EL PASO CORP/DE
JOINT SETTLEMENT AGREEMENT
<DOCUMENT>
<TYPE>EX-10.II
<SEQUENCE>10
<FILENAME>h06201exv10wii.txt
<DESCRIPTION>JOINT SETTLEMENT AGREEMENT
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.II


                            UNITED STATES OF AMERICA
                                   BEFORE THE
                      FEDERAL ENERGY REGULATORY COMMISSION


Public Utilities Commission             )
of the State of California,             )
                                        )
                  Complainant,          )
                                        )
         v.                             )     Docket No. RP00-241-000, et al.
                                        )
El Paso Natural Gas Company,            )
El Paso Merchant Energy-Gas, L.P.,      )
and El Paso Merchant Energy Company,    )
                                        )
                  Respondents.          )


                           JOINT SETTLEMENT AGREEMENT

         Pursuant to Rule 602 of the Rules of Practice and Procedure of the
Federal Energy Regulatory Commission ("Commission"), 18 C.F.R. Section 385.602
(2002), El Paso Natural Gas Company ("EPNG"), El Paso Merchant Energy Company
and El Paso Merchant Energy-Gas, L.P. (jointly, "Merchant"), the Public
Utilities Commission of the State of California ("CPUC"), Pacific Gas and
Electric Company ("PG&E"), Southern California Edison Company ("Edison") and the
City of Los Angeles hereby submit and enter into this Joint Settlement Agreement
("Settlement Agreement").

                                    ARTICLE 1
                                   DEFINITIONS

         The following terms have the following meanings:

         1.1 "Article" means a numbered Article of this Settlement Agreement,
unless otherwise noted, and all references to an Article shall include all
paragraphs, subparts or subparagraphs of that Article.


                                       1

<PAGE>

         1.2 "California Settling Parties" means the CPUC, PG&E, Edison, and the
City of Los Angeles, as those parties are defined herein.

         1.3 "Capacity Allocation Proceeding" means the proceeding pending
before the Commission at Docket No. RP00-336-000, including all subdockets.

         1.4 "City of Los Angeles" means the City of Los Angeles, a California
municipal corporation.

         1.5 "Commission" means the Federal Energy Regulatory Commission.

         1.6 "CPUC" means the Public Utilities Commission of the State of
California, or its successor.

         1.7 "Edison" means Southern California Edison Company, a California
corporation.

         1.8 "Effective Date" has the meaning set forth in Paragraph 10.1 of
this Settlement Agreement.

         1.9 "El Paso Settling Parties" means EPNG and Merchant, as those
parties are defined herein.

         1.10 "EPNG" means El Paso Natural Gas Company, a Delaware corporation.

         1.11 "Master Settlement Agreement" means the agreement memorialized in
the settlement agreement to be filed with the California Superior Court for the
County of San Diego in June 2003 at Case No. J.C.C.P. Nos. 4221, 4224, 4226 and
4228.

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<PAGE>

         1.12 "Merchant" means El Paso Merchant Energy Company and El Paso
Merchant Energy-Gas, L.P.

         1.13 "Paragraph" means a numbered paragraph of this Settlement
Agreement, unless otherwise noted, and all references to a paragraph shall
include all subparts or subparagraphs of that paragraph.

         1.14 "PG&E" means Pacific Gas and Electric Company, a California
corporation.

         1.15 "Power-Up Project" means the facilities as proposed in EPNG's
October 3, 2002 certificate application at Docket No. CP03-1-000.

         1.16 "Settlement Agreement" means this document.

         1.17 "Settling Parties" means EPNG, Merchant, the CPUC, PG&E, Edison
and the City of Los Angeles, as those parties are defined herein. Each of the
Settling Parties may be individually referred to herein as a "Settling Party."

         1.18 "Special Master" means the individual designated by the parties
and approved by the court to resolve disputes regarding certain contractual
commitments, as more fully described in Article 12.

         1.19 "Stipulated Judgment" means the agreement memorialized in the
Stipulation to Entry of Judgment to be filed no later than June 30, 2003, with
the United States District Court for the Central District of California, in
proceedings to be filed by the State of California, Edison, and PG&E, in which
the Special Master is to be appointed. A pro forma copy of the Stipulated
Judgment is attached hereto as Tab 3.


                                       3

<PAGE>

         1.20 "1996 Settlement" means the settlement approved by the Commission
in Docket No. RP95-363-000, et al., on April 16, 1997. El Paso Natural Gas Co.,
79 FERC Paragraph 61,028 (1997), reh'g denied, 80 FERC Paragraph 61,084 (1997).

                                   ARTICLE 2
                        FACTUAL AND PROCEDURAL BACKGROUND

         2.1 On April 4, 2000, the CPUC filed a complaint against EPNG and
Merchant in Docket No. RP00-241-000. On March 28, 2001, the Commission issued an
order that, among other things, set for hearing the issue of whether EPNG and/or
Merchant had market power and, if so, exercised it to drive up the price of
natural gas at the California border. Pub. Util. Comm'n of Cal. v. El Paso
Natural Gas Co., 94 FERC Paragraph 61,338 (2001).

         2.2 The market power hearing commenced on May 14, 2001, and ended on
June 19, 2001. On May 31, 2001, the Chief Judge submitted a report to the
Commission in which he asked the Commission to clarify whether he should take
evidence on the Standards of Conduct issue that had been raised by the CPUC but
which the Commission had previously dismissed. Pub. Util. Comm'n of Cal. v. El
Paso Natural Gas Co., 95 FERC Paragraph 63,020 (2001). The Commission issued an
Order on Rehearing on June 11, 2001, in which it set the Standards of Conduct
issue for hearing. Pub. Util. Comm'n of Cal. v. El Paso Natural Gas Co., 95 FERC
Paragraph 61,368 (2001). This second phase of the hearing was held from August
2-6, 2001.

                                       4

<PAGE>

         2.3 The Chief Judge issued his first Initial Decision on October 9,
2001. Pub. Util. Comm'n of Cal. v. El Paso Natural Gas Co., 97 FERC Paragraph
63,004 (2001). On December 27, 2001, the Commission remanded the proceeding for
a limited supplemental hearing on whether, during the period from November 2000
through March 2001, EPNG made all of its capacity available to its shippers at
its California delivery points and provided non-discriminatory access to such
capacity. Pub. Util. Comm'n of Cal. v. El Paso Natural Gas Co, 97 FERC Paragraph
61,380 (2001). This third phase of the hearing began on March 21, 2002, and
concluded on April 10, 2002.

         2.4 On September 23, 2002, the Chief Judge issued his second Initial
Decision. Pub. Util. Comm'n of Cal. v. El Paso Natural Gas Co, 100 FERC
Paragraph 63,041 (2002). The parties filed briefs on and opposing exceptions
with the Commission, and oral argument was held before the Commission on
December 2, 2002. The Commission has not yet issued an order on the two Initial
Decisions.

         2.5 On March 21, 2003, the Settling Parties filed a joint motion to
defer for forty-five days any further action in Docket No. RP00-241-000, et al.,
to enable the Settling Parties to finalize and file this Settlement Agreement
with the Commission. The Settling Parties subsequently asked the Commission to
extend the deadline for an additional thirty days, which the Commission granted.

                                   ARTICLE 3
                               SCOPE OF SETTLEMENT

         3.1 In further implementation of the Master Settlement Agreement and as
reflected more fully in Article 11, this Settlement Agreement constitutes a full
and complete resolution of (1) all claims and issues that were raised by the
California Settling

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<PAGE>

Parties in the proceeding at Docket No. RP00-241-000 and all subdockets, and (2)
all related claims and issues that were raised by the California Settling
Parties in the Capacity Allocation Proceeding and in any other Commission
proceedings, including but not limited to allegations raised that EPNG violated
its certificates and/or the 1996 Settlement, and that EPNG and/or Merchant
violated the Natural Gas Act, the Natural Gas Policy Act and/or the Commission's
regulations or orders.

                                   ARTICLE 4
                                SETTLING PARTIES

         4.1 This Settlement Agreement in its entirety is sponsored jointly by
the Settling Parties.

         4.2 The Settling Parties jointly request and urge the Commission to
approve this Settlement Agreement without condition or modification.

         4.3 None of the Settling Parties, either directly or indirectly, shall
seek in any proceeding or forum to set aside or modify this Settlement Agreement
or challenge its applicability after the Settlement Agreement becomes effective
pursuant to the terms of Article 10.

         4.4 The Settling Parties agree to cooperate, each at its own expense,
and to use their best efforts in securing all necessary governmental approvals
for this Settlement Agreement and in defending against any litigation affecting
the validity and enforceability of this Settlement Agreement, or any provision
thereof.

                                       6


<PAGE>

                                   ARTICLE 5
             CAPACITY AVAILABLE TO EPNG'S CALIFORNIA DELIVERY POINTS

         5.1 EPNG agrees to make 3290 MMcf/day of firm primary capacity
available to its California delivery points, provided that each of the following
conditions occur:

                  5.1.1 As more fully set forth in Article 6, EPNG is able to
                        place into service its 320 MMcf/day Power-Up expansion
                        project as proposed in Docket No. CP03-1-000;

                  5.1.2 As more fully set forth in Article 7, EPNG obtains
                        tariff authority to provide shippers who contract for
                        any unsubscribed or turnback capacity of an aggregate of
                        no more than 623 MMcf/day of the 3290 MMcf/day to a
                        primary non-California delivery point(s) with dual
                        primary delivery point rights that permit the shippers
                        to ship gas either to a primary non-California delivery
                        point(s), to a primary California delivery point, or to
                        a combination of both; and

                  5.1.3 As more fully set forth in Article 8, EPNG obtains
                        tariff authority to revise the procedure originally
                        agreed to in the 1996 Settlement whereby northern
                        California shippers may recall Block II capacity in
                        order to serve customers in PG&E's service area.

         5.2 EPNG will not be deemed to have violated its obligations in this
Article if it is unable to make available or schedule to its California delivery
points 3290 MMcf/day of firm primary capacity due to, for the duration of, and
to the extent of, events and factors beyond its control, including but not
limited to: (a) force majeure events (as defined in


                                       7
<PAGE>

Section 7.2 of the General Terms and Conditions of EPNG's Volume No. 1-A
Tariff); (b) delays in securing necessary regulatory approvals; (c) superseding
regulatory or court rulings; (d) shipper choices which have relocated or will
relocate shippers' primary delivery points from California points to
non-California points, thereby reducing the contractual amount of capacity with
California primary delivery point rights below 3290 MMcf/day; and (e) shipper
choices to use dual primary delivery point capacity to deliver gas to
non-California delivery points instead of to California delivery points;
provided, however, and subject to the foregoing, that nothing herein will alter
EPNG's obligation herein to maintain facilities sufficient to physically deliver
3290 MMcf/day to its California delivery points.

         5.3 EPNG shall not add new firm incremental load to its system that
would prevent it from making available or scheduling to its California delivery
points 3290 MMcf/day of firm primary capacity, as set forth in Paragraph 5.1.

         5.4 The Settling Parties agree that with regard to the choices provided
shippers by the Commission, this Settlement Agreement, including the obligations
undertaken by EPNG in this Article, is not intended to, and does not, preclude,
restrict or inhibit any such choices in any way, but rather broadens such
choices by, among other things, eliminating contractual restraints on the
delivery of gas to the California border.

                                   ARTICLE 6
                               LINE 2000 POWER-UP

6.1 On October 3, 2002, in Docket No. CP03-1-000, EPNG submitted an application
for Commission certificate authority to install additional compression on its


                                       8
<PAGE>

Line 2000 that would add an additional 320 MMcf/day of capacity to its system,
all as more fully described in the application.

