Kern River Gas Transmission Company

Second Revised Volume No. 1

Effective Date: 11/01/2003, Docket: RP04- 4-000, Status: Effective

Third Revised Sheet No. 717 Third Revised Sheet No. 717 : Effective

Superseding: Second Revised Sheet No. 717

RATE SCHEDULE MO-1

Kern River Firm Transportation Services

(Continued)

ARTICLE III - TRANSPORTATION RATES AND CHARGES (Continued)

3.6 Cost of Leases. If Transporter enters into any lease agreements for the

use of third party facilities, Shipper will not make any payments (if

any) for such leases, except to the extent that the cost of any such

lease is reflected in Shipper's rate for transportation service

hereunder.

3.7 State of Wyoming Financing. Notwithstanding Section 3.1 herein, debt

service costs associated with financing by the state of Wyoming will be

passed on to Shipper on a basis that is consistent with the terms and

conditions of the final loan agreement between Transporter and the State

of Wyoming, which loan agreement shall be subject to approval by

Shipper.

3.8 System Expansions and/or Extensions. If Transporter expands or extends

its pipeline system and if Transporter has available capacity on this

expansion or extension and if Shipper desires to contract for such

capacity, Shipper and Transporter will negotiate suitable terms and

conditions, including rates, for such capacity.

3.9 Third Party Expansion. Shipper shall bear no costs whatsoever,

including fuel, related to the incremental expansion on behalf of

parties other than Shipper of the Kern River System above the System's

initial capacity, unless such incremental expansion, the allocation of

costs thereof, associated fuel requirements, and lost and unaccounted

for Gas results in a decrease in Shipper's unit cost per Dth of Gas.

Such unit cost shall include the Transportation Rate and the market

value of Gas at Shipper's Receipt Point(s) used for fuel to compress

that unit of Gas and for lost and unaccounted for Gas.

3.10 Shipper's Rate Option. Shipper shall have the option to pay for

transportation service hereunder a rate higher than that which would

otherwise be in effect pursuant to this Article III.