Dear _____:

We respond to Enron North America’s proposed amendment (Enron Draft) to the Master Gas Purchase and Sale Agreement between Enron and PG&E.  Your amendment draft was sent to us late last year.  Our response is shown in “strike and bold” format.  We have added text as shown. :

We agree to introductory text of the Enron Draft.  

We suggest the following highlighted changes, where the numbered paragraphs begin on the Enron Draft:

1.  Paragraph 1.1 of Article I, Definitions, of the Agreement is amended by adding thereto immediately after the last sentence thereof the following, to wit:

Where a Baseload Transaction has been agreed to using the electronic system EnronOnline, the provisions of paragraph 2.3 of Article 2 shall apply thereto.

2.  Paragraph 1.17 of Article I, Definitions, of the Agreement is amended by adding thereto immediately after the last sentence thereof the following, to wit:

Where a Multi-Month Transaction has been agreed to using the electronic system EnronOnline, the provisions of paragraph 2.3 of Article 2 shall apply thereto.

3.   Paragraph 1.3 of Article 1, Definitions, of the Agreement is deleted and a new Paragraph 1.3 is inserted in its stead, to wit:

1.3   Confirmation:  A written notice confirming the specific terms of a Transaction.  Such notice shall be substantially in the form of Exhibit A where a Baseload or Multi-Month transaction has been orally agreed to by both Parties pursuant to the provisions of this Agreement.  Such notice shall be substantially in the form of Exhibit B, where a Transaction has been agreed to using the electronic system EnronOnline   More than one Confirmation Notice may be in effect at any time, provided only a single Confirmation Notice applies to each Transaction.  In those provisions where the Agreement, as executed effective October 1, 1999, refers to “Exhibit A” as a Confirmation, the Parties shall now deem a reference to Exhibit A to be a reference to either Exhibit A or to Exhibit B, as may be applicable.

4.  Paragraph 2.3 of Article 2, Transaction Procedures, of the Agreement is amended by adding thereto immediately after the last sentence thereof the following; to wit:

Notwithstanding anything to the contrary hereinabove contained, or in any other agreement between Company or its affiliates for the purchase and sale of natural gas to or from PG&E on behalf of its Core customers, the Parties agree that Transactions for the purchase or sale of gas within the United States and Transactions formed by the Parties on EnronOnline shall not be subject to terms or conditions set forth by EnronOnline, but shall instead shall be subject to this Agreement and be confirmed by Company by forwarding to PG&E Core a facsimile Confirmation Notice, in the form of Exhibit B, attached hereto, by the close of business of the Business Day following the Transaction formation.  [PG&E agrees to the two remaining sentences in paragraph 2.3 provided in the Enron draft.]

5.  Paragraph 11.4 of Article 11, Non-Performance, of the Ageeement is amended by inserting therein, immediately after the phrase “SDP = Seller’s Daily Price.  The lowest daily price determined by the index below for the Gas Delivery/Receipt Point,” and immediately before the subheading, “Gas Delivered in Canada,” the following; to wit: 

[Use first paragraph supplied by Enron for the amendment to paragraph 11.4; remaining paragraphs supplied in the Enron Draft are in the Agreement already.]

PG&E accepts the remainder of the Enron Draft, beginning with the phrase, “Except as amended herein,…” and ending with the Signature Block.

Please let us know your response.  I can be reached at 415-973-6659.

Very truly yours,