         6.2 If EPNG receives the necessary environmental and regulatory
approvals, as proposed by EPNG, including but not limited to Commission
certificate authorization in Docket No. CP03-1-000, then EPNG shall construct
the Power-Up Project on a phased schedule with in-service dates as proposed in
its certificate application at Docket No. CP03-1-000. EPNG will use all
commercially reasonable efforts to obtain all approvals on a timely basis to
meet that schedule.

         6.3 Upon completion of the Power-Up Project, EPNG will have the
physical capacity to deliver up to 3840 MMcf/day in the aggregate to the
California delivery points as follows: (a) 540 MMcf/day to SoCal-Topock; (b) 400
MMcf/day to Mojave-Topock; (c) 1140 MMcf/day to PG&E-Topock; and (d) 1760
MMcf/day to Ehrenberg.

         6.4 No California Settling Party shall object to the recovery in EPNG's
rates in its next rate case of the costs reasonably incurred by EPNG in
connection with the increase of physical California delivery capacity from 3290
MMcf/day to 3840 MMcf/day, which physical capacity will be available to serve
California and East of California markets. Those costs are all the costs
reasonably incurred by EPNG associated with the construction of the Power-Up
Project (Docket No. CP03-1-000) and the Line 2000 Conversion Project (Docket No.
CP00-422-000). The California Settling Parties shall not be prohibited from
objecting to the allocation of such costs in EPNG's next rate case.


                                       9
<PAGE>

                                   ARTICLE 7
                          DUAL PRIMARY DELIVERY POINTS

         7.1 Upon approval of this Settlement Agreement, EPNG will have tariff
authority to provide shippers who contract for no more than 623 MMcf/day of the
3290 MMcf/day by obtaining unsubscribed or turnback capacity as part of the
conversion from full requirements to contract demand to a non-California
delivery point(s) with dual primary delivery point rights that permit the
shippers to ship gas either to a primary non-California delivery point(s) or to
a primary California delivery point. Accordingly, effective on the first day of
the month following the Effective Date of this Settlement Agreement, the General
Terms and Conditions of EPNG's Volume No. 1-A Tariff shall be modified to
reflect the changes shown on the Pro Forma Tariff Sheets attached hereto under
Tab 1; provided, however, that the California Settling Parties will have the
right to argue to the Commission in the future that non-California shippers
should not be permitted to acquire part of the 3290 MMcf/day and change the
primary delivery points to non-California points. Upon agreeing to a shipper's
request to move its primary delivery point from a California point to a
non-California point, EPNG agrees to notify the California Settling Parties
promptly of the fact of such agreement.

         7.2 Unless the parties otherwise agree, at no time during the term of
this Settlement Agreement shall EPNG be obligated to provide capacity under firm
contracts with primary rights to California delivery points, either on a
"single" or "dual" basis, that exceeds the following:

             SoCal Topock                             540 MMcf/day
             PG&E Topock                             1140 MMcf/day


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<PAGE>

             Mojave Topock                            400 MMcf/day
             SoCal Ehrenberg                         1210 MMcf/day

         7.3 Except as may be limited by Article 8 relating to Block II recall
rights, shippers holding contracts with dual primary rights will have the sole
discretion to determine the points to which they will nominate their gas
deliveries on any given day, i.e., subject to the provisions of EPNG's tariff,
EPNG's shippers will determine where and how much gas will be delivered to
California and non-California delivery points on EPNG's system.

                                   ARTICLE 8
                             BLOCK II RECALL RIGHTS

         8.1 The parties to the 1996 Settlement divided EPNG's 1.614 Bcf/day of
turnback capacity into three blocks (Blocks I, II, and III) for the term of that
settlement. Block II contains 614 MMcf/day of capacity, and, among other things,
it gives shippers serving customers in PG&E's market area the right to recall
Block II capacity under certain conditions.

         8.2 The Settling Parties agree that, during the remaining term of the
1996 Settlement, Block II capacity will remain subject to recall by PG&E or
shippers serving a market in PG&E's service territory. Upon approval of the
Settlement Agreement by the Commission, EPNG's tariff provisions regarding the
Block II recall process will be revised to clarify the recall process as stated
in the pro forma tariff sheets attached hereto under Tab 2. Accordingly,
effective on the first day of the month following the Effective Date of this
Settlement Agreement, Section 4 of the General Terms and Conditions of


                                       11
<PAGE>

EPNG's Volume No. 1-A Tariff shall be revised to clarify the recall process as
reflected in the provisions set forth on the Pro Forma Tariff Sheets attached
hereto under Tab 2.

                                   ARTICLE 9
                                AFFILIATE ISSUES

         9.1 EPNG agrees that no affiliate of the pipeline will enter into new
contractual commitments to hold capacity on the EPNG system for the term of this
Settlement Agreement except (1) to the extent that such affiliate requires the
capacity to fulfill its obligations existing under the terms of the Master
Settlement Agreement, or (2) to replace existing capacity to serve existing
contractual obligations. As of the date of this Settlement Agreement, existing
capacity held by Merchant is: (1) approximately 37 MMcf/day of firm capacity
which it acquired directly from EPNG and that has primary California delivery
rights; (2) approximately 156 MMcf/day of primary firm capacity to Ehrenberg
which it acquired from Southern California Gas Company under a temporary release
that expires on August 31, 2006; and (3) approximately 92 MMcf/day of capacity
on the Wilcox lateral that does not include any mainline rights.

         9.2 To the extent that, on any day, Merchant is not using any of its
mainline capacity on EPNG to fulfill its settlement obligations or to serve
other obligations existing at the time of this Settlement Agreement as set forth
in Paragraph 9.1 above, it shall not unreasonably delay posting the capacity not
so used for release in accordance with the terms of EPNG's tariff, and upon
terms and conditions comparable to capacity release transactions occurring
contemporaneously among non-affiliated shippers on EPNG's system. Furthermore,
the Settling Parties agree that in its order approving the Settlement Agreement
the Commission must waive the applicability of Section 28.9(d) of


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<PAGE>

the General Terms and Conditions of EPNG's Volume No. 1-A Tariff (which
prohibits the re-release of capacity acquired on a volumetric reservation charge
basis) to the extent necessary to enable Merchant to release any capacity it has
acquired in the secondary market in accordance with the provisions of this
Paragraph.

                                   ARTICLE 10
                                 EFFECTIVE DATE

         10.1 It is stipulated and agreed that the various provisions of the
instant Settlement Agreement are not severable and that neither this Settlement
Agreement, nor any of the provisions hereof, shall become effective unless and
until each of the following has occurred: (a) the Commission shall have entered
an order approving the instant Settlement Agreement without condition or
modification; (b) such Commission order approving the instant Settlement
Agreement shall have waived compliance by the El Paso Settling Parties with the
requirements of the Commission's Rules and Regulations as necessary to carry out
the provisions of this Settlement Agreement; (c) the Stipulated Judgment
referenced in Article 12 has become fully effective pursuant to its terms; and
(d) the Master Settlement Agreement has become fully effective pursuant to its
terms. When conditions (a), (b), (c) and (d) are satisfied, including Paragraph
10.2 below if applicable, then this Settlement Agreement will become effective,
and such date will constitute the Effective Date. None of the provisions of this
Settlement Agreement will become effective prior to the Effective Date.

         10.2 If the Commission issues an order modifying this Settlement
Agreement or approving it only subject to modification(s) or condition(s), then
this Settlement Agreement will not become effective unless each of the Settling
Parties expressly accepts


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<PAGE>

the modification(s) or condition(s) in writing within thirty (30) days of the
date of the Commission's order requiring the modification(s) or condition(s),
and also not until conditions (b), (c) and (d) of Paragraph 10.1 are satisfied.
In the event any of the Settling Parties fails to accept a modification or
condition required by the Commission, then this Settlement Agreement and the
Master Settlement Agreement shall be void and of no effect.

         10.3 If a party other than a Settling Party requests rehearing of a
Commission order approving the Settlement Agreement, or of a Commission order
that modifies and/or conditions the Settlement Agreement and that is accepted by
the Settling Parties pursuant to the provisions of Paragraph 10.2, and if in
that situation the Commission on rehearing reverses or otherwise modifies or
conditions the order, and that prevents any Settling Party from fully performing
its obligations under the Settlement Agreement, then the Settling Parties agree
to negotiate in good faith as to additional modifications to the Settlement
Agreement to reflect the material impact, if any, of the Commission's
modifications or conditions; provided, however, that if the parties are unable
to agree to additional modifications, then the parties shall present their
respective positions to the Special Master for resolution, which resolution
shall be taken to the Commission for review to the extent such review may be
required. The Settling Parties further agree that: (1) there shall be no
liability for any Settling Party's failure to perform as a result of any action
set forth in this paragraph, and (2) none of the Settling Parties will have the
right to terminate the Settlement Agreement as a result of any action set forth
in this paragraph.

         10.4 If a party other than a Settling Party seeks judicial review of a
Commission order approving the Settlement Agreement pursuant to the provisions
of

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<PAGE>

Paragraph 10.1, or of a Commission order that modifies and/or conditions the
Settlement Agreement and that is accepted by the Settling Parties pursuant to
the provisions of Paragraph 10.2, and if in that situation a reviewing court, or
the Commission on remand of an order from a reviewing court, reverses or
otherwise modifies or conditions the Commission's order, and that prevents any
Settling Party from fully performing its obligations under the Settlement
Agreement, then the Settling Parties agree to negotiate in good faith as to
additional modifications to the Settlement Agreement to reflect the material
impact, if any, of the Commission's or court's modifications or conditions;
provided, however, that if the parties are unable to agree to additional
modifications, then the parties shall present their respective positions to the
Special Master for resolution, which resolution shall be taken to the Commission
for review to the extent such review may be required. The Settling Parties
further agree that: (1) there shall be no liability for any Settling Party's
failure to perform as a result of any action set forth in this paragraph, and
(2) none of the Settling Parties will have the right to terminate the Settlement
Agreement as a result of any action set forth in this paragraph.

         10.5 Nothing in this Article precludes any Settling Party from
requesting rehearing or seeking judicial review of any Commission order
regarding this Settlement Agreement; provided, however, that such rehearing
request or court appeal by a Settling Party shall not affect a Settling Party's
acceptance of a Commission order approving the Settlement Agreement as set forth
in Paragraphs 10.1 and 10.2 above.


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<PAGE>

                                   ARTICLE 11
                    TERMINATION OF OTHER PROCEEDINGS, MUTUAL
                               RELEASE AND WAIVER

         11.1 The Settling Parties hereby agree that in its order approving this
Settlement Agreement the Commission must dismiss with prejudice the complaint in
Docket No. RP00-241-000 effective upon the Effective Date, and all claims or
issues raised in that proceeding by any of the California Settling Parties, and
in all subdockets, will be deemed finally resolved effective upon the Effective
Date.

         11.2 The Settling Parties further agree that in its order approving
this Settlement Agreement the Commission must terminate with prejudice the
Docket No. RP00-241-000 proceeding and all subdockets effective upon the
Effective Date, and must vacate the October 9, 2001, and September 23, 2002
Initial Decisions of the Chief Administrative Law Judge in that proceeding
effective upon the Effective Date.

         11.3 The California Settling Parties hereby agree that the issues and
claims settled herein, as described in Article 3 and Paragraph 11.6, are deemed
withdrawn with prejudice as to the Settling Parties in all other Commission
proceedings, including but not limited to the Capacity Allocation Proceeding and
Docket No. RP01-484-000 effective upon the Effective Date.

         11.4 The California Settling Parties each further agree that none of
them, either directly or indirectly, in any current or future proceeding, forum,
formal or informal investigation, case or any other matter, will advocate any
position that is inconsistent with the terms of this Settlement Agreement,
including the release set forth in Paragraph


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<PAGE>

5.2 of the Master Settlement Agreement, or take any action that materially
interferes with the El Paso Settling Parties' ability to perform under this
Settlement Agreement.

