Citizens request for proposal

Thanks, Drew. That's consistent with my thinking, but I wanted to hear it
straight from the expert.

From: Drew Fossum 11/28/2000 08:59 AM

To: Jeffery Fawcett/ET&S/Enron@ENRON
cc: Randy Rice/OTS/Enron@ENRON, Rich Jolly/ET&S/Enron@ENRON, Susan
Scott/ET&S/Enron@ENRON, Steven Harris/ET&S/Enron@ENRON, Kevin
Hyatt/ET&S/Enron@Enron, Mary Kay Miller/ET&S/Enron@ENRON, Julia
White/ET&S/Enron@ENRON

Subject: Re: Citizens request for proposal

I'm not aware of any legal or regulatory prohibition on our performing such a
service for Citizens. We can't actually buy the assets without a FERC
certificate, but that's not what you are suggesting. I can think of one
example on NN in which Northwestern Pub. Service owns a some branch lines and
we operate them. Whether we do it as a separate legal entity or as TW is a
strategy call that will depend on whether we want to keep the revenue stream
out of the regulated pipeline entity. Since TW doesn't have a rate case
until 2006, there is probably no reason to put the contract in a separate
entitiy until we get down the road a ways.

Jeffery Fawcett
11/27/2000 04:00 PM
To: Randy Rice/OTS/Enron@ENRON, Rich Jolly/ET&S/Enron@ENRON
cc: Susan Scott/ET&S/Enron@ENRON, Steven Harris/ET&S/Enron@ENRON, Kevin
Hyatt/ET&S/Enron@Enron, Mary Kay Miller/ET&S/Enron@ENRON, Drew
Fossum/ET&S/Enron@ENRON, Julia White/ET&S/Enron@ENRON

Subject: Citizens request for proposal

Citizens Utilities is in the process of selling off all of its
non-telecommunications businesses throughout North America. One of their
principal assets, Louisiana Gas Service (LGS) is one of those companies
recently sold by Citizens. LGS provided gas control and operations services
to other non-LGS companies, including the Citizens Utilities LDC assets in
Arizona. With the consummation of the sale of LGS, Citizens has told me
confidentially that they have no reasonable way of operating the
interconnect, metering and 1.5 mile lateral pipeline facilities that
interconnects TW and EPNG to the recently constructed Griffith Energy Power
Plant. Therefore, Citizens is looking to possibly have a 3rd party provide
contract operations services under an operating agreement. TW has been asked
in writing by Citizens to consider making a proposal to operate these
facilities.

Does TW have an interest in providing contract operations services for
Citizens? In a related legal/regulatory question, does TW have the authority
to conduct contract services on behalf of others, or would we have to perform
these services as a separate legal entity? If we do, does this present an
affiliate problem for us if we "share" operating employees? If these
threshold questions can be accommodated, and TW is not only able to provide
contract operations services for Citizens, but has a commercial desire to do
so, what would we charge Citizens for this service? Although it would appear
at first blush to be a relatively simple matter to operate these facilities,
remember that Citizens will be receiving gas (potentially) from both TW and
EPNG simultaneously, presenting not only a challenge to balance pressure
between the pipes, but to account for and reconcile deliveries and receipts
from both pipes as well as the plant site.

Although I'm the principal commercial representative for Citizens as regards
transportation matters, I'm certainly willing to step out of the middle of
this negotiation if Operations desires to handle it themselves. I will be
happy to provide you a copy of the brief 1/2 page letter Citizens sent to me
on the 17th soliciting TW's interest. Given the relatively short lead time
until LGS operations is sold, Citizens has requested expedited
consideration. Please let me know how you want to proceed. Call if you have
any questions.