Message-ID: <24953308.1075858858943.JavaMail.evans@thyme>
Date: Thu, 18 Oct 2001 04:34:17 -0700 (PDT)
From: j..porter@enron.com
To: maria.pavlou@enron.com, kay.miller@enron.com, robert.kilmer@enron.com, 
	steven.harris@enron.com, steve.kirk@enron.com, 
	e-mail <.frank@enron.com>, e-mail <.steve@enron.com>
Subject: FW: E TW settlement offer
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X-From: Porter, Gregory J. </O=ENRON/OU=NA/CN=RECIPIENTS/CN=GPORTER>
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FYI... This was received yesterday from the CPUC.  As you can see, settleme=
nt prospects do not look good.  Ann is trying to get a meeting set up to di=
scuss our next step regarding settlement (tentatively 1:30).  Greg
-----Original Message-----
From: Passamonti, Ida [mailto:imp@cpuc.ca.gov]
Sent: Wednesday, October 17, 2001 3:41 PM
To: Porter, Gregory J.
Subject: RE: E TW settlement offer
Sensitivity: Confidential



 Yes - the copies of the letter orders and one decision of the footnote arr=
ived yesterday and we have looked at them.=20

First, I think it is in this proceeding that the FERC advisory staff raised=
 the issue whether the contracts revealed contravention of FERC policy.  Se=
e the original order to show cause.  The issues addressed in the hearing we=
re a means or an attempt to get more facts that relate to the original ques=
tions flagged by the FERC advisory staff regarding the FERC's policy on use=
 of negotiated rates.  We also know that when Indicated Shippers attempted =
to challenge the policy statement when it first issued, the court said that=
 such a challenge was not appropriate and only the implementation cases reg=
arding the policy would give rise to issues the court could consider.  The =
CPUC is therefore in the right forum and in the right proceeding to claim t=
hat TW used market-based rates without authority to use market-based rates.=
 TW's tariff must be modified to provide for the exclusion of market-based =
rates.    Of course we understand that the FERC had pinned its hopes on neg=
otiated rates working equitably and legally by emphasizing all shippers mus=
t be treated in nondiscriminatory manner and all shippers who bid the recou=
rse rate must be granted the capacity bid on at the recourse rate.  We saw =
in this proceeding, however, that shippers were not treated equally and in =
nondiscriminatory manner (see e.g. our discussion in CPUC's reply brief of =
TW's total disregard for accuracy and equitable treatment regarding announc=
ement of delivery points ).

We also note that in your proposed tariff modification - last page of tarif=
f changes attachment to your outline of settlement - you do not provide for=
 evaluation of bids in a manner that would indeed assure shippers who bid f=
or the capacity they want at the recourse rate would get that capacity at t=
he recourse rate. If there are a number of bidders at the recourse rate and=
 some bidders at a negotiated rate that is not fixed at a rate below the re=
course rate, then the available capacity should first be prorated among the=
 recourse rate bidders, and the remainder allocated to negotiated rate bidd=
ers.  Unless this is done, TW cannot say that shippers who bid the recourse=
 rate are awarded the bid. If you include negotiated rates (not fixed below=
 recourse rate)in prorating the capacity allocation, then you are not imple=
menting the FERC's essential rationale that shippers must have the right to=
 bid for the capacity they want at the recourse rate if the pipeline is to =
be allowed use of negotiated rates. By prorating among negotiated rate ship=
pers, you are forcing shippers who only want to bid the recourse rate to en=
ter into a negotiated rate to get the total capacity they need. That underm=
ines  the FERC's only rationale for authorizing negotiated rates.

We think,therefore, that the next step would be for TW to draft a revision =
of the initial TW settlement offer expressing whatever changes TW is propos=
ing in response to Indicated Shippers comments and CPUC

s comments.   I will send in separate e-mail an outline of CPUC concerns re=
garding TW's original settlement offer. This outline summarizes the issues =
TW may want to consider if it revises that offer.

