1999 NNG & TW Audited Financial Statements

Re: your comment on this today. Unbelievable!!! What a ton of _____. Lets
talk. DF )by the way, whats a PAJE? DF
---------------------- Forwarded by Drew Fossum/ET&S/Enron on 04/10/2000
01:11 PM ---------------------------

From: Bob Chandler 04/10/2000 10:05 AM

To: Rod Hayslett/FGT/Enron@Enron
cc: Allison Millan/ET&S/Enron@ENRON, Harry Walters/ET&S/Enron@Enron, Mary Kay
Miller/ET&S/Enron@ENRON, Drew Fossum/ET&S/Enron@ENRON

Subject: 1999 NNG & TW Audited Financial Statements

Heather Mueck (AA) advised me this morning that in spite of our recent letter
order from the FAO by Jim Guest, AA still does not believe we have enough
evidence (other than our own opinion) to justify regulatory asset treatment
for the Y2K costs. While this position is consistent with what they had told
us before we made the filing, they had given us no clue last week when they
were providing their comments on our browncover drafts that they still had a
problem with the Y2K assets--even when they were relaying Roger Willard's
comments.

The bottom line is that they will have a PAJE on Northern for the amount of
the asset (aproximately $3.6MM), but the amount on TW (less than $.5MM) is
so small they will pass on it. As I understand it, that won't preclude a
clean opinion on NNG this year, but the PAJE will continue in future years'
audits until the asset is approved for recovery in Northern's next general
rate case. Therefore, if we have additional Northern PAJE's in future years,
the combined effect would be used to determine whether or not a clean opinion
would be appropriate in those years.

I assume we will suffer the scarlet letter of the multi-year PAJE, rather
than write off the reg asset in the 1999 Brown Cover and be required to flow
the write-off through consolidated earnings (and internal scorekeeping) in
the year 2000.