Nicor Enerchange LLC said it signed an agreement with Caledonia Energy Partners LLC of Dallas to market and administer the proposed 11.7 Bcf Caledonia storage project in northeast Mississippi. An open season is currently underway for the storage facility, which is a depleted gas reservoir. The project will have a direct interconnect with Tennessee Gas Pipeline’s 500 leg in Zone 1. Market demand for direct interconnects with Southern Natural and Texas Eastern will be evaluated as a Phase II project. The non-binding open season for firm storage capacity started May 13 and lasts through June 25. Service requests during this open season will be non-binding on all parties. For detailed information on the open season, visit the storage company’s website at www.caledoniastorage.com.

KeySpan announced the successful pricing of an exchange transaction that will reduce its ownership in Houston Exploration to 24% from 55% (see Daily GPI, May 26). Under the terms of the agreement, Houston Exploration will redeem 10.8 million shares of its common stock from KeySpan, in exchange for subsidiary Seneca-Upshur Petroleum, which owns 50.5 Bcf of Appalachian Basin gas reserves valued at $60 million, and $389 million in cash. Houston Exploration will retire 4.6 million shares and will issue 6.2 million shares in a public offering. Based on the Houston Exploration announced offering price of $48 per share, KeySpan’s Seneca-Upshur’s shares will be valued at the equivalent of $449 million, or $41.57 per share. Houston Exploration has granted the underwriters the option to purchase up to an additional 930,000 shares at the public offering price to cover any over-allotments. If the green shoe is exercised in full, KeySpan’s ownership of Houston Exploration will decline by 310,000 shares to 22.5% and the value of the exchange will increase to $463.3 million or $41.70 per share.

The Pennsylvania Public Utility Commission has opened a proceeding to evaluate the effectiveness of its 1999 Natural Gas Choice and Competition Law. When it was enacted, the law directed the PUC to investigate the level of competition five years after it went into effect and to report its findings to the state’s General Assembly. If the PUC concludes that effective competition does not exist, it will reconvene the stakeholders to explore options to increase participation. The order asks parties to comment, in written testimony, on several topics, including the level of competition in the state’s gas supply service market, gas prices and competition, consumer education, customer information/services; supplier financial security requirements, and gas distribution company penalties and other costs. The PUC also is interested in “any avenues,” including legislative, that would encourage increased competition in the state. Comments are due by Aug. 27, and the PUC will hold an en banc hearing on Sept. 30 to discuss the findings. For more information, visit the web site at www.puc.paonline.com.

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