Norteño Pipeline Company

First Revised Volume No. 1

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Effective Date: 04/01/1996, Docket: CP96- 81-007, Status: Effective

Original Sheet No. 184 Original Sheet No. 184 : Superseded

RATE SCHEDULE IT-S

INTERRUPTIBLE TRANSPORTATION SERVICE - SOUTHERN DIVISION

(Continued)

5.4 RATES: (Continued)

(1) Norte¤o will install, at its own

expense, any new facilities which, based

on Norte¤o's estimates, will generate

annual revenues equal to or greater than

the annual cost of service associated

with such facilities. Revenues will be

based on projected annual incremental

volumes of throughput and peak usage for

each year for the depreciable life of

the facilities to be built or for the

number of years under the initial term

of the operable service agreement,

whichever is shorter, and the currently

effective rate for the service

contemplated.

(2) In calculating the incremental cost of

service, Norte¤o shall utilize the

methodologies for calculating cost of

service which underlies its currently

effective transportation rates.

(3) The projected costs and revenues in

nominal dollars will be evaluated using

a standard discounted cash flow

analysis, with a discount rate equal to

the most recently approved overall rate

of return for Norte¤o or the FERC

generic rate of return for utilities,

whichever is greater. Norte¤o will

undertake projects for which the

internal rate of return is positive by

greater than 3%.

(4) When Norte¤o has previously paid for all

or a portion of delivery point

facilities under this facilities

reimbursement policy, Shipper shall,

nevertheless, within thirty (30) days

after receipt of invoice prepared by

Norte¤o, pay Norte¤o for Norte¤o's net

book value of such facilities when