I will give it some thought.  My initial reaction is "so what" - TW is substantially contracted for through 2006/7 which would allow it to weather any storm during the interim period.  I think there would be more pressure on the proposed expansion projects more than anything.

-----Original Message-----
From: Hayslett, Rod 
Sent: Wednesday, November 21, 2001 3:02 PM
To: McCarty, Danny; Harris, Steven; Donoho, Lindy
Cc: Geaccone, Tracy; Howard, Kevin A.; Donahue, Jeff; Taylor, Mitch; Taylor, Sarah; Desai, Jayshree
Subject: FW: Consultant's view on gas transmission into California
Importance: High



I received these comments this afternoon from JPMorgan.     I need to have some help putting together a story to counteract the basics of this story from CERA.

Rod

-----Original Message-----
From: Brent.Wahl@jpmorgan.com [ <mailto:Brent.Wahl@jpmorgan.com>]
Sent: Wednesday, November 21, 2001 2:00 PM
To: Hayslett, Rod
Cc: Eric.Fornell@jpmorgan.com
Subject: Consultant's view on gas transmission into California
Importance: High


Rod:

As we discussed here are the bulletts that summarize what we heard from our consultants.

Overall demand picture

Believe it will be 2006 before the California market will get back to 2000/2001 demand levels

          2002            demand down approximately 900 mmcf/d
          2003            demand will be flat
          2004            growth in demand will begin
          2005-2006   return to 2001 demand levels

Reasoning:
   2001 was a dry year - the lack of hydro generation created an additional 600 mmcf/d demand for gas in California
   Anticipated generation capacity overbuild in California - new more efficient power plants with better heat rates will displace older gas fired generation, reducing the amount of gas              required to generate a MW of electricity on the margin
   California electricity rate increases have curtailed demand for power and subsequently, gas

Gas transmission capacity into the state

Over the next two to three years there will be an additional 2.0 Bcf/d of transmission capacity into California
   800 mmcf/d in 2002
   900 mmcf/d in 2003 (Kern River expansion)
   300 mmcf/d               (El Paso conversion of All American oil line and power up)

San Juan basin gas

San Juan basin production is declining

   first half of 2001 vs. first half of 2000 production off by approximately 200 mmcf/d
   Rockies gas will not replace declining production in the San Juan San Juan gas will move closer to Permian pricing


The consultants believe that the combination of these factors will put decontracting pressure on existing transmission into the state of California, and especially the El Paso and Transwestern lines.

However, the "wild card" in their view is unforeseen California power demand growth.

As we discussed, JPMorgan would like to hear your views on the above issues.

Please give me a call when you have had sufficient time to digest and we can set up a conference call to make the most efficient use of your time.

Thanks Rod

Brent

Also, when you have had a chance to look at sales gas volume growth please
e-mail the volume numbers to me...thanks