-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HcaEm9RD4TTYLiIPBnNdNes4g8n1MQFD3VCLrOtcQJNqBkHTDiSgkGStW1xHu1e5 7NWKKQX+VYke1vj4RPjULw== 0000008154-97-000007.txt : 19970520 0000008154-97-000007.hdr.sgml : 19970520 ACCESSION NUMBER: 0000008154-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATLANTA GAS LIGHT CO CENTRAL INDEX KEY: 0000008154 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 580145925 STATE OF INCORPORATION: GA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09905 FILM NUMBER: 97609577 BUSINESS ADDRESS: STREET 1: 303 PEACHTREE ST NE STREET 2: ONE PEACHTREE CENTER CITY: ATLANTA STATE: GA ZIP: 30308 BUSINESS PHONE: 4045844000 MAIL ADDRESS: STREET 1: 303 PEACHTREE ST NE STREET 2: ONE PEACHTREE CENTER SUITE 5300 CITY: ATLANTA STATE: GA ZIP: 30308 10-Q 1 ATLANTA GAS LIGHT SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1997 Commission Registrant; State of Incorporation; I.R.S. Employer File Number Address; and Telephone Number Identification Number 1-9905 ATLANTA GAS LIGHT COMPANY 58-0145925 (A Georgia Corporation) 303 PEACHTREE STREET, NE ATLANTA, GEORGIA 30308 404-584-4000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock. As of March 31, 1997, 55,352,415 shares of Common Stock, $5.00 Par Value, were outstanding, all of which are owned by AGL Resources Inc. ATLANTA GAS LIGHT COMPANY Quarterly Report on Form 10-Q For the Quarter Ended March 31, 1997 Table of Contents Item Page Number PART I -- FINANCIAL INFORMATION Number 1 Financial Statements Condensed Consolidated Income Statements 3 Condensed Consolidated Balance Sheets 4 Condensed Consolidated Statements of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 7 2 Management's Discussion and Analysis of Results of Operations and Financial Condition 11 PART II -- OTHER INFORMATION 1 Legal Proceedings 17 4 Submission of Matters to a Vote of Security Holders 17 5 Other Information 17 6 Exhibits and Reports on Form 8-K 22 SIGNATURES 23 Page 2 of 23 Pages PART I -- FINANCIAL INFORMATION Item 1. Financial Statements ATLANTA GAS LIGHT COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED) FOR THE THREE MONTHS, SIX MONTHS AND TWELVE MONTHS ENDED MARCH 31, 1997 AND 1996 (MILLIONS, EXCEPT PER SHARE DATA)
Three Months Six Months Twelve Months -------------------------------------------------------------- 1997 1996 1997 1996 1997 1996 - ---------------------------------------------------------------------------------------------------- Operating Revenues ................ $ 470.5 $ 478.8 $ 835.4 $ 807.6 $ 1,245.4 $ 1,093.6 Cost of Gas ....................... 294.2 308.0 513.2 496.8 735.1 610.6 - ---------------------------------------------------------------------------------------------------- Operating Margin .................. 176.3 170.8 322.2 310.8 510.3 483.0 - ---------------------------------------------------------------------------------------------------- Other Operating Expenses .......... 87.6 91.2 174.3 172.0 335.8 333.3 Income Taxes ...................... 27.8 25.1 44.8 42.3 46.0 39.3 - ---------------------------------------------------------------------------------------------------- Operating Income .................. 60.9 54.5 103.1 96.5 128.5 110.4 - ---------------------------------------------------------------------------------------------------- Other Income Other income and deductions . 3.5 6.7 4.7 8.3 9.0 8.0 Income taxes ................ (1.2) (2.4) (1.7) (3.0) (3.5) (2.8) - ---------------------------------------------------------------------------------------------------- Total other income-net .. 2.3 4.3 3.0 5.3 5.5 5.2 - ---------------------------------------------------------------------------------------------------- Income Before Interest Charges .... 63.2 58.8 106.1 101.8 134.0 115.6 Interest Charges .................. 13.8 12.4 27.4 25.2 51.3 47.3 - ---------------------------------------------------------------------------------------------------- Net Income ........................ 49.4 46.4 78.7 76.6 82.7 68.3 - ---------------------------------------------------------------------------------------------------- Dividends on Preferred Stock ...... 1.1 1.1 2.2 2.2 4.4 4.4 - ---------------------------------------------------------------------------------------------------- Earnings Available for Common Stock $ 48.3 $ 45.3 $ 76.5 $ 74.4 $ 78.3 $ 63.9 ====================================================================================================
See notes to condensed consolidated financial statements. Page 3 of 23 Pages ATLANTA GAS LIGHT COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (MILLIONS) September March 31, 30, -------------------- --------- 1997 1996 1996 ASSETS (Unaudited) - -------------------------------------------------------------------------------- Utility Plant .............................. $ 2,011.5 $ 1,969.3 $ 1,969.0 Less accumulated depreciation ............ 627.2 607.1 607.8 - -------------------------------------------------------------------------------- Utility plant-net ...................... 1,384.3 1,362.2 1,361.2 - -------------------------------------------------------------------------------- Other Property and Investments (less accumulated depreciation of $2.7 at March 31, 1996) ............... 16.5 - -------------------------------------------------------------------------------- Current Assets Cash and cash equivalents ................ 1.9 4.5 7.9 Receivables (less allowance for uncollectible accounts of $7.2 at March 31, 1997, $6.4 at March 31, 1996, and $2.7 at September 30, 1996 ............................... 202.2 215.8 91.3 Receivables from associated companies .... 18.8 0.6 Inventories Natural gas stored underground ......... 35.5 14.5 144.0 Liquefied natural gas .................. 12.3 4.0 16.8 Materials and supplies ................. 7.2 8.0 7.9 Other .................................. 0.4 0.1 Deferred purchased gas adjustment ........ 19.3 19.3 4.7 Other .................................... 7.1 8.4 10.3 - -------------------------------------------------------------------------------- Total current assets ................... 304.3 275.5 283.0 - -------------------------------------------------------------------------------- Deferred Debits and Other Assets Unrecovered environmental response costs .................................. 40.9 34.7 38.0 Unrecovered Integrated Resource Plan costs ............................. 7.7 8.0 10.0 Investment in joint ventures ............. 35.0 Receivable from AGL Resources - prepaid pension ........................ 5.2 Other .................................... 36.5 34.1 36.0 - -------------------------------------------------------------------------------- Total deferred debits and other assets ............................... 90.3 111.8 84.0 - -------------------------------------------------------------------------------- Total Assets ............................... $ 1,778.9 $ 1,766.0 $ 1,728.2 ================================================================================ See notes to condensed consolidated financial statements. Page 4 of 23 Pages ATLANTA GAS LIGHT COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (MILLIONS, EXCEPT PAR VALUE DATA) September March 31, 30, -------------------- --------- CAPITALIZATION AND LIABILITIES 1997 1996 1996 (Unaudited) - -------------------------------------------------------------------------------- Capitalization Common stock, $5 par value, shares issued and outstanding of 55.4 at March 31, 1997, 55.4 at March 31, 1996, and 55.4 at September 30, 1996 ......$ 276.8 $ 276.8 $ 276.8 Premium on capital stock .................... 166.2 166.2 166.2 Earnings reinvested ......................... 101.2 167.6 59.7 - -------------------------------------------------------------------------------- Total common stock equity ................. 544.2 610.6 502.7 - -------------------------------------------------------------------------------- Preferred stock, cumulative $100 par or stated value, shares issued and outstanding of 0.6 at March 31, 1997, March 31, 1996, and September 30, 1996 .... 58.5 58.5 58.5 Long-term debt .............................. 584.5 554.5 554.5 - -------------------------------------------------------------------------------- Total capitalization ...................... 1,187.2 1,223.6 1,115.7 - -------------------------------------------------------------------------------- Current Liabilities Short-term debt ............................. 113.0 66.5 152.0 Accounts payable-trade ...................... 47.9 81.5 72.7 Payable to associated companies ............. 2.7 Customer deposits ........................... 30.0 29.1 27.8 Interest .................................... 27.1 25.3 25.7 Taxes ....................................... 39.1 28.0 16.0 Other ....................................... 37.9 44.0 26.9 - -------------------------------------------------------------------------------- Total current liabilities ................. 295.0 274.4 323.8 - -------------------------------------------------------------------------------- Long-Term Liabilities Accrued environmental response costs ..................................... 31.3 28.6 30.4 Payable to AGL Resources - accrued pension costs ..................... 1.5 4.9 Payable to AGL Resources - accrued postretirement benefits costs ..................................... 35.7 33.6 36.2 Deferred credits ............................ 59.4 63.2 60.9 - -------------------------------------------------------------------------------- Total long-term liabilities ............... 126.4 126.9 132.4 - -------------------------------------------------------------------------------- Accumulated Deferred Income Taxes ............. 170.3 141.1 156.3 - -------------------------------------------------------------------------------- Total Capitalization and Liabilities ..........$ 1,778.9 $ 1,766.0 $ 1,728.2 ================================================================================ See notes to condensed consolidated financial statements. Page 5 of 23 Pages ATLANTA GAS LIGHT COMPANY AND SUBISIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS AND TWELVE MONTHS ENDED MARCH 31, 1997 (MILLIONS)
Six Months Twelve Months ---------------- ----------------- 1997 1996 1997 1996 - ------------------------------------------------------------------------------------------ Cash Flows from Operating Activities Net income .................................. $ 78.7 $ 76.6 $ 82.7 $ 68.3 Adjustments to reconcile net income to net cash flow from operating activities Depreciation and amortization ........... 32.7 33.4 65.3 64.4 Deferred income taxes ................... 1.3 2.4 23.7 17.6 Noncash compensation expense ............ 2.1 4.1 Noncash restructuring costs ............. 2.8 Other ................................... (1.1) (1.2) (2.3) (2.3) Changes in certain assets and liabilities ... (14.8) (45.4) (50.5) (96.8) - ------------------------------------------------------------------------------------------- Net cash flow from operating activities 96.8 67.9 118.9 58.1 - ------------------------------------------------------------------------------------------- Cash Flows from Financing Activities Sale of common stock, net of expenses ....... 1.0 50.4 Short-term borrowings, net .................. (39.0) 15.5 46.5 66.5 Sale of long-term debt ...................... 30.0 30.0 Common stock dividends paid to parent ....... (30.1) (24.4) (59.5) (47.1) Preferred stock dividends ................... (2.2) (2.2) (4.4) (4.4) - ------------------------------------------------------------------------------------------- Net cash flow from financing activities (41.3) (10.1) 12.6 65.4 - ------------------------------------------------------------------------------------------- Cash Flows from Investing Activities Utility plant expenditures .................. (61.9) (57.9) (136.1) (125.2) Investment in joint venture ................. (32.6) Nonutility capital expenditures ............. 1.1 1.6 Cash received from joint venture ............ 2.4 Cost of removal, net of salvage ............. 0.4 (0.2) (0.4) 1.0 - ------------------------------------------------------------------------------------------- Net cash flow from investing activities (61.5) (57.0) (134.1) (155.2) - ------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents .................... (6.0) 0.8 (2.6) (31.7) Cash and cash equivalents at beginning of year ................... 7.9 3.7 4.5 36.2 - ------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year ......................... $ 1.9 $ 4.5 $ 1.9 $ 4.5 =========================================================================================== Supplemental Information Cash paid during the period for Interest ................................ $ 26.1 $ 25.5 $ 49.8 $ 48.4 Income taxes ............................ $ 18.3 $ 12.7 $ 24.6 $ 20.6
See notes to condensed consolidated financial statements. Page 6 of 23 Pages ATLANTA GAS LIGHT COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Implementation of Holding Company Reorganization On March 6, 1996, following shareholder approval, Atlanta Gas Light Company (AGLC) completed a corporate restructuring in which a new company, AGL Resources Inc. (AGL Resources), became the holding company for AGLC, AGLC's wholly owned natural gas utility subsidiary, Chattanooga Gas Company (Chattanooga), and AGLC's nonregulated subsidiaries. The consolidated financial statements of AGLC include the financial statements of AGLC and Chattanooga and unless noted specifically or otherwise required by the context, references to AGLC include the operations and activities of AGLC and Chattanooga. During fiscal 1996 ownership of AGLC's nonregulated business, Georgia Gas Company (natural gas production activities), was transferred to AGL Energy Services, Inc. (AGL Energy Services). Ownership of AGLC's other nonregulated businesses, Georgia Gas Service Company (propane sales) and Trustees Investments, Inc. (real estate holdings), was transferred to AGL Investments, Inc. (AGL Investments). AGLC's interest in Sonat Marketing Company L.P. was transferred to AGL Gas Marketing, Inc., a wholly owned subsidiary of AGL Investments. The transfer of AGLC's nonregulated businesses to those subsidiaries of AGL Resources was effected through a noncash dividend of $45.9 million during fiscal 1996. AGL Resources Service Company (Service Company) was formed during fiscal 1996 to provide corporate support services to AGLC, AGL Resources and its other subsidiaries. The transfer of related assets and accumulated deferred income tax liabilities from AGLC to Service Company and other nonregulated subsidiaries of AGL Resources was effected through noncash dividends of $34.3 million during the fourth quarter of fiscal 1996 and $4.8 million during the first quarter of fiscal 1997. As a result of those noncash dividends, utility plant-net decreased by $48.4 million and accumulated deferred income tax decreased by $9.3 million. Expenses of Service Company are allocated to AGLC, AGL Resources and its other subsidiaries. 2. Interim Financial Statements In the opinion of management, the unaudited condensed consolidated financial statements included herein reflect all normal recurring accruals necessary for a fair statement of the results of the interim periods reflected. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted from these condensed consolidated financial statements pursuant to applicable rules and regulations of the Securities and Exchange Commission. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the annual reports on Form 10-K of AGLC for the fiscal years ended September 30, 1996 and 1995. Certain 1996 amounts have been reclassified for comparability with 1997 amounts. 3 . Earnings Since consumption of natural gas is dependent to a large extent on weather, the majority of AGLC's income is realized during the winter months. Earnings for three-month and six-month periods are not indicative of the earnings for a twelve-month period. On October 3, 1995, AGLC implemented revised firm service rates pursuant to an order on rehearing of the rate design issues of AGLC's 1993 rate case that was issued by the Georgia Public Service Commission (Georgia Commission) on September 25, 1995. Although neutral with respect to total annual margins, the new rates shift margins from heating months (November - March) into non-heating months, thereby affecting the comparisons of earnings for the twelve-month periods ended March 31, 1997, and 1996. Page 7 of 23 Pages 4. Environmental Matters AGLC has identified nine sites in Georgia where it currently owns all or part of a manufactured gas plant (MGP) site. In addition, AGLC has identified three other sites in Georgia which AGLC does not now own, but which may have been associated with the operation of MGPs by AGLC or its predecessors. There are also three sites in Florida which have been investigated by environmental authorities in connection with which AGLC may be contacted as a potentially responsible party. AGLC's response to MGP sites in Georgia is proceeding under two state regulatory programs. First, AGLC has entered into consent orders with the Georgia Environmental Protection Division (EPD) with respect to four sites: Augusta, Griffin, Savannah and Valdosta. Under these consent orders, AGLC is obliged to investigate and, if necessary, remediate environmental impacts at the sites. AGLC developed a proposed Corrective Action Plan (CAP) for the Griffin site, received conditional approval of the CAP, and has initiated corrective measures. Assessment activities are being conducted at Augusta and have been completed at Savannah. In addition, AGLC is in the process of conducting certain interim remedial measures at the Augusta MGP site. Those measures are expected to be implemented principally during fiscal 1997. Second, AGLC's response to all Georgia sites is proceeding under Georgia's Hazardous Site Response Act (HSRA). AGLC submitted to EPD formal notifications pertaining to all of its owned MGP sites, and EPD had listed seven sites (Athens, Augusta, Brunswick, Griffin, Savannah, Valdosta and Waycross) on the state's Hazardous Site Inventory (HSI). EPD has not listed the Macon site on the HSI at this time. EPD has also listed the Rome site, which AGLC has acquired, on the HSI. Under the HSRA regulations, the four sites subject to consent orders are presumed to require corrective action; EPD will determine whether corrective action is required at the four remaining sites (Athens, Brunswick, Rome and Waycross) in due course. In that respect, however, AGLC has submitted Compliance Status Reports (CSRs) for the Athens, Brunswick and Rome MGP sites, and AGLC has concluded that these sites do not meet applicable risk reduction standards. Accordingly, some degree of response action is likely to be required at those sites. AGLC has estimated that, under the most favorable circumstances reasonably possible, the future cost to AGLC of investigating and remediating the former MGP sites could be as low as $31.3 million. Alternatively, AGLC has estimated that, under reasonably possible unfavorable circumstances, the future cost to AGLC of investigating and remediating the former MGP sites could be as high as $117.3 million. Those estimates have been adjusted from the September 30, 1996 estimates to reflect settlements of property damage claims at certain sites. If additional sites were added to those for which corrective action now appears reasonably likely, or if substantially more stringent cleanups were required, or if site conditions are markedly worse than those now anticipated, the costs could be higher. In addition, those costs do not include other expenses, such as property damage claims, for which AGLC may ultimately be held liable, but for which neither the existence nor the amount of such liabilities can be reasonably forecast. Within the stated range of $31.3 million to $117.3 million, no amount within the range can be reliably identified as a better estimate than any other estimate. Therefore, a liability at the low end of this range and a corresponding regulatory asset have been recorded in the financial statements. AGLC has two means of recovering the expenses associated with the former MGP sites. First, the Georgia Commission has approved the recovery by AGLC of Environmental Response Costs, as defined, pursuant to an Environmental Response Cost Recovery Rider (ERCRR). For purposes of the ERCRR, Environmental Response Costs include investigation, testing, remediation and litigation costs and expenses or other liabilities relating to or arising from MGP sites. In connection with the ERCRR, the staff of the Georgia Commission conducted a financial and management process audit related to the MGP sites, cleanup activities at the sites and environmental response costs that have been incurred for purposes of the ERCRR. On October 10, 1996, the Georgia Commission issued an order to prohibit funds collected through the ERCRR from being used for the payment of any damage award, including punitive damages, as a result of any litigation associated with any of the MGP sites in which AGLC is involved. AGLC is currently pursuing judicial review of the October 10, 1996, order. Page 8 of 23 Pages Second, AGLC intends to seek recovery of appropriate costs from its insurers and other potentially responsible parties. With respect to its insurers, AGLC filed a declaratory judgement action against 23 of its insurance companies in 1991. After the trial court entered a judgement adverse to AGLC and AGLC appealed that ruling, the Eleventh Circuit Court of Appeals held that the case did not present a case or controversy when filed, and the case was remanded with instructions to dismiss. Since the Eleventh Circuit's decision, AGLC has settled with, or is close to settlement with, most of the major insurers. AGLC has not determined what actions it will take with respect to non-settling insurers. 