Transwestern Pipeline Company

Second Revised Volume No. 1

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Effective Date: 02/01/1993, Docket: RS92- 87-003, Status: Effective

1st Revised Sheet No. 77 1st Revised Sheet No. 77 : Effective

Superseding: Substitute Original Sheet No. 77

GENERAL TERMS AND CONDITIONS

(continued)

20. RESEARCH AND DEVELOPMENT ADJUSTMENT

Periodically rates and charges under Transporter's FERC Gas Tariff shall

be adjusted to reflect changes in Transporter's expenditures for research

and development. Such expenditures shall include both expenditures

chargeable to operations as well as expenditures includable in rate base.

20.1 Procedure for Computation of Adjustment

The Research and Development (R&D) Adjustment shall be reflected in

rates only when it amounts to at least one-tenth of one mill

($0.0001) per dth of annual transportation quantities. The R&D

Adjustment shall be applied to the commodity component of all

applicable rates and shall maintain historical rate design concepts.

A. Research and Development Chargeable to Operation

The R&D Adjustment shall reflect the amount which actual R&D

expenditures chargeable to operations during the twelve month

period ending three months prior to the effective date of R&D

Adjustment exceed or are less than (1) the amount allowed in

Transporter's last rate proceeding or the average of three years

R&D expenditures for the initial filing under this Section 20;

or (2) the actual R&D expenditure in Transporter's last R&D

Adjustment under this Section 20.

B. Research and Development Includable in Rate Base

The R&D Adjustment shall reflect the amount which the actual

balances in Account 188 during the twelve month period ending

three months prior to the effective date of R&D Adjustment

exceed or are less than (1) the amount allowed in Transporter's

last previous rate proceeding for the initial filing under this

Section 20 or (2) the balances in Account 188 included in

Transporter's last prior R&D Adjustment under this Section 20.

The balance in Account 188, for the purpose of computing the R&D

Adjustment, shall be reduced by all monies recorded in Account

495 related to R&D expenditures, and shall be reduced by the tax

effect of R&D expenditures, as recorded in Account 283. The

rate of return used to determine the rate effect of the rate

base treatment of the balance in Account 188 shall be the rate

of return