Southern Natural Gas Company

Seventh Revised Volume No. 1

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Effective Date: 01/01/1997, Docket: RP97-125-000, Status: Effective

First Revised Sheet No. 197 First Revised Sheet No. 197 : Effective

Superseding: Original Sheet No. 197

GENERAL TERMS AND CONDITIONS

(Continued)

transportation rates shall be the unit change (either increase or

decrease) determined by dividing (i) the jurisdictional portion of the

Research and Development Expenditure Adjustment by (ii)

transportation volumes for the Determination Period.

(d) Research and development expenditures chargeable to operations shall

be the amount which actual research and development expenditures

during the twelve month period ending three months prior to a

proposed rate adjustment (Determination Period) (a) exceeds the

amount allowed in COMPANY'S last rate proceeding, or the amount

reflected in the last prior rate adjustment under this Section 30, or as

to the initial research and development rate adjustment the average of

three years research and development expenditures chargeable to

operations, or (b) is less than the actual research and development

expenditures in the COMPANY'S prior rate adjustment under this

subsection.

(e) For the purpose of determining the balance in Account 188 which may

be tracked COMPANY shall increase such balance by the tax effect of

research and development expenditures as recorded in Account 190

and shall reduce such balance by all amounts which are (i) received

from others in payment for rights and/or benefits received from

research and development expenditures recorded in Account 188 and

received by the end of the Determination Period and not used to

reduce the balance of Account 188 in any prior filing under this

Section 30 and (ii) the tax effect of research and development

expenditures as recorded in Account 283. The rate of return used by

COMPANY to determine the rate effect of the rate base treatment of

the balance in Account 188 shall be the rate of return last allowed by

the Commission during the previous three year period. If there has

been no such rate of return determined during the previous three year

period, and, in the absence of evidence submitted to the contrary, the

rate of return utilized shall be the then present interest rate used for

computing refunds as specified in Section 154.501 of the Commission's

Regulations under the Natural Gas Act.