California state regulatory matters ,
 Paul and Jeff,

Becky, Donna and I (gas girls) met with Phillip Allen (ENA West) to discuss 
FERC gas issues today, and Phillip had some issues that were more state than 
federal, and I told him I would bring them to your attention.

He is interested in seeing incentive rates or more hedging on the part of the 
CA LDC's so that all their needs are not being served by the spot market.  In 
the current market, hedges (longer term contracting and financial) are being 
done primarily by the producers and marketers, which results in a thin and 
probably off-kilter market (the LDCs buying for the customers are not 
participating).  I know we have to square this with the EES positions, but I 
am not up to speed on what is going on in CA on this issue.

Phillip also made that point that while the LDCs are focusing on their core 
load, no one is doing system planning on the macro basis, taking into account 
the ability of the physical systems to meet the needs of all customers, core 
and non-core and making sure the system will be adequate.

Finally, he is very interested in seeing the CA LDC rates unbundled.

Any updates we can provide to Phillip (and the gas girls) would be 
appreciated, as well as what our plans are to address these issues.

From our side, El Paso is having a conference in July and we will be taking 
up a number of allocation and transportation issues at that time.

Thanks.
paul.kaufman@enron.com, jeff.dasovich@enron.com, james.steffes@enron.com