Merger shouldn't raise costs
Natural gas company deal might have long-term effects on Ohio, though

The Akron Beacon Journal
July 11, 2006
By Betty Lin-Fisher

A merger of the parent companies of two natural gas marketers announced on Monday shouldn't affect the thousands of Ohio customers with contracts, officials with both companies said.

WPS Resources Corp. of Green Bay, Wis., agreed to buy Peoples Energy Corp. of Chicago for stock worth about $1.52 billion in a deal that will create a company with regulated utilities serving four Midwest states and nonregulated businesses in the Northeast and Canada.

The combined company would have assets of $9.2 billion and combined revenue of $5 billion, based on 2005 sales. Those numbers would have made the merged firm a Fortune 500 company.

Its regulated electric and natural gas operations will serve about 1.6 million natural gas customers and 477,000 electric customers.

WPS Resources' shareholders will own about 57.6 percent of the combined company, and Peoples Energy shareholders will own about 42.4 percent.

A new name for the combined company out of Chicago has yet to be determined.

The regulated electric and natural gas operations for the two companies are not in Ohio. But the nonregulated subsidiaries, WPS Energy Services and Peoples Energy Services, both have natural gas customers in Northeast Ohio.

Customers of those two subsidiaries should not notice any difference, said Darrell Bragg, vice president of WPS Energy Services.

"We're already a low-priced competitor,'' said Bragg, whose office is in Worthington. "We're just going to be bigger and stronger.''

Similarly, about 2,000 customers of Peoples Energy Services, which started marketing in the Dominion East Ohio territory in late spring, will keep the terms of their contracts, said Wendy Ito, director of finance and administration, in Chicago.

The merger is expected to close in early 2007. Until then, both companies will continue their own marketing.

The merger comes on top of news of another consolidation. Later this summer, about 100,000 natural gas customers of Shell Energy Services of Houston will become customers of MXenergy of Stamford, Conn. MXenergy also will honor Shell contracts.

Consolidation in the industry is always a concern because that means there are fewer competitors, Ohio Consumers' Counsel Janine Migden-Ostrander said.

While Ohio still has a healthy market of natural gas competitors, the state does not want to get to a point where mergers will hurt consumer choice and prices, she said.

"In essence, we just lost two (marketers),'' said the state's residential utility advocate. "While that may reinforce their resources, I'm hoping they'll be able to provide better prices for consumers. We'll have to see in time.''