Southern Natural Gas Company

Seventh Revised Volume No. 1

Effective Date: 10/01/2004, Docket: RP04-523-002, Status: Effective

Third Revised Sheet No. 212J Third Revised Sheet No. 212J : Effective

Superseding: Second Revised Sheet No. 212J

GENERAL TERMS AND CONDITIONS

(Continued)

42. Discount Terms

42.1 In the event COMPANY agrees to discount its rate to SHIPPER below

COMPANY's maximum rate under COMPANY's Rate Schedules FT, FT-NN,

IT, CSS, ISS, or PAL, the following discount terms may be

reflected on Exhibit E to the Service Agreement and will apply

without the discount constituting a material deviation from

COMPANY's proforma Service Agreement; provided, however, any such

discount shall not be less than COMPANY's minimum rate. Such

discounted rate may:

(1) apply only to specified quantities under SHIPPER's Service

Agreement(s);

(2) apply only if specified quantities are achieved (with maximum

rates applicable to volumes above specified quantities or to

all quantities if specified quantities are never achieved);

(3) apply only in a specified relationship to quantities actually

transported (i.e., that the rates shall be adjusted in a

specified relationship to the quantities actually

transported);

(4) apply only during specified periods of the year or over

specifically-defined periods of time;

(5) apply only to specified receipt or delivery points, zones,

markets, or other defined geographical areas;

(6) apply only to production reserves dedicated by the SHIPPER;

(7) apply to quantities conditioned upon implementation and

completion of a construction project or acquisition of

facilities; and/or

(8)provide for an agreed upon overall rate, with a provision for

adjusting the rate components of discounted agreements, if

needed to preserve the agreed upon overall effective rate, so

long as all rate components remain within the applicable

minimum and maximum rates specified in the tariff. Such

discounted rate may be based on published index price point

differentials or arrived at by formula provided that (a) the

same rate design underlying the pipeline's tariff rates is

utilized, (b) the rate component (i.e., reservation charge,

usage charge, or both) that is discounted is identified, and

formula used will produce a reservation rate per unit of

contract demand.