IN: At the meeting yesterday, SoCalGas outlined their plan for implementing the unbundling of their backbone system including a proposed timeline which will be filed at the CPUC on Jan. 17, 2002. Lad Lorenz state that the proposal is "not cast in concrete" and invited comments at the meeting as well as in response to the filing. However as you might expect, when some customers expressed their concern with the timeline being too short, SoCal made no offer to push some of the dates out into the future and stuck with their proposal. All of the proposed dates are their best estimate for timing as variables such as the system requirements may cause delays and rescheduling of some portions of the implementation plan. Key items and dates are as follows: Jan. 17 SoCalGas files its proposed Implementation Plan and timeline. Feb. 14 Meeting with CPUC Energy Staff and Interested Parties. Tariff Workshop. Feb. 22 SoCalGas files tariffs including a definition of Annual Average Usage for existing end-use customers. This definition is important as it determines their capacity rights in the Open Season. Mar. 15 50 mmcf/d of capacity at North Needles to be placed into service. May 6 Distribution of informational packages on Backbone Receipt Point Rights to customers. May 29 Begin Phase I of the Open Season. June 5 Phase I Open Season ends. See Slides 55 through 57 for all other Open Season dates. June 22 SoCal will post awarded receipt point capacity. July 1 Implementation of unbundling the backbone receipt point services. Slide 13 Indicates North Needles has 800 mmcf/d of capacity This was described as "primarily Transwestern" Slide 15 The Core backbone receipt point capacity at Needles is set at 313 mmcf/d. I'm faxing an entire copy of the presentation to Marketing and Regulatory Affairs for distribution and review. Slides 11-21 describe the Backbone Receipt Services and Slides 50-63 provide the proposed timeline for implementation. Please give me a call if you have any questions about SoCal's proposal. gh

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OUT: Summary of SoCalGas Unbundling Customer Meeting

IN: Mark: Mark Haedicke and Lance Schuler asked me and Pete del Vecchio to draft a letter to Dynegy to clarify certain of the covenants and to ask for their consent to certain possible transactions. We would like your input on what we ask for and how we go about asking. I understand Lance Schuler spoke with you today regarding having a telephone conference tomorrow on this. Please send me an e-mail or leave me a voice mail (713 345-1549) as to what time is convenient for you. I'm also sending this to you by fax.

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OUT: Dynegy Covenant Issues

IN: We currently have $21.4 million in reserve for potential Northwest refunds. $10 million currently sits in the LTCA book and $11.4 currently sits in the LTNW book. During the summer, FERC initiated an investigation into the potential of unjust and unreasonable spot prices in the northwest from December of 2000 through June of 2001. Seatlle City Light, Tacoma City Light, Eugene Water and Electric Board, and Sacramento Municipal Utility District all filed claims at FERC for refunds from EPMI. The claims totaled close to $100 million. However, many of these claims were, on their face, spurious. For example, Eugene Water and Electric Board filed for refund of forward purchases which was clearly outside the scope of FERC's proceeding. We hired consultants from Charles River Associates (CRA) to help us with this process. One of their tasks was to apply the CAISO competitive benchmark pricing methodology to the Northwest market. That is, CRA attempted to reverse engineer the CAISO's methodology in order to estimate our Northwest risk. I was informed by our litigation team that EPMI's realistic potential exposure using this methodology was roughly $30 million. We decided to reserve roughly 2/3 of this amount which came to about $21 million. In September a FERC Adminitrative Law Judge heard the case and submitted a draft decision to the FERC. The draft decision recommended against any refunds. This draft decision is supposed to come in front of the FERC commissioners for approval before the end of the year. If this draft decision is approved, it would be appropriate to remove these reserves.

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OUT: Northwest Reserves

IN: Eric, I was examining EGM's businesses for 2001 and I wanted to ask you a question about your specific business. As you examine your goals and objectives, I would like to know what you think I could do to help you accomplish your plan. Please send me a return email with 3 specific items that I could do personally to add to your business. Thanks,

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OUT:
2001 business