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(letterhead of Southern Natural Gas Company appears here)

SOUTHERN NATURAL GAS


                                  June 30, 1994

         Mr. Stephen J. Gunther
         Vice President-Gas Supply
             and Federal Regulation
         Atlanta Gas Light Company
         P.O. Box 4569
         Atlanta, Georgia 30302

Re:               Amendment to Letter Agreement dated
                  October 22, 1993 among and between
                  Southern Natural Gas Company,
                  Atlanta Gas Light Company and Chattanooga Gas Company

Dear Mr. Gunther:

         By letter  agreement dated October 22, 1993,  Atlanta Gas Light Company
(Atlanta),  Southern Natural Gas Company  (Southern) and Chattanooga Gas Company
(Chattanooga) agreed on certain terms and conditions with respect to the service
elections  of Atlanta and  Chattanooga  to be effective  November 1, 1993.  Such
letter  agreement shall be referred to throughout as the "Letter  Agreement." In
paragraph 6 of the Letter Agreement, Southern agreed that it would file with the
Federal Energy Regulatory Commission ("Commission") for authorization to abandon
by  assignment  and  novation  of its  obligations  to  Atlanta a portion of the
transportation service ("ANR Transportation  Service") and storage service ("ANR
Storage  Service)  Southern  receives from ANR Pipeline  Company ("ANR") and ANR
Storage   Company,   ("ANR   Storage")   respectively.   Such   portion  of  the
transportation  and storage service is attributable to service Southern provides
on its  system  under  its Rate  Schedules  CSS-1,  CSS-2 and STS-1 on behalf of
Atlanta.  Atlanta has  requested to amend the terms of paragraph 6 to the Letter
Agreement to provide for the assignment and



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Mr. Stephen J. Gunther
June 30, 1994
Page 2 of 9

novation of the ANR Storage  Service  without the assignment and novation of the
ANR Transportation  Service.  Southern is agreeable to such amendment subject to
the terms and conditions set forth below.

In addition, at the time the Letter Agreement was executed, Southern intended to
implement  zone matrix rates as provided by the  Commission's  September 3, 1993
Order in Docket Nos.  RS92-10-001,  et al.  Southern does not now have in effect
zone matrix rates thereby  requiring  that the Letter  Agreement be amended with
respect  to the  commodity  rates to be  charged  for the  transportation  to be
performed by Southern  under Rate Schedule  STS-1.  Further,  on May 4, 1994, in
Docket No. RP94-183-000,  the Commission issued an order which required Southern
to remove  certain  provisions  in its Rate  Schedule  STS- 1 to provide for the
transportation  of third party gas to and from storage.  The order also required
Southern to proceed with a process under which  Southern would assign its rights
in the ANR  Transportation  Service  and ANR Storage  Service at the  customer's
election.  The  terms of this  amendment  reflect  the  terms  applicable  to an
election by Atlanta to take  assignment  of the ANR Storage  Service  and/or ANR
Transportation Service pursuant to the May 4 Order and under which Southern will
reflect  such  election in its tariff  filings  complying  with the May 4 Order,
hereinafter the  "Compliance  Filings."  Accordingly,  in  consideration  of the
mutual  agreements  and  covenants  contained  herein,  Southern,   Atlanta  and
Chattanooga agree as follows:

1.  Atlanta  and  Southern  agree  to the  amendment  of the last  paragraph  in
paragraph 6 to the Letter  Agreement such that Southern  agrees to file with the
Commission


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Mr. Stephen J. Gunther
June 30,1994
Page 3 of 9

an application  or request in the Compliance  Filings to abandon a percentage of
the ANR Storage Service equal to that portion of the service received by Atlanta
under  Southern's  Rate  Schedules  CSS-1 and CSS-2  pursuant  to the 50-day and
100-day storage service agreements  ("Storage  Agreements") between Southern and
ANR Storage  Company  dated  January 31, 1979,  and  February 1, 1979.  Further,
Atlanta and Southern continue to understand that if the abandonment,  assignment
or novation is modified by the  Commission  and results in the allocation of GSR
costs  to the ANR  Storage  Service  or the  ANR  Transportation  Service,  then
Southern will seek authority  from the  Commission to rescind such  abandonment,
assignment or novation and reinstate the current  service if requested by AGL in
writing  within fifteen (15) days of the date of the order of the Federal Energy
Regulatory  Commission  (Commission)  resulting  in  such  allocation;  provided
however,  that nothing  contained herein shall obligate Southern to rescind such
abandonment  or  assignment  without  approval  from  the  Commission.  

