Eastern Shore Natural Gas Company

Second Revised Volume No. 1

Effective Date: 11/01/1997, Docket: CP96-128-004, Status: Effective

Original Sheet No. 118 Original Sheet No. 118 : Effective

EASTERN SHORE NATURAL GAS COMPANY

GENERAL TERMS AND CONDITIONS

(Continued)

12. Construction of Facilities (Continued)

(d) (Continued)

(1) (Continued)

(iii) The estimated capital cost of the proposed

facilities, assumed to be depreciated over the

life of the proposed new service; and,

(iv) A carrying charge on all capital costs for the

proposed facilities equal to the pre-tax

overall rate of return reflected in Seller's

most recent rate filing.

(2) The facilities will be adequate to provide the

requested service and the utilization of the

facilities will not, in Seller's reasonable

judgment, compromise the integrity of Seller's

pipeline system.

(3) The necessary authorizations are obtained from

governmental bodies.

(e) Seller may waive the requirement for its ownership of any

facilities based on the determination that the best

interests of Buyer and Seller are served by the granting

of such waiver. Waivers of Seller's requirement for its

ownership of any facilities will be granted in a not

unduly discriminatory manner based on an evaluation of

the potential costs and revenues related to the

facilities, other relevant economic factors and operating

considerations.

(f) Seller shall not be obligated to build or contribute to

the cost of building any new facilities or lateral

pipelines to provide service to any Buyer under this

Tariff. Nothing in Section 12 of these General Terms and

Conditions shall require Seller to file an application

for a Certificate of Public Convenience and Necessity