<<Gas Transaction Collateral Agreement(4-18-01)ENA_.doc>>

I made two changes to your version.  Because of cumulative blacklining, they
are not separately identified, but they were to add "or the Designee" in the
parenthetical at the end of Section 4.  More significantly, I reinserted our
cure rights if you are in default of this Agreement.  You had changed it to
arise only in the event of a "Default under the Master Netting Agreement."
We need it in either case.

Regarding UCCs.  We are giving you a clean release under El Paso's release
procedures.  Hence I do not see the need to do a UCC search.  If you would
like, we will give you a representation that we hold the Pipeline Capacity
free and clear of any liens or encumbrances, but then we would expect you to
give us a covenant not to create or permit to create any lien or encumbrance
on the Pipeline Capacity, all of which is implicit in any event.  Also,
since you possess the Pipelien Capacity outright, there is no need for a
security interest grant to you.  To give you a security interest under the
El Paso tariff, we need to use the whole Trust and Assignment Agreement that
we drafted originally.  Moreover, if we must do that to give you a security
interest in something you already possess, then it becomes patently unfair
to deny us a reciprocal security interest in the Pipeline Capacity, which,
after all, we do not hold in our possession.  One of the points of giving
you the present release without the recall right was that you were not
satisfied with the security interest route.  In short, we think it adds no
protection for you and creates significant additional burden for us (and for
you in documentation).

Please call me on my cell phone at 301-502-1715 as you as you are available.

Thanks, 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.

 - Gas Transaction Collateral Agreement(4-18-01)ENA_.doc