riday July 7, 11:43 am Eastern Time

Company Press Release

SOURCE: Columbia Gas Transmission

Columbia Gas Transmission Files Innovative Capacity Auction
Process With FERC

FAIRFAX, Va., July 7 /PRNewswire/ -- Continuing its quest to promote creative 
regulatory policies, Columbia Gas Transmission, a wholly owned
subsidiary of Columbia Energy Group, has urged the Federal Energy Regulatory 
Commission to consider an interactive, Internet-based pipeline capacity
auction process that enhances Columbia's current open auction process.

In a first of its kind filing, Columbia proposes a ``bid/offer'' system for 
selling capacity similar to on-line natural gas commodity trading systems. 
The filing
was made in response to customer concerns with the current process and is 
consistent with sentiments expressed in FERC's Order 637, which
encourages companies to voluntarily submit ``new and innovative approaches'' 
to capacity auctions. Since the filing is not required under Order 637,
Columbia's proposed auction is separate from Columbia's Order 637 compliance 
filing made June 15.

``Under the current mechanism, capacity is not always awarded to the party 
that places the highest value on it,'' said Carl Levander, vice-president of
Rates and Regulatory Policy for Columbia Gas Transmission. ``Even though we 
conduct our current capacity auction over a five-day period, parties often
wait until the last 15 minutes to place a bid. Also, since the current 
process is based on set time periods, customers often call us back after the 
auction is
closed saying they valued the capacity greater than the winning bid.''

According to Levander, Columbia's proposal addresses these concerns by moving 
to an enhanced, Internet-based interactive auction that takes into
consideration such current market conditions as daily fluctuations in 
capacity value and the increased level of auction activity due to shorter-term
contracts.

Under Columbia's proposed ``bid/offer'' system, Columbia would ``offer'' (via 
its electronic bulletin board) sales terms for all its available firm 
capacity.
Customers can then match all asking sales terms for any portion of the 
quantity and a sale is immediate and binding. If Columbia offers discounted
capacity, the customer can counter-offer with a different rate. Or, if 
Columbia offers maximum rate capacity, then a customer can counter-offer with 
a
different term length. Columbia can match the highest bid, subject to a 
present value process, and the sale is immediate and binding. At any time 
before a
binding sale, the customer can change or withdraw its bid.

Columbia's ``bid/offer'' auction proposal meets the six basic principles 
outlined in FERC's Order 637. 

    *     Columbia's auction has predictable timing since the auction will
          begin each day at 9:15 a.m. (EST) and all available capacity will be
          posted prior to 8:00 a.m. (EST).
    *     The auction will be open to all creditworthy bidders on a non-
          discriminatory basis.
    *     The auction is user-friendly since it will use Columbia's existing
          EBB format. All information concerning rules and procedures will be
          made available on the Internet.
    *     The method of selecting the best bid will be easily understood since
          bidders will only be able to change one variable with respect to
          each capacity package made available.
    *     As is Columbia's current practice, winning bids and the bidder's
          identity will be posted to permit monitoring of how the selection
          criteria were applied.
    *     The bidding process will be transparent to all parties since all
          bids (without the bidder's identity) will be available for review to
          all bidders through an Internet-based system.


``We believe the combination of these factors will ensure that the capacity 
auction format is 'transparent, verifiable, and non-discriminatory' to all 
parties
as well as innovative in design,'' Levander said.

Levander said the proposal not only meets the Commission's principles, it is 
based on feedback gathered from customers, who expressed a desire for
transparent market information; shorter auction periods; an ability to 
withdraw and change bids; and a real-time, immediate closure process.

Columbia Gas Transmission, with offices in Charleston, W.Va., and Fairfax, 
Va., moves an average of three billion cubic feet of natural gas per day to
markets along a 12,550-mile pipeline network, which reaches across 10 
Midwestern, Northeastern and mid-Atlantic states. The company operates one
of the largest natural gas storage systems in the country with over 240 
billion cubic feet (Bcf) of working capacity.

Columbia Energy Group, based in Herndon, Va., is one of the nation's leading 
energy services companies, with assets of approximately $7 billion. Its
operating companies engage in nearly all phases of the natural gas business, 
including exploration and production, transmission, storage and distribution,
as well as retail energy marketing, propane and petroleum product sales, and 
electric power generation. Information about Columbia Energy Group
(NYSE: CG - news) is available on the Internet at 
http://www.columbiaenergygroup.com. 

SOURCE: Columbia Gas Transmission 

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