Northern Natural Gas Company

Fifth Revised Volume No. 1

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Effective Date: 12/31/9999, Docket: RP00-404-007, Status: Accepted

Original Sheet No. 306 Original Sheet No. 306 : Pending

57. PENALTY AND DDVC REVENUE CREDITING MECHANISM

1. Crediting Mechanism

a. In March of each year, Northern will credit all penalty and DDVC revenues

collected that exceed the representative level of penalty revenue reflected

in the design of the currently effective base tariff rates, including

interest per the Commission's regulations, during the prior contract year

(November through October) to shippers as described below. Northern will add

the credit to shippers' April invoices. If a shipper is no longer a customer

of Northern, then the shipper will receive payment by check. Northern will

not issue a check for shipper credits totaling less than $50 for the year.

2. Allocation Method

a. Daily Delivery Variance Charges and Curtailment Penalty. DDVC charges

(positive, negative, punitive & critical) collected pursuant to Section 48

and penalties collected pursuant to Section 19.A.2. of the GENERAL TERMS AND

CONDITIONS of this tariff will be credited to firm and interruptible

shippers as follows: Shippers who are subject to daily delivery variance

charges (Shippers who take the swing at delivery points on Northern's

system) will receive an allocated portion of the DDVC dollars collected.

Northern will prorate the DDVC dollars based on a weighted value equal to

the total annual scheduled volume at the delivery points where each shipper

takes the swing, multiplied by a percent equal to 100% minus the percent of

the total DDVC dollars paid by each shipper for the year.

b. Receipt Point and Supply Shortfall and Excess Penalties. Receipt Point and

Supply Shortfall and Excess penalties collected pursuant to Section 31 of

the GENERAL TERMS AND CONDITIONS of this tariff will be credited to firm and

interruptible shippers as follows: Shippers that operate contiguous, onshore

receipt points that do not have an Operator Balancing Agreement (OBA) will

receive a credit. Northern will prorate the receipt point penalty dollars

based on a weighted value equal to the total annual scheduled volume at the

receipt points operated by the shipper, multiplied by a percent equal to

100% minus the percent of the total receipt point and supply shortfall

penalty dollars paid by each shipper.

c. Carlton Penalty. Penalties collected pursuant to Section 29(c) of the

GENERAL TERMS AND CONDITIONS of this tariff will be credited to firm and

interruptible shippers as follows: All Market Area shippers will share any

Carlton penalty dollars, prorated according to each shipper's total Market

Area deliveries for the month in which the penalty was incurred.

d. Unauthorized Gas. The value of unauthorized gas remaining in Northern's

system will be credited to firm and interruptible shippers in accordance

with the following:

i. The value of unauthorized gas remaining in Northern's system under

Section 34 of the GENERAL TERMS AND CONDITIONS of the tariff will be

credited to firm and interruptible shippers, prorated according to each

shipper's total deliveries for the month in which the gas was determined

to be Unauthorized Gas.

ii. The value of gas invoiced to the shipper in excess of 100% of the

index price, or the value of the gas remaining in Northern's system

under Section 9 of the PDD Rate Schedule and Section 5 of the IDD Rate

Schedule will be credited to firm deferred delivery shippers, according

to each FDD shipper's total cycle quantity.

iii. The value of unauthorized gas remaining in Northern's system will be

determined by multiplying the applicable Monthly Index Price (MIP), as

set forth in Section 32.C., for the applicable month, by the total

quantity of gas remaining in the system.