5. Competition AGLC competes to supply natural gas to interruptible customers who are capable of switching to alternative fuels, including propane, fuel and waste oils, electricity and, in some cases, combustible wood by-products. AGLC also competes to supply gas to interruptible customers who might seek to bypass its distribution system. AGLC can price distribution services to interruptible customers four ways. First, multiple rates are established under the rate schedules of AGLC's tariff approved by the Georgia Commission. If an existing tariff rate does not produce a price competitive with a customer's relevant competitive alternative, three alternate pricing mechanisms exist: Negotiated Contracts, Interruptible Transportation and Sales Maintenance (ITSM) discounts and Special Contracts. On February 17, 1995, the Georgia Commission approved a settlement that permits AGLC to negotiate contracts with customers who have the option of bypassing AGLC's facilities (Bypass Customers) to receive natural gas from other suppliers. The bypass avoidance contracts (Negotiated Contracts) can be renewable, provided the initial term does not exceed five years, unless a longer term specifically is authorized by the Georgia Commission. The rate provided by the Negotiated Contract may be lower than AGLC's filed rate, but not less than AGLC's marginal cost of service to the potential Bypass Customer. Service pursuant to a Negotiated Contract may commence without Georgia Commission action, after a copy of the contract is filed with the Georgia Commission. Negotiated Contracts may be rejected by the Georgia Commission within 90 days of filing; absent such action, however, the Negotiated Contracts remain in effect. None of the Negotiated Contracts filed to date with the Georgia Commission have been rejected. The settlement also provides for a bypass loss recovery mechanism to operate until the earlier of September 30, 1998, or the effective date of new rates for AGLC resulting from a general rate case. Under the recovery mechanism, AGLC is allowed to recover from other customers 75% of the difference between (a) the nongas cost revenue that was received from the potential Bypass Customer during the most recent 12-month period and (b) the nongas cost revenue that is calculated to be received from the lower Negotiated Contract rate applied to the same volumetric level. Concerning the remaining 25% of the difference, AGLC is allowed to retain a 44% share of capacity release revenues in excess of $5 million until AGLC is made whole for discounts from Negotiated Contracts. To the extent there are additional capacity release revenues, AGLC is allowed to retain 15% of such amounts. In addition to Negotiated Contracts, which are designed to serve existing and potential Bypass Customers, AGLC's ITSM Rider continues to permit discounts for short-term transactions to compete with alternative fuels. Revenue shortfalls, if any, from interruptible customers as measured by the test-year interruptible revenues determined by the Georgia Commission in AGLC's 1993 rate case will continue to be recovered under the ITSM Rider. The settlement approved by the Georgia Commission also provides that AGLC may file contracts (Special Contracts) for Georgia Commission approval if the service cannot be provided through the ITSM Rider, existing rate schedules, or Negotiated Contract procedures. A Special Contract, for example, could involve AGLC providing a long-term service contract to compete with alternative fuels where physical bypass is not the relevant competition. Pursuant to the approved settlement, AGLC has filed and is providing service pursuant to 46 Negotiated Contracts. Additionally, the Georgia Commission has approved Special Contracts between AGLC and six interruptible customers. Page 9 of 23 Pages On November 27, 1996, the Tennessee Regulatory Authority (TRA) approved a settlement that permits Chattanooga to negotiate contracts with large commercial or industrial customers who are capable of bypassing Chattanooga's distribution system. The settlement provides for approval on an experimental basis, with the Tennessee Regulatory Authority (TRA) to review the measure two years from the approval date. The pricing terms provided in any such contract may be neither less than Chattanooga's marginal cost of providing service nor greater than the filed tariff rate generally applicable to such service. Chattanooga can recover 50% of the difference between the contract rate and the applicable tariff rate through the balancing account of the purchased gas adjustment provisions of Chattanooga's rate schedules. Pursuant to the approved settlement, Chattanooga has entered into four negotiated contracts which are currently under review by the TRA. The 1997 session of the Georgia General Assembly passed legislation which provides a legal framework for comprehensive deregulation of many aspects of the natural gas business in Georgia. Senate Bill 215, the Natural Gas Competition and Deregulation Act, which became law on April 14, 1997, if implemented by AGLC with respect to its system, would result in the application of an alternative form of regulation, such as performance based regulation, to AGLC. Pursuant to a separate election, AGLC, as an electing distribution company, could choose to exit the merchant function and fully unbundle its system. Senate Bill 215 provides for a transition period leading to a condition of effective competition in the natural gas markets. An electing distribution company would unbundle all services to its natural gas customers, assign firm delivery capacity to certificated marketers selling the gas commodity and create a secondary transportation market for interruptible transportation capacity. Marketers, including unregulated affiliates of AGLC, would compete to sell natural gas to all customers at market-based prices. AGLC would continue to provide intrastate transportation of the gas to end users through its existing system, subject to continued rate regulation by the Georgia Commission. In addition, the Georgia Commission would continue to regulate safety, access, and quality of service pursuant to an alternative form of regulation. The law provides for marketer standards and rules of business practice to ensure that the benefits of a competitive natural gas market are available to all customers on the AGLC system. It imposes an obligation to serve on marketers with a corresponding universal service fund which can also facilitate the extension of AGLC facilities in order to serve the public interest. In order to implement the new law, the Georgia Commission must undertake and complete several rulemakings by December 31, 1997. As these rules become effective the extent of and schedule for actions under the legislation by AGLC will evolve further. Currently, in accordance with Statement of Financial Accounting Standard No. 71, "Accounting for the Effects of Certain Types of Regulation," (SFAS 71), AGLC has recorded regulatory assets and liabilities which represent regulator-approved deferrals resulting from the ratemaking process. Recently, the staff of the Securities and Exchange Commission has questioned the continued applicability of SFAS 71 to portions of the business of three California utilities, as a result of legislation recently enacted in California. The Emerging Issues Task Force (EITF) will begin discussion of this issue at its May 1997 meeting. While the legislation and circumstances under review with respect to California differ substantially from those associated with electing distribution companies in Georgia, AGLC will monitor the deliberations of the EITF. On May 1, 1997, Chattanooga filed a rate proceeding with the TRA seeking an increase in revenues of $4.4 million annually. Revenues from the rate increase will be used to improve and expand Chattanooga's natural gas distribution system, to recover increased operation, maintenance and tax expenses, and to provide a reasonable return to investors. Under the TRA's rules and regulations, the effective date of the requested increase likely will be suspended until November 1, 1997. During that time the TRA will complete a review of the requested increase and will hold public hearings on the request. Page 10 of 23 Pages Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION On March 6, 1996, Atlanta Gas Light Company (AGLC) completed a corporate restructuring in which a new company, AGL Resources Inc. (AGL Resources) became the holding company for AGLC and its subsidiaries. During calendar 1996, ownership of AGLC's nonregulated businesses was transferred to AGL Resources and its various subsidiaries. Unless noted specifically or otherwise required by the context, references to AGLC include the operations and activities of AGLC and Chattanooga. The following discussion and analysis reflects events affecting AGLC's results of operations and financial condition and factors expected to impact its future operations. See Note 1 in Notes to Condensed Consolidated Financial Statements in this Form 10-Q. Results of Operations Three-Month Periods Ended March 31, 1997 and 1996 Explained below are the major factors that had a significant effect on results of operations for the three-month period ended March 31, 1997, compared with the same period in 1996. Operating revenues decreased 1.7% for the three-month period ended March 31, 1997, compared with the same period in 1996 primarily due to (1) decreased volumes of gas sold as a result of weather that was 34.6% warmer than during the same period in 1996 and (2) a decrease in the cost of the gas supply recovered from customers under the purchased gas provisions of AGLC's rate schedules, as explained in the following paragraph. The decrease in operating revenues was offset partly by growth in the number of customers served. AGLC balances the cost of gas with revenues collected from customers under the purchased gas provisions of its rate schedules. Underrecoveries or overrecoveries of gas costs are deferred and recorded as current assets or liabilities, thereby eliminating the effect that recovery of gas costs would otherwise have on net income. Cost of gas decreased 4.5% during the three-month period ended March 31, 1997, compared with the same period in 1996. The decrease in the cost of AGLC's gas supply was primarily due to decreased volumes of gas sold as a result of weather that was 34.6% warmer than during the same period in 1996. The decrease in cost of gas was offset partly by (1) an increase in the cost of gas purchased for system supply and (2) an increase in the cost of gas withdrawn from underground storage. Operating margin increased 3.2% for the three-month period ended March 31, 1997, compared with the same period in 1996 primarily due to growth in the number of customers served. Weather normalization adjustment riders (WNARs) approved by the Georgia Commission and the TRA stabilized margin at the level which would occur with normal weather for the three-month periods ended March 31, 1997 and 1996. As a result of the WNARs, weather conditions experienced do not have a significant impact on the comparability of operating margin. Operating expenses decreased 3.9% for the three-month period ended March 31, 1997, compared with the same period in 1996 primarily due to decreased (1) labor and labor-related expenses as a result of the transfer of AGLC's nonregulated business to AGL Resources and its subsidiaries subsequent to March 1996 (see Note 1 to Notes to Condensed Consolidated Financial Statements in this Form 10-Q), (2) outside services employed and (3) maintenance of general plant. The decrease in operating expenses was offset partly by increased (1) uncollectible accounts expense, (2) injuries and damages expense and (3) expenses related to AGLC's Integrated Resource Plan (IRP) which are recovered through an IRP Cost Recovery Rider approved by the Georgia Commission. AGLC balances IRP expenses which are included in operating expenses with revenues collected under the rider, thereby eliminating the effect that recovery of IRP expenses would otherwise have on net income. Operating expenses excluding IRP expenses decreased $4.2 million, or 4.9%. Page 11 of 23 Pages Other income decreased $2 million for the three-month period ended March 31, 1997, compared with the same period in 1996 primarily due to the transfer of AGLC's nonregulated business to AGL Resources and its subsidiaries subsequent to March 1996 (See Note 1 to Notes to Condensed Consolidated Financial Statements in this Form 10-Q). The decrease in other income was offset partly by (1) the recovery from customers of carrying costs not included in base rates related to storage gas inventories and (2) the recovery from customers of carrying costs attributable to an increase in underrecovered deferred purchased gas costs. Income taxes increased $1.5 million for the three-month period ended March 31, 1997, compared with the same period in 1996 primarily due to increased taxable income. Interest charges increased $1.4 million for the three-month period ended March 31, 1997, compared with the same period in 1996 primarily due to increased amounts of short-term and long-term debt outstanding. Earnings available for common stock for the three-month period ended March 31, 1997, was $48.3 million, compared with $45.3 million in 1996. The increase in earnings available for common stock was primarily due to (1) increased operating margin and (2) decreased other operating expenses. Six-Month Periods Ended March 31, 1997 and 1996 Explained below are the major factors that had a significant effect on results of operations for the six-month period ended March 31, 1997, compared with the same period in 1996. Operating revenues increased 3.4% for the six-month period ended March 31, 1997, compared with the same period in 1996 primarily due to (1) an increase in the cost of the gas supply recovered from customers under the purchased gas provisions of AGLC's rate schedules, as explained in the following paragraph and (2) growth in the number of utility customers served. The increase in operating revenues was offset partly by decreased volumes of gas sold as a result of weather that was 30.6% warmer than during the same period in 1996. AGLC balances the cost of gas with revenues collected from customers under the purchased gas provisions of its rate schedules. Underrecoveries or overrecoveries of gas costs are deferred and recorded as current assets or liabilities, thereby eliminating the effect that recovery of gas costs would otherwise have on net income. Cost of gas increased 3.3% during the six-month period ended March 31, 1997, compared with the same period in 1996. The increase in the cost of AGLC's gas supply was primarily due to (1) an increase in the cost of gas purchased for system supply and (2) an increase in the cost of gas withdrawn from underground storage. The increase in cost of gas was offset partly by decreased volumes of gas sold as a result of weather that was 30.6% warmer than during the same period in 1996. Operating margin increased 3.7% for the six-month period ended March 31, 1997, compared with the same period in 1996 primarily due to growth in the number of customers served. WNARs approved by the Georgia Commission and the TRA stabilized margin at the level which would occur with normal weather for the six-month periods ended March 31, 1997 and 1996. As a result of the WNARs, weather conditions experienced do not have a significant impact on the comparability of operating margin. Operating expenses increased 1.3% for the six-month period ended March 31, 1997, compared with the same period in 1996 primarily due to increased (1) uncollectible accounts expense, (2) injuries and damages expense, (3) expenses related to AGLC's IRP which are recovered through an IRP Cost Recovery Rider approved by the Georgia Commission, (4) ad valorem taxes and (5) franchise expenses which are recovered through a Franchise Recovery Rider approved by the Georgia Commission. AGLC balances IRP and franchise expenses which are included in operating expenses with revenues collected under the riders, thereby eliminating the effect that recovery of IRP and franchise expenses would otherwise have on net income. Operating expenses excluding IRP and franchise expenses increased $1 million, or 1%. The increase in operating expenses was offset partly by decreased labor and labor-related expenses as a result of the transfer of AGLC's nonregulated Page 12 of 23 Pages business to AGL Resources and its subsidiaries subsequent to March 1996 (see Note 1 to Notes to Condensed Consolidated Financial Statements in this Form 10-Q). Other income decreased $2.3 million for the six-month period ended March 31, 1997, compared with the same period in 1996 primarily due to the transfer of AGLC's nonregulated business to AGL Resources and its subsidiaries subsequent to March 1996 (See Note 1 to Notes to Condensed Consolidated Financial Statements in this Form 10-Q). The decrease in other income was offset partly by (1) the recovery from customers of carrying costs not included in base rates related to storage gas inventories and (2) the recovery from customers of carrying costs attributable to an increase in underrecovered deferred purchased gas costs. Income taxes increased $1.2 million for the six-month period ended March 31, 1997, compared with the same period in 1996 primarily due to increased taxable income. Interest charges increased $2.2 million for the six-month period ended March 31, 1997, compared with the same period in 1996 primarily due to increased amounts of short-term and long-term debt outstanding. Earnings available for common stock for the six-month period ended March 31, 1997, was $76.5 million, compared with $74.4 million in 1996. The increase in earnings available for common stock was primarily due to increased operating margin. The increase in earnings available for common stock was offset partly by increased (1) operating expenses and (2) interest charges. Twelve-Month Periods Ended March 31, 1997 and 1996 Explained below are the major factors that had a significant effect on results of operations for the twelve-month period ended March 31, 1997, compared with the same period in 1996. Operating revenues increased 13.9% for the twelve-month period ended March 31, 1997, compared with the same period in 1996 primarily due to (1) an increase in the cost of the gas supply recovered from customers under the purchased gas provisions of AGLC's rate schedules, as explained in the following paragraph and (2) growth in the number of customers served. The increase in operating revenues was offset partly by decreased volumes of gas sold as a result of weather that was 27.2% warmer than during the same period in 1996. AGLC balances the cost of gas with revenues collected from customers under the purchased gas provisions of its rate schedules. Underrecoveries or overrecoveries of gas costs are deferred and recorded as current assets or liabilities, thereby eliminating the effect that recovery of gas costs would otherwise have on net income. Cost of gas increased 20.4% during the twelve-month period ended March 31, 1997, compared with the same period in 1996. The increase in the cost of AGLC's gas supply was primarily due to (1) an increase in the cost of gas purchased for system supply and (2) an increase in the cost of gas withdrawn from underground storage. The increase in cost of gas was offset partly by decreased volumes of gas sold as a result of weather that was 27.2% warmer than during the same period in 1996. Operating margin increased 5.7% for the twelve-month period ended March 31, 1997, compared with the same period in 1996 primarily due to (1) revised firm services rates, effective October 3, 1995, which shift margins from heating months into non-heating months (see Note 3 to Notes to Condensed Consolidated Financial Statements in this Form 10-Q) and (2) growth in the number of customers served. WNARs approved