Following its reorganization of semi-autonomous PacificNorthwest and Texas gas assets, PG&E Gas Transmission (PG&EGT) is looking to bolster earnings through alliances andacquisitions that it hopes to complete later this year, accordingto Thomas King, president/COO of the Houston-based unit of PG&ECorp. PG&E GT transports an average of 6 Bcf/d through the tworegions.

In the meantime, none of its assets, including Texas operationsthat lost money last year, are for sale, and there will be no moredownsizing following last week’s reorganization announcement, saidKing, who joined PG&E last fall, following a varied gasindustry career with Kinder Morgan Energy Partners, Enron LiquidServices Corp.and three different interstate natural gaspipelines in the mid-continent region of the U.S.

The changes and new initiatives should have little or no impacton existing customers in either region, said King, noting heexpects services eventually to be enhanced for both existing andnew customers.

“We’re moving on, looking at earnings opportunities and costsavings that are located within the businesses today that are notpayroll related,” said King, declining to talk about specific areasof earnings growth or cost savings, but adding that a short list ofopportunities will be completed soon. “We’re going to prioritize[the list] in the next week or two and start moving.

“Relative to selling assets, we haven’t identified anything thatis non-performing to the standpoint that it would justify a sale.As far as acquisitions or joint ventures, there is a lotopportunity out there, and we’re trying to determine whichopportunity makes the best strategic move for us, along with thetiming and earnings impact, and then try to pull something off assoon as possible [before the end of 1999].” He added that PG&EGT is “not under any negotiations at this point.” PG&E’sstrategy is to as much as possible leverage all of its non-utilityenergy companies in given regions, so King’s operations are lookingfor potential deals for US Generating Co. to build merchant powerplants along the PG&E GT pipelines in Texas and to do dealswith the trading and energy services arms of PG&E. Nevertheless, King conceded, the industry observers keep askingabout the Texas properties.

King noted that PG&E Energy Trading, despite recentpersonnel cutbacks, is establishing a “real strong presence” inTexas, as is US Generating. So when King’s units look at newregional opportunities they will be doing this with the idea ofmultiple business unit opportunities.

“In the Northwest we are a major strategic supplier of Canadiangas (and the largest in the U.S.),” King said. “In Texas, we play akey role as it feeds the Texas and interstate systems. And we feelfrom a corporate standpoint, that there are good growthopportunities in power generation, trading and transportation inboth of these regions.

In the regulatory arena, which PG&E GT is consolidating inits Houston office, King sees PG&E generally as being an activeplayer, particularly at the state level. He said at the federallevel the best thing regulators could do would be to “support theindustry’s position on the NOPR for capacity release and brokeringand basically let the market negotiate rates, capacity, etc. [FERC]has done a very good job in the gas business of trying to move ittoward a market-based and market-oriented industry. And they shouldkeep moving in that direction.”

He doesn’t see anything in the offing that would block thismovement.

As for restructuring of electricity, “actually the industry ismoving in the direction that many of us thought it would. It issomething we saw and have been working on for a long time. It isdeveloping at a pace that we pretty much expected.”

In terms of the ongoing consolidations and convergence, Kingsaid he doesn’t see any new competitive threats, just acontinuation of competition that PG&E GT has been dealing withfor some time. He said he expects more consolidation, although “thenumbers and the opportunities are getting smaller.”

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