
Date: Tue, 25 Jan 2000 01:29:00 -0800 (PST)
From: ed.mcmichael@enron.com
To: jeffrey.hodge@enron.com
Subject: Re: Columbia Energy Services Corporation ("CES")
Cc: robin.barbe@enron.com, stacy.dickson@enron.com, chris.germany@enron.com,
dick.jenkins@enron.com, billy.lemmons@enron.com,
scott.neal@enron.com, colleen.sullivan@enron.com
Bcc: robin.barbe@enron.com, stacy.dickson@enron.com, chris.germany@enron.com,
dick.jenkins@enron.com, billy.lemmons@enron.com,
scott.neal@enron.com, colleen.sullivan@enron.com

My only suggestion are as follows:
(1)  We need to be more explicit about the de-coupling of the assets from the
gas that is delivered to CES by ENA.  As such, I would recommend that we
expand Sections 4.1 and 4.2  to include a CES paper pool storage or bank
which gets credits (theoretical injections) and debits (theoretical
withdrawals).  The credits to the bank would be made in accordance with the
"Theoretical Storage Injection Schedule (TSIS)" as per 4.2 and Exhibit 2.
The debits to the bank would be made per the daily CES nominations on days
when the retail demand is greater than the daily purchase quantity defined on
Exhibit 1.  The one exception to this de-coupling is that all of the
debits/credits would be subject to operational constraints imposed by the Gas
Storage Contracts and the Gas Transportation Contracts.  The constraints
should only come into play with the debits, as the TSIS (which by definition
will be less than the daily MDIQ) would rarely be impacted by constraints.
At the end of the term, the bank balance and the physical storage balance
will need to be equal.  If not, provision needs to be made for a post term
true-up.

(2)  In the last sentence of Section 4.1, should the remedy for CES's failure
to notify in a timely manner be "penalties" or "ENA damages," which would
include both penalties and trading losses &/or opportunity costs?  I am not
certain, but I understood it to be the latter.







