RE: Additional Questions from Eric ,
 -----Original Message-----
From: 	Taylor, Gina  
Sent:	Wednesday, September 05, 2001 11:17 AM
To:	Hyatt, Kevin
Subject:	Additional Questions from Eric

Hi Kevin!

Eric thought we might get the questions below.  Can you provide answers to these questions?

Thanks or your help, Gina

PS - the capitol of Arizona is Phoenix.

QUESTIONS THAT NEED TO BE ANSWERED

How much new gas is being produced in the Rocky Mountain and San Juan gas supply basins? [Hyatt, Kevin]   San Juan Basin production peaked in 1999 at 4.3 Bcf/day and is expected to decline by 2.4% year for the next 10 years.  However, over the same 10 year forcast period, 6500 new wells are scheduled to start producing.  In addition, current Rockies production is expected to average 250 MMcf/d in 2001 growing to 570 MMcfd by 2009.   

What gas-fired electric generation projects will be served by Sun Devil? [Hyatt, Kevin]    There are a number of power plants currently being developed in the Phoenix area.  We are evaluating which projects make the most economic sense to serve. 

Kinder Morgan and El Paso are proposing pipeline projects to serve Arizona and California.  Why do we need another pipeline? [Hyatt, Kevin]    The KM Sonoran project proposes to serve the California border and eventually the San Francisco area, not southwest Arizona.  El Paso's proposed expansion is not expected to be enough to meet the growing demands of the Southwest including Phoenix, Southern California, and Baja California.

Gas prices are collapsing in the Permian basin.  How competitive are new gas supplies from the Rocky Mountain and San Juan basins? [Hyatt, Kevin]  Gas production in the Rockies and San Juan basin has been on the increase but there has not been enough pipeline capacity to move the gas to market.  This capacity bottleneck has had the effect of depressing prices in the San Juan basin.  Historically, San Juan prices have been a few pennies to as much as fifty-cents below Permian gas prices.  As recently as Jan. 2001, San Juan gas was nearly $2.00 less than Permian. 

Why are so many power projects being developed in Phoenix?  How necessary is all this new power generation capacity?  What markets will it serve?
[Hyatt, Kevin]  The Southwest U.S., inlcuding the Phoenix area, has experienced an increase in population and therefore energy demand.  Over the last several years, power reserve margins (the available power supply in excess of demand) have been shrinking from a high of 22% to less than 8%.  This reserve margin decline, coupled with a drought-induced decrease in available hydro power supplies from the Northwest, have created a need for new electric power plant generation capacity.  Because of the availability of high voltage transmission capacity from the Palo Verde area, it was natural for developers to site plants near these lines to move power into Phoenix and Southern California.


The economy is not nearly as strong now as it was last year.  Why do we need more pipelines and power plants? [Hyatt, Kevin]   Existing pipe capacity to the Phoenix and So. California areas is not sufficient to meet EXISTING demands, let alone the demand created by the new power plants under construction.  There are more power plants planned for the Phoenix area, but with the economy slowing down, those projects may be somewhat delayed.
gina.taylor@enron.com