Message-ID: <10291492.1075846657090.JavaMail.evans@thyme>
Date: Tue, 4 Jan 2000 04:54:00 -0800 (PST)
From: susan.scott@enron.com
To: kevin.hyatt@enron.com, jeffery.fawcett@enron.com
Subject: Re: The El Paso Controversy Continues
Cc: steven.harris@enron.com
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Attached is Shelley Corman's response to Jeff Dasovich, based on
conversations with Drew and me. Accordingly, I would advise you not to
participate in the conference call Jeff is setting up for tomorrow.
Questions -- give me a call.
---------------------- Forwarded by Susan Scott/ET&S/Enron on 01/04/2000
12:52 PM ---------------------------
Shelley Corman
01/04/2000 12:50 PM
To: Jeff Dasovich/SFO/EES@EES
cc: Susan Scott/ET&S/Enron@ENRON
Subject: Re: The El Paso Controversy Continues
Jeff,
From the pipeline group's perspective, this transaction is a commercial
matter between El Paso and ENA. Accordingly, the gas pipeline group does not
believe that it is appropriate to participate in the development of ENA's
response.
I do understand that the referenced article and certain of the protests make
factual allegations about Transwestern's available capacity to California.
Susan Scott or I can certainly provide corrected information from
Transwestern's available capacity postings.
Jeff Dasovich @ EES on 01/04/2000 11:23:33 AM
To: Richard Shapiro/HOU/EES@EES, Paul Kaufman@EES, Julie A Gomez@ECT, Susan J
Mara/SFO/EES@EES, Mona L Petrochko/SFO/EES@EES, Sandra McCubbin/SFO/EES@EES,
Leslie Lawner/HOU/EES@EES, Margaret Carson/Corp/Enron@Enron, Chris H
Foster@ECT, Kevin Simmons@ECT, Dave Parquet@ENRON_DEVELOPMENT, Robert
Shiring/HOU/ECT@ECT, Joe Hartsoe/Corp/Enron@Enron, James D
Steffes/HOU/EES@EES, Harry Kingerski/HOU/EES@EES, Patrick Keene/HOU/EES@EES,
Rebecca W Cantrell@ECT, Kevin Hyatt@ECT, Susan Scott/ET&S/Enron@Enron,
Jeffery Fawcett/ET&S/Enron@Enron, Shelley Corman/ET&S/Enron@Enron
cc:
Subject: Re: The El Paso Controversy Continues
i would like to set up a conference call for tomorrow, jan. 5 at 3:30 CST to
discuss the ena/el paso deal. please let me know if 1) you would like to be
on the call, and 2) you are available at that time. thanks, jeff
Jeff Dasovich on 01/02/2000 07:19:57 PM
To: Richard Shapiro/HOU/EES@EES, Paul Kaufman@EES, Julie A Gomez@ECT, Susan J
Mara/SFO/EES@EES, Mona L Petrochko/SFO/EES@EES, Sandra McCubbin/SFO/EES@EES,
Leslie Lawner/HOU/EES@EES, Margaret Carson/Corp/Enron@Enron, Chris H
Foster@ECT, Kevin Simmons@ECT, Dave Parquet@ENRON_DEVELOPMENT, Robert
Shiring/HOU/ECT@ECT, Joe Hartsoe/Corp/Enron@Enron, James D
Steffes/HOU/EES@EES, Harry Kingerski/HOU/EES@EES, Patrick Keene/HOU/EES@EES
cc:
Subject: Re: The El Paso Controversy Continues
please read be story from trade press below. i have not included et&s folks
on this note because i'm uncertain regarding the rules with respect to
communication among business units in these sorts of matters. if it's
acceptable to include tw in the notes and in conversations, that would be my
preference. rick, is it your view that tw can or cannot be included?
i believe i passed along word of the ena/el paso deal when it hit the press
week before last. the press reported both the amount of capacity and the
price for which ena bought it from el paso. to summarize: ena purchased
1.25 bcf per day for one year starting jan 1, 2000. ena paid $38 million,
which gives an average price of $.0831 per mmbtu. (by contrast, williams
bought about 0.1 bcf/day at an average rate of $.207.) el paso released
this information via a a press release without any prior approval from ena.
julie, please don't hesitate to fill any holes or (unintended) innaccuracies.
