Eastern Shore Natural Gas Company

Second Revised Volume No. 1

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

Original Sheet No. 226 Original Sheet No. 226 : Effective

EASTERN SHORE NATURAL GAS COMPANY

GENERAL TERMS AND CONDITIONS

(Continued)

38. Transition Cost Recovery Mechanism (Continued)

(b) Recovery of Gas Supply Realignment Costs (Continued)

Seller's agreement to terminate such Buyer(s) Service

Agreement(s) prior to their date of expiration. GSRC

reservation surcharges shall be applied to services

provided under Rate Schedules FT and ST for recovery of

ninety percent (90%) of recoverable GSRC. Ten percent

(10%) of recoverable GSRC shall be allocated to the rates

for volumes transported under Rate Schedule IT. Such

GSRC reservation surcharge and the allocation of GSRC to

Rate Schedule IT shall be calculated to recover the known

and measureable GSRC as of the time of the limited

Section 4 filing referenced below.

Seller shall perform the following to attempt to mitigate

all GSRC costs:

(1) Seller will propose an assignment to each Buyer

receiving service from Seller under Seller's

Rate Schedules CD-1 or CD-E or firm direct

sales service on the day before the effective

date of the service restructuring a pro rata

share of all daily gas purchase agreements.

Each Buyer will have up to ten (10) calendar

days to accept or decline the assignment of its

respective share of the daily gas purchase

agreements. The share offered to each Buyer

will be based on each Buyer's pro rata share of

CD-1 service, CD-E service, or firm direct

sales service prior to the restructuring. In

the event there is remaining service