PRIVILEGED AND CONFIDENTIAL: SUBJECT TO ATTORNEY CLIENT AND OTHER PRIVILEGES

Mark:

I assume that you and Richard are very familiar with the day-to-day 
developments in the heavily publicized FERC case involving the investigation 
by FERC of El Paso's sale of pipeline capacity into the CA market to its 
merchant arm last year that CA officials have partly blamed for the spike in 
gas and power prices.  As you know, this is the case where the highest 
executives of El Paso recently were called to testify at FERC.

An article in this morning's New York Times (which begins on page 1), in 
discussing El Paso's significant earnings generated by the El Paso merchant 
arm from the pipeline capacity purchase, says that the parties with which El 
Paso hedged its position also made sizeable profits.  The article notes that 
about half of El Paso's trades were with Enron "according to people present 
at the briefings El Paso officials have given to California officials."  
While this probably is not surprising in light of our size and breadth in the 
market, it nonetheless is made to sound somewhat sinister, and my sense is 
that it is just another potential barb for the CA officials to throw at us.  
Since the article quotes a response from Mark Palmer (in which he suggests 
that Enron, in turn, likely would have resold the capacity and would not have 
realized the benefit of the rising market), I assumed that you were aware of 
it, but I thought I would err on the side of putting an extra e-mail in your 
in-box.

John

John Klauberg
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
212 424-8125
john.klauberg@llgm.com


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