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                                                                   EXHIBIT 10(u)

                                K N ENERGY, INC.

                           PERFORMANCE INCENTIVE PLAN

I.       PLAN PURPOSE:

         The K N Energy, Inc., Performance Incentive Plan has been designed to
         support and encourage achievement of our business strategy of improved
         customer focus and value for the shareholders. The Plan is designed to
         work in combination with the Profit Sharing Plan, whereby attainment
         of annual corporate goals will trigger a contribution to the Profit
         Sharing Plan. The realization of quarterly regional financial goals
         will make possible distributions from the Performance Incentive Plan.
         Combined with the Profit Sharing Plan, this Plan is intended to
         accomplish the following objectives:

         -       Link employees variable compensation to the operational
                 realities financial, customer, operating/process and growth
                 objectives of the Company;

         -       Support the evolving organizational culture;

         -       Enhance employees' awareness of customer satisfaction by
                 reinforcing K N's customer intimacy focus;

         -       Have profit and loss knowledge alive and driving informed
                 action throughout the Company; and

         -       Clarify that incentives are not available until after
                 corporate and business unit/ process objectives have been
                 achieved.

II.      PARTICIPATION:

         A.      To be a participant, an employee must be assigned to assume
         full-time duties in an established Company classification as of the
         last day of a calendar quarter. "Full-Time" is defined as: a position
         with a normally established work schedule of at least 40 hours per
         work week. Employees will receive a pro-rated share if they work less
         than a full quarter.

         B.      This plan is intended to cover all full-time employees.
         Bargaining unit employees shall be covered only if they have bargained
         to be covered by this plan.

         C.      Employees currently participating in one of the Company's
         other incentive compensation program may be excluded from
         participating in this program. Employees
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         participating in this Performance Incentive Plan are eligible for
         Special Recognition Awards not related to this plan. such as Extra
         Mile, Spot Awards and Project Incentives.

III.     BASIS OF AWARDS:

         A.      Incentive payments to Plan participants are based on the
         degree of success achieved in meeting the Company's goals. The degree
         to which the objectives are achieved is subject to determination that
         the results were achieved without compromising the safety of employees
         or the public, or the investments which serve as the foundation for
         future growth.

         B.      The operating income is key to our business success. Business
         unit/process business plans are subject to review and modification.
         The business plans guide our operations and identify major 1996
         objectives, as described in Attachment A.

         C.      At the business unit/process level, Incentive Awards will be
         determined based on the achievement of financial, safety, operational,
         customer satisfaction and growth goals. Details about those specific
         goals are outlined in Attachment B. At the corporate level, Incentive
         Awards will be adjusted based exclusively on financial performance.


IV.      SIZE OF INCENTIVE OPPORTUNITY PAYMENTS:

         A.      The potential range of incentive targets, expressed as a
         percent of an eligible participant's earnings (base pay plus any
         overtime) for each quarter, is between 0% and 10%.

         B.      After the attainment of quarterly regional financial goals, a
         determination will be made about whether a particular business unit
         has achieved its other goals for the quarter. The distribution for any
         given quarter will be as follows:

<TABLE>
<CAPTION>
                                                                    % of Pay
                                                                    --------
                 <S>                                                <C>
                 Business Unit Financial:                           0-2%
                 Customer Satisfaction:                             0 or 1%
                 Operating:                                         0 or 1%
                 Growth:                                            0 or 1%
</TABLE>

         The financial component will be pro-rated based on actual results
         versus goal, with no payment if results were not at least 90% of goal
         ("Threshold" level). (The financial goals for the processes will be
         the average of the business units' financial performance.) The other
         factors will not be pro-rated, i.e., the goal is either accomplished
         or not.




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         C.      After a particular quarter's Incentive Award has been
         determined, it will be multiplied by a factor based on the corporate
         financial results for the quarter. The multiplier will be 0.5 if 
         corporate financial results have not been achieved or 2.0 if they 
         have been achieved.

         D.      The Performance Incentive Plan Administrators review and
         recommend Incentive Awards to the Management Committee of K N Energy,
         Inc. Final determination of actual awards is made by the Management
         Committee of K N Energy, Inc.

