Portland Natural Gas Transmission System

Second Revised Volume No. 1

Effective Date: 09/01/2006, Docket: RP06-449-000, Status: Effective

Original Sheet No. 505 Original Sheet No. 505 : Effective

Shipper will be permitted to reduce the Maximum Contract Demand and

the associated term in an amount equivalent to the quantity and term covered

in the Firm Transportation Contract with the replacement shipper; provided,

however, that any such reduction in quantity and term, after conversion of the

units of quantity, term and rates to revenues, shall be permitted only to the

extent it does not reduce the recovery of revenues equal to Transporter's Cost

of Service. Maximum Contract Demand will be reduced among all shippers

entitled to and requesting reductions in Firm Transportation Contracts, pro

rata, based on annual revenue contributions.

For purposes of this paragraph, the Cost of Service shall be the cost

of service to be collected by Transporter calculated on the basis of the

principles established in its Certificate of Public Convenience and Necessity,

or any amendments thereto, issued by the FERC, or the cost of service in

effect pursuant to Transporter's general rate filing under Section 4 of the

Natural Gas Act. In the event the replacement shipper causes an increase in

the cost of service, the Cost of Service shall be increased by an equivalent

amount.

If Shipper does not timely request a reduction in its Maximum Contract

Demand as provided herein, the amount by which Shipper would have been

entitled to reduce its Maximum Contract Demand shall be deemed Ineligible

Capacity. With respect to such Ineligible Capacity, Shipper permanently

relinquishes the rights to reduce its Maximum Contract Demand under this

paragraph in a quantity equivalent to the Ineligible Capacity. The right

relinquished under this paragraph shall take effect concurrently with the

relinquishment.