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06-A TXU Gas RateAGENDA INFORMATION SHEET PROJECT: Consider adoption of an ordinance implementing settlement of the TXU Gas Distribution Rate Case. BACKGROUND: The City of Paris has original jurisdiction over TXU Gas Distribution's rates and services within the municipal limits. This does not include jurisdiction over the cost of natural gas. TXU is entitled to recover its reasonable actual cost of natural gas plus a profit as determined exclusively by the Railroad Commission. The City's jurisdiction over distribution costs commences when gas is delivered to the city gate. The rates set by the City may be appealed to the Railroad Commission if the Company is dissatisfied with the City's consideration of its requested increase in rates. On March 2, 2001, TXU Gas Distribution filed a request to increase rates effective April 6, 2001. The City passed a resolution suspending the effective date for 90 days and authorized participation with other Cities in a review of the reasonableness of the Company's request. The Coalition of Cities reviewing TXU's request had assistance of legal counsel from Geoffrey Gay of Lloyd, Gosselink, Blevins, Rochelle, Baldwin & Townsend in Austin, Texas and rate consultants Bill McMorries, Connie Cannady and Stephen Hill. Following issuance of a consultants' report a series of settlement discussions were pursued with policy and strategic determinations being made by City representatives. Protracted good faith settlement discussions led the Company to extend its effective date and increase the City's jurisdiction by 30 days. A settlement has been reached between the Cities and the Company, and TXU has agreed to further extend its effective date to accommodate the schedules of the Cities in passing a rate ordinance that reflects the settlement. The current generic extension authorized City action through August 31,2001. DESCRIPTION: The Company originally requested an increase in annual revenues of $6,886,682 but disguised the percentage increase suggested to be 8.81% by rolling all the cost of the commodity (natural gas) into the base rates. The real proposed increase in the portion of costs regulated by the City was substantially higher. Cities' consultants proposed an alternative revenue requirement deficiency of $2,977,000. A compromise was ultimately reached on an increase of $3,977,141. A comparison of the amount of additional dollars to be recovered from each customer class under the settlement with the amounts proposed by TXU is as follows: Rate Class Original TXU Filing Settlement Residential 2,847,681 1,391,427 Commercial 1,955,575 502,288 Industrial 2,067,336 2,067,336 Service Charges 16,090 16,090 TOTAL 6,886,682 3,977,141 The bill impact of the settlement on average residential and commercial customers will be as follows: Present Proposed Settlement Increase % Change Residential @ 5 Mcf Mo. $40.03 $41.84 $40.49 $0.46 1.15% Commercial @ 30 Mcf Mo. $208.31 $219.87 $208.36 $0.05 0.02% As shown by the proposed residential and commercial rates originally filed by the company, the average additional rate would have increased by $1.81 per month, but will only increase by $.46 per month as a result of the settlement, for a savings of $1.35 per month for the average residential customer and an annual savings of $16.20. For commercial customers, the rate originally proposed by the Company would have increased the average commercial bill by $11.56 per month, as opposed to the $.05 per month under the settlement, for a savings of $11.51 per month and $138.12 per year for the average commercial customer. The Company is in the process of consolidating more than 200 Lone Star distribution systems into six or seven regional distribution systems. This filing reflected consolidation of several old Lone Star systems. The Settlement results in common rates for each class of customers in all 121 affected cities. Overall percentage changes by city vary widely because of different existing rates (some existing rates are higher than the new rates requested by TXU and result in rate decreases) and different mixes of residential, commercial and industrial customers. No two Cities have the same percentage change, yet all residential, commercial and industrial customers will pay the same rate regardless of which of the 121 cities is called "home." A chart reflecting percentage changes for residential and commercial classes, with and without gas costs, for each of the 27 coalition cities is attached as Exhibit A. The 94 Cities that did not join the coalition are either very small or were disinterested because they would be entitled to a rate decrease, regardless of outcome. TXU proposed monthly customer charges of $8.00 for residential and $14.00 for commercial customers. The Cities' Settlement Committee directed that the customer charges be set at $7.00 and $12.00 respectively and that all other revenues be recovered through a volumetric charge. The new rates for residential and commercial customers will be: Residential Customer Charge All Consumption $7.00 $1.2108 per Mcf Commercial Customer Charge First 20 Mcf Next 30 Mcf Over 50 Mcf $12.00 ~ $1.2108 per Mcf ~ 0.9108 per Mcf ~ 0.7608 per Mcf The large percentage increase for industrials proposed by the Company and recommended pursuant to the Settlement Agreement is attributable to historic under-allocation of fixed costs and an application of an allocation methodology that all parties agree would have a reasonable expectation of adoption by the Railroad Commission if this case were to be reviewed on appeal. The allocation is consistent with the allocation methodology approved by the Commission in a Dallas distribution case at the end of last year. Despite the large percentage increase in industrial rates, TXU cannot charge those rates until existing contracts with industrial customers expire. Ifa given industrial customer has competitive fuel options, that customer may remain a customer of TXU under a lower negotiated contract rate, regardless of the tariffs approved in this case. Cities' consultants approved the proposed service charges, and these charges will result in $16,040 in additional system revenues. One final important note is that TXU's filing included all costs of natural gas in base rates. Cities' consultants recommended approving for base rate inclusion only the portion of gas costs authorized by the Railroad Commission in TXU's last city gate rate proceeding. The Settlement removes all gas costs from base rates. That should be of benefit to Cities in the future in explaining to citizens that the Cities have no regulatory authority over the cost of the commodity (the price of which has become extremely volatile during the last year), but rather only over the costs of the delivery of the commodity from the city gate to the end user. Percentage ~'hanges Resulting From Settlement % Change In RS % Change in Total % Change In % Change in Total Margin RS Commercial Margin Commercial (gas costs excluded) (gas costs included) (gas costs excluded) (gas costs included) Athens 41.32 12.22 61.02 9.5 Bells 14.89 -0.41 50.70 2.9 Clarksville -8.12 -5.76 24.50 0.88 Corsicana 19.78 3.81 -17.01 -6.13 Crandall 61.78 13.45 36.82 6.17 Denison 15.47 5.65 5.77 2.42 Ennis -1.30 1.61 -5.08 1.24 Farmersville 4.16 0.42 9.51 0.85 Gainesville 48.24 11.16 -10.49 -3.14 Greenville 22.43 4.56 22.29 4.12 Howe 182.43 21.18 85.32 9.10 Kaufman 10.45 0.60 13.41 3.04 Malakoff 104.89 17.07 97.47 9.52 Maypearl -4.01 -0.82 -7.94 - 1.44 Midlothian -3.77 -0.66 -6.82 0.76 Palestine -28.53 -11.40 -39.33 -11.80 Paris 16.6 7.18 20.69 6.40 Pecan Hill -2.68 -0.22 0 0 Point 44.07 9.68 37.19 9.46 Poyner 00.02 -3.96 40.56 4.63 Princeton 9.39 0.31 69.14 6.23 Red Oak -2.67 0.42 -5.86 0.27 Sherman 19.4 6.93 38.04 7.57 Sulphur Spring 12.06 5.11 17.84 5.31 Trenton 29.40 3.39 44.61 10.20 Waxahachie -0.81 1.81 -4.56 1.47 Whitewright 50.38 7.17 85.57 14.43 Note: This chart only includes the 27 cities that are participating in a review of TXU's application. Most of the 94 other cities receive rate reductions or are so small that they did not care to be involved in this case. A comparison of the percentage change resulting from the settlement specifically for customers in the City of Paris indicates that Paris indeed benefitted from this rate appeal. The Company originally proposed an over-all rate increase for the City of Paris of 10.56%. As noted in the settlement table above, as a result of the settlement the rate increase will represent only a six (6) to seven (7) percent increase for Paris citizens. STAFF CONTACT: Larry W. Schenk, City Attorney COST: There is no direct cost to the City as a result of this settlement. RECOMMENDED ACTION: Approval of the ordinance. CO[INCIL DATE: Consider for approval at City Council's August 13, 2001, regular Council meeting. ADDITIONAL MATERIAL: See attached draft ordinance and accompanying additional materials. DRAFT ALICE\ORDWORK\CURRENT\TXU Gas Rates Change Ord August 10, 2001 ORDINANCE NO. AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PARIS, PARIS, TEXAS, FINDING, AFTER REASONABLE NOTICE AND HEARING, THAT TXU GAS DISTRIBUTION'S RATES AND CHARGES WITHIN THE CITY SHOULD BE CHANGED; DETERMINING JUST AND REASONABLE RATES; ADOPTING GENERAL SERVICE RATES, INCLUDING RATE ADJUSTMENT PROVISIONS AND MISCELLANEOUS SERVICE CHARGES TO BE CHARGED FOR SALES AND TRANSPORTATION OF NATURAL GAS TO RESIDENTIAL, COMMERCIAL AND INDUSTRIAL CUSTOMERS; PROVIDING FOR RECOVERY OF RATE CASE EXPENSES; PRESERVING REGULATORY RIGHTS OF THE CITY; PROVIDING FOR REPEAL OF CONFLICTING ORDINANCES; MAKING OTHER FINDINGS AND PROVISIONS RELATED TO THE SUBJECT; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, the City of Paris, Paris, Texas ("City"), acting as a regulatory authority, has previously suspended the effective date of TXU Gas Distribution's ("Company") application to increase rates in the City in order to study the reasonableness of that application; and, WHEREAS, the City of Paris, in a reasonably noticed public hearing considered the Company's application, a report from the City's consultants who were retained to evaluate the merits of the Company's application and a settlement agreement negotiated with TXU Gas Distribution by a Steering Committee of Cities on the East Region Distribution System; and, WHEREAS, the City has determined that the Company's rates within the City should be changed and that the Company's application should be granted, in part, and denied, in part; NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF PARIS, PARIS, TEXAS: Section 1. That the findings set out in the preamble to this ordinance are hereby in all things approved. Section 2. That on March 2, 2001, TXU Gas Distribution, a division of TXU Gas Company ("Company") filed with the City Council of the City of Paris a Statement of Intent to Change Residential, Commercial and Industrial Rates charged to consumers within this municipality. Also -1- filed was the Tariff for Gas Service in the East Region Distribution System ("Tariff for Gas Service") and the supporting Cost of Service Schedules ("Schedules"). Section 3. That the existing rates and charges of TXU Gas Distribution are hereby found, after reasonable notice and hearing, to be unreasonable and shall be changed as hereinafter ordered. The changed rates resulting from this Ordinance are hereby determined to be just and reasonable rates to be observed and in force within the City. Section 4. That the Company has agreed to modify the rates proposed in its Statement of Intent and the modified rates are reflected in the revised Tariff for Gas Service attached hereto as Exhibit A. Section 5. That the maximum general service rates for sales and transportation of natural gas rendered to residential, commercial and industrial consumers within the city limits of the City of Paris, Texas by TXU Gas Distribution, a division of TXU Gas Company, a Texas corporation, its successors and assigns, are hereby fixed and approved as set forth in the revised Tariff for Gas Service attached hereto as Exhibit A. The rates reflected in the attached Rate Schedules entitled Residential Service, Commercial Service, Industrial Sales, Industrial Transportation and Industrial Sales & Transportation are found to be reasonable. Section 6. That the Rate Adjustment Provisions set forth in the revised Tariff for Gas Service attached hereto as Exhibit A and entitled Gas Cost Adjustment, Tax & Franchise Fee Adjustment, and Weather Normalization Adjustment are approved. Section 7. That the Company shall have the right to collect such reasonable charges as are necessary to conduct its business and to carry out its reasonable rules and regulations. Such miscellaneous service charges are identified in Rate Schedules 9001 through 9007 of the attached revised Tariff for Gas Service. Section 8. That the Cities' rate case expenses are found to be reasonable and shall be reimbursed by the Company. The Company is authorized to recover the rate case expenses reimbursed to Cities and the Company's rate case expenses (at an amount not to exceed $85,000) through a per Mcf surcharge based upon total system sales as set forth in the Rider entitled Surcharges in the attached revised Tariff for Gas Service. Section 9. That the aforesaid rate schedules and riders herein approved shall be effective for bills rendered on or after approval of this Ordinance. Section 10. That the rates set forth in this Ordinance may be changed and amended by either the City or Company in any other manner provided by law. Service hereunder is subject to the orders of regulatory bodies having jurisdiction, and to the Company's Rules and Regulations currently on file with the City. -2- Section 11. That unless otherwise noted herein, other than TXU Gas Distribution (a named party), no person or entity has been admitted as a party to this rate proceeding. Section 12. That it is hereby found and determined that said meeting at which this ordinance was passed was open to the public, as required by Texas law, and that advance public notice of the time, place and purpose of said meeting was given. Section 13. That this ordinance shall be served on TXU Gas Distribution by U. S. Mail to the Company's authorized representative, Autry Warren, Rates Manager, TXU Business Services, 1601 Bryan Street, Dallas, Texas 75201-3411. Section 14. That nothing contained in this Ordinance shall be construed now or hereafter as limiting or modifying, in any manner, the right and power of the City under law to regulate the rates and charges of TXU Gas Distribution. Section 15. That all ordinances, resolutions, or parts thereof, in conflict with this Ordinance are repealed to the extent of such conflict. To the extent Public Authority Rates are in effect in the city, those rates are specifically repealed as Public Authority Rates, are now a part of the Commercial rates, and are calculated in accordance with the revenue requirement for Commercial customers. Section 16. That this ordinance shall be effective September 1, 2001, or earlier to the extent otherwise provided herein. PASSED AND ADOPTED this 13th day of August, 2001. Michael J. Pfiester, Mayor ATTEST: Mattie Cunningham, City Clerk APPROVED AS TO FORM: Larry W. Schenk, City Attorney -3- TXU TARIFF FOR GAS SERVICE IN THE EAST REGION DISTRIBUTION SYSTEM TXU GAS DISTRIBUTION EXHIBIT A TO ORDINANCE NO. Tariff for Gas Service TXU Gas Distribution RATE SCHEDULE: I Index of Rates & List of Cities No. 4200 APPLICABLE TO: East Region Distribution System REVISION: 0 DATE: EFFECTIVE DATE: PAGE: I of 4 RATES: 4200 4201 4202 4204 4211-13 4221 Index of Rates and List of East Region Distribution System Cities Residential Service Commercial Service Industrial Transportation Industrial Sales Industrial Sales & Transportation RATE ADJUSTMENT PROVISIONS: 4208-1 Gas Cost Adjustment 4208-2 Tax & Franchise Fee Adlustment 4208-3 Weather Normalization Adjustment MISCELLANEOUS SERVICE CHARGES: ~01 90O2 90O3 90~ 9O06 90O6 9007 Connection Charge Read for Change Charge Returned Check Charges Delinquent Notification Charge Main Line Extension Rate Excess Flow Valve Charge Certain Stand-by Gas Generators SURCHARGES: 4206 Surcharge Rider Tariff for Gas Service TXU Gas Distribution RATE SCHEDULE: Index of Rates & Uat of Cities No. 4200 APPLICABLE TO: East Region Distribution