         11.5 Notwithstanding the foregoing provisions, nothing in this
Settlement Agreement shall replace or supplant any remedy which the Commission
prospectively makes available to all shippers, including the California Settling
Parties, in the Capacity Allocation Proceeding, including the relief already
provided in the Commission's May 31, 2002, and September 20, 2002 Orders;
provided, that the California Settling Parties shall not be entitled to any
relief against the El Paso Settling Parties in that proceeding, or in any other
proceeding, which is covered by the scope of the release set forth at Paragraph
5.2 of the Master Settlement Agreement, and thus would be duplicative or
cumulative to the consideration that the El Paso Settling Parties have provided
to the California Settling Parties under this Settlement Agreement and the
Master Settlement Agreement; and provided further, that the Special Master is
empowered to require specific performance and impose reasonable injunctive
remedies as agreed to by the parties to ensure compliance with the contractual
commitments that are set forth in the Stipulated Judgment.

         11.6 The release provisions set forth in Paragraphs 5.2 and 5.3 of the
Master Settlement Agreement, and the other provisions of Section 5 of the Master
Settlement Agreement as appropriate, are incorporated herein by reference, and
the instant Settlement Agreement is subject to said release provisions.


                                       17
<PAGE>

                                   ARTICLE 12
                               DISPUTE RESOLUTION

         12.1 As more fully discussed in the Offer of Settlement, the Settling
Parties have agreed to an alternative dispute resolution process. Under that
process, compliance with certain of the terms of this Settlement Agreement shall
be enforced by a Special Master, as provided in a Stipulated Judgment that the
Settling Parties will file with a federal district court in California. In part,
the Stipulated Judgment will provide that, to the extent that the Settling
Parties disagree in the future as to whether particular compliance issues are
subject to the jurisdiction of this Commission, the parties agree that such
disputes will be submitted to the Commission for resolution. The Stipulated
Judgment will further state that in the event the Commission does not resolve
such a dispute within 60 days, the dispute will be submitted to the Special
Master for his/her immediate resolution, provided, however, that nothing in the
Stipulated Judgment is intended to deprive the Commission of the ability to
resolve any disputes or issues within its jurisdiction.

                                   ARTICLE 13
                                      TERM

         13.1 The term of this Settlement Agreement will be five (5) years from
the Effective Date.

                                   ARTICLE 14
                               GENERAL PROVISIONS

         14.1 In entering this Settlement Agreement, the Settling Parties assume
the risk of any mistake of fact or law. If the Settling Parties, or any of them,
should later discover that any fact they relied upon in entering this Settlement
Agreement is not true, or that


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<PAGE>

their understanding of the facts or law was incorrect, none of the Settling
Parties shall be entitled to seek rescission, termination or modification of
this Settlement Agreement on that basis. This Settlement Agreement is intended
to be final and binding upon the Settling Parties regardless of any mistake of
fact or law.

         14.2 This Settlement Agreement shall be binding upon and for the
benefit of each of the Settling Parties, and their successors and assigns.
Nothing in this Settlement Agreement shall be construed or interpreted to impart
any rights or obligations to any third party (other than a permitted successor
or assignee bound to this Settlement Agreement).

         14.3 Neither the provision of consideration in the form of the mutual
covenants contained herein, nor the performance of any such covenants contained
herein, nor anything contained or incorporated herein shall be deemed, nor shall
the negotiations, execution and performance of this Settlement Agreement
constitute, an admission or concession of liability or wrongdoing on the part of
any Settling Party, or any other form of admission with respect to any matter,
thing or dispute whatsoever.

         14.4 Each Settling Party represents and warrants to each of the other
Settling Parties that, subject to this Paragraph: (a) it has the full power and
authority to enter into this Settlement Agreement and to perform all
transactions, duties and obligations set forth herein; (b) it has duly and
validly executed and delivered this Settlement Agreement and the other documents
and agreements provided for herein to be executed and delivered by such Settling
Party; and (c) this Settlement Agreement and the other documents and agreements
provided for herein to be executed and delivered by such Settling Party


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<PAGE>

constitute the legal, valid and binding obligations of such Party, enforceable
against such Settling Party in accordance with their respective terms. The CPUC
and the Los Angeles City Council have not yet had an opportunity to conduct the
required votes on whether to approve the Settlement Agreement. Accordingly, this
Settlement Agreement is executed by counsel for the CPUC and the City of Los
Angeles subject to such approval. Not later than five (5) business days after
each such vote is taken, counsel for each of these Parties shall certify the
results of their respective votes in writing to each of the other Parties to the
Joint Settlement Agreement, and will notify the Commission in writing.

         14.5 This Settlement Agreement, the Stipulated Judgment, and the Master
Settlement Agreement, along with the attachments thereto, constitute the entire
agreement between the Parties as to the issues specified herein and supersede
and replace all prior negotiations or proposed agreements, written or oral, with
respect to the subject matter thereof; provided, however, that nothing in this
Settlement Agreement shall be deemed to supersede, modify or replace the
provisions of the 1996 Settlement except with respect to those clarifying
revisions set forth in Article 8 relating to the recall of Block II capacity.

         14.6 This Settlement Agreement may not be altered, amended, modified or
otherwise changed in any respect whatsoever except by writing duly executed by
an authorized representative of each of the Settling Parties.

         14.7 The language of this Settlement Agreement shall be construed as a
whole, and not strictly for or against any Settling Party, regardless of who
drafted or was principally responsible for drafting the Settlement Agreement or
any specific terms or


                                       20
<PAGE>

conditions hereof. This Settlement Agreement shall be deemed to have been
drafted by all Settling Parties, and no Settling Party shall urge otherwise.

         14.8 The descriptive titles and headings of the Articles of this
Settlement Agreement are for reference purposes only. The titles and headings
are not to be construed or taken into account in interpreting any term or
provision of the Settlement Agreement and do not qualify, modify, or explain the
meaning or constriction of any term or provision of the Settlement Agreement.

                                   ARTICLE 15
                                  RESERVATIONS

         15.1 This Settlement Agreement is entered into pursuant to Rule 602 of
the Commission's Rules of Practice and Procedure, 18 C.F.R. Section 385.602
(2002). Unless and until the provisions of the Settlement Agreement become
effective pursuant to its terms, the Settlement Agreement, the Offer of
Settlement, the Stipulated Judgment, the Explanatory Statement, and the tariff
sheets attached hereto shall be privileged and of no effect and shall not be
admissible in any proceeding before any court or regulatory body.

         15.2 This Settlement Agreement is made upon the express understanding
that it constitutes a negotiated settlement of the subject proceeding. Neither
the Commission nor any of the Settling Parties shall be deemed to have approved,
accepted or otherwise consented to any legal principle, policy, methodology,
tariff modification or interpretation, or contract modification or
interpretation, except as expressly provided in this Settlement Agreement.


                                       21
<PAGE>


                                            /s/ Daniel F. Collins
                                            --------------------------------
Kenneth M. Minesinger                       Daniel F. Collins
Lois K. Perrin                              Senior Vice President & Deputy
Christopher Cobb                              General Counsel
MORRISON & FORESTER, L.L.P.                 EL PASO CORPORATION
2000 Pennsylvania Avenue, N.W.              555 11th Street, N.W.
Washington, D.C.                            Suite 750
(202) 887-1500                              Washington, D.C. 20004
                                            (202) 637-3500




                                            Judy A. Heineman
                                            Vice President and General Counsel
                                            EL PASO NATURAL GAS COMPANY
                                            2 North Nevada Avenue
                                            Colorado Springs, CO 80903
                                            (719) 473-2300

                                            Attorneys for
                                            EL PASO NATURAL GAS COMPANY




                                            /s/ Gregory W. Jones
                                            --------------------------------
William S. Scherman                         Gregory W. Jones
Douglas G. Robinson                         Vice President and
David J. Hill                               Associate General Counsel
SKADDEN, ARPS, SLATE,                       EL PASO CORPORATION
  MEAGHER & FLOM, L.L.P.                    1001 Louisiana Street
1440 New York Avenue, N.W.                  Houston, TX 77002
Washington, D.C. 20005                      (713) 420-4431
(202) 371-7060
                                            Attorneys for
                                            EL PASO MERCHANT ENERGY, L.P.


                                       22
<PAGE>


                                            /s/ Stephen E. Pickett
                                            --------------------------------
Kevin J. Lipson                             Stephen E. Pickett
Douglas L. Beresford                        Douglas Kent Porter
J. Patrick Nevins                           SOUTHERN CALIFORNIA EDISON COMPANY
HOGAN & HARTSON L.L.P.                      P.O. Box 800
555 13th Street, N.W.                       2244 Walnut Grove Avenue
Washington, D.C. 20004                      Rosemead, CA 91770
(202) 637-5614                              (626) 302-3694

                                            Attorneys for
                                            SOUTHERN CALIFORNIA EDISON COMPANY



                                            /s/ Joshua Bar-Lev
                                            --------------------------------
Jon B. Streeter                             Joshua Bar-Lev
KEKER & VAN NEST L.L.P.                     Charles Middlekauff
710 Sansome Street                          PACIFIC GAS AND ELECTRIC COMPANY
San Francisco, CA 94111                     P.O. Box 7442
(415) 391-5400                              77 Beale Street, 30th Floor
                                            San Francisco, CA 94120
                                            (415) 973-2776

                                            Attorneys for
                                            PACIFIC GAS AND ELECTRIC COMPANY


                                            /s/ Harvey Y. Morris
                                            --------------------------------
                                            Harvey Y. Morris
                                            PUBLIC UTILITIES COMMISSION OF
                                              THE STATE OF CALIFORNIA
                                            505 Van Ness Avenue
                                            San Francisco, CA 94102
                                            (415) 703-1086

                                            (Subject to formal approval by the
                                            Public Utilities Commission of the
                                            State of California)

                                            Attorney for the
                                            PUBLIC UTILITIES COMMISSION
                                              OF THE STATE OF CALIFORNIA


                                       23

<PAGE>
                                            /s/ Rockard J. Delgadillo
                                            ------------------------------------
Regina Y. Speed-Bost                        Rockard J. Delgadillo
SULLIVAN & WORCESTER LLP                    City Attorney
1666 K Street, N.W.                         Terree Bowers
Suite 700                                   Executive Assistant
Washington, D.C. 20006                      Mark L. Brown
Telephone: (202) 775-6816                   Senior Assistant Attorney
                                            Edward J. Perez
                                            Assistant City Attorney
                                            CITY OF LOS ANGELES, CALIFORNIA
                                            1800 City Hall East
                                            Los Angeles, CA 90012
                                            Telephone: (213) 485-3160

                                            (Subject to formal approval by the
                                            Los Angeles City Council)

                                            Attorneys for the
                                            CITY OF LOS ANGELES, CALIFORNIA


                                       24
<PAGE>


                          UNITED STATES DISTRICT COURT
                     FOR THE CENTRAL DISTRICT OF CALIFORNIA


THE PEOPLE OF THE STATE OF           |
CALIFORNIA ex rel. BILL LOCKYER,     |
ATTORNEY GENERAL OF THE STATE        |    CIVIL ACTION NO.
OF CALIFORNIA and THE STATE OF       |                    ------------------
CALIFORNIA, PACIFIC GAS AND          |
ELECTRIC COMPANY, AND SOUTHERN       |
CALIFORNIA EDISON COMPANY,           |
                                     |
                                     |    [PRO FORMA] STIPULATION TO
                   Plaintiffs,       |    ENTRY OF JUDGMENT(1)
                                     |
                                     |
         v.                          |
                                     |
EL PASO NATURAL GAS COMPANY,         |
EL PASO MERCHANT ENERGY COMPANY,     |
EL PASO MERCHANT ENERGY - GAS,       |
L.P.,                                |
                                     |
                   Defendants.       |
                                     |
--------------------------------------


                                   STIPULATION

         The parties to these actions, plaintiffs, the People of the State of
California, ex rel. Bill Lockyer, Attorney General of the State of California
and the State of the California ("State of

--------
(1) [Note: Prior to its actual filing, the Stipulated Judgment will be conformed
to the filing requirements of the United States District Court for the Central
District of California and the Federal Rules of Civil Procedure to ensure that
judgment is entered in accordance with the Parties' agreement. No changes to the
substantive commitments of the Parties will be made.]


