Message-ID: <30319456.1075855741275.JavaMail.evans@thyme> Date: Mon, 4 Dec 2000 04:02:00 -0800 (PST) From: richard.rathvon@enron.com To: randall.gay@enron.com Subject: Re: West Coast Gas Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Richard Rathvon X-To: Randall L Gay X-cc: X-bcc: X-Folder: \Randall_Gay_Dec2000\Notes Folders\Discussion threads X-Origin: Gay-R X-FileName: rgay.nsf Attached is the e-mail that I revised pursuant to our discussions. I have also sent to Bob Carter, the ENA lawyer on the National Gypsum deal. As you can see, he does not see any issues that would prevent sending to my contact at National Gypsum. Do you have additional comments or changes? (Also, I will pursue getting the name of the entity that sent it to National Gypsum.) ---------------------- Forwarded by Richard Rathvon/Corp/Enron on 12/04/2000 12:04 PM --------------------------- Bob.Carter@enron.com on 12/04/2000 10:46:29 AM To: Richard.D.Rathvon@enron.com cc: Subject: Re: West Coast Gas Looks good to me. Richard D Rathvon@ENRON To: Bob Carter/HOU/ECT@ECT Sent by: cc: Richard Subject: Re: West Coast Gas(Document link: Bob Carter) Rathvon@ENRON 12/04/2000 10:36 AM I want to send this to our customer, National Gypsum, but thought you should review prior to it going out. Do you have any comments? I've talked with several people familar with gas sales and distribution in the southwestern portion of the US. Summarized below is their collective response: 1. The pipeline capacity is limited due to an order by the Federal Energy Regulatory Commission (FERC), and FERC has jurisdiction over the interstate sale and distribution of natural gas. The Department of Transportation has jursidiction only over certain safety issues resulting from the gas explosion. 2. The spot market has risen in the Arizona area -- currently it is at $ __ for 30-day ___. The reason prices are high is due to the excessive demand in California for natural gas for its power plants. Thus, gas is flowing into California -- the only way gas will flow east away from California is in response to higher prices. 3. Enron is not "holding back supplies to the area". Enron is not a producer of natural gas, does not have ANY physical supplies, and does not have or utilize storage capacity in this area. Also, Enron controls pipeline capacity over the El Paso Gas Pipeline of only 80,000 cf per day -- this pipeline has a capacity of 4 BILLION cf per day (at full capacity). The dominant holder of capacity on this pipleline is a gas marketing subsidiary of El Paso Gas. Moreover, there are numerous marketers of natural gas in the area, ensuring competition and pricing visibility and liquidity. Thus, there is no way that Enron could control or influence the price of physical suppliles in the area. 4. Gas trading generally occurs over monthly or seasonal (e.g., winter) periods, not annual periods. And, the winter season for which marketers generally quote prices is considered to be November to March (not on December 1 as the note below suggests). 5. Finally, Enron would not want to hold back physical supplies to the area. Enron is primarily a trader of natural gas, engaged in the buying and selling of the non-physical and financial side of natural gas supplies. Through Enron On Line, Enron is both a seller AND a buyer, making margins on trades of positions in natural gas. Thus, Enron would be disadvantaged by not selling gas positions, even if it could hold back physical supplies to the area, because it is not engaged in buying and selling of positions in natural gas. "Lowe, Carol" on 11/30/2000 04:46:56 PM To: "Richard D. Rathvon (E-mail)" cc: "Kellie Metcalf (E-mail)" Subject: West Coast Gas Rich, The following information was included in an email that was sent to our executives and CEO. The tone leaves a negative impression for Enron. Can you or someone at Enron comment on Enron's role or lack thereof with respect to this item? I am afraid this will taint our plans if not addressed quickly. I want to circulate Enron's side of the story. Carol Excerpt from email circulated today: Due to the lingering effects of the August gas pipeline explosion in New Mexico that killed 10 people, coupled with some possible market manipulation by Enron, we're facing a potential problem at Phoenix in the short term and possibly all three western plants longer term. The pipeline which is owned by El Paso Gas is back in operation, but is being limited to 50% of capacity. Weather has turned cold, spiking demand for gas in the region. Enron appears to be holding back supplies to the area until at least December 1st, when many of its contracts set the index price for the following year. Consequently, gas prices on the spot market in Arizona are hitting $25 per MMBTU. The situation has caused several marketers to declare force majeure. If our marketer does so, we'll be curtailed. As you probably know, we don't have any backup fuel capabilities at these three plants. The U.S. Dept of Transportation controls this and is reported to be getting involved. Will keep you posted as it unfolds.