Kern River Gas Transmission Company

Second Revised Volume No. 1

Effective Date: 08/01/2004, Docket: RP04-339-000, Status: Effective

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

Superseding: Original Sheet No. 106-A

GENERAL TERMS AND CONDITIONS

(Continued)

10. OPERATING AND BALANCING PROCEDURES (Continued)

10.9 Corrective Action by Transporter. Transporter will have the right

to take actions of whatever nature may be required (including

termination or reduction of service to Shipper) to correct any

imbalances which impair the operation of or threaten the integrity

of its system, including maintenance of service to other Shippers.

10.10 Imbalances at Termination of Service. In the event the Thermally

Equivalent quantities of Gas received and delivered are not in

balance at the expiration of the primary term of the

Transportation Service Agreement or such earlier termination as

provided herein, then such balance shall be achieved at the

earliest practical date, not to exceed 90 days after expiration or

termination of the Transportation Service Agreement, by extending

receipts or deliveries, as applicable, at the appropriate Receipt

or Delivery Points, until such balance is achieved, or by such

other method as is then mutually agreed upon by Transporter and

Shipper.

10.11 Penalty Revenue Crediting. One hundred percent (100%) of all net

penalty revenues received by Transporter will be credited to firm

and interruptible Transportation Shippers paying maximum rates

(including Shippers that elect 10-year or 15-year extended term

rates), pro rata based on the total maximum rate revenues received

from each Shipper during the calendar year, excluding revenues

from ACA and any other surcharges approved by the Commission. For

the purpose of determining whether a Shipper is paying maximum

rates in a capacity release situation, the reservation/demand

charges paid by a Replacement Shipper will be attributed to the

Releasing Shipper if the Replacement Shipper is paying less than

maximum rate. Negotiated Rate Shippers are not eligible to receive

penalty revenue credits. Penalty revenue credits will be

allocated only to those Shippers that were not assessed penalties

on the day(s) for which such penalty revenues are to be credited.

Penalty revenue credits will be reflected as a credit billing

adjustment to each March billing for credits accrued during the

prior calendar year.