                                       1

<PAGE>

California"),(2) Pacific Gas and Electric Company ("PG&E"), and Southern
California Edison Company ("Edison") (plaintiffs, and the CPUC, jointly referred
to herein as the "California Parties"), and defendants El Paso Merchant
Energy-Gas, L.P., El Paso Merchant Energy Company (together "Merchant"), and El
Paso Natural Gas Company ("EPNG") (defendants collectively referred to herein as
"El Paso") (California Parties and defendants collectively "Settling Parties"),
having agreed to a settlement of these actions on the terms as set forth in this
Stipulation to Entry of Judgment ("Stipulation"), hereby stipulate to the
following:

         1. Entry of Judgment Under Federal Rule of Civil Procedure 58

         Without any admission by El Paso of liability or fault, the Settling
Parties have entered into this Stipulation with the intent to fully and finally
compromise and settle all of plaintiffs' claims. In consideration of covenants
made in this Stipulation, the Settling Parties respectfully request that the
Court enter judgment in accordance with the terms of this Stipulation under
Federal Rule of Civil Procedure 58. For the purpose of enforcing the Settling
Parties' compliance with the Stipulated Judgment during the five (5) year period
following the effective date of the Stipulated Judgment, the Court shall retain
jurisdiction over the consolidated actions during said period. The Court's
jurisdiction shall terminate at the end of that period.

         In addition to the filing of this Stipulation in this Court, filings
have been made in California Superior Court, and at the Federal Energy
Regulatory Commission ("FERC"), to resolve all claims covered by the release
provisions contained in those filings. The FERC settlement filing shall resolve
all claims and issues raised by the California Parties in the proceeding at
Docket No. RP00-241-000 and all subdockets, and all related claims and issues
raised in a number of other proceedings. The California Superior Court filing
("Master Settlement Agreement") shall resolve, inter alia, the class action
litigation and other cases pending in California Superior Courts in San Diego,
Los Angeles and San Francisco, and in Nevada.

         Importantly, the effectiveness of this Stipulated Judgment shall be
contingent upon the

--------
(2) It is stipulated that both the Attorney General of the State of California
and the Public Utilities Commission of the State of California ("CPUC") will
concurrently have the State of California's rights and obligations under this
Stipulated Judgment.

                                       2
<PAGE>

approval and effectiveness of the settlements filed with the California Superior
Court and at the FERC, and the five year term of the Stipulated Judgment shall
not commence until that time. This Stipulation shall become void and the
obligations of the Settling Parties thereunder will not arise if either of the
settlements filed with the California Superior Court and at the FERC do not
become effective in accordance with their terms. Accordingly, the Settling
Parties respectfully request that the Court enter this Stipulated Judgment now,
but defer its effective date until such time as the Settling Parties jointly
inform the Court that it should be implemented.

         In addition, in the event that this Stipulation is not approved as
submitted and does not become effective as requested by the Settling Parties, or
becomes void, then the Settling Parties agree that: (1) it cannot be used in any
proceeding for any purpose; (2) El Paso retains and specifically reserves the
right to, within a reasonable time, file an answer and any other pleadings in
response to the plaintiffs' complaints (including dispositive motions) and/or
assert all applicable affirmative defenses and/or counter-claims against the
plaintiffs; and, (3) the plaintiffs retain and specifically reserve the right to
amend their complaints.

         2. Order of Reference Under Federal Rule of Civil Procedure 53

         The Settling Parties respectfully request that the Court approve a
Special Master in these actions under Federal Rule of Civil Procedure 53, for a
term of five (5) years, commencing upon the effective date of this Stipulation.

         APPOINTMENT AND REMOVAL OF THE SPECIAL MASTER.

         The Settling Parties shall use their best efforts to agree upon a
mutually acceptable Special Master within ten business days after the approval
of the Stipulation. If the Settling Parties are unable to agree to a Special
Master, the Settling Parties shall nominate a list of qualified, experienced,
neutral individuals with no conflicts of interest to be Special Master. The
nomination list shall be submitted to the Court no later than twenty days after
approval of the Stipulation. "No conflicts of interest," for purposes of Special
Master selection under this Stipulation, shall mean that the nominated
individual has no present employment, consulting or other professional
affiliation with any of the Settling Parties, and has no financial interest in
any of the corporate entities among the


                                       3
<PAGE>

Settling Parties. The nomination and selection procedure shall take place as
follows: (i) the California Parties and the El Paso shall simultaneously
exchange lists of five candidates each; (ii) the California Parties and the El
Paso shall each have three peremptory challenges; (iii) any name or names common
to both the California Parties' list and the El Paso's list shall be exempt from
peremptory challenges, (iv) within 48 hours of the initial exchange of names,
the California Parties and the El Paso shall simultaneously exercise their
peremptory challenges, (v) the remaining list of candidates, after exercise of
peremptory challenges, or the original list if no peremptory challenges have
been exercised, shall be submitted to the Court no later than twenty days after
approval of the Stipulation, (vi) the Settling Parties shall have the right to
address the qualifications of the remaining candidates before the Court prior to
the Court's selection, and (vii) the Special Master shall be selected by the
Court from the list of remaining candidates as soon as possible after it is
submitted. The Special Master shall have no authority to act until after the
Effective Date of the Master Settlement Agreement. A Special Master appointed by
the Court is subject to removal for bias, fraud, corruption or incapacity, but
only upon the standards that would apply to disqualification of a Federal
judicial officer, only if a motion for removal is brought expeditiously to the
Court after the moving Settling Party becomes aware of or should have become
aware of grounds for it, and subject to the proviso that, unless otherwise
directed by the Court, filing of a motion for removal shall not have the effect
of inhibiting, suspending or delaying any proceedings before the Special Master.
If during the five-year settlement period, the Special Master is removed, or if
the Special Master notifies the Settling Parties that he/she is unwilling or
unable to continue to serve, the position of Special Master shall be deemed
vacant upon the date the removal order issues of notice of unwillingness or
inability to serve. To fill a vacancy, the Settling Parties shall follow the
same procedures set forth above for initial selection, commencing from the date
of vacancy.

         ASSISTANCE TO THE SPECIAL MASTER.

         Subject to the agreement of the Settling Parties, the Special Master
may hire additional, qualified individuals as is reasonable and necessary on an
advisory basis to assist him/her. The Special Master shall notify the Settling
Parties of the need for assistance at least ten (10) business days prior to
obtaining assistance.


                                        4
<PAGE>

         PAYMENT OF THE SPECIAL MASTER.

         El Paso shall pay the reasonable fees and expenses associated with the
Special Master, as fixed by the Court pursuant to Federal Rule of Civil
Procedure 53(a). Each Settling Party, however, will bear the expense associated
with its participation in any proceedings before the Special Master or the Court
(including, but not limited to, its own attorneys' fees and costs of witnesses).

         AUTHORITY OF THE SPECIAL MASTER.

         The Settling Parties intend for the Special Master to have authority to
monitor and enforce the following commitments under the provisions of the Joint
Settlement Agreement attached hereto as Appendix A,(3) subject to the
acknowledged principle that the Special Master shall have no jurisdiction over
matters within FERC's jurisdiction:

         o  EPNG's commitment, as provided more fully in Article 5, Paragraph
            5.1 of the Joint Settlement Agreement (and subject to the conditions
            set forth in Article 5, Paragraphs 5.1.1, 5.1.2, and 5.1.3), to make
            3290 MMcf/day of firm primary capacity available to its California
            delivery points, and its commitment, as provided more fully in
            Article 5, Paragraph 5.3, not to add new incremental load to its
            system that would prevent it from making 3290 MMcf/day available;
            provided, however, that EPNG will not be deemed to have violated its
            obligations in Article 5 of the Joint Settlement Agreement if it is
            unable to make available or schedule 3290 MMcf/day due to, for the
            duration of, and to the extent of, events and factors beyond its
            control, including but not limited to the events and factors listed
            in Article 5, Paragraph 5.2.

         o  EPNG's commitments, as provided more fully in Article 6, Paragraph
            6.2 of the Joint Settlement Agreement: (1) to construct its Power-Up
            Project on a phased schedule with in-service dates as proposed in
            its certificate application at Docket No. CP03-1-000,

--------
(3) To the extent that there is any ambiguity and/or inconsistency between the
provisions summarized below and the actual language of the Joint Settlement
Agreement, the Settling Parties hereby agree that the language of the Joint
Settlement Agreement shall control. The Joint Settlement Agreement is identical
to the settlement that has been filed at the FERC in resolution of, inter alia,
FERC Docket No. RP00-241-000 and all subdockets.


                                        5
<PAGE>

            assuming EPNG receives the necessary environmental and regulatory
            approvals, and (2) to use all commercially reasonable efforts to
            obtain all approvals on a timely basis necessary to meet the
            above-referenced schedule.

         o  EPNG's commitments, as provided more fully in Article 7, Paragraph
            7.1, and Article 8, Paragraph 8.2 of the Joint Settlement Agreement,
            to obtain the tariff authority outlined therein.

         o  EPNG's commitment, as provided more fully in Article 7, Paragraph
            7.1 of the Joint Settlement Agreement, to notify the California
            Parties promptly upon agreeing to a shipper's request to move its
            primary delivery point from a California point to a non-California
            point.

         o  El Paso's commitments, as provided more fully in Article 9 of the
            Joint Settlement Agreement, that: (1) no affiliate of EPNG will
            enter into new contractual commitments to hold capacity on the EPNG
            system for the term of the agreement, subject to certain exceptions
            specified therein; and (2) Merchant shall not unreasonably delay
            posting unused capacity for release in accordance with the terms of
            EPNG's tariff and upon terms and conditions comparable to
            contemporaneous capacity release transactions on EPNG's system. As
            of the date of the Joint Settlement Agreement, existing capacity
            held by Merchant is: (1) approximately 37 MMcf/day of firm capacity
            which it acquired directly from EPNG and that has primary California
            delivery rights; (2) approximately 156 MMcf/day of primary firm
            capacity to Ehrenberg which it acquired from Southern California Gas
            Company under a temporary release that expires on August 31, 2006;
            and (3) approximately 92 MMcf/day of capacity on the Willcox lateral
            that does not include any mainline rights.

