FW: Bilas , Proposed Decision SoCal GIR

FYI--Appears others will also be supporting the Proposed Decision. No word yet on SoCal's position. gh

-----Original Message-----
From: Dasovich, Jeff
Sent: Thursday, October 18, 2001 11:16 AM
To: Hass, Glen
Subject: RE: Bilas , Proposed Decision SoCal GIR

FYI. Latest info is that large customers, some QF cogens, independent storage companies, and perhaps PG&E, will be filing separate comments supporting the Bilas decision to adopt the settlement.

-----Original Message-----
From: Hass, Glen
Sent: Wednesday, October 17, 2001 8:36 AM
To: Watson, Kimberly; Lindberg, Lorraine; Lohman, TK; Donoho, Lindy; Dasovich, Jeff; Pryor, Tony; Lichtenwalter, Blair; Lokey, Teb
Cc: Harris, Steven; Kilmer III, Robert; Miller, Mary Kay
Subject: FW: Bilas , Proposed Decision SoCal GIR

As requested, Mark Baldwin has put together a summary of the Proposed Decision and Comment Points for filing on Friday. Below are his comments which we can use for discussion purposes at the conference call later this morning. Having reviewed the Proposed Decision I would agree with Mark's assessment in that while we may prefer that the Commission not modify the Comprehensive Settlement, overall the modifications made should not negatively impact Transwestern. The Proposed Decision retains two important aspects of the CS for Transwestern: 1) Unbundling of the SoCal backbone transmission system and receipt point capacity and 2) Retention of primary firm RP capacity of 750MM/d at Needles from Transwestern. gh

-----Original Message-----
From: <mbaldwin@igservice.com<@ENRON
Sent: Tuesday, October 16, 2001 5:50 PM
To: Hass, Glen
Subject: Bilas , Proposed Decision SoCal GIR

Glen,

I have reviewed the 10/10/01 Revised PD of Comr. Bilas as requested. In view
of the entirety of TW's interest ,I still ascertain that TW can support the
current 10/10 PD. Noted below for your information and review is a summary
of the Modifications to the CSA that Bilas is currently offering :

1)Market concentration limits reduced from 40% to 30 % of available receipt
point capacity. TW has preferred no limits to market concentration
historically. However, as before, I do not believe pushing this issue will
be successful or productive for TW. There are no market concentration limits
in the secondary market. (Although Bilas warns market participants that any
misbehavior will be subject to CPUC investigation) P.44

2)SoCal will be required to make available on a daily basis any unutilized
firm RP capacity. I don't see any negative impact on TW, perhaps positive.
P.45

3)Price Cap for secondary intrastate market set at 120 % of SoCal firm rate.
This is the same cap that applies to SoCal. I don't like the precedent set
in this area, however it assures that the economic value allocation between
SoCal citygate and supply basin will proportionately tend toward the
interstate system providers in any tight transport/supply scenario. P.46

4)Not really a change , but Bilas mentions support for Hector Rd. as a
delivery/receipt at Ferc.

5)PD does not reduce the core's interstate capacity nor their storage
capacities but rather maintains these capacities at current levels. Current
level 1044 MMcfd, proposed 1000 MMcfd on the interstate system and current
storage 70 BCF, 327 MMcfd of injection and 1,935 MMcfd withdrawal Vs
proposed 55 BCF. I see no clear negative impact on TW from this change.P.
52 &54.

6) CTA's (Core Transport Agents) allowed to reject only their prorata share
of non-reliability storage service. No impact on TW interests. P. 58

7) SoCal directed to present(via Advice Ltr.) how the cost of noncore
default balancing will be allocated ONLY to those noncore customer using
this service and not to the Core customers. I see no impact on TW. P.62

8)PD rejects the requirement that SoCal/SDG&E file an application with a
proposal to address core procurement function as the default provider. I
see only positive attributes of this change for TW. P.63

9)Preserves the right for SoCal/SDG&E to seek recovery of expenditures
associated with the transfers of customers from Core to Core Aggregator. NO
impact on TW. P.66

10)PD orders a 10 % cap on ITCS (stranded cost)responsibility borne by
bundled core customers due to unbundled core interstate capacity. No direct
impact upon TW interest, however, likely a touchy point with noncore
interest. P. 75

11) PD orders that the core contribution to noncore ITCS will end effective
the adoption of the PD. Additionally, noncore customers to pay 50% of core
ITCS till the end of the core TW and EPNG agreements. No negative impact on
TW. Noncore customers bear additional expense. The PD estimates an
additional $18 million over next 5 to 6 years. P. 78 The PD provides an
estimate of increased stranded cost for the noncore between 01 and 06 to be
approx. $ 44.4 Million.

12) PD say NO to an increase in the core brokerage fee of $ 0.0039 (to $2.4
cents). No impact on TW interest. P.83.

13) PD treats Core Subscription service differently on an accounting basis.
No impact on TW. P.85-87

14)Generally, the PD makes some administrative changes to the small core/ESP
market rules and SoCal services and consumer protection implementation . NO
impact on TW interest. P 88-100.

15)Lots of tweaking on how SoCal can recover the cost to implement to
services envisioned under the CSA. Owing to the fact that SoCal has already
started to "implement" portions of the CSA and those cost are accruing to a
balancing account etc. Bottomline, not consequential to the approval of the
PD. No direct impact upon TW interest. P. 103-110.

On whole the centerpiece of TW's interest in this proceeding remains intact.
The SoCal receipt points are unbundled along with "SoCal backbone
facilities". TW has primary firm RP of no less than 750 mmfcd. Mojave is
recognized at only 50 mmfcd firm RP. No receipt point complex is given a
preference for capacity expansion. Line 235 appears to remain useful for TW
deliveries into the market load centers. The PD modifications to the CSA do
not impose upon TW any conditions or costs that would be reason not to
support the PD. The parties most affected by the PD are the core aggregators
with additional costs and restrictions to service options and noncore
customers with additional cost allocations.

Points for comments

1) TW agrees with the PD that the centerpiece of positive changes embodied
in the CSA in the creation of firm tradable RP rights. This change in SoCal
market structure provides all market participants with the proper tools to
build long term supply and transportation contracts.

2) Further adoption of the PD substantially reduces unnecessary market
inefficiencies at the California border by providing all market participants
with gas scheduling certainty.

3) The creation of tradable secondary rights on SoCal's intrastate system
will promote competition and generally lead to stable delivered gas prices.

4) The PD correctly observes that the PG&E market structure which relieves
upon an unbundled intrastate backbone system work "relatively well" during
California's challenging energy markets.

5)TW agrees that the time is ripe for approval of the PD. The energy markets
in California have been improving and stabilizing. The Commission promising
options are still valid in today's gas market. Further, SoCal is already
starting to follow the CSA game plan in their attempts to improve the
operating environment on the SoCal system. It is consistent to follow
through and make the structural changes required to make permanent these
improvements.

6)TW supports SoCal and others whom are approving this PD. (ON THIS POINT,
TW SHOULD BE SURE THAT SOCAL IS ON BOARD AS WELL AS OTHER CSA SIGNATORIES,
PRIOR TO FILING THESE TYPE COMMENTS)

I look forward to discussing these matters tomorrow on the conference call.

Mark, IGS.

Mark, IGS.