Enron Capital and Trade Resources currently is negotiating adeal with a Lincoln, NE-based nonprofit joint power agency to sellit wholesale bulk, multi-year gas supplies so the agency can inturn sell them at below-market prices to municipal utilities inCalifornia and other states. Brokered through the American PublicEnergy Agency (APEA), supplies would be paid for in advance atdiscounted prices using the APEA tax-exempt financing capability.

APEA already has supply contracts with municipals in otherstates. Its deals with the three California cities, totaling about11 MMcf/d, are priced at four cents below indexed rates at theCalifornia-Arizona or western Canadian border. The Californiabuyers are the City of Long Beach gas department and Pasadena andGlendale municipal electric utilities for power generation.American Public Energy uses its tax-exempt financing power topurchase the supplies from Enron, passing on the savings tomunicipals which, by law, are its only customers. This is the firsttime the California cities have bought energy supplies from APEA,and they credit Enron with putting the pending deal together.

Enron C&ampT and APEA are expected to wrap up a deal by lateApril, with the first supplies flowing this summer to Glendale, andin the fall to Long Beach and Pasadena. Neither organization wouldtalk about the volumes or timeframe being sought in thediscussions, but it is assumed the talks are aimed at long-termsupplies that exceed the requirements of the three Californiamunicipal utility deals.

“Until it is pulled together in final form, it isn’t a closeddeal,” said John Musselman, a private attorney representing APEAwho noted that the California munis, on the other hand, have signed”substantially final” gas supply contracts. “It is just a matter oftime until that (the Enron deal) is accomplished.” Long Beachexpects to save about $174,000 on about 4.3 Bcf of gas taken inheating season months of October through May, ending in the springof 2002. It represents about one-third of the municipal gas/waterutility’s load, with the rest of the supplies split evenly betweenmonthly spot market purchases and local production, according toElizabeth Wright, a gas department executive. Daily supplies underthe Enron deal will range between 2.5 MMcf/d and 10 MMcf/d, shesaid.

Richard Nemec, Los Angeles

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