MESSAGE FROM GREG PORTER

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As you know, Transwestern filed a complaint against Southern California Gas Company (SoCalGas) at the Federal Energy Regulatory Commission on September 28, 2001.  The complaint asked FERC to find SoCalGas' refusal to pay the tariff commodity rate constitutes a violation of Transwestern's tariff and the 1995 Global Settlement.  SoCalGas filed an Answer on October 18, 2001.  In summary, SoCalGas' Answer stated:

1.	SoCalGas did not affirmatively agree to pay the stated tariff rate during the Global Settlement.  

2.	The commodity charge SoCal has been paying is consistent with the course of performance/conduct prior to, and after, the Global Settlement.  

3.	Since the Global Settlement has been in effect, SoCalGas has relied on the commodity/usage charges that Transwestern has billed.    

4.	SoCalGas claims they had been paying the appropriate rate and that Transwestern failed to include the correct rate in its tariff; such omission has created ambiguity and any ambiguity should be construed against the drafter of the tariff, Transwestern.

5.	If the Commission disagrees with SoCalGas and declines to reject the complaint outright, any retroactive billing adjustment should be limited to a six-month period.

6.	SoCalGas admits that a retroactive billing adjustment for the escalation factor for six months is reasonable and an escalation factor going forward for the remaining term of its Contract No. 8255 is appropriate.

In addition to the foregoing statements, SoCalGas provided that it, like Transwestern, was interested in resolving this matter through ADR.  Accordingly, we will be coordinating with SoCalGas and FERC's ADR group to explore possible ADR procedures.

We will advise as new developments warrant.  In the meantime, should you have any questions regarding this matter please do not hesitate to contact me at (402) 398-7406 or Maria Pavlou at (402) 398-7097.