Kern River Gas Transmission Company

Second Revised Volume No. 1

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Effective Date: 02/01/2006, Docket: RP06-160-000, Status: Effective

Second Revised Sheet No. 175 Second Revised Sheet No. 175 : Effective

Superseding: First Revised Sheet No. 175

GENERAL TERMS AND CONDITIONS

(Continued)

20. FACILITIES (Continued)

20.2 Installation and Reimbursement. (Continued)

(c) an incremental facilities charge which is based on, as

appropriate, Transporter's capital costs associated with

such facilities, including depreciation, return on debt and

equity, related income taxes and all other taxes, and all

associated operating and maintenance costs.

Such CIAC or incremental facility charge will be set forth, as

appropriate, in the Transportation Service Agreement with Shipper

or in a separate facilities reimbursement agreement with Shipper.

Transporter will not use the revenues resulting from such

incremental facilities charge or the costs associated with such

CIAC and/or incremental facilities charge to determine

Transporter's general rates.

All facility installation requests will be handled by Transporter

in a manner that is not unduly discriminatory. For purposes of

determining whether to condition its agreement on Shipper paying

for the facilities, Transporter will evaluate, among other

criteria, the subscription level and/or estimated throughput, cost

of facilities, operating and maintenance and

administrative/general expenses associated with the facilities.

For any Shipper that fails to meet Transporter's creditworthiness

standards, Transporter may require Shipper to provide an

irrevocable letter of credit or cash collateral in an amount up to

the total cost of the facilities (including income taxes, if

applicable) or a written guarantee up to the total cost of

facilities (including income taxes, if applicable) from a third

party on behalf of Shipper that satisfies Transporter's credit

requirements.

For facilities which Transporter determines to be economically

beneficial, Transporter will pay for the construction,

modification or rearrangement of such facilities. In cases where

Shipper constructs, modifies or rearranges facilities to

accommodate the delivery of Gas to Transporter, or the receipt of

Gas from Transporter, Transporter may make a CIAC to Shipper as

Transporter determines is economically beneficial. Such CIACs

will be made in a non-discriminatory manner to all similarly

situated Shippers. However, if Transporter is unable to fully

recover the cost of such facilities in a Section 4 or Section 5

rate proceeding or if Shipper ceases utilizing the applicable

facilities and the net book value of such facilities is greater

than zero, then Shipper will reimburse Transporter for the net

book value of such facilities, or the unamortized value of the

CIAC, including related income taxes.