Lets talk tomorrow about the whole basket of TW issues, including this one.  thanks. df
---------------------- Forwarded by Drew Fossum/ET&S/Enron on 03/20/2001 10:30 PM ---------------------------
From:	Jeffery Fawcett/ENRON@enronxgate on 03/20/2001 04:48 PM
To:	Lorraine Lindberg/Enron@enronXgate, Steven Harris/ET&S/Enron@ENRON, Kevin Hyatt/ENRON@enronxgate, Susan Scott/ENRON@enronXgate, Drew Fossum/ET&S/Enron@ENRON, Mary Kay Miller/ET&S/Enron@ENRON
cc:	 

Subject:	U.S. Gypsum request for capacity

I fielded a call today from Mr. Rob Cooper of U.S. Gypsum.  Mr. Cooper indicated that he's been in contact with Lorraine for purposes of acquiring Red Rock expansion capacity.  Moreover, Mr. Cooper has been in contact with SoCal Gas in order that SoCal Gas recognize firm deliveries from Transwestern at Needles in excess of the current (sustainable) limit of 750 MMcf/d. 

Mr. Cooper insists that he is making progress with SoCal Gas aimed at lifting the 750 window to 760, and that SoCal Gas has indicated U.S. Gypsum would be entitled to an exclusive right to the increased amount.   While trying not to be argumentative, I told Mr. Cooper that if SoCal Gas was willing to set aside a discrete increment of capacity for a single shipper, it would be a radical departure from current SoCal Gas policy.  Currently, SoCal Gas does not provide unbundled intrastate transmission.  They have only accepted or not accepted pipeline nominations, as the case may be, as an aggregate volume, with no distinction being drawn on who the upstream shippers were.

I set about to try to explain that there is no correlation (other than coincidental timing) between (1) TW discussions with SoCal Gas at raising the capacity window at Needles and (2) TW's effort to sell Red Rock Expansion space.  In addition, I attempted to explain that TW feels it will be required to follow certain rules pursuant to its tariff and FERC policy associated with making new delivery point capacity available on a non-discriminatory basis.  With respect to this issue, I told Mr. Cooper that, although we're currently discussing it, we'd yet to come to any decision on how, if incremental capacity does become available at Needles, TW would make such delivery point capacity available to its shippers.  

Mr. Cooper then proceeded to launch into a diatribe about how, if that's the case, then "he's wasted 3 weeks in active negotiations" with both SoCal Gas and TW aimed at securing capacity at Needles.  He said on several occasions that "end game" for him was to secure a firm portal from the interstate system onto and through the SoCal Gas system.  Mr. Cooper also expressed a concern that if he's forced into a competitive bidding situation with other big marketing companies (in his words, "such as ENA") for Needles capacity, then he probably couldn't compete, and once again, would be left on the outside looking in.  He pointed to the El Paso Merchant deal on EPNG as a prime example.  

Mr. Cooper said he wasn't ready to accept my explanation as to why TW couldn't commit to offering U.S. Gypsum an exclusive right to any incremental Needles capacity, and asked that I formally "run it up the flagpole" to senior management and get back with him by telephone with TW's "official position."   As an editorial comment, I'm not sure Mr. Cooper completely understands (or cares about) the landscape here.  I'd go so far as to say that from his style and the tone of his conversation with me, he won't easily take "no" or even a "maybe" as an answer.   The difficulty for TW is going to be in trying to persuade him that we're interested in his business and sympathize with his position, but that we face real legal and/or regulatory issues here, and they cannot be dismissed or ignored by U.S. Gypsum or any other customer.

I'd like to be in a position to call him back on Friday and give him TW's "official position" on his request for Needles service in the Red Rock expansion.  Thoughts?  Suggestions?  Help?