by the Georgia Commission and the TRA stabilized margin at the level which would occur with normal weather for the twelve-month periods ended March 31, 1997 and 1996. As a result of the WNARs, weather conditions experienced do not have a significant impact on the comparability of operating margin. Operating expenses increased $2.5 million for the twelve-month period ended March 31, 1997, compared with the same period in 1996 primarily due to increased (1) uncollectible accounts expense, (2) franchise expenses which are Page 13 of 23 Pages recovered through a Franchise Recovery Rider approved by the Georgia Commission, (3) depreciation expense recorded as a result of increased property and (4) expenses related to AGLC's IRP which are recovered through an IRP Cost Recovery Rider approved by the Georgia Commission. AGLC balances franchise and IRP expenses which are included in operating expenses with revenues collected under the riders, thereby eliminating the effect that recovery of franchise and IRP expenses would otherwise have on net income. The increase in operating expenses was offset partly by decreased (1) maintenance of general plant, (2) customer service expense and (3) outside services employed. Other income increased $0.3 million for the twelve-month period ended March 31, 1997, compared with the same period in 1996 primarily due to (1) the recovery from customers of carrying costs attributable to an increase in underrecovered deferred purchased gas costs, (2) recoveries of environmental response costs from insurance carriers and third parties and (3) the recovery from customers of carrying costs not included in base rates related to storage gas inventories. The increase in other income was offset partly by the transfer of AGLC's nonregulated business to AGL Resources and its subsidiaries subsequent to March 1996. See Note 1 to Notes to Condensed Consolidated Financial Statements in this Form 10-Q. Income taxes increased $7.4 million for the twelve-month period ended March 31, 1997, compared with the same period in 1996 primarily due to increased taxable income. Interest charges increased $4 million for the twelve-month period ended March 31, 1997, compared with the same period in 1996 primarily due to increased amounts of short-term and long-term debt outstanding. Earnings available for common stock for the twelve-month period ended March 31, 1997, was $78.3 million, compared with $63.9 million in 1996. The increase in earnings available for common stock was primarily due to (1) increased operating margin and (2) increased other income. The increase in earnings available for common stock was offset partly by (1) increased operating expenses and (2) increased interest expense. Financial Condition AGLC's business is highly seasonal in nature and typically shows a substantial increase in accounts receivable from customers from September 30 to March 31 as a result of colder weather. AGLC also uses gas stored underground and liquefied natural gas to serve its customers during periods of colder weather. As a result, accounts receivable increased $110.9 million and inventory of gas stored underground and liquefied natural gas decreased $113 million during the six-month period ended March 31, 1997. Accounts receivable decreased $13.6 million from March 31, 1996 to March 31, 1997, primarily due to decreased operating revenues. Inventory of gas stored underground and liquefied natural gas increased $29.3 million from March 31, 1996 to March 31, 1997, primarily due to decreased volumes of gas withdrawn from storage as a result of weather that was 27.2% warmer during the twelve-month period ended March 31, 1997, compared with the same period in 1996. The purchasing practices of AGLC are subject to review by the Georgia Commission under legislation enacted by the Georgia General Assembly (Gas Supply Plan Legislation). The Gas Supply Plan Legislation establishes procedures for review and approval, in advance, of gas supply plans for gas utilities and gas cost adjustment factors applicable to firm service customers of gas utilities. Pursuant to AGLC's approved Gas Supply Plan for fiscal year 1997, gas supply purchases are being recovered under the purchased gas provisions of AGLC's rate schedules. The plan also allows recovery from the customers of AGLC of Federal Energy Regulatory Commission (FERC) Order No. 636 transition costs that are currently being charged by AGLC's pipeline suppliers. On February 27, 1997, the FERC issued Order No. 636-C, on remand from the decision by the United States Court of Appeals for the District of Columbia Circuit (D. C. Circuit) in UNITED DISTRIBUTION COS. V. FERC. In Order No. 636-C, the FERC reaffirmed its decision to permit pipelines to pass all of their gas supply realignment (GSR) costs through to their Page 14 of 23 Pages customers, and ruled that individual pipelines should submit proposals concerning the share of GSR costs their interruptible transportation customers should bear. Requests for rehearing of Order No. 636-C have been filed with the FERC. AGLC currently estimates that its portion of transition costs resulting from the FERC Order No. 636 restructuring proceedings from all of its pipeline suppliers, that have been filed to be recovered to date, could be as high as approximately $105 million. This estimate assumes that FERC approval of Southern Natural Gas Company's (Southern) restructuring settlement agreement is not overturned on judicial review, that FERC approval of Tennessee Gas Pipeline Company's (Tennessee) transition cost settlement becomes final, and that FERC does not alter its GSR recovery policies on rehearing of its Order No. 636-C. Such filings currently are pending final FERC approval, and the transition costs are being collected subject to refund. Approximately $87.8 million of such costs have been incurred by AGLC as of March 31, 1997, recovery of which is provided under the purchased gas provisions of AGLC's rate schedules. For further discussion of the effects of FERC Order No. 636 on AGLC, see Part II, Item 5, "Other Information - Federal Regulatory Matters" of this Form 10-Q. As noted above, AGLC recovers the cost of gas under the purchased gas provisions of its rate schedules. AGLC was in an underrecovery position of $19.3 million as of March 31, 1997, and March 31, 1996, and $4.7 million as of September 30, 1996. Under the provisions of the utility's rate schedules, any underrecoveries of gas costs are included in current assets and have no effect on net income. Cash and cash equivalents decreased $6 million and $2.6 million for the six-month and twelve-month periods ended March 31, 1997, primarily to offset other working capital requirements. The expenditures for plant and other property totaled $61.9 million and $136.1 million for the six-month and twelve-month periods ended March 31, 1997. Service Company was formed during fiscal 1996 to provide corporate support services to AGLC, AGL Resources and its other subsidiaries. The transfer of related assets and accumulated deferred income tax liabilities from AGLC to Service Company and other nonregulated subsidiaries was effected through noncash dividends of $34.3 million during the fourth quarter of fiscal 1996 and $4.8 million during the first quarter of fiscal 1997. As a result of those noncash dividends, utility plant-net decreased by $48.4 million and accumulated deferred income tax decreased by $9.3 million. Expenses of Service Company are allocated to AGL Resources and its subsidiaries. AGLC has accrued liabilities of $31.3 million as of March 31, 1997, $28.6 million as of March 31, 1996, and $30.4 million as of September 30, 1996, for estimated future expenditures which are expected to be made over a period of several years in connection with or related to MGP sites. The Georgia Commission has approved the recovery by AGLC of Environmental Response Costs, as defined in Note 4 to Notes to Condensed Consolidated Financial Statements in this Form 10-Q, pursuant to the ERCRR. In connection with the ERCRR, the staff of the Georgia Commission conducted a financial and management process audit related to the MGP sites, cleanup activities at the sites and environmental response costs that have been incurred for purposes of the ERCRR. On October 10, 1996, the Georgia Commission issued an order to prohibit funds collected through the ERCRR from being used for the payment of any damage award, including punitive damages, as a result of any litigation associated with any of the MGP sites in which AGLC is involved. AGLC is currently pursuing judicial review of the October 10, 1996, order. See Note 4 to Notes to Condensed Consolidated Financial Statements in this Form 10-Q. Short-term debt decreased $39 million for the six-month period ended March 31, 1997, primarily due to net cash flow from operating activities. Short-term debt increased $46.5 million for the twelve-month period ended March 31, 1997, primarily to meet increased working capital requirements. Long-term debt outstanding increased $30 million during the six-month and twelve-month periods ended March 31, 1997, as a result of the issuance by AGLC of $30 million in principal amount of Medium-Term Notes, Series C in November 1996. The notes were issued under a registration statement filed with the Securities and Exchange Commission in September 1993 covering the periodic offer and sale of up to $300 million in principal amount of Medium-Term Notes, Series C. As of March 31, 1997, AGLC had issued $224.5 million in principal amount of Medium-Term Notes Series C, Page 15 of 23 Pages with maturity dates ranging from ten to 30 years and with interest rates ranging from 5.9% to 7.2%. Net proceeds from the issuance of Medium-Term Notes were used to fund capital expenditures, to repay short-term debt and for other corporate purposes. On February 17, 1995, the Georgia Commission approved a settlement that permits AGLC to negotiate contracts with customers who have the option of bypassing AGLC's facilities (Bypass Customers) to receive natural gas from other suppliers. The bypass avoidance contracts (Negotiated Contracts) can be renewable, provided the initial term does not exceed five years, unless a longer term specifically is authorized by the Georgia Commission. The rate provided by the Negotiated Contract may be lower than AGLC's filed rate, but not less than AGLC's marginal cost of service to the potential Bypass Customer. Service pursuant to a Negotiated Contract may commence without Georgia Commission action, after a copy of the contract is filed with the Georgia Commission. Negotiated Contracts may be rejected by the Georgia Commission within 90 days of filing; absent such action, however, the Negotiated Contracts remain in effect. None of the Negotiated Contracts filed to date with the Georgia Commission have been rejected. The settlement also provides for a bypass loss recovery mechanism to operate until the earlier of September 30, 1998, or the effective date of new rates for AGLC resulting from a general rate case. See Note 5 to Notes to Condensed Consolidated Financial Statements in this Form 10-Q. On November 27, 1996, the TRA approved a settlement that permits Chattanooga to negotiate contracts with large commercial or industrial customers who are capable of bypassing Chattanooga's distribution system. The settlement provides for approval on an experimental basis, with the TRA to review the measure two years from the approval date. The pricing terms provided in any such contract may be neither less than Chattanooga's marginal cost of providing service nor greater than the filed tariff rate generally applicable to such service. Chattanooga can recover 50% of the difference between the contract rate and the applicable tariff rate through the balancing account of the purchased gas adjustment provisions of Chattanooga's rate schedules. The 1997 session of the Georgia General Assembly passed legislation which provides a legal framework for comprehensive deregulation of many aspects of the natural gas business in Georgia. Senate Bill 215, the Natural Gas Competition and Deregulation Act, which became law on April 14, 1997, if implemented by AGLC with respect to its system, would result in the application of an alternative form of regulation, such as performance based regulation, to AGLC. Pursuant to a separate election, AGLC, as an electing distribution company, could choose to exit the merchant function and fully unbundle its system. See Note 5 to Notes to Condensed Consolidated Financial Statements in this Form 10-Q. On May 1, 1997, Chattanooga filed a rate proceeding with the TRA seeking an increase in revenues of $4.4 million annually. Revenues from the rate increase will be used to improve and expand Chattanooga's natural gas distribution system, to recover increased operation, maintenance and tax expenses, and to provide a reasonable return to investors. Under the TRA's rules and regulations, the effective date of the requested increase likely will be suspended until November 1, 1997. During that time the TRA will complete a review of the requested increase and will hold public hearings on the request. Page 16 of 23 Pages PART II -- OTHER INFORMATION "Part II -- Other Information" is intended to supplement information contained in the Annual Report on Form 10-K for the fiscal year ended September 30, 1996 and should be read in conjunction therewith. Item 1. Legal Proceedings See Item 5. Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of the Sole Shareholder was held by consent action taken February 7, 1997, and the following four nominees were elected to serve as the four directors of AGLC: David R. Jones Charles W. Bass Thomas W. Benson Melanie M. Platt All of the outstanding shares of AGLC's common stock are owned by AGL Resources and were voted for the election of such directors. Item 5. Other Information Federal Regulatory Matters Order No. 636 On February 27, 1997, the FERC issued Order No. 636-C, on remand from the decision by the United States Court of Appeals for the D. C. Circuit in UNITED DISTRIBUTION COS. V. FERC. Among other matters, the court remanded Order No. 636 to the FERC for reconsideration of certain issues, including the FERC's decision to permit pipelines to pass all of their GSR costs through to their customers and its decision to require interruptible transportation customers to bear 10% of GSR costs. In Order No. 636-C, the FERC reaffirmed its decision to permit pipelines to pass all of their GSR costs through to their customers, and ruled that individual pipelines should submit proposals concerning the share of GSR costs their interruptible transportation customers should bear. Requests for rehearing of Order No. 636-C have been filed with the FERC. In addition, AGLC and others have filed petitions for certiorari to the United States Supreme Court, seeking review of the court's ruling in UNITED DISTRIBUTION COS. V. FERC affirming the FERC's authority over capacity release by local distribution companies. AGLC currently estimates that its portion of transition costs (which include unrecovered gas costs, GSR costs and various stranded costs resulting from unbundling of interstate pipeline sales service) from all of its pipeline suppliers filed with the FERC to date to be recovered could be as high as approximately $105 million. AGLC's estimate is based on the most recent estimates of transition costs filed by its pipeline suppliers with the FERC, and assumes that FERC approval of Southern's restructuring settlement agreement is not overturned on judicial review, that FERC approval of Tennessee's transition cost settlement becomes final, and that FERC does not alter its GSR recovery policies on rehearing of its Order 636-C. Such filings by AGLC's pipeline suppliers are pending final FERC approval. Approximately $87.8 million of transition costs have been incurred by AGLC as of March 31, 1997, and are being recovered from customers under the purchased gas provisions of AGLC's rate schedules. Details concerning the status of the Order No. 636 restructuring proceedings involving the pipelines that serve AGLC directly are set forth below. Page 17 of 23 Pages SOUTHERN GSR Cost Recovery Proceeding. Southern continues to make quarterly and monthly transition cost filings to recover costs from contesting parties to the settlement, and the FERC has ordered that such costs may be recovered by Southern, subject to the outcome of a hearing for contesting parties. However, since AGLC is a consenting party, its GSR and other transition cost charges are in accordance with Southern's restructuring settlement. Assuming the FERC's approval of the settlement is upheld on judicial review, AGLC's share of Southern's transition costs is estimated to be $86.8 million. This estimate would not be affected by the remand of Order No. 636, unless FERC's approval of the settlement is not upheld on judicial review. As of March 31, 1997, $76.5 million of such costs have already been incurred by AGLC. On April 14, 1997, the D.C. Circuit issued an order dismissing AGLC's appeals of the FERC's orders in Southern's restructuring proceeding. AGLC had requested that the dismissal be conditioned upon the outcome of the appeals seeking to overturn the settlement, but the court did not impose the requested condition. The court's order is subject to possible requests for rehearing. TENNESSEE GSR Cost Recovery Proceeding. On February 28, 1997, Tennessee filed with the FERC a settlement that would, if approved by the FERC, resolve the majority of issues associated with Tennessee's restructuring, including its recovery of GSR and other transition costs associated with restructuring. The settlement provides for Tennessee to recover GSR costs via a fixed surcharge, and limits the total amount of such costs that Tennessee may recover. The settlement would also resolve AGLC's appeals of orders issued in Tennessee's restructuring proceeding, as well as AGLC's appeal of the FERC's orders approving the exit fee settlement between Tennessee and Columbia Gas Transmission Corporation. The settlement was not opposed by any party, and was approved by the FERC on April 16, 1997; however, the FERC's order is subject to possible requests for rehearing, and thus is not yet final. Tennessee has continued to make quarterly GSR cost recovery filings with the FERC. On March 31, 1997, Tennessee filed with the FERC a proposal to continue its existing GSR surcharge in light of the aforementioned settlement. In the alternative, Tennessee sought the FERC's approval to recover an additional $100 million in GSR costs. AGLC filed comments supporting Tennessee's request to continue its existing GSR surcharge, but conditionally protested Tennessee's alternate proposal; however, the FERC has not yet acted upon Tennessee's filing. AGLC's estimated liability for GSR costs as a result of Tennessee's settlement filing is approximately $13 million, assuming that the FERC's approval of the settlement becomes final. As of March 31, 1997, $5.9 million of such costs have already been incurred by AGLC. FERC Rate Proceedings TENNESSEE On January 29, 1997, the FERC issued an order denying requests for rehearing of the FERC's October 30, 1996 order approving Tennessee's rate case settlement. One party has sought judicial review of the FERC's orders approving the settlement, which therefore are not yet final. TRANSCO On February 3, 1997, the FERC issued an order denying requests for rehearing of the FERC's November 1, 1996 order approving the partial settlement in Transco's ongoing rate case. One petition for judicial review of the FERC's orders approving the settlement has been filed; therefore, the FERC's orders are not yet final. AGLC has submitted testimony in the consolidated hearing to address Transco's proposal to roll into its general system rates the costs associated with the Leidy Line and Southern expansion facilities. AGLC took no position with respect to Transco's roll-in proposal, but opposed Transco's proposal to allocate additional costs to a bundled storage service provided by Transco to AGLC and other customers. ANR PIPELINE Several parties have filed exceptions to the presiding administrative law judge's January 10, 1997 initial decision in ANR's rate proceeding. The initial decision therefore is not yet final. AGLC cannot predict the outcome of these federal proceedings nor can it determine the ultimate effect, if any, such proceedings may have on AGLC. Page 18 of 23 Pages State Regulatory Matters The 1997 session of the Georgia General Assembly passed legislation which provides a legal framework for comprehensive deregulation of many aspects of the natural gas business in Georgia. Senate Bill 215, the Natural Gas Competition and Deregulation Act, which became law on April 14, 1997, if implemented by AGLC with respect to its system, would result in the application of an alternative form of regulation, such as performance based regulation, to