Eastern Shore Natural Gas Company

Second Revised Volume No. 1

Effective Date: 11/01/2002, Docket: RP00-393-002, Status: Effective

First Revised Sheet No. 222 First Revised Sheet No. 222 : Effective

Superseding: Original Sheet No. 222

EASTERN SHORE NATURAL GAS COMPANY

GENERAL TERMS AND CONDITIONS

(Continued)

36. Crediting of Penalty Revenues

(a) Eligible Penalty Revenues

Eligible Penalty Revenues shall include all penalty

amounts assessed and actually collected by Seller during

the calendar year (January 1st through December 31st)

pursuant to the penalty provisions of Section 22

Unauthorized Daily Overrun; Section 24 Operational Flow

Orders; Section 25 Capacity Curtailment and Section 26

Emergency Capacity Reallocation of the General Terms and

Conditions of Seller's FERC Gas Tariff. Eligible Penalty

Revenues shall exclude all necessary costs incurred.

(b) Disposition of Penalty Revenues

At the end of the calendar year, Seller will calculate

the amount of Eligible Penalty Revenues actually

collected. Such Penalty Revenues will accrue interest

from the date of collection until the date credited,

using the current Federal Energy Regulatory Commission

interest rate as defined in 18 C.F.R. Section 154.501(d).

Seller will credit Eligible Penalty Revenues to all firm

transportation Buyers on a pro rata basis based on each

firm Buyer's MDTQ and MDSTQ and interruptible Buyer's

imputed MDTQ provided, however that transportation Buyers

who were penalized during the year shall not be credited

for any portion of the penalty amount which they paid.

Seller shall credit the bills of such Buyers within sixty

(60) calendar days of the end of the calendar year.