System REVISION: 0 DATE: EFFECTIVE DATE: PAGE: 2 OF 4 LIST OF EA~;T REGION DISTRIBUTION SYSTEM CITIES: Alba Alma Angus Anna Annona Athens Aver,/ Bardwell Barr'/ Bells Blooming Grove Blossom Blue Ridge Bogata Bonham Brownsboro Caddo Mills CampbelJ Canton Celeste Celina Chandler Chapel Hill Clarksville Collinsville Commerce Como Cooper Crandell Cumby Dawson Denison Deport Detroit Dodd City Ector Edom Emhouse Emory Ennis Eustace Farmersville Fate Ferris Fomey Frankston Frost GainesviIle Tariff for Gas Service TXU Gas Distribution RATE SCHEDULE: Index of Rates & List of Cities I No. 4200 APPLICABLE TO: East Region Distribution System REVISION: 0 DATE: EFFECTIVE DATE: PAGE: 3 OF 4 Garrett Goodlow Gunter Heath Honey Grove Howe Italy Josephine Kaufman Kemp Kerens Knollwood Ladonia Leonard Lindsay Lone Oak Mabank Malakoff Maypead Malissa Midlothian Mildred Milford Mobile City Muenster Murchison Nevada Palestine Palmer Paris Pecan Gap Pecan Hill Point Pottsboro Powell Poynor Princeton Quinlan Quitman Ravenna Red Oak Reno (Lamar County) Retreat Rice Richland Roxton Royse City Sadler Savoy Sherman Southmayd Star Harbor Tariff for Gas Service TXU Ges Distribution I RATE SCHEDULE: Rates & List of Cities f No. 4200 Index of APPLICABLE TO: East Region Distribution System REVISION: 0 DATE: EFFECTIVE DATE: PAGE: 4 OF 4 Sulphur Springs Sun Valley Terrell Tioga Toco Tom Bean Trenton Trinidad Tyler Valley View (Cooke County) Van Alstyne Waxahachie Westminster Whitehouse Whitesboro Whitewright Windom Wolfe City Yantis Tariff for Gas Serv[ce SCHEDULE: ;3PLICABLE TO: DATE: Resident;al Service Distribution System TXU Gas Distribution No. 4201 REVISION: 0 DATE: PAGE: I Or 1 RESIDENTIAL SERVICE Monthly Rate: Subject to applicable adjustments, the following rates are the maximum applicable to residential consumers per meter per month or for any part of a month for which gas service Is available at the same location. Customer Charge (Minimum Bill) $ 7.0000 All Consumption @ 1.2108 Per Mcr If the service period is less than 28 days in a month the customer charge is $.2857 times the number of days service. If the consumption contains a portion of an Mcf, a pmrata portion ofthe per Mcf charge will be made. Bills are due and payable when rendered and must be paid within fifteen days from monthly billing date. APPLICABLE RATE SCHEDULES/RIDERS Rate Adjustment Provisions: 4208-1 Gas Cost Adjustment 4208-2 Tax & Franchise Fee Adjustment 4208-3 Weather Normalization Adjustment Miscellaneous/Service Charges: 9001 Connection Charge 9002 Read for Change Charge 9003 Returned Check Charges 9004 Delinquent Notification Charge 9005 Main Line Extension Rate 9006 Excess Flow Valve Charge Surcharges: 4206 Surcharge Rider Tariff for Gas Service TXU Gas Distribution RATE SCHEDULE: I Commercial Service No. 4202 ~,PPLICARLE TO: East Region Distribution System REVISION: 0 DATE: EFFECTIVE DATE: PAGE: 1 OF 1 COMMERCIAL SERVICE Monthly Rate: Customer Charge (Minimum Bi]i) $ 12.0000 First 20 Mcf @ 1.2108 Per Mcf Nexl 30 Mcf @ 0.9108 Per Mcr Over 50 Mcf @ 0.7608 Per Mcf If the service period is less than 28 days in a month the custemer charge is $.5000 times the number of days service, if the consumption contains a portion ef an Mcf, a pmrata portion of the per Mcr charge will be made. Bills are due and payable when rendered and must be paid within fifteen days from monthly billing date. APPLICABLE RATE SCHEDULES/RIDERS Rate Adjustment Provisions: 4208-1 Gas Cost Adjustment 4208-2 Tax & Franchise Fee Adjustment 4208-3 Weather Normalization Adjustment Miscellaneous/Service Charges: 9001 Connection Charge 9002 Read for Change Charge 9003 Returned Check Charges 9004 Delinquent Notilicafion Charge 9005 Main Line Extension Rate 9006 Excess Flow Valve Charge 9007 Certain Stand-By Gas Generators Surcharges: 4206 Sumharge Rider Tariff for Gas Service TXU Gas Distribution RATE SCHEDULE: APPLICABLE TO: Distribution System No. 4204 REVISION: 0 DATE: EFFECTIVE DATE: PAGE: 1 OF 1 INDUSTRIAL TRANSPORTATION. Monthly Rates: The maximum fee for industrial transportation service on the East Region Distribution System is $ .7411 per MMBTU delivered plus applicable taxes exclusive of the backup fee. The above transportation fees include both the fees incurred to move the gas from the receipt point on the transmission system to the city gate and the fee incurred to move the gas from the city gate to the customer's facility. If the fees for transportation service on the transmission system change, the revised fees will be included in the overall transportation rate charged to customers. 100% of the increase in transportation fees incurred to move the gas from the city gate to the customer's facility is to accrue to the benefit of TXU Gas Distribution. Rate Schedule No. 4204 is closed to new customers as of the effective date o! this tariff. Current customers taking service pursuant to this tariff will no longer be eligible for this service upon contract termination. Current customers may convert their existing contract to new Rate Schedule No. 4221. When the final contract subject to Rate Schedule No. 4204 expires or is terminated, Rate Schedule No. 4204 will be cancelled. APPLICABLE RATE SCHEDULES/RIDERS Rate Adjustment Provisions: 4208-2 Tax & Franchise Fee Adjustment Surcharges: 4206 Sumharge Rider Tariff for Gas Service TXU Gas Distribution RATE SCHEDULE: Industrial Sales Nos. 4211-4213 APPLICABLE TO: East Region Distribution System , REVISION: 0 DATE: EFFECTIVE DATE: PAGE: 1 OF 1 IND STRIAL SALES Monthly Rates: Industrial Rates-N is hereby amended and revised as follows: Subject to Company's ~imitations on the availability of each rate, Customer shall receive service under its choice of one of the following rates in accordance with the rate selected by Customer as provided in the contract: RATE 4211 ' First 125 Mci or less ] $ 226.29 All over 125 Mcf @ I $ 1.767 per MCI 4212 ~ RATE First 600 Mcf or less I $1,012,17 All over 600 Mcf @ I $ 1.621 per MCI First I 1,2.50 MCI or less $1,954.57 All over I 1,250 MCI @ $ 1.561 per Mcf In all other respects, Industrial Ratas-N shall remain in effect as filed with the Cities in the East Region Distribution System. 100% of the increase in industrial margin is to accrue to the benefit of TXU Gas Distribution. Industrial Rate N is closed to new customers as of the effective date of this tariff. Current customers taking service pursuant to this tariff will no longer be eligible for this service upon contract termination. Current customers may convert their existing contract to new Rate Schedule No. 4221, When the final contract subject to Industrial Rate N expires or is terminatsd, Industrial Rate N schedule will be cancelled. APPLICABLE RATE SCHEDULES/RIDERS: Rate Adiustment Provisions 4208-2 Tax & Franchise Fee Adjustment Miscellaneous Service Charges: 9005 Main Line Extension Rate Surcharges: 4206 Surcharge Rider Tariff for Gas Service TXU Gas Distribution IRATE SCHEDULE: APPMCABLETO: . EFFECT VE DATE: Industrial ,Sales & Transportation East Region Distribution System No. 4221 IREVISION: 0 DATE: PAGE: I OF 2 INDUSTRIAL SALES AND TRANSPORTATION Monthly Rates: Customer Charge (Minimum Bill) $200.00 per meter Btu transported per month Rate/MMBtu First 600 MMBtu $0.6684 Next 650 MMBtu $0.5274 Next 48,750 MMBtu $0.4694 Over 50,000 MMBtu $0.3883 Availability: These rates are available to gas customers who elect to take service under the terms and conditions of this Industrial Gas Sales or Gas Transportation Contract and all schedules applicable to the service selected, attached as Industrial Gas Sales or Gas Transportation Contract and Schedules A, B, C, and D. Adjustment for Gas Cost: Each industrial sales customer's monthly bill shall be adjusted for gas cost as follows: The weighted average cost of gas (as defined below) times the volume factor (as described in Rate Schedule 4208-1 (1)(a)). The weighted average cost of gas pumhased shall be computed by dividing the total amount paid or accrued by TXU Gas Distribution (as reflected by the company's Gas Purchase Accounts), including a production, severance, dedication or gathering tax paid or accrued by company directly or by way of reimbursement to its gas suppliers, to producers, processors, transporters, or other sellers of gas in the latest available fiscal month by the total votume of pipeline quality gas in MMBtu pumhased by company during said period. In applying the gas cost adjustment clause, the adjustment shall be computed to the nearest one- hundredth of one cent. Company, from time to time, may be required by the terms of a gas pumhase contract (including an agreed settlement of disputed claim) or by a determination of a regulatory body or court to make additional payments with respect to gas previously purchased by Company. In such case, appropriate adjustments to compensate therefore shall be made in the price payable for gas hereunder as soon as practicable after the time of such payment so that the customer sharl bear a proportionate part of any such payment which has not been previously included in the weighted average cost of gas purchased as defined above. Tariff for Gas Service TXU Gas Distribution RATE SCHEDULE: - Industrial Sales & Transportation t No. 4221 ~M~PLICABLE TO: East Region Distribution System REVISION: ~.'~ DATE: EFFECTIVE DATE: PAGE: 2 CF 2 APPLICABLE RATE SCHEDULES: Rate Adjustment Provisions 4208-2 Tax & Franchise Fee Adjustment Surcharges: 4206 Surcharges OPTIONAL INDUSTRIAL (~AS SALES OR GAS TRANSPORTATION CONTRACT LS-MC# (For Certain Industrial Customers Served Inside a C/ty Through Distribution System Only) This Contract is entered into effective the d~ of 20 "Customer:" TXU Gas Distribution, a division of S~tD NOnCeS TO: TXU Gas C~mpany, "TXUGD:" Address: SEND NOTICES TO: 301 S. Ha~vood Street, Suite 460 South Attention: Dallas. Texas 75201 Fax: eMail: Arm: Contract Adntinistration SEND INVOICES TO: Fax: (2[4) 875-3584 Address: eMail: SEND PAYMENVl'S TO: Attention: eMail: P.O, Box 9109'i5 Dallas. Texas 7539143255 SERVICE OPTION: For the first Contract Year Customer may choose, subject to TXUGD's agreement, sales service with or without plant protection supply service or transportation service with or without plant protection supply service: and the quantifies of gas to be purchased or of gas as a pain of the Transportation Service Rate. Such percentage will be TXUGD's mos~ r~ently e.~s m, .b!~h~l~ .c°..mpa~ywide distribution lost COST OF NEW FACILITIES: Cusseme~ will pay TXUGD $ [Cusmm~'s Company By. Title TXU Gas Distribution, a division of TXU Gas Company By. Signature Signature Page Rev 05/25/01 Attach. to Rate Sch. 4221 01 SCHEDULE "A" TO OPTIONAL INDUSTRIAL GAS SALES OR GAS TRANSPORTATION CONTRACT Selection of Service Form I. Customer gives notice to TXU Gas Disu'ibudon ("rXUGD") that Customer, during the Contract Year beginning at 9:00 ^.M. central clock dine on the dayof .20_. and end~ng at 9:00 A.M. central clock dine on the __ day of 20_, between Customer and TXUGD (the "Conu'act'~, elects to receive [CHF. CK ONLY ON~,]: [ ] S~les Service wilhout Plaal Protealioe Supply Service. Customer agrees to purchat, e, receive and pay for gas during the Contract Ye. ar in accordance with TXUGD's latest effective Schedule of Optiona~ Industrial Rato~ for gas sales service in the city in which the Delivery Point is Ioc~ed (which schedule is incorporated by reference and made a pan hereof), toe,her with alt additional fees, chat~es and cosu provided for in this Contr~L Having selected sales service without plant protection supply service. Customer ag~ee~ thai the gas sold and the related gas ~les service provided under the terms this Contract will be subject to the priority of s~rvico for curtailment provided in the Schedule of Optional Industrial Rales and Mat TXUGD wiU have no duty or obligation to provide plant protection supply gas or standt~y gas supply for Customer. [ ] Sales Service with pleat P~oteedon Supp!y Service. Customer agrees to purchase, teoeive and pay for gas during ~be the city in which the Delivery Point is located (which schedule is incoq~oraled by re fere.~ce and made a pan hereof), to pay the Monthly Plant Protection Supply Charge, to pay the Plant Protection Supply Rate for the Plant Prmection Supply for curtailment provided in the Schedule of Optional lndusU'ial Rates. except that Plant Pro~ction Supply Volurcies will be ] Traasportation Service ~itbout Pl~t protection Supply Set,ce. Customea' agrees to receive and pay for gas transportation service during the Contra~ Year in accordance with TXUGD's latest effective Schedule of Optional industrial Rates fOr gas transportation service in the city in which the D~livery Point is located (which schedule is incorporated by ~ference and made a pan hereof), and to pay all.additional fee~, .charge~, tax reimbursement and made this choice, recog~ize~, unders~u~ds and agrees that TXUGD will have no duty et obligation to provide Customer or its third-party gas suppliers with plant protecti, ~on supply gas, "standby ~ supply." a ~o~ck-up" gas supply or any other gas. supply b~,ond the transportation of Customer s gas under the transpot~atnon tem~ of thts Conu'aal. ] Tra~port. etlon Service ~ith Pleat Protection ~upply Service. Custo~r agrees to receive ~nd pay for g~ transportation service during the Contract Year in accordance wtthTXUOD's laleal effect:ye Schedule of Optional ]ndualnal Ralas for gas transportation s~ce in the city in which the DeLivery Point !s ]ocaed (which schedule is. thco~p~ral~ by reference and made a par~ hereo0 to pay all additional fee~. charges, tax reimbursement and costs prowded for tn thts Contract. to pay the Monthly Plant Proroction Supply Charge, to pay the plant ProtealJofl Supply Rate for the Plant protection Supply Volume and to pay ali additional fees, charges, tax reimbursement and costs provided for in thi[ CootracL Customer agrees that the Plant Protection Supply Volumes will be subject to curtailment for rea~oM of force majeure. 2. The undersigned Customer dens hereby propose, subject to the agreement of TXUGD expressed bYi~s executi°n ° f this Selectlon Minimum MonthIy Quantity (Mi~vfO~ = 125 d~:atherms; Maximum Annual Quamity [P~r Contr,~ Yea:] (MAQ) = Ma~mum Dally Q'uanti~ (MDQ) = Maximum Hourly Quantity (MHQ) ~ Plant Protection Supply Volume ~ deca~eanns per day. ¢} per decatherm for the next 650 docalhern~; $0. (___ ¢) per ~lecatherm fo~ the next 48,750 decathcnns; $0. ( TXUGD to have the gas transported to the a, ppLictd~,le city gale. $0. C~ ¢) per d~atherrn for the next 650 decathenm: ~. C.~ ¢) per decalherm for the next 48,750 decathenm; 6. The present difference between the margin in the fiat block of the Conunercial Rate and the margin in the first block of the Rev 05/25/01 Attach. to Rate Sch. 4221 02 7. RETENTION: TXUGD may re~ain a percentage of the gas taceived for transport (the "Retention Volume") and will take title to such volume of gas as a pan of the Transportation Service Rate. Such percentage will be TXUGD's moss recently established companywide disu~butiun lost and unaccounted for gas percentage calculated as provided in 16 TAC Section '/.52(3 XB) u'tating al{ TXUGD disu'ibutiun systems as one system. The presently established pet~entage Lm c~. 8. If Customer elects transportation service hereunder. Customer agrees: (a) that 'I'XUGD's receipt and delivery of u-anspon gas under the terms and provisi.ons of th.is Contract is subjecl to limitetion, intcnuptlon or discontinuation and TXUGD will never be liable in damages or otherv.4sc on account of having so intern{pted or discontinued such receipts or deliveries of gas: (b) to assume any and all risks, including, but no~ limited to. lost profiu, damaged or destroyed fadlhir~.'lost or damaged production, damaged or destroyed machinery and/or equipmenl, and the failure of Customer's faci]ity and/or business due to an interruption or discontinuance of Customer's transport gas supply or of the transportation of such gas undtr this Cunu'aci: and (¢) to indemnify and hold TXUGD harmless Dom and against any and ail damages, cosls, losses and expenses (including reazunablc etlomeys' fees) thai may be susuined by T'XUGD due ~o any claim, demand, suit or action brought against TXUOD (whether or no~ the claim, demand, suit or action is found to be valid) by any pe~'son ot eutiuy arising out of. resulting from or connected, in whole or in pan. with an inten"uption ot discominuatJon of the supply of Lranspo~m {as or the transportation of such gas. 9. TXUGD.s let~t effective Schedule of Optlouul Indnstri~d Rates in tbe city in which the Delivery Poin~ is located, including the terms of the algunture pa~e, Sd~edule "A,' Sched,,le "B" and Schedule "C"' for gas sa{as service; and the signature Image. [Customer's Company By TXU Gas Distribution. a division of TXU Oas Company By END OF SCHEDULE "A" Rev 05/25/01 Attach. to Rate Sch. 4221 03 SCHEDULE "B" TO OPT{ONAIe I]VDUSTRIAL GAS SALES OR GAS TRANSPORTATION CONTRACT GENERAL TERMS AND CONDITIONS APPLICABLE TO BOTH SALF~ SERVICE AND TRANSPORTATION SERVICE ]. 