Kern River Gas Transmission Company

Second Revised Volume No. 1

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

Third Revised Sheet No. 612 Third Revised Sheet No. 612 : Effective

Superseding: Second Revised Sheet No. 612

RATE SCHEDULE UP-1

Kern River Firm Transportation Services

(Continued)

ARTICLE III - TRANSPORTATION RATES AND CHARGES (Continued)

3.2 Transportation Charges. (Continued)

3.2.4 FERC Annual Charge Adjustment Amount. An amount calculated by

multiplying the FERC Annual Charge Adjustment Surcharge shown on

Sheet No. 5 by each Dth of Gas actually received by Transporter

from Shipper during the Billing Month, less fuel use and lost

and unaccounted for Gas.

3.2.5 (Reserved)

3.2.6 Negotiated Rates. Notwithstanding the foregoing provisions of

this Article 3, Transporter and Shipper may mutually agree to

Negotiated Rates for service hereunder as provided in Section 23

of the General Terms and Conditions. The ACA surcharge pursuant

to Article 3.2.4 of this rate schedule, as well as fuel

reimbursement pursuant to Section 12 of the General Terms and

Conditions will be applied to Shippers paying Negotiated Rates

in the same manner as they are applied to Shippers paying

Recourse Rates.