<PAGE>
 
                                                                   EXHIBIT 10.34

                               SERVICE AGREEMENT
                            FOR RATE SCHEDULE FT-I


  This Service Agreement, made and entered into this 30th day of December,
1995, by and between TEXAS EASTERN TRANSMISSION CORPORATION, a Delaware
Corporation (herein called "Pipeline") and BOSTON GAS COMPANY (herein called
"Customer", whether one or more),

                             W I T N E S S E T H:

  WHEREAS, the Federal Energy Regulatory Commission required Pipeline to
restructure Pipeline's services to reflect compliance with Order Nos. 636, 636-
A, and 636-B (collectively hereinafter referred to as "Order No. 636"); and

  WHEREAS, by order issued January 13, 1993 (62 FERC P61,015) and order issued
April 22, 1993 (63 FERC P61,100), the Federal Energy Regulatory Commission
accepted Pipeline's revised tariff sheets filed in compliance with Order No. 636
to become effective June 1, 1993, subject to certain conditions set forth in the
April 22, 1993 order; and

  WHEREAS, Algonquin Gas Transmission Company ("Algonquin") made its final Order
No. 636 service elections on May 3, 1993 pursuant to the April 22, 1993 order
and Pipeline filed revised tariff sheets to become effective June 1, 1993 in
compliance with the April 22, 1993 order; and

  WHEREAS, Customer is also a customer of Algonquin; and

  WHEREAS, Algonquin, in compliance with Order No. 636 and Federal Energy
Regulatory Commission orders issued in Docket No. RS92-28, is assigning its firm
service rights on Pipeline directly to its customers; and
 
  WHEREAS, Customer's service rights hereunder are part of Algonquin's service
rights being assigned to its customers; and

  WHEREAS, Pipeline and Customer now desire to enter into this Service
Agreement to reflect the assignment of Algonquin's service rights to Customer;

  NOW, THEREFORE, in consideration of the premises and of the mutual covenants
and agreements herein contained, the parties do covenant and agree as follows:


                                   ARTICLE I

                              SCOPE OF AGREEMENT

  Subject to the terms, conditions and limitations hereof, of Pipeline's Rate
Schedule FT-1, and of the General Terms and Conditions, transportation service
hereunder will be firm. Subject to the terms, conditions and limitations hereof
and of Pipeline's Rate Schedule FT-1, Pipeline agrees to deliver for
<PAGE>
 
                               SERVICE AGREEMENT
                            FOR RATE SCHEDULE FT-1
                                  (Continued)


Customer's account quantities of natural gas up to the following quantity:

                    Maximum Daily Quantity (MDQ)     21,394 dth

  Pipeline shall receive for Customer's account, at those points on Pipeline's
system as specified in Article IV herein or available to Customer pursuant to
Section 14 of the General Terms and Conditions (hereinafter referred to as
Point(s) of Receipt) for transportation hereunder daily quantities of gas up to
Customer's MDQ, plus Applicable Shrinkage. Pipeline shall transport and deliver
for Customer's account, at those points on Pipeline's system as specified in
Article IV herein or available to Customer pursuant to Section 14 of the General
Terms and Conditions (hereinafter referred to as Point(s) of Delivery), such
daily quantities tendered up to such Customer's MDQ.

  Pipeline shall not be obligated to, but may at its discretion, receive at any
Point of Receipt on any day a quantity of gas in excess of the applicable
Maximum Daily Receipt Obligation (MDRO), plus Applicable Shrinkage, but shall
not receive in the aggregate at all Points of Receipt on any day a quantity of
gas in excess of the applicable MDQ, plus Applicable Shrinkage. Pipeline shall
not be obligated to, but may at its discretion, deliver at any Point of
Delivery on any day a quantity of gas in excess of the applicable Maximum Daily
Delivery Obligation (MDDO), but shall not deliver in the aggregate at all Points
of Delivery on any day a quantity of gas in excess of the applicable MDQ.

  In addition to the MDQ and subject to the terms, conditions and limitations
hereof, Rate Schedule FT-1 and the General Terms and Conditions, Pipeline shall
deliver within the Access Area under this and all other service agreements under
Rate Schedules CDS, FT-1, and/or SCT, quantities up to Customer's Operational
Segment Capacity Entitlements, excluding those Operational Segment Capacity
Entitlements scheduled to meet Customer's MDQ, for Customer's account, as
requested on any day.