0ualification (a) In order to qualify as a Customer and receive service under this Contract a customer must: (i) be served from a connection to a TXUGD distribution system downs:ream fxom a city gate and inside the boundaries of a city; (ii) be served without exceeding the capacity of TXUGD's existing facilities; and (iii) qualify to receive service as an industrial customer under TXUGD's Rate Schedule No. 200 issued in April of 1999; however, such customer may not bo an electric generation customer, and must consurae at least 1500 decatherms as an annual average instead of not less than 125 mcfper month of its Con,.ct Yeat. (b) A customer, other than a residential customer, that is otherwise qualified, but does not have a minimum ga~ usage of 1500 d¢cathetma a~ an annual average, may choose commercial class gas sales service. (c) Service under this Contract will not bo available to a customer that has another existing gas sales or transportation contract or agreement related to those facilities described on the signature page of this Contract for gas service from TXUGD's distribution facilities. Natural gas transportation or sales service unde.r this Contract will only be available to such customers upon the termination of such other contracts. (d) Customer must have emceed a vn'i'~ten agreement with TXUGD in the form of the Contract that is a part of the approved tariff applicable hereto. (e) Customer must have selected one of the service options and other variable terms and provisions that are agreeable to TXUGD, as provided on the signature page of this Contract and on the Selection of Service Form, which is included as Schedule "A." Such a signature page and such Selection of Service Form will, when agreed to by TXUGD, become a part of this Contract and incorporated herein. (0 This Contract. including all applicable Schedules and tariffs, constitutes the entire contract botween Customer and TXUGD with respect to Customer's facilities described on the signature page for the purposes herein designated. (g) Service under this Contract will only be available where Optional Ix~dustrial Rates are in effect. 2. Definitions (a) -Agreement" or "mutual agreement" a.s usexl in this Contract in regatd to an agreement of th~ par~ies on a variable term or provision of this Contract. at inception or in the future, mean an agreement that will not bo unreasonably withheld by either party; however, the agreement of TXUGD will necassa~ly b~ d~peedent upon the relevant disu-ibution system operating conditions, which TXUGD will not be required to change, and TXUC3D will not be required to change the capacity of its system or add new facilities. (b) "Billing month" means that period of time beginning at 9:00 A.M. central clock time on the first calendar day of a calendar month and ending at 9:00 A.M. central ulock time, on the first calendar day of the following calendar month for which TXUGD submits a statoment to Customer for the services, fees, tax reimbursement, costs, charges and compensation due to TXUOD under the provisions of this Contract. (c) "Conu'act Year" means ti~ period of time beginning at 9:00 A.M. central clock time on the first day of the month after initial deliveries of gas to Customer ate measured through TXUGD's rocasatement facilities and ending at 9:00 A.M. central clock time on the same day and month one (1) year thereafter, or as otherwise set forth on the signature page of this Contrant. (d) "Day" means the period of time beginning at 9:00 A.M. central clock time on one calend~t day and ending at 9:00 A.M. central clock time on the followiog calendar day. (e) "Decatherm" has the meaning set forth in paragraph 8(a) of this Schedule "B.' (t3 *Delivery Point" has the meaning set forth on the signature page of this Contract. Rev 05/25/01 Attach. to Rate Sch. 4221 04 (g) "Gas" means natural gas produced from gas wells, vaporized natural gas liquids, gas prodvced in associalion with oil {casinghead gas) and/or the residue gas resulting from processing casinghnad gas and/or gas well gas. (h) "Hour" means a sixty-minute period of time. "Hourly" will mean within an hour or over tee period of an hour, as may be appropriate in the context. (i) "Incorporated herein by reference," "made a pas~ of this Contract" and otha' words to the same effect mean incoq~orated within and made a part of this Contract. (j) "Margin" means the per unit charge in the furst step or block of TXUGD's effective Con~nercial Rate for gas sales or in the first step or block of TXUGD's Optional IedustHal Rate for gas sales, exclusive of any gas costs. (k) "Maximum Daily Quantity' has the meaning set forth in the effective Selection of Service Form. (I) "Mcr' has thc meaning set forth in paragraph 8(0 of this Schedule (m) 'Month" means the period of time beginning at 9:00 A.M. cenu'al clock time on the first day of a calenda~ month and ending at 9:00 A.M. eerie'al clock time on the £trst day of the succeeding calendar month. (n) "Monthly Plant Protection Supply Charge" has the meaning set forth on the signature page of this Contract. (o) "Plant Protection Supply Volumes" means the quantity of gas agreed upon in the a~oplicable, selection of Service Form. (p) "Plant Protection Supply Rate" has the meaning set forth on the signature page of this Contract. (q) "Retention Volume" has the meaning set for~ on the signature page of this Contract. (r) "Taxes" has the meaning set ford~ in paragraph 1 l(b) of this Schedule "B." (s) "Va'iable terms and provisions" means those terms and provisions of this Con,act agreed upon by TX'-UGD and an individual Customer, ~ may be unique to that Customer, in order m complete the blanks in the form of the signature page or a Selection of Service Form, a~ached as Schedule "A," that becomes a part of this Con~ract. (t) "Year" means the period of time beginning at 9:00 A.M. central clock time on any day of a calendar month and ending at 9;00 A.M. cen~l clock time on the same day of the succeeding calendar year. 3. Option Customer will ~ave the option for the £u'sl Contract Year and each Con,'act Yea' thereafter, subject to the agreement of TXUGD, to choose between sales service with or without plant protection supply service and transportation service with or without plant protection supply servlce subject to the terms of this Con~act~ as provided in the Selection of Service Form in the form set out in Schedule "A." at least ninety (90) days prior to the beginning of such subsequent Conu~ct Yea'. If Cuatomer fails to make such a selection, or fails to make a timely selection for such a subsequent Contract Year. the type of service provided by TXUGD during the subsequent Contract Year will. subject to the agreement of TXUGD. semaln the same as the service provided during the prior Contract Yea'. 4. Plant Protection Su~nlv Service (a) A Customer selecting plant protection supply service, as may be mutually agreed to by TXUGD in Schedule "A." may take up to the Plant Protection Supply Volume as purchased plant protection supply gas each day during the term of this Contract. except to the extent that TXUGD is unable to deliver such gas for reasons of force majeure; however. Customer wilt pay TXUGD for a volume of plant protection supply gas equal to the Plant Protection Supply Volume agreed to in Schedule 'A' for each day during the term of this Contract whether such volume of gas is actually taken by Customer or not. The volume of plant protection supply gas actually taken by Customer may be less than. but may not exceed the Plant Protection Supply Volume mutually agreed upon by TXUGD and Customer in Schedule (b) Customer will pay for plant protection supply gas at a rate equal to the per unit charge in the latest effective Schedule of Optional Industrial Rates for gas supply service established for the city in which the Delivery Point is located as they may change from time to time. Rev 05/25/01 Attach. to Rate Sch. 4221 05 (c) The term '~lant protection" means the protection of Customer's Facility described on thc signature page of this Contract and the production and processes in Customer's Facility. during the period of any curtailment of sales s~rvice or interruption of ~ansportailon service, to the extent neeessar~ to avoid damage to: (l) Customer's Facility. (2) the product during the manufacturing process. (3) or the material used to manufacture the p[odact during the manufacturing process. "Manufacture," "manufacturing," and "prodaction" may innlude processes involving Customer's uses of the 'gas sold or ~ansported that ma~e a product suitable for sale or use and may not be limited m the making of a product from raw materials. (d) For measurement, accounting and billing purposes the last volumes of gas delivered each day are deemed to be plant protection supply gas. Thc remainder of the gas delivered, ifa. ny, is deemed to be gas transported under d~e ~'ansportafion service provisions of this Contzact, giving dee consideration to thc Retention Volume, for a ~ansportation service Customer and deemed to be gas sold and delivered under the sales service provisions of this Contract for a sales service Customer. (e) Thc delivery and sale of pinnt protection supply gas will only be curtailed w less than the Plant Protection Supply Volume by TXUGD for reasons of force majeure as provided in Schedule "B," paragraph 13. (f) During periods in which a cunailmant of gas sales servlce or interraption of gas transportation service is in effect, a Customer receiving plant protection supply service that has standby fuel must use the standby fuel unless by reasons of force majeure such Customer is unable to do so. During such a period, in which such a Customer is unable to use its standby fuel for reasons of force majeure, TXUGD will provide Customer with plant protection supply service gas, except to the extent '2'XLTGD is unable to do so for reasons of force majeure.. (g) Notwithstanding any other provislon of this Con,act. to the extent a Customer recaiving plant protection supply service takes less than the Plant Protection Supply Volume during a period of curtailment of gas sales service, a period of interruption of gas transportation service or a period in which TXUGD is unable to deliver plant protection supply gas for reasons of force majeure. Customer will not be required to pay for the pordon of the Plant Protection Supply Volume that 'I'XUGD did not deliver and the Customer did not take. (h) Customer will not have a right to ta~ or purchase plant protection supply gas in excess of the Plant Protection Supply Volume during any day, (i) If Customer should take gas in excess of the Plant Prorecdon Supply Volume during a day in a period when TXUGD has no force majeure in effect, but has placed a cur~lmeat down to or below plant protection levels in effect for other reasons, Customer will pay TXUGD for such volumes in excess of the Plant Protection Supply Volume at a tare equal to the $rea~er of the highest, pr[ce paid for gas by 'FXUGD during that monthly period or 200% of the highest daily Houston Ship Channel price during that monthly period, as reported in Gas Daily. Q) If the reasons of force majeure that prevem the sale or delivery of plant protection supply gas to a transportation service Customer by TXUGD ate such that TXUGD romains capable of transporting a transportation Customer's gas from the Receipt Point(s) to the Delivery Point. TX-dOD will transport such gas to the extent it is capable. giving due regard to tho Retention Volun~. (k) Plant protection supply gas actually taken and the Plant Protection Supply Volume will not be considcred in any calculation of an imbalance in ~anspotlation volumes except tn order to exclude such purchased volumes fi.om having an effect upon such transponat.ion imbalances. (I) Billing for the sales and purchases of plant protocdon supply gas will bt in the manner described in Schedule "B," paragraph 12. 5. Laws. Regulations and Warranty (a) This Contract will be subject to all applicable state and federal laws, orders, directives, rules and regulations of any governmental body, official or agency having jurisdiction over the subject matter hereof: therefore, TXUGD's obligations and liabilities hereunder will be limited accordingly. (b) TX-,JGD's Schedule of Optional Industrial Rates may be revised or replaced from time to time in the future by a regulatory authority with jurisdiction. Any such revised or new Schedule of Optional Industrial Rates. when lawfully established, will immediately become effective and be applicable to gas sales service, gas transportation service and plant protection supply service under this Contract commencing with gas deliven~:l after the effective date of such change. Should new or different rates, or terms and conditions of service, be established for any service under this Rev 05/25/01 Attach. to Rate Sch. 4221 06 Contract by a regulatory authority with jurisdiction, such rate(s) or terms and conditions of service will supersede conflicting provisions of this Con,'ant. Company will give Customer notice of any such change, together with a copy of the revised Schedule of Optional Indus,/al Rates. The notice herein provided foe will be deemed to have been given when forwarded by the party giving the same addressed to Customer at the address shown in this Contract by first class mall. postage prepa/d, separately or in Customer's billing statement. (c) Customer warrants-to TXUGD thnt its or'its agent's facilities utilized for the acceptance, receipt, transpenation or delivery of gas hereunder are not subject to the Natural Gas Act of 1938. as amended. (the "NC}A"). As a material representation, without which TXUGD would not have been willing to execute this Contract. Customer wm"rants to TXUGD that Customer and its agents will take no action nor con-w~it any act of omission that will subject this transaction, the facilities of TX'UGD, or gas that TXUGD has title to or possession of to the jurisdiction of the Federal £usrgy Regulatory Commission CFERC") or its successor governmental agency under the terms of the NGA. the Natural Gas Policy Act of 1978, as amended (the "NGPA"). or any other law. The gas accepted. received, transported or deIivered hereunder shall not have been nor shall be purchased, sold. transported or otherwise utilized in a manner that will subject TXUGD, its gas. its facilities or gas it has possession of. to the terms of the NGA or the NGPA or any other act causing TXUC3D, its gas, ils facilities or gas it has possession of to become subject to the jurisdiction of the FERC or a similar federal agency. In addition to. and without excluding any remedy that TXUGD may have at law or in equity, if Customer breaches the above warranties and representations Customer will be liable to TXUC}D for all damages, injury and reasonable expense that TXUGD may sustain by reason of any bmanh hereof. Further. should Customer or ils agents through any act or omission cause any gas or facilities involved in the performance of this Contract to become regulated by or subject to jurisdictional authority of the FERC. a successor governmental authority or the jurisdiction of any other federal regulatory agency, under the terms of the NGA or NGPA or any other law affecting the benefits or' value of this Contract, this Contract will automatically terminate on the day before the date of such occurrence; provided, however such termination will never be construed so as to impair' any rights of TX'UGD with regard to such breach of contract. Customer hereby waives any defense for breach of this paragraph that TXUGD could avoid NGA jurisdiction under the provisions of Section 1 (e) of such Ant. 6. Term (a) This Contract will remain in full force and effect, subject to the terms and provisions hereof, for a primary t~rm as specified on the signature page of this Conu'acL and from Contract Yeac to Contract Yea~ thereafter until canceled by either party giving the other party written notice at least thirty (30) days prior to the end of the primary term or prior to the end of any Contract Ye, at afar the end of the primary term. However, any termination, cancellation or expiration of this Contract will never operate to extinguish the obligation to make payment for moni~s due hereunder. (b) Service will not commence under this Con~ract until after 9:00 A.M, on the day of installation of the electronic measurement facilities, related leleme~-y equipment and an opurationa/telephone line for and compatible with TXUGD's elec~onic gas measurement facilities and related telemeU'y equipment at the Delivery Point. 