Kern River Gas Transmission Company

Second Revised Volume No. 1

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

1st Rev Third Revised Sheet No. 171 1st Rev Third Revised Sheet No. 171 : Effective

Superseding: Third Revised Sheet No. 171

GENERAL TERMS AND CONDITIONS

(Continued)

18. REVENUE SHARING

18.1 Annual Revenue Threshold Level. Pursuant to the provisions of

this Section 18, commencing May 1, 1999 and continuing for the

period that the Settlement rates in the Stipulation and Agreement

of Settlement filed March 31, 1999 (Settlement), are in effect,

Transporter and its Shippers agree to a revenue sharing

arrangement consistent with the following principles. Transporter

will retain all revenues generated up to an Annual Revenue

Threshold Level of $177.3 million, excluding revenues from ACA and

any other surcharges approved by the Commission, and excluding

penalty revenues to the extent they are credited to firm or

interruptible customers pursuant to Section 10.11 of the General

Terms and Conditions of this tariff. Any revenue generated above

this Annual Revenue Threshold Level (as adjusted pursuant to

Section 18.2 below) will be shared on a 50/50 basis between

Transporter and all primary and replacement firm Transportation

Shippers paying maximum rates on an annual or seasonal basis.

18.2 Adjustments to Annual Revenue Threshold Level.

(a) The Annual Revenue Threshold Level of $177.3 million will be

reduced by:

(1) the difference between the annual revenue at the

Settlement rate of $0.6399/Dth (or such other rate

which might be in effect, if and when an extended term

(ET) program is implemented) for any ET Shippers and

the annual revenue at the total extended term rate for

those ET Shippers, to be effective on the date of

implementation of rates under an ET program; and/or

(2) the difference between the annual revenue at the

Settlement rate of $0.6399/Dth (or such other rate

which might be in effect when any rate reduction takes

effect) for all Shippers and the annual revenue at any

total reduced rate resulting from refinancing savings,

to be effective on the date of implementation of a

rate reduction resulting from such refinancing.