Kern River Gas Transmission Company

Second Revised Volume No. 1

Effective Date: 07/01/2000, Docket: RP00-288-000, Status: Effective

Original Sheet No. 183 Original Sheet No. 183 : Effective

GENERAL TERMS AND CONDITIONS

(Continued)

23. NEGOTIATED RATES (Continued)

23.2 Applicability. (Continued)

its capacity when such capacity is posted subject to

Negotiated Rate offers (1) by matching the highest

Negotiated Rate offer submitted by another Shipper that

meets or exceeds the lowest rate Transporter is willing to

accept for such service, or (2) by paying a Recourse Rate

or discounted Recourse Rate per Dth that is equivalent to

the Negotiated Rate for the capacity it wishes to retain;

provided, however, that nothing herein shall obligate

Transporter to render service to any Shipper at rates less

than Transporter's then applicable Maximum Base Tariff

Rates.

23.3 Bid Evaluation and Award Criteria.

(a) If Transporter determines that it is willing to accept Negotiated

Rate offers for capacity that is available pursuant to Sections

23.2(b)(2) or 23.2(c) above, it will state in its posting the

specific basis on which Negotiated Rate offers will be considered

and one of the following methods for calculating the value of the

guaranteed revenues used to determine the winning bid:

(i) Net Present Value (rate x quantity x term, discounted

using the interest rate(s) shown in the posting);

(ii) Revenue (rate x quantity); or

(iii) Rate.

(b) If Transporter's posting specifies that it will accept

Negotiated Rate bids tied to an index or indices,

Transporter will post an assumed value for such index or

indices, where such assumed value is based on both

historical and projected index prices. This assumed value

will be used to compare Negotiated Rate bids with Recourse

Rate and discounted Recourse Rate bids; provided, however,

that if a Shipper with a Negotiated Rate bid tied to an

index or indices has submitted the bid with the highest

value and is awarded the capacity, such Shipper will pay

according to the actual value of the index or indices at

the time service is rendered.