Gas Structure OII: Altra Energy Technologies

September 5, 2000

To all persons on the Service List in I.99-07-003 (Gas Structure
OII):

As part of the approved Gas Structure settlements for PG&E and the
Comprehensive Settlement proposed for SoCalGas and SDG&E, SoCalGas and PG&E
would contract with Altra Energy Technologies (Altra) to develop several new
electronic trading services including anonymous imbalance trading, OFO
imbalance rights trading, storage trading and anonymous capacity trading.
Recently, while working on finalizing contracts to provide these services,
Altra informed both SoCalGas and PG&E that they are no longer interested in
offering these new services. Altra restructured their business and has
determined that this service is not the right business direction for them at
this time.

SoCalGas and PG&E were working together to provide a consistent
service prior to the announcement by Altra, and we will continue working
together to seek an alternative service provider for these services. PG&E's
intention is to investigate the possible alternatives and to present those
alternatives to the parties to I.99-07-003 along with our suggested plan of
action as soon as possible. PG&E understands that SoCal Gas intends to work
with parties in a similar fashion. Since it is unknown how long it will
take a service provider other than Altra to develop these services, the
implementation dates for trading services by a third party will need to be
reevaluated once a selection is made and a development schedule set.

We recognize that a replacement service provider raises a number of
questions such as implementation costs and service fees. We will attempt to
address those questions as we investigate the alternatives. Please send any
comments or questions you may have to Ed Vera (EVera@socalgas.com) of
SoCalGas and Ben Campbell (BCC3@pge.com) of PG&E.

Sincerely,

Dan Thomas