         In addition to the foregoing commitments, the Settling Parties intend
for the Special Master to have authority to enforce the following:

         o  EXPANSION COSTS: The California Parties' commit, as set forth more
            fully in Article 6, Paragraph 6.4 of the Joint Settlement Agreement,
            not to object to the recovery in EPNG's


                                        6
<PAGE>

            rates in its next rate case of the costs reasonably incurred by EPNG
            in connection with the increase of physical California delivery
            capacity from 3290 MMcf/day to 3840 MMcf/day.

         o  COST ALLOCATION: EPNG agrees that, in its next FERC rate case, its
            proposed rates will be based on a miles of haul approach for all
            costs, including its Line 2000 Conversion and Power-Up costs,
            consistent with the position advocated by Edison in the rate hearing
            at Docket No. RP95-363-002, an approach that is representative of
            the actual flows EPNG has experienced on its system in the recent
            past. In EPNG's next rate case, the California Parties shall not be
            prohibited from objecting to the allocation of costs reasonably
            incurred by EPNG associated with the construction of the Power-Up
            Project (Docket No. CP03-1-000) and the Line 2000 Conversion Project
            (Docket No. CP00-422-000); provided, that in such rate case, the
            California Parties shall not propose a cost allocation, rate design
            or other methodology or proposal that would preclude EPNG from
            recovering its reasonably incurred costs, including those costs
            associated with the construction of the Power-Up Project (Docket No.
            CP03-1-000) and the Line 2000 Conversion Project (Docket No.
            CP00-422-000).

         o  REQUESTS FOR DATA: At any time that a majority of the California
            Parties requests data to address compliance issues arising out of
            the implementation of the Joint Settlement Agreement, including, but
            not limited to, any computer simulations or models of the EPNG
            system, EPNG shall comply with the request within seven business
            days by providing information that it is lawfully able to provide
            and that is not competitively sensitive for its other shippers;
            provided, however, that the California Parties may request data not
            more than four times per year; and provided, further, that all such
            requests must be reasonable and not overly burdensome.

         Prior to initiating proceedings with the Special Master, a Settling
Party must make a good faith effort to resolve the issue with the opposing
Settling Party. Specifically, any Settling Party seeking to initiate proceedings
before the Special Master shall first give the other Settling Party


                                        7
<PAGE>

written notice thereof, and may also provide a copy of such notice to the
Special Master. Such notice must: describe briefly the nature of the dispute;
describe briefly the notifying Settling Party's claim or position in connection
with the dispute; and identify an individual with authority to settle the
dispute on behalf of the notifying Settling Party.

         Within ten (10) business days after service of any such notice, the
receiving Settling Party will give the other Settling Party a written reply (a
copy of which may also be provided to the Special Master) which describes
briefly the receiving Settling Party's responses and positions in connection
with the dispute and identifies an individual with the authority to settle the
dispute on behalf of the receiving Settling Party.

         The individuals identified in the Settling Party's respective notices
will promptly make such investigation of the dispute as they deem appropriate.
Promptly and in no event later than fifteen (15) business days after the date of
the service of the initiating Settling Party's notice, such individuals will
commence discussions concerning resolution of the dispute, preferably in person.
If the dispute has not been resolved within ten (10) business days after
commencement of such discussions, then either Settling Party may submit the
dispute to the Special Master by filing a motion with the Special Master and
serving all of the Settling Parties.(4) Such motion shall state that it is a
notice initiating the Special Master procedures; identify the provisions of the
Stipulation that are the subject matter of the dispute; describe briefly the
nature of the dispute; describe briefly the notifying Settling Party's claim or
position in connection with the dispute; and provide adequate information
regarding the facts underlying the dispute to allow the other Settling Party to
respond.

         The Special Master shall proceed promptly to set a briefing schedule,
and, upon due notice and opportunity for hearing, shall make a report under
Federal Rule of Civil Procedure 53(e). Any Report of the Special Master shall be
subject to review by this Court upon filing of objections thereto within
fourteen (14) days after service of the Report. Absent timely filing of
objections, a Report of the Special Master shall become final.

--------
(4) In the event of a claim of irreparable harm, the Settling Parties agree to
immediately attempt to resolve the issue, and, if the parties are unable to
resolve the issue, the party claiming irreparable harm can seek immediate,
temporary injunctive relief before the Special Master pending a resolution of
the issue based upon a schedule to be established by the Special Master. The
other Parties shall have the right to oppose such request for temporary
injunctive relief.

                                        8
<PAGE>

         The Special Master shall have all powers granted by Federal Rule of
Civil Procedure 53(c); provided, that the sole remedy the Special Master shall
be authorized to impose for breaches of the Settling Parties' commitments
identified herein shall be specific performance, and other reasonable injunctive
remedies to ensure compliance with such commitments. In addition, the Settling
Parties agree that the Special Master shall be the exclusive vehicle for
resolution of the commitments set forth above of the Settling Parties, without
prejudice to other claims or remedies that the Settling Parties may have in
other forums other than any claim or remedy for a breach or breaches of the
Stipulation.

         To the extent that there is a dispute as to whether any matter
submitted to the Special Master is subject to the jurisdiction of the FERC, that
jurisdictional dispute shall be submitted to the FERC for resolution. The motion
before the Special Master giving rise to the jurisdictional dispute shall be
held in abeyance for 60 days pending the FERC's resolution of the matter, and
all deadlines relating to said motion before the Special Master shall be tolled.
Any Settling Party may appeal the FERC's determination of a jurisdictional
dispute concerning the Special Master to the United States Court of Appeals for
the District of Columbia Circuit ("D.C. Circuit").

         1. Should the FERC and the D.C. Circuit determine within 60 days that
the FERC does not have jurisdiction, proceedings before the Special Master shall
resume;

         2. Should the FERC determine within 60 days that it does not have
jurisdiction, but no appeal is taken, proceedings before the Special Master
shall resume;

         3. Should the FERC determine that it does not have jurisdiction within
the 60 day period, but the D.C. Circuit has not had the opportunity to review
the FERC's determination, the proceedings before the Special Master shall
resume, subject to the outcome of the Court's review of the jurisdictional
issue;

         4. In the event that FERC does not resolve the jurisdictional dispute
within 60 days, proceedings before the Special Master shall resume, provided,
however, that the resumption of the


                                        9
<PAGE>

Special Master proceedings shall not act to divest the FERC or the D.C. Circuit
of the authority to decide the jurisdictional dispute and the Special Master's
proceeding shall be subject to the outcome of the determination of the FERC or
the D.C. Circuit.

         5. El Paso shall comply with orders issued by the Special Master after
proceedings before him or her resume, which orders will be subject to the
outcome of any FERC or D.C. Circuit proceedings.

         ADMISSIBILITY IN SUBSEQUENT PROCEEDINGS.

         Any findings, recommendations or decisions by the Special Master and
written products of the Special Master are not prohibited from submission or
admission in any subsequent proceeding before the Special Master under the terms
of this Stipulation. The Settling Parties further agree that they may use the
Special Master's (or, as the case may be, the District Court's) findings,
recommendations, decisions and written products (hereafter "Findings") as
evidence in FERC proceedings, but also agree that such Findings do not have any
preclusive effect or constitute binding precedent in such proceedings, and that
none of the Settling Parties will argue otherwise.

         ATTORNEYS' FEES UNDER THE MASTER SETTLEMENT AGREEMENT

         In addition to the remedial authority set forth herein, the parties
agree that the United States District Court or the Special Master shall have
authority to determine, by application or by stipulation, the amount of
attorneys' fees and costs to which the office of the Attorney General of the
State of California, the Public Utilities Commission of the State of California,
the California Department of Water Resources, the City of Los Angeles, Pacific
Gas and Electric Company, and Southern California Edison Company, respectively,
may claim out of the total settlement consideration paid by El Paso Corporation,
El Paso Natural Gas Company, and El Paso Merchant Energy, L.P. (collectively "El
Paso Parties") under the Master Settlement Agreement on which this Stipulated
Judgment is based. Any award of fees and costs hereunder shall not increase the
amount of consideration paid by the El Paso Parties under the Master Settlement
Agreement but shall simply be used as a basis for allocating the portions of
said consideration that are payable as fees and costs under the Master
Settlement Agreement to the office of the Attorney General of the State of


                                       10
<PAGE>

California, the Public Utilities Commission of the State of California, the
California Department of Water Resources, the City of Los Angeles, Pacific Gas
and Electric Company, and Southern California Edison Company, respectively.

    Dated:                 , 2003          Respectfully submitted,
          -----------------
                                           Attorney General of the State of
                                           California

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------
                                           Date:
                                                --------------------------------


                                           Public Utilities Commission of the
                                           State of California

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------
                                           Date:
                                                --------------------------------


                                           (Subject to formal approval by the
                                           Public Utilities Commission of the
                                           State of California)


                                           Pacific Gas and Electric Company

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------
                                           Date:
                                                --------------------------------


                                           Southern California Edison Company

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------
                                           Date:
                                                --------------------------------


                                           El Paso Natural Gas Company

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------
                                           Date:
                                                --------------------------------


                                       11
<PAGE>

                                           El Paso Merchant Energy-Gas, L.P.

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------
                                           Date:
                                                --------------------------------


                                           El Paso Merchant Energy Company

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------
                                           Date:
                                                --------------------------------

         The Settling Parties to the above-captioned action have informed the
Court that they have reached a settlement to fully and finally resolve all
matters relating to the above-captioned action without trial or adjudication of
any issue of fact or law, and without the settlement in this matter constituting
any evidence against or admission by any Settling Party regarding any issue of
fact or law.

         Good cause appearing therefor, and by the agreement of the Settling
Parties, IT IS SO ORDERED.

    DATED:                  , 2003
          ------------------


                                           -------------------------------------
                                             United States District Court Judge


                                       12
<PAGE>
El PasoNatural Gas Company
FERC Gas Tariff                                     Tenth Revised Sheet No. 202B
Pro Forma Second Revised Volume No. 1A                               Superseding
                                                   Second Revised Sheet No. 202B
--------------------------------------------------------------------------------

                   TRANSPORTATION GENERAL TERMS AND CONDITIONS
                                   (Continued)


1. DEFINITIONS (Continued)

     1.13 The term "business day" means Monday through Friday, excluding Federal
          Banking Holidays for transactions in the United States.

     1.14 The term "fuel" means the quantity of gas determined to be consumed
          during the transportation of gas, including fuel and gas lost and
          unaccounted for.

     1.15 Samalayuca Lateral Line Facilities - Those facilities constructed
          pursuant to the Commission's authorization at Docket No. CP93-252-000,
          et al. Such facilities extend from the Hueco Compressor Station to the
          International Border.

     1.16 Out-of-Zone Daily Reservation Charge - For alternate receipts or
          deliveries, Shippers shall pay an Out-of-Zone Daily Reservation Charge
          to compensate El Paso for service using points not provided for in the
          TSA. The Out-of-Zone Daily Reservation Charge shall be equal to the
          higher of the Reservation Rate provided in the TSA, stated on a daily
          basis, or the maximum rate applicable to the receipt and delivery zone
          for which service is provided, unless El Paso agrees to discount such
          rate(s).

     1.17 Western Energy Settlement, for purposes of this tariff, means the
          settlement between and among El Paso Natural Gas Company, El Paso
          Merchant Energy Company, El Paso Merchant Energy-Gas, L.P., the Public
          Utilities Commission of the State of California, Pacific Gas and
          Electric Company, Southern California Edison Company, and the City of
          Los Angeles, and approved by the Federal Energy Regulatory Commission
          in Docket No. RP00-241.

--------------------------------------------------------------------------------
Issued by: Catherine E. Palazzari, Vice President
Issued on:                                  Effective on:

<PAGE>
El Paso Natural Gas Company
FERC Gas Tariff                                     Fourth Revised Sheet No. 218
Pro Forma Second Revised Volume No. 1A                               Superseding
                                                    Second Revised Sheet No. 218

--------------------------------------------------------------------------------
                   TRANSPORTATION GENERAL TERMS AND CONDITIONS
                                   (Continued)

     4.5  Access to Receipt Points

          (a)  Effective January 1, 1998, for purposes of applying Sections 4.1
               and 4.2, firm capacity having primary access to receipt points
               shall consist of the following: (i) Shippers holding firm
               Transportation Service Agreements on December 31, 1995 ("12-31-95
               Shippers") only to the extent of the capacity actually covered by
               such agreements from time to time; (ii) Shippers who acquire
               Block I capacity from the Permian and Anadarko basins for the
               maximum tariff rate as described in Section 4.5(b)(i); (iii)
               Shippers who acquire Block II and Block III capacity as described
               in Section 4.5(b)(ii) and (iii); and (iv) Shippers resubscribing
               to capacity pursuant to Section 4.5(b)(iii) below.

