Kern River Gas Transmission Company

Second Revised Volume No. 1

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Effective Date: 01/01/2003, Docket: RP00-337-003, Status: Effective

First Revised Sheet No. 106 First Revised Sheet No. 106 : Effective

Superseding: Original Sheet No. 106

GENERAL TERMS AND CONDITIONS

(Continued)

10. OPERATING AND BALANCING PROCEDURES (Continued)

10.7 Shipper Imbalance Netting. A Shipper Imbalance is created on any

Gas Day when upstream allocated/scheduled receipts differ from

downstream allocated/ scheduled deliveries. A Shipper may net

Shipper Imbalances between its service agreements, provided that

Transporter will be reimbursed for any difference in

Transportation revenues that may result from such netting. Any

difference in Transportation revenues that result in an

overpayment to Transporter will be credited/refunded to the

Shipper.

10.8 Shipper Imbalance Trading. A Shipper may trade imbalances with

another Shipper, provided that the Shipper with an imbalance

resulting from deliveries by Transporter in excess of receipts

from Shipper will reimburse Transporter for any difference in

Transportation revenues that may result from such trading. Any

trading of Shipper Imbalances must result in each Shipper's

imbalance decreasing.

(a) All imbalance trading will be conducted through

Transporter's Designated Site. If a Shipper desires to

trade an imbalance, such Shipper must consent to

Transporter's release of necessary information regarding the

imbalance.

(b) Shippers that trade imbalances are responsible for making

whatever arrangements they deem necessary to finalize and

document the imbalance trade between them.

(c) Transporter will not be responsible for eliminating any

imbalances between Shipper and any third party.

Furthermore, Transporter will not be obligated to adjust or

deviate from its standard operating and accounting

procedures in order to alleviate any such imbalances.

(d) A Shipper may designate a third party to provide imbalance

management services by executing an Agency Delegation

Agreement, which may be obtained from Transporter's

Marketing Services Department.