El Paso Natural Gas Company

First Revised Volume No. 1-A

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Effective Date: 01/01/1994, Docket: TM94-3-33-001, Status: Effective

Substitute Second Revised Sheet No. 227 Substitute Second Revised Sheet No. 227 : Superseded

Superseding: Second Revised Sheet No. 227

TRANSPORTATION GENERAL TERMS AND CONDITIONS

(Continued)

18. GAS RESEARCH INSTITUTE GENERAL RESEARCH, DEVELOPMENT AND

DEMONSTRATION FUNDING UNIT ADJUSTMENT PROVISION

18.1 Purpose - El Paso has joined with other enterprises in the formation

of and participation in the activities and financing of the Gas

Research Institute ("GRI"), an Illinois non-profit corporation. GRI

has been organized to sponsor research, development and demonstration

("RD&D") programs in the field of natural and manufactured gas for

the purpose of assisting all segments of the gas industry in

providing adequate, reliable, safe, economic and environmentally

acceptable gas service for the benefit of gas consumers and the

general public. This Section 18 provides for a volumetric surcharge

and, as specified herein, a reservation surcharge applicable to the

Program Funding Services comprising transportation services rendered

by El Paso, under the rate schedules contained in this FERC Gas

Tariff. Such surcharges are necessary to produce revenues required

to fund El Paso's allocable pro rata share of the RD&D expenditures

of GRI, as approved by the Commission.

18.2 Applicability - This Section 18 establishes El Paso's GRI General

RD&D Funding Unit Adjustment to be included in El Paso's rates for

transportation services rendered for Shippers, except other pipeline

companies which include in their respective tariffs a charge for the

GRI funding requirement, under rate schedules contained in this FERC

Gas Tariff. This Section 18 also specifies the procedures to be

utilized in changing El Paso's GRI General RD&D Funding Unit

Adjustment under each such applicable rate schedule in order to

reflect changes in El Paso's allocable share of GRI's approved RD&D

expenditures. For the period commencing January 1, 1994 through

December 31, 1994 the Commission approved a GRI funding mechanism

designed to collect 50 percent of GRI's budget through reservation

surcharges, and 50 percent through usage surcharges. Under such

funding mechanism, the reservation and usage surcharges are

applicable to volumes of natural gas transported by El Paso. In the

event El Paso discounts its reservation and/or usage rates, the

applicable surcharges shall be considered as the first rate increment

to be discounted for purposes of this Section 18. If the discount is

less than the reservation and/or usage surcharges, then the

difference between the reservation and/or usage surcharges and the

discount shall be remitted to GRI. The reservation surcharge is

divided into two load factor categories at two distinct rates: (1)

high load factor Shippers and (2) low load factor Shippers. The load

factor is calculated yearly using the firm Shipper's most recent

twelve (12) month throughput divided by its annual contract demand or

billing determinant. The load factor for a new firm Shipper shall be

calculated each month based on actual throughput for each prior