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DISPLACEMENT SERVICE AGREEMENT

THIS  AGREEMENT,  made and  effective  as of this 4th day of April 1996,  by and
between  Washington  Gas Light Company  ("Seller") and Atlanta Gas Light Company
("Buyer").

WITNESSETH

WHEREAS,  Buyer  has  entered  into  a Firm  Peaking  Service  Agreement  (FPS-1
Agreement) with Cove Point LNG Company,  Limited  Partnership.  (Cove Point LNG)
and desires to have its Gas under the FPS- 1 Agreement delivered by displacement
from the  facilities  of Cove  Point LNG to its  facilities  utilizing  Seller's
services hereunder; and

WHEREAS,  Seller has firm  transportation  arrangements  on and agreements  with
various  interstate  pipelines and a blanket  certificate  issued by the Federal
Energy  Regulatory  Commission (FERC) 39 F.E.R.C.P.  61,119 (1987),  pursuant to
which Seller is willing to provide a displacement service to Buyer hereunder.

THEREFORE,  in  consideration  of the mutual  covenants  and promises  contained
herein, the parties do hereby agree:

I.  DEFINITIONS

A.  British  Thermal  Unit shall mean the amount of heat  required  to raise the
temperature  of one  avoirdupois  pound of water  one  degree  Fahrenheit  at 60
degrees Fahrenheit.

B. Day shall mean the 24-hour  period  commencing at eight  o'clock  (8:00) a.m.
Eastern Standard Time.

C.  Dekatherm  or Dth shall mean a  quantity  of heat equal to ten therms or one
million British thermal units (one MMBtu).

D.  Delivery  Point  shall mean the  existing  metering  station at the point of
interconnection  between the  facilities of Buyer and the facilities of Seller's
Transporters.


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E.  Displacement   Imbalance  shall  be  the  difference  between   Displacement
Quantities and Exchange Quantities during the Term of this Agreement.

F.  Displacement  Quantity  shall mean up to 69,000  dekatherms  per day as such
quantity of Gas is available  under Buyer's FPS-1 Agreement that Buyer nominates
for delivery to the Receipt Point.

G.  Exchange  Quantity  shall  mean on any day a  quantity  of gas  equal to the
Displacement  Quantity for such day  pursuant to Buyer's  FPS-1  Agreement  that
Seller shall arrange to be delivered to the Delivery Point.

H. Gas  means  natural  gas,  revaporized  liquefied  natural  gas  (LNG) or any
commonly accepted suitable equivalent.

I. MMBtu shall mean one million (1,000,000) BTUs.

J. Receipt Point shall mean the point of interconnection  between the facilities
of Cove Point LNG and the facilities of Seller.

K. Seller's Transporters shall mean Transcontinental Gas Pipeline Corporation or
any  other   interstate   pipeline  or  entity  with  whom  Seller  has  a  firm
transportation agreement and under which Seller can provide Displacement Service
to Buyer hereunder.

L. Psia shall mean pounds per square inch absolute.

M. Therm  shall mean a quantity of heat equal to one  hundred  thousand  British
thermal units (100,000 Btu's).

N. Total Heating Value Per Cubic Foot shall mean the number of BTU's produced by
the combustion,  at constant pressure,  of one cubic foot of gas, saturated with
water  vapor,  at 14.73  psia and 60  degrees  Fahrenheit,  with air of the same
pressure and  temperature as the gas, when the products of combustion are cooled
to the  initial  temperature  of gas and  air,  and  when the  water  formed  by
combustion is condensed to a liquid state and then adjusted to a dry basis.

II. TERM


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The Term of this  Agreement  shall  commence  on  December  15,  1996 and  shall
continue  through March 15, 1997. This Agreement shall continue for like periods
in subsequent years, on a year-to-year  basis, unless terminated by either party
upon no less than one hundred and twenty (120) days prior written  notice to the
other,  non-terminating  party;  Provided  that  this  agreement  shall  not  be
terminated prior to March 15, 1997.