                                  ARTICLE II

                               TERM OF AGREEMENT

  The term of this Service Agreement shall commence on June 1, 1993 and shall
continue in force and effect until 04/30/2012 and year to year thereafter unless
this Service Agreement is terminated as hereinafter provided. This Service
Agreement may be terminated by either Pipeline or Customer upon five (5) years
prior written notice to the other specifying a termination date of any year
occurring on or after the expiration of the primary term. In addition to
Pipeline rights under Section 22 of Pipeline's General Terms and Conditions and
without prejudice to such rights, this Service Agreement may be terminated at
any time by Pipeline in the event Customer fails to pay part or all of the

                                       2
<PAGE>
 
                               SERVICE AGREEMENT
                            FOR RATE SCHEDULE FT-1
                                  (Continued)


amount of any bill for service hereunder and such failure continues for thirty
(30) days after payment is due; provided, Pipeline gives thirty (30) 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 Pipeline of such outstanding bill.

  THE TERMINATION OF THIS SERVICE AGREEMENT WITH A FIXED CONTRACT TERM OR THE
PROVISION OF A TERMINATION NOTICE BY CUSTOMER TRIGGERS PREGRANTED ABANDONMENT
UNDER SECTION 7 OF THE NATURAL GAS ACT AS OF THE EFFECTIVE DATE OF THE
TERMINATION. PROVISION OF A TERMINATION NOTICE BY PIPELINE ALSO TRIGGERS
CUSTOMER'S RIGHT OF FIRST REFUSAL UNDER SECTION 3.13 OF THE GENERAL TERMS AND
CONDITIONS ON THE EFFECTIVE DATE OF THE TERMINATION.

  Any portions of this Service Agreement necessary to correct or cash-out
imbalances under this Service Agreement as required by the General Terms and
Conditions of Pipeline's FERC Gas Tariff, Volume No. 1, shall survive the other
parts of this Service Agreement until such time as such balancing has been
accomplished.


                                  ARTICLE III

                                 RATE SCHEDULE

  This Service Agreement in all respects shall be and remain subject to the
applicable provisions of Rate Schedule FT-1 and of the General Terms and
Conditions of Pipeline's FERC Gas Tariff on file with the Federal Energy
Regulatory Commission, all of which are by this reference made a part hereof.

  Customer shall pay Pipeline, for all services rendered hereunder and for the
availability of such service in the period stated, the applicable prices
established under Pipeline's Rate Schedule FT-1 as filed with the Federal Energy
Regulatory Commission, and as same may hereafter be legally amended or
superseded.

  Customer agrees that Pipeline 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 Pipeline's Rate Schedule FT-I, (b)
Pipeline's Rate Schedule FT-1 pursuant to which service hereunder is rendered or
(c) any provision of the General Terms and Conditions applicable to Rate
Schedule FT-1. Notwithstanding the foregoing, Customer does not agree that
Pipeline shall have the unilateral right without the consent of Customer
subsequent to the execution of this Service Agreement and Pipeline shall not
have the right during the effectiveness of this Service Agreement to make any
filings pursuant to Section 4 of the Natural Gas Act to change

                                       3
<PAGE>
 
                               SERVICE AGREEMENT
                            FOR RATE SCHEDULE FT-1
                                  (Continued)


the MDQ specified in Article I, to change the term of the agreement as specified
in Article II, to change Point(s) of Receipt specified in Article IV, to change
the Point(s) of Delivery specified in Article IV, or to change the firm
character of the service hereunder. Pipeline agrees that Customer may protest or
contest the aforementioned filings, and Customer does not waive any rights it
may have with respect to such filings.


                                  ARTICLE IV

                 POINT(S) OF RECEIPT AND POINT(S) OF DELIVERY

  The Point(s) of Receipt and Point(s) of Delivery at which Pipeline shall
receive and deliver gas, respectively, shall be specified in Exhibit(s) A and B
of the executed service agreement. Customer's Zone Boundary Entry Quantity and
Zone Boundary Exit Quantity for each of Pipeline's zones shall be specified in
Exhibit C of the executed service agreement.

  Exhibit(s) A, B and C are hereby incorporated as part of this Service
Agreement for all intents and purposes as if fully copied and set forth herein
at length.


