Panhandle Eastern Pipe Line Company, LP

THIRD REVISED VOLUME NO. 1

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Effective Date: 06/30/2004, Docket: RP04-321-000, Status: Effective

Original Sheet No. 224 Original Sheet No. 224 : Effective

GENERAL TERMS AND CONDITIONS

(Continued)

7. CONTRACTING FOR SERVICE RIGHTS

This Section 7 governs the order in which requests for

Transportation or Storage service rights shall be accommodated where

capacity is not available for all valid requests. It does not govern

scheduling, which is governed by Section 8 herein.

7.1 Order For Accommodating Firm Service Rights

(a) Subject to the provisions of Section 7.2 hereof,

as firm capacity becomes available for

(1) Transportation, (2) Storage from Field Area

Storage Facilities under Rate Schedule IOS, WS or FS,

or (3) Storage from Market Area Storage Facilities

under Rate Schedule WS, PS or FS, requests for firm

services shall be fulfilled first, commencing with

the requested service offering the greatest

economic value for the capacity available. If the

economic values, as determined below, of separate

service requests are equal, then service shall be

offered in sequence starting with the request for

such service with the earliest date. If separate

service requests have equal economic values and the

same date of request, service shall be offered to

such requests on a pro-rata basis.

(b) The economic value of request(s) for service rights

shall be the net present value of the reservation

charges, capacity charges and deliverability

charges that Shipper would pay at the rates Shipper

has requested, which shall not be less than the

Minimum Rate nor greater than the Maximum Rates as

stated on the currently effective Tariff Sheet

governing such service, over the term of service

specified in the request(s), utilizing as the

annual discount factor the overall rate of return

underlying Panhandle's currently effective rates.

For purposes of determining the economic value of

request(s) for service rights under Rate Schedule

SCT, the net present value will be determined using

the applicable reservation rate per Dt. under Rate

Schedule EFT at a load factor of 100%. Shippers

requesting service at a Negotiated Rate which

exceeds the Maximum Rate will be considered to be

paying the Maximum Rate for purposes of determining

the economic value of request(s) for service

rights.