The Connecticut Department of Public Utility Control (DPUC)approved the merger of Northeast Utilities, the state’s largestelectric utility, and Yankee Energy System, the parent of YankeeGas Services, the state’s largest gas distributor. Yankeeshareholders approved the merger agreement, in which YES willbecome a subsidiary of NU, on Oct. 12. According to the deal, NUwill pay $478 million for all of YES common equity. The mergerstill requires the approval of the Securities and ExchangeCommission, which is expected early next year.

Northern States Power (NSP) said its shareholders and those ofNatrogas have approved a previously announced transaction that willadd 20,000 gas and propane customers in four states to NSP’sbusiness. The stock-for-stock deal will make Minneapolis-basedNatrogas a subsidiary of NSP. Regulators already have approved it.Natrogas has provided retail and wholesale propane service to15,000 customers in 20 locations throughout Minnesota, Wisconsin,North Dakota and South Dakota. Also included in the agreement isNatrogas’ wholesale propane business, America Energy Inc., which islocated in Hankinson, ND. Additionally, Western Gas Utilities, aNatrogas subsidiary, will merge with NSP early next year. Westernis a gas utility serving 5,000 customers in Minnesota. NSP provideselectric service to many of the same customers. NSP distributes gasto 475,000 customers in five midwestern states and Arizona andprovides power to 1.5 million customers in the Upper Midwest.

The Department of the Interior’s Minerals Management Serviceplans to publish another supplement on its proposed rulemaking oncrude oil royalty valuation today in the Federal Register. “Severalchanges have been made in this proposed rule which respond tocomments we received during the workshops held in March and April1999,” said MMS Director Walt Rosenbusch. “I believe this proposaldemonstrates we have listened closely and we carefully consideredall of the comments which were received.” The changes to thesupplementary proposed rule include: (1) adding specific regulatorylanguage regarding the issue of “second guessing” a sale under anarms-length contract; (2) ability to issue binding valuedeterminations; (3) changing the definition of an affiliate becauseof a new judicial decision; (4) changing the way that actual costsof transportation are calculated; and (5) eliminating MMS-publisheddifferentials and associated proposed form MMS-4415. MMS said itupdated its economic analysis of the rule and found that it nowwill result in a “net royalty impact of $67.3 million.” Theprevious analysis resulted in an estimated $66 million inadditional royalties. MMS intends to hold three workshops todiscuss the proposed rule. For additional information, includingthe Federal Register notice, see MMS’ web site.

SCANA Corp. and Public Service Company of North Carolina, Inc.said they have set Feb. 10 as the closing date for their merger. Thecompanies are expecting to have cleared all regulatory requirements bythat date. They currently expect to begin mailing election forms toSCANA and PSNC shareholders in early January in accordance with thedual cash election process provided under the merger agreement. The$900 million transaction (including the assumption of debt), which wasannounced in February was approved in July by shareholders. It hasbeen approved by regulators but still requires authorization from theSecurities and Exchange Commission under the Public Utility HoldingCompany Act of 1935. Following completion of the merger, SCANA willbecome a registered holding company under the Act. PSNC will beoperated as a wholly owned subsidiary with headquarters remaining inGastonia, NC (see Daily GPI, Feb. 18). SCANA subsidiaries serve morethan 517,000 electric customers in South Carolina and more than675,000 gas customers in South Carolina and Georgia. Public Serviceserves 351,000 gas customers in north central, Piedmont and westernareas of North Carolina.

Duff & Phelps Credit Rating Co. (DCR) downgraded the creditratings of Consolidated Natural Gas (CNG) because of theheightening of CNG’s business risk profile, a continued strongplanned capital expenditure program that may pressure leverage andcredit protection measures, as well as the impact of its mergerwith Dominion Resources, which is expected to close in January.About $2.4 billion of debt is affected. The rating outlook isstable, however. Credit quality also reflects Dominion’s strongreliance on upstream cash flow from CNG to fund its merger-relateddebt obligations. This is partially offset by cash flow flexibilityassociated with the discretionary nature of a significant portionof CNG’s capital expenditure plans, DCR said. CNG’s credit qualitybenefits from expected improvement in its credit protectionmeasures, reflecting growing cash flow generation at itshigher-risk oil and gas exploration and production (E&P)subsidiary that supplements the cash flow generated by its coreregulated operations. In 1999, the regulated segments are expectedto generate two-thirds of revenues and EBITDA, a level that isexpected to decline toward one-half over the next five years. Theshift in contributions will reflect E&P growth and performanceas well as CNG’s sale or spin-off of its Virginia distributionassets as required under certain regulatory merger approvals.

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