         E.      Incentive amounts will be pro-rated based on regional
         financial performance between the stated Threshold, Target, and
         Maximum levels. No payment will be made for performance below the
         Threshold level. 

         The corporate financial objective will be the 1996 operating income 
         goal (excluding one time positive or negative events as recognized by 
         GAAP accounting) as approved by the Board of Directors in the 1996 
         budget plan. In 1997 a second corporate financial goal of Return on 
         Assets" will be added to the plan.


V.       TIMING OF PAYMENTS

         A.      The Incentive payment for each quarter depends on the
         performance level achieved through the end of that quarter as measured
         on March 31, June 30, September 30 and December 31. Results will be
         communicated to eligible participants by the middle of the month
         following the close of financial records.

         B.      Incentive payments will be paid in a separate paycheck (with
         standard payroll tax withholdings) by the end of the second month
         following the quarter in which the incentive was earned. Payments for
         this Plan do not apply toward eligible earnings for any other employee
         benefit or employee welfare plans that may be established by the
         Company.

         C.      The following table shows anticipated announcements of results
         and payments under the Plan, subject to when financial and other
         performance data are available for measuring and reporting results,
         and then earned payments can be processed by payroll:

<TABLE>
<CAPTION>
Month Ending The                                                    Month During which
Quarter In Which                  Announcement of                   Incentive Payment 
Incentive Is Earned               Incentive Results                 Would Be Received
-------------------               -----------------                 -----------------
<S>                               <C>                               <C>
March                             May                               May*
June                              August                            August*
September                         November                          November*
December                          February                          February*
</TABLE>

*Approximately end of the month




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         D.      Earned Incentive payments will be paid to the estate of a
         deceased participant on a prorated basis of days worked during the
         quarter, as previously described in Section II.


VI.      PLAN ADMINISTRATION:

         A.      The Plan shall be administered by the business
         units/processes. It is suggested that the business units/processes
         convene a cross functional team within their respective groups to work
         on the development of goals and the determination of performance
         against those goals.

         B.      The Plan Administrators shall have full power to construe and
         interpret this Plan within the established rules for its administration
         which are contained in this document.

         C.      This Plan is administered without regard to race, color,
         religion, sex, national origin, age, disability, Vietnam Era Veteran,
         disabled Veteran status, or citizenship status.

VII.     PLAN EFFECTIVE DATE:

         A.      The Plan shall be effective January 1, 1996.

         B.      The Company presently intends to continue this plan. However,
         each Plan year is unique and stands on its own with regard to the
         existence of a plan, objectives and payout opportunity levels.


VIII.    OTHER ITEMS

         A.      Not a contract of employment. This Plan shall not be deemed to
         constitute a contract of employment, nor shall any provision hereof
         restrict the right of K N Energy, Inc. (or its subsidiaries) to
         terminate an "at will" participant.

         B.      Controlling law. This Plan and its provisions shall be
         governed by, and construed in accordance with, the Laws of the State
         of Colorado.

         C.      Number and gender. Wherever appropriate herein, words used in
         the singular shall include the plural and the plural shall include the
         singular. The masculine gender where appearing herein shall be deemed
         to include the feminine gender.

         D.      Unfunded obligation. The obligation to pay amounts under this
         Plan is an unfunded obligation of K N Energy, Inc. (including its
         subsidiaries), and no such obligation shall create a trust or be
         deemed to be secured by a pledge or encumbrance on any property of K N
         Energy, Inc. (including its subsidiaries).




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         E.      Non-alienation. Participants shall not have any right to
         pledge, hypothecate, anticipate or assign this Plan or the rights
         hereunder, except by will, or the laws of descent and distribution.

         F.      Severability Any provision in this Plan that is prohibited or
         is found to be unenforceable in any jurisdiction under applicable law
         shall, as to such jurisdiction, be ineffective only to the extent of
         such prohibition or unenforceability in any jurisdiction and shall not
         invalidate or render unenforceable such provision in any other
         jurisdiction.




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