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Peoples' $720M purchase of Equitable Gas approved by state regulators

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Company breakdown

EQT Corp.

Annual revenue: $1.64 billion

Net income: $479.77 million

Executives: David L. Porges, CEO; Philip P. Conti, senior vice president and CFO

Businesses: Natural gas production, transmission and utility

Employees: 1,800

Peoples Natural Gas Co.*

Annual revenue: $400 million

Net utility income: $59.2 million

Executives: Morgan K. O'Brien, CEO

Businesses: Natural gas utility

Employees: 965

*As reported to the state Public Utility Commission

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By John D. Oravecz
Thursday, Nov. 14, 2013, 2:27 p.m.
 

State regulators approved the sale of Equitable Gas Co. to Peoples Natural Gas Co. on Thursday, removing one of the final hurdles to a deal that will make Peoples the largest gas utility in Pennsylvania.

The state Public Utility Commission approved the $720 million deal, announced in December, by a 5-0 vote. If completed, North Shore-based Peoples would distribute natural gas to about 660,000 customers in 19 Pennsylvania counties, West Virginia and Kentucky.

A settlement approved by the PUC will cap Peoples' existing base rates until 2018 and is expected to save millions by combining operations and avoiding replacement of some pipelines. But Commissioner James H. Cawley warned that some terms could increase the wholesale cost of natural gas that Peoples passes on to consumers.

The transaction requires Peoples to purchase wholesale gas from Downtown-based EQT Corp., the parent of Equitable Gas, in place of current supplier Dominion Transmission Inc., Cawley said.

Traditionally, “Peoples was successful in providing gas supply service over 30 percent less expensively than Equitable,” Cawley said in a statement. EQT's transmission system lacks the same level of “competitive pricing” as the Dominion system, he said, and the deal “will tether Peoples” to EQT.

Peoples Gas spokesman Barry Kukovich called Cawley's concerns “prudent” and said People's will get more wholesale gas from EQT. But consumers can look for a better deal from alternative suppliers, and 33 percent of Peoples' current customers select such suppliers who offer better deals. An EQT spokesman could not be reached.

“We are pleased with the PUC's decision, and it is an important step in the merger,” Kukovich said. “We hope it can be completed by the end of the year.”

Approval is needed from the Federal Energy Regulatory Commission, he said. The Federal Trade Commission and regulators from West Virginia and Kentucky have approved it. The companies must wait 30 days after the PUC approval to close the transaction to allow for final appeals.

“In my view, the merger represents a win for consumers,” Commissioner Pamela A. Witmer said in a statement.

Combining operations of Peoples and Equitable will save an estimated $10 million to $20 million a year. The combined company will save an estimated $162 million in pipeline replacement costs in areas where both have lines, sometimes running parallel. Such savings will lower consumer rates.

The sale would allow EQT to invest in its rapidly growing natural gas drilling, pipeline and compressor station interests, particularly in the Marcellus shale, and permit Peoples to concentrate on its core business of local gas distribution to residential, commercial and industrial customers.

John D. Oravecz is a staff writer for Trib Total Media. He can be reached at 412-320-7882 or joravecz@tribweb.com.

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