7, Pressures a~ points of Receiot and Delivery (a) Cuswmer (or its designee) will deliver gas to TXUGD at the Receipt Poim(s) at prassurus sufficiunt to enter TXUGD's pipeline system at such point(s); provided, however, tha~ Customer's delivery pressure into TXUGD's system at the Receipt Point(s) will not exceed TXUGD's maximum allowable operating pressure, as such may vary from time to time, at any such point(s), or cause the pressure at such point(s) to exceed TXUGD's maximum allowable operating pressure. (b) TXLTGD will deliver gas to Customer at TXUGD's operating pressure, as such may vary from time to time. at the Delivery Point. (a) The unit of measurement of gas for all purposes will be the "decatharm." The term "decatherm" as used in this Contract means a volume of gas Otat contains a sufficient number of British thermal units ('Btus") per cubic foot of gas such that the pedduct of the volume multiplied by the number of Btu per cubic foot of gas equals one million (1,000,000) Btu, or one (1) IVI3/B tu. determined at a temperature of sixty (60) degrees Fahrenheit, ~mrated with water vapor and under a pressure equivalent to that of thirty (30) inches of mewury at thirty-two (32) degrees Fahrenheit converted to base conditions of sixty (60) degrees Fahtenbelt and an absolute pressure of fourteen a-al sixty-five one hund~dths (14.65) pounds per squase inch and adjusted to reflect actual wnter vapor content. Gas measurements will be computed by the measuring party into such units in accordance with the Ideal Gas Laws for volume variations 4 Rev 05/25/01 Attach. to Rate Sch. 4221 07 due to metered pressure and corrected for dcviation using average values of recorded relative density and flowing temperature, or by using the calculated relative density determined by the method mentioned in paragraph lC) below. In no c~cumstance will the average value of flowing temperature or relative deasity be determined for a period of {ess than one day. (b) The facilities installed for measurement of ga~ hereunder will be installed and operated, and gas measurement computations will be rfiade, in accordance with current industry standards. Orifice metering will be done in accordance with the latest version of A.G.A. Report No. 3 - AN$1/API 2530. Positive displacement and turbine metering will be done in accordance with the latest version of A.G.A. Report No. 7, Electronic Gas Measurement (EGM) will be done in accordance with the latest version of APl Manual of Petroleum Measurement Standards Chapter 21 - Flow Measurement Using Electronic Metering Systems. (c) TXUGD may at its expease properly install and operate a device of standard make to continuously determine or record flowing temperature. The temperana'e values shall be used in gas measurement computations. With respect to relative density (specific gravity) of the gas, such shall be determined by (i) [on-site] sampling and laboratory analysis; or (ii) any other method which is of standard industmy practice; (iii) provided, however, that either party may at its own expense properly instaII and operate a recording relative density instrument of standard make and in this event the relative density as recorded shall be used in the gas rneasurcment computations. (d) The average heating value (in Btu) and relative density of the gas delivered hereunder by either party may be determined by the use of recording instruments of standard type, which may be installed and operated by TXUGD at the measuring point, or at such other point or points as axe mutually agreeable to both parties; prov. ided, however, if there is no Btu/relative density instrument at a particular Receipt or Delivery Point specified herein or agreed upon hereunder, then the heating value and relative density of the gas at such point may be determined by [on-site] sampling and laboratory analysis. (e) The terms "decatherm" and "MMBtu" may be used thterehangeably th this Contrect as a measure of vo{ume or heat content under the conditions stated in paragraph 8(a), and may be convened from one to the other in accordance . with the Ideal Gas Laws under those conditions when necessary. (f') The term "Mc£' means one thousand (1,000) cubic feet of gas under the conditions stated in paragraph 8(a). (g) In gas measurement computations thc dctormiuatioas for the average values for meter pressure, relative density and flowing temperature values will be determined only during periods of time when gas is actually flowing flu'ough the measuring facilities. 9. Measuring]~uinment and Testing (a) The gas delivered to TXUGD (or its designee) at the Receipt Point(s) for transportation by TXUGD will be measured by means of gas measuring devices of standard type that will be installed, operated and maintained by TXUGD (or its designee) and gas delivered to Customer at the Delivery Point, whether sold or u-ansported, will be measured by electronic gas measurement facilities of stand~d type that will be installed, operated and maintained by TXUGD (or its designee). Gas measurement devices and equipment will be tested and adjusted for accuracy on a regular schedule by TXUGD (or its designee). (b) If adequate measuring facilidas are already in existence at the Receipt Point(s) and adequate electronic measuring facilities are already in existence at the Delivery Point hereunder, such existing mensming facilities will be used for so long as, in TX'UGD's sole opinion, they remain adequate and Ibe patty having title to such facilities will retain title to such facilities. (c) It is agreed that it will be necessary for TXUGD to install electronic gas measurement facilities at the Delivery Point in order to comply with the various measurement and monitoring gn'ovisioas of this Contract, if, in TXUGD's sole judgement, adequate electronic gas measurement facilities are not already located at the Delivery Point. (d) lfocworadditional facilities are required to effectuate the reeeipt or delive~ of gas hereunder, Customer agzees to reimburse TXUGD. within thirty (30) days from the date of receipt of TXUGD's invoice, for the cost of any *ap valves, measuring facilities and associated equipment and all labor and overhead expenses (including applicable federal income tax imposed as a result of installation of such facilities), attributable to the installation of such equipment. If the invoiced amount is not paid when due, interest on all unpaid amounts will accrue at tha rate of one and one-half percent (1 - 1/2%) per month, or the highest rate allowed by law. whichever is less, from the date such amount is due TXUGD. If TXUGD docs not receive total reimbursement through the payment of such invoice 5 Rev 05/25/01 Attach. to Rate Sch. 4221 08 within sixty (60) days from Customer's receipt of TXUGD's invoice. TXUGD may suspend and/or terminate this Contract. (c) It is ag!etd that it will be necessary for TXUGD to install electronic gas measurcmen! facilhies at the Delivery. Point in order ,to comply with the various measurement and moni!oring pruvisious of this Conu'act. if. in TXUGD's sole judgemenL adequate electronic gas measurement fac!lilies ate not already located a! the Delivery Point. (~ If TXUGD installs any new electronic gas measurement facilhies, related communicatious eqthpment or telemeu"y equipment, Customer agrees to pay TXUGD the amount specified in the Cost of Ne w Facilities section of the signature page of this Contract within ninety (90) days of the date of initial deliveries under this Contract. to cover the initial cost of all such facilities (including applicable federal income tax imposed as a result of installation of such facilities) and related set-up expenses related to all such new facilities. All such facilities will be the sole property of 'f'XUGD and will be operated and maintained by TXUGD at TXUGD's expense. If any amounls due under this paragraph are not paid when due. interest on all unpaid amounts will accrue at the rate of one and one-half percent (1-1/2%) per month, or the highest rate allowed by law, whichever is less. from the date such amount is due TXUGD. IfTXUGD iustalls new electronic gm measurement facilities, TXUGD agrees to provide and maintain a telephone connection to, and a compatible and operational telephone i{ee for, TXUGD's electronic gas measurement facilities. (g) If at any time after the date of initial deliveries hereunder 'TXUGD determines that additional facilities required to effectuate the receipt or delivery of gas hereunder, Customer will reimburse TXUGD, within 30 days from the date of receipt of TX'UGD's invoice, for the cost of any tap valves, measuring fac!lilies and associated equipment and all labor and overhead expenses (iocluding applicable federal income tax imposed_ as a result of installation of soch facilities), attributable 1o the installation of such equipment. If!be invoiced amount is not paid when due, interest on all unpaid amounts will accruc at the rate of 1-1/2% per month, or the highest rate al!owed by law, whichever is less, from the date such amount is due TXUGD. If TXUGD does not receive total reimbursement through the payment of such invoice within 60 days fi.om Customer's receipt of TXUGD's invoice. TXUGD may suspend and/or terminate this Contract. (h) It is understood and agreed that although Customer will reimburse TXUGD for any tap valves, measuring facilities and ali associated costs (including income taxes) incurred by TXUGD in establishing any Receipt Point(s) and/or the Delivery Point hcreandet, Customer may, in such event, receive only the ownership of such measuring facilities, but TXUGD will receive ownership of alt cap and tap valve installations and all associated equipment- TXUGD will be solely responsible for all activities in connection with said measuring facilities and all tap and tap valve installations and all associated equipment, including, but not limited to, opera!loc, testing, calibration, adjusting, repair and replacement (at Customer's expense), and maintenance, necessary for performance of this Contract until TXUGD disconnecLs and removes the measuring facilities after termination of this Contract. After such disconnection and removal, Customer will have the Hght to claim and take possession of such measuring facilities (previously paid for by Customer) fxom TXUGD. Customer's failure to so claim and take possession of such measuring facilities within ninety (90) days of TXUGD's notice of disconnection and removal thereof, will constitute a waiver by Customer of any right, tide or interest in and to such measuring facilities and the transfer of all right, title and interest therein to TXUGD. TXUGD will retain ownership of ail equipment associated with tap and tap valve installations. (i) The Customer will have access to observe TXUGD's Delivery Point measuring facilities at all times, but all maintenance, calibration and adjustment of the Delivery Point measuring facilities will be done only by the employees or agents of TXUGD. Records from all such measuring facilities will remain the property of TXUGD and will be kepi on file by TXUGD for a period of not less than two (2) years. However. upon request of Customer within such two (2) year period, TXUGD will make the measurement records from the measuring facilities, together with any calculations therefrom, available to Customer for inspection and verification, subject to return by Customer to TXUGD within thirty (30) days after receipt thereof. (j) Customer may, at iLS option and expense, install and operate measuring facilities, check meters and related insmamenLS and equipment, in a manner which will not interfere with TXUGD's equipment, to check TXUGD's Delivery Point measuring facilities, instruments and equipment, but the me~ssurement of gas for the purpose of this Contract, both at the Delivery and Receipt Points, will be by the facilities of TXUGD (or its designee) only, except as hereinafter specifically provided, The gas measurement facilities, check meters, ins~xumenLs, and equipment installed by each party at the Delivery Point will be subject at all reasonable tim~s to inspection or examination by the other party, but the calibration and adjustment thereof, as well as those at the Receipt Point(s), will be done only by the installing party, Rev 05/25/01 Attach. to Rate Sch. 4221 09 (k) TXUGDwill, atCustomer,swritrenrequcst, give to Custoracr noticeofthetime°falltes~s°fthe Receipt Point or Delivery Point electronic gas measurin8 facilities, as may be applicable, sufficiently in adva~ce ef such tests so that Customer may conveniently have its representatives, present:, provided, however, that if'rXUGD, has given such notice to Customer and Customer is not present at the nme specified, then TXUGD may proCec:l vath the tests as · . . · ' ' Point Designee though Customer were presenL TXUGD well ~.ve nonce to Customer's P, ecetpt Pome or Dchvery (who is responsible for the physical receipt or delivery of gas at the point), as may be apphoab,e, of the ume of all tests of such electronic'gas measuring facilities sufficiently in advance of such tests so that Customer's designee may notice to Customer's designee and conveniently be presem; provided, however, that if TXUGD has given such test us though Customer's designee is not preSent at the time specified, then TXUGD may proceed with the Customer's designee wern presenL (1) Gas meesurements computed by TXUGD (°t its desigeee) will be deemnd to be c°rrect except where the gas measurement facilities are found to be inaccurate by mor~ ~ one percent (1%), fast ct slow. or to have failed to register, in either of which cases TXUGD will repair or replace the measurement facilities. Th~ quantity of gas delivered while the measurement facilities were inaccurate ct failed to register will. at TXUGD's di~retion be determined by: (i) the readings of Customer's check meter,, if installed, and. in good operating, condition:. .(ii) by... correcting the error if the percentage of ecror is ascenmnable by cahbrauon or mathematical calculation, or (m) by estimating the quantity on a basis of deliveries under similar conditions when the measurement facilities were registering accurately. (m) It is understood ~nd agreed that Customer's n~ansportation gas will be part of and will be measuled as a pail of a commingled stream of gas by the measuring purty at the Receipt Point(s) such that the quantity of gas delivered by Customer to TXU(3D (or its designee) at the Receipt Point(s) for transportation under this Contra.~ may be determined by an allocadon methodology provided for in balancing provisions in this Contract or in another asroement between: (A) Customer and Customer's transporter that delivers such gas to the Receipt Point(s); (B) TXUGD and Customer's wansporter that delivers such gas m the Receipt Point(s); or (C) TXUGD and Customer. 