Kern River Gas Transmission Company

Second Revised Volume No. 1

Effective Date: 02/03/2002, Docket: RP02-137-000, Status: Effective

First Revised Sheet No. 536 First Revised Sheet No. 536 : Effective

Superseding: Original Sheet No. 536

RATE SCHEDULE CH-1

Kern River Firm Transportation Services

(Continued)

ARTICLE X - INVOICING AND PAYMENT (Continued)

10.2 Payment. On or before the twenty-fifth Day of each Month, or the

previous Business Day in the event the twenty-fifth Day is a weekend or

holiday, Shipper shall pay Transporter by wire transfer of federal

funds, the amount of the invoice rendered by Transporter for the Billing

Month in accordance with Section 10.1. Any payment shall be considered

to have been made on the date such payment is transferred by Shipper to

the address designated by Transporter. Shipper shall make payment each

month of the amount as invoiced by Transporter for transportation

service rendered pursuant hereto without any abatement or set off unless

the parties agree otherwise; provided, however, such payment shall be

without prejudice to Shipper's right to claim, demand, and recover from

Transporter any billing adjustments and amounts paid by Shipper which it

is mutually determined by the parties or determined by judgement or

decree were not owed to Transporter together with interest as provided

in Section 10.4.

10.3 Interest on Unpaid Amounts. Should Shipper fail to pay the amount of

any bill rendered by Transporter when such amount is due, unless such

failure to pay is the result of Transporter's error, interest shall

accrue on the amount not paid at a rate of interest equal to the then

effective rate computed in the manner set forth in Section 154.501(d)(1)

of the FERC's regulations under the Natural Gas Act. If such

regulations become inapplicable to such amounts, the rate shall be

computed on the basis of the lesser of two percent (2%) above the prime

rate from time to time charged by Chase Manhattan, N.A. (or the

succeeding bank of Chase Manhattan, N.A.), or the maximum applicable

nonusurious rate of interest in the state of Texas. Such interest shall

accrue on unpaid amounts, including any unpaid interest compounded

daily, beginning on the payment due date of Transporter's invoice to

Shipper, and shall terminate when such an invoice is paid.