Tres Palacios Gas Storage LLC

Original Volume No. 1

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Effective Date: 08/01/2008, Docket: RP08-424-000, Status: Effective

Original Sheet No. 133 Original Sheet No. 133

GENERAL TERMS AND CONDITIONS

(Continued)

(h) Termination of an Action Alert or OFO: TRES

PALACIOS shall lift any effective Action Alert or OFO promptly

upon the cessation of operating conditions that caused the

relevant system problem. After TRES PALACIOS has lifted the

Action Alert or the OFO, TRES PALACIOS shall post a notice on its

Internet Web Site specifying the factors that caused the Action

Alert or OFO to be issued and then lifted, to the extent such

factors are known. TRES PALACIOS shall also provide such

notification via e-mail communication to those Customers who have

submitted a request, and provided e-mail address information for

at least one contact person, via TRES PALACIOS' Internet Web Site

to receive e-mail notification of Critical Notices issued by TRES

PALACIOS.

(i) Penalties: All quantities tendered to TRES

PALACIOS and/or taken by Customer on a daily basis in violation of

an Action Alert or OFO shall constitute unauthorized receipts or

deliveries for which the applicable Action Alert or OFO penalty

charge stated below shall be assessed.

(l) Action Alert penalty charge for each Dekatherm of Gas by

which Customer deviated from the requirements of the Action Alert

shall be equal to an Action Alert Index Price, calculated as 110%

of the applicable daily Gas Daily Mid Point price posting for

Tennessee Zone Zero for the Day on which the deviation occurred,

multiplied by the quantity by which the Customer deviated from the

requirements of the Action Alert.

(2) OFO penalty charge for each Dekatherm of Gas by which

Customer deviated from the requirements of the OFO shall be equal

to an OFO Index Price, calculated as three (3) times the

applicable daily Gas Daily Mid Point price posting for Tennessee

Zone Zero for the Day on which the deviation occurred, multiplied

by the quantity by which the Customer deviated from the

requirements of the OFO.

Any penalty revenue collected by TRES PALACIOS pursuant to this

Section 5.5(i) shall be credited to those firm and Interruptible

Customers that did not incur Action Alert or OFO penalties

pursuant to this Section 5.5(i) in the Month for which Action

Alert or OFO penalty revenues were received ("Non-Offending

Customers"), based on the ratio of the total charges paid during

that Month by the Non-Offending Customer to the sum of the total

charges paid during that Month by all Non-Offending Customers.

Such credits shall be calculated for each Month of the twelve (12)

Month period ending July 31 of each year, and will be included on

the Non-Offending Customer's invoice for the Month following the

date of the final Commission order approving TRES PALACIOS'

penalty disbursement report; provided, however, that TRES PALACIOS

will calculate and include such credits on Non-Offending

Customer's invoices for a period shorter than twelve Months in the

event and to the extent that the total accumulated amount of

Action Alert or OFO penalty revenue collected pursuant to this

Section 5.5(i) by TRES PALACIOS as of the end of any Month exceeds

$1,000,000. TRES PALACIOS will file with the Commission a penalty

disbursement report within sixty days of July 31 or sixty days

after the end of the Month for which revenue collected exceeds

$1,000,000. Any penalty revenue credited to Non-Offending

Customers pursuant to this Section shall include interest

calculated in accordance with Section 154.501(d) of the

Commission's regulations.