Notice of Tennessee Gas Pipeline Co's 01/21/03 filing of Sixth Revised Sheet 209A to FERC Gas Tariff, Fifth Revised Volume 1 in compliance with FERC's 12/19/02 , effective 02/20/03 etc under RP02-114.

Jnofflclal FERC-Generated P D F o f 20021101-0032 Received by FERC OSEC 10/25/2002 in D o c k e t # : PL02-9-000 Federal Energy Regulatory Commission Natural Gas Markets Conference PL02-9-000 October 25, 2002 Session I - Supply and Demand - Anticipated long term growth issues Panel B Comments of Calpine Corporation I. Calpine Introduction a. Independent power producer with appox. 17,8000 MW of gas fired in operation, 9,700 MW in construction b. Estimated gas usage of3 Bcfperday H. Physical Supply/Demand versus Economic/Financial a. Calpine expects physical demand for 8as (driven by power demand) to increase and it will be met with new production and LNG imports b. The complexion of the market has changed significantly i. Fewer participants (Enron, Dynegy, Aquila) ii. Sealed back activity (Williams, El Paso) iii. Credit erosion on all fronts PG&E, CMS, Calpine, Mirant' Reliant, Duke c. ResuR has been a concentration ofsellers (and buyers), reduction of liquidity, increase in market and price risk, and increase in market power by the few suppliers remaining i. Marketers (the guys you love to hate) traditionally played a middleman role and provided supply and services including gas management, financial (risk management) services and credit support as well as provided a marketplace with numerous competitive market participants. This increased price discovery/tranaparency resulting in a more competitive environment. ii. As a result of credit and liquidity issues & fewer market participants there is an increase in risks for both suppliers and customers. This is from a decrease in the diversified portfolio of on the part of both parties. d. There may well be an extended gap in the physical supply/demand because of the economic/financial supply/demand i. Power companies driving gas demand ii. Lack of credit capacity to acquire existing capacity or fund infrastructure development iii. Lack of credit capacity to enter into long-term ~upply arrangements to underpin production Jnofflclal FERC-Generated P D F o f 20021101-0032 Received by FERC OSEC 10/25/2002 in D o c k e t # : PL02-9-000 HI. What can the Commission Do? a Calpine does not want to infer that the Commission should interfere with the market but it should be careful not to exacerbate the situation b. Do not allow "economic gold plating" by pipelines in regards to credit i. Credit provisions should be fair to both pipelines and shippers ii. Credit evaluation process should be transparent iii. Credit provisions should ...