Canyon Creek Compression Company

Third Revised Volume No. 1

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

First Revised Sheet No. 200 First Revised Sheet No. 200 : Effective

Superseding: Original Sheet No. 200

GENERAL TERMS AND CONDITIONS

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37.4 COST OF SERVICE PROCEDURE

Canyon shall calculate the Cost of Service portion of

the revised rates under Section 37.3 as follows:

(a) Canyon shall estimate the Semi-Annual Cost of

Service and Rate Base for the six (6) month period that the revised

rates are to be in effect. Canyon will use reasonable care in

making such estimates, but shall have no liability for any

inaccuracy therein.

(b) In making the estimates required by Section 37

hereof in respect of any Semi-Annual COS Period, Canyon shall take

account of any increases or decreases in the quantities of gas to

be received by Canyon for transportation and compression and any

changes in cost factors which Canyon reasonably anticipates will

occur in such Semi-Annual COS Period.

(c) In deriving the Cost of Service portion of the

revised rates, the Semi-Annual Cost of Service calculated pursuant

to this Section 37.4 and Section 37.5 below shall be divided by

the quantity of gas estimated to be received by Canyon for

transportation and compression, adjusted for estimated discounts,

during the six (6) month period that the calculated Semi-Annual

Cost of Service rates will be in effect.

37.5 COST OF SERVICE

Computations of Cost of Service under this Section 37

shall include the following items:

(a) Operation and Maintenance Expenses (Accounts 700 -

900), excluding all adjustments for traditional ratemaking

purposes;

(b) Depreciation and Amortization - shall be computed

as the product of one-half of the Depreciation Rate times the

balance of Gas Plant in Service.