Acquisition of PNM capacity

Lorraine: here's what we would have to show FERC, along with some of my
comments. Let me know if you have additional ideas, and I'll turn it into a
draft to send around to the usual suspects.

1. Rate impact on TW customers; method by which TW would collect the costs
of the acquired capacity.

- I assume TW would be at risk for any undercollection of revenue
associated with the PNM capacity; thus there is no cost-shift potential to
other shippers.
- Net costs will be separately recorded.

2. Would acquisition of PNM capacity enable TW to gain control over access
to upstream capacity and supply sources in a manner which would permit TW to
limit customer choices or improperly tie use of the acquired capacity to
other pipeline services? (I think Mary Kay will be able to help us explain
the "no tying" part).

3. Would TW's marketing affiliates receive preferential treatment?

- No TW marketing affiliate will be involved in the proposed transaction
- Acquisition of PNM capacity will not result in any undue preference or
advantage to any affiliated entity.

4. Will TW as a holder of capacity receive preferential treatment over PNM's
customers, to the detriment of PNM's customers?

- No. PNM will be making the capacity available to TW only during periods
in which it has unused capacity available on its system, so any impact on PNM
shippers should be minimal.
- Service contract under PNM's tariff does not provide for unduly
preferential treatment of TW.

5. How will capacity be managed or otherwise integrated into TW's existing
open access operations?

- TW will enter into service agreements with PNM from time to time to
transport gas on the portion of PNM's line from Blanco, NM (i.e., the Blanco
Hub operated by TW) to Rio Puerco, NM, where PNM's system interconnects with
TW's mainline. Resulting available capacity will be posted according to TW's
tariff.
- The capacity will be used to serve customers under TW's FTS-1, LFT and ITS
(right?) rate schedules from the Blanco receipt point to delivery points on
TW's system.
- Lorraine -- we need to discuss our arrangement with PNM -- Would we be
able to acquire on an as-needed basis? Would it be an ordinary service
agreement as provided in their tariff? Which would come first, our deal with
PNM or with our shipper? It might be good to come up with some examples of
likely scenarios.

6. Would acquisition of PNM capacity prevent unnecessary construction of new
facilities?

- Yes. Demand currently exceeds available capacity on the San Juan
Lateral. Transwestern was unable to construct San Juan Phase II because of
prohibitively high costs of obtaining an easement on Navajo land. Using the
PNM Blanco to Rio Puerco line is one of the few remaining alternatives
available to TW to expand this portion of its system. It would enable TW to
transport an additional ______ of gas for shippers from the San Juan Basin to
delivery points on the mainline of TW's system without the need for expanding
the San Juan lateral. The acquired capacity would benefit customers by
effectively providing incremental capacity on a constrained portion of TW's
system, at minimal cost to TW and no environmental disturbance. Would enable
both TW and PNM to use their systems more efficiently.