Canyon Creek Compression Company

Third Revised Volume No. 1

Effective Date: 07/01/2003, Docket: RP02-356-003, Status: Effective

First Revised Sheet No. 199 First Revised Sheet No. 199 : Effective

Superseding: Original Sheet No. 199

GENERAL TERMS AND CONDITIONS

----------------------------

37. COST OF SERVICE RATE MECHANISM

37.1 PURPOSE AND APPLICABILITY

The applicable rates for service under Rate Schedule FCS

and Rate Schedule ICS are governed by this Section 37; provided that

calculation of the rate adjustments under this Section 37 shall be

performed in accordance with the Stipulation and Agreement

(Settlement) filed with the Commission on March 2, 2003, in Docket

No. RP02-356, and approved by the Commission on May 23, 2003, 103

FERC Paragraph 61,232, but the calculation of rate adjustments under

this Section 37 shall only be subject to the Settlement during the

term of the Settlement. Such rates are set forth on the currently

effective Sheet No. 6 of this Tariff and shall be subject to semi-

annual revision under this Section 37. Shipper's obligation to pay

its monthly invoices reflecting rates consistent with this Section 37

is not subject to adjustment under any circumstances except as

provided in Canyon's General Terms and Conditions.

37.2 DEFINITIONS

(a) "Semi-Annual COS Period" shall mean a six-month

period commencing on June 1 or December 1, respectively.

(b) "Overall Rate of Return" shall mean 8.90%.

3.1%.

(d) "Plant AFUDC - Equity" shall mean an amount equal to

$538,078, subject to adjustment consistent with the Settlement.

37.3 RATE ADJUSTMENT

(a) The rates for Rate Schedules FCS and ICS shall be

revised semi-annually effective each June 1 and December 1,

commencing June 1, 2003. The revised rates shall be the sum of the

Cost of Service Procedure rate calculation (Sections 37.4 through

37.6) and the Deferred Account rate calculation under Section 37.7.

(b) On or before each May 1 and November 1, Canyon

shall make a filing with the FERC to place into effect the revised

rates for the Semi-Annual COS Period commencing on the next

following June 1 or December 1. Such filing shall set forth in

reasonable detail the basis of determining such rates.