FYI.  Kim.
---------------------- Forwarded by Kimberly Watson/ET&S/Enron on 12/16/99 
04:51 PM ---------------------------


Lorna Brennan
12/16/99 09:59 AM
To: Rockey Storie/ET&S/Enron@ENRON, Stephanie Miller/ET&S/Enron@ENRON, Kent 
Miller/ET&S/Enron@ENRON, John Dushinske/ET&S/Enron@ENRON, Dave 
Neubauer/ET&S/Enron@ENRON, Michael Bodnar/ET&S/Enron@ENRON, Joni 
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cc:  

Subject: Intelligence: El Paso Capacity--Someone has Upped the Ante But Match 
Still Possible

Negotiated El Paso Deal Topped

    
     El Paso confirmed that someone had upped the ante on the negotiated deal 
for slightly
     more than 1.2 Bcf/d in firm capacity to the California border that was 
announced Friday
     (see Daily GPI, Dec. 13). A higher bid was submitted prior to 
Wednesday's 1 p.m. MST
     deadline in a four-day open season, a pipeline spokesman said. However, 
the original
     negotiating party has until this afternoon to match the new price and 
retain the capacity. 

     The new bid was for $38 million over one year starting Jan. 1, about $8 
million more than
     the amount in Friday's announcement ($30 million). One source called it 
"ridiculous" that
     someone was willing to pay so much for the space, given that on a 
mark-to-market basis
     the capacity is worth only about $20-25 million. 

     Late last week some sources speculated that Duke Energy was the 
recipient of next
     year's package given its large power generation holdings in California. 
A marketer
     yesterday said he believed Dynegy upped the ante. "Rather than go 
through all the
     hassles they [Dynegy] had at FERC with the 1998-99 package, they let 
someone else do
     all the work this time and then came in late with a higher bid. That way 
no one can
     complain that the procedure was tainted. After all, Dynegy has quite a 
few power plants
     in California to keep fueled, and all of their current FT on El Paso 
expires at the end of
     this year. Of course, they still could be thwarted if the original 
negotiated customer
     matches their bid. It may all sound kind of Machiavellian but sort of 
makes sense." Other
     sources heavily discounted the chances of Dynegy being the new high 
bidder, pointing out
     that the company made significantly less than expected this year because 
San
     Juan/border basis differentials narrowed significantly. A Dynegy source 
indicated that the
     company was involved in the bidding and lost to Duke in the first round. 

     Regardless of what happens next year, a marketer noted that the Southern 
California
     border/San Juan basis spread continues to compress as SoCal Gas 
withdraws from
     storage and east-of-California utilities exercise their peaking 
contracts because of cold
     weather in the Rockies and elsewhere in the West. From a December index 
spread of 29
     cents, the border/basin gap was down to about 18 cents Wednesday, she 
said.