Jeff & Susan,

Per your request, I have outlined potential rebuttal testimony points for
your consideration. I recommend that we minimize our testimony to distinct
points without extensive elaboration whenever possible and/or coordinate our
ideas into Socal sponsored testimony.

Kern Rebuttal:

Transwestern desires to clarify Kern's request modification to the
Comprehensive Settlement into two parts. Kern is not correct in its
allegation that new or expanded interconnections have only secondary rights
in order to "discourage new pipeline interconnections" with Socal Gas. On
the contrary, the Settlement parties envisioned that future market
conditions may warrant such new supply interconnects and nothing in the
Comprehensive Settlement denies such interconnections from occurring.
Specifically, Transwestern and other parties simply did not want any such
new interconnects disrupting existing shippers primary firm rights. A
benefit during the entire settlement period is that holders of Socal
backbone capacity have stability and certainty for their backbone capacity
entitlements.

On the second part of Kern's request to modify the Comprehensive Settlement
by allowing new supply interconnections "primary firm receipt capacity,
where such new interconnections do not degrade existing delivery capacity at
the existing Socal Gas receipt points.", the Comprehensive
Settlement does not prohibit such an outcome. The Settlement parties simply
envision that this matter and any other pertinent interconnection issues
would be negotiated between Socal and the new interconnection counter party
or would be determined in a separate Commission Application.

PG&E :

I think we need to play this problem as we have been, through private off
line discussions. If the Indicated Producer Group members can get
comfortable then we will find the right means to modify the Comprehensive
Agreement.


Post Interim Settlement (PIS) :

P8. The PIS correctly observes that there have been serious concerns with
respect to Socal Gas "windowing" procedures but incorrectly characterizes
the adoption of primary/secondary receipt point protocol outlined in the
Comprehensive Settlement as a "resort to extreme measures". Transwestern has
operated its own FERC pipeline system under such a protocol with great
success and customer satisfaction. The primary/secondary protocol is a
proven workable solution. The PIS receipt point protocol is an modified
"windowing" procedure which does not offer a long term solution to receipt
point access on the Socal system.

P13. YAP The PIS proponents suggest "it may be possible to put a system of
capacity rights into practice,". Transwestern agrees that it is possible and
in fact the Comprehensive Settlement does in fact accomplish the possible.
While Transwestern agrees that customers are currently benefiting from
competitively priced gas at the interstate/intrastate Socal border, we see
no evidence that the unbundling of Socal's backbone system will reduce the
competitive environment
at the Socal border. In fact, the PIS consistently fails to recognize the
creation of an additional Socal competitive trading point, the Socal
citygate. All customers will have increase trading opportunities not less.

P14. The PIS proponents suggest that a "bottleneck situation" could occur at
the Socal citygate. Transwestern simply disagrees. The full 3500 mmfcd a day
of existing interstate capacity is available to supply the citygate market.
Most importantly, in addition to these supplies the entirety of Socal
storage withdrawal capacity (over 3 Bcf/d ) also trades at the Citygate
point on the Socal system. In view of potential new storage development in
Socal,this Citygate capacity could even increase. So rather than a
"bottleneck situation" at the Citygate, Socal customers would reasonably
expect to enjoy even greater capacities than currently available at the
Socal border.

P14. The PIS proponents simply are incorrect that marketers could increase
prices by withholding
backbone capacity during alleged "constrain periods". SoCal and the parties
assured that Socal has the full opportunity to sell either operational
available firm capacity or interruptible capacity at anytime. If a firm
backbone capacity holder is not utilizing their full capacity entitlements ,
Socal can sell interruptible services.

P17. The problem identified by the PIS testimony where generators do not
receive confirmation of their electric bid award from the PX until after the
first gas nomination cycle is manageable under the Comprehensive Settlement
primary/secondary protocol. Firm primary receipt point capacity holders have
full use of their backbone capacity through the first 3 nomination cycles.
That is to say, generators can bid competitively into the PX market and be
absolutely certain that their Socal primary access and backbone transmission
service capacities will be available to them. These certainties do not exist
under the current or contemplated "windowing" procedure. The Comprehensive
Settlement offers a real long term improvement for generators.