Costs

In an ongoing effort to reduce power costs from existing PublicUtilities Regulatory Policy Act (PURPA) contracts, Puget SoundEnergy announced yesterday an agreement to buy a 160 MW gas-firedcogeneration plant in Bellingham, WA, from Encogen for $164million. Puget Sound said buying the facility eliminated its secondlargest PURPA contract, a deal which required it to pay Encogenfixed and escalating fees through mid-2008 for the plant’s output.

Start-up costs and rapid Georgia customer acquisitions by itsSouthStar Energy Services partnership with Dynegy and AGLResources, cost Piedmont Natural Gas about $0.06/share during itsthird quarter, which ended July 31, the company reported this week.It experienced a net loss of $8.2 million (-$0.26/share) during thequarter, compared with a net loss of $6.3 million (1$0.20/share)during the same period a year earlier. As of Oct. 1, SouthStar willbe serving more than 450,000 new gas customers in Georgia. Theearnings per share impact of this venture for the first nine monthsof the year was -$0.10/share. Piedmont also noted that weather inits territory was 57% of the thirty-year normal heating degreedays. The company’s margin (revenues less cost of gas) was $44.4million compared with $45.5 million for the comparable year-agoperiod. For the nine-month period, basic earnings per share were$2.17, compared with $2.32 for the year-ago period, and margin was$279.8 million compared with $282.6 million for the prior yearperiod.

In an effort to build a larger customer base, cut costs and offer a wider variety of commodities and services, Indiana Energy, parent of Indiana Gas, announced plans to merge with Sigcorp, the holding company for Southern Indiana Gas and Electric (Sigeco). The merger of equals will create a new $1.9 billion holding company called Vectren Corp.

Amoco said yesterday it would consolidate its U.S. explorationand production management offices in Houston to cut costs andincrease competitiveness. About 660 E&P management, technicaland administrative jobs in Denver and New Orleans will be affected.Many of the positions will be relocated to Houston, but Amoco saidthere will be some jobs eliminated as well.

MCN Energy Group Inc. said yesterday it will take a year-end,one-time charge of $10 million for the first phase of its corporatereorganization, which should remove $15 million a year from itscurrent operating expenses. The realignment establishes a morestreamlined organizational structure to enhance efficiency, linesof authority and internal customer responsiveness. It includes areorganization of some upper management positions, including theretirement, effective next April, of its Vice Chairman and CFOWilliam K. McCrackin.

In a move to cut debt and costs by reducing its propertyinventory, Dallas-based Pioneer Natural Resources agreed to sellcertain oil and gas properties to Costilla Energy Inc. for $410million. The transaction will be effective Oct. 1 and is expectedto close by year-end. Despite the recent volatility in oil and gasprices, the company said the price falls within its expectations.

A 14% increase in electric sales and the absence of $70 millionin merger-related costs (posted in 2Q97) sent Duke Energy earningsper share soaring 77% during the second quarter to 76 cents/share,well above analysts’ estimates. Duke reported earnings for commonstock of $274.4 million compared to $157.6 million in 2Q97.

PG&E Corp. said second quarter earnings suffered because ofcosts associated with electric restructuring and its sale ofAustralian assets to Duke Energy. The company reported earnings of46 cents per share, compared to 49 cents per share for thecorresponding quarter in 1997, and net income of $174 million,compared with $193 million in 2Q97. A lower rate of exchangebetween the Australian and U.S. dollar resulted in a six-centcharge taken during the second quarter, PG&E said.