          (b)  Beginning January 1, 1998, access of turned-back capacity to
               system receipt points shall be administered as follows:

               (i)  Block I - A block of 500 MMcf/d of turned-back capacity
                    shall be given alternate receipt point access rights to all
                    system receipt points; provided, however, capacity sold from
                    Block I for the maximum tariff rate set forth in Rate
                    Schedule FT-1 shall have primary receipt point access rights
                    to system receipt points in the Permian and Anadarko Basins.

               (ii) Block II - A block of 614 MMcf/d of turned-back capacity
                    shall be designated for primary point deliveries to TOPOCK
                    for PG&E or shipper(s) serving a market in PG&E's service
                    territory (collectively "Block II Shippers") and shall have
                    primary access rights to all system receipt points.

                    For the period January 1, 1998 through the effective date of
                    the Western Energy Settlement in Docket No. RP00-241, et
                    al., El Paso may market available Block II capacity to other
                    delivery points subject to recall by El Paso for Block II
                    Shipper(s) as follows: 350 MMcf/d within 48 hours (any
                    time), 150 MMcf/d within one month (72 hours prior to the
                    first of the month), and 114 MMcf/d within three months (72
                    hours prior to the first of the month); provided, however,
                    that to the extent Block II capacity has not been


--------------------------------------------------------------------------------
Issued by: Catherine E. Palazzari, Vice President
Issued on:                                  Effective on:

<PAGE>
El Paso Natural Gas Company
FERC Gas Tariff                                      Third Revised Sheet No. 219
Pro Forma Second Revised Volume No. 1A                               Superseding
                                                     First Revised Sheet No. 219
--------------------------------------------------------------------------------

                   TRANSPORTATION GENERAL TERMS AND CONDITIONS
                                   (Continued)

     4.5  Access to Receipt Points (Continued)

                    marketed, Block II Shipper(s) must acquire such unmarketed
                    capacity before requesting El Paso to recall capacity from
                    Block II. El Paso shall recall Block II capacity marketed to
                    other delivery points if Block II Shipper(s) requesting the
                    recall at least match the rate in the contract covering the
                    capacity to be recalled and subscribe such capacity for a
                    term of longer than one month. El Paso shall recall capacity
                    for terms of one month or less if Block II Shipper(s) agree
                    to pay the maximum tariff rate set forth in Rate Schedule
                    FT-1 for the capacity. Capacity recall shall comply with the
                    provisions of Section 28.14 of this Tariff. A Shipper may
                    elect to purchase capacity from Block III below to access
                    PG&E's service territory regardless of the availability of
                    Block II capacity. Beginning with the effective date of the
                    Western Energy Settlement in Docket No. RP00-241, et al.,
                    through December 31, 2005, the Block II recall provisions
                    detailed in Section 4.10 of the General Terms and Conditions
                    of this Tariff shall apply.

              (iii) Block III - A block of 500 MMcf/d of turned-back capacity
                    shall have primary access rights to all system receipt
                    points. The capacity currently held by 12-31-95 Shippers,
                    excluding the capacity shown in Section 25.1 of this Tariff,
                    shall be added to Block III if such Shippers terminate their
                    firm agreements or reduce their Billing Determinants or
                    Contract Demand. Such terminating Shippers may resubscribe,
                    for a volume up to 53.7% of such Shippers' Docket No.
                    RP95-363-000 Settlement Billing Determinants or Contract
                    Demand, firm capacity having primary system receipt point
                    access for delivery points stated in the terminated
                    Transportation Service Agreement; provided, however, that
                    such Shippers may also acquire available capacity in this or
                    other blocks.

         (c)  If PEMEX Gas y Petroquimica Basica does not elect to exercise its
              step down or contract reduction/termination rights as listed in
              Section 25.1(a)(iii), Blocks I and III shall each be reduced
              equally.

         (d)  Effective January 1, 1998, Shippers acquiring released firm
              California capacity may, subject to Section 28.25 (2) of El Paso's
              Volume No. 1-A Tariff, change the primary delivery point to TOPOCK
              for deliveries into PG&E's service territory. This capacity shall
              maintain its primary delivery point status for purposes of supply
              basin receipt point access.

--------------------------------------------------------------------------------
Issued by: Catherine E. Palazzari, Vice President
Issued on:                                  Effective on:


<PAGE>
El Paso Natural Gas Company
FERC Gas Tariff                                          Original Sheet No. 219F
Pro Forma Second Revised Volume No. 1A

--------------------------------------------------------------------------------

                   TRANSPORTATION GENERAL TERMS AND CONDITIONS
                                   (CONTINUED)

4.10     Block II Recall Provisions to be in effect from the effective date of
         the Western Energy Settlement through December 31, 2005. The Block II
         capacity that is subject to recall under these procedures is defined in
         Section 4.5(b)(ii) of this Tariff and consists of 614 MMcf/day of
         turned-back capacity.

         (a)      Conditions Precedent to Effectuating a Recall

                  (i)     The Shipper requesting a recall of Block II capacity
                          must enter into a new firm Transportation Service
                          Agreement ("TSA") with El Paso for unsubscribed Block
                          II capacity up to the volume of capacity required by
                          such Shipper before El Paso will effectuate a recall
                          of subscribed Block II capacity. The term of the TSA
                          will be the term specified for the recall by the
                          Shipper requesting the recall.

                  (ii)    On the day the recall becomes effective, the Shipper
                          requesting the recall must attempt to nominate all
                          Block II capacity it had under contract prior to the
                          effective date of the recall.

         (b)      Posting of Block II Capacity Information - El Paso will make
                  available on its website, at the conclusion of each scheduling
                  cycle described in Section 4.1 of this Tariff, information
                  identifying the Block II capacity contract holders, their
                  rates, and the volume of gas that each has scheduled to a
                  "non-PG&E TOPOCK" Delivery Point during that cycle. The
                  posting shall appear in the "Informational Postings, Capacity"
                  section of the website under a new sub-section entitled "Block
                  II Capacity".

         (c)      Notice Requirements for Block II Recall

                  (i)     The first 350 MMcf/d of Block II capacity is subject
                          to recall upon 48 hours notice given at any time.

                  (ii)    The next 150 MMcf/d of Block II capacity is subject to
                          recall within one month upon notice given not less
                          than 72 hours prior to the first of the month in which
                          the recall will be effectuated.

                  (iii)   The final 114 MMcf/d of Block II capacity is subject
                          to recall within three months upon notice given not
                          less than 72 hours prior to the first of the month in
                          which the recall will be effectuated.



--------------------------------------------------------------------------------
Issued by: Catherine E. Palazzari, Vice President
Issued on:                                  Effective on:
<PAGE>
El Paso Natural Gas Company
FERC Gas Tariff                                          Original Sheet No. 219G
Pro Forma Second Revised Volume No. 1A

--------------------------------------------------------------------------------
                   TRANSPORTATION GENERAL TERMS AND CONDITIONS
                                   (CONTINUED)

Section 4.10 (continued)

     (d)  Block II Recall Request Requirement - El Paso will process a request
          for recall only upon receipt of a written request from a party
          desiring to serve a market in PG&E's service territory. Such written
          request can be received at the designated site by regular mail, fax or
          electronic mail. The written request must include:

          (i)   The volume requested for recall.

          (ii)  The desired term including the beginning and ending date of such
                recall.

     (e)  Determining the Sequence of Block II Capacity Subject to Recall - Upon
          receipt by El Paso of a valid written request to recall Block II
          capacity, El Paso will first notify Shipper if there is any
          unsubscribed capacity that can serve the Shipper's need as required in
          Section 4.10(a)(i) of this Tariff. If the request can not be satisfied
          in total by the purchase of unsubscribed capacity, any Block II
          capacity that has been marketed to a non-PG&E Topock Delivery Point,
          either on a single primary delivery point or a dual primary delivery
          point basis, is subject to recall except during the time such capacity
          is being used to serve markets in PG&E's service territory. El Paso
          will recall capacity from the following categories according to the
          following sequence:

          (i)   Unused (i.e., not scheduled) capacity under any Block II
                contracts with primary delivery point rights, either single or
                dual, to non-PG&E Topock Delivery Points. The recall request
                will be filled on a pro-rata basis from all Shippers meeting
                these criteria.

          (ii)  Used (i.e., scheduled) capacity under any Block II Topock
                contracts where the quantity scheduled is to a non-PG&E
                alternate Delivery Point and where the single primary Delivery
                Point under the contract is to PG&E Topock. The recall request
                will be filled on a pro-rata basis from all Shippers meeting
                these criteria.

          (iii) Used (i.e., scheduled) capacity under any Block II contracts
                other than those falling under Section 4.10(e)(ii) above where
                the quantity scheduled is to a non-PG&E Topock Delivery Point.
                The recall request will be filled on a pro-rata basis from all
                Shippers meeting these criteria.

--------------------------------------------------------------------------------
Issued by: Catherine E. Palazzari, Vice President
Issued on:                                  Effective on:

<PAGE>
El Paso Natural Gas Company
FERC Gas Tariff                                          Original Sheet No. 219H
Pro Forma Second Revised Volume No. 1A

--------------------------------------------------------------------------------
                   TRANSPORTATION GENERAL TERMS AND CONDITIONS
                                   (CONTINUED)

Section 4.10 (continued)

          (f)   Rate to be Paid for Recall of Block II Capacity - For recall
                periods of one month or less, the recalling Block II Shipper
                agrees to pay the maximum reservation Tariff rate for deliveries
                to the California zone. For recall periods of longer than one
                month, the rate paid shall be equal to the rate paid by the
                Shipper whose capacity is being recalled. When the capacity
                being recalled is held by converted Full Requirements
                Shipper(s), the rate to be paid by the recalling Shipper shall
                be the Effective Unit Rate(s) for capacity for the converted
                Full Requirements Shipper(s) as stated in Section 9 of Rate
                Schedule FT-1. The Effective Unit Rates displayed in that
                Section of the Tariff have been determined by dividing the
                annual cost responsibility of each converted Full Requirements
                Shipper by the aggregate annual Contract Demand, both as
                determined in the Docket No. RP00-336 proceeding. In the event
                an extension of the recall period is requested pursuant to
                Section 4.10(i), the rate payable during the extension period
                shall be the rate paid during the initial recall period.






--------------------------------------------------------------------------------
Issued by: Catherine E. Palazzari, Vice President
Issued on:                                  Effective on:

<PAGE>
El Paso Natural Gas Company
FERC Gas Tariff                                          Original Sheet No. 219I
Pro Forma Second Revised Volume No. 1A

--------------------------------------------------------------------------------
                   TRANSPORTATION GENERAL TERMS AND CONDITIONS
                                   (CONTINUED)

Section 4.10 (continued)

     (g)  Notification of Ability to Fulfill Recall Request - El Paso will
          provide a written response to the recalling Block II Shipper
          describing whether its request can be fulfilled and specifying the
          capacity that is recallable and how the request is being evaluated by
          El Paso. El Paso will provide the response to the request on the
          following time schedule:

          i)    For a request received by 10:00 a.m., Pacific Clock Time ("PCT")
                on a business day, a response will be provided no later than
                3:00 p.m. PCT on the same business day.

          (ii)  For a request received after 10:00 a.m. PCT on a business day, a
                response will be provided by 7:00 a.m. PCT the following
                business day.

          (iii) For a request received on a weekend or holiday, a response will
                be provided by noon PCT on the next business day.

