Kentucky West Virginia Gas Company

Third Revised Volume No. 1

Effective Date: 01/01/1999, Docket: TM99-1-46-000, Status: Effective

Third Revised Sheet No. 162 Third Revised Sheet No. 162 : Superseded

Superseding: Second Revised Sheet No. 162

GENERAL TERMS AND CONDITIONS (Continued)

28. GAS RESEARCH INSTITUTE FUNDING CHARGE FOR RESEARCH, DEVELOPMENT AND

DEMONSTRATION ACTIVITIES

28.1 Purpose

The Pipeline has joined with other gas enterprises in the

formation of, and participation in the activities and financing

of Gas Research Institute (GRI), an Illinois not for profit

corporation. GRI has been organized for the purpose of

sponsoring 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.

For the purpose of funding for GRI's approved expenditures, this

Section establishes as part of the Pipeline's rate a charge for

RD&D by GRI, said charge to be recovered by a funding charge

adjustment provision applicable to Pipeline's Rate Schedules ITS,

VTS and FTS, provided, however, that such funding charge for RD&D

by GRI shall not be applicable to Customers which are interstate

pipelines and which include in their rates a charge for RD&D by

GRI. Customers with both gathering and transportation services

will be billed the GRI charge on only one service.

28.2 Basis for the GRI Charge

The Rate Schedules ITS, VTS and FTS specified in Section 28.1

hereof shall include a GRI Funding Charge Adjustment Provision

for such RD&D activities by GRI. The unit rate of such charge

shall be the amount, adjusted to Company's pressure base and

heating value, if required, which has been approved by Federal

Energy Regulatory Commission orders approving GRI's RD&D

expenditures. The current effective GRI charge for all

applicable nondiscounted commodity units and nondiscounted

one-part rates for transportation service under Rate Schedules

FTS, ITS and VTS is set forth on Sheet Nos. 4 and 5.

Additionally, a GRI demand or reservation surcharge will be

assessed on all firm delivery entitlements for Customers with

load factors exceeding 50% and for Customers with load factors

of 50% or less as set forth on Sheet Nos. 4 and 5.

A Customer's load factor will be determined on an annual basis

using the most current 12 months data available at the time

Kentucky West prepares its annual tariff to implement the

following year's GRI surcharges. A Customer's load factor will

be calculated based on actual firm throughput, including

throughput resulting