the situation is complicated by the fact that california is currently in the
midst of intense negotiations over restructuring the state's gas industry.
the negotiations have been going on for about 8 months and have been very
contentious. socal has teamed with indicated producers, california
manufacturers association, and muni generators from southern california to
push a very "go slow" approach that is (surprise) quite friendly to larger
users. enron is teamed with western hub storage, wild goose storage,
calpine, southern california edison, green mountain power, the city of
vernon, and spurr/remac (provides services to california's k-12 school
system) under an alliance called "california alliance for competition"
(snappy, i know). the cac proposal is pushing, among other things, a single,
state-wide market for transport, storage and balancing, including tradeable
rights in a secondary market.
indicated producers has been aggressive and hostile toward marketers--as has
cma--throughout the negotiations. ip's bile has not been reserved solely for
enron, however. one outcome of the negotiations has been the suit ip
launched against el paso at ferc regarding el paso's nom process. (i believe
ena filed in support of the suit.) el paso is losing that one and will
likely change its nom process sooner rather than later.
i think it's important to have a quick call to develop a clear and consistent
message on the ena deal and coordinate what we're saying about that deal with
the other gas issues on the table. i'm assuming that if there's anything we
can do to keep harvey morris (and california) from mucking up the deal, the
better. i know harvey well. i'm not sure, given his quotes, there's much
"educating" to be done, but may make sense to meet with him, nonetheless.
more important, indicated producers is the real--and biggest--problem.
let me know if you folks think there'd be value in briefly discussing the
issue.
best,
jeff
Kevin Hyatt@ENRON
12/30/99 10:51 AM
To: Jeff Dasovich/SFO/EES@EES, Joseph Alamo/SFO/EES@EES
cc:
Subject: The El Paso Controversy Continues
CPUC attorney Harvey Morris obviously has NO CLUE on how the transportation
business works.
---------------------- Forwarded by Kevin Hyatt/ET&S/Enron on 12/30/99 12:49
PM ---------------------------
ET & S Business Intelligence
From: Lorna Brennan on 12/30/99 09:18 AM
To: Bill Cordes/ET&S/Enron@ENRON, Julie McCoy/ET&S/Enron@ENRON, Lou
Geiler/ET&S/Enron@ENRON, Tim Aron/ET&S/Enron@ENRON, Steve
Klimesh/ET&S/Enron@ENRON, Sarabeth Smith/ET&S/Enron@ENRON, Gary
Sova/ET&S/Enron@ENRON, Rob Wilson/ET&S/Enron@ENRON, Lon
Stanton/ET&S/Enron@Enron, Margaret Carson/Corp/Enron@ENRON, Rita
Hartfield/Corp/Enron@ENRON, Rockey Storie/ET&S/Enron@ENRON, Stephanie
Miller/ET&S/Enron@ENRON, Kent Miller/ET&S/Enron@ENRON, John
Dushinske/ET&S/Enron@ENRON, Dave Neubauer/ET&S/Enron@ENRON, Michael
Bodnar/ET&S/Enron@ENRON, Joni Bollinger/ET&S/Enron@ENRON, David
Badura/ET&S/Enron@Enron, Janet Bowers/ET&S/Enron@ENRON, Craig
Buehler/ET&S/Enron@ENRON, Bob Burleson/ET&S/Enron@ENRON, Allen
Cohrs/ET&S/Enron@ENRON, John Fiscus/ET&S/Enron@ENRON, Bret
Fritch/ET&S/Enron@Enron, Steve Gilbert/ET&S/Enron@ENRON, Morgan
Gottsponer/ET&S/Enron@ENRON, Brenda Harris/ET&S/Enron@ENRON, James
Harvey/ET&S/Enron@ENRON, Stephen Herber/ET&S/Enron@ENRON, Dana
Jones/ET&S/Enron@ENRON, Jane Joyce/ET&S/Enron@ENRON, Stephanie
Korbelik/ET&S/Enron@ENRON, Therese Lohman/ET&S/Enron@ENRON, Bill
Mangels/ET&S/Enron@ENRON, Penny McCarran/ET&S/Enron@ENRON, Vernon
