WPS Resources Corp. and Peoples Energy Corp. said last week that they have made progress toward obtaining the approvals needed to close their proposed $1.52 billion merger, including a resolution of issues with all complaining parties in Illinois. The companies added that the proposed merger remains on track for completion during the first quarter of 2007 (see NGI, July 17, 2006).

Last Tuesday, the companies reached an agreement with most of the interveners on the contested issues in the merger application pending before the Illinois Commerce Commission (ICC). The agreement is between the companies and the City of Chicago, the Cook County State’s Attorney’s Office, the attorney general of Illinois, the Citizens Utility Board, the Environmental Law and Policy Center, the Utility Workers Union of America, AFL-CIO, and UWUA Local Union No. 18007 (UWUA Local 18007). The staff of the ICC, which as a general rule does not join in settlement agreements, has signed the agreement to indicate no objections.

According to the settlement, Peoples Gas’ and North Shore Gas’ recovery of merger-related costs incurred to achieve the synergy savings will be capped at about $45 million. About $35 million will be recovered through an annual cost recovery of about $7 million, which will be provided through a five-year amortization period included in the 2007 rate case. The remaining costs, to the extent actually incurred, will be eligible for recovery through rates established in a future rate case.

In their next rate cases, Peoples Gas and North Shore Gas will propose energy efficiency programs with an aggregate cost of $7.5 million per year.

Late last Thursday, the companies reached an agreement with the remaining active intervening parties in the state. The dispute was over contested issues in the two companies’ merger application pending before the ICC. The agreement is still subject to approval by the ICC.

Under the agreement with a group of natural gas marketers who make direct gas sales to utility customers, Peoples Gas and North Shore Gas will make certain limited administrative changes to make the customer choice programs easier for marketers. The utilities will propose certain specified changes relating to rate design for their customer choice programs in their next rate cases. The companies will also discuss with marketers other changes to their customer choice programs that may be addressed in the upcoming rate cases.

Peoples Gas said there will be no reorganization-related layoffs or reorganization-related position reductions among the UWUA Local 18007 employees. In addition, there will be a specific limited number of position upgrades and additions to the current union work force levels.

Last month the Federal Energy Regulatory Commission and the shareholders of WPS Resources and Peoples approved the merger transaction (see NGI, Dec. 11, 2006). In October, the companies announced the post-merger organizational structure (see NGI, Oct. 16, 2006).

©Copyright 2007Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.