s Bureau of Land Management (BLM) recommended alternatives that would require operators to submit a development plan and water-use plan for CBM production. The proposal also would require wastewater to be recycled for irrigation or livestock watering. The draft EIS assumes that 10,000-26,000 CBM wells would be drilled in the south-central southern part of the state, including 4,000 wells on Indian lands. Five public hearings are scheduled on the proposal, with a deadline for comments set for May 15. A final EIS could be issued by the end of this summer. The U.S. Environmental Protection Agency Region VIII, along with Montana and Wyoming environmental officials, also are reviewing comments on CBM discharge water before issuing draft rules. The comments were submitted by industry, land owners and other stakeholders in the region. Federal and state regulators may apply the surface discharge rules set up for the oil and gas industry to CBM production, and will also consider whether reinjection or other water contaminant methods would be suitable for some producing areas. The energy industry wants to use EPA’s surface discharge methods calling for best professional judgment, but many of the stakeholders in ranching operations are concerned that the rules would allow permits to be issued that would not protect existing land uses, such as cattle production.

The Illinois Commerce Commission (ICC) has adopted emergency rules that would require the state’s licensed marketers to meet more stringent financial qualifications. The rules, approved by the Commission and submitted to the Illinois secretary of state, were to take effect March 1, when the systemwide customer choice program by Nicor Gas was scheduled to begin. Similar to ICC rules for competitive electric suppliers, the Certification of Alternative Gas Suppliers (Part 551) would require a bond of $150,000 to be posted and a line of credit or similar proof of credibility maintained. Marketers also have to provide itemized billing statements clearly describing the prices, terms and conditions of the service being offered, and would have to provide financial statements indicating their creditworthiness. Marketing materials that make statements concerning prices, terms and conditions of service have to contain information that adequately discloses the prices, term and conditions of the products or services that the alternative gas supplier is offering or selling to the customer, under the rules. Also, before a customer is switched from another supplier, the alternative gas supplier has to give the customer written information that discloses in plain language the terms, prices and conditions of the products and services being offered and sold to the customer. Final rules could be promulgated within 60 days, depending on the hearing process. For further information, go to the ICC web site at www.icc.state.il.us/icc/home/wn.asp and click on “Natural Gas: Code Part 551.”

Nicor Services, a subsidiary of Nicor, Inc., introduced a fixed payment plan for retail customers. The Nicor Services Fixed Bill gives customers security by guaranteeing a gas bill amount that remains the same for 12 months — regardless of changes in gas prices or the weather. The way the fixed bill program works is simple. Nicor Services calculates an individual monthly amount for each customer, based on a variety of factors, including the gas usage profile of their home and natural gas market prices. Quotes are good for 24 hours. Once a customer signs up, their monthly fixed bill amount is guaranteed not to change for 12 months. Nicor Services will pay the customer’s monthly utility bill and the customer pays Nicor Services their fixed bill amount. Before the end of a customer’s one-year agreement, a new fixed bill quote is calculated by analyzing the customer’s most recent gas usage profile, and the process starts over from there. Nicor Gas residential customers can receive individual fixed bill quotes and sign up for the program online at www.nicorservices.com or by calling 1 866 FIX-BILL (1 866 349-2455).

Marking its first petition for a rate increase in seven years, Progress Energy subsidiary, NCNG, said that it has filed with the North Carolina Utilities Commission (NCUC), seeking an increase in natural gas service rates for its customers. The company said it is seeking to recover the cost of serving its 176,000 residential, commercial, industrial and municipal customers. NCNG said it has invested more than $200 million to expand natural gas supply and service in central and eastern North Carolina, adding 33,927 customers, 479 miles of distribution pipeline and 306 miles of transmission pipeline since its last rate increase in 1995. NCNG is seeking a 16% overall rate increase, or $47.6 million. If approved, the average residential customer would pay approximately $8 more each month once the increase takes effect. Today, a typical NCNG residential customer using 67 Dth of natural gas annually pays an average of $49 a month throughout the year. The company added that its service territory in North Carolina is especially expensive to serve because of its distance from interstate pipelines and its pockets of sparsely populated areas. If the NCUC approves NCNG’s request, the new rates would take effect next fall. NCNG has lowered the fuel cost portion of its rates three times within the last 12 months.

Dynegy Inc. has filed a registration statement on Form S-1 with the Securities and Exchange Commission (SEC) concerning a proposed underwritten initial public offering of 8.8 million common units in Dynegy Energy Partners LP, a Delaware limited partnership that has been formed to own and operate a portion of Dynegy’s large natural gas liquids business. The Houston-based partnership will be engaged in fractionation, storage, terminalling, transportation, distribution and marketing natural gas liquids to consumers throughout North America. Dynegy and certain of its affiliates will be the general partner of the partnership. Based on a potential price of $20 per unit, the company expects net proceeds of about $165.2 million. It plans to pay $148.3 million owed to Dynegy, reserve $13.7 million for working capital and capital expenditures, and pay $3.2 million of expenses associated with the offering and the related transactions. The filing said common units are entitled to receive distributions of available cash of $0.4375 a quarter, or $1.75 on an annualized basis, before any distributions are paid on the company’s subordinated units. The offering will be underwritten by Lehman Brothers.

After two large one-time charges, ONEOK Inc. reported 2001 earnings of $101.6 million ($0.85 per diluted share), compared with $145.6 million ($1.23 per diluted share) for the previous year. Earnings included a pretax charge of $34.6 million for outstanding gas costs from the winter of 2000/2001 and a $37.4 million pretax charge related to the company’s exposure in the Enron bankruptcy. ONEOK’s 2000 results included a one-time gain of $26.7 million on the sale of a gas processing plant. Excluding the one-time events for both years, earnings for 2001 would have been $146.8 million ($1.23 per diluted share), compared with $128.8 million ($1.09 per diluted share) for the year 2000. The First Call consensus estimate for 2001 was $1.20 per diluted share, excluding charges. “If you eliminate the two dramatic charges for fiscal year 2001 resulting from the Oklahoma Commission’s action and the Enron bankruptcy, ONEOK could have reported earnings in line with the previous year,” said David Kyle, CEO of ONEOK. “Excluding the one time gain in 2000, earnings for 2001 could have been 13% higher, exceeding our annual average growth rate of 10%.” ONEOK said the charge for the outstanding gas costs is a result of the Oklahoma Corporation Commission (OCC) order denying ONEOK the right to collect a portion of gas costs incurred during the extraordinarily cold winter of 2000/2001. The company added that it has appealed that order to the Oklahoma Supreme Court. The Enron bankruptcy related charges are due to Enron’s non-payment of both financial and physical natural gas positions for November and December of 2001. These charges also include the value of forward natural gas positions on ONEOK’s termination of natural gas contracts in early January 2002. ONEOK said it will continue to seek opportunities to recover these charges.

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