2. Upon execution of this  amendment,  receipt of consent from ANR Storage,  and
receipt  of  authorization  from the  Commission,  Southern  agrees to assign by
execution of an assignment  and novation  agreement with Atlanta and ANR Storage
those  portions of the Storage  Agreements  applicable  to services  provided to
Atlanta  without  assignment  of  the  ANR  Transportation  Service.  Southern's
assignment of the Storage Agreements and Atlanta's acceptance of such assignment
shall be conditioned on the occurrence of the following events:



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Mr. Stephen J. Gunther
June 30,1994
Page 4 of 9

(a)  The  amendment  by  Atlanta  and  Southern  of the  Storage  Transportation
Agreement dated June 1, 1979, as further described below in paragraph 3; and 

(b) The receipt of authorization from the Commission  acceptable to Southern and
Atlanta  under  either  specific   authority  or  on  a  pregranted   basis  for
authorization  for Southern to abandon the ANR Storage  Service by assignment to
Atlanta and for  authorization  to amend  Southern's Rate Schedule STS under the
terms set forth below in paragraph 3; and

(c) The receipt of ANR Storage's  affirmation and consent to such assignment and
novation.

It is understood that a Commission  authorization  rendered as requested in 2(b)
above which  results in Atlanta  having  direct or indirect  responsibility  for
transition costs, including GSR costs, of ANR that are not currently included in
ANR's Rate Schedules X-115 and X-116, under which the ANR Transportation Service
is performed, may not be acceptable to Atlanta.

3. In further consideration for the agreement herein, Southern and Atlanta agree
to amend the Storage Transportation Agreement between Southern and Atlanta dated
June 1, 1979, as follows:

(a) to include monthly payment by Atlanta to Southern of Atlanta's percentage of
the MW Monthly Charge and the Michigan Wisconsin


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Mr. Stephen J. Gunther
June 30,1994
Page 5 of 9

Excess  Charge  set forth in  Section  10.2(a)  (iii) and  Section  10.2(a)(iv),
respectively,  and the fuel gas charges set forth in Articles  4,5,6and 7 to the
Exhibit B to Southern's Rate Schedules CSS-1 and CSS-2; and 

(b) to state  that it is  understood  and  agreed  that it is the  intent of the
parties that Southern will flow-through to Atlanta its percentage of any charges
or surcharges  attributable  to that portion of the ANR  Transportation  Service
provided  to Atlanta  and  incurred  by  Southern  under the ANR  Transportation
Service as provided in ANR Pipeline Company's Rate Schedules X-115 and X-116, or
any applicable successor Rate Schedules.

4.  Atlanta and Southern  further  agree that the  commodity  charge for service
under Rate Schedule  STS-1 shall be (i) the Zone 3 commodity  charge  (including
applicable  surcharges and fuel) set forth under Southern's Rate Schedule FT for
that portion of the total volumes  delivered to Atlanta at its Redelivery Points
equal to the volumes  delivered by Southern to ANR at Shadyside  under Atlanta's
Rate Schedule FT Service  Agreements  and those volumes which were  delivered to
ANR Storage for injection from pipeline  sources other than  Southern's  system;
and, (ii) the Zone 3 commodity charge (including applicable surcharges and fuel)
under  Southern's  Rate  Schedule  IT for  that  portion  of the  total  volumes
delivered to Atlanta at its Redelivery  Points equal to the volumes delivered by
Southern to ANR at Shadyside under Atlanta's Rate Schedule IT Service Agreement.
It is  understood  and agreed  that  nothing  contained  herein  shall  obligate
Southern to transport