AGLC. Pursuant to a separate election, AGLC, as an electing distribution company, could choose to exit the merchant function and fully unbundle its system. Senate Bill 215 provides for a transition period leading to a condition of effective competition in the natual gas markets. An electing distribution company would unbundle all services to its natural gas customers, assign firm delivery capacity to certificated marketers selling the gas commodity and create a secondary transportation market for interruptible transportation capacity. Marketers, including unregulated affiliates of AGLC, would compete to sell natural gas to all customers at market-based prices. AGLC would continue to provide intrastate transportation of the gas to end users through its existing system, subject to continued rate regulation by the Georgia Commission. In addition, the Georgia Commission would continue to regulate safety, access, and quality of service pursuant to an alternative form of regulation. The law provides for marketer standards and rules of business practice to ensure that the benefits of a competitive natural gas market are available to all customers on the AGLC system. It imposes an obligation to serve on marketers with a corresponding universal service fund which can also facilitate the extension of AGLC facilities in order to serve the public interest. In order to implement the new law, the Georgia Commission must undertake and complete several rulemakings by December 31, 1997. As these rules become effective the extent of and schedule for actions under the legislation by AGLC will evolve further. On May 21, 1996, the Georgia Commission adopted a Policy Statement following its November 20, 1995, Notice of Inquiry concerning changes in state regulatory guidelines to respond to trends toward increased competition in natural gas markets. Among other things, the Policy Statement sets up a distinction between competitive and natural monopoly services; favors performance-based regulation in lieu of traditional cost-of-service regulation; calls for unbundling interruptible service; directs the Georgia Commission's staff to develop standards of conduct for utilities and their marketing affiliates; and invites pilot programs for unbundling services to residential and small business customers. Consistent with specific goals in the Georgia Commission's Policy Statement, AGLC filed on June 10, 1996, the Natural Gas Service Provider Selection Plan (the Plan), a comprehensive plan for serving interruptible markets. The Plan proposes further unbundling of services to provide large customers more service options and the ability to purchase only those services they require. Proposed tariff changes would allow AGLC to cease its sales service function and the associated sales obligation for large customers; implement delivery-only service for large customers on a firm and interruptible basis; and provide pooling services to marketers. The Plan also includes proposed standards of conduct for utilities and utility marketing affiliates. The Georgia Commission granted AGLC's Motion for Continuance on January 30, 1997, moving the Georgia Commission to suspend the proceeding after a showing that all parties of record had expressed an interest in pursuing settlement discussions in lieu of rebuttal hearings. The hearing schedule remains suspended for settlement discussions currently in progress. AGLC supports both the Plan under consideration by the Georgia Commission and the new regulatory model contemplated by Senate Bill 215. AGLC currently makes no profit on the purchase and sale of gas because actual gas costs are passed through to customers under the purchased gas provisions of AGLC's rate schedules. Earnings are provided through revenues received for intrastate transportation of the commodity. Consequently, allowing AGLC to cease its sales service function and the associated sales obligation would not adversely affect AGLC's ability to earn a return on its Page 19 of 23 Pages distribution system investment. Gas will be sold to all customers by numerous marketers, including nonregulated subsidiaries of AGL Resources. On July 22, 1996, Chattanooga filed a plan with the TRA that permits Chattanooga to negotiate contracts with customers in Tennessee who have long-term competitive options, including bypass. On November 27, 1996, the TRA approved a settlement that permits Chattanooga to negotiate contracts with large commercial or industrial customers who are capable of bypassing Chattanooga's distribution system. The settlement provides for approval on an experimental basis, with the TRA to review the measure two years from the approval date. The pricing terms provided in any such contract may be neither less than Chattanooga's marginal cost of providing service nor greater than the filed tariff rate generally applicable to such service. Chattanooga can recover 50% of the difference between the contract rate and the applicable tariff rate through the balancing account of the purchased gas adjustment provisions of Chattanooga's rate schedules. On May 1, 1997, Chattanooga filed a rate proceeding with the TRA seeking an increase in revenues of $4.4 million annually. Revenues from the rate increase will be used to improve and expand Chattanooga's natural gas distribution system, to recover increased operation, maintenance and tax expenses, and to provide a reasonable return to investors. Under the TRA's rules and regulations, the effective date of the requested increase likely will be suspended until November 1, 1997. During that time the TRA will complete a review of the requested increase and will hold public hearings on the request. Environmental Matters AGLC has identified nine sites in Georgia where it currently owns all or part of an MGP site. In addition, AGLC has identified three other sites in Georgia which AGLC does not now own, but which may have been associated with the operation of MGPs by AGLC or its predecessors. There are also three sites in Florida which have been investigated by environmental authorities in connection with which AGLC may be contacted as a potentially responsible party. AGLC's response to MGP sites in Georgia is proceeding under two state regulatory programs. First, AGLC has entered into consent orders with the EPD with respect to four sites: Augusta, Griffin, Savannah and Valdosta. Under these consent orders, AGLC is obliged to investigate and, if necessary, remediate environmental impacts at the sites. AGLC developed a proposed CAP for the Griffin site, received conditional approval of the CAP, and has initiated corrective measures. Assessment activities are being conducted at Augusta and have been completed at Savannah . In addition, AGLC is in the process of conducting certain interim remedial measures at the Augusta MGP site. Those measures are expected to be implemented principally during fiscal 1997. Second, AGLC's response to all Georgia sites is proceeding under Georgia's HSRA. AGLC submitted to EPD formal notifications pertaining to all of its owned MGP sites, and EPD had listed seven sites (Athens, Augusta, Brunswick, Griffin, Savannah, Valdosta and Waycross) on the state's HSI. EPD has not listed the Macon site on the HSI at this time. EPD has also listed the Rome site, which AGLC has acquired, on the HSI. Under the HSRA regulations, the four sites subject to consent orders are presumed to require corrective action; EPD will determine whether corrective action is required at the four remaining sites (Athens, Brunswick, Rome and Waycross) in due course. In that respect, however, AGLC has submitted CSRs for the Athens, Brunswick and Rome MGP sites, and AGLC has concluded that these sites do not meet applicable risk reduction standards. Accordingly, some degree of response action is likely to be required at those sites. AGLC has estimated that, under the most favorable circumstances reasonably possible, the future cost to AGLC of investigating and remediating the former MGP sites could be as low as $31.3 million. Alternatively, AGLC has estimated that, under reasonably possible unfavorable circumstances, the future cost to AGLC of investigating and remediating the former MGP sites could be as high as $117.3 million. Those estimates have been adjusted from the September 30, 1996 estimates to reflect settlements of property damage claims at certain sites. If additional sites were added to those for which action now appears reasonably likely, or if substantially more stringent cleanups were required, or if site conditions are markedly worse than those now anticipated, the costs could be higher. In addition, those costs do not include other expenses, Page 20 of 23 Pages such as property damage claims, for which AGLC may ultimately be held liable, but for which neither the existence nor the amount of such liabilities can be reasonably forecast. Within the stated range $31.3 million to $117.3 million, no amount within the range can be reliably identified as a better estimate than any other estimate. Therefore, a liability at the low end of this range and a corresponding regulatory asset have been recorded in the financial statements. AGLC has two means of recovering the expenses associated with the former MGP sites. First, the Georgia Commission has approved the recovery by AGLC of Environmental Response Costs, as defined, pursuant to AGLC's ERCRR. For purposes of the ERCRR, Environmental Response Costs include investigation, testing, remediation and litigation costs and expenses or other liabilities relating to or arising from MGP sites. In connection with the ERCRR, the staff of the Georgia Commission conducted a financial and management process audit related to the MGP sites, cleanup activities at the sites and environmental response costs that have been incurred for purposes of the ERCRR. On October 10, 1996, the Georgia Commission issued an order to prohibit funds collected through the ERCRR from being used for the payment of any damage award, including punitive damages, as a result of any litigation associated with any of the MGP sites in which AGLC is involved. AGLC is currently pursuing judicial review of the October 10, 1996, order. Second, AGLC intends to seek recovery of appropriate costs from its insurers and other potentially responsible parties. See Note 4 to Notes to Condensed Consolidated Financial Statements in this Form 10-Q. Other Legal Proceedings With regard to other legal proceedings, AGLC is a party, as both plaintiff and defendant, to a number of other suits, claims and counterclaims on an ongoing basis. Management believes that the outcome of all litigation in which it is involved will not have a material adverse effect on the consolidated financial statements of AGLC. Joint Venture During December 1996, AGL Resources signed a letter of intent with Transco to form a joint venture, which would be known as Cumberland Pipeline Company, to operate and market interstate pipeline capacity. The transaction is subject to various corporate and regulatory approvals. Initially, the 135-mile Cumberland pipeline will include existing pipeline infrastructure owned by the two companies. Projected to enter service by November 1, 2000, Cumberland will provide service to AGLC, Chattanooga and other markets throughout the eastern Tennessee Valley, in northwest Georgia and northeast Alabama. Affiliates of Transco and AGL Resources each will own 50% of the new pipeline company, and an affiliate of Transco will serve as operator. The project will be submitted to the FERC for approval in the fourth quarter of 1997. Page 21 of 23 Pages Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 - Amendment to Displacement Service Agreement, dated February 14, 1997, between Washington Gas Light Company and Atlanta Gas Light Company, amending Exhibit 10.57, Form 10-K for the fiscal year ended September 30, 1996. 10.2 - Amendment to Service Agreement under Rate Schedule ESS, dated January 10, 1996, between Atlanta Gas Light Company and Transcontinental Gas Pipe Line Corporation. 10.3 - Letter agreement amending FPS-1 Service Agreement, dated January 9, 1997, between Atlanta Gas Light Company and Cove Point LNG Limited Partnership, amending Exhibit 10.53, Form 10-K, for the fiscal year ended September 30, 1996. 10.4 - Letter agreement amending FPS-1 Service Agreement, dated February 14, 1997, between Atlanta Gas Light Company and Cove Point LNG Limited Partnership, amending Exhibit 10.53, Form 10-K for the fiscal year ended September 30, 1996. 10.5 - Notification letter dated April 2, 1997, and Service Agreement No. 905660 under Rate Schedule FT, effective May 17, 1995, between Chattanooga Gas Company and Southern Natural Gas Company. 10.6 - Cherokee Expansion Project Precedent Agreement and letter agreement between Atlanta Gas Light Company and Transcontinental Gas Pipe Line Corporation, dated February 28, 1997. 27 - Financial Data Schedule. (b) Reports on Form 8-K. None. Page 22 of 23 Pages SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Atlanta Gas Light Company (Registrant) Date May 15, 1997 /s/ David R. Jones David R. Jones President and Chief Executive Officer Date May 15, 1997 /s/ J. Michael Riley J. Michael Riley Vice President and Chief Financial Officer (Principal Accounting and Financial Officer) Page 23 of 23 Pages EX-27 2 EXHIBIT 27
UT 0000008154 ATLANTA GAS LIGHT COMPANY 1,000,000 6-MOS SEP-30-1997 OCT-01-1996 MAR-31-1997 PER-BOOK 1,384 0 305 74 16 1,779 277 166 101 544 56 3 585 113 0 0 0 0 0 0 478 1,779 835 47 174 687 103 3 106 27 79 2 77 30 22 97 0.00 0.00
EX-10 3 EXHIBIT 10.1 Washington Gas Light Company Washington 1100 H Street, N.W. Gas Washington, D.C. 20080 Direct Dial (202 -624-6116) February 28, 1997 BY FAX Ms. Eileen Stanek Atlanta Gas Light Company 303 Peachtree Street, N.E. Atlanta, Georgia 30308 Re: Amendment No. 1 to Displacement Service Agreement Dear Eileen: Attached is a copy of a fully executed agreement between Washington Gas and Atlanta Gas Light Company. A hard copy will be sent out today by Federal Express. Sincerely, /s/ Mac Telemac N. Chryssikos AMENDMENT NO. 1 DISPLACEMENT SERVICE AGREEMENT This Amendment No. 1 , made and effective as of this 14th day of February 1997, reflects the agreement of the parties to amend the Displacement Service Agreement (Agreement) dated April 4, 1996 between Washington Gas Light Company (Seller) and Atlanta Gas Light Company (Buyer). Buyer and Seller agree to an extended term of the Agreement through April 15, 2001. Effective April 15, 1997, the parties agree that Article II shall be replaced by the following provision: "II. Term. The parties agree to extend the Term of this Agreement to be effective December 15, 1997 for four consecutive winter periods (Decmber 1 through the following April 15) through April 15, 2001. Thereafter, the Agreement shall continue in full force and effect for the same periods in subsequent years, on a year-to-year basis, unless terminated by either party upon written notice given to the other, non-terminating party no less than one hundred and twenty (120) days prior to the commencement of the ensuing winter period." In all other aspects, the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused this Supplement No. 1 to executed by their duly authorized officers, as of the day and year first written above. Seller: WASHINGTON GAS LIGHT COMPANY Witness: By: /s/Kathy McKee By: /s/J.M. Schepis Admin. Associate SVP (Title) (Title) Buyer: ATLANTA GAS LIGHT COMPANY Witness: By: /s/Eileen G. Stanek By: /s/Thomas H. Benson Director Executive Vice President (Title) (Title) EX-10 4 EXHIBIT 10.2 TRANSCONTINENTAL PIPE LINE CORPORATION 2800 Post Oak Boulevard P.O. Box 1396 Houston, Tax 77125-1396 713-439-2000 January 10, 1996 Mr. Stephen Gunther Atlanta Gas Light Company One Peachtree Center 303 Peachtree Street, N.E. Atlanta, Georgia 30308-3249 Dear Mr. Gunther: Transcontinental Gas Pipe Line Corporation ("Transco") and Atlanta Gas Light Company executed a Rate Schedule ESS Service Agreement, effective November 1, 1993, as a part of Transco's compliance with the Federal Energy Regulatory Commission's ("FERC") Order No. 636 in Docket No. RS92-86. Notwithstanding anything contained in Article III (Term) thereof. Atlanta Gas Light Company hereby agrees not to exercise its contract termination rights under the Rate Schedule ESS Service Agreement (i) to the extent that Atlanta Gas Light Company's Rate Schedule FS service agreements remain in effect; (ii) as long as Transco has an obligation to provide Rate Schedule FS service to Atlanta Gas Light company; and (iii) Rate Schedule FS service remains a swing service. Very truly yours, TRANSCONTINENTAL GAS PIPE LINE CORPORATION By: /s/ Frank J. Ferazzi Frank J. Ferazzi Vice President Customer Service ACCEPTED AND AGREED TO: ATLANTA GAS LIGHT COMPANY By: /s/ Stephen J. Gunther Title: Vice President AMENDMENT TO SERVICE AGREEMENT UNDER RATE SCHEDULE ESS THIS AMENDMENT is made and entered into effective as of the first day of December, 1994 by and between ATLANTA GAS LIGHT COMPANY, hereinafter referred to as "Buyer," and TRANSCONTINENTAL GAS PIPE LINE CORPORATION, hereinafter referred to as "Seller." WITNESSETH: WHEREAS, Buyer and Seller entered into an Agreement under Seller's Rate Schedule ESS effective as of November 1, 1993, (Agreement); and WHEREAS, Buyer and Seller amended this Agreement on December 1, 1993, in order to provide for the increased capacity and deliverability attributable to Phase I (as described in Seller's Eminence Expansion Application in Docket No. CP90-2230-000) of Seller's Eminence Storage Field Expansion approved by the Federal Energy Regulatory Commission (Commission) on April 18, 1991, in Docket No. CP90-2230-000, and the allocation of such increased deliverability in accordance with the Commission's Order on October 4, 1993, in Docket No. RS92-86-004, el. al., (October 4 Order); and WHEREAS, Buyer and Seller desire to further amend this Agreement to provide for the increased capacity and deliverability attributable to Phase II (as described in Seller's amended Eminence Expansion Application in Docket No. CP90-2230-005) of Seller's Eminence Storage Field Expansion in order to comply with the allocation authorized by the October 4 Order; and WHEREAS, Buyer and Seller intend that the Agreement shall be further amended effective as of the in-service date of Phase III (as described in Seller's amended Eminence Expansion Application in Docket No. CP90- 2230-005) of Seller's Eminence Storage Field Expansion to provide for any applicable revisions to the level of Storage Injection Quantity and Storage Demand Quantity compared to Buyer's Storage Injection Quantity and Storage Demand Quantity as of the effective date of Phase II in order to comply with the allocation authorized by the October 4 Order. NOW THEREFORE, in consideration of the premises and mutual covenants hereinafter contained, the parties amend the Agreement as follows: 1. Article I is hereby deleted in its entirety effective December 1, 1994 and the following Article I, substituted therefor for the period extending until the in-service date of Phase III of Seller's Eminence Storage Field Expansion: ARTICLE I SERVICE TO BE RENDERED 1. Subject to the terms and provisions of this agreement and of Seller's Rate Schedule ESS, Seller agrees to inject into storage for Buyer's account, store and withdraw from storage, quantities of natural gas as follows: To withdraw from storage up to a maximum quantity on any day of 37,871 Mcf, which quantity shall be Buyer's Storage Demand Quantity, or such greater daily quantity, as applicable from time to time, pursuant to the terms and conditions of Seller's Rate Schedule ESS. To inject into storage a maximum quantity on any day of 2,525 Mcf, which quantity shall be Buyer's Storage Injection Quantity, or such greater daily quantity, as applicable from time to time, pursuant to the terms and conditions of Seller's Rate Schedule ESS. To receive and store up to a total quantity at any one time of 304,821 Mcf, which quantity shall be Buyer's Storage Capacity Quantity. AMENDMENT TO SERVICE AGREEMENT UNDER RATE SCHEDULE ESS (CONTINUED) ARTICLE I SERVICE TO BE RENDERED (Continued) 2. Article I is hereby deleted in its entirety effective upon the in-service date of Phase III of Seller's Eminence Storage Field Expansion and the following Article I substituted therefor: 1. Subject to the terms and provisions of this agreement and of Seller's Rate Schedule ESS, Seller agrees to inject into storage for Buyer's account, store and withdraw from storage, quantities of natural gas as follows: To withdraw from storage up to a maximum quantity on any day of 30,297 Mcf, which quantity shall be Buyer's Storage Demand Quantity, or such greater daily quantity, as applicable from time to time, pursuant to the terms and conditions of Seller's Rate Schedule ESS. To inject into storage a minimum quantity on any day 2,020 of Mcf, which quantity shall be Buyer's Storage Injection Quantity, or such greater daily quantity, as applicable from time to time, pursuant to the terms and conditions of Seller's Rate Schedule ESS. To receive and store up to a total quantity at any one time of 304,821 Mcf, which quantity shall be Buyer's Storage Capacity Quantity. 