10. Easement. Access. Removal Customer will provide, in accordance with TX'UGD's specifications, thc necessary service lines on Customer's premises m connect with TXUGD's lines and suitable space and an easement for TXUC3D's lines and other equip- merit, including, but not limited to, a telephone llne and associated equipment rc[atnd to electronic gas measurement facilities and teleme~y equipmenL Customer will use due care to protect TXUGD's propet~y that i~ located on Customer's premises from damage and will permit no person other than an agem of TXUGD, or a person otherwise lawfully authorized, to tamper with, inspect or remove same, All propet~y belonging to 2"XUGD and located on Customer's premises will be removable by 2'XUGD at any time during the term of this Contract and within a reasonable time after its termination or after reasonable nodce of Customer's desire to have such property removed, title thereto remaining in TXUGD a~ all 6mes. TXUGD will have full and free ingress to and egress from Customer's premises for the construction, inspection, maintenance, repair and removal of TXUGD's property thereon or for any purpose conee~ted with the service provided under this Con,'act. 11. Taxes (a) Customer agrees to pay TXUGD. by way of reimbursement, ail Taxes paid by TXUGD with respect to the sales service, the transportation service, the plant protection supply service and any other commodity or service provided hereunder, and that may be related to any associated facilities involved in the performance of this Contract If any such Taxes paid by TXUGD to any goveramenl~l author/ty are calculated based upon the value of or price paid for thc gas w, msported hereunder, Customer will disclose m TXUOD the purchase price of such gas to enable TXUGD to calculate and pay all such fees and taxes to appropriate goveramen~l anthodties in a timely manner. If Customer fails or refuses to disclose thc purchase price of such gas within sixty (60) days from the date thc related wanspotmtion service is provided, TXUGD will have thc right to pay such fees and taxes based upon the hishest prices reported for thc per/od in Gas Daily for gas purchased or gas sold in the State of Taxas and to be reimbursed by customer, In any event. Customat agrees to indemnify TXUGD for. and hold TXUGD harndess from, any and ali claims, demands, losses or expenses, including auorneys' fees. which TXUGD may incur as a result of Customar's faihirc or refusal to disclose the purchase price of gas mmspormi hereunder. Rev 05/25/01 Attach. to P,ate Sch. 4221 10 (b) The term "'Taxes" as used herein means all taxes and fees levied upon and/or paid by TX'UGD [other than ad valorem, capital stock, income ut excess profit taxes (except as provided herein), general franchise t~xes imposed on corporations on account of thcLr corporate existence or on ~ r right to do business within the state as a foreign corporation and similar taxes], including, but not limited to, gas utility tax, s~'eet and alley tents] fees set out ~n franchise ordinances, licenses, fees and other charges levied, assessed or made by any governmental authority Qn the act, right Or privilege of selling, U'ansporfing. handling ut delivering gas, which taxes or fees am based upon the volume, heat content, value or saies/putchuse price of the gas, or transportation fee payable hereunder, any other fee, charge or payment bereundet and applicable federal income tax imposed as a result of installation of equipment al the Delivery Point or Receipt Point(s) under the terms of this Contract. Any income tax costs of TXUGD that have been reimbursed to TXUGD by Customer under paragraphs 9(d) and 9(f) will not be reimbursed to TXUGD by Customer under this paragraph 11. 12. Bill[ne. Accountiniand Re°oru (a) On approximately the fifteenth (15th) day of each month, TXUGD will render to Customer a statement for compensation for all fees, charges, costs, tax reimbm~ement and services payable under this Contract for the preceding month, showing either the number of Btu or the number of decatherms daiivernd at the Receipt Point(s} and Delivery Point, the amount of compensation due to TXUGD under this Contract, including tax reimbursement. other reasonable and peninem information that is necessary to explain and support the same and any adjustments made by TXUGD in determining the amount billed. TXUGD may deliver to Customer such statements of amounts owed to TXUGD by United States mail (first class, registered or certified), postage prepaid, fax, electronic medium, email or delivery service at the mailing address or electroaic medium address provided on the signature page of this Contract. The fax, email, mailing address and electronic medium address provided on the signet .ul'e page of this Contract may be changed at any time by either party upon thirty (30) days prior written notice to the other party. (b) Customer will pay TXUGD withina period of ten (10) days from the date TXUGD's statament setting out the compensation due under this Contract for ail fees, charges, costs is deposited prepaid in the United States mail, or us to payment which is otherwise due, according to the measurements, computations and rates herein provided, TXUGD hereby agrees, however, that Customer may pay any such statement by bank wire Iransfcr by directing the bank wire transfer to TXUGD at Chase Texas Bank, Dallas, Texas, ABA No. 113000609. for deposit to TXLTGD Account No. 08805016795. To assure proper credit. Customer should designate the company name, invoice number and amount being paid in the Fedwire Text Section. If the invoiced amount of any payment due is not paid when due, interest on ail unpaid amounts will accrue at the rate of one and one half percent ( 1 - iE2%) per month, or the highest rate allowed by law, whichever is less, from the data such amount is due TXUGD; provided, however no interest wil! accrue on unpaid amounts when failure to make payment is the result of a bona fide dispute between the parties hereto regarding such amounts (and Customer timely pays all amounts not in dispute), unless and until it is ultimately determined that Customer owes such disputed amount, whereupon Customer will pay TXUGD that amount, plus interest computecl back to the original payment due date, immediately upon such determination, The designated banks, addresses and accounts for wire transfer may be changed at any time by TXUGD upon thLrty (30) days prior written notice to Customer. (c) Notwithstanding any other provision of this Contract, Customer will make payments for ail gus service under this Contract beginning with initial deliveries. (d) If Customer fails to pay bills for service within twenty (20) days from the date they ate rendered hereunder or otherwise defaults under this Contract, Company may suspend service and deliveries of gas and such suspension will not prevent enforcement by Company of any of its legal rights. Waiver by Company of a particular default hereunder will not be deemed a waiver of subsequent defaults whether similar or dissimilar. (e) Each party hereto will have the right at ail reasonable times to examine the measurement records and charts of the other par~y, or its agenu'dasignee if any, to the extent necessary to verify the accuracy of any statement, charge, computation or demand made under or pursuant to any of the provisions in this Contract. If any such examination reveals any inaccuracy in such previous billing, the necessary adjustments in such billing and payment will be made; provided, that no adjustments for any billing or payment will be made for any inaccuracy claimed after the lapse of twenty five (25) months from the rendition of the invoice relating thereto. (0 If the credit worthiuess or financial respousibifity of Customer should, in the sole opinion of TXUGD. ever become unsatisfactory, then upon request by TXUGD at any time and from time m time during the term of this Conlract, Customer will deposit with 'FXUGD (i) such amount of money requested by TXUGD, or (ii) a let*et of credit in a form acceptable to TXUGD from a financial institution acceptable to TXUGD in an amount requested by TXUGD, to guaxantee the payment of statements and invoices hereunder, as well as any possible imbalances Rev 05/25/01 Attach. to Rate Sch. 4221 11 hereunder. Upon the termination of this Conu'ac:. any money so deposited, less any amount due TXUGD by Customer. will be refunded to Customer. 13. l~orqe Maieur~ (a) In the event either party is rendlered unable, wholly or in part. by force majeure to carry out its obligations under this Contract, except the obligation to pay monies due hereunder, it is a~eed that, on such party's giving notice and reasonably full particulars of such force majeure, in writing or by fax. email, electronic transfer or telecopy, to the other party within a reasonable time after the occurrence of the cause relied on, the obligations of the party giving such notice, to the extent they are affected by such force majeure, will be suspended during the continuance of any inability so caused, but for no longer period, and such cause will, so far as possible, b~ remedied with all reasonable dispatch. Inability or failure of TXUGD to deliver, or. TXIJGD to receive gas or perform under this Contract may. not be thc basis of claims for damages sustained by etther party or for breach of contract when due to force majeure. (b) The term "force majeure," as employed herein, means acts of God: thc clements; strikes, lockouts or other labor troubles or industrial disturbances; acts of the public enemy, wa~s. blockades, insun~ctioes, civil disturbances and riots, and epidemics; landslides, lighming, earthquakes, lures, storms, floc~s and washouts; acts. arresu, orders, directives, restraints and requirements of the government and governmental agencies, whether federal, state, civil or milieu'y; accidents: explosions; breakage, accident or obstructions involving a pipeline, machinery or lines of pipe: repairs or outages (shutdowns) of power plant equipment or lines of pipe for inspection, maintenance, change or repair: freezing of lines of pipe: depletion or failure of TXUGD's gas supply: fluctuations in gas pressure; demands in excess of the capacity of TXUGD's equipment, pipelines or TXUGD's sources of gas supply; and any other causes, whether of the kind enumerated or otherwise, not reasonably within the consol of the par~.y claiming suspension. It is understood and agreod that the handling of litigation with thixd paxties of any fact or issue and the settlement of strikes or lockouts will be entirely within the discretion and control of the patty involved, and that thc above reasonable dispatch will not require any particular action or the settlement of strikes or lockouts by acceding to the demand of the opposing party when such course is deemed to be inadvisable or inappropriate in the discretion of the party involved. 14. Waiver of Breaches. Defaults or Risthts, Performance durin~ Default No waiver by either party hereto of any one or more breaches, defaults or rights under any provision of this Contract will operate or be construed as a waiver of any other breaches, defaults or rights, whether of a like or of a different character. By providing written notice to the other party, either party may assert any right not previously asserted hereunder or may assert its right to object to a default not previously protested. Except as specifically provided herein, in the event of any dispute under this Contract. the parties will. notwithstanding the pendency of such dispute, diligently proceed with the performance of this Contract without prejudice to the rights of either party. 15. Ren~dv for Breach Except as otherwise specifically provided herein, if either par~y fails to perform any of the covenants or obligations imposed upon it in this Contract (except where such failure is excused under the Force Majeure provisions hereof), then the other party may. at its option (without waiving any other remedy for breach hcxeof), by notice in writing specifying the facts giving rise to the default has occurred, indicate such party's election to terminate this Contract due to such failure, However. Customer's failure to pay TXUGD within a period often (10) days followthg Customer's receipt of written notice from TXUGD advising of such failure to make payment in full within the time specified previously herein, will be a default that will give TXUGD the right to immediately terminate this Contract, unless such failure to pay such amounts is the result of a bona fide dispute betweco the parties hereto regarding such amounts hereunder and Customer timely pays ail amounts not in dispute. With respect to any other n~ters, the party in default will have thirty (30) days from receipt of such notice to remedy such default, and upon failure to do so, the party sending the notice of default may terminate this Contract from and after the expiration of such thirty (30) day period by sending the other party a notice of termination within thirty (30) days from the end of the prior thirty (30) day period. Such termination will he an additional remedy and will not prejudice the tighl of the pared not in default to collect any amounts due hereunder for any damage or loss suffered by it and will not waive any other remedy to which the party oot in default may be entitled for breach of this Conlxuct. 16. Dispute Resolution Pursuant to the Federal Arbitration Act, the parties hereby agree that any controversy, chtitn or alleged breach, including but not limited to torts and statutory claims, at~ing out of ar related to this Contract shall be settled by binding arbitration administered by the American Arbitration Association ("AAA") Rev 05/25/01 Attach. to Rate Sch. 4221 12 in accordance with its Commercial Arbitration Rules. Demancl for arbitration may be made no later than the time that such acti~n w~u~d be permitted under the applicable Texas statute ~f limitati~n. Any disputes regarding the timeliness of the demand for arbitration shall be decided by the arbitrator(s). Judgment upon the award rendered by the arbitratorfs) may be entered in any Court having jurisdiction thereof in order to obtain compliance therewith, Any case in which any claim, or combination of clab~. , exceeds $500,000 will be subject to the AAA's Large, Complex Ca~e Procedures and decided by the majority of a panel of three (3) neutral arbitrators. In rendering the award, the arbitrator(s) will determine the rights and obligations of the parties according to the laws of the State of Texas (excluding any conflict of law principles), but punitive and ezemplary damages may not be awarded. The arbitration proceedings and hearings will be conducted at the Dallas Regional Office of the AAA or at such other place as may be selected by mutual agreement. No party nor the arbitrator(s) may disclose the existence, content or result~ of any arb[tratlon hereunder without the prior writlen consent of all parties. 17. ~Pipeline and Facility Safety Customer's piping and facilities downstream from or connected to the Delivery Point may be subject to potential hazards such as corrosion and leakage. Consequently. such piping and facilities should be inspected periodically for leaks and damage. If metallic materials are used. they should be regularly inspected for corrosion damage. If any deterioration or unsafe conditions arc discovered, they should be repaired or the affected facility replaced. Additionally, when any excavation work is planned, all buried facilities and piping in the axes shou. ld be located before beginning such work. Operators of underground facilities and piping on Customer's proper~y, including TXUGD, should be notified of the p armed excavanon acttvlties by contacting the Texas One Call service at (8 ) 344-8377. If the excavation is in the vicinity of any gas piping or facilities, they should be localed prior to beginning work and excavation near the piping or facilities should be accomplished by hand digging. Plumbers and heating contractors can assist in locating, inspecting and repairing Customer's buried piping and facilities. 18. Confidentiality TXUGD and Customer agree to keep the t~nns and provisions of this Conu'act confidential and to not disclose the terms of this Contract to any third panias. If disclosure is sought through process of a court, a government or a city, state or fedural regniatory agency, ti~ party from whom disclosure is sought will resist disclosure through all reasonable means and will immediately notify the other party to allow it rise opportunity to participate in such proceedings. However. each party will have the right to make such disclosuras, if any, to governmental agencies and to its own attorneys, auditors, accountants and shareholders that will in turn maintain in; confidentiality. TXUGD s. nd Customer agree to cooperate m maintain confidentiality of this Contract and to obtain a reasonable protective order or agreement to maintain that confidentiality under circumstances in which disclosure becomes necassar~. 