Transport formula settles

---------------------- Forwarded by Chris Germany/HOU/ECT on 02/04/2000 12:20
PM ---------------------------

From: Colleen Sullivan 02/03/2000 09:03 AM

To: Scott Neal/HOU/ECT@ECT
cc: Dan Junek/HOU/ECT@ECT, Chris Germany/HOU/ECT@ECT, Judy
Townsend/HOU/ECT@ECT
Subject: Transport formula settles

Scott--
Something for you to consider:
If the transport people are to have their own books, my belief is that the
curve setting used for the transport values ought to be as unbiased as
possible. This means using as few "formula based" curves as possible and as
many Gas Daily publication postings as possible. I'm not sure how you or
your traders feel about the following postings, (how realistic they are), but
I think they bear watching to see if they could be used for calculating
transport p&l. In Gas Daily, under Citygate, Pooling Point Prices, there are
Mid Atlantic Citygates postings for both CNG and Columbia Gas. These could
potentially be used for CNG North & South Citygates and TCO citygates. The
only thing I have to confirm is how these would load since there is no index
posted each day--it is a range of prices instead.

Historically TCO and CNG citygate postings haven't been much of an issue
because we haven't held much transport on CNG and TCO, but with the CES
business in our portfolio, the times have changed. Currently we are using
"formula based" curves set by the traders to calculate CNG and TCO transport
p&l, and there sure seems to be a huge difference between the postings and
how we are marking the curves. For example, today's Gas Daily postings
compared to our curve markings are as follows:
GAS DAILY GAS DAILY SPREAD SPREADS per TRADERS CURVES
TCO pool $2.985 $1.565 $.10
TCO citygate $4.55

CNG North $3.39 $ .585 $.16
CNG South $3.305 $ .670 $.16~
CNG Citygate $3.975

Obviously there are huge differences, so someone must be wrong. There are
two solutions that I see. One is to switch to the Gas Daily posting, which
in my mind is preferable if you believe the postings are accurate; the other
solution is to have the traders change their curves more often to more
closely reflect the actual spreads in the marketplace. That's up to you.
Obviously if we believe the postings are completely off base and our spreads
are more accurate, then nothing needs to be done, but if you want to know
what you're really making on your transport (and you now have a lot of it),
we need to focus on it being accurate.

Anyway, let me know what you decide and I'll either forget about it or work
on getting the Gas Daily postings pulled into the calculations.

---------------------- Forwarded by Colleen Sullivan/HOU/ECT on 02/03/2000
08:29 AM ---------------------------

From: David Oliver 02/02/2000 12:56 PM

To: Colleen Sullivan/HOU/ECT@ECT, Mark Friedman/HOU/ECT@ECT
cc:
Subject: Transport formula settles

Colleen,

Mark wanted me to let you know where a few city gate points are settling
daily:

CNG North City Gate = GD CNG North +.16
CNG South City Gate = Settles at what the intra-month trader sets their
intra-month curve at.
TECO Citygate = GD CGT/App +.10

Please note that CNG North City and TECO City settle prices come in at a one
day lag. After we receive gas daily settles, we reload prices for any
derived curves.
If you have any questions please let me know.

David
x3-4231