Jeff,

I got 20 cents for the swith option per Dth. My assumptions are as follows:

price curve assumption:
Waha   --- IF-WAHA
La Plata Pool  and TW(Ignacio)   -- IF-EPSO/SJ
California Border -- NGI-SOCAL

Correlation assumption:

Waha- SJ  95%
Socal-  SJ  90%

See the attached spreadsheet for more info.  Call me for questions.

Zimin









Jeffery Fawcett@ENRON
10/11/2000 02:56 PM
To: Zimin Lu/HOU/ECT@ECT
cc:  
Subject: Options model

Zimin,
We're trying to price out a "live" options deal.  Here are the parameters:

Volume: 32,000 Dth/d
Term:  Jan. 1, 2002 through Oct. 31, 2006 (58 mos.)
Price:  One part rate, $0.2175/Dth, plus applicable fuel 
Primary Receipt/Delivery Points: (East - to -East Transport)
 Receipt: La Plata Pool (use San Juan, Blanco price equivalent)
 Delivery: Waha area 

Option:
 Alternate Delivery Pnt.:  California Border (East - to- West Transport)
 Price:
 Floor-  $0.2175/Dth, plus 4.75% pipeline fuel, plus 50% of the difference 
between the California Border index
  price and the San Juan Basin index price.  Specifically, we'll use:
      (SoCalGas large pkgs. minus TW (Ignacio, pts. south))

An important things to consider:
This option is only for Alternate Firm deliveries.  Alternate firm is really 
just a glorified version of interruptible.

Can you run the option model and tell me what is the dollar value of this 
rather "unpure" option?

I appreciate it.  Give me a call at 3-1521 if you have any questions.  Also, 
can you get us an answer by Friday, 10/13/00?  We're looking to get the 
proposal out to the customer by the end of the week if possible.  Thanks.