Eastern Shore Natural Gas Company

Second Revised Volume No. 1

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

Original Sheet No. 225 Original Sheet No. 225 : Effective

EASTERN SHORE NATURAL GAS COMPANY

GENERAL TERMS AND CONDITIONS

(Continued)

38. Transition Cost Recovery Mechanism (Continued)

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

Costs (Continued)

Unrecovered Gas and Transportation Costs (including

interest) will be allocated as follows among applicable

Buyers under Rate Schedules FT and ST:

(1) The portion of unrecovered costs that relate to

demand charges shall be allocated on the basis of

each Buyer's contract demand quantity under Seller's

former CD-1 or CD-E Rate Schedule in effect on the

day before the effective date of this tariff sheet;

and

(2) The portion of unrecovered costs that relate to

commodity charges shall be allocated on the basis of

each Buyer's purchases under Seller's former CD-1

and CD-E Rate Schedules during the twelve (12)

months immediately preceding the effective date of

this tariff sheet.

Buyer may elect, in the case of a positive balance, to be

billed in twelve (12) equal monthly installments, in

which case, Buyer shall be required to pay interest on

the unpaid balance at the applicable annual interest rate

specified in Section 154.501(2)(d)(1) of the Commission's

regulations. Payment of such billed amount shall be due

within ten (10) calendar days of Seller's bill. If the

normal payment date is a Saturday, Sunday or holiday,

than payment is due the next Business Day.

(b) Recovery of Gas Supply Realignment Costs

All Gas Supply Realignment Costs ("GSRC"), including

interest, prudently incurred by Seller as a result of

implementing, in connection with implementing, or

attributable to the requirements of the Commission's

Order No. 636 will be recovered by Seller by means of a

reservation surcharge contained in its rates for Part 284

firm transportation, a volumetric surcharge included in

the Rate Schedule IT rate, and any exit fees agreed upon

by Seller and its former Buyers in consideration of