DEREGULATION OF ANY INDUSTRY OFTEN LEADS TO consolidation and merger, which frequently bolsters the involved companies' stock prices.
In the SBC/Pacific Telesis merger, intervenors...
power markets to the east of Chicago are reasons for extending and connecting pipe in this direction. Yet while spark spreads in these markets were higher this year than in the ComEd/Chicago market, those spark spreads also were low relative to year-earlier values in these markets because of high natural gas prices.
Investors also know that as an increasing amount of natural gas-fueled generation is installed in Illinois, Indiana, and Ohio, price volatility will fall, as will the gains from using these generators as a way to profit on the wholesale power market. In short, Alliance and connecting pipelines heading east will have a role in reducing price volatility. However, this trend for increased natural gas-fueled power generation will be weakened unless the natural gas price declines or the power price increases.
If the price of natural gas does not decline significantly, there will be fewer companies willing to take the risk of investing in natural gas-fueled generation. A steady negative spark spread in the Chicago market most likely will blow many investments out of the water, and reduce the full value that Alliance can deliver.
1 The chemical arm now is a separate company, NOVA Chemicals.
2 An expansion also occurred along the border in late December, bringing additional Canadian gas to the United States.
3 The company with the largest equity interest in Alliance is First Chicago, a limited liability company whose major equity holder (26 percent of the equity) is Gendis, a Manitoba-based company with interest in retail outlets and real estate.
4 The markets to be served by Alliance are near Chicago and to the east of Chicago. Thus Alliance connects with Vector, which also connects to such systems as NiSource (which signed up for 200 MMcf per day of firm service on Vector). Vector ships gas through Indiana and Michigan into Toronto, where it connects to Millennium West. Millennium West, in turn, will connect to the proposed Millennium pipe in New York state, which ships the gas into the New York City metropolitan area.
5 , FTEnergy, Feb. 11, 2000, p. 8.
6 See FERC Docket No. RP-00-241-000, filed Apr. 24, 2000. The California PUC filed a complaint against El Paso Natural Gas co., accusing the gas pipeline of anticompetitive conduct by awarding firm transportation rights in a capacity auction to two of its marketing affiliates, which won out over some 24 bids by other unaffiliated competitors. In August, the PUC asked the FERC to issue a summary ruling on the complaint, without a hearing, on the basis of evidence taken in discovery.
7 For a discussion of estimating conservation or price effects for natural gas use, see John H. Herbert, "Clean Cheap Heat-The Development of Residential Markets for Natural Gas in the United States," Praeger, New York, N.Y., 1992.
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