Mercaldo/ET&S/Enron@ENRON, Larry Pavlou/ET&S/Enron@ENRON, Eileen
Peebles/ET&S/Enron@ENRON, Maria Perales/ET&S/Enron@ENRON, Tony
Perry/ET&S/Enron@Enron, Loren Penkava/ET&S/Enron@ENRON, Ken
Powers/ET&S/Enron@ENRON, Joan Schwieger/ET&S/Enron@ENRON, Chris
Sebesta/ET&S/Enron@ENRON, Frank Semin/ET&S/Enron@Enron, Neal
Shaw/ET&S/Enron@ENRON, Larry Swett/ET&S/Enron@ENRON, Kay
Threet/ET&S/Enron@ENRON, Mike Ullom/ET&S/Enron@ENRON, Lisa
Valley/ET&S/Enron@Enron, Chuck Wilkinson/ET&S/Enron@ENRON, Jim
Wiltfong/ET&S/Enron@ENRON, Jo Williams/ET&S/Enron@ENRON, Karen
Lagerstrom/ET&S/Enron@Enron, Ray Stelly/ET&S/Enron@ENRON, Bob
Stevens/ET&S/Enron@Enron, Sue M Neville/ET&S/Enron@ENRON, Mike
Barry/ET&S/Enron@ENRON, Miriam Martinez/ET&S/Enron@ENRON, Martha
Janousek/ET&S/Enron@ENRON, Kimberly Watson/ET&S/Enron@ENRON, Don
Powell/ET&S/Enron@ENRON, Melinda Tosoni/ET&S/Enron@ENRON, Steve
Weller/ET&S/Enron@ENRON, Michael G Stage/ET&S/Enron@ENRON, Tim
Johanson/ET&S/Enron@ENRON, Mike McGowan/ET&S/Enron@ENRON, Steven
Harris/ET&S/Enron@ENRON, Lindy Donoho/ET&S/Enron@ENRON, Jeffery
Fawcett/ET&S/Enron@ENRON, Lorraine Lindberg/ET&S/Enron@ENRON, Kevin
Hyatt/ET&S/Enron@Enron, Christine Stokes/ET&S/Enron@ENRON, Drew
Fossum/ET&S/Enron@ENRON, Lee Huber/ET&S/Enron@ENRON, Maria
Pavlou/ET&S/Enron@ENRON, Mary Kay Miller/ET&S/Enron@ENRON, Glen
Hass/ET&S/Enron@ENRON, Donna Fulton/Corp/Enron@ENRON
cc:
Subject: The El Paso Controversy Continues
Enron-El Paso Deal Could Mute Competition to CA
Fearing an end to pipeline competition in California, the state's
regulators and Indicated
Shippers have called on FERC to summarily reject the three
transportation agreements by
which Enron North America Corp. has contracted for 1.25 Bcf/d of
unsubscribed firm
capacity on El Paso Natural Gas.
Approval of these agreements would give Enron Corp., parent of
Transwestern Pipeline
and Enron North America, control over all the available transportation
capacity to the
southern California border, warned Harvey Morris, principal attorney for
the California
Public Utilities Commission (CPUC), which plans to submit its protest
today. Between
the two pipelines, he estimated Enron will control 2.34 Bcf/d of firm
capacity from the
San Juan and Permian basins to California.
For Morris, Enron North America's contracting of the El Paso capacity
represents a
worse threat to the pipeline's other shippers than Dynegy Marketing and
Trade, who has
held the capacity for past two years and whose contract expires Dec. 31.
"At least then
there was some Transwestern competition to the Dynegy situation. Now
it's Enron, the
owner of Transwestern, who's stepping into Dynegy's shoes."
But "what's even worse," he told NGI, is the revenue-sharing provision
in the contracts. It
stipulates that "after Enron makes $35 million off of these contracts,
it has to share the
proceeds with El Paso for 25% of anything beyond $35 million. So
effectively, Enron and
El Paso have become partners in how high they can jack up the
transportation rate
differential between the California border and the Southwest producing
basins."
The two pipeline companies "that have for decades competed with each
other in carrying
Southwest supplies to California are now partners. We think that's
anticompetitive, and
there's no way FERC should approve it," Morris said. He recalled the
basis differential
between the San Juan Basin spot price and the California border shot up
by 17% during
1998, the first year during which Dynegy controlled the El Paso capacity
into California.
