-----Original Message-----
From: 	Hyatt, Kevin  
Sent:	Friday, January 25, 2002 9:30 AM
To:	Gadd, Eric; Wadle, Susan
Subject:	Weekly update 1/25

Marketing
-- Desert Crossing Storage (near Kingman, AZ).  Their strategic advantage seems to be accessing cheaper Rockies gas via Kern River and putting it into storage for later delivery to California markets.  One partner, SRP, is banking on getting a firm backhaul on El Paso to serve their Phoenix requirements.  Unless someone significantly expands the California infrastructure and interstate delivery points, the only beneficiary of this project will be Sempra with its North Baja power plant and this is not enough to justify the storage project.

--  Pataya Storage is another project soon to be announced by partners SouthWest Gas and Aquila Energy.  They plan to develop 12 Bcf of salt dome storage (in 2 phases) in the same formation as Desert Crossing.  Their plan is to tie into El Paso and TW; we have been in contact and await their response to our suggestion of incorporating a Sun Devil pipeline option.

--  Our response to APS on the transport option if they reimburse TW for EIS costs is expected to go out 1/25.  We are drafting a similar offer to Panda Energy.

--  Panda Energy:  The current economic conditions have struck Panda-- they have initiated a restructuring and severed some of the headquarters staff including fuel supply representatives we were negotiating with for Sun Devil.  The project now reverts back to the department VP whom we have contacted to further our negotiations. 

Engineering -  still waiting on the revised project cost estimate based on the reduced compressor and looping costs.  The goal is $100 million in reductions.  

FERC and El Paso Full Requirements Contracts - The discussion of the Strawman settlement proposal submitted by SRP to FERC did not make it on FERC's January agenda.  At our meeting this week, APS did not put much faith in the Strawman making much forward progress.