Peoples Energy CEO Thomas M. Patrick said a review by the Illinois Commerce Commission (ICC) of the utility’s purchasing practices last year “will show that the company conducted its business prudently and that none of our practices increased costs to customers.” He added that the case is on a typical procedural schedule that would bring it to conclusion early in 2003.

Peoples Energy said the ICC staff’s recent “motion to compel” relates to questions about off-system transactions. “The transactions in question were all done at market prices and relate primarily to a contract with Enron North America,” Peoples Energy said. “We believe this contract was prudent and provided for gas purchases at prices at or below market rates.” The company added that the contract was also in effect in fiscal year 2000 and no purchases or activities involving it were found to be imprudent in that year’s reconciliation proceeding, which has been concluded.

Peoples Energy explained that as part of normal operations to balance gas supplies, such as on warm winter days, certain gas required to be purchased under contract minimums may be resold. During the year in question, a number of such balancing sales occurred. All were done at then market rates, the company assured.

Due to prevailing market conditions, the company said that in some cases the resale produced a negative margin. The aggregate negative margin for all transactions was approximately $1.5 million. These were typical transactions that have occurred in all years. “The company is confident that they will be found prudent,” Peoples Energy said. “Other such resales occurred during the year with positive margins and these margins were refunded to customers.”

Peoples Gas has provided ICC staff with all information necessary to assess the reasonableness of its gas transactions.

Peoples Energy added that the motion to compel reviews a separate, immaterial item in the case. “During the discovery phase of this proceeding, Peoples Gas identified a singular occurrence in which the demand charge component was improperly documented, and as a result, not credited to the Purchased Gas Adjustment (PGA).” The company said it brought this fact to staff’s attention, and Peoples Gas has already indicated its agreement that $241,600 should be refunded to customers.

In response to further questions by staff, Peoples Gas reviewed all of its off-system transactions for the fiscal year and found no transactions of a similar nature and no further instances of unrecorded PGA credits.

Looking forward, Peoples Energy affirmed its guidance for fiscal 2002 earnings at the high end of the range of $2.70 to $2.80 per share excluding the special charge taken in the third quarter, and for fiscal 2003 earnings of $2.70 to $2.80 per share.

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