     (h)  Coordination with the Capacity Release System - After notification to
          the recalling Block II Shipper, El Paso will use the capacity release
          system described in Section 28.14 of the Tariff to provide notice of
          the recall. The recall of Block II capacity will be treated as a
          pre-arranged release with no open season requirement. The parties from
          whom the capacity is recalled will have their contracts reduced by the
          recalled amount through the capacity release system. When the recall
          term has expired, the capacity will be returned to the original
          holder(s) of the Block II capacity.

          (i)   Extension of a Recall. (i) For recalls of less than one month,
                the term of the recall can be extended by the recalling Shipper
                by providing El Paso notice of such request to extend no less
                than 48 hours prior to the expiration of the current recall
                term. (ii) For recalls with a term of one month or longer, the
                term of a recall can be extended by the recalling Shipper by
                providing El Paso notice of such request to extend no less than
                ten days prior to the expiration of the current recall term.

          (j)   Block II Re-Recall Rights - The Shipper from whom the capacity
                was recalled can re-recall the capacity at the beginning of a
                gas day on 24 hours written notice to El Paso by fax or e-mail,
                providing the original Shipper is re-recalling the capacity to
                serve a market in PG&E's service territory.

--------------------------------------------------------------------------------
Issued by: Catherine E. Palazzari, Vice President
Issued on:                                  Effective on:

<PAGE>
El Paso Natural Gas Company
FERC Gas Tariff                                    Second Revised Sheet No. 290A
Pro Forma Second Revised Volume No. 1A                               Superseding
                                                    First Revised Sheet No. 290A

--------------------------------------------------------------------------------
                   TRANSPORTATION GENERAL TERMS AND CONDITIONS
                                   (Continued)

20.  OPERATING PROVISIONS FOR FIRM TRANSPORTATION SERVICE (Continued)

     20.16 Right-of-First-Refusal (Continued)

           (e) In the event there are no competing offers, then the existing
               Shipper shall not be entitled to continue to receive
               transportation service upon the expiration of its contract except
               by agreeing to pay the maximum tariff rate unless El Paso and
               such Shipper shall enter into a new firm transportation service
               agreement providing otherwise.

     20.17 Arbitration - El Paso agrees to include an arbitration provision in
           Shipper's Transportation Service Agreement detailing the requirements
           of this section if the following conditions are met: (1) if Shipper
           is a foreign government, an agency of a foreign government, or an
           entity created by them to conduct business and, (2) prior to
           execution of such agreement, requests binding arbitration of any
           dispute arising under a Transportation Service Agreement not subject
           to the Commission's exclusive jurisdiction, Unless the parties agree
           otherwise, such arbitration shall be conducted using the Rules of
           Arbitration of the International Chamber of Commerce of Paris,
           France.

     20.18 Dual Primary Delivery Point Rights - Through the five-year term of
           the Western Energy Settlement and as provided for in the Western
           Energy Settlement, El Paso may sell up to, but no more than, 623
           MMcf/d of the 3,290 MMcf/d of capacity committed by the Western
           Energy Settlement to California under contracts with dual primary
           delivery points, i.e., contracts with both a California primary
           delivery point and non-California primary delivery point(s). The
           specified contract demand shall apply to the dual primary delivery
           points in the aggregate.

           (a) Shippers holding TSAs with dual primary points will have sole
               discretion to determine which point or points they will nominate
               on any given day. (b) Converting Full Requirements Shippers with
               dual Delivery Points shall pay the Effective Unit Rate for
               deliveries to either point.


--------------------------------------------------------------------------------
Issued by: Catherine E. Palazzari, Vice President
Issued on:                                  Effective on:

<PAGE>
El Paso Natural Gas Company
FERC Gas Tariff                                     First Revised Sheet No. 290B
Pro Forma Second Revised Volume No. 1A

--------------------------------------------------------------------------------
                   TRANSPORTATION GENERAL TERMS AND CONDITIONS
                                   (Continued)

20. OPERATING PROVISIONS FOR FIRM TRANSPORTATION SERVICE (Continued)

    20.18 (Continued)

           (c) El Paso will notify Shippers with dual delivery point rights 60
               days prior to the expiration of the Western Energy Settlement.
               Each affected Shipper must designate one of the dual primary
               points as the single delivery point for continued service.
               Shipper must notify El Paso of its election within 30 days of El
               Paso's notice.

           (d) Changes in capacity under this section will not be permitted if
               they would adversely affect or diminish the recall rights
               associated with Block II Capacity described in Section 4.10 of
               the Tariff.






--------------------------------------------------------------------------------
Issued by: Catherine E. Palazzari, Vice President
Issued on:                                  Effective on:
<PAGE>
El Paso Natural Gas Company                         Tenth Revised Sheet No. 202B
Pro Forma Second Revised Volume No. 1A             Eighth Revised Sheet No. 202B
                                                     Effective: November 1, 2002
                                                         Issued: October 4, 2002
                                                                          Page 1
--------------------------------------------------------------------------------

                   TRANSPORTATION GENERAL TERMS AND CONDITIONS
                                   (Continued)

1.     DEFINITIONS (Continued)

       1.13     The term "business day" means Monday through Friday, excluding
                Federal Banking Holidays for transactions in the United States.

       1.14     The term "fuel" means the quantity of gas determined to be
                consumed during the transportation of gas, including fuel and
                gas lost and unaccounted for.

       1.15     Samalayuca Lateral Line Facilities - Those facilities
                constructed pursuant to the Commission's authorization at Docket
                No. CP93-252-000, et al. Such facilities extend from the Hueco
                Compressor Station to the International Border.

       1.16     Out-of-Zone Daily Reservation Charge - For alternate receipts or
                deliveries, Shippers shall pay an Out-of-Zone Daily Reservation
                Charge to compensate El Paso for service using points not
                provided for in the TSA. The Out-of-Zone Daily Reservation
                Charge shall be equal to the higher of the Reservation Rate
                provided in the TSA, stated on a daily basis, or the maximum
                rate applicable to the receipt and delivery zone for which
                service is provided, unless El Paso agrees to discount such
                rate(s).

       1.17     Western Energy Settlement, for purposes of this tariff, means
                the settlement between and among El Paso Natural Gas Company, El
                Paso Merchant Energy Company, El Paso Merchant Energy-Gas, L.P.,
                the Public Utilities Commission of the State of California,
                Pacific Gas and Electric Company, Southern California Edison
                Company, and the City of Los Angeles, and approved by the
                Federal Energy Regulatory Commission in Docket No. RP00-241.

<PAGE>
El Paso Natural Gas Company                         Fourth Revised Sheet No. 218
Pro Forma Second Revised Volume No. 1A              Second Revised Sheet No. 218
                                                         Effective: July 1, 1997
                                                            Issued: June 9, 1997
                                                                          Page 1
--------------------------------------------------------------------------------

                   TRANSPORTATION GENERAL TERMS AND CONDITIONS
                                   (Continued)

       4.5      Access to Receipt Points

                (a)      Effective January 1, 1998, for purposes of applying
                         Sections 4.1 and 4.2, firm capacity having primary
                         access to receipt points shall consist of the
                         following: (i) Shippers holding firm Transportation
                         Service Agreements on December 31, 1995 ("12-31-95
                         Shippers") only to the extent of the capacity actually
                         covered by such agreements from time to time; (ii)
                         Shippers who acquire Block I capacity from the Permian
                         and Anadarko basins for the maximum tariff rate as
                         described in Section 4.5(b)(i); (iii) Shippers who
                         acquire Block II and Block III capacity as described in
                         Section 4.5(b)(ii) and (iii); and (iv) Shippers
                         resubscribing to capacity pursuant to Section
                         4.5(b)(iii) below.

                (b)      Beginning January 1, 1998, access of turned-back
                         capacity to system receipt points shall be administered
                         as follows:

                            (i)       Block I - A block of 500 MMcf/d of
                                      turned-back capacity shall be given
                                      alternate receipt point access rights to
                                      all system receipt points; provided,
                                      however, capacity sold from Block I for
                                      the maximum tariff rate set forth in Rate
                                      Schedule FT-1 shall have primary receipt
                                      point access rights to system receipt
                                      points in the Permian and Anadarko Basins.

                           (ii)       Block II - A block of 614 MMcf/d of
                                      turned-back capacity shall be designated
                                      for primary point deliveries to TOPOCK for
                                      PG&E or shipper(s) serving a market in
                                      PG&E's service territory (collectively
                                      "Block II Shippers") and shall have
                                      primary access rights to all system
                                      receipt points.

                                      For the period January 1, 1998 through the
                                      effective date of the Western Energy
                                      Settlement in Docket No. RP00-241, et al.,
                                      El Paso may market available Block II
                                      capacity to other delivery points subject
                                      to recall by El Paso for Block II
                                      Shipper(s) as follows: 350 MMcf/d within
                                      48 hours (any time), 150 MMcf/d within one
                                      month (72 hours prior to the first of the
                                      month), and 114 MMcf/d within three months
                                      (72 hours prior to the first of the
                                      month); provided, however, that to the
                                      extent Block II capacity has not been

<PAGE>
El Paso Natural Gas Company                          Third Revised Sheet No. 219
Pro Forma Second Revised Volume No. 1A               First Revised Sheet No. 219
                                                         Effective: July 1, 1997
                                                            Issued: June 9, 1997
                                                                          Page 1
--------------------------------------------------------------------------------

                   TRANSPORTATION GENERAL TERMS AND CONDITIONS
                                   (Continued)

       4.5      Access to Receipt Points (Continued)

                                      marketed, Block II Shipper(s) must acquire
                                      such unmarketed capacity before requesting
                                      El Paso to recall capacity from Block II.
                                      El Paso shall recall Block II capacity
                                      marketed to other delivery points if Block
                                      II Shipper(s) requesting the recall at
                                      least match the rate in the contract
                                      covering the capacity to be recalled and
                                      subscribe such capacity for a term of
                                      longer than one month. El Paso shall
                                      recall capacity for terms of one month or
                                      less if Block II Shipper(s) agree to pay
                                      the maximum tariff rate set forth in Rate
                                      Schedule FT-1 for the capacity. Capacity
                                      recall shall comply with the provisions of
                                      Section 28.14 of this Tariff. A Shipper
                                      may elect to purchase capacity from Block
                                      III below to access PG&E's service
                                      territory regardless of the availability
                                      of Block II capacity. Beginning with the
                                      effective date of the Western Energy
                                      Settlement in Docket No. RP00-241, et al.,
                                      through December 31, 2005, the Block II
                                      recall provisions detailed in Section 4.10
                                      of the General Terms and Conditions of
                                      this Tariff shall apply.

                         (iii)        Block III - A block of 500 MMcf/d of
                                      turned-back capacity shall have primary
                                      access rights to all system receipt
                                      points. The capacity currently held by
                                      12-31-95 Shippers, excluding the capacity
                                      shown in Section 25.1 of this Tariff,
                                      shall be added to Block III if such
                                      Shippers terminate their firm agreements
                                      or reduce their Billing Determinants or
                                      Contract Demand. Such terminating Shippers
                                      may resubscribe, for a volume up to 53.7%
                                      of such Shippers' Docket No. RP95-363-000
                                      Settlement Billing Determinants or
                                      Contract Demand, firm capacity having
                                      primary system receipt point access for
                                      delivery points stated in the terminated
                                      Transportation Service Agreement;
                                      provided, however, that such Shippers may
                                      also acquire available capacity in this or
                                      other blocks.

                (c)      If PEMEX Gas y Petroquimica Basica does not elect to
                         exercise its step down or contract
                         reduction/termination rights as listed in Section
                         25.1(a)(iii), Blocks I and III shall each be reduced
                         equally.