19. Miscellaneous (a) All notices, requests, demands and sm,,'ments provided for in this Contract must be given in writing, direcled to the pazly to whom given, and mailed to. or delivered at. such party's address as specified on the signature page of this Contract or at such address as each patty may by like notice later give to the other. Such mailed notices will be dccmod to have been given when deposited in the United States mail (first class, registered or certified), postage prepaid, or sent by fax. electronic medium, email or independent delivery service at the mailing address provided herein. In thc case of hand delivery, notices will be deemed to have been given when delivered to a representative of ¢ithcr party by a representative of thc other pa,-ty. (b) This Conu-act constitutes the entlxe agreement between thc parties covering the subject matter hcreof, aod thcrc arc no ag~eemenU, modifications, conditions or understandings, written or oral. express or implied, pertaining to the subject matter hcroof that are not contained herein. No representation or statement of any representative of TXUGD will be a part of this Contract nor an inducement to the execution hereof unless incorporated fully herein and this Contract may not be amendcd except in writing duly executed by the parties. (c) Modifications of this Contract will be or become effectlve only upon the mutual execution of appropriate supplcmental agreements or amendments hereto in writing by duly authorized representatives of the respective parties. 10 Rev 05/25/01 Attach. to Rate Sch. 4221 13 The capdons or headings preceding the venous pans of chzs Contract at'c msortod and nc uded solely for (cdo)nvcnience and will never be considered or given any effect in cons~z'uin.~ this Contract or any pan of this Contrac,, or in connection with the intent, duties, obligations or liabilities of the panics hereto. · ' ' u n and inure to the benefit of the parties hereto and their respeclive successors (e) 'l~is Contrac! wall be binding po ....... ~.~.~ .... ~;~-ed by Customer without thc prior written cofisent of TXU'- OD. and such conSent may nor be uru-easonably withheld. Any purported transfer or assignment without such conSent will be null and void and w/Il not operate to release any obligation o1' Customer under chis Contract. · ' ' chis Contract, Both (f) TXUGD and Customer intend to be legally bound by the terms and provisions Set out tn TXUGD and Customer intend, acknowledge and agree that this Contract is entered into solely for the respective benefil of TXUGD and Customer. No provision of this Conlract. either cxpress or implied, will be interpreted or construed as conferring any rights, remedies or claims upon any person or entity not a party to this Contract, except (g) Tlds Contract is nmde in the State of Texas umi will be governed bY the laws of the S~te °fTex~s' without regard to eorfllict of laws provisions. (h) ~iunyd~spu~eunder~his~ntractis~tres~vndbymrbitrail~ndresu~tsin~il~g~ti~i~thec~urts~ Dallas County, Texas, will be the proper venue for such Uilgnfiom TXUGD will not bc liable for any loss, damage or injury resulting from the gas or im usc a~..t it flows out of ~ia)cilitics or equipment owned by TXUGD, or its agent or designee, and into facilities or equipment owned by Customer, or its agent or designee, at thc Delivery Point, all risks thereof and therefrom being hereby assumed by END OF SCHEDULE 11 Rev 05/25/0L ~&ch. ~o Ra~e Sch. 422~ X4 SCHEDULE "C" TO OPTIONAL INDUSTRIAL GAS SALES OR GAS TRANSPORTATION CC~£RACT GENERAL TERMS AND CONDITIONS APPLICABLE TO SALK$ SERVICE= 1. TX'.JGD agrees to sell and deliver natural gas to Customer and Customer ag~es to purchase and receive such gas from TXUGD to ~eet Customer's natural ga~ requi~'ements at Customer's premises described on the signature page of this Contract. Customer agnres to pay for such volumes of gas at TXUGD's latest effrcth'e Schedule of Optional Indus~al Rates for gas sales service established for the city in which the Delivery Poim is located, subject to and in accordance with all the terms and conditions contained in this Contract. 2. This Con,'act covers Customer's entre natural gas requirements at the aforesaid premlse,~ and Customer will not use gu under this Contract for service other than that classified so that Customer is qualified for service under this Contract. 3. TXUGD.s Scbedul¢ of Optional Indus~al Rates for gas sales Service may be revised from time to time in thc future and the rates contained in any such revised or new Schedule of Optional Industrial Rates for gas sales service, when lawfully established, will be applicable to gas purchased and sold under this Conlract commencing 'with gas delivered after the effective date of such change. Company will give Customer written notice of any such change. together with a copy of the revised Schedule of Optional Industrial Rates for gas sales service. The notice herein provided for will be deemed to have been given when sent by Company to Customer at the addcess ShOWn on the signature page of this Contract by first class mail, postage prepaid, or included with a monthly statement. 4, Customer agrees to keep its ga.s-using or burning equipment and appurtenances located on th~ aforesaid premises in good condition and in conformity with the requirements of any applicable city ordinance, state or federal law or rule and any applicable order of regulation of any governmental authority having jurisdiction. Customer agrees to comply with all of Company's reasonable rules and regulations. 5. Tide to and ownership of the gas sold and delivered by TXUGD to Customer at the Delivery Point will vest in Customer at that point. 6. TXUOD will have the right at any and all times to immediately discontinue, in whole or in part, the supply of gas hereunder, with or without notice, if in the opinion of TXUGD a continuation of the supply under this ConLract would adversely affect, jeopardize or threaten adequate service te TXUGD's domestic or commercial customers or hazazd, adversely affect, jeopardize or threaten adequate service to other customers having priority of service under TXUGD's latest effective Schedule of Optional Industrial Rates, and Customer hereby authorizes TXUGD to do so. Further, Customer agrees that TX'UOD will never be liable in damages or otherwise on account of having exercised such rights. 7. When notified by TXUGD to do so, Customer agrees to curtail or discontinue the use of gas hereunder in con- fornfity with the service priority provided for in this Contract and in the latest effective Schedule of Optioual Industrial Rates. Lf Customer classifies its business and operations as being essential to the public health and safety and considers continuity of its fuel service essential to the public welfare, then Customer will provide stand-by fuel and equipment adequate to meet its fuel requirements during periods of interruption of gas service under this Contract. TXUGD cannot and does not guarantee a constant supply of gas hereunder. 8. In the event during any day Customer purchases or takes volumes in excess of the Maximum Daily Quantity, in addition to al}. other fees and charges provided for in this Contract, Customer will pay TXUGD $1.00 for each decatherm received by Customer in excess of the Maximum Daily Quantity. END OF SCHEDULE "C" Rev 05/25/01 Attach. to Rate Sch. 4221 15 SCHEDULE "D" TO OPTIONAL II~DUSTRIAL GAS SALES OR GAS TRANSPORTATION CONTRACT GENERAL TERMS AND CONDITIONS APPLICABLE TO TRANSPORTATION SERVICE I. Transo~nation Service TXUGD agrees to transport gas for Customer and Customer abc'ecs to purchase and receive gas transportation service from TXUGD to meet Customer's natural gas requirements at Customer's premises described on the signature page of this Conlract. subject to and in accordance with all the terms and conditions contained in this Contract. 2. Definitions (a) "Con,'act" means the signature page of this ConuacL the effective Selection of Service form executed by Customer and TXUGD, Schedule "B" of this Conu'act and this Schedule "D." (b) -Day" means the period of time beginning at 9:00 A.M. central clock time on one calendar day and ending at 9:00 A.M. central clock time on the following calendar day. (c) "Decatherm" has the meaning set forth in paragraph 8(a) of Schedule "B" of this Contract. - (d) "Delivery Point' has the meaning set forth on the signature page of this Contract. (e) "Gas" means natural gas produced from gas wells, vaporized natural gas liquids, gas produced in association with oil (casinghead gas) and/or the residue gas resulting from pr~cassing casinghead gas and/or gas well gas. (0 "Maximum Daily Quantity" has thc meaning set forth in the applicable Selection of Service Form. (g) "Month" means the period of dm~ heg~nning at 9:00 A.M, central clock time on the fu'at day of a calendar month and ending at 9:00 A.M. central clock time on the £trst day of thc succeeding calendar month. (h) "Receipt Point" has the meaning set forth on the signature page of ~his Con~'act. (i) "Retention Volume" has the meaning set forth on the signature page of this Contract. "Taxes' has the meaning set fot',h in paragraph 11 (b) of Schedule "B" of ~h~s Contract. (k) "Transportation" as used in this Contract includes the movement of gas by displacement and backhanl, and as such, the term "a'aasportstion" or "transport" as used herein includes the delivery of gas by TXUGD that is not the sam~ gas received by TX'UGD. (1) "Transport gas" means that volume of gas received by TXUGD for Ixansportatiun to Customer less the Ratenfion Volume. 3. Quantity Customer represents that it owns or conlrols cea~ain quantities of natural gas, and Cusmrner dcsiras thru TXUGD receive such gas from Customer (or its designee) at the Receipt Point(s); and deliver gas to ~e Delivery Point in quantities as agreed to by the parties herein. It is agreed that the quantity of gas to he anmsported under this Contract will not exceed He maximum annual, dally or hourly quantities specified on the effective Selection of Service Form. Customer warrants that at the time of delivery of gas hereunder m TXUGD for ~tansportation, Customer will have goccl title or the right to deliver such gas, and that such gas will he free and clear of all liens and adverse claims. Customer agrees to indemnify TXUGD for, and hold TX1.TC~D basmlass from, all suits, actions, debts, accounts, damages, costs (including attorneys' fees), losses and expenses arising from or out of any adverse claims of any and Rev 05/25/0~ Attach. to Rate Sch. 4221 16 all persons to or against said gas. Fur~cr, neither TX'UGD nor Customer will lake any action that changes or jeopardizes Customer's title to the gas transported hereunder. 5. Quality (a) The natural gas delivered by Custotoer to TXUGD for transportation under this Contract will be of merchantable qualii3' and commercially-free from water, hazardous substances, hydrocarbon liquids, bacteria and other objectionable liquids, solids orgas components. In addition, any such gas will specifically coomin not more (i) five one hundredths of one percent (.05%) oxygen; (ii) ~ve($) grains ~f t~tal $ulphur~ e~nsis~ing ~f n~t more than ~ne quaner ( ~/4) grain ~f hydr~gen sul~de and one(l) grain ofmercaptan sulphur per one hundred (100) cubic feet of gas; (iii) rwopercent(2%)byvolumeofcarbondioxide: (iv) four percent (4%) by volume of total non-hydrocarbon and inert gases (including carbon dioxide, nitrogen, oxygen, helium, otc.); and (v) sevtn pounds (7#) of water vapor per one mlllion (l,OOO,OOO) cabic feet of gas. The gas will be at temperatures not in excess of one hundred twen~. (120) degrees Fahrenheit nor less than forty (40) degrees Fahrenheit, provided that the gas will have a hydrocarbon dew point not to exceed foxy (40) degrees Fahrenheit at the delivery pressure, and will have a heat content of not less than nine hundred fifty (950) or more thaneteven hundred (1,100) Btu per cubic foot under the conditions of measurement contained herein. TXUGD will not be obligated to accept any gas delivered by Customor (or its designee) hereunder that is not interchangeable with other gas in TXUGD's distribution system at the applicabl= Receipt Point hereunder. TXUGD's d. etermination of such interchangcability will be based upon a factor that is equivalent to the quotient obtained by dividing thc total beadng value of such gas, expressed in Btu, by the square root of the specific gravity of such gas. Such factor must be within 7% of the interchange factor established by TXUGD for its system at the applicable Receipt Point hereunder. (b) If at any time the gas fails to meet the quality specifications cnutoerated herein, TXUGD will notify Customer, . and Customer will immediately correct such failure. If Custotoer is unable or unwilling to deliver gas according to such specifications, TXUGD may rcfitse to accept delivery of gas hereunder for so long as such condition exists. (c) Notwithstanding anything contained herein, TXUGD reserves the right, at any time and froto time to time, to unilaterally amend, on a nondiscriminatory basis, the quality specifications s~t forth above to conform with standard industry practices upon giving Customer at least thirty (30) days prior written notice of any such change(s). 6. R~sooosibilitv Customer or Customer's designee will be in control and possession of thc ga* to be transported and will be responsible for and will indemnify TXUGD for, and hold TX'UGD harmless from, any damage or injury caused thereby prior to such gas being delivered into a facility owned by TXUGD at the Receipt Point(s) and aflar such gas is delivurcd by TXUGD into a facility owned by Customer or Castomer's designee at the Delivery Point, except for injuries and damages caused by the negligence of TXUGD. TXUGD will be in control and possession of thc gas it transports bereunder, and will be responsible for and will indemnify Customer for, and hold Custorner harndcss from, any damage or injury caused thereby a:Rcr receipt of the gas by TXUGD into a facility owned by TXUGD at the Receipt Point(s) and until such gas is delivered into a facility of the Cuatotocr or Customer's designee at tip Delivery Point, except for injuries ami damages caused by the negligence of Customer or Custotocr's designee. However, gas will be received by TXUGD after it has passed out of thc meter at a Receipt Point and until it is delivered by TXUGD to Custotocr or Customer's designee after it has passed out of the meter at a Delivery Point. Thc meter will be considered to be the meter tube for purposes of this provision. 