Southern Natural Gas Company

Seventh Revised Volume No. 1

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Effective Date: 09/01/2009, Docket: RP09-427-001, Status: Effective

Fourth Revised Sheet No. 210 Fourth Revised Sheet No. 210

Superseding: Third Revised Sheet No. 210

GENERAL TERMS AND CONDITIONS

(Continued)

35. FUEL MECHANISM

35.1 Purpose:

The purpose of this Section 35 is to establish a mechanism to reconcile annually the

difference between (a) the quantity of gas retained by COMPANY for company used and lost

and unaccounted for gas plus that portion of the transportation charges collected

applicable to electricity used for compression under Rate Schedules FT, FT-NN, IT, CSS

and ISS during the annual period, and (b) the actual quantity of gas consumed by COMPANY

for company use and lost and unaccounted for gas and costs of electricity used for

compression during the annual period. Such difference shall be (a) refunded if the

cumulative difference for the annual period is positive ("Refund Amount") or (b) charged

if the cumulative difference for the annual period is negative ("Charge Amount").

35.2 Calculation:

Each month during the annual period COMPANY will calculate the difference between (a) the

quantity of gas retained by COMPANY for company use and lost and unaccounted for gas

based on allocated quantities under Rate Schedules FT, FT-NN, IT, CSS and ISS and under

Liquefiable Transportation Agreements ("Retained Volume") multiplied by the Index Price

set forth in Section 14.1 of these General Terms and Conditions for the month plus an

amount equal to the electricity component of the transportation charges, as shown below

in Section 35.5, collected during the month; and (b) the actual quantity of gas that was

consumed by COMPANY for company use and lost and unaccounted for gas for the month,

multiplied by the Index Price for the month plus the actual cost of electricity used for

compression during the month.

35.3 Procedures for Refund or Charge:

At the end of the annual period, the cumulative total of the differentials calculated

above for all of the months during the applicable annual period shall be determined. If

this differential is positive, there will be a Refund Amount. If this differential is

negative, there will be a Charge Amount. The Refund Amount or Charge Amount, whichever

is applicable for the annual period, will include interest computed as specified in

Section 154.501(d) of the Commission's Regulations, on the monthly amounts derived in

Section 35.2 above. The amount to be refunded or charged to each shipper will be

determined on a pro rata basis to those shippers on COMPANY's system that had fuel

retained under their transportation or storage service agreements during the applicable

annual period. Each Shipper's share of the Refund Amount or Charge Amount, whichever is

applicable for the annual period, will be calculated by dividing that Shipper's total

quantities retained during the annual period by the total annual Retained Volume and

multiplying such quotient by the Refund Amount or Charge Amount, whichever is applicable

for the annual period. For purposes of this Section 35, the annual period shall commence

on September 1 of each year with the first annual period commencing on September 1, 2009.

COMPANY shall make an annual filing with the FERC within sixty-five (65) days of the end

of the annual period setting forth the calculation in Section 35.2 by month, including

interest, and the calculation of the Refund Amount or Charge Amount by Shipper. Any such

refunds or charges will be sent to Shippers within forty-five (45) days after FERC

approval of the annual filing. Charge Amounts shall be billed and paid under Section 15

of these General Terms and Conditions.

35.4 Last Filing Related to Fuel Sharing Mechanism

Regarding the fuel sharing mechanism that was in effect prior to September 1, 2009 in

accordance with this Section 35, the COMPANY shall make a filing within sixty-five (65)

days of August 31, 2009 with the FERC setting forth the calculation in Section 35.2 by

month for the period March 1, 2009 through August 31, 2009, including interest, and the

calculation of the Refund Amount, by SHIPPER, if any. Any such refunds will be sent to

SHIPPER within seventy-five (75) days of August 31, 2009.