This past Tuesday, Ron Tapscott, Dwight Larson, Saeed Raja and myself met w/ 
all 5 counterparties from Cristobal (AEP, First Energy, CMS Energy, Detroit 
Edison and Virginia Power - collectively the Alliance Partners) to initiate 
the discussions and process of asset valuations.  Also, attending the meeting 
on behalf of the Alliance Partners was a representative from Arthur Andersen 
who will be assisting them in this process.  AA has also been working with 
the Partners since their own inception of forming an RTO.

Overall the meeting was productive and we focused on both asset valuations as 
well as structural issues.  We itemized a general list of data/info 
(deliverables) that will be necessary to begin the analysis/negotiation 
process.  We also highlighted a list of specific issues related to structural 
aspects which we (ENE) felt were critical path items and have to be addressed.

The Alliance Partners focus is that the combination of operating synergies, 
revenue enhancements, growth and financial engineering for a Pipe/Wire combo 
has to produce significant upside value that the Wires Co can't get on its 
own.  Of the 5 Alliance Partners, it is clear that 3 of them (AEP, First 
Energy and Detroit Edison) are definitely "in the game" and serious about 
moving forward.  We're not so sure about either CMS or Va Power.  The primary 
obstacle seems to be both parties apparent reluctance to divulge the level of 
financial/operating information (which they feel is too sensitive of info to 
be shared on an individual basis at this time) necessary to move the deal 
forward.  They did however agree to AA playing the role of an information 
clearinghouse whereby each Alliance Partner can send its individual data to 
AA who in turn will aggregate it into one "Wires Co."  Finally, both CMS and 
VP seem to be somewhat "non-committal" towards how they would participate 
(i.e., divest, lease, etc...) but AEP, First Energy and Detroit Edison all 
made it very clear that once the group (at least a majority thereof) decides 
to move forward, any entity not divesting would be excluded from subsequent 
discussions, etc... where values, structural issues, etc... are being 
discussed.  They would essentially be treated as a counterparty in an 
ordinary contracting process.

The path forward with action items and deadlines are as follows:

1/7 - ENE is to provide AA with basic GPG financial info pursuant to the list 
we discussed in the meeting (basically, FERC Form 2 data)
1/7 - ENE is also to provide to AA for each of the 5 Alliance Partners, the 
financial info, assumptions, etc... we have used to date in our analysis
1/7 - CMS to decide if they're interested in including their pipes (PEPL and 
TGP)
1/10 - AA is to distribute ENE's assumptions/info to each respective Alliance 
Partner for them to review/confirm/edit (as needed)
1/17 - AA is to have gathered the individual data from each Partner and 
"aggregate" it into one Wires Co and submit it to all parties including ENE
1/28 - AA is to analyze and quantify the potential operating synergies for 
Wires Co and submit a new "synergized" version of Wires Co financial data/info
2/4 - next meeting with ENE and Alliance Partners scheduled in Houston at ENE 
office (Beth Ryan coordinating details)
ENE to outline/summarize details re: all structural issues and send to 
Alliance Partners prior to the 2/4 meeting in Houston

If you have any questions/comments, call me at x33212 to discuss.

RANDY