<PAGE>

                                                                    Exhibit 10.4

                                                                         93002CR

                                SERVICE AGREEMENT
                       (APPLICABLE TO RATE SCHEDULE AFT-1)

This Agreement ("Agreement") is made and entered into this 29th day of October,
1999, by and between Algonquin Gas Transmission Company, a Delaware Corporation
(herein called "Algonquin"), and Boston Gas Company (herein called "Customer"
whether one or more persons).

WHEREAS, Customer and Algonquin currently are parties to an executed agreement
under Algonquin's Rate Schedule AFT-1 (Algonquin's Contract No. 93002C) dated
January 1, 1998; and

WHEREAS, Algonquin and Customer desire to enter into this Agreement to supersede
Algonquin's currently effective Contract No. 93002C;

In consideration of the premises and of the mutual covenants herein contained,
the parties do agree as follows:

                                    ARTICLE I
                               SCOPE OF AGREEMENT

1.1   Subject to the terms, conditions and limitations hereof and of Algonquin's
      Rate Schedule AFT-1, Algonquin agrees to receive from or for the account
      of Customer for transportation on a firm basis quantities of natural gas
      tendered by Customer on any day at the Point(s) of Receipt; provided,
      however, Customer shall not tender without the prior consent of Algonquin,
      at any Point of Receipt on any day a quantity of natural gas in excess of
      the applicable Maximum Daily Receipt Obligation for such Point of Receipt
      plus the applicable Fuel Reimbursement Quantity; and provided further that
      Customer shall not tender at all Point(s) of Receipt on any day or in any
      year a cumulative quantity of natural gas, without the prior consent of
      Algonquin, in excess of the following quantities of natural gas plus the
      applicable Fuel Reimbursement Quantities:

                     Maximum Daily Transportation Quantity
                     -------------------------------------

                       Nov 16 - Apr 15          44,699*
                       Apr 16 - May 31          38,582
                       Jun 1  - Sep 30          26,349
                       Oct 1  - Nov 15          38,582

      *MDTQ to be utilized in applying monthly Reservation Charge

            Maximum Annual Transportation Quantity            13,513,671 MMBtu
<PAGE>

                                                                         93002CR

                                SERVICE AGREEMENT
                       (APPLICABLE TO RATE SCHEDULE AFT-1)

            provided, however, subject to Algonquin's receipt of one (1) year
            prior written notice Customer shall have a one time election to
            reduce to 25,478 MMBtu the MDTQ of this Agreement with such
            reduction to be effective on November 1, 2005.

1.2   Algonquin agrees to transport and deliver to or for the account of
      Customer at the Point(s) of Delivery and Customer agrees to accept or
      cause acceptance of delivery of the quantity received by Algonquin on any
      day, less the Fuel Reimbursement Quantities; provided, however, Algonquin
      shall not be obligated to deliver at any Point of Delivery on any day a
      quantity of natural gas in excess of the applicable Maximum Daily Delivery
      Obligation.

                                   ARTICLE II
                                TERM OF AGREEMENT

2.1   This Agreement shall become effective on the later of November 1, 1999, or
      the in-service date of the facilities authorized by the Commission in
      Docket No. CP99-113-000, and shall continue in effect for a term ending
      and including October 31, 2006 ("Primary Term"), and shall remain in force
      from year to year thereafter unless terminated by either party by written
      notice one year or more prior to the end of the Primary Term or any
      successive term thereafter. Algonquin's right to cancel this Agreement
      upon the expiration of the Primary Term hereof or any succeeding term
      shall be subject to Customer's rights pursuant to Sections 8 and 9 of the
      General Terms and Conditions.