-----Original Message-----=20
From: Porter, Gregory J.=20
To: Passamonti, Ida=20
Sent: 10/17/01 5:45 AM=20
Subject: RE: E TW settlement offer=20
Sensitivity: Confidential=20

Privileged and Confidential=20
 =20
Ida,=20
 =20
A response to your questions regarding the citations was provided=20
yesterday under separate cover.=20
 =20
In regards to TW's settlement proposal, we need to know whether the CPUC=20
can settle this case and if so on what terms.  To date, you and I have=20
discusseds everal policy matters.  It is not practical to think all of=20
them will be addressed in this proceeding, let alone in a settlement.=20
Therefore, it would be most helpful if the CPUC would specifically let=20
us know what it needs to settle. =20
 =20
We have discussed so many issues that I am quite honestly having=20
difficulty identifying the CPUC's objective in this proceeding as=20
opposed to general policy concerns that could be raised by the CPUC in=20
other, more broad based, proceedings.  For instance, it is my=20
perception, based on our last conversation, that CPUC will oppose any=20
settlement that does not prohibit TW from negotiating agreements with=20
shippers that include a rate component based off of published indexes.=20
If this is correct, is the CPUC's concern the resulting rate (i.e., that=20
the rate may exceed max rates) or is it the fundamental structure (i.e.,=20
index rates are inappropriate)?  TW will not give up the flexibility to=20
enter into deals based off of published indexes.  Such deals reflect how=20
the gas market works and are desired by customers.  Is it possible for=20
the CPUC to agree on specific tariff changes of the nature proposed by=20
TW and pursue broaderp olicy concerns in another proceeding?=20
 =20
TW would like a specific response to the settlement proposal it provided=20
on ora bout October 8, 2001.  Obviously, the more specific the better.=20
However, our immediate question is whether the CPUC believes it is=20
possible to reach a settlement based on the process oriented tariff=20
changes proposed by TW or, if not, what else needs to be considered.   =20
 =20
Please give me a call when you get in today to discuss.  Thanks.  Greg=20
J. Gregory Porter=20
Assistant General Counsel=20
Enron Transportation Services=20
(402) 398-7406  (voice)=20
(402) 398-7426  (fax)=20
greg.porter@enron.com=20

 =20
[Porter, Gregory J.]  ----Original Message-----=20
From: Passamonti, Ida [ <mailto:imp@cpuc.ca.gov>]=20
Sent: Tuesday, October 16, 2001 3:25 PM=20
To: Porter, Gregory J.=20
Subject: E TW settlement offer=20
Importance: High=20
Sensitivity: Confidential=20



We are still reviewing your letters of October 12, 2001 and the=20
settlement TW has thus far proposed.  One practical problem you may be=20
able to help us with. In the first of your letters, you referenced  FERC=20
approval of "index-to-index" type mechanisms in other proceedings as=20
noted TW's Reply Brief at footnote 10 (page 48 not page 49).  The=20
footnote of TW's brief, however, contains inaccurate and incomplete=20
citations.  Please provide the correct citation for the reference to=20
TransColorado decision, the docket number for the Great Lakes Letter=20
order so we can try to retrieve it from FERC's electronic data base -or=20
please provide a copy of the letter order; and a correction of the date=20
of the letter order re Columbia in Docket RP96-389-026 since a July 7=20
letter order cannot be found. Also, please let me know Greg how TW wants=20
to proceed.  Should we communicate by telephone the CPUC's responses to=20
the TW settlement offer and letters, and determine whether TW is=20
prepared to revise the offer pursuant to our responses and those of=20
Indicated SHippers?  Are weto  have a teleconference call including=20
Kathy and Tom or just with Kathy to see where we are on the possibility=20
of reaching a settlement?  Would TW like an outline of the CPUC's=20
responses, thus far, including outline of questions or concerns still=20
not answered by TW in their settlement offer?  How should the outline be=20
sent?=20



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