Southern Natural Gas Company

Seventh Revised Volume No. 1

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Effective Date: 09/01/2009, Docket: RP09-427-002, Status: Effective

Second Revised Sheet No. 147 Second Revised Sheet No. 147

Superseding: Original Sheet No. 147

GENERAL TERMS AND CONDITIONS

(Continued)

Section 15.5 (continued)

(b) Evaluation of Prepayment Offers

In the event COMPANY does not reject SHIPPER's bid, and the bid(s) in the aggregate offer to

prepay more than the maximum amount set out by COMPANY in its solicitation, then the bid(s)

will be evaluated using objective criteria. The maximum aggregate dollar amount of bids that

COMPANY will accept will be allocated to the valid bid(s) that generate the highest net

present value ("NPV") to COMPANY. When two or more bids for prepayment are being evaluated

under this section, bids evaluated at the same time shall be considered together under the

same criteria. NPV will be determined based on the discounted cash flow of revenues to COMPANY

produced, lost, or affected by the bid(s). For purposes of its NPV evaluation, COMPANY may

consider the aggregate NPVs of two or more bids.

The objective criteria for evaluating NPV may include, without limitation, the quantity of

prepayment bid, the number of months' charges bid, the date on which the prepayment would be

received and applied to charges, and such other factors available and included in the bids

that COMPANY has chosen to evaluate. The NPV shall include only revenues generated by the

reservation rate component(s). For purposes of billing and future rate case billing

determinants, such prepayment shall not be considered a discount or negotiated rate. The

reservation rate charges will be subject to adjustments when COMPANY's recourse rates are

changed pursuant to NGA section 4 or 5 during the period for which SHIPPER has prepaid for

service and SHIPPER shall understand that any prepayment does not absolve it of such future

adjustments to the recourse rates. For capacity release and posting requirements, the rate to

be charged will be considered to be the same as the rate specified in the applicable Service

Agreement.

If COMPANY receives two (2) or more bids that produce comparable net present values, then

aggregate amount of the prepayments to be accepted will be allocated to the comparable requests

on a pro rata basis. A party must specify in its request whether it is willing to accept a

prepayment on a pro rata basis pursuant to this Section. If any party declines to accept a

prorated prepayment, such party's request shall be null and void and COMPANY shall be entitled

to reallocate the prepayment among the other comparable requests.

(d) Acceptance of Prepayment Offers

COMPANY's posting, and any updates thereto, may specify the deadline for bids, the time that

COMPANY may take to evaluate and compare bids, and the manner in which offers will be accepted.

Unless specified otherwise in the posting, bids for prepayment are binding on shipper.

(e) Posting of Accepted Prepayments

COMPANY shall post the terms of the prepayment bid(s) accepted by COMPANY without disclosing

the identity of the SHIPPER.

(f) Other Provisions

Prepayments received by COMPANY under this section shall not qualify as security deposits for

purposes of creditworthiness, nor shall security deposits for purposes of creditworthiness be

considered as prepayments under this section.

The provisions of Section 15.3 above shall not apply for a SHIPPER's reservation charges that

are prepaid by SHIPPER and received by COMPANY in accordance with this Section 15.5.

In no event will a prepayment or an agreement for prepayment be used by COMPANY in evaluating

the NPV of a bid for capacity being sold or offered by COMPANY including Receipt and Delivery

Point shifts, in connection with an expansion, or otherwise. Furthermore, for the purposes of

calculating rates, such prepayment shall be credited to the relevant period(s) for which

service is provided as if there had been no discount factor applied.