                                   ARTICLE V

                                    QUALITY

  All natural gas tendered to Pipeline for Customer's account shall conform to
the quality specifications set forth in Section 5 of Pipeline's General Terms
and Conditions. Customer agrees that in the event Customer tenders for service
hereunder and Pipeline agrees to accept natural gas which does not comply with
Pipeline's quality specifications, as expressly provided for in Section 5 of
Pipeline's General Terms and Conditions, Customer shall pay all costs associated
with processing of such gas as necessary to comply with such quality
specifications. Customer shall execute or cause its supplier to execute, if such
supplier has retained processing rights to the gas delivered to Customer, the
appropriate agreements prior to the commencement of service for the
transportation and processing of any liquefiable hydrocarbons and any PVR
quantities associated with the processing of gas received by Pipeline at the
Point(s) of Receipt under such Customer's service agreement. In addition,
subject to the execution of appropriate agreements, Pipeline is willing to
transport liquids associated with the gas produced and tendered for
transportation hereunder.

                                       4
<PAGE>
 
                               SERVICE AGREEMENT
                            FOR RATE SCHEDULE FT-1
                                  (Continued)


                                  ARTICLE VI

                                   ADDRESSES

  Except as herein otherwise provided or as provided in the General Terms and
Conditions of Pipeline's FERC Gas Tariff, any notice, request, demand,
statement, bill or payment provided for in this Service 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 regular
mail to the post office address of the parties hereto, as the case may be, as
follows:

  (a)  Pipeline:   TEXAS EASTERN TRANSMISSION CORPORATION
                   5400 Westheimer Court
                   Houston, TX  77056-5310

  (b)  Customer:   BOSTON GAS COMPANY
                   ONE BEACON STREET
                   BOSTON, MA  02108

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


                                  ARTICLE VII

                                  ASSIGNMENTS

  Any Company which shall succeed by purchase, merger, or consolidation to the
properties, substantially as an entirety, of Customer, or of Pipeline, as the
case may be, shall be entitled to the rights and shall be subject to the
obligations of its predecessor in title under this Service Agreement; and either
Customer or Pipeline may assign or pledge this Service Agreement under the
provisions of any mortgage, deed of trust, indenture, bank credit agreement,
assignment, receivable sale, or similar instrument which it has executed or may
execute hereafter; otherwise, neither Customer nor Pipeline shall assign this
Service Agreement or any of its rights hereunder unless it first shall have
obtained the consent thereto in writing of the other; provided further, however,
that neither Customer nor Pipeline shall be released from its obligations
hereunder without the consent of the other. In addition, Customer may assign its
rights to capacity pursuant to Section 3.14 of the General Terms and Conditions.
To the extent Customer so desires, when it releases capacity pursuant to Section
3.14 of the General Terms and Conditions, Customer may require privity between
Customer and the Replacement Customer, as further provided in the applicable
Capacity Release Umbrella Agreement.

                                       5
<PAGE>
 
                               SERVICE AGREEMENT
                            FOR RATE SCHEDULE FT-1
                                  (Continued)



                                 ARTICLE VIII

                                INTERPRETATION

  The interpretation and performance of this Service Agreement shall be in
accordance with the laws of the State of Texas without recourse to the law
governing conflict of laws.

  This Service Agreement and the obligations of the parties are subject to all
present and future valid laws with respect to the subject matter, State and
Federal, and to all valid present and future orders, rules, and regulations of
duly constituted authorities having jurisdiction.


                                  ARTICLE IX

                       CANCELLATION OF PRIOR CONTRACT(S)

  This Service Agreement supersedes and cancels, as of the effective date of
this Service Agreement, the contract(s) between the parties hereto as described
below:


                                     NONE

                                       6
<PAGE>
 
                               SERVICE AGREEMENT
                            FOR RATE SCHEDULE FT-1
                                  (Continued)



  IN WITNESS WHEREOF, the parties hereto have caused this Service Agreement to
be signed by their respective Presidents, Vice Presidents or other duly
authorized agents and their respective corporate seals to be hereto affixed and
attested by their respective Secretaries or Assistant Secretaries, the day and
year first above written.

