DEAR OII AND OFO SETTLEMENT PARTIES:

Thank you to the parties who worked very hard to develop the September 15,
1999 OFO Settlement Proposal in response to PG&E's August 18 proposal.  We
have carefully reviewed your settlement offer and sought clarification where
needed.  As a result, PG&E is able to accept most of the changes and
provisions contained in that proposal, and is offering back a few
modifications which we think should allow us to reach closure on a
multi-party OFO Settlement Agreement.  We encourage all parties to sign this
settlement.

Our September 24, 1999 response is attached in two forms.  One is a summary
of the items we agree with and those where we have changes, including the
reason for our changes.  The second is a revision-marking of the September
15 proposal to show all the specific changes, including some minor edits.
We have not included the tariff revisions to support this package, but will
provide them once we have a final agreement.  At this point, the changes to
the prior tariff drafts are straight forward.

Also attached is a draft Joint Motion for your review and approval.  Our
suggested approach is to have Settlement Parties sign the motion as the
means of signifying their approval of the Settlement and the need for
expeditious Commission action.

We have scheduled a Settlement Conference next week on Tuesday, September
28, starting at 10:00 a.m. in Room 308, 77 Beale Street, San Francisco.
HOWEVER, the attendance of a couple key parties is problematic, and we may
need to move this settlement meeting to accommodate their schedules so we
can ensure a productive day.  We will advise you no later than Monday
morning of the meeting status and possible next steps.

We appreciate your continued active participation in this settlement process
and look forward to your feedback on our modifications.

Sincerely,



Dan Thomas
PG&E California Gas Transmission
Manager, Products and Sales

cc: Kirk Johnson
 Ben Campbell
 Patrick Golden
 Randy Litteneker
 Steve McCarty
 Chris McManus
 Roland Risser
 Dave Rubin
  Al Torres
 Ron Stoner
 Eric Eisenman
 Geoffrey Bellenger

Attachments

 <<Sept 24 Summary of PG&E OFO Settlement Response.doc>>  <<Sept 24 PG&E OFO
Settlement Response.doc>>  <<Sept 24 Draft Motion for OFO Settlement.doc>>

 - Sept 24 Summary of PG&E OFO Settlement Response.doc
 - Sept 24 PG&E OFO Settlement Response.doc
 - Sept 24 Draft Motion for OFO Settlement.doc