Joe:

I never accepted that it was an

electricity problem, nor a supply
problem. I've always suspected
that the NM Gas Co. temporarily
made their capacity available to
another gas supplier or they missed
their demand forecast in their IRP
(See answer #2). In all fairness -
nobody expected the arctic blast
that came down to New Mexico.

In answer to your question(s):

1) The NM Gas company buys gas

from a number of producers and gas
brokers. Who they are is moot
because market prices are always
set at bid week for the month. NM
Gas Company passes on the cost of
the gas to consumers at the price
they bought it. There exist "daily"
cash prices, where gas is bought to
smooth out the
demand/supply variations of the
daily market.

2) The cost of the natural gas is not

an issue for the NM Gas Co. NM Gas
Co., as a condition being a regulated
monopoly, has to buy enough gas
on the shoulder months (spring thru
the end of summer) to inject into
storage in order to guarantee gas
availability for its customers. All
utilities have underground storage
or what is known as "peaker units"
that liquefy pipeline gas in the
shoulder months and re-gassify it
and release it into the pipeline(s)
when peak demand comes along.**
Each utility (power included) has
to present to the Public
Regulation Commission an
Integrated Resource Plan (IRP) for
each coming year. This may be a
case that they just missed the mark
on their demand forecast. New
Mexico does not have a peaker.

3) The reason for electricity

shortage at compression
stations does not wash because all
have standby gen-sets that run or
either diesel or natural gas. In
addition, trunkline's like El Paso all
have force majeure clauses in their
capacity contracts.

4) And last but not least, I do not

believe that it was a producer
problem. Why? Gas wells,
irrespective of weather, produce gas
based on their reservoir
pressure. In turn, that gas
is collected by the local gathering
system (small pipelines)
and compressed into the major
trunkline. You may have had some
isolated instances of water freeze-
up produced from on-site heater-
treaters, but not enough to make an
overall difference in production.
Case in point, when demand is low,
pipelines keep their pressures up
and let the field compressors do the
heavy lifting to "buck" the trunkline
pressures. In the winter, pressures
fall and field compressors work at
rated pressures.

Regards,
Spiro
** I went up to the PRC on
Thursday February 19, 2011 and
presented the concept of a peaker
and introduced them to Chicago
Bridge & Iron and provided printed
materials. CB&I has built all but 3
of the approximate 75 peakers in
the US. Attached is what I read to
the commission. I was told that I
would be invited to the utility
division of the PRC to expand on a
peaker for New Mexico. See
attached.