7. Transportation Rates (a) Commencing with initial deliveries of gas bereunder, Customer will pay to TXUGD each month the Transportation Service Rate set forth on the signature page of this Contract for transportation services provided hereunder during such month, at the rate(s) sci forth on the signatory page of this Con~acL which will include TX'UGD's right to retain and become the owner of thc Retention Volutoe and the fees, charges, tax reitobursctoents and costs provided for in this Contract. (b) Custotoer agrees to reitoburse TXUGD for any Taxes as berein defined. Rev 05/25/01 Attach. to Rate Sch. 4221 17 $, Receipt Point~ (a) Gas delivered by Customer (or its designee) to TXUGD hereunder will be delivered at the outlet of a city gate meter, referred to herein as the "Receipt Point," described on the signature p~ge of this Contract. The Receipt Point will be at an active city gate o~ the TXUGD's distribution system, described on the signature page of this Contract. provided, that if TXUGD owns the applicable city gate, the Receipt Poinl will be thc inlet of the city gate. It is agreed tha~ Customer and TXUGD may mutually agree to addilionai receipt points under this Contract that will also be at active city gates on such distribution system. (b) Notwithstanding an!ahing contained in this Contract that might be construed to the contras', in the event of unfavorable operating conditions (as determined by TXUGD in its sole opinion), or a change of ownership of a specific Receipt Point or appurtenant facilities, or if, in TXUGD's sole opinion, the receipt of gas from a specific Receipt Point ever becomes uneconomical for any reason whatsoever, then TXUGD will have the right (9 to immediately discontinue the receipt of gas from any such Receipt Point and/or (ii) upon thirty (30) days' prior written notice to Customer, to delete any such Receipt Point from this Contract. However, Customer and T×UGD may agree to perform this Contract with reduced volumes, or Customer and TXUGD may agree that Customer will pay for the necessary increase in capacity of the facilities involved, 9. Interruotible Service Customer hereby acknowledges that TXUGD's ~:ceipt and delivery of gas volumes hereunder will be on a wholly intermptible basis and subject m: (i) the most efficient and economic utilization of TX'UGD's pipeline capacity as determined by 'rXUGD in its sole discretion; (ii) pipeline capacity necessary to serve existing or _future sales customers under tariffs filed with applicable regulatory authorities or under negotiated contracts as determined by TXUGD in its sole discretion; and (iii) the other terms and conditions contained in this Contract. Customer agrees that such transportation service may be interrupted, in whole ot in paz'L from time to time, without notice; however, T'XUGD's dispatcher will endeavor to advise (by telephone or electronic medium) Customer's dispatcher or authorized representative of an interruption as soon as practicable, either before or after such interruption, but TXUGD will have no liability for any failure to give such notice. In no event will an interruption of transportation service pursuant to the terms, conditions and contingencies of this Contract constitute a breach of this Contract. and TXUGD will not be liable to Customer or third parties in damages or otherwise because of any interruption of such service. Customer agrees to indemnify TX'UGD for, and hold TXUGD harmless from, any damages, causes of actions or claims asserted by any third parties as a result of any termination, suspension, or interruption of services hereunder by TXI.ICiD for any r~ason. 10. ~ominations (a) Custoroer will provide TXUGD with its tint of the month nomination of volumes for receipt and delivery by TXUGD du~ng a month no later than I 1:30 a.m. central clock time on the second business day prior to the first calendar day of each month, giving due consideration to the Retention Volume. (b) Each such nominatlon by Customer will contain the nominated quantities for each Receipt Point and the Delivery PoinL designation of the appropriate contrnct(s) covering such gas, and the identity by name and telephone number of individual(s) who have authority to confirm the gas volumes nominated at each Receipt Point and the Delivery Point. (c) Customer may change nominated volumes for the remainder of a month on any busianss day, provided such nomination change must be received by TXUGD prior to 10:00 a.m. central clock time of any business day to be effective the next business day. (d) If Customer fails to nominate volumes for ~ceipt and delivery by TXUC}D under this Contract for any month, TXUGD may suspend Iranspormtion service under this Contract for such month. Such interruption of ser'~ice by TXUGD will not prevent etfforcement by TXUGD of any of its other legal rights or remedies nor will the same be consumed as a breach of the obligations of TXUGD under this Contract. (c) IfCnstomer fails to nominate volumes for receipt and delivery by TXUGD under this Contract for three(3) consecutive months during the term of this Contract, TXUGD may upon thirty (30) days prior written notice to Customer terminate this Contrant: provided, the obligations to make payment for monies duc under this Contract, including payments for any kind of imbalances, will not be extinguished. (fi Customer understands and agrees that TXUGD may for operational reasons prorate and/or totally refuse te accept new nominations or honor then existing nominations at any existing Receipt Points and/or proposed Receipt Rev 05/25/01 Attach. to Rate Sch. 4221 18 Points, at any time and from time to time and for any specified or unspecified time period(s). TXUGD will endeavor to notify Customer or Customer's designee of such refusal to accept or honor any nomination or nominations as soon as practicable, but TXUGD will not be liable for any failure to do so. (g) Notwithstanding the foregoing, Customer will not attempt to utilize the nomination process under this Contract to reserve or gain additional pipeline capacity by over nomination. In the event 'I'XUGD. in its sole discretion. determines that Customer has attempted to reserve or gain additional pipeline capacity by over nomination, Customer agrees that TXUGD will have the right, with or without prior nmice, to: (i) revise the nomination, (ii) suspend service under this Contract. and/or (iii) terminate this Contract. ll, ]mba]ances of Nominations and ¥olumes (a) It is recognized and understood that: (i) an exact day-to-day balance of thc volume of gas nominated for receipt and delivery by TXUGD and the volume of gas delivered to (taken or used by) Customer at the Delivery Point may not be possible due to the inability of Customer to precisely predict or control such receipts or deliveries; and (ii) an exact day.to-day balance of the volume of gas delivered to TXUGD at the Receipt Points for transportation, less the Retention Volume, and the quantity of gas delivered Io (taken or used by) Customer at the Delivery Point by TXUGD may not be possible due to the inability of Customer to contxol precisely such receipts or deliveries. However. Customer will endeavor to nominate and deliver to TXUGD at the Receipt Point the v~lume of gas that is delivered to (taken or used by) Customer at the Delivery Point, plus the Retention Volume, during any applicable period. (b) Customer will be obligated to monitor on both an hourly and a dally basis and. if necessary, adjust, or cause to be adjusted: (i) the volume of gas delivered to TXUGD at the Receipt Points fo£ manspomtion; and (ii) the volume of ~.nsportation gas taken or received by Customer, or its designee, fi.om TXUGD at the Delivery Point, in order to maintain both an hourly and a daily balance of receipts and deliveries at consistent flow rates throughout each day. giving du~ consideration to the related Retention Volume. Customer will advise TXUGD of any situation wherein any kind of imbalance has occurred or may occur. Customer will endeavor to adjust its receipts and/or deliveries of transportation gas to thc extent necessary to avoid any kind of imbalance, and promptly notify TXUGD of such adjustments. Any adjustments to receipts and/or deliveries by Customer, whether or not pursuant to notification from either party, will be coordinated with TXUGD's gas control personnel. (c) TXU~'D will not be obligated to receive or deliver quantities of gas on any day in excess of the lesser of: (i) those quantities nominated by Customer for transportation hereunder ou such day, giving due consideration to the Retention Volume; or (ii) those quantities received by TXLTGD at the Receipt Points for transportation hereunder on such day, giving due consideration to the Retention Volume. However, TXUGD, to the extent practicable, will endeavor to deliver to Customer each day a quantity of gas equivalent to the quantity of gas received by TXUGD from Customer (or its designee) at the Receipt Points on such day, less the Retention Volume. (d) TXUGD will retain and become the owner of such Retention Volume to replace the normal gas lost. gas used as fuel and gas used in its day-to-day pipeline operations related to the volumes delivered by Customer to TXUGD, (e) Notwithstanding anything contained heroin that might be construed to the coot~ary, TXUGD will always have the total and ur~restficted fight, but with no obligation whatsoever, at any time and from time to time. to restrict, interrupt or reduce its receipt and/or delivery of transport gas hereunder in order to maintain both an hourly and a dally balance of receipts and deliveries at consistent flow rates throughout each day or to correct any imbalance between receipts and deliveries hereunder. (0 Other provisioos of this Coho'act ntawithstandiog, in the event the transportation of volumes of gas delivered to the Receipt Point are interrupted by TXUGD dining any day for any reason, the volume interrupted, up to the Maximum Daily Quantity, will not be considered as a part of any imbalance for that day under the terms of this Contract. Rev 05/25/01 Attach. to Rate Sch. 4221 19 Nomination Imbalance Payments (a) A nomination imbalance will exist under this Contract when, during any applicable period of the term bereo f. there is a numerical difference between: (i) the quantity of gas delivered by TXUGD to Customer; and (ii) the quantity of gas nominated for that period by Customer. (b) To the extent Customer fails to avoid a monthly nomination imbalance [as described in paragraph 12(a) above], and Customer's nominations for deliveries to TXUGD at the Receipt Point(s) during such momh]y period are in excess of the transportation quantities actually, or deemed by allocation, delivered m TXUGD for Iransportation to Customer at the Delivery Point during said monthly period ("over nomination by Customer"): i) if the imbalance is greater than 0%. but 5% or less during such month, Customer wiil pay to TXUGD a sum of money determined by the product of (A) $0.1.5 (15 cents) per decalh~rm multiplied by (B) the number of deuatherms in such monthly imbalance, thereby eliminating such imbalance; (ii) if the imbalance is greater than 5%, but 10% or less during such month, Customer wall pay to TXUGD a sum of money determined by the product of (A) $0.30 (30 cents) per deeatherm multiplied by (B) ~he number of decatherms in such monthly imbalance, thereby eliminating such imbalance; (iii) if the imbalance is greater than 10%, but 15% or less during such month, Custome; will pay to 'rXUGD a sum of money determined by the product of (A) $0.45 (45 cents) per decatherm multiplied by (B) the number of decatherms in such monthly imbalance, thereby eliminating such imbalance; (iv) ifthe imbalance is greater than 15%, but 20% or less during such month, Customer willpayto TXUOD a sum of moray determined by the product of (A) $0.60 (60 cents) per decatherm multiplied by (B) the number of decatherms in such monthly imbalance, thereby eliminating such imbalance; or (v) if the imbalance is greater than 20% during such month, Customer will pay to TXUGD a sum of money det~rmincd by the product of (A) $0.75 (75 cents) per deeatherm multiplied by (B) the number of decatherrns in such monthly imbalance, thereby eliminating such imbalance. (c) To the extent Customer fails to avoid a monthly nomination imbalance [as described in paragraph 12(a) above], and Customer's nomination for deliveries to TXUGD at the Receipt Point(s) during such monthly period are less than the transportation quantifies actually, or deemed by allocation, delivered to TX'UGD for transportation to Customer at the Delivery Point during said monthly period ("under nomination by Customer"), Customer will pay TXUGD a sum of money determined by the product of (A) $0.05 (5 cents) per decatherm muhiplicd by (B) the number of decatherms in such monthly imbalance, thereby eliminating such imbalance. (d) TXIJGD will bill Customer for any such amounts owed to TXUGD by Customer under this paragraph 12 by including such amounUl in the monthly slatement(s) rendered to Customer under paragraph 12 of Schedule "B" of this Contract, or by a separate statement whether or not this Contract has terminated. 13. Volume Imbalance Payments (a) A volume imbalance will exist under this Contract when, during any month of the term hereof, there is a numerical difference between: (i) the volume of gas delivered by TXUGD to Customer at the Delivery Point: and (ii) thc volume of gas rnceived by TXUGD fi'om Customer (or its designee) at the Receipt Point(s), less the Retention Volume. Volumes received or delivered will for purposes of this Contract include volumes that are not separately met~'ext, but are deemed received or delivered by allocation in situations in which Customer's gas is commingled with gas owned by others. (b) To the extent Customer fails to avoid a monthly volume imbalance [as describ~:l in paragraph 13(a) above], and Customer's deliveries to TXUGD at tho Receipt Poim(s) during such monthly period, less tl~ Retch/ion Volumes, ar~ in excess of ~he Uansportafioo quantities delivered by TXUGD to Customer at the Delivery Point during said monthly period ("over deliveries by Customer cresting an imbalance 'due' Customer"): 5 Rev 05/25/01 Attach. to Rate Sch. 4221 20 i) Jf the imbalance is greater than 0%, but 5% or less, of the total gas volumes delivered to Customer at the Delivery Point during such month, Cusiomer will sell m TXUGD and TXUGD will purchase from Customer the decatherms of such monthly imbalance for a sum of money delerminod by the product of (A) thc lasses of the lowest price paid for gas by TXUGD during that monthly period or the lowest daily Houston Ship Channel price during that monthly period, as reported in the publication Gas Daily, mbltiplied by (B) the number of dccatherms in such monthly imbalance, thereby eliminating such monthly imbalance; ii) if the imbalance is grea~er than 5%, but 10% or Icss, of thc total gas volumes delivered to Customer at thc Delivery Point during such month, Customer will sell to TXUGD and TXUGD will purchase from Customer thc decathcrms of such monlhly imbalance for a sum of money determincd by thc product of (A) the lesser of the lowest price paid for gas by TXUGD during that monthly period or 809'c of the lowest dally Houston Ship Channel price during that monthly period, as reported in the publication Gas Dally, multiplied by (B) the number of decatherms in such monthly imbalance, thereby eliminating suchmonthly imbalance; iii) if the imbalance is greater than 10%. but 15% or less, of the total gas volumes dcllvered to Customer at the Delivery Point during such month, Customer will sell to TXUGD and TXUGD will purchase from Customer the decatherms of such monthly imbalance for a sum of money determined by thc product of (A) the lesser of the lowest price paid for gas by TXUGD during that monthly period or 70% of the lowest daily Houston Ship Channel price during that monthly period, as reported in the publication Gu.