<<Collateral Trust and Security Agr ver 1.doc>>

 I received Gerald's voice mail last night that El Paso cannot handle
an agency agreement wherein Enron would be our agent for the limited purpose
of exercising the recall right on only three of the capacity packages.
Although I find this disappointing, we obviously need to address this
development.

 We think the proper approach is to retain the firm recallable
release structure we developed.  That creates a present release into Enron's
hands of the contracts, which was Barry's stated desire.  We would retain a
recall right BUT we could only exercise it in accordance with the Support
Agreement (e.g., monthly, so long as not in default).  We understand that
you might want some further assurance that we would not misuse that right.
To that end, I have resuscitated the Collateral Trust and Security
Agreement.  In other words, we would give you a first priority lien on the
applicable transportation packages so that if we improperly recalled the
capacity (which we of course would not), you would still be the senior
secured party on the capacity and be entitled to exercise your remedies of
foreclosure.  Moreover, as Lisa and I discussed when we first considered the
security interest, this security interest would be exempted from the
automatic stay in accordance with Section 362(b)(17) of the Bankruptcy Code
and thus you would be in a position to exercise your lien notwithstanding
even the meltdown scenario of a bankruptcy.

 Please respond at youre earliest convenience.

 Peter



PG&E National Energy Group and any other
company referenced herein that uses the PG&E name or
logo are not the same company as Pacific Gas and
Electric Company, the regulated California utility.  Neither
PG&E National Energy Group nor these other
referenced companies are regulated by the California Public
Utilities Commission.  Customers of Pacific Gas and Electric Company
do not have to buy products from these companies in order
to continue to receive quality regulated services from the utility.

 - Collateral Trust and Security Agr ver 1.doc