2.2   This Agreement may be terminated at any time by Algonquin in the event
      Customer fails to pay part or all of the amount of any bill for service
      hereunder and such failure continues for thirty days after payment is due;
      provided Algonquin gives ten days prior written notice to Customer of such
      termination and provided further such termination shall not be effective
      if, prior to the date of termination, Customer either pays such
      outstanding bill or furnishes a good and sufficient surety bond
      guaranteeing payment to Algonquin of such outstanding bill; provided that
      Algonquin shall not be entitled to terminate service pending the
      resolution of a disputed bill if Customer complies with the billing
      dispute procedure currently on file in Algonquin's tariff.
<PAGE>

                                                                         93002CR

                                SERVICE AGREEMENT
                       (APPLICABLE TO RATE SCHEDULE AFT-1)

                                   ARTICLE III
                                  RATE SCHEDULE

3.1   Customer shall pay Algonquin for all services rendered hereunder and for
      the availability of such service under Algonquin's Rate Schedule AFT-1 as
      filed with the Federal Energy Regulatory Commission and as the same may be
      hereafter revised or changed. The rate to be charged Customer for
      transportation hereunder shall not be more than the maximum rate under
      Rate Schedule AFT-1, nor less than the minimum rate under Rate Schedule
      AFT-1.

3.2   This Agreement and all terms and provisions contained or incorporated
      herein are subject to the provisions of Algonquin's applicable rate
      schedules and of Algonquin's General Terms and Conditions on file with the
      Federal Energy Regulatory Commission, or other duly constituted
      authorities having jurisdiction, and as the same may be legally amended or
      superseded, which rate schedules and General Terms and Conditions are by
      this reference made a part hereof.

3.3   Customer agrees that Algonquin shall have the unilateral right to file
      with the appropriate regulatory authority and make changes effective in
      (a) the rates and charges applicable to service pursuant to Algonquin's
      Rate Schedule AFT-1, (b) Algonquin's Rate Schedule AFT-1, pursuant to
      which service hereunder is rendered or (c) any provision of the General
      Terms and Conditions applicable to Rate Schedule AFT-1. Algonquin agrees
      that Customer may protest or contest the aforementioned filings, or may
      seek authorization from duly constituted regulatory authorities for such
      adjustment of Algonquin's existing FERC Gas Tariff as may be found
      necessary to assure that the provisions in (a), (b), or (c) above are just
      and reasonable.

                                   ARTICLE IV
                               POINT(S) OF RECEIPT

Natural gas to be received by Algonquin for the account of Customer hereunder
shall be received at the outlet side of the measuring station(s) at or near the
Primary Point(s) of Receipt set forth in Exhibit A of the service agreement,
with the Maximum Daily Receipt Obligation and the receipt pressure obligation
indicated for each such Primary Point of Receipt. Natural gas to be received by
Algonquin for the account of Customer hereunder may also be received at the
outlet side of any other measuring station on the Algonquin system, subject to
reduction pursuant to Section 6.2 of Rate Schedule AFT-1.
<PAGE>

                                                                         93002CR

                                SERVICE AGREEMENT
                       (APPLICABLE TO RATE SCHEDULE AFT-1)

                                    ARTICLE V
                              POINT(S) OF DELIVERY

Natural gas to be delivered by Algonquin for the account of Customer hereunder
shall be delivered on the outlet side of the measuring station(s) at or near the
Primary Point(s) of Delivery set forth in Exhibit B of the service agreement,
with the Maximum Daily Delivery Obligation and the delivery pressure obligation
indicated for each such Primary Point of Delivery. Natural gas to be delivered
by Algonquin for the account of Customer hereunder may also be delivered at the
outlet side of any other measuring station on the Algonquin system, subject to
reduction pursuant to Section 6.4 of Rate Schedule AFT-1.

