Liane,

 As we discussed yesterday, I am concerned there has been an attempt to 
manipulate the  El Paso San Juan monthly index.  A single buyer entered the 
marketplace on both September 26 and 27 and paid above market prices 
($4.70-$4.80) for San Juan gas with the intent to distort the index.  At the 
time of these trades, offers for physical gas at significantly (10 to 15 
cents) lower prices were bypassed in order to establish higher trades to 
report into the index calculation.  Additionally, these trades are out of 
line with the associated financial swaps for San Juan.

 We have compiled a list of financial and physical trades executed from 
September 25 to September 27.  These are the complete list of trades from 
Enron Online (EOL), Enron's direct phone conversations, and three brokerage 
firms (Amerex, APB, and Prebon).  Please see the attached spreadsheet for a 
trade by trade list and a summary.  We have also included a summary of gas 
daily prices to illustrate the value of San Juan based on several spread 
relationships.  The two key points from this data are as follows:

 1.  The high physical prices on the 26th & 27th (4.75,4,80) are much greater 
than the high financial trades (4.6375,4.665) on those days. 

 2.  The spread relationship between San Juan and other points (Socal & 
Northwest)  is  consistent between the end of September and 
       October gas daily.  It doesn't make sense to have monthly indeces that 
are dramatically different.


 I understand you review the trades submitted for outliers.  Hopefully, the 
trades submitted will reveal counterparty names and you will be able to 
determine that there was only one buyer in the 4.70's and these trades are 
outliers.  I wanted to give you some additional points of reference to aid in 
establishing a reasonable index.  It is Enron's belief that the trades at 
$4.70 and higher  were above market trades that should be excluded from the 
calculation of index.

 It is our desire to have reliable and accurate indeces against which to 
conduct our physical and financial business.  Please contact me 
anytime I can assist you towards this goal.

Sincerely,

Phillip Allen