Panhandle Eastern Pipe Line Company, LP

THIRD REVISED VOLUME NO. 1

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

Original Sheet No. 304 Original Sheet No. 304 : Effective

GENERAL TERMS AND CONDITIONS

(Continued)

18. PERIODIC RATE ADJUSTMENTS AND SURCHARGES

Periodically rates and charges under Panhandle's FERC Gas

Tariff shall be adjusted to reflect changes in Panhandle's

expenditures for Take-or-Pay, the Gas Research Institute, the Annual

Charge Adjustment, the Applicable Surcharge Adjustments and the

Transition Cost Recovery Mechanism. Such expenditures shall include

both expenditures chargeable to operations as well as expenditures

includable in rate base. Panhandle and Shipper recognize that

Panhandle shall from time to time experience changes in costs related

to providing service under this FERC Gas Tariff, including, but not

limited to, changes in the cost of labor, benefits, materials and

supplies, taxes, and required rate of return, costs associated with

the resolution of past disputes or outstanding uncertainties

concerning amounts owed by Panhandle or attributable to Panhandle,

and costs generated by decisions by the Commission, the courts or by

an arbitration panel or other body having jurisdiction over

Panhandle. It may be appropriate, equitable and consistent with cost

responsibility to allocate such costs among Shippers based on or

taking into account past period factors, such as contract demand

levels, purchases or other factors related to a prior period of time.

Panhandle shall have the right from time to time to make rate change

filings which may include such costs and utilize an allocation

methodology based in whole or in part on factors related to past

periods. Specific allocation methodologies will be determined when

Panhandle submits a filing to recover any of the aforesaid costs.

Shipper shall have the right to intervene and protest any such

filings.