Last week’s agreement by Semco Energy Gas Co. to a three-yeardeal with TransCanada PipeLines Ltd. for management of its gassupply gives TransCanada its largest asset management relationshipto date. Semco also will buy the majority of its gas supplies fromTransCanada for the three years of the agreement, which iseffective April 1, 1999.

Semco, a regulated gas distributor, has more than 240,000customers in the Upper and Lower Peninsulas of Michigan. Theagreement calls for TransCanada to manage 157.5 MMcf/d of gastransportation on five U.S. pipelines on behalf of Semco. Thepipelines are ANR, Panhandle Eastern, Northern Natural, Great LakesGas Transmission, and Jackson Pipeline. TransCanada also willmanage 16 Bcf of storage for the utility.

“This agreement will have positive results for SEMCO ENERGYcustomers and shareholders with lower prices for our product andthe opportunity to increase earnings in the future by being on thecompetitive edge,” said William L. Johnson, CEO Semco.

A strategic alliance with an asset manager is another move bySemco to position itself for the competitive market that will existafter gas industry deregulation is completed, said Jon A. Kosht,vice president for rates and regulatory affairs. The company inSeptember said it will reduce and freeze its gas cost recoveryfactor for three years beginning with the April 1999 billing cycle.The GCR factor is the purchased gas cost component of the ratescharged by the company to its customers.

TransCanada has similar asset management arrangements with 21other customers, five of them in Canada and the rest in the UnitedStates, most in the Midwest.

Joe Fisher, Houston

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