3. Seller shall notify Buyer of the in-service date of Phase III at least thirty (30) days prior to such in-service date. 4. Except as hereinabove amended, the Agreement shall remain in full force and effect as written. IN WITNESS WHEREOF, the parties hereto have executed this Amendment. TRANSCONTINENTAL GAS PIPE CORPORATION By /s/ Frank J. Ferazzi Frank J. Ferazzi Vice President Customer Service ATLANTA GAS LIGHT COMPANY By /s/ Stephen J. Gunther Name Stephen J. Gunther Title Vice President EX-10 5 EXHIBIT 10.3 AGL Energy Services, Inc. P.O. Box 4569 Atlanta, Georgia 30302-4569 Telephone (404) 584-9470 January 9, 1997 Mr. John Hritcko, Jr. Director Marketing & Regulatory Affairs Cove Point LNG Limited Partnership 20 Montchanin Road Wilmington, Delaware 19807-0020 Re: Letter Agreement Concerning FPS-1 Service Agreement between Cove Point LNG Limited Partnership ("Operator") and Atlanta Gas Light Company ("Buyer") (the "Service Agreement") Dear Mr. Hritcko: Appendix A to the Service Agreement states that Buyer may terminate the Service Agreement at the end of the first Contract Year (April 15, 1997) by providing notice to Operator no later than ninety (90) days prior to April 15, 1997 (January 15, 1997). As you are aware, Buyer is in the process of negotiating a transportation agreement with a transporter ("Transporter") to transport the quantities purchased under the Service Agreement for the period from April 15, 1997 through the remaining term of the Service Agreement. However, Buyer does not believe that such negotiations can be completed and a transportation agreement executed by January 15, 1997. In order to give Buyer additional time to reach an agreement with Transporter that would enable Buyer to continue purchasing gas under the Service Agreement beyond the first Contract Year, Buyer and Operator hereby agree to extend the notice date for termination to February 15, 1997. Accordingly, Paragraph B of Appendix A to the Service Agreement will be deleted in its entirety as of January 10, 1997 and replaced with the following new Paragraph B: "B. Buyer may terminate this Agreement effective as of the end of the first Contract Year (April 15, 1997) by providing Notice to Operator of Buyer's election to terminate no later than February 15, 1997." Page 2 Mr. John Hritcko, Jr. January 9,1997 If the terms set forth herein reflect your understanding of our agreement, please execute two (2) copies of this letter agreement in the space provided below and return one (1) fully executed copy to the undersigned. COVE POINT LNG AGL Energy Services, Inc. LIMITED PARTNERSHIP as agent for ATLANTA GAS LIGHT COMPANY By:/s/ John Hritcko, Jr. By: /S/Michael P. Wingo Title:Director Marketing & Regulatory Title: VP - AGL Energy Services, Inc. Affairs Date: 1/16/97 Date: 1/9/97 EX-10 6 EXHIBIT 10.4 February 14, 1997 Mr. John Hritcko, Jr. Director Marketing & Regulatory Affairs Cove Point LNG Limited Partnership 20 Montchanin Road Wilmington, Delaware 19807-0020 Re: Letter Agreement Concerning FPS-1 Service Agreement between Cove Point LNG Limited Partnership ("Operator") and Atlanta Gas Light Company ("Buyer") (the "Service Agreement") Dear Mr, Hritcko: Appendix A to the Service Agreement states that Buyer may terminate the Service Agreement at the end of the first Contract Year (April 15, 1997) by providing notice to Operator no later than ninety (90) days prior to April 15, 1997 (January 15, 1997). As you are aware, Buyer is in the process of negotiating a transportation agreement with a transporter ("Transporter") to transport the quantities purchased under the Service Agreement for the period from April 15, 1997 through the remaining term of the Service Agreement. However, Buyer does not believe that such negotiations can be completed and a transportation agreement executed by January 15, 1997. In order to give Buyer additional time to reach an agreement with Transporter that would enable Buyer to continue purchasing gas under the Service Agreement beyond the first Contract Year, Buyer and Operator hereby agree to extend the notice date for termination to February 15, 1997. Accordingly, Paragraph B of Appendix A to the Service Agreement will be deleted in its entirety as of January 10, 1997 and replaced with the following new Paragraph B: "B. Buyer may terminate this Agreement effective as of the end of the first Contract Year (April 15, 1997) by providing Notice to Operator of Buyer's election to terminate no later than February 28, 1997." Page 2 Mr. John Hritcko, Jr. January 9,1997 If the terms set forth herein reflect your understanding of our agreement, please execute two (2) copies of this letter agreement in the space provided below and return one (1) fully executed copy to the undersigned. COVE POINT LNG AGL Energy Services, Inc. LIMITED PARTNERSHIP as agent for ATLANTA GAS LIGHT COMPANY By: /s/John Hritcko, Jr. By: /s/Michael P. Wingo Title: Director Marketing & Regulatory Title: VP - AGL Energy Services, Inc. Affairs Date: 2/26/97 Date: 2/14/97 EX-10 7 EXHIBIT 10.5 Southern Natural Gas Company Post Office Box 2563 Birmingham AL 35202 2563 205 325 7410 SOUTHERN NATURAL GAS April 2, 1997 Mr. John Cavallin Atlanta Gas Light Company P. O. Box 4569 Atlanta, GA 30302 Re: Firm Transportation Service Agreement No. 905660 Dear John: This letter is to follow up on Southern's prior notification of the in-service date of facilities required to provide additional firm transportation capacity of 5,000 Mcf to Chattanooga Gas Company at the Chattanooga delivery point (790200). As we have previously notified you, these facilities were placed in service on November 1, 1996 as part of Southern's north system expansion. Therefore, in accordance with Article IV, paragraph 4.1 of the above-referenced service agreement, the term of the contract commences on November 1, 1996. If you have further questions, please contact me at (205) 325-3816. Yours very truly, Lisa D. Gunthrie Account Manager LDG:Ief A SONAT COMPANY Service Agreement No, 905660 Authorization: Blanket (Reservation Charge) SERVICE AGREEMENT UNDER RATE SCHEDULE FT THIS AGREEMENT, made and entered into as of this 17th day of May 1995 , by and between Southern Natural Gas Company, a Delaware corporation, hereinafter referred to as "Company" , and Chattanooga Gas Company, a Tennessee corporation hereinafter referred to as "Shipper", WITNESSETH WHEREAS, Company is an interstate pipeline, as defined in Section 2(15) of the Natural Gas Policy Act of 1978 (NGPA); and WHEREAS, Shipper is a LDC/DISTRIBUTOR; and WHEREAS, Shipper has requested firm transportation pursuant to Rate Schedule FT of various supplies of gas for redelivery for Shipper's account, and has submitted to Company a request for such transportation service in compliance with Section 2 of the General Terms and Conditions applicable to Rate Schedule FT; and WHEREAS, Company has agreed to provide Shipper with transportation service of such gas supplies in accordance with the terms and conditions of this Agreement. NOW THEREFORE, the parties hereto agree as follows: ARTICLE I TRANSPORTATION QUANTITY 1.1 Subject to the terms and provisions of this Agreement, Rate Schedule FT and the General Terms and Conditions thereto, Shipper agrees to deliver or cause to be delivered to Company at the Receipt Point(s) described in Exhibit A and Exhibit A-1 to this Agreement, and Company agrees to accept at such point(s) for transportation under this Agreement, an aggregate quantity of up to 5,000 Mcf of natural gas per day (Transportation Demand). Company's obligation to accept gas on a firm basis at any Receipt Point is limited to the Receipt Points set out on Exhibit A and to the Maximum Daily Receipt Quantity (MDRQ) stated for each such Receipt Point. The sum of the MDRQ's for the Receipt Points on Exhibit A shall not exceed the Transportation Demand. Service Agreement No. 905660 Authorization: Blanket 1.2 Subject to the terms and provisions of this Agreement, Rate Schedule FT and the General Terms and Conditions thereto, Company shall deliver a thermally equivalent quantity of gas, less the applicable fuel charge as set forth in Rate Schedule FT, to Shipper at the Delivery Point(s) described in Exhibit B and Exhibit B-1 hereto. Company's obligation to redeliver gas at any Delivery Point on a firm basis is limited to the Delivery Points specified on Exhibit B and to the Maximum Daily Delivery quantity (MDDQ) stated for each such Delivery Point. The sum of the MDDQ for the Delivery Points on Exhibit B shall equal the Transportation Demand. ARTICLE II CONDITIONS OF SERVICE 2.1 It is recognized that the transportation service hereunder is provided on a firm basis pursuant to, in accordance with and subject to the provisions of Company's Rate Schedule FT, and the General Terms and Conditions thereto, which are contained in Company's FERC Gas Tariff, as in effect from time to time, and which are hereby incorporated by reference. In the event of any conflict between this Agreement and Rate Schedule FT, the terms of Rate Schedule FT shall govern as to the point of conflict. Any limitation of transportation service hereunder shall be in accordance with the priorities set out in Rate Schedule FT and the General Terms and Conditions thereto. 2.2 This Agreement shall be subject to all provisions of the General Terms and Conditions applicable to Company's Rate Schedule FT as such conditions may be revised from time to time. Unless Shipper requests otherwise, Company shall provide to Shipper the filings Company makes at the Federal Energy Regulatory Commission ("Commission") of such provisions of the General Terms and Conditions or other matters relating to Rate Schedule FT. 2.3 Company shall have the right to discontinue service under this Agreement in accordance with Section 15.3 of the General Terms and Conditions hereto. 2.4 The parties hereto agree that neither party shall be liable to the other party for any special, indirect, or consequential damages (including, without limitation, loss of profits or business interruptions) arising out of or in any manner related to this Agreement. 2 Service Agreement No, 905660 Authorization: Blanket 2.5 This Agreement is subject to the provisions of Part 284 of the Commission's Regulations under the NGPA and the Natural Gas Act. Upon termination of this Agreement, Company and Shipper shall be relieved of further obligation hereunder to the other party except to complete the transportation of gas underway on the day of termination, to comply with provisions of Section 14 of the General Terms and Conditions with respect to any imbalances accrued prior to termination of this Agreement, to render reports, and to make payment for all obligations accruing prior to the date of termination. ARTICLE III NOTICES 3.1 Except as provided in Section 8.6 herein, notices hereunder shall be given pursuant to the provisions of Section 18 of the General Terms and Conditions to the respective party at the applicable address, telephone number or facsimile machine number stated below or such other addresses, telephone numbers or facsimile machine numbers as the parties shall respectively hereafter designate in writing from time to time: 3 Service Agreement No. 905660 Authorization: Blanket Company: Notices and General Correspondence Southern Natural Gas Company Post Office Box 2563 Birmingham, Alabama 35202-2563 Attention: Transportation Services Department Telephone No.: (205) 325-7223 Facsimile Machine No.:(205) 325-7303 Dispatching Notices - Nominations/Confirmations/Scheduling Southern Natural Gas Company Post Office Box 2563 Birmingham, Alabama 35202-2563 Attention: Transportation Services Department Telephone No.: (205) 325-7223 Facsimile Machine No.:(205) 325-7303 Emergencies/24-Hour Dispatching/ Limitation and Penalty Notices Southern Natural Gas Company Post Office Box 2563 Birmingham, Alabama 35202-2563 Attention: Gas Operations Department Telephone No.: (205) 325-7308 Facsimile Machine No.: (205) 325-7375 Alternative Contacts: (1) Attention: Gas Operations Department Telephone No.: (205) 325-7305 Facsimile Machine No.: (205) 325-7375 (2) Attention: Gas Operations Department Telephone No: (205) 325-7309 Facsimile Machine No.: (205) 325-7375 Payments Southern Natural Gas Company Post Office Box 102502 68 Annex Atlanta, Georgia 30368 4 Service Agreement No. 905660 Authorization: Blanket Shipper: Notices and General Correspondence MANAGER, GAS SUPPLY P.O. BOX 4569 ATLANTA, GA 30302-4569 Telephone No.: (404) 584-3798 Facsimile Machine No.: (404) 584-3703 Dispatching Notices - Nominations/Confirmations DEBBIE MCNEELY P.O. BOX 4569 ATLANTA, GA 30302-4569 Telephone No.: (404) 584-3796 Facsimile Machine No.: (404) 584-3703 Dispatching Notices - Limitations STEVEN L. MOORE P.O. BOX 4569 ATLANTA, GA 30302-4569 Telephone No.: (404) 584-4484 Facsimile Machine No.: (404) 584-4772 Emergencies and 24-Hour Dispatching Contact STEVEN L. MOORE P.O. BOX 4569 ATLANTA, GA 30302-4569 Telephone No.: (404) 584-4484 Facsimile Machine No.: (404) 584-4772 Alternative Contacts: (1) BRAD FREEMAN P.O. BOX 4569 ATLANTA, GA 30302-4569 Telephone No.: (404) 584-4993 Facsimile Machine No.: (404) 584-4772 (2) DEBBIE MCKNEELY P.O. BOX 4569 ATLANTA, GA 30302-4569 Telephone No.: (404) 584-3796 Facsimile Machine No.: (404) 584-3703 Invoices W. ANDREW HAMILTON P.O. BOX 4569 ATLANTA, GA 30302-4569 5 Service Agreement No. 905660 Authorization: Blanket ARTICLE IV TERM 4.1 Subject to the provisions hereof, this Agreement shall become effective as of the date first hereinabove written and shall be in full force and effect for a primary term of ten (10) years from the date Company notifies Shipper that the facilities necessary to provide service hereunder, which Company must request and receive authorization from the Commission to construct, are complete and in service and therefore service will commence hereunder, and shall continue and remain in force and effect for successive terms of one (1) year each thereafter unless and until cancelled by either party giving 180 days written notice to the other party prior to the end of the primary term or any yearly extension thereof. ARTICLE V CONDITIONS PRECEDENT 5.1 Unless otherwise agreed to by the parties, the terms of Rate Schedule FT, and the General Terms and Conditions thereto,shall apply to the acquisition or construction of any facilities necessary to effectuate this Agreement. Other provisions of this Agreement notwithstanding, Company shall be under no obligation to commence service hereunder unless and until (1) all facilities, of whatever nature, as are required to permit the receipt, measurement, transportation, and delivery of natural gas hereunder have been authorized, installed, and are in operating condition, and (2) Company, in its reasonable discretion, has determined that such service would constitute transportation of natural gas authorized under all applicable regulatory authorizations and the Commission's Regulations. ARTICLE VI REMUNERATION 6.1 Shipper shall pay Company monthly for the transportation services rendered hereunder the charges specified in Rate Schedule FT, including any penalty and other authorized charges assessed under Rate Schedule FT and the General Terms and Conditions. Company shall notify Shipper as soon as practicable of the date services will commence hereunder, and if said date is not the first day of the month, the Reservation Charge for the first month of service hereunder shall be adjusted to reflect only the actual number of days during said month that transportation service is available. Company may agree from time to time to discount the rate charged Shipper for services provided hereunder in accordance with the provisions of Rate Schedule FT. Said discounted charge shall be set forth on Exhibit E hereto. 6 Service Agreement No. 905660 Authorization: Blanket 6.2 The rates and charges provided for under Rate Schedule FT shall be subject to increase or decrease pursuant to any order issued by the Commission in any proceeding initiated by Company or applicable to the services performed hereunder. Shipper agrees that Company shall, without any further agreement by Shipper, have the right to change from time to time, all or any part of this Agreement, as well as all or any part of Rate Schedule FT, or the General Terms and Conditions thereto, including without limitation the right to change the rates and charges in effect hereunder, pursuant to Section 4(d) of the Natural Gas Act as may be deemed necessary by Company, in its reasonable judgment, to assure just and reasonable service and rates under the Natural Gas Act. Nothing contained herein shall prejudice the rights of Shipper to contest at any time the changes made pursuant to this Section 6.2, including the right to contest the transportation rates or charges for the services provided under this Agreement, from time to time, in any subsequent rate proceedings by Company under Section 4 of the Natural Gas Act or to file a complaint under Section 5 of the Natural Gas Act with respect to such transportation rates or charges. ARTICLE VII SPECIAL PROVISIONS 7.1 If Shipper is a seller of gas under more than one Service Agreement and requests that Company allow it to aggregate nominations for certain Receipt Points for such Agreements, Company will allow such an arrangement under the terms and conditions set forth in this Article VII. To be eligible to aggregate gas, Shipper must comply with the provisions of Section 2.2 of the General Terms and Conditions and the terms and conditions of the Supply Pool Balancing Agreement executed by Shipper and Company pursuant thereto. 7.2 If Shipper is a purchaser of gas from seller(s) that are selling from an aggregate of Receipt Points, and Shipper wishes to nominate to receive gas from such seller's aggregate supplies of gas, Company will allow such a nomination, provided that the seller (i) has entered into a Supply Pool Balancing Agreement with Company and (ii) submits a corresponding nomination to deliver gas to Shipper from its aggregate supply pool. ARTICLE VIII MISCELLANEOUS 8.1 This Agreement constitutes the entire Agreement between the parties and no waiver by Company or Shipper of any default of either party under this Agreement shall operate as a waiver of any subsequent default whether of a like or different character. 7 Service Agreement No. 905660 Authorization: Blanket 8.2 The laws of the State of Alabama shall govern the validity, construction, interpretation, and effect of this Agreement. 8.3 No modification of or supplement to the terms and provisions hereof shal1 be or become effective except by execution of a supplementary written agreement between the parties except that in accordance with the provisions of Rate Schedle FT, and the General Terms and Conditions thereto, Receipt Points may be added to or deleted from Exhibit A and the Maximum Daily Receipt Quantity for any Receipt Point on Exhibit A may be changed upon execution by Company and Shipper of a Revised Exhibit A to reflect said change(s), and Delivery Points may be added to or deleted from Exhibit B and the Maximum Daily Delivery Quantity for any Delivery Point may be changed upon execution by Company and Shipper of a Revised Exhibit B to reflect said change(s); provided, however, that any such change to Exhibit A or Exhibit B must include corresponding changes to the existing Maximum Daily Receipt Quantities or Maximum Daily Delivery Quantities, respectively, such that the sum of the changed Maximum Daily Receipt Quantities shall not exceed the Transportation Demand and the sum of the Maximum Daily Delivery Quantities equals the Transportation Demand. 8.4 This Agreement shall bind and benefit the successors and assigns of the respective parties hereto. Subject to the provisions of Section 22 of the General Terms and Conditions applicable hereto, neither party may assign this Agreement without the prior written consent of the other party, which consent shall not be unreasonably withheld; provided, however, that either party may assign or pledge this Agreement under the Provisions of any mortgage, deed of trust, indenture or similar Instrument. 8.5 Exhibits A, A-l, B, B-l, and/or E, if applicable, attached to this Agreement constitute a part of this Agreement and are incorporated herein. 