FERC Gives High Sign to WI Pipe Competition

      The northern Illinois and southeastern Wisconsin gas transportation 
markets, which long have been dominated by
      ANR Pipeline, moved one step closer to obtaining pipeline-on-pipeline 
competition yesterday when FERC awarded
      the proposed Guardian Pipeline LLC a favorable preliminary 
determination on non-environmental issues. 

      The decision was a major win for the proposed greenfield pipeline 
because not only did it shoot down most of the
      arguments presented by ANR to thwart the project, but it found that 
even though the project would "adversely
      affect" landowner interests, Guardian was making "reasonable efforts" 
to mitigate the impact on landowners. 

      Moreover, FERC ruled that while the $224 million pipeline would compete 
head-to-head with ANR, it would not
      have a negative affect on the Coastal pipeline and its customers. "On 
balance, the Commission finds that the
      proposed Guardian pipeline will provide substantial public benefits 
with minimal adverse impacts," the order said
      [CP00-36]. 

      The Commission also found that sufficient need was established for the 
36-inch, 140-mile pipeline that would
      transport 750,000 Dth/d of gas from the Chicago Hub to markets in 
northern Illinois and southern Wisconsin,
      providing customers there with an alternative to ANR and access to 
competitive Canadian gas supplies. It would
      terminate near Ixonia, WI, where it would interconnect with Wisconsin 
Gas Co.'s distribution system. At the
      Chicago Hub, the pipeline proposes to interconnect to Alliance 
Pipeline, Northern Border Pipeline, Midwestern Gas
      Pipeline and Natural Gas Pipeline Co. of America. 

      Guardian has executed 10-year precedent agreements with four shippers 
for 702,500 Dth/d, which equals about
      94% of the project's design capacity. The largest shipper by far will 
be Wisconsin Gas, which has committed itself
      to 650,000 Dth/d of the capacity on the proposed line. In fact, the 
Guardian project is an outgrowth of Wisconsin
      Gas's request for proposals (RFP) process in June 1998, which the LDC 
initiated in anticipation of the expiration of
      its firm transportation contract with ANR in October 2003. The other 
shippers on Guardian include Alliant Energy
      (10,000 Dth/d), WPS Energy Services Inc. (2,500 Dth/d) and an unnamed 
shipper (40,000 Dth/d). The project has a
      targeted in-service date of Nov. 1, 2002. 

      In multiple protests filed at the Commission, ANR argued that 
Guardian's application was "patently deficient"
      because it didn't include the proposed lateral that Wisconsin Gas plans 
to build to interconnect with Guardian.
      Wisconsin Gas currently is seeking the approval of state regulators to 
build the lateral. Furthermore, ANR claimed
      Wisconsin Gas was using its monopoly power as a franchised LDC serving 
southern Wisconsin to subsidize the
      Guardian project. Wisconsin Gas's parent, WICOR Inc., is one of the 
sponsors of Guardian. The other backers are
      CMS Gas Transmission and Storage and Viking Gas Transmission. 

      But FERC rejected both arguments. "While previous attempts to inject 
competition into ANR's market in this area
      have failed, we believe that this area is ripe for competition, and 
that it is only a matter of time before other
      pipelines submit similar proposals to the Commission. We find that the 
proposed project will provide southeastern
      Wisconsin with access to another source of supply, which will allow 
this market to enjoy the benefits of
      pipeline-to-pipeline competition for the first time," the order noted.