Subject: Confidential: PG&E/Topock issue
From: [email-masked]
To: [email-masked], [email-masked]
Cc: [email-masked]
Date: Wed, 1 Mar 2000 08:23:00 -0800 (PST)

As you know, current firm contracts on Transwestern provide for delivery of 
250 MMcf/d of gas to Topock.  In the context of the Gallup Expansion, 
Transwestern has entered into firm contracts for an additional 40 MMcf/d to 
Topock.  Once the Gallup expansion is built, Transwestern will have a total 
of 290 MMcf/d of firm capacity under contract to the Topock delivery point:  
40 MMcf/d more than PG&E has agreed to accept while PCBs continue to be 
present.

Bill Cordes has asked what Transwestern's potential liability to shippers 
would be if PG&E's refusal to accept deliveries due to the continued presence 
of contaminants causes Transwestern to have to curtail firm service at 
PG&E/Topock.  The legal answer is that Transwestern's tariff provides for a 
reservation charge refund but does not limit the damages that could be sought 
by a shipper.  

More specifically, Rate Schedule FTS-1 specifically provides for a 
reservation charge refund if Transwestern fails to deliver gas for a firm 
shipper.  In December, January, February, July and August, the shipper is 
entitled to a reservation charge refund for all nominated and confirmed 
quantities not delivered.  In all other months, the shipper is entitled to a 
refund only if deliveries fall below 75% of nominated/confirmed quantities 
for a period of 75 consecutive days. The tariff does not preclude a shipper 
from seeking other damages resulting from Transwestern's failure to provide 
service under an FTS-1 contract.  A shipper whose firm service is curtailed 
would likely incur damages in addition to the reservation charge, including, 
for example, the cost of buying spot gas or damages resulting from the 
shipper's inability to fulfill contractual obligations. Such damages could be 
recovered in a breach of contract action.  Not all shippers would incur such 
damages because some might be willing to take delivery of gas at alternate 
points if capacity is available at such points.

Bill has asked Steve to work with me in quantifying our potential exposure.  
I could really use your help in putting a dollar amount on potential 
damages.  Can we meet briefly to discuss this?  I'm available after the 
Gallup meeting tomorrow a.m., or after lunch on Friday...or we can discuss a 
meeting time for next week.  Thank you.