Eastern Shore Natural Gas Company

Second Revised Volume No. 1

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

Original Sheet No. 224 Original Sheet No. 224 : Effective

EASTERN SHORE NATURAL GAS COMPANY

GENERAL TERMS AND CONDITIONS

(Continued)

38. Transition Cost Recovery Mechanism

This Section 38 of these General Terms and Conditions provides

for the recovery of costs incurred as a result of

implementing, in connection with implementing, or attributable

to the requirements of the Commission's Order No. 636, as it

may be modified or amended ("Order No. 636"), such costs

hereinafter referred to as "Transition Costs".

(a) Recovery of FERC Account No. 191 and Account No. 858

Costs

Seller shall direct bill Buyer, in the case of a positive

balance, or refund Buyer, in the case of a negative

balance, its share of the unrecovered costs. Such amounts

are subject to adjustment in order to permit recovery by

Seller of one hundred percent (100%) of its unrecovered

costs. Seller shall revise its billings to permit

recovery of out-of-pocket costs incurred within nine (9)

months from the date its Purchase Gas Adjustment and

Transportation Cost Adjustment provisions are

terminated. Refunds related to purchases prior to the

implementation of Section 38(a) of the General Terms and

Conditions Of Seller's FERC Gas Tariff shall be flowed

through to the former CD sales Buyers regardless of when

Seller receives such refund.