Kim,

Again, to reiterate my changes, include the following general terms of your
offer in the LOU.
- Seller to provide all incremental gas needs up to 6,197 MMBtu/day at Malin
priced at bidweek flat and remaining incremental gas needs at PG&E citygate
bidweek flat.
- Seller to act as the Buyer's imbalance agent and provide such services as
nomination, scheduling and operations for all gas delivered to Buyer,
including gas purchased from a third party supplier.
- Seller to protect Buyer from daily price risk and penalties on EFO/OFO
events.
- Seller to provide in an electronic format daily price indications.

Also, I spoke to Karla about this and she too had some changes.  First,
change the term "demand" charge to volumetric charge, since demand charge is
commonly assessed on nominated not actual load.  And change the deadline to
June 30, 2001 (5 days can make a difference).

Thanks,

Monica

-----Original Message-----
From: Ward, Kim S. [mailto:Kim.Ward@ENRON.com]
Sent: Tuesday, May 15, 2001 1:52 PM
To: Monica Padilla (E-mail)
Subject: Letter of Understanding


Monica,

      Attached is a copy of the letter of understanding.  Barry will be
signing the originals and we will overnight them to you tonight.  Let me
know if you need anything else and I will send you prices tomarrow.

Thanks,

Kim

 <<Letterofunderstanding1.DOC>>