Transwestern held its Transport Options Workshop on August 31.   Commercial 
and regulatory representatives of BP-Amoco, Burlington, Conoco, Coral, 
Dynegy, Phillips and Reliant attended.  After a brief overview of the 
proposed filing, TW opened the floor for questions and comments.  Here is a 
summary of the comments.

Marketing affiliate concerns.  BP's regulatory representative expressed 
concern that TW's marketing affiliates would be able to use options to game 
the system.  In BP's example, since TW and ENA are both Enron companies, ENA 
could purchase an "out of the money" call option essentially cost free, since 
its affiliate (TW) would have the ability to buy the option back.  Proceeds 
from ENA's ability to then "move the market" through the establishment of the 
long basis position would go directly to Enron's bottom line.  BP suggested 
that TW's marketing affiliates be banned from purchasing options, or that the 
marketing affiliate be required to credit 100% of the option proceeds to 
other shippers.  Although BP admits that Transwestern's prior dealings with 
ENA have not been suspect, BP fears that TW's filing will set a precedent for 
other pipelines to offer a similar service.  Since TW will be the first 
pipeline to offer such services, BP wants TW's program to be as restricted as 
possible.  Dynegy echoed BP's concern regarding possible affiliate abuse, but 
rather than shelve the program entirely, Dynegy reiterated an earlier 
suggestion that Transwestern be required to credit back the difference 
between the option fee paid by an affiliate and the next highest bidder, if 
the affiliate's bid exceeds the next highest by a certain percentage.  

TW's response was that while actual abuse of an options program by a 
marketing affiliate may be a legitimate concern, owing to its unassailable 
record in this area, TW should be entitled to a presumption that it has 
complied and will continue to comply with Commission policy covering the sale 
of capacity to marketing affiliates, and was not inclined to voluntarily 
include any limitations on the options program.  If BP and others have 
serious concerns regarding the Commission's overall policy on marketing 
affiliates, those issues should be raised in a separate proceeding that 
applies to all interstate pipelines.

Right of first refusal.  Burlington asked whether options would replace the 
right of first refusal.  TW's  response was that ROFR will still be available 
pursuant to the terms and conditions of our tariff.

Negotiated rate.  BP's representative claimed that option contracts will 
constitute a negotiated rate and that each deal will need to be filed as 
such.  TW did not respond to this or discuss it further.  However, TW's 
position at this point is that since the option fee is part of the 
transportation rate, transportation deals that include the option amendment 
will only be considered negotiated rate deals if the total rate including the 
option fee exceeds the maximum transport rate.  

Hoarding capacity.  Using the recent large block sale of capacity on El Paso 
as an example, several customers expressed concern that the options program 
would make it easier for a shipper to hoard capacity.  It was not clear why 
some of the workshop participants thought that the sale of options would 
create more opportunity for hoarding capacity than already exists.  Perhaps 
because the option fee is a lesser cost than the transport rate for the 
underlying capacity, their perception was that options would simply make 
hoarding cheaper and easier.  TW acknowledged that the potential for 
withholding capacity from the market is one reason for FERC's current policy 
against reserving capacity for shippers.  Although TW did not commit to 
placing any limits on the either the quantity of capacity or options for 
capacity that any one shipper may own, it is possible that FERC may require 
TW to do so in a final order.

Our plan is to meet with PG&E and SoCalGas in California the week of 
September 11 to go over details of the program, and to finalize the FERC 
filing by mid-September.