                                   ARTICLE VI
                                    ADDRESSES

Except as herein otherwise provided or as provided in the General Terms and
Conditions of Algonquin's FERC Gas Tariff, any notice, request, demand,
statement, bill or payment provided for in this Agreement, or any notice which
any party may desire to give to the other, shall be in writing and shall be
considered as duly delivered when mailed by registered, certified, or first
class mail to the post office address of the parties hereto, as the case may be,
as follows:

      (a)   Algonquin: Algonquin Gas Transmission Company
                       5400 Westheimer Ct
                       Houston, TX 77056

      (b)   Customer:  Boston Gas Company
                       One Beacon Street
                       Boston, MA 02108

or such other address as either party shall designate by formal written notice.
<PAGE>

                                                                         93002CR

                                SERVICE AGREEMENT
                       (APPLICABLE TO RATE SCHEDULE AFT-1)

                                   ARTICLE VII
                                 INTERPRETATION

The interpretation and performance of the Agreement shall be in accordance with
the laws of the Commonwealth of Massachusetts, excluding conflicts of law
principles that would require the application of the laws of a different
jurisdiction.

                                  ARTICLE VIII
                           AGREEMENTS BEING SUPERSEDED

When this Agreement becomes effective, it shall supersede the following
agreements between the parties hereto, except that in the case of conversions
from former Rate Schedules F-2 and F-3, the parties' obligations under Article
II of the service agreements pertaining to such rate schedules shall continue in
effect.

      Algonquin's agreement no. 93002C dated January 1, 1998 between Algonquin
      and Customer under Algonquin's Rate Schedule AFT-1.
<PAGE>

                                                                         93002CR

                                SERVICE AGREEMENT
                       (APPLICABLE TO RATE SCHEDULE AFT-1

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their respective agents thereunto duly authorized, the day and year first
above written.


                        ALGONQUIN GAS TRANSMISSION COMPANY


                        By:
                               ------------------------------ /s/ DMT

                        Title:
                               ------------------------------


                        BOSTON GAS COMPANY

                        By:    /s/ Nicholas Stavropoulos
                               ------------------------------

                        Title: Senior Vice President
                               ------------------------------
<PAGE>

                                                                         93002CR

                                SERVICE AGREEMENT
                       (APPLICABLE TO RATE SCHEDULE AFT-1)

                                    Exhibit A
                               Point(s) of Receipt

                             Dated: October 29, 1999

           To the service agreement under Rate Schedule AFT-1 between
Algonquin Gas Transmission Company (Algonquin) and Boston Gas Company (Customer)
                         concerning Point(s) of Receipt

       Primary                   Maximum Daily              Maximum
       Point of                Receipt Obligation      Receipt Pressure
       Receipt                      (MMBtu)                  (Psig)
       --------                ------------------      ----------------

       Hanover, NJ (TETCO)                             At any pressure requested
           Nov 16 - Apr 15          20,583             by Algonquin but not in
           Apr 16 - May 31          17,071             excess of 750 Psig.
            Jun 1 - Sep 30          10,047
            Oct 1 - Nov 15          17,071

       Lambertville, NJ                                At any pressure requested
           Nov 16 - Apr 15          24,116             by Algonquin but not in
           Apr 16 - May 31          21,512             excess of 750 Psig.
            Jun 1 - Sep 30          16,302
            Oct 1 - Nov 15          21,512

Signed for Identification

Algonquin:
           --------------------------- /s/ JMM

Customer: /s/ Nicholas Stavropoulos
          ----------------------------

                                /s/ ED
<PAGE>

                                                                         93002CR

                                SERVICE AGREEMENT
                       (APPLICABLE TO RATE SCHEDULE AFT-1)

                                    Exhibit B
                              Point(s) of Delivery

                             Dated: October 29, 1999

           To the service agreement under Rate Schedule AFT-1 between
Algonquin Gas Transmission Company (Algonquin) and Boston Gas Company (Customer)
                         concerning Point(s) of Delivery

       Primary                    Maximum Daily            Minimum
       Point of                Delivery Obligation    Delivery Pressure
       Delivery                     (MMBtu)                 (Psig)
       --------                -------------------    -----------------

       At Customer's reduction
       valves located at Everett, MA                         75
         Nov 16 - Apr 15              16,552
         Apr 16 - May 31              14,411
         Jun 1  - Sep 30              10,130
         Oct 1  - Nov 15              14,411