~ Doii)', multiplied by (B) the number of decatherms in such monthly imbalance~ thereby elimina!ing sucbmonthiy imbalance; iv} if the imbalance is greater than 15%. but 20% or less. of file tolal gas volumes delivered to Customer at the Delivery Point during such month, Customer will sell to TXUGD and TXUGD will purchase from Customer the decatherms of such monthly imbalance for a sum of money de.trained by the product of (A) the lesser of the lowest price paid for gas by TXUGD during that monthly period or 60% of the lowest daily Houston Ship Channel price daring that monthly period, as reported in the publication Gas Daily, multiplied by (B) the number of decatherms in such monthly imbalance, thereby eliminating suchmonthly imbalance; and v) if the imbalance is greater than 20~ of the tolal gasvolumes delivered to Customer at the Delivery Point during such month, Customer will sell to TXUGD and TXUGD will purchase from Customer the decatherms of such monthly imbalance for a sum of money determined by the product of (A) the lesser of the lowest price paid for gas by TXUGDduring that monthly period or 509',~ of the hiwast daily Houston Ship Channel price during that monthly period, as reponecl in the publication G~2s Da//y, multiplied by (B) the number of decathnrms in such monthly imbalance, thereby eliminating such monthly imbalance. (c) To the extent Customer does not avoid a monthly volume imbalance [as described in pasa~raph 13(a) abow], and Customer's deliveries to TXUGD a~ thc Receipt Point(s) during such monthly period are less than the mmspormtion quantities deliveredby TXUGD to Customer at the Delivery Point during said monthly period ("under deliveries by Customercreating an imbalance 'due' TXUGD"): i) if the imbalance is greater than 0%, but 5 % or less, of the total gas volumes delivered Customer at the Delivery Point during such month, Customer will purchase such imbalance gas volumes from TXUGD, and TXUGD will have the right to collect from Customer, a sum of money determined by the product of (A) the greater of the highest price paid for gas by TXUG'D during that monthly period or 100% of the highest daily Houslon Ship Channel price during that momhly period, as reported in the publication Gas Daily, multiplied by (B) the number of dncatherras in such monthly imbalance, thereby eliminating such monthly imbalance; ii) if the imbalance is grea~et than 5%, but 10% or less, of the total gas volumes delivered to Customer at the Delivery Point during such month, Customer will purchase such imbalance gas volumes from TXUGD, and TXUGD will have the right to collect from Customer, a sum of money determined by the product of (A) the greater of the highest price paid for gas by T'XUGD during that monthly period or 12.5% of the highest daily Houston Ship Channel price during that monthly period, as reported in the publication Gas Daily, multiplied by (B) the number of decatherms in such monthly imbalance, thereby eliminating such monthly imbalance; 6 Rev 05/25/01 Attach. to Rate Sch. 4221 21 iii) if ac imbalance is ~'~ater d~nlO%, burl5% or less. of ~.e m~l gas volumes dcliver~ Customer a~ · e ~live~ Point d~ s~h mon~, Customer ~11 p~c~e such im~lance gm volumes ~om ~UGD. ~d ~GD ~11 have ~ fight to coll~[ ~om Customer, a sum of mo~y de~ned by ~ pr~ac~ o~ (Al ~e ~eatcr of ~e hi.st price ~d f~ g~ by ~GD d~ng ~t money ~d~ or 150% of ~e highas~ d~ly Houston Ship C~nnel ~e d~ng ~at mon~ly ~, ~ re~n~ in ~e publication Gas Dail)~ multiplied by (B) ~e numar of ~s in such mon~ly imb~, the~by climinadng such monthly impale; iv) if ~c imb~ce is ~e~or ~[5%. but 2~ or less. of ~e total g~ volumes delivered to C~tomor at · e ~live~ Point during such mort&, Cromer will purch~ such im~e g~ volumes from ~UGD. and ~GD ~11 have ~e right to collar ~om Cmtomer, a sum of money dete~ned by the pr~ucl of (Al ~e ~ea~r of ~e highas~ price p~d for gm by ~GD d~ng ~t monthly ~6~ or 1~5% of ~c hig~sl d~ly Houston Ship ~nnel ~ce d~ng &m mon~ly ~, m re~ in ~e publication Gas Daily, mul~pli~ by (B) ~e numar of d~e~ in such mon~ly imb~ce, thereby eliminating such mon~ly imb~ancel and v) if~e imb~an~ is ~r ~an 20% of~e to~ g~ volumes delive~ m Customer at ~e Dclive~ Point during such mon~, Customer ~11 p~hmc such imbal~ce g~ volumes ~om ~UGD. and ~UGD will have ~e 6ght to coll~t ~om C~tomer. a sum of money det~i~ by ~ pr~uct of (Al the ~r of ~e ~ghest p~ce p~d for g~ by ~UGD d~ng ~t monthly ~6~ or 2~% of thc highest d~ly Houston Ship Channel p~cc d~ng ~ai mon~iy ~. ~ m~ in ~ publication G~ Daily, muhipiied by (B) ~e numar of d~ in such monthly imb~ance. ~by climina~ng suchmonthly imbal~ce. (d) ~UGD will bill Customer for ~y such ~oun~ o~ to ~GD by Custo~ undcr ~is p~a~ph 13 by including such amounts in ~ ~n~ly s~n~s) re~e~ to Customer u~er ~a~ph 12 of Sch~uie "B" of ~is C~r, or by a ~p~a~ smtc~nt wbe~er or not &is ~n~i hm ~inated. ~GD will c~dit Customer for any such ~oun~ ow~ to Cnsto~r by ~GD under ~s p~a~ 13 by c~didng such ~unn~ ag~nst amoun~ owed to ~GD by Customer in any such sm~ment(s) r~ede~ to Cmtomer, O~c~i~, such amoun~ will be paid to Custo~r wi~in they (30) days ~om thc date Con.ac[ h~ ~ina~ if ~c net ~count b~ancc is ~ ~ouni owed m Customer by ~GD. 14. Misuse of Imbalance ~rovisions Customer wilt not a~empt to utliize thc imbalance provisions hereundcr to provide standby or backup service or plant protection supply gas for its Facility in the event its ~itd party supplier(s) fail to deliver sufficient volumes of gas to TXUGD for r~xtelivery hereunder to Customer's Facility for snch purposes, with due consideration to the Retention Volume, or for any other purpose not expressly contemplated in Ibc terms of Ibis Contract. In the event TXUGD ever determines that Customer has aRempted to do so, Caswmor agrees that TXUGD will have the right to suspend and/or terminate this Contract. 15. Failure of Pr~cin~ Resource (al In the event no Gas Daily is published or no "highest daily price" is published in the Gas Daily, thc price used thcrcforc will he thc highes~ price published in Iaside F.E.R.C.'~ Gas Market Report for gas sold during thc month in Texas, In the event no Gas Daily is published or no "lowest daily price" is published in the Gax Daily, the prlcc used therefor will be the lowast price published in the laslde F.E.R.C.'x Gas Market Report for gas sold during the month in Texas. (b) ~n the evcnt n~ Gas Daily and n~ ~aside F.F.`R~C.~x Gas Market Rep~rt is pub~ishe~ ~r n~ .~highes~ dai~y ~xice~' is published in the Gas Daily or in the "Inside FERC." the. price used therefore will be the highest price published by thc New York Mercantile Exchange (NYMEX) for gas sold during the month in Texas. In thc event no Ga~ Daily and no Iaside F.F~ R. C.'s Gas Market Report is published or no "lowest daily price" is published in ~ae Gas Daily or in the "Inside FERC." the price used therefor wiU be the lowest price published by the New York Mercantile Exchange (NYMEX) for gas sold during thc month in Texas. (c) In the event (;as Daily, In.vide F.F..R.C.'x Gas Market Report and ~he New York Mercantile Exchange (NYMEX) ail ~ fail to report a highest or lowest price for the month for us~ under the rcspectlvc provisions of this Contract the panics may mutually agran upon thc price or prices to be used. However, if the panins cannot agree on such a price or prices within thirty (30) days of such an event thc appropriate price or prices will be es~blished by arbiwation as provided in this Contract. Rev 05/25/01 Attach. to Rate Sch. 4221 22 16. ]nterfupUign. Reductign or Termination of Service Customer a~ccs that: (a) in the event of any interruption, reduction or termination of service under this Conu'act TXUGD's personnc! may enter Customem"s facility's premises and physically turn offthe g~ serving such £acility: and Cb) no one other than TXUGD's personnel will be permit~d to turn thc gas back on, "' END OF SCHEDULE "D" *** Rev 05/25/01 ~:tach. ko Rake Sch. 4221 23 Tariff for Gas Service TXU Gas Distribution RATE SCHEDULE: Gas Cost Adjustment No. 4208-1 APPLICABLE TO: East Region Distribution System REVISION: 0 'DATE: EFFECTIVE DATE: PAGE: I OF 1 GAS COST ADJUSTMENT Each residential and commercial monthly bill shall be adjusted for gas cost as follows: (1) The city gate rate increase or decrease applicable to current billing month residential and commercial sales shall be calculated to the nearest $0.0001 per Mcr based upon: (a) A volume factor of 1.0117 determined in establishing the above rate for the distribution system as the ratio of adjusted purchased volumes divided by adjusted sales volumes. Said factor shall be adjusted annually following determination of the actual lost and unaccounted for gas percentage, not to be less than zero, based upon year ended June 30. The city gate rate applicable to volumes purchased during the current calendar month, expressed to the nearest $0.0001 per Mcf (shown below as "Re'). (c) A base city gate rate of $0.0000 per Mcr. In summary, the gas cost adjustment (GCA) shall be determined to the nearest $0.0001 per Mcf as follows: GCA = ((1.0117) (Re - $0.0000)) TXU Gas Distribution Tariff for Gas Service APPUCABLE TO: East Region Distribution System REVISION: 0 DATE: ~_~-F~.CTIVE DATE: PAGE: 1 OF 1 TAX & FRANCHISE FEE ADJUSTMENT For customers inside the city limits of an incorporated city, each monthly billing, ~ts adjusted, shall be adjusted tor municipal franchise fees (street and alley rental assessments) and the state gross receipts taxes imposed by Sections 182.021 - 182.025 of the Texas Tax Code. Municipal franchise fees ara determined by each city's franchise ordinance. Each monthly bill, as adjusted, shall also be adjusted by an amount equivalent to the proportionate part of any new tax, or any tax increase or decrease, or any increase or decrease of any other governmental imposition, rental fee, or charge (except state, county, city and special district ad valorem taxes and taxes on net income) levied, assessed or imposed subsequent to September 30, 20OO, upon or allocated to the Company's distribution operations, by any new or amended law, ordinance or contract. Municipal franchise fees (street and alley rental assessments) and the state gross receipts taxes imposed by Sections 182.021 - 182.025 of the Texas Tax Code shall continue to be collected pursuant to individual industrial contracts. Tariff for Gas Service TXU Gas Distribution RATE SCHEDULE: I Weather Normalization Adjustment No. 4208-3 ~,PPMCABLE TO: East Region Distribution System REVISION: 0 DATE: EFFECTIVE DATE: PAGE: I OF 1 WEATHER NORMALIZATION ADJUSTMENT Effective with bills rendered during the October 2001 through May 2002 billing months, and annually thereafter for the October through May billing months, the residential and commercial consumption rates for gas service, as adjusted, shall be subject to a weather normalization adjustment each billing cycle to reflect the impact of variations in the actual heating degree days dudng the period included in the bi]ling cycle from the nermal level of heating degree days during the period included in the billing cycle. The weather normalization adjustment will be implemented on a per Mcf basis and will be appliceble to the heating load of each customer during the period included in the billing cycle. It will be determined separately for residential and commercial customers based on heating degree data recorded at the official weather station for each town. The adjustment to be made for each billing cycle will be calculated according to the following formula: WNA = NOO..4DO x M x AHL ADO Where: WNA= NDD= ADD= M= AHL = Weather normalization adjustment Normal heating degree days during the period covered by the billing cycle Actual heating degree days during the period covered by the billing cycle Weighted average margin per Mcf included in the commodity portion of the rates effective during the October through May billing months Actual heating load per customer The heating load to which the weather normalization adjustment is to be applied for rasidential and commercial customers is determined by subtracting the base load for the customer from the tctal volume being billed to the customer. The base load of a customer is the average level of nonheating consumption, The weather normalization adjustment is subject to a 50% limitation factor based on temperatures being fifty percent warmer or colder than normal. The weather normalization adjustment will be calculated to the nearest $.0001 per Mcr. Tariff for Gas Service TXU Gas Distribution RATE SCHEDULE: Miscellaneous Service Cha~ea Nos. 9001 thru 9007 APPLICABLE TO: As Referenced REVISION: 0 EFFECTIVE DATE: As Referenced PAGE: I OF 2 MISCELLANEOUS SERVICE CHARGES: 9001 gO0'2 Connection Charge (Residential & Commercial) The following connection charges apply: Schedule Charqe Business Hours $ 35.00 After Hours 52.50 For each reconnoction of gas service where service has been discontinued at the same premises for any reason, for the initial inauguration of service, and for each inauguration of service when the billable party has changed, with the following exceptions: (a) For a builder who uses gas temporarily dudng construction or for display purposes. (b) Whenever gas service has been temporarily interrupted because of system outage or service work done by Company; or (c) For any reason deemed necessary for company operations. Read For Change Charge (Realdentlal & Commercial) A read for change charge of $12.00 is made when it is necessary for a company employee to read the meter at a currently served location because of a change in the billable party. 9003 Returned Check Charges (Residential & Commercial) A returned check handling charge of $16.25 is made for each check retumeq to the Company for any reason. 9004 Delinquent Notification Charge (Residential & Commercial) A charge of $4.75 shall be made for each trip by a Company employee to a customer's residence or place of business when there is an amount owed to the Company that is past due. This charge shall not be made when the tdp is required for safety investigations or when gas service has been temporarily interrupted because of system outage or service work done by Company. 9005 Main Line Extension Rate (Residential, Commercial, & Industrial) The charge for extending mains beyond the free limit established by Franchise for residential, commercial, and industrial customers shall be based on the actual cost per foot of the extension. Tariff for Gas Service RATE SCHEDULE: - APPLICABLE TO: EFFECTIVE DATE: Miscellaneous Service Cha~ As Re~'erenced As Referenced TXU Gas Distribution Noe. 9001 thru 9007 REVISION: 0 PAGE: 2 OF 2 9n06 9O07 Charge for Installing and Maintaining and Excess Flow Valve (Residential) A customer may request the Installation of an excess flow valve on a new service line or on a service line being replaced provided that the service line will serve a single ras[dence and operate continuously throughout the year at a pressure of not less than 10 pslg. The customer will pay the actual cost incurred to install the excess flow valve. That cost will include the cost of the excess flow valve, the labor cost required to install the excess flow valve, and other associated costs. The estimated total cost to install an excess flow valve is $50.00. This cost is based on installing the excess flow valve at the same time a service line is installed or replaced. The excess flow valve will be installed on the service line upstream of the customer's meter and as near as practical to the main. A customer requiring maintenance, repair, or replacement of an excess flow valve will be required to pay the actual cost of locating and repairing or replacing the excess flow vane, The cost to bedorrn this service will normally range from $200.00 to $2,000.00, depending on the amount of work required. This cost will be determined on an individual project basis. This tadff is being filed in accordance with the U.S. Department of Transportation rule requiring the installation of an excess flow valve, if requested by a customer, on new or replaced service lines that operate continuously throughout the year at a pressure of not less than 10 psig and that serve a single residence. The rule further states that the customer will bear all costs of installing and maintaining the excess flow valve. Recovery of Connection Costs Associated with Certain Stand-By Ga. Generators (Commercial) Commercial customers installing stand-by gas generators to provide service in the event of an interruption in electric service in facilities where gas service is not otherwise provided will reimburse TXU Gas Distribution for the actual cost of acquiring and installing the regulator, service line, and meter required to provide gas service for the stand-by generators. Gas service provided for the stand-by generators will be billed at the applicable commercial rate. Tariff for Gas Service TXU Gas Distribution RIDER: Sur~char~lee No. 4206 APPUCABLE TO: East Region Distribution System - REVISION: 0 as listed below DATE: EFFECTIVE DATE: PAGE: I OF 1 SURCHARGES Rate Case Expense Surcharge Rider: TXU Gas Distribution is authorized to recover the currant rote case expense through a surcharge designed for a six-month nominal recovery pedod. The surcharge per Mcf will be calculated by dividing the rate case expense to be recovered by one-half of the adjusted annual sales volume to residential, commercial, Industrial Sales, and Industrial Transportation customers. TXU Gas Distribution will provide monthly status reports to the City to account for the collection of rote case expense. The surcharge for the company's rate case expenses shall be pro-rated over the system as a whole. The cities rate case expenses shall be pro-rated among the cities who hired outside consultants and/or atlomeys to represent them in this case. Other Surcharges: TXU Gas Distribution will recover other surcharges as authorized by the relevant municipality, the Railroad Commission of Texas or the Texas Utilities Code. Applicable only in the fallowing East Region Distribution System Cities: Athens Bells Clarksville Crandall Denison Ennis Farmersville Gainesville Howe Kaufman Malakoff Maypearl Midlothian Palestine Pads Pecan Hill Point Poynor Princeton Red Oak Sherman Sulphur Springs Trenton Waxahachie Whitewright