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Mr. Stephen J. Gunther
June 30,1994
Page 6 of 9

and deliver any quantities of gas under Rate Schedule STS-1 on behalf of Atlanta
which exceed  Atlanta's  Winter Contract  Quantity as set forth in Rate Schedule
STS-1.  During  the winter  withdrawal  period,  Southern  shall  allocate  such
withdrawal  volumes  under (i) and (ii)  above on a prorata  basis  based on the
ratio of volumes  available for  withdrawal  under (i) and (ii) above.  Southern
shall use the gas accounting  calculations of ANR Storage to determine the total
volumes  available for  withdrawal.  If during the Contract Year,  defined under
Rate Schedule  STS-1,  gas is withdrawn or released from the ANR Storage Service
assigned to Atlanta (Assigned  Storage  Service),  and the withdrawn or released
storage gas is not  delivered to Atlanta's  Redelivery  Points under the Storage
Transportation  Agreement (Off-System Volume), then Atlanta shall pay Southern a
commodity  charge equal to the  effective  summer  period Zone 1 commodity  rate
under  Southern's FT Rate Schedule  applicable to that portion of the Off-System
Volume attributable to Atlanta's  deliveries to Southern at Shadyside during the
relevant  Contract Year  (Shadyside  Portion).  The  Shadyside  Portion shall be
determined in accordance with the following  formula:  SP = OS X (SV / TV) where
"SP" is the Shadyside Portion;  "OS" is the Off-System Volume; "SV" is the total
volume available for withdrawal from the Assigned Storage Service as of November
1 of the Contract  Year that was  delivered by Atlanta to Southern at Shadyside,
as  adjusted  to  include  subsequent  deliveries  to  storage  of gas  that was
delivered  by Atlanta to  Southern at  Shadyside,  if any,  during the  relevant
winter withdrawal  period; and "TV" is the total volume available for withdrawal
from the Assigned Storage



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Mr. Stephen J. Gunther
June 30,1994
Page 7 of 9

Service as of November 1 of the Contract Year, as adjusted to include subsequent
deliveries to storage,  if any,  during the relevant winter  withdrawal  period.

Atlanta agrees to calculate and inform  Southern in writing of the OS, SV and TV
volumes no later than 30 days  following  the end of a  Contract  Year.  Atlanta
agrees that Southern, at it sole cost and expense, shall have the right to audit
Atlanta's  books and  accounts  to verify  the  submitted  OS, SV and TV volumes
within one year from the date Atlanta submits such volumes to Southern.  Atlanta
stipulates and agrees that, in the event Southern implements separate production
area rates or returns to a Zone Matrix Rate Design,  such that  production  area
costs are no longer  reflected  in the  applicable  zone of  delivery  commodity
charge, or in the event Southern  implements  separate  injection and withdrawal
rates for  transportation  in and out of storage under its Rate Schedules  FT-NN
and CSS, Atlanta will not oppose paying the effective  production-area commodity
charge or injection charge for the transportation service to Shadyside, provided
that each unit of storage gas  transported by Southern in its production area is
charged the applicable  production area rate only one time, and provided further
that for so long as such separate production area, injection or matrix rates are
in effect the  separate  charges  for the  Shadyside  Portion  of the  Offsystem
Volumes as provided above will not apply.

5. The parties agree and acknowledge, (a) that Atlanta has waived the obligation
by  Southern  under  paragraph  6 of the Letter  Agreement  to file to amend its
certificate to allow for the injection of third-party gas and to file to abandon
the ANR Storage  Service and ANR  Transportation  Service  within 45 days of the
date of the Letter Agreement; and



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Mr. Stephen J. Gunther
June 30,1994
Page 8 of 9

(b) that,  instead,  Southern will make any  necessary  filings as part of or in
conjunction  with the  Compliance  Filings  required by the  Commission's  May 4
Order.  Further,  Southern and Atlanta  each agree to pursue with due  diligence
receipt of the  necessary  consent  from ANR  Storage to assign the ANR  Storage
Service. 

6. The parties agree that, except as expressly recited herein, no other terms or
conditions  of the  Letter  Agreement  shall be  considered  amended  or  waived
pursuant  to this  amendment  and all other terms and  conditions  of the Letter
Agreement shall remain in full force and effect.  Please indicate your agreement
to the terms of this amendment by executing  this letter in the spaces  provided
below. 

Very truly yours,

SOUTHERN NATURAL GAS COMPANY

By:      /S/ Jim J. Cleary

Its:     Vice President

Agreed to and accepted
as of this 13 day
of July 1994

ATLANTA GAS LIGHT COMPANY

By:      /S/  Stephen J. Gunther

Its:     Vice President


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Mr. Stephen J. Gunther
June 30, 1994
Page 9 of 9

Agreed to and accepted
as of this day
of             :

CHATTANOOGA GAS COMPANY
By:  /s/ Kenneth A. Royse
Its:     President