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. 206 Second Revised Sheet No. 206 : Effective

Superseding: Sub First Revised Sheet No. 206

GENERAL TERMS AND CONDITIONS

(Continued)

27. AVAILABLE CAPACITY (Continued)

27.2 Posting. (Continued)

If no bids are received that meet Transporter's minimum

acceptable price and term as provided in Section 27.2(f) and

(g), and Transporter has executed a Letter of Intent with a

prospective shipper or announced its intent to hold an open

season for an expansion project, Transporter may elect to

reserve all or a portion of the expiring or terminating

capacity for future expansion projects as provided in

Section 27.2(d) below; provided, however, that a shipper

with a right of first refusal will have the option to retain

all or a portion of its expiring or terminating capacity in

accordance with Section 27.5(a).

If service will not commence within 30 days following the

date that capacity is awarded, or if Transporter elects to

reserve any capacity under expiring or terminating

agreements for future expansion projects, Transporter will

repost such capacity for use on an interim basis, but

Transporter will indicate in its posting that such capacity

is reserved for future use.

(c) Pre-Arranged Capacity. Transporter may enter into a pre-

arranged Transportation Service Agreement with any party for

available unsubscribed capacity or capacity that will become

available under an expiring or terminating agreement;

provided that Transporter will post the terms of the pre-

arranged transaction in accordance with the time periods

specified in (a) and (b) above, and other parties will have

an opportunity to bid on the capacity. If another party

submits a bid with a higher incremental economic value, the

pre-arranged Shipper will have twenty-four (24) hours to

match the higher bid for Transportation Service Agreements

with a term of one year or longer and two (2) hours to match

the higher bid for Transportation Service Agreements with a

term of less than one year in order to retain the capacity.

If the pre-arranged Shipper elects not to match a higher

competing bid, the capacity will be awarded to the highest

creditworthy bidder in accordance with Section 27.4.

If service will not commence within 30 days following the

date that capacity is awarded, Transporter will repost such

capacity for use on an interim basis, but Transporter will

indicate in its posting that such capacity is reserved for

future use.

(d) Reserved Capacity. Transporter may reserve for future

expansion projects any unsubscribed capacity at receipt

points, delivery points or on the mainline or any such

capacity under expiring or terminating Transportation

Service Agreements where the existing shipper does not have

a right of first refusal; or, if the existing shipper does

have a right of first refusal, where such shipper elects not

to retain its capacity in accordance with Section 27.5(a).

Prior to reserving any mainline capacity, Transporter must

first post such capacity for competitive bid in