Socal ATM nominations

Good morning. With the energy crisis in California at this time, we will
need to be extra careful with nominations at Socal and throughout the west to
ensure that we continue to provide the excellent nomination service that we
have been providing to our customers. You guys are doing an excellent job
and we understand that you are under quite a bit of pressure with limited
staff. Our contracts state that we must notify every customer of pipeline
allocations 12 hours in advance. We all know that this can be almost
impossible on EPNG, but because of the current price levels at Socal and the
basins, Enron needs to call each customer and notify them of their cuts with
an explanation of the pipeline cuts each day to avoid any potential
penalties. We also need to document when the call was made. In regards to
the ATM nominations on Socal (ones that we can't monitor), Enron will be
requesting full pipeline summaries of the nominations from our
counterparties. Please try to think of any nomination gaming that may take
place at these historical levels. We need to remember that our
counterparties may not act as they have in the past due to the market price
implications on their P&L. We should not rely on prior business conduct in
regards to "standard epng allocations" when dealing with our customers. I
would expect that the market is going to overreact to any cuts that may be
above the "pipeline average".

Let's discuss how we are going to monitor the flows of nominations out of our
control. How do we prevent collusion with respect to the socal nominations
that we can't see? Are there package numbers on each baseload contract to
ensure that they don't simply reshuffle gas according to price? Let me know
which companies are not providing Enron with timely allocation reports at
Socal and I will call their senior trader to discuss getting this operational
information sooner.

Sincerely,

Mike