                              TEXAS EASTERN TRANSMISSION CORPORATION



                              By  /s/ Diane I. Tom
                                 ----------------------------------------
                                   Vice President



ATTEST:


/s/ Robert W. Reed
---------------------


                              BOSTON GAS COMPANY


                              By /s/ W. R. Luthern
                                 -----------------------------------------

ATTEST:

/s/ C. Nesser
---------------------

                                       7
<PAGE>
 
                                                               CONTRACT #800287

                        EXHIBIT A, TRANSPORTATION PATHS
                    FOR BILLING PURPOSES, DATED __________,
               TO THE SERVICE AGREEMENT UNDER RATE SCHEDULE FT-1
          BETWEEN TEXAS EASTERN TRANSMISSION CORPORATION ("Pipeline")
                     AND BOSTON GAS COMPANY ("Customer"), 
                                DATED ________:


(1)  Customer's firm Point(s) of Receipt:

<TABLE> 
<CAPTION> 
                                              Maximum Daily
                                                 Receipt
        Point                                  Obligation
          of                                 (plus Applicable        Measurement
       Receipt           Description          Shrinkage) dth       Responsibilities        Owner      Operator
       -------           -----------          --------------       ----------------        -----      --------
 <S>   <C>           <C>                     <C>                   <C>                     <C>        <C>
 1.     75931        Leidy Storage Field          21,394                  CNG                CNG         CNG
                     Potter Co., PA
</TABLE>

(2)  Customer shall have Pipeline's Master Receipt Point List ("MRPL").
     Customer hereby agrees that Pipeline's MRPL as revised and published by
     Pipeline from time to time is incorporated herein by reference.

Customer hereby agrees to comply with the Receipt Pressure Obligation as set
forth in Section 6 of Pipeline's General Terms and Conditions at such Point(s)
of Receipt.
                                               Transportation
             Transportation Path            Path Quantity (Dth/D)
             -------------------            ---------------------

             M3 to M3                              21,394



SIGNED FOR IDENTIFICATION

PIPELINE:   /s/ Diane I. Tom
            --------------------------

CUSTOMER:   /s/ W. R. Luthern
            --------------------------

SUPERSEDES EXHIBIT A DATED: __________

                                      A-1
<PAGE>
 
                                                               CONTRACT #:800287


              EXHIBIT B, POINT(S) OF DELIVERY, DATED ___________,
               TO THE SERVICE AGREEMENT UNDER RATE SCHEDULE FT-1
       BETWEEN TEXAS EASTERN TRANSMISSION CORPORATION ("Pipeline"), AND
                       BOSTON GAS COMPANY ("Customer"),
                              DATED ____________:

<TABLE> 
<CAPTION> 
                                                       Maximum                                                        
                                                       Daily                                                          
                                                       Delivery        Delivery      Measurement                      
        Point of                                       Obligation      Pressure      Responsi-                        
                                                       ----------                                                     
        Delivery         Description                   (dth)           Obligation     bilities     Owner      Operator
        --------       ---------------                                 ----------    ----------    -----      -------- 
<S>     <C>            <C>                             <C>             <C>           <C>           <C>        <C> 
1.      70087          ALGONQUIN - LAMBERTVILLE,           21,394      AS REQUESTED   TX EAST       TX EAST    ALGONQUIN
                       NJ  HUNTERDON CO., NJ                           BY CUSTOMER,  TRAN          TRAN 
                                                                       NOT TO
                                                                       EXCEED 750
                                                                       PSIG

2.      71078          ALGONQUIN - HANOVER, NJ             21,394      AS REQUESTED   TX EAST       TX EAST    ALGONQUIN
                       MORRIS CO., NJ                                  BY CUSTOMER,  TRAN          TRAN 
                                                                       NOT TO
                                                                       EXCEED 750
                                                                       PSIG
                                            
3.      79818          AGT-BOSTON GAS - FOR                  0         N/A           N/A           N/A         N/A
                       NOMINATION PURPOSES
</TABLE>

provided, however, that until changed by a subsequent Agreement between Pipeline
and Customer, Pipeline's aggregate maximum daily delivery obligations at each of
the Points of Delivery described above, including Pipeline's maximum daily
delivery obligation under this and all other firm Service Agreements existing
between Pipeline and Customer, shall in no event exceed the following:

                                      B-1
<PAGE>
 
                                                               CONTRACT #:800287

                  EXHIBIT B, POINT(S) OF DELIVERY (Continued)
                              BOSTON GAS COMPANY

<TABLE> 
<CAPTION> 
                                             AGGREGATE MAXIMUM DAILY
          POINT OF DELIVERY                  DELIVERY OBLIGATION (DTH)
          -----------------                  -------------------------
          <S>                                <C> 
               No. 1                                   157,064
               No. 2                                    72,571
</TABLE> 