                (d)      Effective January 1, 1998, Shippers acquiring released
                         firm California capacity may, subject to Section 28.25
                         (2) of El Paso's Volume No. 1-A Tariff, change the
                         primary delivery point to TOPOCK for deliveries into
                         PG&E's service territory. This capacity shall maintain
                         its primary delivery point status for purposes of
                         supply basin receipt point access.

<PAGE>
El Paso Natural Gas Company                              Original Sheet No. 219F
Pro Forma Second Revised Volume No. 1A
                                                                          Page 1
--------------------------------------------------------------------------------

                   TRANSPORTATION GENERAL TERMS AND CONDITIONS
                                   (CONTINUED)

4.10     Block II Recall Provisions to be in effect from the effective date of
         the Western Energy Settlement through December 31, 2005. The Block II
         capacity that is subject to recall under these procedures is defined in
         Section 4.5(b)(ii) of this Tariff and consists of 614 MMcf/day of
         turned-back capacity.

         (a)      Conditions Precedent to Effectuating a Recall

                  (i)     The Shipper requesting a recall of Block II capacity
                          must enter into a new firm Transportation Service
                          Agreement ("TSA") with El Paso for unsubscribed Block
                          II capacity up to the volume of capacity required by
                          such Shipper before El Paso will effectuate a recall
                          of subscribed Block II capacity. The term of the TSA
                          will be the term specified for the recall by the
                          Shipper requesting the recall.

                  (ii)    On the day the recall becomes effective, the Shipper
                          requesting the recall must attempt to nominate all
                          Block II capacity it had under contract prior to the
                          effective date of the recall.

         (b)      Posting of Block II Capacity Information - El Paso will make
                  available on its website, at the conclusion of each scheduling
                  cycle described in Section 4.1 of this Tariff, information
                  identifying the Block II capacity contract holders, their
                  rates, and the volume of gas that each has scheduled to a
                  "non-PG&E TOPOCK" Delivery Point during that cycle. The
                  posting shall appear in the "Informational Postings, Capacity"
                  section of the website under a new sub-section entitled "Block
                  II Capacity".

         (c)      Notice Requirements for Block II Recall

                  (i)     The first 350 MMcf/d of Block II capacity is subject
                          to recall upon 48 hours notice given at any time.

                  (ii)    The next 150 MMcf/d of Block II capacity is subject to
                          recall within one month upon notice given not less
                          than 72 hours prior to the first of the month in which
                          the recall will be effectuated.

                  (iii)   The final 114 MMcf/d of Block II capacity is subject
                          to recall within three months upon notice given not
                          less than 72 hours prior to the first of the month in
                          which the recall will be effectuated.

<PAGE>
El Paso Natural Gas Company                              Original Sheet No. 219G
Pro Forma Second Revised Volume No. 1A
                                                                          Page 1
--------------------------------------------------------------------------------

                   TRANSPORTATION GENERAL TERMS AND CONDITIONS
                                   (CONTINUED)

Section 4.10 (continued)

         (d)      Block II Recall Request Requirement - El Paso will process a
                  request for recall only upon receipt of a written request from
                  a party desiring to serve a market in PG&E's service
                  territory. Such written request can be received at the
                  designated site by regular mail, fax or electronic mail. The
                  written request must include:

                  (i)      The volume requested for recall.

                  (ii)     The desired term including the beginning and ending
                           date of such recall.

         (e)      Determining the Sequence of Block II Capacity Subject to
                  Recall - Upon receipt by El Paso of a valid written request to
                  recall Block II capacity, El Paso will first notify Shipper if
                  there is any unsubscribed capacity that can serve the
                  Shipper's need as required in Section 4.10(a)(i) of this
                  Tariff. If the request can not be satisfied in total by the
                  purchase of unsubscribed capacity, any Block II capacity that
                  has been marketed to a non-PG&E Topock Delivery Point, either
                  on a single primary delivery point or a dual primary delivery
                  point basis, is subject to recall except during the time such
                  capacity is being used to serve markets in PG&E's service
                  territory. El Paso will recall capacity from the following
                  categories according to the following sequence:

                  (i)      Unused (i.e., not scheduled) capacity under any Block
                           II contracts with primary delivery point rights,
                           either single or dual, to non-PG&E Topock Delivery
                           Points. The recall request will be filled on a
                           pro-rata basis from all Shippers meeting these
                           criteria.

                  (ii)     Used (i.e., scheduled) capacity under any Block II
                           Topock contracts where the quantity scheduled is to a
                           non-PG&E alternate Delivery Point and where the
                           single primary Delivery Point under the contract is
                           to PG&E Topock. The recall request will be filled on
                           a pro-rata basis from all Shippers meeting these
                           criteria.

                  (iii)    Used (i.e., scheduled) capacity under any Block II
                           contracts other than those falling under Section
                           4.10(e)(ii) above where the quantity scheduled is to
                           a non-PG&E Topock Delivery Point. The recall request
                           will be filled on a pro-rata basis from all Shippers
                           meeting these criteria.

<PAGE>
El Paso Natural Gas Company                              Original Sheet No. 219H
Pro Forma Second Revised Volume No. 1A
                                                                          Page 1
--------------------------------------------------------------------------------

                   TRANSPORTATION GENERAL TERMS AND CONDITIONS
                                   (CONTINUED)

Section 4.10 (continued)

         (f)      Rate to be Paid for Recall of Block II Capacity - For recall
                  periods of one month or less, the recalling Block II Shipper
                  agrees to pay the maximum reservation Tariff rate for
                  deliveries to the California zone. For recall periods of
                  longer than one month, the rate paid shall be equal to the
                  rate paid by the Shipper whose capacity is being recalled.
                  When the capacity being recalled is held by converted Full
                  Requirements Shipper(s), the rate to be paid by the recalling
                  Shipper shall be the Effective Unit Rate(s) for capacity for
                  the converted Full Requirements Shipper(s) as stated in
                  Section 9 of Rate Schedule FT-1. The Effective Unit Rates
                  displayed in that Section of the Tariff have been determined
                  by dividing the annual cost responsibility of each converted
                  Full Requirements Shipper by the aggregate annual Contract
                  Demand, both as determined in the Docket No. RP00-336
                  proceeding. In the event an extension of the recall period is
                  requested pursuant to Section 4.10(i), the rate payable during
                  the extension period shall be the rate paid during the initial
                  recall period.

<PAGE>
El Paso Natural Gas Company                              Original Sheet No. 219I
Pro Forma Second Revised Volume No. 1A
                                                                          Page 1
--------------------------------------------------------------------------------

                   TRANSPORTATION GENERAL TERMS AND CONDITIONS
                                   (CONTINUED)

Section 4.10 (continued)

         (g)      Notification of Ability to Fulfill Recall Request - El Paso
                  will provide a written response to the recalling Block II
                  Shipper describing whether its request can be fulfilled and
                  specifying the capacity that is recallable and how the request
                  is being evaluated by El Paso. El Paso will provide the
                  response to the request on the following time schedule:

                  i)      For a request received by 10:00 a.m., Pacific Clock
                          Time ("PCT") on a business day, a response will be
                          provided no later than 3:00 p.m. PCT on the same
                          business day.

                  (ii)    For a request received after 10:00 a.m. PCT on a
                          business day, a response will be provided by 7:00 a.m.
                          PCT the following business day.

                  (iii)   For a request received on a weekend or holiday, a
                          response will be provided by noon PCT on the next
                          business day.

         (h)      Coordination with the Capacity Release System - After
                  notification to the recalling Block II Shipper, El Paso will
                  use the capacity release system described in Section 28.14 of
                  the Tariff to provide notice of the recall. The recall of
                  Block II capacity will be treated as a pre-arranged release
                  with no open season requirement. The parties from whom the
                  capacity is recalled will have their contracts reduced by the
                  recalled amount through the capacity release system. When the
                  recall term has expired, the capacity will be returned to the
                  original holder(s) of the Block II capacity.

          (i)     Extension of a Recall.

                  (i)     For recalls of less than one month, the term of the
                          recall can be extended by the recalling Shipper by
                          providing El Paso notice of such request to extend no
                          less than 48 hours prior to the expiration of the
                          current recall term.
                  (ii)    For recalls with a term of one month or longer, the
                          term of a recall can be extended by the recalling
                          Shipper by providing El Paso notice of such request to
                          extend no less than ten days prior to the expiration
                          of the current recall term.

          (j)     Block II Re-Recall Rights - The Shipper from whom the capacity
                  was recalled can re-recall the capacity at the beginning of a
                  gas day on 24 hours written notice to El Paso by fax or
                  e-mail, providing the original Shipper is re-recalling the
                  capacity to serve a market in PG&E's service territory.

<PAGE>
El Paso Natural Gas Company                        Second Revised Sheet No. 290A
Pro Forma Second Revised Volume No. 1A              First Revised Sheet No. 290A
                                                       Effective: April 14, 2002
                                                          Issued: March 13, 2002
                                                                          Page 1
--------------------------------------------------------------------------------

                   TRANSPORTATION GENERAL TERMS AND CONDITIONS
                                   (Continued)

20.    OPERATING PROVISIONS FOR FIRM TRANSPORTATION SERVICE (Continued)

       20.16    Right-of-First-Refusal (Continued)

                (e)      In the event there are no competing offers, then the
                         existing Shipper shall not be entitled to continue to
                         receive transportation service upon the expiration of
                         its contract except by agreeing to pay the maximum
                         tariff rate unless El Paso and such Shipper shall enter
                         into a new firm transportation service agreement
                         providing otherwise.

       20.17    Arbitration - El Paso agrees to include an arbitration provision
                in Shipper's Transportation Service Agreement detailing the
                requirements of this section if the following conditions are
                met: (1) if Shipper is a foreign government, an agency of a
                foreign government, or an entity created by them to conduct
                business and, (2) prior to execution of such agreement, requests
                binding arbitration of any dispute arising under a
                Transportation Service Agreement not subject to the Commission's
                exclusive jurisdiction, Unless the parties agree otherwise, such
                arbitration shall be conducted using the Rules of Arbitration of
                the International Chamber of Commerce of Paris, France.

       20.18    Dual Primary Delivery Point Rights - Through the five-year term
                of the Western Energy Settlement and as provided for in the
                Western Energy Settlement, El Paso may sell up to, but no more
                than, 623 MMcf/d of the 3,290 MMcf/d of capacity committed by
                the Western Energy Settlement to California under contracts with
                dual primary delivery points, i.e., contracts with both a
                California primary delivery point and non-California primary
                delivery point(s). The specified contract demand shall apply to
                the dual primary delivery points in the aggregate.

                (a)      Shippers holding TSAs with dual primary points will
                         have sole discretion to determine which point or points
                         they will nominate on any given day.
                (b)      Converting Full Requirements Shippers with dual
                         Delivery Points shall pay the Effective Unit Rate for
                         deliveries to either point.

<PAGE>
El Paso Natural Gas Company                         First Revised Sheet No. 290B
Pro Forma Second Revised Volume No. 1A
                                                                          Page 1
--------------------------------------------------------------------------------

                   TRANSPORTATION GENERAL TERMS AND CONDITIONS
                                   (Continued)

20.    OPERATING PROVISIONS FOR FIRM TRANSPORTATION SERVICE (Continued)

       20.18 (Continued)

                (c)      El Paso will notify Shippers with dual delivery point
                         rights 60 days prior to the expiration of the Western
                         Energy Settlement. Each affected Shipper must designate
                         one of the dual primary points as the single delivery
                         point for continued service. Shipper must notify El
                         Paso of its election within 30 days of El Paso's
                         notice.

                (d)      Changes in capacity under this section will not be
                         permitted if they would adversely affect or diminish
                         the recall rights associated with Block II Capacity
                         described in Section 4.10 of the Tariff.


</TEXT>
</DOCUMENT>
