---------------------- Forwarded by Lorraine Lindberg/ET&S/Enron on 
08/09/2000 12:48 PM ---------------------------


"Frost, Pete" <Pete.Frost@usa.conoco.com> on 08/09/2000 12:47:17 PM
To: "'lorraine.lindberg@enron.com'" <lorraine.lindberg@enron.com>
cc: "'Tarpey, Steve P'" <tarpeysp@bp.com>, "'Pete Cervin'" 
<pcervin@br-inc.com>, "Wheatley, Jerry L." <Jerry.L.Wheatley@usa.conoco.com>, 
"Jones, Teddy G." <Teddy.G.Jones@usa.conoco.com> 

Subject: Prelimiinary Comments on Transport Option Program


Lorraine,

Below are some very preliminary regulatory issues that I have identified
regarding Transwestern's
Transport Option Program.  These concerns may not constitute all of our
concerns; I'm sure there will be more as we continue to review this proposal
with our commercial people.  Also, they have not been reviewed with
management, and may, or may not, represent the ultimate positions that
Conoco (or the Indicated Shipper Trial Group) takes in any proceeding before
the FERC.

Thanks again for inviting us to lunch yesterday.  Both Teddy and I found it
to be very helpful and informative.  We look forward to a more detailed
description of your proposal, and the ability to discuss it with
Transwestern in a future customer meeting.  Please forward this e-mail on to
Jeff; I don't have his direct e-mail address.

Tentative Regulatory Issues regarding Transwestern's Transport Option
Program ("TOP").

1. Market Based Rates.  To the extent that TW intends to offer the TOP
service without a corresponding cost based recourse service, under current
FERC policy, TW would need to make a filing that demonstrates a lack of
market power.
2. Comparable Service:  To the extent that TW implements a TOP service,
it would be highly advisable to provide that other FT holders be able to
offer a similar call & put capability in the capacity release market.  As I
remember TW's tariffs, this would likely require specific changes to the
capacity release sections in order to allow prospective capacity releases
with a call or put pricing option.
3. Hoarding:  The TOP service should not be a means for any party
(particularly an affiliate) to manipulate the transportation market and/or
to exert market power by withholding capacity.
4. Reliability:  The TOP service should require sufficient protections
to ensure continued, undiminished service to all of TW's existing and future
FT customers.
5. Standardized Product:  The terms and conditions for the TOP service
should be standardized in order that each TOP service offer is not
considered a "non-conforming" contract under FERC policy.  The call and put
options, and any administrative or operating limitations, should be
specifically defined.
6. Non-preferential Service:  TW must ensure that the TOP service is
offered and administered in a manner that is fair and equitable, and in a
manner that does not convey a preferential right to any party (particularly
an affiliate).
7. Revenue:  Regardless of whether the TOP is a cost or market based
rate, there will be a question as to where the revenue goes.
8. Pilot Program.  Given the precedential nature of this proposal,
perhaps the industry would be more comfortable with the TOP if it were filed
as an experimental program on TW, with a finite life.  This would allow
parties to gain experience prior to having all of the Enron pipelines (and
others) file for similar authority.

Thanks again.

Pete Frost
Manager of Regulatory Affairs
Conoco Gas and Power Marketing
pete.frost@usa.conoco.com <mailto:pete.frost@usa.conoco.com>