Problem: BODY: Jim Speaking with Don Miller last night he has indicated that Jeff McMahon would like to secure our membership and ongoing participation in NEPOOL and possibly other Pools, and is prepared to make cash available through the Cash Committee. While we discussed a number of options, the starting point is to identify the contracts that are in the money to EPMI and which have not yet been terminated. The long term deals that we have been looking at in NEPOOL are NSTAR, UI and CMP. We are getting closer to an acceptable internal valuation of these and need to get a "robust" number that we can defend in order to release cash from the Cash Committee. The three main cash related issues we need to address as I see it in the short term are: (1) We must provide NEPOOL with the comfort, possibly even in the form of a pre-pay, that we will pay our invoices for November, especially since the bonds we posted terminate on 29, December (2) We must provide cash collateral immediately and (3) We will need pay our NEPOOL invoices over a two, or possibly, one week period to reduce NEPOOL's exposure to EPMI. This creates cash flow issues as we are only paid monthly by our customers. With the one way payment issue we are facing with NSTAR and UI there is clearly little incentive for them to re-negotiate their contracts. Turning to point (2), it is not clear to me whether we will be able to post the $137,390,360.10 and I will assume that we will not get the authority to post this but a lesser amount. In trying to provide NEPOOL with comfort as to their exposures it may be that we can get them to agree that for the foreseeable future we will only be serving certain contracts and that the collateral requirement be based solely on EPMI serving those contracts. I am not confident however that NEPOOL has the authority to what is in effect change the Financial Assurance Policy for one Participant, without approval of all Participants and approval of FERC, but we can explore this with them. If the price of energy, ICAP and other services moves up then EPMI should be given a reasonable period of time to post further collateral. That way we can hopefully reduce the initial amount we post and if the price moves up we can elect at that point whether to retain our membership or relinquish it. While EPMI will be taking market risk, which ill not be hedged, it will have the ability to stop performing f the price moves against it. It should not be forgotten that both the NSTAR and UI deals are one way payments and there is no time limit as to when either of these counterparties can claim a default due to EPMI's bankruptcy. The effect of this being that we are at risk from a termination by these two counterparties at any time and since we are currently the "Defaulting Party" we would not receive any Early Termination Payment. CMP is a two way payment and therefore there may well be some merit in entering into a term energy purchase deal to lock in value to this contract. I am not aware of what EES is trying to do with NEPOOL, or the other pools in the North East, however I thought it would be helpful if they knew what we were trying to do and why. Any input as to what EES is doing and any merit in a joint approach could be explored if both companies considered value could be achieved. Finally, the recipients of this email will hopefully know of other people, for example in credit, scheduling and settlements who could assist in ensuring that we can accurately value and schedule the contracts we would like to continue performing under, please pass these on to Don Miller who is coordinating this initiative. Regards,
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A: SUBJECT: NEPOOL

Problem: BODY: REAL TIME TRADERS, SPS HAS MANAGED TO OVER SCHEDULE BY 100MW PER HOUR ON PEAK HOURS SUNDAY 1/20 AT PV THEIR EDDY/PV SWAP WITH EPE. Steve at EPE has agreed to a leading deal with SPS where SPS/PSCO will supply 100 mw at PV real time to EPE. El Paso already has tags out there showing EPE as the source for SPS sales. SPS/PSCO will supply the energy to El Paso at PV and El Paso should show it going to their system. Steve was supposed to let the dispatchers know all the details. Les
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A: SUBJECT: SUNDAY ON PEAK LEADING DEAL

Problem: BODY: Lorraine: here's what we would have to show FERC, along with some of my comments. Let me know if you have additional ideas, and I'll turn it into a draft to send around to the usual suspects. 1. Rate impact on TW customers; method by which TW would collect the costs of the acquired capacity. - I assume TW would be at risk for any undercollection of revenue associated with the PNM capacity; thus there is no cost-shift potential to other shippers. - Net costs will be separately recorded. 2. Would acquisition of PNM capacity enable TW to gain control over access to upstream capacity and supply sources in a manner which would permit TW to limit customer choices or improperly tie use of the acquired capacity to other pipeline services? (I think Mary Kay will be able to help us explain the "no tying" part). 3. Would TW's marketing affiliates receive preferential treatment? - No TW marketing affiliate will be involved in the proposed transaction - Acquisition of PNM capacity will not result in any undue preference or advantage to any affiliated entity. 4. Will TW as a holder of capacity receive preferential treatment over PNM's customers, to the detriment of PNM's customers? - No. PNM will be making the capacity available to TW only during periods in which it has unused capacity available on its system, so any impact on PNM shippers should be minimal. - Service contract under PNM's tariff does not provide for unduly preferential treatment of TW. 5. How will capacity be managed or otherwise integrated into TW's existing open access operations? - TW will enter into service agreements with PNM from time to time to transport gas on the portion of PNM's line from Blanco, NM (i.e., the Blanco Hub operated by TW) to Rio Puerco, NM, where PNM's system interconnects with TW's mainline. Resulting available capacity will be posted according to TW's tariff. - The capacity will be used to serve customers under TW's FTS-1, LFT and ITS (right?) rate schedules from the Blanco receipt point to delivery points on TW's system. - Lorraine -- we need to discuss our arrangement with PNM -- Would we be
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A:
SUBJECT: Acquisition of PNM capacity