Canyon Creek Compression Company

Third Revised Volume No. 1

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Effective Date: 07/01/2002, Docket: RP02-356-000, Status: Effective

Original Sheet No. 202 Original Sheet No. 202 : Effective

GENERAL TERMS AND CONDITIONS

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37.7 COST OF SERVICE DEFERRED ACCOUNT

Canyon shall establish and maintain a current deferral

sub-account Unrecovered COS Account in Other Regulatory Assets,

Account 182.3.

(a) If Canyon's Cost of Service for any semi-annual COS

Period shall be greater or less than that reflected in its rates

hereunder for such semi-annual COS Period, and/or if Canyon's

recoveries for any semi-annual COS Period are greater than or less

than the Cost of Service underlying Canyon's rates for that COS

Period, an amount equal to the difference shall be recorded in the

current deferral sub-account for such semi-annual COS Period. The

outstanding balance in the current deferral sub-account shall

accumulate carrying charges each month in the manner and at the then

current rate of interest on pipeline refunds established by the FERC.

Any balance remaining in current deferral sub-account at the end of

any six-month period shall be added to or deducted from the deferral

sub-account for the next semi-annual COS Period.

(b) The accumulated current deferral subaccount

balances of Account 182.3 may include the following:

(i) The monthly deferral of a dollar amount

associated with Canyon's actual under- or over-recovered Cost of

Service.

(ii) Adjustments to prior Semi-Annual COS Periods.

(iii) Transfers of any unamortized amounts

remaining in a Semi-Annual COS Period deferral subaccount of Account

No. 182.3 after the related amortization period has expired.

(iv) The Semi-Annual COS Period portion of all

refunds or revenue credits, including out-of-period billing

adjustments.

(v) Carrying charges on the current deferral and

amortizing subaccounts.

(c) The amount to be included in the current deferral

subaccounts shall be calculated as follows:

(i) Canyon shall determine the actual Rate Base

and Cost of Service incurred for that Semi-Annual COS Period.