8.6 This Agreement is subject to all present and future valid laws and orders, rules, and regulations of any regulatory body of the federal or state government having or asserting jurisdiction herein. After the execution of this Agreement, each party shall make and diligently prosecute all necessary filings with federal or other governmental bodies, or both, as may be required for the initiation and continuation of the transportation service which is the subject of this Agreement and to construct and operate any facilities necessary therefor. Each party shall have the right to seek such governmental authorizations as it deems necessary, including the right to prosecute its requests or applications for such authorization in the manner it deems appropriate. Upon either party's request, the other party shall timely provide or cause to be provided to the requesting party 8 Service Agreement No. 905660 Authorination: Blanket such information and material not within the requesting party's control and/or possession that may be required for such filings. Each party shall promptly inform the other party of any changes in the representations made by such party herein and/or in the information provided pursuant to this paragraph. Each party shall promptly provide the party with a copy of all filings, notices, approvals, and authorizations in the course of the prosecution of its filings. In the event all such necessary regulatory approvals have not been issued or have not been issued on terms and conditions acceptable to Company or Shipper within twelve (12) months from the date of the initial application therefor, then Company or Shipper may terminate this Agreement without further liability or obligation to the other party by giving written notice thereof at any time subsequent to the end of such twelve-month period, but prior to the receipt of all such acceptable approvals. Such notice will be effective as of the date it is delivered to the U. S. Mail, for delivery by certified mail, return receipt requested. IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the date first written above by their respective duly authorized officers. Attest: SOUTHERN NATUAL GAS COMPANY Illegible Signature By /s/ Joel Anderson Its Vice President Attest:/s/ J.E. Greer CHATTANOOGA GAS COMPANY By /s/ K.A Royse Its President 9 SERVICE AGREEMENT NO: 905660 EXHIBIT A The legal description of the Receipt Points listed below are more particularly set forth in Company's Receipt Point catalog, a copy of which can be requested from Company or accessed through SoNet, Company's electronic computer system. RECEIPT POINT: MDRQ ZONE in Mcf /s/ K.A. Royse /s/ Joel Anderson CHATTANOOGA GAS COMPANY SOUTHERN NATURAL GAS COMPANY EFFECTIVE DATE: May 17,1995 SERVICE AGREEMENT NO: 905660 EXHIBIT B The legal description of the Delivery Points listed below are more particularly set forth in Company's Delivery Point catalog, a copy of which can be requested from Company or accessed through SoNet, Company's electronic computer system. DELIVERY POINT: MDDQ CONTRACT 790200 CHATTANOOGA GAS COMPANY in Mcf PRESS. 5,000 250 - -------------------------------------------------------------------------------- /S/ K.A. Royse /s/ Joel Anderson CHATTANOOGA GAS COMPANY SOUTHERN NATURAL GAS COMPANY EFFECTIVE DATE: May 17,1995 Service Agreement No. 905660 EXHIBIT E Discount Information Discounted Transportation Rate: See below Discounted Rate Effective From: See below This Exhibit E shall be in effect for a period which begins on the date that Company notifies Shipper that service will commence hereunder and terminates on the earlier of (i) three years from commencement of service hereunder, or (ii) the effective date of any Transportation Demand reduction under or termination of Shipper's FT Service Agreement No. 904470 dated November 1, 1994, ("Rate Cap Period"). During the term of this Agreement, Shipper shall pay the full charges and surcharges applicable to service under Rate Schedule FT, including any applicable charges assessed to this Agreement under the General Terms and Conditions of Company's Tariff, provided, however, that during the Rate Cap Period the Reservation Charge to be paid by Shipper under this Agreement shall not exceed $12.50 per Mcf. /S/ K.A. Royse /s/ Joel Anderson CHATTANOOGA GAS COMPANY SOUTHERN NATURAL GAS COMPANY (Shipper) (Company) SERVICE AGREEMENT NO: 905660 EXHIBIT A-1 The legal description of the Receipt Points listed below are more particularly set forth in the Company's Receipt Point catalogs, a copy of which can be requested from Company or accessed through SoNet, Company's electronic computer system. Maximum Daily Receipt Production Area Receipt Points: Quantity in MMBTU 010850 ALLIANCE - CITRUS LAND #1 PO 5,000 601600 ANGI - JACKSON TO SNG PO 5,000 604000 ANR - SHADYSIDE TO SNG PO 5,000 ARCO - MOPS EXCH - MATAGORDA ISLAND 686 OFFSYSTEM RECEIPT POINT: 664100 ARCO - MOPS EXCH - MATAGORDA ISLAND 686 P0 5,000 OFFSYSTEM DELIVERY POINT(S): 656800 NNG EXCHANGE - MOPS TIVOLI 656801 CHANNEL INDUSTRIES EXCHANGE - MOPS TIVOLI 656802 FGT EXCHANGE - MOPS TIVOLI 010600 BARATARIA SOUTH PO 5,000 025300 BARATANIA WEST - CANLAN PO 5,000 015200 BASTIAN BAY #1 PO 5,000 038300 BAY NATCHEZ PO 5,000 034200 BAYOU BOULLION - AMERICAN QUASAR PO 5,000 032100 BAYOU BOULLION - WILBERT 1 PO 5,000 032400 BAYOU CROOK CHENE PO 5,000 010700 BAYOU DE FLEUR - CHEVRON PO 5,000 017000 BAYOU FELICE - TEXACO - SOUTH PASS 24 PO 5,000 018800 BAYOU FELICE - VINTAGE - SOUTH PASS 24 PO 5,000 030500 BAYOU LONG #1 PO 5,000 024700 BAYOU LONG #3 - VINTAGE PO 5,000 030600 BAYOU LONG NORTH PO 5,000 027500 BAYOU MONGOULOIS R/S - PLAINS RESOURCES PO 5,000 400300 BAYOU MONGOULOIS TO SNG PO 4,800 030900 BAYOU POSTILLION - ANSON #2 PO 5,000 031000 BAYOU POSTILLION - EXXON PO 5,000 030850 BAYOU POSTILLION - LLOG PO 3,000 034900 BAYOU POSTILLION - WILLIAMS PO 5,000 036300 BAYOU SALE - MCCORMICK PO 5,000 035900 BAYOU SALE - NRM PO 5,000 030000 BAYOU SALE - TEXACO - HORSESHOE BAYOU PO 5,000 010500 BAYOU VILLARS - CHEVRON PO 5,000 051513 BEAR CREEK - BROYLES FANNIE WOOD #1 GO 5,000 051510 BEAR CREEK - BROYLES R/S #1 GO 3,336 SERVICE AGREEMENT NO: 905660 EXHIBIT A-1 PAGE 2 OF 15 Maximum Daily Receipt Quantity in MMBTU Production Area Receipt Points: 051512 BEAR CREEK - BROYLES R/S #2 GO 5,000 051515 BEAR CREEK - PAN OK D.E. BROWN #1 GO 5,000 503971 BEAR CREEK - RECEIPTS FROM TENNESSEE P0 5,000 051550 BEAR CREEK - SONAT ARTHUR SOUR GO 3,384 051514 BEAR CREEK - SONAT CONTINENTAL CAN #2 GO 5,000 051544 BEAR CREEK - SONAT CRAWLEY #A-1 GO 5,000 051540 BEAR CREEK - SONAT CRAWLEY #1 GO 5,000 051535 BEAR CREEK - SONAT CRAWLEY M #1 GO 1,368 051567 BEAR CREEK - SONAT CULBERTSON "A" NO. l GO 5,000 051556 BEAR CREEK - SONAT DUNCAN #1 GO 3,360 051539 BEAR CREEK - SONAT F. WOODS #1-2 ALT GO 5,000 051516 BEAR CREEK - SONAT H. JORDAN #1 GO 5,000 051557 BEAR CREEK - SONAT HARRISON #4 GO 5,000 051517 BEAR CREEK - SONAT HODGE HUNT #1C GO 2,856 051518 BEAR CREEK - SONAT J. HARRISON #2 GO 5,000 051549 BEAR CREEK - SONAT JAMES JORDAN #1 GO 5,000 051563 BEAR CREEK - SONAT JORDAN #B-1 GO 3,360 051546 BEAR CREEK - SONAT KMI CONT. ROYALTY #1 GO 2,856 051537 BEAR CREEK - SONAT KMI ROYALTY M#1 GO 5,000 051564 BEAR CREEK - SONAT LOE "C" NO. 1 GO 5,000 051565 BEAR CREEK - SONAT LOE "D" NO. 1 GO 5,000 051558 BEAR CREEK - SONAT LOE B-1 (COTTON VALLEY) GO 5,000 051559 BEAR CREEK - SONAT LOE B-1 (HOSSTON) GO 5,000 051560 BEAR CREEK - SONAT LOE B-2 GO 5,000 051519 BEAR CREEK - SONAT LONETTE JONES #1 GO 5,000 051561 BEAR CREEK - SONAT LOUISIANA MINERALS A #1 GO 5,000 051536 BEAR CREEK - SONAT M.E. JORDAN #12-1 GO 5,000 051562 BEAR CREEK - SONAT MCGEE #A-1 GO 2,856 051522 BEAR CREEK - SONAT MS. E. CONVILLE #1D GO 5,000 051524 BEAR CREEK - SONAT N A CULBERTSON #1 (SLIG0) GO 5,000 051525 BEAR CREEK - SONAT O.C. POOLE #2 GO 5,000 051526 BEAR CREEK - SONAT O.M. ALLISON #1 GO 5,000 051527 BEAR CREEK - SONAT OTIS POOLE #3 GO 5,000 051547 BEAR CREEK - SONAT POOLE #5 GO 5,000 051529 BEAR CREEK - SONAT SNG FEE #2 G0 5,000 051530 BEAR CREEK - SONAT T.A. L0E #3 G0 5,000 051542 BEAR CREEK - SONAT T.A. LOW M#1 GO 2,856 051531 BEAR CREEK - SONAT T.J. CUMMINGS #2 GO 5,000 051533 BEAR CREEK - SONAT T.J. CUMMINGS #4 GO 5,000 051534 BEAR CREEK - SONAT W.T. HAYES #1 GO 5,000 051551 BEAR CREEK - TXO ALLISON #1 GO 3,360 051553 BEAR CREEK - TXO CRAWLEY #C-1 GO 3,360 051543 BEAR CREEK - TXO FEDERAL LAND BANK #1 GO 5,000 050900 BENSON PO 2,000 604800 BENSON SABINE-TEXICAN PO 4,500 SERVICE AGREEMENT NO: 905660 EXHIBIT A-1 PAGE 3 OF 15 Production Area Receipt Points: Maximum Daily Receipt Quantity in MMBTU 050950 BENSON - TXO POLLOCK F PO 4,800 602200 BIG POINT PO 5,000 013900 BLACK BAY - GULF PO 5,000 014000 BLACK BAY - WEST - CHEVRON PO 5,000 690700 BOURBON LINE (FGT) FROM MISS CANYON 268 PO 5,000 690600 BOURBON LINE (FGT) FROM MISS CANYON 311 PO 5,000 690500 BOURBON LINE (FGT) FROM WEST DELTA 152 PO 5,000 BRAZOS A-133A - TEXACO OFFSYSTEM RECEIPT POINT: 509100 BRAZOS A-133A - TEXACO PO 5,000 0FFSYSTEM DELIVERY POINT(S): 519000 TRANSCO MARKHAM PLANT - CENTRAL TEXAS LOOP 519001 NGPL EXCHANGE - TRANSC0 MARKHAM PLANT 672600 SNG - TRANSC0 EXCHANGE - WHARTON COUNTY, TX BRAZOS A-133B - TEXACO OFFSYSTEM RECEIPT POINT: 509150 BRAZOS A-133B - TEXACO PO 5,000 OFFSYSTEM DELIVERY POINT(S): 519000 TRANSCO MARKHAM PLANT - CENTRAL TEXAS LOOP 519001 NGPL EXCHANGE - TRANSCO MARKHAM PLANT 672600 SNG - TRANSCO EXCHANGE - WHARTON COUNTY, TX BRAZOS A-47 - TEXAS GULF OFFSYSTEM RECEIPT POINT: 508400 BRAZOS A-47 - TEXAS GULF PO 5,000 OFFSYSTEM DELIVERY POINT(S): 519000 TRANSCO MARKHAM PLANT - CENTRAL TEXAS LOOP 519001 NGPL EXCHANGE - TRANSCO MARKHAM PLANT 672600 SNG - TRANSC0 EXCHANGE -WHARTON COUNTY, TX BRAZOS 367-L OFFSYSTEM RECEIPT POINT: 503300 BRAZOS 367-L PO 1,000 OFFSYSTEM DELlVERY POINT(S): 656900 FGT EXCHANGE - BRAZOS 367 SERVICE AGREEMENT N0: 905660 EXHIBIT A-1 PAGE 4 OF 15 MAXIMUM Daily Receipt Quantity in MMBTU Production Area Receipt Points: 512100 BRETON SOUND 11 PO 5,000 016200 BRETON SOUND 18 (19,30,35 & MP 21) PO 5,000 020600 BRETON SOUND 21 PO 5,000 023000 BRETON SOUND 23 - POGO PO 5,000 020800 BRETON SOUND 32 PO 5,000 015600 BRETON SOUND 34 PO 5,000 016300 BRETON SOUND 36 (BS29) PO 5,000 035800 BULL BAYOU PO 1,500 022800 CARTHAGE - UPRC PO 5,000 013100 CHANDELEUR SOUND 25 PO 5,000 654000 CHANDELEUR SOUND 51 PO 5,000 036700 CHANDELEUR SOUND 51 - GULF PO 5,000 024300 CHANDELEUR SOUND 52 - UNION PO 5,000 021400 CHANDELEUR SOUND 71 - MLG PO 5,000 013400 CHANDELEUR SOUND 73 PO 5,000 685200 COGNAC LINE (FGT) FROM MISS CANYON 109 PO 5,000 685000 COGNAC LINE (FGT) FROM MISS CANYON 194 PO 5,000 685100 COGNAC LINE (FGT) FROM MISS CANYON 20 PO 5,000 685300 COGNAC LINE (FGT) FROM SOUTH PASS 27 PO 5,000 685600 COGNAC LINE (TGPL) FROM MISS CANYON 109 PO 5,000 685400 COGNAC LINE (TGPL) FROM MISS CANYON 194 PO 5,000 685500 COGNAC LINE (TGPL) FROM MISS CANYON 20 PO 5,000 685700 COGNAC LINE (TGPL) FROM SOUTH PASS 27 PO 5,000 605500 COLUMBIA GULF - SHADYSIDE TO SNG PO 5,000 CONE MILLS - NABISCO OFFSYSTEM RECEIPT POINT: 034100 CONE MILLS - NABISCO PO 2,500 OFFSYSTEM DELIVERY POINT(S): 501000 EAST HAPPYTOWN - BAYOU HENRY TO GGC 015700 COQUILLE BAY P0 5,000 027100 COQUILLE BAY - COMMERCE P0 5,000 015800 COQUILLE BAY - SOUTH P0 2,500 014800 COX BAY P0 5,000 400650 CUTOFF FIELD - COLUMBIA EXCHANGE P0 5,000 014200 DIAMOND - GULF EXPLORATION P0 5,000 EAST CAMERON 23 OFFSYSTEM RECEIPT POINT: 503404 EAST CAMERON 23 P0 5,000 SERVICE AGREEMENT NO: 905660 EXHIBIT A-1 PAGE 5 OF 15 Maximum Daily Receipt Production Area Receipt Points: Quantity in MMBTU OFFSYSTEM DELIVERY POINT(S): 689300 COLUMBIA GULF EXCHANGE - EAST CAMERON 23 EAST CAMERON 46 OFFSYSTEM RECEIPT POINT: 502200 EAST CAMERON 46 PO 5,000 OFFSYSTEM DELIVERY POINT(S): 032508 TENN EXCHANGE - EAST CAMERON 46 027750 EAST LAKE WASHINGTON - LL&E P0 5,000 019000 ELOI BAY - TIPCO P0 5,000 EUGENE ISLAND 108 OFFSYSTEM RECEIPT POINT: 508300 EUGENE ISLAND 108 OFFSYSTEM DELIVERY POINT(S): 673500 TRANSCO EXCHANGE - EUGENE ISLAND 129 P0 5,000 EUGENE ISLAND 341 OFFSYSTEM RECEIPT POINT: 037203 EUGENE ISLAND 341 OFFSYSTEM DELIVERY POINT(S): 037204 ANR EXCHANGE - EUGENE ISLAND 341 PO 3,650 EUGENE ISLAND 47 OFFSYSTEM RECEIPT POINT: 035200 EUGENE ISLAND 47 OFFSYSTEM DELIVERY POINT(S): 675900 UNITED EXCHANGE - EUGENE ISLAND 51 PO 5,000 EUGENE ISLAND 57 OFFSYSTEM RECEIPT POINT: 503000 EUGENE ISLAND 57 OFFSYSTEM DELIVERY POINT(S): 675800 UNITED EXCHANGE - EUGENE ISLAND 32 PO 5,000 SERVICE AGREEMENT NO: 905660 EXHIBIT A-1 PAGE 6 OF 15 Maximum Daily Receipt Production Area Receipt Points: Quantity in MMBTU 029000 FGT - FRANKLINTON - TO SNG PO 5000 037300 FT. PIKE PO 5000 017250 GRAND BAY - MID-LOUISIANA EXCHANGE PO 5000 038500 GRAND CANE - TEXICAN PO 2000 024200 GRAYS CREEK PO 5000 601950 GULF STATES - GSP TO SNG PO 5000 049912 JOAQUIN - ARCO J.S. PRICE #2 GO 5000 049913 JOAQUIN - ARCO J.S. PRICE #3 GO 3336 049911 JOAQUlN - ARCO R/S #1 GO 5000 049944 JOAQUIN - BIG RUN SILER #1 GO 1368 049910 JOAQUIN - FREDONIA COOK #1 GO 2856 049927 JOAQUIN - GRAND ENERGY GO 5000 049929 JOAQUIN - GRAND ENERGY R/S #2 GO 1752 049917 JOAQUIN - KEY C. CHILDRESS #1 GO 5000 049919 JOAQUIN - KEY E.L. LOWE #1 GO 2856 049920 JOAQUIN - KEY E.L. LOWE #2 GO 5000 049912 JOAQUIN - KEY GARRETT #1 GO 5000 049905 JOAQUIN - KEY R/S #1 GO 5000 049906 JOAQUIN - KEY R/S #2 GO 2856 049923 JOAQUIN - KEY REED #1 GO 3336 049924 JOAQUIN - KEY RUSHING #1 GO 2856 049925 JOAQUIN - KEY TEXAS CORP GO 2856 049930 JOAQUIN - SONAT BROOKS #1 GO 1128 049932 JOAQUIN - SONAT O.L. GUY #1 GO 5000 049933 JOAQUIN - SONAT O.L. GUY #2 GO 5000 049940 JOAQUIN - SONAT PICKERING B-7 GO 5000 049945 JOAQUIN - SONAT PICKERING C-8 GO 3312 049948 JOAQUIN - SONAT PICKERING C-9 GO 3360 049943 JOAQUIN - SONAT R/S #2 GO 5000 049949 JOAQUIN - STATELINE R/S GO 5000 512000 KOCH GATEWAY - FT. PIKE TO SNG PO 5000 602910 KOCH GATEWAY - LIVINGST0N TO SNG (DISPLACE) PO 5000 030300 KOCH GATEWAY - SHADYSIDE TO SNG PO 5000 538100 KOCH GATEWAY - ST. MARTIN TO SNG PO 5000 601110 KOCH GATEWAY -TANGIPAHOA TO SNG (DISPLACE) PO 5000 013060 LAKE CAMPO - LINDER PO 5000 013600 LAKE FORTUNA PO 3000 025600 LAKE FORTUNA - NOMECO PO 5000 031900 LAKE LAROSE PO 5000 023300 LAKE ST. CATHERINE PO 5000 035600 LAKE WASHINGION - LADD PO 5000 036100 LAKE WASHINGTON NORTH #2 - PHILLIPS PO 5000 015000 LAKE WASHINGTON SOUTH - PHILLIPS PO 5000 LEDRICK RANCH - ALPHA #1-7 OFFSYSTEM RECEIPT POINT: 503408 LEDRICK RANCH - ALPHA #l-7 PO 5,000 SERVICE AGREEMENT NO: 905660 EXHIBIT A-1 PAGE 7 OF 15 Maximum Daily Receipt Production Area Receipt Points: Quantity in MMBTU OFFSYSTEM DELIVERY POINT(S): 692300 NNG EXCHANGE - ROBERTS COUNTY, TEXAS LEDRICK RANCH - LARD 1-61 OFFSYSTEM RECEIPT POINT: 503407 LEDRICK RANCH - LARD 1-61 PO 5,000 OFFSYSTEM DELIVERY POINT(S): 692300 NNG EXCHANGE - ROBERTS COUNTY, TEXAS LEDRICK RANCH - MAULSBY 1-4 OFFSYSTEM RECEIPT POINT: 503405 LEDRICK RANCH - MAULSBY 1-4 PO 5,000 OFFSYSTEM DELIVERY POINT(S): 692300 NNG EXCHANGE - ROBERTS COUNTY, TEXAS LEDRICK RANCH - MAUSLBY 2-4 OFFSYSTEM RECEIPT POINT: 503406 LEDRICK RANCH - MAUSLBY 2-4 PO 5,000 OFFSYSTEM DELIVERY POINT(S): 692300 NNG EXCHANGE - ROBERTS COUNTY, TEXAS 048000 LIG - LOGANSPORT TO SNG PO 5,000 011000 LITTLE LAKE PO 5,000 657100 LITTLE LAKE SOUTH PO 4,500 LOCKHART CROSSING - AMOCO OFFSYSTEM RECEIPT POINT: 044200 LOCKHART CROSSING - AMOCO GO 5,000 OFFSYSTEM DELIVERY POINT(S): 690900 KOCH GATEWAY EXCHANGE - LOCKHART CROSSING 050011 LOGANSPORT - ARCO A.D. COBB GO 3,336 050012 LOGANSPORT - ARCO A.E. WELLS #1 GO 1,368 050013 LOGANSPORT - ARCO ALSTON FROST #2 GO 3,336 050017 LOGANSPORT - ARCO D.B. FURLOW GO 5,000 050016 LOGANSPORT - ARCO D.B. LEWIS GO 5,000 050018 LOGANSPORT - ARCO FROST BILLINGSLEY #1 GO 2,856 SERVICE AGREEMENT NO: 905660 EXHIBIT A-1 PAGE 8 OF 15 Maximum Daily Receipt Production Area Receipt Points: Quantity in MMBTU 050019 LOGANSPORT - ARCO FROST BILLINGSLEY #2 GO 3,336 050020 LOGANSPORT - ARC0 FROST LUMBER IND #1 GO 1,368 050021 LOGANSPORT - ARC0 FROST LUMBER IND #2 GO 2,856 050026 LOGANSPORT - ARCO J. O. PACE GO 1,368 050033 LOGANSPORT - ARCO R/S #1 GO 5,000 050032 LOGANSPORT - ARCO R/S #2 GO 5,000 050027 LOGANSPORT - ARGO R/S #3 GO 2,856 050036 LOGANSPORT - ARCO T. J. HOLLINGSWORTH GO 2,856 050037 LOGANSPORT - CITIES A. W. WELLS #1 GO 5,000 050058 LOGANSPORT - CITIES A. W. WELLS #2 GO 5,000 050043 LOGANSPORT - CITIES STEPHENS A LEASE GO 1,368 050044 LOGANSPORT - CITIES W. E. STEPHEN B-1 GO 5,000 050048 LOGANSPORT - INEXCO WILLIAMS ESTATE GO 5,000 050057 LOGANSPORT - KEYS R/S #1 GO 1,368 025500 LOGANSPORT - LONG O&G R/S #1 PO 5,000 050067 LOGANSPORT - MARATHON DOW A-1 GO 5,000 050055 LOGANSPORT - MARATHON DOWDELL GO 3,360 050061 LOGANSPORT - MARATHON O. E. PRICE #1 GO 2,856 050069 LOGANSPORT - MARATHON PARK CIRCLE #1 GO 3,360 050053 LOGANSPORT - MARATHON R/S #1 GO 4,776 050068 LOGANSPORT - MARATHON W. A. WILLIAMS #1 GO 3,360 050001 LOGANSPORT - MARSHALL R/S #1 GO 5,000 050002 LOGANSPORT - MARSHALL R/S #2 GO 5,000 050003 LOGANSPORT - MARSHALL R/S #3 GO 2,856 050060 LOGANSPORT - OXY FROST #2 GO 2,856 050064 LOGANSPORT - OXY FULMER A-1 GO 5,000 050056 LOGANSPORT - OXY M. E. WILLIAMS #1 GO 3,360 050040 LOGANSPORT - OXY R/S #1 GO 5,000 050039 LOGANSPORT - OXY R/S #2 GO 3,336 050041 LOGANSPORT - OXY R/S #4 GO 5,000 050062 LOGANSPORT - OXY STEPHEN B-2 ALT GO 3,360 050066 LOGANSPORT - PG&E RESOURCES #3 GO 5,000 050046 LOGANSPORT - PG&E RESOURCES R/S #4 GO 5,000 050065 LOGANSPORT - TEX/CON R/S #1 GO 4,776 050047 LOGANSPORT - TEX/CON R/S #2 GO 5,000 604110 LRC - CARRVILLE TO SNG (DISPLACEMENT) PO 5,000 664000 LRC - WHITE CASTLE TO SNG PO 5,000 024600 LUCKY FIELD PO 5,000 024400 MAIN PASS 108 PO 5,000 023800 MAIN PASS 116 - MAXUS PO 5,000 028250 MAIN PASS 123 - POGO EXCHANGE PO 5,000 037600 MAIN PASS 127 - CHEVRON PO 5,000 023500 MAIN PASS 129 - HALL HOUSTON PO 5,000 021200 MAIN PASS 133C PO 5,000 026750 MAIN PASS 138 - UMC EXCHANGE PO 5,000 SERVICE AGREEMENT NO: 905660 EXHIBIT A-1 PAGE 9 OF 15 Maximum Daily Receipt Production Area Receipt Points: Quantity in MMBTU 017800 MAIN PASS 144 - CHEVRON PO 5,000 663300 MAIN PASS 151 - M.P. 72 - UNITED EXCHANGE PO 5,000 663000 MAIN PASS 151 - NGPL EXCHANGE PO 5,000 018300 MAIN PASS 153 - S.P. 65 - SHELL PO 5,000 028050 MAIN PASS 181 - DIAMOND SHAMROCK EXCHANGE PO 5,000 022700 MAIN PASS 265 PO 5,000 019900 MAIN PASS 288 - CONOCO PO 5,000 018400 MAIN PASS 289 - M.P. 290 - SHELL PO 5,000 026050 MAIN PASS 292 - AMERADA EXCHANGE PO 5,000 018100 MAIN PASS 293 - M.P. 306 - SUN PO 5,000 020000 MAIN PASS 296 PO 5,000 017900 MAIN PASS 298 - CHEVRON PO 5,000 018500 MAIN PASS 306 PO 5,000 022900 MAIN PASS 310 PO 5,000 021651 MAIN PASS 311 - WALTER O&G EXCHANGE PO 5,000 021600 MAIN PASS 311A PO 5,000 021700 MAIN PASS 311B PO 5,000 021300 MAIN PASS 313 PO 5,000 016100 MAIN PASS 46 - NERCO PO 5,000 651000 MAIN PASS 46 - QUINTANA PO 5,000 016000 MAIN PASS 47 PO 5,000 026150 MAIN PASS 49 - EDC EXCHANGE PO 5,000 023900 MAIN PASS 59 PO 5,000 023200 MAIN PASS 64 - HOWELL PO 5,000 016451 MAIN PASS 68 - PELTO EXCHANGE PO 5,000 016400 MAIN PASS 69 PO 5,000 027400 MAIN PASS 69(FEDERAL) PO 5,000 036901 MAIN PASS 72 - EXCHANGE PO 5,000 036900 MAIN PASS 73 - M.P. 72/73/74 - MOBIL PO 5,000 023100 MAIN PASS 77 - CHEVRON PO 5,000 012000 MANILA VILLAGE PO 5,000 011900 MANILA VILLAGE #2 PO 5,000 012050 MANILA VILLAGE S. E. PO 5,000 MATAGORDA ISLAND 632 OFFSYSTEM RECEIPT POINT: 508001 MATAGORDA ISLAND 632 P0 5,000 OFFSYSTEM DELIVERY POINT(S): 656800 NNG EXCHANGE - MOPS TIVOLI 656801 CHANNEL INDUSTRIES EXCHANGE - MOPS TIVOLI 656802 FGT EXCHANGE - MOPS TIVOLI MATAGORDA ISLAND 665 OFFSYSTEM RECEIPT POINT: 502100 MATAGORDA ISLAND 665 PO 5,000 SERVICE AGREEMENT ND: 905660 EXHIBIT A-1 PAGE 10 OF 15 Maximum Daily Receipt Production Area Receipt Points: Quantity in MMBTU OFFSYSTEM DELIVERY POINT(S): 656800 NNG EXCHANGE - MOPS TIVOLI 656801 CHANNEL INDUSTRIES EXCHANGE - MOPS TIVOLI 656802 FGT EXCHANGE - MOPS TIVOLI MATAGORDA ISLAND 686 OFFSYSTEM RECEIPT POINT: 511500 MATAGORDA ISLAND 686 PO 5,000 OFFSYSTEM DELIVERY POINT(S): 656800 NNG EXCHANGE - MOPS TIVOLI 656801 CHANNEL INDUSTRIES EXCHANGE - MOPS TIVOLI 656802 FGT EXCHANGE - MOPS TIVOLI MATAGORDA ISLAND 686 - 0XY USA EXCHANGE OFFSYSTEM RECEIPT POINT: MATAGORDA ISLAND 686 - OXY USA EXCHANGE P0 5,000 OFFSYSTEM DELIVERY POINT(S): 656800 NNG EXCHANGE - MOPS TIVOLI 656801 CHANNEL INDUSTRIES EXCHANGE - MOPS TIVOLI 656802 FGT EXCHANGE - MOPS TIVOLI MATAGORDA ISLAND 686 - WALTER 0&G EXCHANGE OFFSYSTEM RECEIPT POINT: 692800 MATAGORDA ISLAND 686 - WALTER 0&G EXCHANGE P0 5,000 OFFSYSTEM DELIVERY POINT(S): 656800 NNG EXCHANGE - MOPS TIVOLI 656801 CHANNEL INDUSTRIES EXCHANGE - MOPS TIVOLI 656802 FGT EXCHANGE - MOPS TIVOLI MATAGORDA ISLAND 696 OFFSYSTEM RECEIPT POINT: 508900 MATAGORDA ISLAND 696 P0 5,000 OFFSYSTEM DELIVERY POINT(S): 656800 NNG EXCHANGE - MOPS TIVOLI 656801 CHANNEL INDUSTRIES EXCHANGE - MOPS TIVOLI 856802 FGT EXCHANGE - MOPS TIVOLI SERVICE AGREEMENT NO: 905660 EXHIBIT A-1 PAGE 11 OF 15 Maximum Daily Receipt Production Area Receipt Points: Quantity in MMBTU 603300 MISSISSIPPI CANYON 109 - BP PO 5,000 022400 MISSISSIPPI CANYON 194 PO 5,000 603700 MISSISSIPPI CANYON 20 - BP PO 5,000 024950 MISSISSIPPI CANYON 268 - ORYX EXCHANGE PO 5,000 037400 MISSISSIPPI CANYON 268A - EXXON PO 5,000 037000 MISSISSIPPI CANYON 311 PO 5,000 027800 MISSISSIPPI CANYON 397 PO 5,000 012400 MONTEGUT PO 5,000 030700 MYSTIC BAYOU PO 5,000 663200 NGPL - ERATH TO SNG PO 5,000 - --------------------------------------------------------------------------- NNG EXCHANGE - MATAGORDA ISLAND 713 OFFSYSTEM RECEIPT POINT: 663900 NNG EXCHANGE - MATAGORDA ISLAND 713 PO 5,000 OFFSYSTEM DELIVERY POINT(S): 656800 NNG EXCHANGE - MOPS TIVOLI 656801 CHANNEL INDUSTRIES EXCHANGE - MOPS TIVOLI 656802 FGT EXCHANGE - MOPS TIVOLI - --------------------------------------------------------------------------- 030200 PATTERSON - PLANT OUTLET GO 5,000 025400 PATTERSON - ZENOR GO 5,000 026200 PAXTON R/S PO 5,000 014100 POINTE A LA HACHE PO 5,000 010900 QUARANTINE BAY PO 5,000 016500 ROMERE PASS PO 5,000 605200 SABINE - HENRY HUB TO SNG PO 5,000 019300 SATURDAY ISLAND - HUBCO PO 5,000 605300 SEA ROBIN - ERATH TO SNG PO 5,000 033200 SECTION 28 - AMOCO PO 3,000 032900 SECTION 28 - GULF PO 250 - --------------------------------------------------------------------------- SHELL - MOPS EXCHANGE - MAT IS 686 (MAT 681) OFFSYSTEM RECEIPT POINT: 664150 SHELL - MOPS EXCHANGE - MAT IS 686 (MAT 681) PO 5,000 OFFSYSTEM DELlVERY POINT(S): 656800 NNG EXCHANGE - MOPS TIVOLI 656801 CHANNEL INDUSTRIES EXCHANGE - MOPS TIV0LI 656802 FGT EXCHANGE - MOPS TIVOLI - --------------------------------------------------------------------------- SHIP SHOAL 84 - AMOCO 0FFSYSTEM RECEIPT POINT: 029003 SHIP SHOAL 84 - AMOCO PO 5,000 SERVICE AGREEMENT NO: 905660 EXHIBIT A-1 PAGE 12 OF 15 Maximum Daily Receipt Production Area Receipt Points: Quantity in MMBTU OFFSYSTEM DELIVERY POINT(S): 695900 TRANSCO EXCHANGE - SHIP SHOAL 70 695950 TRANSCO EXCHANGE - SHIP SHOAL 72 - ------------------------------------------------------------------------------- 022450 SOUTH PASS 27 - TEXACO PO 5,000 020400 SOUTH PASS 60 PO 5,000 026950 SOUTH PASS 62 - BP EXCHANGE PO 5,000 018200 SOUTH PASS 62 - CHEVRON PO 5,000 018600 SOUTH PASS 62 - SHELL PO 5,000 021100 SOUTH PASS 70 PO 5,000 - ------------------------------------------------------------------------------- SOUTH PASS 77 - OXY OFFSYSTEM RECEIPT POINT: 045501 SOUTH PASS 77 - OXY PO 5,000 OFFSYSTEM DELIVERY POINT(S): 694700 TENN EXCHANGE - SOUTH PASS 77 (SP 78) - ------------------------------------------------------------------------------- SOUTH TIMBALIER 37 OFFSYSTEM RECEIPT POINT: 032506 SOUTH TIMBALIER 37 PO 5,000 OFFSYSTEM DELIVERY POINT(S): 694900 TENN EXCHANGE - SOUTH TIMBALIER 37 - ------------------------------------------------------------------------------- 050300 SPIDER - PHILLIPS #1 PO 5,000 032600 ST. GABRIEL GO 5,000 013700 STUARD'S BLUFF PO 5,000 013200 STUARD'S BLUFF EAST - RANGER PO 5,000 601700 SUGAR BOWL #3 - DESOTO PARISH PO 1,000 601410 SUGAR BOWL #6 - TO SNG - DISPLACEMENT PO 5,000 601900 SUGAR BOWL #7 - BIENVILLE PARISH TO SNG PO 5,000 603000 SUGAR BOWL #9 - DESOTO PARISH TO SNG PO 4,080 032500 TENN - PATTERSON TO SNG PO 5,000 503802 TENN - TOCA TO SNG PO 5,000 501410 TEXAS GAS - BAYOU PIGEON TO SNG PO 5,000 046400 TRANSCO - FROST TO SNG PO 5,000 601500 TRANSOK - BIENVILLE PARISH TO SNG PO 5,000 502710 TRUNKLINE - SHADYSIDE TO SNG PO 5,000 018450 VKGC - MAIN PASS 289 TO SNG PO 5,000 017100 WEST BAY PO 5,000 017120 WEST BAY - NORTHCOAST PO 5,000 017500 WEST DELTA 105 PO 5,000 SERVICE AGREEMENT NO: 905660 EXHIBIT A-1 PAGE 13 OF 15 Maximum Daily Receipt Production Area Receipt Points: Quantity in MMBTU 017600 WEST DELTA 133,152 - TAYLOR PO 5,000 015100 WEST DELTA 30 PO 5,000 017300 WEST DELTA 42 PO 5,000 025950 WEST DELTA 62 - WALTER EXCHANGE PO 5,000 017400 WEST DELTA 75 - AMOCO (WD 73) PO 5,000 026600 WEST DELTA 89 - AGIP Maximum Daily Receipt Zone 1 Receipt Points: Quantity in MMBTU 605110 AIM PIPELINE - AIM TO SNG (DISPLACE) Z1 5,000 653000 COLUMBIA GULF - EAST CARROLL TO SNG Z1 5,000 044600 CORINNE - NASON G1 1,560 043350 CORINNE FIELD - TOTAL VOLUME G1 5,000 041200 CRANFIELD NORTH - KAISER FRANCIS Z1 5,000 040125 DEXTER - CELT R/S #1 G1 2,856 040119 DEXTER - GETTY PITTMAN C-1 G1 5,000 040120 DEXTER - PENNZOIL MORRIS A-1 G1 5,000 040123 DEXTER - PENNZOIL PRISK C G1 5,000 040130 DEXTER - PITTMAN R/S #1 - TYSON G1 5,000 040112 DEXTER - TEXACO J.N. PITTMAN G1 5,000 040113 DEXTER - TEXACO MORRIS 2-9 G1 5,000 040126 DEXTER - TXO MORRIS 35-9 G1 3,360 043600 GRANGE - STEELE #1 WELL Z1 5,000 041712 GWINVILLE - EXXON UNIT 103D G1 5,000 041714 GWINVILLE - LAUREL FUEL B.A. WALKER G1 1,368 041715 GWINVILLE - LAUREL FUEL C.E. BERRY G1 1,368 041711 GWINVILLE - WILL-DRILL GGU 203 #1 G1 5,000 044700 HOOKER Z1 5,000 040350 HUB - EXXON -HELEN K BALL Z1 5,000 040250 HUB R/S #2 - MOON-HINES-TIGRETT Z1 5,000 027700 HUB R/S #3 - SKRIVANOS Z1 5,000 041000 KNOXO R/S #2 - JR POUNDS G1 4,000 051300 KOCH GATEWAY - PERRYVILLE TO SNG Z1 5,000 740310 KOCH GATEWAY - RANKIN TO SNG (DISPLACE) Z1 5,000 040400 KOKOMO - GARTMEN #1 (TEXACO) G1 5,000 025000 KOKOMO - MARATHON WALKER G1 3,000 041850 MAGEE SOUTH FIELD Z1 5,000 028350 MAIN PASS 245 - WALTER O&G EXCHANGE Z1 041600 OLDENBURG FIELD - EASON G1 5,000 039900 SANDY HOOK WEST - BOONE #1 Z1 5,000 045100 SANDY HOOK WEST - F.E. FORBES Z1 5,000 046900 SANDY HOOK WEST - FORBES #3 Z1 5,000 046100 SANDY HOOK WEST - FORNEA #1 (UMC) Z1 1,392 SERVICE AGREEMENT NO: 905660 EXHIBIT A-1 PAGE 14 OF 15 Maximum Daily Receipt Zone 1 Receipt Points: Quantity in MMBTU 043500 SANDY HOOK WEST - HART #1 Z1 2,856 045200 SANDY HOOK WEST - HART #2 Z1 5,000 045300 SANDY HOOK WEST - HART #3 Z1 5,000 044800 SANDY HOOK WEST - HART #4 Z1 5,000 047200 SANDY HOOK WEST - HART #5 Z1 5,000 047400 SANDY HOOK WEST - HART #6 Z1 5,000 043100 SANDY HOOK WEST - MAXIE FORBES Z1 3,312 047300 SANDY HOOK WEST - R/S #1 - CARDINAL Z1 5,000 040000 SANDY HOOK WEST - R/S #2 - EXXON Z1 5,000 045900 SANDY HOOK WEST - RANKIN #1 Z1 1,300 047500 SANDY HOOK WEST - RONALD FORBES Z1 1,368 050101 SPIDER - MIDLAND Z1 5,000 041900 TALLAHALA CREEK Z1 2,500 051800 TENN - PUGH TO SNG Z1 5,000 504002 TENN - ROSE HILL TO SNG Z1 5,000 600810 TEXAS EASTERN - KOSCIUSKO TO SNG(DISPLACEMENT) Z1 5,000 043700 THOMASVILLE FIELD Z1 5,000 504200 TRUNKLINE - WEST CARROLL TO SNG Z1 5,000 Maximum Daily Receipt Zone 2 Receipt Points: Quantity in MMBTU - -------------------------------------------------------------------------------- BIG ESCAMBIA OFFSYSTEM RECEIPT POINT: 045000 BIG ESCAMBIA Z2 500 OFFSYSTEM DELIVERY POINT(S): 501200 FGT EXCHANGE - ESCAMBIA COUNTY, ALABAMA - ------------------------------------------------------------------------------ 046830 BLUE CREEK #2 - RIVER GAS Z2 5,000 046835 BLUE CREEK #2 - SIA TO SNG EXCHANGE Z2 5,000 046840 BLUE CREEK #3 - RIVER GAS Z2 5,000 046845 BLUE CREEK #3 - SIA TO SNG EXCHANGE Z2 5,000 045800 BROOKWOOD Z2 5,000 025100 CAINWOOD Z2 5,000 025700 CEDAR COVE - MOUNDVILLE - MERIDIAN Z2 5,000 601200 CORONADO TO SNG Z2 5,000 046800 DEERLICK CREEK - TRW Z2 5,000 025200 GURNEE #1 - MCKENZIE METHANE Z2 5,000 046200 LEXINGTON #1 - ESPERO ENERGY Z2 5,000 046000 OAK GROVE - U.S. STEEL/COAL Z2 5,000 046050 OAK GROVE #2 - BASIN Z2 5,000 SERVICE AGREEMENT NO: 905660 EXHIBIT A-1 PAGE 15 OF 15 Maximum Daily Receipt Zone 2 Receipt Points: Quantity in MMBTU 046060 OAK GROVE #3 - MCKENZIE Z2 5,000 046070 OAK GROVE #4 - AMOCO Z2 5,000 046040 OAK GROVE #5 - TAURUS Z2 5,000 046080 OAK GROVE #6 - AMOCO Z2 5,000 026300 ROBINSON BEND - TORCH Z2 5,000 605400 SIA - DUNCANVILLE TO SNG Z2 5,000 051900 SIA - MCCONNELLS TO SNG Z2 5,000 052400 SOUTHLAND TO SNG - MERIDIAN OIL Z2 5,000 027900 VIRGINIA MINE - TAURUS Z2 5,000 046850 WHITE OAK - SIA TO SNG EXCHANGE Z2 047600 WOOLBANK CREEK - GERMANY Z2 4,500 047100 WOOLBANK CREEK - JUSTISS OIL Z2 5,000 Maximum Daily Receipt Zone 3 Receipt Points: Quantity in MMBTU 043200 TRANSCO - JONESBORO TO SNG (DISPLACEMENT) Z3 5,000 SERVICE AGREEMENT NO: 905660 EXHIBIT B-1 Page: 1 The legal description of the Delivery Points listed below are more particularly set forth in the Company's Delivery Point catalogs, a copy of which can be requested from Company or accessed through SoNet, Company's electronic computer system. Maximum Daily Delivery Production Area Delivery Points: Quantity in MMBTU 705500 AIR PRODUCTS 5,000 705600 AMAX METALS RECOVERY INC. 5,000 601610 ANGI - JACKSON TO ANGI (DISPLACEMENT) 5,000 033400 ANR - SHADYSIDE TO ANR 5,000 037204 ANR EXCHANGE - EUGENE ISLAND 341 3,650 034510 BAYOU BOULLION - REDELIVERY (US EXPL) 5,000 033510 BAYOU LONG #2 - REDELIVERY 2,228 503970 BEAR CREEK - DELIVERIES TO TENNESSEE 5,000 604810 BENSON - SABINE-TEXICAN TO S-T (DISPLACE) 4,500 013910 BLACK BAY - REDELIVERY 2,400 014010 BLACK BAY - WEST - REDELIVERY 3,936 705300 BP OIL - ALLIANCE REFINERY 5,000 022810 CARTHAGE - TO UPRC (DISPLACEMENT) 5,000 706800 CHANDELEUR SOUND 25 - REDELIVERY TO ARCO 3,936 656801 CHANNEL INDUSTRIES EXCHANGE - MOPS TIVOLI 5,000 605510 COLUMBIA GULF - SHADYSIDE TO CG (DISPLACE) 5,000 689300 COLUMBIA GULF EXCHANGE - EAST CAMERON 23 5,000 741300 DENHAM SPRINGS 3,840 014510 DIAMOND SOUTH - REDELIVERY 2,400 501000 EAST HAPPYTOWN - BAYOU HENRY TO GGC 5,000 019010 ELOI BAY - TIPC0 REDELIVERY 4,968 601000 FGT - FRANKLINTON - TO FGT 5,000 656900 FGT EXCHANGE - BRAZOS 367 1,000 656802 FGT EXCHANGE - MOPS TIVOLI 5,000 705700 FMP SULPHUR - MAIN PASS 299 5,000 601850 GULF STATES - SNG TO GSP 4,200 601951 GULF STATES - TO GSP (DISPLACEMENT) 5,000 030320 KOCH GATEWAY - SHADYSIDE TO KOCH (DISPLACE) 5,000 538110 KOCH GATEWAY - ST. MARTIN KOCH (DISPLACE) 5,000 601100 KOCH GATEWAY - TANGIPAHOA TO KOCH 5,000 690900 KOCH GATEWAY EXCHANGE - LOCKHART CROSSING 5,000 707200 LAKE FORTUNA - GAS LIFT - O'MEARA 3,936 048010 LIG - LOGANSPORT TO LIG (DISPLACEMENT) 5,000 604100 LRC - CARRVILLE TO LRC 5,000 664010 LRC - WHITE CASTLE TO LRC (DISPLACEMENT) 5,000 023510 MAIN PASS 129 - HALL HOUSTON - REDELIVERY 2,544 017810 MAIN PASS 144 - REDELIVERY 2,544 017910 MAIN PASS 298 - REDELIVERY 2,544 SERVICE AGREEMENT NO: 905660 EXHIBIT B-1 Page: 2 Maximum Daily Delivery Production Area Delivery Points: (Continued) Quantity in MMBTU 022910 MAIN PASS 310 - REDELIVERY 2,544 021750 MAIN PASS 311B - REDELIVERY 2,544 021310 MAIN PASS 313 - REDELIVERY 2,544 023910 MAIN PASS 59 - REDELIVERY 5,000 016410 MAIN PASS 69 - REDELIVERY 2,544 663210 NGPL - ERATH TO NGPL (DISPLACEMENT) 5,000 519001 NGPL EXCHANGE - TRANSCO MARKHAM PLANT 5,000 656800 NNG EXCHANGE - MOPS TIVOLI 5,000 692300 NNG EXCHANGE - ROBERTS COUNTY, TEXAS 5,000 603500 NOPSI - SNG TO NOPSI (NEW ORLEANS EAST) 5,000 656600 NUECES COUNTY, TEXAS 1,000 710200 POLARIS 1,968 605210 SABINE - HENRY HUB TO SABINE 5,000 605310 SEA ROBIN - ERATH TO SEA ROBIN (DISPLACE) 5,000 672600 SNG - TRANSCO EXCHANGE - WHARTON COUNTY, TX 5,000 020410 SOUTH PASS 60 - REDELIVERY 2,424 018210 SOUTH PASS 62 - REDELIVERY 2,424 021110 SOUTH PASS 70 - REDELIVERY 5,000 601710 SUGAR BOWL #3 - DESOTO PH TO SB - DISPLACE 1,000 601400 SUGAR BOWL #6 - TO ACADIAN - CARRVILLE 5,000 601910 SUGAR BOWL #7 - BIENVILLE PH TO SB - DISPLACE 5,000 603010 SUGAR BOWL #9 - DESOTO PH TO SB - DISPLACE 4,080 032510 TENN - PATTERSON TO TENN (DISPLACMENT) 5,000 503801 TENN - TOCA TO TENN (DISPLACEMENT) 5,000 032508 TENN EXCHANGE - EAST CAMERON 46 5,000 694700 TENN EXCHANGE - SOUTH PASS 77 (SP 78) 5,000 694900 TENN EXCHANGE - SOUTH TIMBALIER 37 5,000 501400 TEXAS GAS - BAYOU PIGEON TO TEXAS GAS 5,000 011110 THREE BAYOU BAY REDELIVERY - WICHITA 1,000 703500 TRANS LOUISIANA GAS COMPANY 528 603100 TRANSCO - FROST TO TRANSCO 5,000 673500 TRANSCO EXCHANGE - EUGENE ISLAND 129 5,000 695900 TRANSCO EXCHANGE - SHIP SHOAL 70 5,000 695950 TRANSCO EXCHANGE - SHIP SHOAL 72 5,000 519000 TRANSCO MARKHAM PLANT - CENTRAL TEXAS LOOP 5,000 601510 TRANSOK - BIENVILLE PARISH TO TRANSOK (DISPL) 5,000 502711 TRUNKLINE - SHADYSIDE TO TRUNK (DISPLACEMENT) 5,000 675800 UNITED EXCHANGE - EUGENE ISLAND 32 5,000 675900 UNITED EXCHANGE - EUGENE ISLAND 51 5,000 Maximum Daily Delivery Zone 1 Delivery Points: Quantity in MMBTU SERVICE AGREEMENT NO: 905660 EXHIBIT B-1 Page: 3 Maximum Daily Delivery Zone 1 Delivery Points: (Continued) Quantity in MMBTU 605100 AIM PIPELINE INTERCONNECT - SNG TO AIM 5,000 738300 ARTESIA 217 741200 BAY SPRINGS 480 731900 BUNGE CORPORATION 2,736 740500 CANTON 5,000 743100 CHEVRON - BROOKHAVEN 1,032 653010 COLUMBIA GULF - EAST CARROLL TO CG (DISPLACE) 5,000 732300 ERGON REFINING 5,000 742500 FAYETTE, MISSISSIPPI 3,312 712500 GAYLORD CONTAINER CO. 5,000 733200 HASSIE HUNT - JOHNSON & FAIR 72 742700 JOHN W. MCGOWAN - FRANKLIN CO 2,304 733100 JONES & O'BRIEN - STEVENS TAP 336 051410 KOCH GATEWAY - KOSCIUSKO TO KOCH 5,000 051310 KOCH GATEWAY - PERRYVILLE TO KOCH (DISPLACE) 5,000 740300 KOCH GATEWAY - RANKIN TO KOCH 5,000 741100 LAKE ST. JOHN - INTERNATIONAL PAPER 5,000 734000 MCGOWAN #1 120 734300 MCGOWAN #2 96 501300 MID-LOUISIANA - PERRYVILLE TO MID-LOUISIANA 5,000 726900 MISSISSIPPI CHEMICAL 5,000 739500 MVG - AMORY 5,000 727300 MVG - BENTON 336 735100 MVG - CARTHAGE 3,744 738600 MVG - CLAYTON VILLAGE 432 739200 MVG - COLUMBUS 5,000 725300 MVG - DEER CREEK NATURAL GAS DISTRICT 3,648 737200 MVG - DEKALB 960 730000 MVG - DURANT 1,776 729000 MVG - GOODMAN 624 734900 MVG - KOSCIUSKO 5,000 731100 MVG - LEXINGTON 5,000 735700 MVG - LOUISVILLE 5,000 736500 MVG - MACON LINE 5,000 940000 MVG - MERIDIAN AREA 5,000 741400 MVG - NATCHEZ 55 737500 MVG - NAVAL AIR STATION 1,320 735600 MVG - NORTH CENTRAL GAS DISTRICT 5,000 735500 MVG - NOXAPATER 696 728000 MVG - PICKENS 1,488 738800 MVG - STARKVILLE 5,000 746400 MVG - SYSTEMWIDE FARM TAPS 100 739600 MVG - WEST POINT 5,000 726000 MVG - YAZ00 CITY 5,000 SERVICE AGREEMENT NO: 905660 EXHIBIT B-1 Page: 4 Maximum Daily Delivery Zone 1 Delivery Points: (Continued) Quantity in MMBTU 732700 PENNZOIL - MILNER 96 733900 PENNZOIL - MITCH PAYNE 432 733800 PENNZOIL - NAN BERRY 1,032 733600 PENNZOIL - PERRY & CHILDRESS TAP 288 733400 PENNZOIL - PERRY TAP 840 732600 PENNZOIL - POWELL & TWINER TAP 696 732900 PENNZOIL - STEVENS 336 733000 PENNZOIL - STEVENS, WOODRUFF & HERRON 288 733300 PENNZOIL - WOODRUFF & FRILEY 288 744700 PLANT SWEATT - MISSISSIPPI POWER 5,000 740800 RALEIGH 1,440 742900 ROXIE 1,008 746600 SMC - SYSTEMWIDE FARM TAPS 2,000 732800 SOHIO PUMPING STATION 168 731000 TCHULA 912 051810 TENN - PUGH TO TENN 5,000 504001 TENN - ROSE HILL TO TENN 5,000 600800 TEXAS EASTERN - KOSCIUSKO TO TETCO 5,000 504210 TRUNKLINE - WEST CARROLL TO TRUNKLINE (DISPL) 5,000 731700 U.S. CORPS OF ENGINEERS 552 732200 VICKSBURG 5,000 746200 VICKSBURG AREA FARM TAPS 100 656200 WASHINGTON PARISH AREA 2,064 742600 WEST LINCOLN 1,728 727600 WESTLAND RESOURCES - CMW OIL 96 740400 WESTLAND RESOURCES - MADISON 72 Maximum Daily Delivery Zone 2 Delivery Points: Quantity in MMBTU 850010 ADEL - SGNG 2,688 659700 ALA - ANNISTON AREA 5,000 841400 ALA - ASHVILLE 1,632 838100 ALA - BARRETT COMPANY 2,496 658500 ALA - BIRMINGHAM AREA 5,000 817400 ALA - BRENT & CENTERVILLE 2,880 838300 ALA - BULLOCK 1,152 659900 ALA - DEMOPOLOS AREA 5,000 806800 ALA - ECLECTIC 530 940021 ALA - FAIRFAX-SHAWMUT AREA 5,000 654700 ALA - GADSDEN AREA 5,000 801600 ALA - GREENE COUNTY 5,000 802400 ALA - GREENSBORO 2,880 SERVICE AGREEMENT NO: 905660 EXHIBIT B-1 Page: 5 Maximum Daily Delivery Zone 2 Delivery Points: (Continued) Quantity in MMBTU 847000 ALA - HEFLIN GATE 1,488 940035 ALA - JASPER AREA 5,000 940005 ALA - LINCOLN AREA 2,688 803400 ALA - MARION 2,832 833400 ALA - MONTEVALLO 4,176 940022 ALA - MONTGOMERY AREA 5,000 809400 ALA - NOTASULGA TAP 696 821200 ALA - OAK GROVE 1,032 940011 ALA - OPELIKA AREA 5,000 836201 ALA - PARRISH-OAKMAN 1,152 940056 ALA - PELL CITY AREA 2,304 909700 ALA - PHENIX CITY AREA 5,000 834100 ALA - PLANT MILLER 5,000 818800 ALA - REFORM #1 888 819400 ALA - REFORM #2 1,176 844800 ALA - RIVERSIDE EAST TAP 100 940023 ALA - SELMA AREA 5,000 847900 ALA - SYSTEMWIDE FARM TAPS 100 940006 ALA - TALLADEGA AREA 5,000 845400 ALA - TALLADEGA RACEWAY 432 940002 ALA - TUSCALOOSA AREA 5,000 940024 ALA - TUSKEGEE AREA 5,000 802600 ALA - UNIONTOWN 2,064 843200 ALABAMA POWER COMPANY - GADSDEN 5,000 940012 ALABASTER AREA 5,000 850020 ALBANY AREA - SGNG 5,000 831900 ALLIED LIME CO 3,336 800500 AMERICAN CAN JAMES RIVERS 5,000 850030 AMERICUS AREA - SGNG 5,000 850041 ANDERSONVILLE #1 - SGNG 288 850040 ANDERSONVILLE/MULCOA AREA - SGNG 5,000 850050 ASHBURN - SGNG 2,688 850390 ATLANTA GAS LIGHT - SGNG 5,000 850060 BAINBRIDGE AREA - SGNG 4,032 820200 BERRY 696 850070 BLAKELY AREA - SGNG 3,360 832900 BLUE CIRCLE 5,000 909300 BOAZ AREA 3,096 811700 BRICKYARD - BICKERSTAFF 4,488 821900 BROOKSIDE 888 820300 BROWN WOOD PRESERVING 480 850080 CAIRO - SGNG 2,304 833200 CALERA 5,000 850090 CAMILLA - SGNG 1,728 SERVICE AGREEMENT NO: 905660 EXHIBIT B-1 Page: 6 Maximum Daily Delivery Zone 2 Delivery Points: (Continued) Quantity in MMBTU 808500 CAMP HILL 1,392 832100 CHENEY LIME 3,096 844400 CHILDERSBURG #1 3,648 844500 CHILDERSBURG #2 5,000 833600 CHILTON COUNTY 1,488 850100 COLQUITT - SGNG 864 832600 COLUMBIANA 2,376 850110 CORDELE AREA - SGNG 5,000 940027 CORDOVA AREA 3,480 601210 CORONADO TO CORONADO - DISPLACEMENT 5,000 823300 CULLMAN - JEFFERSON 5,000 850120 CUTHBERT - SGNG 2,904 808400 DADEVILLE 4,440 850130 DAWSON - SGNG 2,544 850140 DECATUR COUNTY - SGNG 2,688 843400 DEKALB -CHEROKEE #1 5,000 843500 DEKALB - CHEROKEE #2 811500 DIXIELAND - BICKERSTAFF 4,224 850150 DOERUN - SGNG 720 850160 DONALSONVILLE - SGNG 864 834800 DORA 1,032 850170 DOUGLAS - SGNG 5,000 832300 DRAVO - LONGVIEW LIME 5,000 850180 EDISON - SGNG 864 850410 ENGELHARD - SGNG 5,000 814400 FAIRFAX MILLS - WEST POINT PEPPERELL 3,192 819900 FAYETTE, ALABAMA 5,000 656100 FGT EXCHANGE - ESCAMBIA COUNTY, ALABAMA 500 501200 FGT EXCHANGE - ESCAMBIA COUNTY, ALABAMA 500 850190 FITZGERALD - SGNG 2,688 850420 FLORIDA POWER - SGNG 5,000 850430 FLORIDIN - SGNG 5,000 850200 FORT GAINES - SGNG 864 940029 FULTONDALE AREA 5,000 850450 GEORGIA PACIFIC CORPORATION - SGNG 5,000 850440 GOLDKIST - SGNG 1,488 819600 GORDO 948 940030 GRAYSVILLE AREA 5,000 801000 GULF STATES PAPER COMPANY 5,000 850210 HAVANA - SGNG 1,920 830600 HELENA 744 816800 HUNT OIL COMPANY 5,000 850530 JACKSONVILLE - SGNG 5,000 846200 JACKSONVILLE, ALABAMA 5,000 SERVICE AGREEMENT NO: 905660 EXHIBIT B-1 Page: 7 Maximum Daily Delivery Zone 2 Delivery Points: (Continued) Quantity in MMBTU 850220 JASPER - SGNG 840 801900 LAFARGE - CITADEL DIVISION 1,368 814200 LAFAYETTE - CHAMBERS COUNTY, ALABAMA 4,704 901100 LAGRANGE #2 5,000 815500 LANETT 3,336 815600 LANETT MILLS - WEST POINT PEPPERELL 1,392 814800 LANGDALE MILLS - WELLINGTON SEARS 1,104 815700 LANTUCK - WELLINGTON SEARS 480 826700 LEHIGH PORTLAND CEMENT 5,000 800800 LIVINGSTON 5,000 850230 LUMPKIN - SGNG 784 825400 MARSHALL COUNTY #1 5,000 825500 MARSHALL COUNTY #2 5,000 802900 MCMILLAN-BLOEDEL 5,000 850240 MEIGS AREA - SGNG 2,616 850460 MERCK & COMPANY - SGNG 5,000 809820 MGAG - LEE COUNTY 5,000 850470 MILWHITE - SGNG 1,248 850250 MONTEZUMA - SGNG 3,840 850260 MOULTRIE AREA - SGNG 5,000 807900 MOUNT VERNON MILLS, INC. 696 821400 MULGA 2,064 850270 NASHVILLE - SGNG 2,688 840800 NATIONAL CEMENT 5,000 819800 NORTHWEST ALABAMA GAS 5,000 046042 OAK GROVE - LICK CREEK METER STATION 4,152 046071 OAK GROVE #4 - FUEL GAS 3,768 046041 OAK GROVE #5 - FUEL GAS 3,648 046081 OAK GROVE #6 - FUEL GAS 3,768 850490 OCCIDENTAL CORP - SGNG 5,000 850280 OCILLA - SGNG 1,008 850500 OIL DRI OF GEORGIA - SGNG 5,000 823400 ONEONTA 5,000 850510 PACKAGING CORP OF AMERICA - SGNG 5,000 850290 PELHAM - SGNG 2,424 819000 PICKENS COUNTY GAS DISTRICT 2,640 846400 PIEDMONT 5,000 850300 QUINCY - SGNG 5,000 850310 QUITMAN - SGNG 2,688 841200 RAGLAND 576 840400 RAGLAND BRICK 696 850320 RICHLAND - SGNG 624 814700 RIVERVIEW MILLS - WEST POINT PEPPERELL 576 842600 SCOTTSBORO 5,000 SERVICE AGREEMENT NO: 905660 EXHIBIT B-1 Page: 8 Maximum Daily Delivery Zone 2 Delivery Points: (Continued) Quantity in MMBTU 815300 SHAWMUT MILLS - WEST POINT PEPPERELL 1,080 850330 SHELLMAN - SGNG 576 605410 SIA - DUNCANVILLE TO SIA (DISPLACEMENT) 5,000 051950 SIA - MCCONNELLS TO SIA (DISPLACEMENT) 5,000 940031 SOUTHEAST ALABAMA GAS DISTRICT AREA 5,000 052410 SOUTHLAND TO SOUTHLAND - DISPLACEMENT 5,000 834600 SUMITON 1,440 848000 SYLACAUGA 5,000 850340 SYLVESTER - SGNG 1,056 850350 TALLAHASSEE - SGNG 5,000 940032 TALLASSEE AREA 4,752 840600 TEMCO METALS ASBESTOS 312 850360 THOMASVILLE - SGNG 5,000 850370 TIFTON - SGNG 5,000 912900 TRUSSVILLE AREA 5,000 940037 U.S. STEEL FAIRFIELD AREA 5,000 850380 UNADILLA AREA - SGNG 1,032 809200 UNION SPRINGS 4,392 698200 UNITED CITIES - COLUMBUS AREA 5,000 850400 VIENNA - SGNG 3,240 823600 VULCAN MATERIALS - DOLCITO QUARRY 480 850520 WAVERLY MINERAL - SGNG 5,000 834400 WEST JEFFERSON 888 900800 WEST POINT, GEORGIA 3,888 802800 WILCOX COUNTY 5,000 833800 WILTON 288 800200 YORK 1,176 Maximum Daily Delivery Zone 3 Delivery Points: Quantity in MMBTU 905500 ADAIRSVILLE 5,000 919200 AGL - ALAMO 5,000 683600 AGL - ATLANTA AREA 5,000 940016 AGL - AUGUSTA AREA 5,000 917800 AGL - BARNESVILLE 5,000 919600 AGL - BAXLEY 5,000 931600 AGL - BLYTHE 432 920200 AGL - BRUNSWICK 5,000 940019 AGL - CALHOUN AREA 5,000 940026 AGL - CARROLLTON AREA 5,000 907800 AGL - CATOOSA COUNTY 888 940020 AGL - CEDARTOWN - ROCKMART AREA 5,000 SERVICE AGREEMENT NO: 905660 EXHIBIT B-1 Page: 9 Maximum Daily Delivery Zone 3 Delivery Points: (Continued) Quantity in MMBTU 907600 AGL - CHATSWORTH 5,000 918400 AGL - DANVILLE 888 918600 AGL - DEXTER 888 918800 AGL - EASTMAN - CADWELL 5,000 917200 AGL - FORSYTH 5,000 913400 AGL - GRIFFIN 5,000 919400 AGL - HAZLEHURST 3,576 918000 AGL - JACKSON 2,880 919800 AGL - JESUP 5,000 911500 AGL - MACON AREA 5,000 940018 AGL - NEWNAN-YATES-DALLAS AREA 5,000 908000 AGL - RINGGOLD 5,000 940013 AGL - ROME AREA 5,000 932500 AGL - SANDERSVILLE 5,000 911800 AGL - SAVANNAH AREA 5,000 934200 AGL - SPRINGFIELD-GUYTON 864 907000 AGL - SYSTEMWIDE FARM TAPS 100 917600 AGL - THOMASTON 5,000 930600 AGL - WARRENTON 5,000 917400 AGL - ZEBULON 2,208 932400 ARCADIAN 5,000 935500 ARCADIAN - SAVANNAH 5,000 659000 AUSTELL AREA 5,000 780900 BATH MILL 504 940039 CARTERSVILLE AREA 5,000 935700 CERTAIN-TEED 1,152 790200 CHATTANOOGA 5,000 934400 CLAXTON 2,736 781100 CLEARWATER MILL 5,000 915001 COCHRAN 5,000 940017 DALTON AREA 5,000 780500 DIXIE CLAY 1,056 901600 DIXIE MILLS - WEST POINT PEPPERELL 720 916800 DUBLIN #3 5,000 940028 DUBLIN AREA 5,000 901700 DUNSON MILLS - WEST POINT PEPPERELL 696 916400 EATONTON-GRAY 5,000 935200 ELBA ISLAND REDELIVERY TO SOUTHERN ENERGY 1,000 914800 FORT VALLEY 5,000 782700 GRANITEVILLE MILLS 5,000 902200 GRANTVILLE 888 915002 HAWKINSVILLE 5,000 902000 HOGANSVILLE 4,560 781200 HUBER #1 864 SERVICE AGREEMENT NO: 905660 EXHIBIT B-1 Page: 10 Maximum Daily Delivery Zone 3 Delivery Points: (Continued) Quantity in MMBTU 915000 JOINTLY OWNED BOARD #1 5,000 783300 KENTUCKY-TENNESSEE CLAY CO 576 905800 LAFAYETTE 5,000 901000 LAGRANGE #1 5,000 932800 LOUISVILLE 5,000 914200 MANCHESTER 2,880 933200 MILLEN 2,304 916200 MONTICELLO 4,704 935900 OWENS CORNING FIBERGLAS 984 915003 PERRY 5,000 935300 SAVANNAH SUGAR 5,000 782500 SCPL - AIKEN 5,000 780600 SCPL - BATH 3,648 781600 SCPL - GRANITEVILLE 4,080 780200 SCPL - NORTH AUGUSTA 5,000 783500 SOUTHEASTERN CLAY 576 930200 SPARTA 1,488 933600 STATESBORO 5,000 935100 STONE CONTAINER - PORT WENTWORTH 5,000 905400 SUMMERVILLE, TRION & LAFAYETTE 5,000 933800 SYLVANIA 5,000 914000 TALBOTTON 816 903400 TALLAPOOSA 2,064 931000 THOMSON, GEORGIA 5,000 043201 TRANSCO - JONESBORO TO TRANSCO 5,000 906000 TRION - LAFAYETTE 5,000 936300 UNION CAMP CORP. #1 5,000 936400 UNION CAMP CORP. #2 5,000 915100 WARNER ROBINS #2 5,000 781900 WARRENVILLE 840 933000 WAYNESBORO 2,880 914400 WOODLAND 336 931200 WRENS 5,000 931300 WRENS #2 5,000 EX-10 8 EXHIBIT 10.6 TRANSCONTINENTAL GAS PIPELINE CORPORATION 2800 Post Oak Boulevard P.O. Box 1396 Houston, TX 77251-1396 713-439-2000 March 4, 1997 Ms. Eileen Stanek AGL Resources Inc. 303 Peachtree Street, N.E. Atlanta, GA 30308 Dear Eileen: Enclosed for your records are fully executed originals of the following agreements for the 1998 Cherokee Expansion Project: o Precedent Agreement o Side Letter agreement regarding supply arrangements Transco hopes to file the certificate application for the project on March 31, 1997, I will forward a copy for your records when the filing is available. Hope you had a good vacation! Best regards, /s/ Craig Adams Craig Adams Project Development Enclosure Transco 1998 CHEROKEE EXPANSION PROJECT PRECEDENT AGREEMENT THIS PRECEDENT AGREEMENT, entered into this 28th day of February, 1997, is by and between TRANSCONTINENTAL GAS PIPE LINE CORPORATION ("Transco"), a Delaware corporation, and ATLANTA GAS LIGHT COMPANY ("Atlanta"), a Georgia corporation. Transco and Atlanta are sometimes referred to individually as "Party" and jointly as "Parties". WITNESSETH WHEREAS, Transco conducted an open season from December 18, 1996 through January 20, 1997, during which it accepted requests for firm transportation service to be made available through an expansion of its transmission facilities, hereinafter referred to as the "1998 Cherokee Expansion Project"; WHEREAS, Atlanta submitted a Complete Request (as defined in Transco's open season announcement) during the open season and desires firm transportation service as part of the 1998 Cherokee Expansion Project for 85,000 dekatherms of gas per day ("Dt/D") from the receipt point(s) specified in exhibit A hereto to the delivery point(s) specified in exhibit B hereto; WHEREAS, subject to the terms and conditions of this Precedent Agreement, Transco is willing to provide such firm transportation service for Atlanta as part of the 1998 Cherokee Expansion Project commencing as soon as all rights and regulatory approvals are received and accepted by Transco and all of the necessary facilities are constructed and ready for service. 1 NOW THEREFORE, in consideration of the mutual covenants herein assumed, Transco and Atlanta hereby agree as follows: 1. Rights and Approvals. Following the execution by Transco of this Precedent Agreement, Transco shall seek such contract rights, property rights, financing arrangements and regulatory approvals, including, without limitation, the requisite authorizations from the Federal Energy Regulatory Commission ("FERC"), including rates based on a straight fixed-variable ("SFV") rate design methodology and an incremental cost of service, as may be necessary to provide firm transportation service for Atlanta of 85,000 Dt/D from point(s) of receipt set forth in Exhibit A hereto point(s) of delivery set forth in exhibit B hereto. Transco reserves the right to file and prosecute applications for any required authorizations, any supplements, or amendments thereto, and, if necessary, court review, in such manner as it deems to be in its best interest. Atlanta agrees to use its good faith efforts to cooperate with and support Transco in obtaining such regulatory approvals and to provide Transco with any necessary information reasonably requested in order to obtain contract rights, property rights, financing arrangements and/or regulatory approvals, provided that Transco shall, upon Atlanta's request, seek confidential treatment of such information. In that regard, Atlanta agrees to file with the FERC in support of Transco's certificate application (including rates based on the SFV rate design methodology) filed pursuant to Section 7(c) of the Natural Gas Act for a certificate of public convenience and necessity and authorizing the 1998 Cherokee Expansion Project ("FERC Authorization"). In addition, if the FERC determines that information relating to Atlanta's markets, gas supply, or upstream transportation or storage arrangements is required from Transco, Atlanta shall provide Transco with such information in a timely manner to enable Transco to respond within the time required by the FERC. 2. Service Agreement. Within thirty (30) days after the date Transco receives and accepts the FERC Authorization, on terms satisfactory to Transco in its sole opinion, Transco and Atlanta shall deliver and execute a service agreement under Transco's Rate Schedule FT ("Service Agreement"), provided that this Precedent Agreement has not been previously terminated. The Service Agreement shall provide for the firm transportation by Transco for Atlanta of 85,000 Dt/D 2 from point(s) of receipt set forth in exhibit A hereto point(s) of delivery set forth in Exhibit B hereto. 3. Rates. For the subject firm transportation service, Atlanta agrees to pay rates as approved by the FERC. 4. Term. Transco's obligation to provide the firm transportation service contemplated herein and Atlanta's obligation to pay Transco reservation charges for such service shall commence on the first day on which Transco's facilities necessary to provide firm service to Atlanta under the 1998 Cherokee Expansion Project have been constructed and are ready for service as determined in Transco's sole opinion. Such firm transportation service shall continue for a primary term of fifteen (15) years from the date that the firm transportation service commences, and year-to-year thereafter subject to termination after such primary term by either Party upon one (1) year prior written notice to the other Party. 5. Termination of Agreements. If Transco has not received and accepted the necessary FERC Authorizations on or before May 31, 1999, then at any time thereafter until Transco receives and accepts such FERC Authorizations, either Party shall have the right to terminate this Precedent Agreement by giving (30) days advance written notice to the other Party; provided, however, that such termination shall not be effective if during the 30-day period Transco receives and accepts the necessary FERC Authorizations. Additionally, if Transco has not commenced the firm shall have the right to terminate this Precedent Agreement and the Service Agreement by giving twenty-four (24) hours advance written notice to the other Party; provided that such right must be exercised on or before November 2, 2000 or else such right shall be waived. 6. Construction, After both Parties' execution of the Service Agreement pursuant to Paragraph 2 above and Transco's receipt and acceptance of all other necessary contracts rights, property rights, financing arrangements and regulatory approvals in a form and substance 3 satisfactory to Transco in its sole opinion, Transco shall proceed with the construction of the facilities so as to begin firm service by a projected in-service date of November 1, 1998. If Transco is unable to complete such construction and place such facilities into operation by such proposed in-service date despite its exercise of due diligence, Transco shall continue to proceed with due diligence to complete such construction, place such facilities in operations and commence service for Atlanta at the earliest practicable date thereafter. Transco shall not be liable in any manner to Atlanta, nor shall this Precedent agreement or the Service Agreement be subject to termination if, despite Transco's exercise of due diligence, Transco is unable to complete the construction of such facilities and commence firm transportation service contemplated herein by the proposed in-service date. 7. Prepayment Refund. Transco and Atlanta agree that the prepayment submitted by Atlanta during the open season for the 1998 Cherokee Expansion Project plus any interest that accrues on the prepayment amount (any interest on the prepayment amount calculated hereunder shall be a the interest rate set forth in Section 7 of the General Terms and Conditions of Transco's FERC Gas Tariff) prior to the in-service date of the project will be applied to Atlanta's reservation charges due of the first month of firm transportation service under the project. In the event that service commences on a date other than the first day of the month, the reservation charge will be prorated and the prepayment plus accrued interest will be applied to such pro rated reservation charge. In the event that Atlanta terminates this Precedent Agreement pursuant to Paragraph 5 above, Transco shall refund Atlanta's prepayment plus accrued interest. 8. Remedies. Atlanta recognizes that Transco will be required to incur material expenses to construct the 1998 Cherokee Expansion Project facilities by a projected in-service date of November 1, 1998. In the event that Atlanta fails to perform its obligations under this Precedent Agreement or terminates this Precedent Agreement in a manner inconsistent with Paragraph 5 above, Transco shall have the right to retain Atlanta's prepayment (plus accrued interest) made in accordance with Atlanta's request for firm transportation service under the 1998 Cherokee Expansion Project and to seek any other legal remedies available to Transco, provided that any such legal 4 remedy which is a monetary remedy shall be reduced by an amount equal to the prepayment (plus accrued interest) retained by Transco. 9. Notice. Notices under this Precedent Agreement shall be in writing and shall be addressed as follows: If to Atlanta: Thomas H. Benson Executive Vice President and Chief Operating Officer Atlanta Gas Light Company 303 Peachtree Street, N.E. Atlanta, GA 30308-3249 Fax: 404/584-3703 If to Transco: Transcontinental Gas Pipe Line Corporation 2800 Post Oak Boulevard P. O. Box 1396 Houston, Texas 77251-1396 Attention: Customer Services Fax: 713/215-2549 Notices may abe given by hand, electronic transmission, mail or courier. Notices shall be deemed given upon the date the notice is sent. Either Party may change its address or telecopy number for notices hereunder by providing written notice of such change to the other Party. 10. Assignment. Any individual or entity which shall succeed by purchase, merger or consolidation of the properties of Transco or Atlanta shall be entitled to the rights and shall be subject to the obligations of its predecessor in title under this Precedent Agreement. Either Party may, without prior consent of the other Party, pledge, mortgage or assign its rights hereunder as security for its indebtedness; otherwise, any assignment of this Precedent Agreement or any of the rights and obligations hereunder shall be void and of no force or effect unless the assigning Party first obtains the consent thereto in writing of the other Party. With respect to the foregoing sentence, Atlanta and Transco hereby agree to execute and deliver to any pledgee or mortgagee of the other 5 Party a consent to assignment to the extent such consent does not materially alter any of the terms and conditions of this Precedent Agreement. Any assignment hereof shall be subject to the receipt and acceptance by Transco of any necessary regulatory or governmental authorizations. This Precedent Agreement shall be binding upon and shall inure to the benefit of the respective authorized successors and assigns. 11. Governing Law. This Precedent Agreement and any action, claims, demands or settlements hereunder shall be governed by and construed in accordance with the laws of the State of Texas, excluding, however, any conflicts of laws, rules or principles which might require the application of the laws of another jurisdiction. Any action or proceeding arising out of this Precedent Agreement must be brought in the courts of the State of Texas with venue in the District Courts of Harris County; provided, however, that to the extent a basis for federal jurisdiction exists, Transco or Atlanta may in the alternative bring an action in the United States District Court for the Southern District of Texas. The Parties irrevocably waive any objections they might otherwise have to such jurisdiction or venue, whether on the grounds of inconvenience or otherwise, and any rights they might otherwise have to bring action in other jurisdiction or venue. 12. Third Persons. Except as expressly provided in this Precedent Agreement, nothing herein expressed or implied is intended or shall be construed to confer upon or to give any person not a Party hereto any rights, remedies or obligations under or by reason of this Precedent Agreement. 13. Laws and Regulatory Bodies. This Precedent Agreement and the obligations of the Parties hereunder are subject to all applicable laws, rules, orders and regulations of governmental authorities having jurisdiction and, in the event of conflict, such laws, rules, orders and regulations of governmental authorities having jurisdiction shall control. 14. Captions. The titles to each of the paragraphs in this Precedent Agreement are included for convenience of reference only and shall have no effect on, or be deemed as part of the 6 text of this Precedent Agreement. 15. Severability. Any provision of this Precedent Agreement that is prohibited or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of that prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of that provision in any other jurisdiction. 16. Further Assurances. Each Party agrees to execute and deliver all such other and additional instruments and documents and to do such other acts as may be reasonably necessary to effectuate the terms and provisions of this Precedent Agreement. IN WITNESS WHEREOF, the Parties have executed this Precedent Agreement, in duplicate originals, as of the date first above written. TRANSCONTINENTAL GAS PIPE LINE CORPORATION By: /s/ Frank J. Ferazzi Frank J. Ferazzi Vice President, Customer Service ATLANTA GAS LIGHT COMPANY By: /s/ Thomas H. Benson Thomas H. Benson Executive Vice President & Chief Operating Officer 7 EXHIBIT A Specified Receipt Points Atlanta Gas Light Company Transportation Contract Quantity: 85,000 DT/D Receipt Points Maximum Daily Quantity at Each Receipt Point(1) Point of interconnection between Transco's 85,000 Dt/D mainline and Mobile Bay Lateral at milepost 784.66 in Choctaw County, Alabama (1) These quantities do not include the additional quantities of gas to be retained by Transco for compressor fuel and line loss make-up. Therefore, Atlanta shall also deliver or cause to be delivered at the receipt points such additional quantities of gas to be retained by Transco for compressor fuel and line loss make-up. 8 Exhibit B Specified Delivery Points Atlanta Gas Light Company Transportation Contract Quantity: 85,000 Dt/D Delivery Points Maximum Daily Quantity at Each Delivery Point(2) Suwanee 85,000 (2) Deliveries to or for the account of Atlanta at the delivery point(s) shall be subject to the limits of the Delivery Point Entitlements ("DPEs") at such delivery points, as such DPEs are set forth in Transco's FERC Gas Tariff as amended from time to time. 9 TRANSCONTINENTAL GAS PIPELINE CORPORATION 2800 Post Oak Boulevard P.O. Box 1396 Houston, TX 77251-1396 713-439-2000 February 19, 1997 Mr. Thomas H. Benson Senior Vice President and Chief Operating Officer Atlanta Gas Light Company 303 Peachtree Street, N. E. Atlanta, GA 30308-3249 Re: 1998 Cherokee Expansion Project Dear Mr. Benson: Transcontinental Gas Pipe Line Corporation ("Transco") and Atlanta Gas Light Company ("Atlanta") are parties to a Precedent Agreement dated February 28 , 1997, providing the terms and conditions for Atlanta's subscription to 85,000 dt per day of firm transportation service under Transco's 1998 Cherokee Expansion Project. Atlanta has requested that it be permitted to terminate the Precedent Agreement in the event it is unable to secure gas supply arrangements at the point of receipt set forth in the Precedent Agreement. Transco is agreeable to Atlanta's request, subject to certain conditions. Accordingly, Transco and Atlanta hereby agree as follows: 1. If Atlanta has not secured, on or before any one of the respective dates set forth below (each such date is respectively referred to as a "Notice Date"), arrangements with one or more sellers of natural gas which in total will provide at least two years of natural gas supplies for Atlanta's firm transportation capacity under the 1998 Cherokee Expansion Project, Atlanta shall have the right to terminate the Precedent Agreement by (i) providing written notice of termination to Transco on or before a Notice Date (referred to as the "Applicable Notice Date" and (ii) delivering, on or before the Applicable Notice Date, payment of the reimbursement amount set forth below which corresponds to the Applicable Notice Date. Upon Transco's receipt of timely delivered termination notice and reimbursement amount, if any, the Precedent Agreement shall automatically terminate. Mr. Thomas H. Benson Atlanta Gas Light Company February 19, 1997 Page 2 Notice Date Reimbursement Amount(1) March 31, 1997 None April 30, 1997 $360,000 May 31, 1997 $550,000 June 30, 1997 $1,000,000 2. Notices under this letter agreement shall be in writing and shall be addressed as follows: If to Atlanta: Thomas H. Benson Senior Vice President and Chief Operating Officer Atlanta Gas Light Company 303 Peachtree Street, N. E. Atlanta, GA 30308-3249 Fax: 404/584-3703 If to Transco: Transcontinental Gas Pipe Line Corporation 2800 Post Oak Boulevard P. O. Box 1396 Houston, Texas 77251-1396 Attention: Director, Project Development Fax: 713/215-2459 Notices may be delivered by fax, and notices shall be deemed delivered upon receipt by the receiving party. Either party may change its address or fax number for notices hereunder by providing written notice of such change to the other party. 3. This letter agreement shall be effective as of the date first above written. (1) In addition to the reimbursement amount, Transco shall have the right to retain Atlanta's $50,000 prepayment (plus accrued interest) submitted with Atlanta's request for service under the project. Mr. Thomas H. Benson Atlanta Gas Light Company February 19, 1997 Page 3 4. This letter agreement shall be governed by the laws of the State of Texas. 5. Any assignment of this letter agreement by either party to an entity other than an affiliate shall be void and of no force or effect. If the foregoing is agreeable to Atlanta, please execute both originals of this letter agreement and return them to Transco. Upon receipt, Transco will execute both duplicate originals and return one for Atlanta's records. Sincerely, TRANSCONTINENTAL GAS PIPE LINE CORPORATION By: /s/ Frank J. Ferazzi Frank J. Ferazzi Vice President, Customer Service Accepted and Agreed: ATLANTA GAS LIGHT COMPANY By:/s/Thomas H. Benson Thomas H. Benson Executive Vice President and Chief Operating Officer -----END PRIVACY-ENHANCED MESSAGE-----