August 15, 2001

Mr. Philip T. Schnorbach
Texas Independent Energy, LP
13760 Noel Road, Suite 930
Dallas, Texas 75240 

Re: 	Guadalupe Power Partners, LP (“GPP”)

Dear Mr. Schnorbach:

I am in receipt of your letter of July 20, 2001.  The purpose of this letter is to provide information as promised regarding the “commercial issues” related to Issue 2 (Does HPLC have the ability to serve the Gas Supply Contract?).  I offer the following responses to your original inquiry about the proposed assignment of the Gas Supply Contract from Enron North America Corp. (“ENA”) to Houston Pipe Line Company (“HPLC”).

a.	[Does HPLC have] the ability to serve the Gas Supply Contract

Yes. HPLC has the ability to serve the Gas Supply Contract.  HPLC currently manages a 118.0 BCF storage facility, has 2.4 BCF/d of pipeline capacity, and averages 1.5 BCF/d of throughput.  [Do we know anything about purchases and sales?]

b.	[What is] the ability of AEP to serve the Gas Supply

American Electric Power (“AEP”), with its HPL asset, can easily cover GPP’s base nominations.  AEP may have some difficulty covering swing volumes since GPP has the right to nominate volumes for thirty (30) minutes after day trading is complete. Swing While swing volumes can be as high as 80,000 MMBTU/d. However, considering the amount of assets and reserves mentioned above, AEP is in a position to effectively serve the Gas Supply Contract.

In addition, when Enron ENA sold the asset HPLC, it in effect sold all its intellectual capital associated with the Texas physical natural gas markets.

Philip T. Schnorbach
Page 2
August 14, 2001

c.	What are HPLC’s delivery points

HPLC delivery points to serve this contract are as follows:
Direct access – Oasis/HPL Katy
Indirect access – TECO/Guadalupe, Dow D-T, Midcon, Aquila Hub

d.	Is HPLC any different after the sale to AEP

No.  The pipeline asset was sold as fully operational and the operations personnel (i.e. field operations, physical trading, scheduling, gas control) were included in the sale. 

Also included as part of the sale were the Texas region portfolio of contracts, the pipeline asset, and storage gas.

e.	Any other information that provides insight into the ability to properly serve the Gas Supply Contract

In summary, when Enron North America (“ENA”) ENA acquired this deal, we owned   HPLC including the storage facility, the pipeline, and the baseload transactions.   The flexibility of these assets allowed ENA the ability to serve the Guadalupe deal.  Now that AEP owns these assets, they are in a much better position to serve Guadalupe.  The late nomination rights, and the swing capabilities, and the daily swings on weekends cannot be effectively managed without the asset.

I turst trust the foregoing provides you with the information you need to go forward.  I look forward to hearing from you.

Very Truly Yours,

Jim Coffey
Enron North America Corp

cc:		Jeffery Jeffrey Hodge

bcc:		Brian Redmond
		Janet Wallis
		Gary Bryan
		Barbara Gray
		Troy Denetsosie
		Bryon Gannaway – Texas Independent Energy, LP
		Dan Hyvl – via e-mail (djhyvl@aep.com)  

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