Southern Natural Gas Company

Seventh Revised Volume No. 1

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Effective Date: 03/01/2005, Docket: RP04-523-004, Status: Effective

Fifth Revised Sheet No. 144A Fifth Revised Sheet No. 144A : Effective

Superseding: Fourth Revised Sheet No. 144A

GENERAL TERMS AND CONDITIONS

(Continued)

14.2 Storage Cost Reconciliation Deferred Account:

(a) The purpose of this Section 14.2 is to establish a mechanism to reconcile

through surcharges or credits, as appropriate, differences between the cost to

COMPANY of its storage gas inventory and the amounts COMPANY receives

for such gas arising out of both the purchase and sale of such gas in order

to resolve SHIPPER imbalances as provided for pursuant to the this Section

14 and the purchase and sale of gas as may be necessary to maintain an

appropriate level of storage gas inventory for system management purposes.

(b) COMPANY shall maintain a Storage Cost Reconciliation Deferred Account

(referred to in this Section 14 as the "Deferred Account") in the manner

described in this Section 14.2. COMPANY shall calculate the difference

between (a) the cost per Mcf of the gas in storage owned by COMPANY and

(b) the weighted average price per Mcf arising out of the following

transactions: (i) any sale or purchase of gas to resolve imbalances under

Sections 14.1(b) and (c) above, Section 2.2 of COMPANY'S Pipeline

Balancing Agreement, and any other form of balancing agreement between

COMPANY and a pipeline operator entered into to facilitate the allocation

of SHIPPERS' gas at pipeline interconnections, respectively, (ii) any

assignment to or from COMPANY of gas to resolve SHIPPER imbalances

pursuant to Section 14.1(f) above, and (iii) any sale or purchase of gas to

maintain an appropriate level of storage gas inventory; and shall multiply

such difference by the volumes of gas injected into or withdrawn from storage,

as applicable, during such month for such purposes. If the product is

positive, the amount shall be credited to the Deferred Account, and if

negative, shall be debited (as a positive number) to the Deferred Account.

Further, any revenues collected by COMPANY pursuant to the tariff sections or any

other penalties listed in Section 41 of the General Terms and Conditions or those penalties

set forth in Article 7 of Rate Schedule PAL, net any associated costs, for any

month beginning March 2000, shall be credited to the Deferred Account.

(c) At the end of October 1994, and at the end of the same month

of each succeeding calendar year, COMPANY shall determine whether the

balance in the Deferred Account, whether debit or credit, is in excess of

$500,000. If so, COMPANY shall refund or surcharge, as appropriate and

as hereinafter provided, the portion of the Deferred Account balance

representing fixed and realized gains or losses from the purchase and sale of

COMPANY's storage gas inventory. Such amount shall be divided by the

Transportation Volumes computed for the preceding twelve (12) calendar

months. For purposes of this section, Transportation Volumes shall be

defined as the sum of 1) the total quantity received under Supply Pool

Balancing Agreements in Dth excluding receipts from CSS or ISS Contracts,

other Supply Pool Balancing Agreements, and PAL Points of Transaction (PT),

and 2) the total quantity delivered under Rate Schedules FT, FT-NN, and IT

in Dth. The amount so computed shall be applied as a reduction (if the

balance in the Deferred Account was a credit) or as a surcharge (if the

balance in the Deferred Account was a debit) to the Transportation Volumes

under Rate Schedules FT, FT-NN, IT, and Supply Pool Balancing Agreements

during the following calendar year beginning January 1. The total amount

of any such reductions applied during any month shall be debited to the

Deferred Account and the total amount of any such surcharges collected

during any month shall be credited to the Deferred Account. The portion of

the Deferred Account representing contingent and unrealized gains and

losses from the purchase and sale of the COMPANY's storage gas inventory

shall be carried forward in the Deferred Account.