SIGNED FOR IDENTIFICATION

PIPELINE: /s/ Diane I. Tom
          ---------------------------

CUSTOMER:  /s/ William R. Luthern
          ---------------------------

SUPERSEDES EXHIBIT B DATED __________

                                      B-2
<PAGE>
 
                                                               CONTRACT #:800287

   EXHIBIT C, ZONE BOUNDARY ENTRY QUANTITY AND ZONE BOUNDARY EXIT QUANTITY,
 DATED ___________________, TO THE SERVICE AGREEMENT UNDER RATE SCHEDULE FT-I
        BETWEEN TEXAS EASTERN TRANSMISSION CORPORATION ("PIPELINE") AND
             BOSTON GAS COMPANY ("CUSTOMER"), DATED_____________:


                         ZONE BOUNDARY ENTRY QUANTITY
                                     DTH/D

                                      TO
                                      --
<TABLE>
<CAPTION>
============================================================================================================================
FROM    STX    ETX    WLA    ELA    M1-24    M1-30    M1-TXG    M1-TGC    M2-24    M2-30    M2-TXG    M2-TGC    M2     M3
----------------------------------------------------------------------------------------------------------------------------
<S>     <C>    <C>    <C>    <C>    <C>      <C>      <C>       <C>       <C>      <C>      <C>       <C>       <C>    <C>
STX
----------------------------------------------------------------------------------------------------------------------------
ETX
---------------------------------------------------------------------------------------------------------------------------- 
WLA
---------------------------------------------------------------------------------------------------------------------------- 
ELA
---------------------------------------------------------------------------------------------------------------------------- 
M1-24
---------------------------------------------------------------------------------------------------------------------------- 
M1-30
---------------------------------------------------------------------------------------------------------------------------- 
M1-TXG
---------------------------------------------------------------------------------------------------------------------------- 
M1-TGC
---------------------------------------------------------------------------------------------------------------------------- 
M2-24
---------------------------------------------------------------------------------------------------------------------------- 
M2-30
---------------------------------------------------------------------------------------------------------------------------- 
M2-TXG
---------------------------------------------------------------------------------------------------------------------------- 
M2-TGC
---------------------------------------------------------------------------------------------------------------------------- 
M2
---------------------------------------------------------------------------------------------------------------------------- 
M3
============================================================================================================================
</TABLE> 

                                      C-1
<PAGE>
 
                                                               CONTRACT #:800287
 
                             EXHIBIT C (CONTINUED)
                              BOSTON GAS COMPANY

                          ZONE BOUNDARY EXIT QUANTITY
                                     DTH/D

                                      TO
                                      --

<TABLE>
<CAPTION>
============================================================================================================================
FROM    STX    ETX    WLA    ELA    M1-24    M1-30    M1-TXG    M1-TGC    M2-24    M2-30    M2-TXG    M2-TGC    M2     M3
----------------------------------------------------------------------------------------------------------------------------
<S>     <C>    <C>    <C>    <C>    <C>      <C>      <C>       <C>       <C>      <C>      <C>       <C>       <C>    <C>
STX
----------------------------------------------------------------------------------------------------------------------------
ETX
---------------------------------------------------------------------------------------------------------------------------- 
WLA
---------------------------------------------------------------------------------------------------------------------------- 
ELA
---------------------------------------------------------------------------------------------------------------------------- 
M1-24
---------------------------------------------------------------------------------------------------------------------------- 
M1-30
---------------------------------------------------------------------------------------------------------------------------- 
M1-TXG
---------------------------------------------------------------------------------------------------------------------------- 
M1-TGC
---------------------------------------------------------------------------------------------------------------------------- 
M2-24
---------------------------------------------------------------------------------------------------------------------------- 
M2-30
---------------------------------------------------------------------------------------------------------------------------- 
M2-TXG
---------------------------------------------------------------------------------------------------------------------------- 
M2-TGC
---------------------------------------------------------------------------------------------------------------------------- 
M2
---------------------------------------------------------------------------------------------------------------------------- 
M3
============================================================================================================================
</TABLE> 

SIGNED FOR IDENTIFICATION:

PIPELINE: /s/ Diane I. Tom
         -------------------------------------

CUSTOMER: /s/ William R. Luthern
         -------------------------------------

SUP ERCEDES EXHIBIT C DATED __________________

                                      C-2