       At the property line
       on the outlet side of
       meter stations located at:
       Waltham, MA                                          125
         Nov 16 - Apr 15               6,733
         Apr 16 - May 31               6,037
         Jun 1  - Sep 30               4,643
         Oct 1  - Nov 15               6,037

       East Braintree, MA                                   125
         Nov 16 - Apr 15               8,605
         Apr 16 - May 31               7,697
         Jun 1  - Sep 30               5,880
         Oct 1  - Nov 15               7,697

Signed for Identification

Algonquin:
           --------------------------- /s/ JMM

Customer: /s/ Nicholas Stavropoulos
          ----------------------------

                                /s/ ED
<PAGE>

                                                                         93002CR

                                SERVICE AGREEMENT
                       (APPLICABLE TO RATE SCHEDULE AFT-1)

                                    Exhibit B
                              Point(s) of Delivery
                                   (Continued)

                             Dated: October 29, 1999

           To the service agreement under Rate Schedule AFT-1 between
Algonquin Gas Transmission Company (Algonquin) and Boston Gas Company (Customer)
                         concerning Point(s) of Delivery

       Primary                    Maximum Daily            Minimum
       Point of                Delivery Obligation     Delivery Pressure
       Delivery                      (MMBtu)                (Psig)
       --------                -------------------     -----------------

       Weston, MA                                            100
         Nov 16 - Apr 15                 917
         Apr 16 - May 31                 752
         Jun 1  - Sep 30                 422
         Oct 1  - Nov 15                 752

       Wellesley, MA                                          60
         Nov 16 - Apr 15              11,384
         Apr 16 - May 31               9,419
         Jun 1  - Sep 30               5,487
         Oct 1  - Nov 15               9,419

       Ponkapoag, MA                                         200
         Nov 16 - Apr 15              15,116
         Apr 16 - May 31              14,523
         Jun 1  - Sep 30              13,338
         Oct 1  - Nov 15              14,523


Signed for Identification

Algonquin:
           --------------------------- /s/ JMM

Customer: /s/ Nicholas Stavropoulos
          ----------------------------

                                /s/ ED
<PAGE>

                                                                         93002CR

                                SERVICE AGREEMENT
                       (APPLICABLE TO RATE SCHEDULE AFT-1)

                                    Exhibit B
                              Point(s) of Delivery
                                   (Continued)

                             Dated: October 29, 1999

           To the service agreement under Rate Schedule AFT-1 between
Algonquin Gas Transmission Company (Algonquin) and Boston Gas Company (Customer)
                         concerning Point(s) of Delivery

       Primary                    Maximum Daily             Minimum
       Point of                Delivery Obligation     Delivery Pressure
       Delivery                      (MMBtu)                 (Psig)
       --------                -------------------     -----------------

       Norwood, MA                                            75
         Nov 16 - Apr 15               1,488
         Apr 16 - May 31               1,209
         Jun 1  - Sep 30                 651
         Oct 1  - Nov 15               1,209

       Potter Street
        East Braintree, MA                            Algonquin's line
         Nov 16 - Apr 15               6,664          pressure as may exist
         Apr 16 - May 31               6,402          from time to time.
         Jun 1  - Sep 30               5,880
         Oct 1  - Nov 15               6,402

       Algonquin's Maximum Daily Delivery Obligations for the East Braintree and
       Potter Street Points of Delivery under Contract Nos. 93002CR, 93002ER and
       99012 shall not exceed a combined daily total equal to the aggregate of
       the former Maximum Daily Delivery Obligations at the East Braintree Point
       of Delivery under Rate Schedules AFT-1 (F-1) and AFT-E (F-1) in the
       amounts of 16,948 MMBtu and 5,238 MMBtu, respectively.


Signed for Identification

Algonquin:
           --------------------------- /s/ JMM

Customer: /s/ Nicholas Stavropoulos
          ----------------------------

                                /s/ ED