Pueblo

Tino called today to report on their meetings with DOE last week. Tino,
Dennis Langley, and their outside lawyer Jim Slattery met with Bill
Richardson and DOE staff to discuss the "sole source" procurement approach to
DOE's obtaining an alternative power supplier for Kirtland AFB and Sandia.
Tino reports that Richardson signed off on the sole source approach, subject
only to DOE review of the final contract to assure its consistency with the
public interest. Tino believes that the combination of significant Native
American involvement in the overall deal structure along with a power price
that is lower than DOE's current PNM rates will satisfy the "public interest"
standard.

Slattery is set to begin discussions with DOE next week on the overall
structure of Dennis' proposal. I am surprised that Dennis would go this far
before hearing from us on the economics, but Tino made it sound like the
initial discussions would be fairly general--i.e., to explain to DOE that the
plan is to build a new pipeline and a new power plant and to do the whole
thing in partnership with the Isleta Tribe, but without talking about
specific economic issues. Sounds to me like Dennis has Richardson on board
but is nevertheless planning to pitch to the lower level DOE staff people
what a great deal this is for the Tribes and therefore the government.

Tino, not surprisingly, is eager to see numbers and sit down to discuss
them. He suggested a meeting the first week of May in either Houston or KC.
I asked Tino whether he could get firmer numbers from DOE than we currently
have on (1) total electric and gas load (current and projected) for the AFB
and Sandia and (2) actual price DOE currently pays for gas and power. He
didn't think he could get better information before the first week in May.

On another related topic, through Shelley Corman's group I got acquainted
with a guy named Tim Beldon who runs the ENA transmission capacity book for
the Western U.S., out of Portland. I talked with him for a few minutes about
power flows and pricing in the N.M-Arizona area and he seemed pretty
knowledgable. He has a transmission engineer on his team who is an expert in
verifying utility claims of transmission constraints. Apparently, ENA buys
and sells a lot of power in the four corners area and is pretty familiar with
the transmission availabilty and power pricing situation up there. I didn't
discuss with Tim the specifics of the project we are looking at, but did tell
him that Kevin and Steve were looking at a potential power plant load and
trying to figure out how serious it is. Kevin, if you guys think Beldon
could provide useful info on the cost and availability of firm and non-firm
transmission for the surplus power out of Albequerque up to four corners,
please give him a call. It is OK to disclose to Beldon what we are working
on, but please inform him that we are subject to a confidentiality agreement
and that further disclosure is improper.

Please let me know whether a meeting with these guys the first week of May is
doable. Thanks. DF