----- Forwarded by Steven J Kean/NA/Enron on 12/27/2000 02:01 PM -----

Phillip K Allen@ECT
12/22/2000 03:06 PM

To: Steven J Kean/NA/Enron@Enron
cc:
Subject:

Steve,

I am sending you a variety of charts with prices and operational detail. If
you need to call with questions my home number is 713-463-8626.

As far as recommendations, here is a short list:

1. Examine LDC's incentive rate program. Current methodology rewards sales
above monthly index without enough consideration of future
replacement cost. The result is that the LDC's sell gas that should be
injected into storage when daily prices run above the monthly index.
This creates a shortage in later months.

2. California has the storage capacity and pipeline capacity to meet
demand. Investigate why it wasn't maximized operationally.
Specific questions should include:

1. Why in March '00-May '00 weren't total system receipts higher in order
to fill storage?

2. Why are there so many examples of OFO's on weekends that push away too
much gas from Socal's system.
I believe Socal gas does an extremely poor job of forecasting their
own demand. They repeatedly estimated they would receive more gas than
their injection capablity, but injected far less.

3. Similar to the power market, there is too much benchmarking to short
term prices. Not enough forward hedging is done by the major
LDCs. By design the customers are short at a floating
rate. This market has been long historically. It has been a buyers market
and the
consumer has benefitted.

Call me if you need any more input.

Phillip