This situation could worsen under Enron, he believes.
"At first blush the El Paso-Enron contracts [do] not appear to contain
the same
anticompetitive features of the El Paso-Dynegy contracts," Indicated
Shippers noted, but
a "closer review and analysis" reveals the anticompetitive effects of
the revenue-sharing
provision (RSP) in El Paso-Enron contracts "are not only similar" to
those of the hotly
contested reservation-reduction mechanism (RRM) in the El Paso-Dynegy
case, "but are
increased......due to the fact that the contracts are with a marketing
affiliate of El Paso's
primary interstate pipeline competitor," Transwestern.
Both the RRM and RSP "operate to provide a disincentive for El Paso and
its competitors
to compete against each other, or to take any other action that will act
to drive down the
basis differential that defines the market value of the capacity,"
Indicated Shippers told
FERC in a protest filed on Wednesday [RP97-287-041]. The group includes
producers
Amoco Production, Burlington Resources Oil and Gas, Marathon Oil, and
Phillips
Petroleum, and two marketers - Amoco Energy Trading and Phillips Gas
Marketing.
FERC "should reject the tariff filing immediately. The Commission erred
in allowing the
El Paso-Dynegy contracts to remain intact for their two-year term after
finding that the
contracts were anticompetitive. This issue is pending in the [D.C. Court
of Appeals].
That same error should not be repeated here," the producers and
marketers said.
The CPUC's attempt to block the Enron-El Paso contracts at the outset is
a little bit
unusual for the agency, Morris said, but it learned its lesson following
Dynegy. "When the
Dynegy situation first hit, we asked for FERC to investigate the matter.
We thought
FERC did a very inadequate job then.....This time around we're asking
for FERC to
summarily reject it. It's hard for an agency like ours to take such a
strong stand right at
the beginning, but we've learned too much from two years of suffering
under the Dynegy
situation. And this is even worse."
In the event the Commission should reject California's request, the CPUC
has asked that
an "anti-hoarding condition" be included in the contracts, which would
require Enron to
release unused capacity into the short-term market at a price higher
than what it's paying
El Paso for the capacity. "They must make a little profit," Morris
noted. "We're confident
Enron can't use the entire 1.2 Bcf/d of capacity.....so there's going to
be unused
capacity."
The agency also wants FERC to clarify that the primary delivery point
for the Block II
portion of the capacity (579MMcf/d) is PG&E-Topock in keeping with the
terms of the
1996 settlement between El Paso and its customers. Morris said he agreed
fully with
Amoco, Burlington Resources and Southern California Gas (SoCalGas),
which accused
El Paso of violating the 1996 agreement by allowing Dynegy to use
SoCalGas-Topock as
a primary delivery point for the Block II capacity last summer. They
contend the alleged
violation is included in the Enron contracts.
He also noted the CPUC will challenge the ability of Enron to call back
Block II capacity
after it already had been recalled by El Paso shippers to serve Pacific
Gas and Electric
(PG&E) customers in northern California. Last July, FERC granted Dynegy
the right to
do this under its contracts with El Paso. But Morris contends the
decision violates the
1996 settlement under which PG&E paid $54 million to preserve the right
of the pipeline's
shippers to recall the Block II capacity to serve end-users in its
service territory.
The CPUC also intends to challenge the Commission's decision that would
enable Enron
to "just sit on the capacity," thereby withholding idle Block II
capacity from the market.
Indicated Shippers also contend the Enron contracts violate the Block II
capacity
provisions of the 1996 rate case, as well as "exacerbate" the primary
firm delivery point
capacity-allocation issues that are pending before FERC now.
The CPUC accused El Paso of "deliberately" filing the Enron contracts at
FERC just
before the holidays to avoid controversy. The pipeline "is trying to
sneak one of the most
controversial things ever past FERC right before Christmas so that
protests would be
minimized," said Morris. "They did this with the Dynegy contracts two
years ago. They
have a pattern of filing right at the last minute, making it harder for
people to protest and
harder for FERC to stop it from going into effect."
,Copyright 1999 Intelligence Press Inc. All rights reserved. The preceding
news report may not
be republished or redistributed, in whole or in part, in any form, without
prior written consent
of Intelligence Press, Inc.