Southern Natural Gas Company

Seventh Revised Volume No. 1

Effective Date: 03/01/2005, Docket: RP04-523-000, Status: Effective

Fourth Revised Sheet No. 212G Fourth Revised Sheet No. 212G : Suspended

Superseding: Third Revised Sheet No. 212G

GENERAL TERMS AND CONDITIONS

(Continued)

39. TRANSPORTATION DEMAND ADJUSTMENT FOR STATE REGULATORY ACTION

(a) If SHIPPER is a local distribution company, or a Hinshaw pipeline

under Section 1(c) of the Natural Gas Act, subject to the jurisdiction

of a state regulatory agency, and if said state regulatory agency issues

a final order that (i) finds SHIPPER'S aggregate firm transportation quantities

with all of its pipeline transporters to be excessive when compared to its

requirements for firm transportation service necessary to serve all of the

loads attached to its distribution system, and (ii) requires SHIPPER to reduce

such aggregate firm transportation quantities, SHIPPER may reduce its

Transportation Demand under any Service Agreement for firm transportation services

between SHIPPER and COMPANY by the amount ordered by said state regulatory agency;

provided however, that any such reduction shall be applied first to the Transportation

Demand under the Service Agreement for which SHIPPER is paying the lowest transportation

rate, calculated on a one hundred percent(100%)load factor basis, and then to the

Transportation Demand under the Service Agreement with the shortest remaining contract term.

For purposes of determining under which Service Agreement Transporter is paying the lowest

rate, any seasonally adjusted contracts shall be considered to be discounted contracts,

with such discounted transportation rate to be determined by dividing the annual revenues

under the Service Agreement by the product of the maximum monthly Transportation Demand

times 12. Such reduction shall become effective twenty-four (24) months after the date of

SHIPPER'S written notice to COMPANY that it has been ordered by the state regulatory agency

to reduce its Transportation Demand. SHIPPER'S right to reduce its Transportation Demand as

provided in this Section 39 is conditioned upon (i) SHIPPER having provided written notice

to COMPANY that its aggregate firm transportation quantities were the subject of a state

regulatory proceeding so that COMPANY had a reasonable opportunity to participate in said

proceeding, and (ii) SHIPPER having made a good faith effort to defend its aggregate firm

transportation quantities in said proceeding.

(b) SHIPPER's right to reduce its Transportation Demand under this Section 39 shall not apply

to Service Agreements executed or extended as part of a system expansion or other transaction

between COMPANY and SHIPPER where facilities on COMPANY's system are to be constructed,

modified or sold after May 20, 2004, in consideration for the contract subscription or

extension; provided, however, once the primary term of such Service Agreement or contract

extension has expired, Section 39(a) will apply to any future evergreen periods for Service

Agreements covered hereunder. Each package of capacity under SHIPPER's firm Service Agreement

for which this Section 39(b) exclusion applies will be designated by the COMPANY on the

Exhibit B to SHIPPER's Service Agreement.