Re: TW Fuel

Thanks for the encouraging words. Your support of TW throughout the year has
been tremendous and I have let Danny and Stan know that. Thanks for all your
help.

Steve

Drew Fossum
11/29/2000 04:40 PM
To: Steven Harris/ET&S/Enron@ENRON, Kevin Hyatt/ET&S/Enron@Enron, TK
Lohman/ET&S/Enron@ENRON, Julia White/ET&S/Enron@ENRON, Steven
January/ET&S/Enron@ENRON
cc: Danny McCarty/ET&S/Enron@Enron, Dave Neubauer/ET&S/Enron@ENRON, Kent
Miller/ET&S/Enron@ENRON, Mary Kay Miller/ET&S/Enron@ENRON, Susan
Scott/ET&S/Enron@ENRON, Glen Hass/ET&S/Enron@ENRON, Maria
Pavlou/ET&S/Enron@ENRON

Subject: Re: TW Fuel

First, congratulations to all five of you and the others on your staffs who
were involved for working together to get the excess line pack deal done
today. As I understand it, TK was able to sell 10,000 MMBtu at the Cal
Border for something like $15 thanks to your efforts. This thing went from
Dave and Kent's idea to you guys' execution in about two days, even with a
(slight) delay due to my panic attack on whether we can make downstream
sales. Great job! Second, I think TK, Kevin, Maria and Glen and I have
come up with a workable set of guidelines on when similar deals can be done
in the future. The key, as I expressed in the attached email, is that the
sales be driven by a legitimate operational basis. If Gas Control verifies
that we have excess line pack at a location and that making the sale helps
get line pack to optimal levels, such sales are appropriate. Gas Control
should also verify that the operational basis for the sale can be documented
if the need ever arises. Today's deal is a great example of that as we
actually communicated to outside parties that we anticipated some pressure
management issues. If there are ever any questions about when such deals are
appropriate, or about how to document the operational basis, please give me,
Susan, or Maria a call. Again, great job! DF

From: Drew Fossum 11/27/2000 06:01 PM

To: Steven Harris/ET&S/Enron@Enron, Dave Neubauer/ET&S/Enron@ENRON, Kent
Miller/ET&S/Enron@ENRON, Mary Kay Miller/ET&S/Enron@ENRON
cc: Susan Scott/ET&S/Enron@ENRON

Subject: TW Fuel

This morning I raised a concern regarding TW's sale of excess fuel at
downstream points. Here's the problem: the tariff requires shippers to
tender fuel to us at their receipt points. With rare exceptions, those
receipt points are not at the Cal. border. Order 636 mandates that pipelines
unbundle transportation from storage. It also requires that pipelines that
make gas sales do so at the furthest upstream point on their pipeline. That
latter requirement means that if a pipe buys gas at point "x", it should
resell the gas at point "x" and not haul the gas to point "y" and then sell
it there as a delivered (i.e., bundled) product. My concern this morning was
that our receipt of fuel gas in the San Juan or Permian and shipment of that
gas to the Cal. border for sale arguably violates the unbundling requirement
(because the Cal. border sale is a bundled combination of the sale and the
transportation of the gas to the downstream location) or the "furthest
upstream point" requirement or both. Susan and my recollection was that when
ECS wanted to receive the Gallup fuel deliveries at a point other than
Permian pool, we made them sign a transport contract to move the gas to where
they wanted it. I haven't confirmed that recollection but I am recalling
that we told Courtney that we couldn't just move our fuel gas around
whereever we wanted it--we needed someone to pay us to transport it.

Irrespective of what we did with ECS, I think the following is the correct
way to look at this situation: We receive fuel at the shippers' receipt
points. Once we receive it, however, it is no longer "fuel." It becomes
line pack until it is burned. Line pack moves around based on a lot of
reasons, including shipper imbalances, etc. It also, obviously, has to move
to the compressors where it is burned as fuel. It is our job to manage
line pack, and that means we buy line pack at locations where we are short,
and sell it at locations where we are long. If we end up long at the Cal.
border from time to time, we should sell excess line pack to get line pack
back to optimal levels. I wouldn't want to get into a pattern where we are
consistently buying line pack in the San Juan and Permian and selling line
pack at the Cal. border, but thats not what we are talking about here. I
can't think of anything in the tariff or otherwise that is inconsistent with
this interpretation of our authority as operator of the pipeline. MKM--OK
with you? DF