Guys,  

Our friends at Environmental and Energy Analysis sent this email around 
regarding the gas shortage in CA.  They might be useful for us in terms of 
analysis, prepartion etc.  Or is MRW already providing us with this type of 
assistance?  

---------------------- Forwarded by Janel Guerrero/Corp/Enron on 04/03/2001 
01:04 PM ---------------------------


"Joel Bluestein" <jbluestein@eea-inc.com> on 04/03/2001 10:05:24 AM
To: mschoen@enron.com, Janel_Guerrero@enron.com, jkeeler@enron.com
cc:  

Subject: fuel switching in california

besides electricity, there is an equal and related upcoming 
meltdown on gas in california.  our assessment is that the current 
high prices are largely a result of intrastate constraints that will be 
exacerbated as gas use for power generation increases.  for this 
summer it is possible that there will be generating constraints due 
to inadequate gas delivery capacity.  a more likely outcome is that 
power generators will get the gas they need at the expense of 
storage injection for winter heating load.  this will create supply 
problems and higher residential gas problems next winter.  summer 
prices for industrial gas users will also be higher.

a possible solution is to take advantage of fuel switching.  many of 
the california plants are old oil/gas plants and have the capacity to 
switch fuels.  they are currently limited by environmental limits.  it 
might be in california's broader interests to allow some flexibility on 
switching this summer to ensure power reliability and adequate gas 
storage for the winter.  

reasons for possible interest for enron - better power reliability this 
summer, possible gas/oil trading opportunities, emissions trading 
opportunities?, other?

since oil is much cheaper than the currently high california gas 
prices, this option would also increase the profitability of the plants 
that switch fuels.  it's not clear whether this helps Enron.  one 
option would be to require very clean oil since the market will bear 
significant cost.

there are a few questions related to this: how tight will gas be this 
summer?  what are the likely impacts without switching?  are the 
plants still oil-capable?

let me know if this is something you are interested in discussing.

Joel Bluestein
Energy and Environmental Analysis, Inc.
Phone 703-528-1900
Fax 703-528-5106