Eastern Shore Natural Gas Company

Second Revised Volume No. 1

Effective Date: 02/01/1998, Docket: CP96-128-011, Status: Effective

2nd Sub 1st Revised Sheet No. 231 2nd Sub 1st Revised Sheet No. 231 : Effective

Superseding: Sub First Revised Sheet No. 231

EASTERN SHORE NATURAL GAS COMPANY

GENERAL TERMS AND CONDITIONS

(Continued)

39. Negotiated Rates

Notwithstanding anything to the contrary contained in this

Tariff, Buyer and Seller may negotiate a rate for service

under any Part 284 transportation rate schedule contained in

this Tariff. Seller's maximum rate, as shown on Currently

Effective Rates Applicable to Part 284 Transportation, for a

service ("Recourse Rate") is available for any Buyer that does

not desire to negotiate a rate with Seller.

A Negotiated Rate shall mean a rate for service which may be

greater than the maximum tariff rate or may be less than the

minimum tariff rate, or a rate which falls between the maximum

and minimum tariff rates but employs a rate design other than

straight fixed variable. This definition shall also include

a formula rate which may be greater than the maximum tariff

rate or may be less than the minimum tariff rate in some

months but not in others. With respect to a Negotiated Rate

which, when calculated on a 100% load factor basis, exceeds

Seller's maximum rate for that service, for purposes of

Nominations and Scheduling of Transportation Services and

Capacity Curtailment pursuant to Sections 21 and 25

respectively, of the General Terms and Conditions of Seller's

Tariff, Buyers willing to pay said Negotiated Rate would be

considered to have paid the maximum Recourse Rate. For

purposes of exercising rights to continue service pursuant to

Right of First Refusal Procedures (Section 13) of the General

Terms and Conditions of Seller's Tariff, the highest rate that

a Buyer must match if it desires to retain all or a portion of

its capacity and continue to receive firm service under the

same Rate Schedule beyond the expiration date of such long-

term firm Service Agreement is the maximum rate applicable to

such service. For purposes of Capacity Release (Section 29)

of the General Terms and Conditions of Seller's FERC Gas

Tariff, the highest rate that a Buyer may bid if it desires to

obtain released capacity is the maximum rate.

Seller shall file with the Commission individually numbered

tariff sheets implementing the Negotiated Rate at the time

Seller intends the rate to go into effect. Such tariff sheet

shall include said Negotiated Rate, the name of the Buyer, the

type of service, the receipt and delivery points, the quantity

of gas to be transported, and any other applicable charges.