Peoples Energy Chairman Richard E. Terry indicated Tuesday thathis company is talking with potential partners about building analternative pipeline project that would extend from the Chicago hubto serve the southern Wisconsin market.

“Basically at this point we’re talking with Northern Border[Pipeline] and others,” he told NGI, adding that “we really haven’tidentified publicly the other partners.” He provided scantspecifics about the project, explaining that it’s still in the”planning stage.”

The proposed pipeline would be a “modification and alternative”to the 650 MMcf/d Wisconsin-Illinois Express Project, which hasbeen placed on temporary hold, Terry said. While the fate of theproject hangs in the balance, the sponsors of the Express Project -Peoples Energy, Northern Border, El Paso and Enron – are allowed topursue other opportunities in the Wisconsin market on their own.And that is what Peoples Energy and Northern Border appear to bedoing with this latest effort. It was not known whether El Paso andEnron are also sponsors.

The proposed Express Project, if ever realized, would providetakeaway capacity from the Chicago hub to a point west ofMilwaukee, WI. With the alternative project, “we would be basicallybuilding a pipe probably off the Northern Border system” to atermination point still yet “undefined” in southern Wisconsin.”That’s what we’re reconsidering. Where we want to terminate woulddepend on who all would be customers etcetera.”

Peoples Energy’s alternative project would be the third attempt- behind the failed 1 Bcf/d Voyageur Pipeline project and theon-hold Express Project – by a company or coalition of companies tobuild a pipeline from northern Illinois to southern Wisconsin tocompete with the existing ANR Pipeline, which has a lock ontransportation along that route. Reportedly neither Voyageur northe Express Project were attractive enough options to entice LDCcustomers to commit to long-term capacity contracts.

Separately, Terry believes that FERC at its scheduled conferenceon retail unbundling in February should endorse state efforts inthis area. “…I think it’s really a state issue, and it has to bedecided state by state. Different states are in differentcircumstances. The LDCs are in different positions in differentstates…So for the FERC to try to do something [in a]cookie-cutter approach across the country, I think, is wrong,” hesaid at a luncheon sponsored by the American Gas Association inWashington D.C. Terry will be AGA’s chairman in 1999.

He also thinks that the Commission’s mega-notice of proposedrulemaking, which calls for the auctioning of short-term capacity,could be a roadblock to unbundling. “It could be a problem in somestates,” Terry told reporters. “I don’t see it as a benefit…in acompany like ourselves where we can basically go out and negotiateour own deals.”

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