III. RATE

For services provided during the  effectiveness of this Agreement,  Seller shall
charge  Buyer a rate of $0.50 per  dekatherm  of Gas  delivered  to the Delivery
Point hereunder and received by Buyer.

IV. SERVICE

A. Displacement  Service.  Seller shall provide a firm  displacement  service to
Buyer by receiving Displacement Quantities at the Receipt Point and by arranging
for equivalent Exchange Quantities to be delivered to the Delivery Point.

B. Nominations.  Buyer may make Displacement  Quantity  Nominations to Seller in
accordance with Article VI hereunder.  Upon receiving such  nominations,  Seller
shall arrange to receive such  quantities at the Receipt Point and to deliver an
equivalent Exchange Quantity to Buyer at the Delivery Point pursuant to Seller's
flexible  delivery point rights under its firm  transportation  agreements  with
Seller's  Transporters.  Seller warrants that it has sufficient firm capacity on
Seller's  Transporters to deliver the Exchange  Quantities to the Delivery Point
on a firm basis.  Buyer warrants that it has sufficient  capacity to receive the
Exchange Quantities on a firm basis.

C.  Imbalances.  It is  the  parties'  intent  that  there  be  no  Displacement
Imbalances  during the Term of this  Agreement.  To the extent that  measurement
records show an imbalance at the end of a month, Seller shall reimburse Buyer if
Displacement  Quantities exceed Exchange  Quantities,  and Buyer shall reimburse
Seller if Exchange Quantities exceed Displacement Quantities.  To the extent the
measurement  records  show an  imbalance  at the end of a month,  Seller  shall,
within 30 days,  reimburse  Buyer  with an  amount of gas equal to the  positive
difference,  if any,  between  the  Displacement  Quantities  and  the  Exchange
Quantities, and Buyer shall, within 30 days, reimburse


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Seller with an amount of gas equal to the negative  difference,  if any, between
the Displacement Quantities and the Exchange Quantities.

V. AGENCY DESIGNATION

During the effectiveness of this Agreement,  Buyer agrees to designate Seller as
Buyer's Agent under Buyer's  FPS-1  Agreement for the limited  purpose of making
nominations and scheduling Gas for delivery to Buyer, as well as the utilization
of Buyer's  rights  under such  agreement.  As Buyer's  Agent,  Seller  shall be
responsible  for  submitting  and  receiving  notices,  making  nominations  and
performing all necessary administrative duties under Buyer's FPS-1 Agreement and
under  Cove Point  LNG's  applicable  FERC-approved  Tariffs in order to provide
services to Buyer hereunder.

VI.   NOTICES AND COMMUNICATIONS

A. Displacement Quantity Nominations.  During the Term of this Agreement,  Buyer
shall  be the  sole  party  to  determine  when  to make  Displacement  Quantity
Nominations under Article IV-B. Buyer agrees to provide Seller with a minimum of
two (2) hours  notice  prior to any Day for which Buyer  exercises  its right to
withdraw gas from storage under its FPS-1  Agreement with Cove Point LNG. Seller
agrees to make a reasonable  effort to  accommodate  any  Displacement  Quantity
Nomination  provided by Buyer after the  commencement  of a Day. Upon receipt of
Buyer's Displacement Quantity Nomination, Seller shall nominate and schedule the
delivery of the  Displacement  Quantity in accordance with its agency powers and
responsibilities  under Article V. Displacement  Quantities  delivered hereunder
shall be considered by the parties as first through the meter(s) at the Delivery
Point.  Any  telephonic  notice  provided  by one party to the other  under this
Paragraph  A  shall  be  followed  up by  facsimile  transmission  by the  party
providing the notice.

B.  Representatives.  The  parties  agree  to have at least  one  representative
available by telephone at all times to receive  notices to each other  hereunder
including  notices of operational  conditions on their  respective  systems on a
daily basis. Each shall notify the other of the name(s) and telephone  number(s)
of the  representative(s)  authorized to receive  notices  hereunder.  Telephone
notice to one of such  representatives  shall constitute  sufficient  notice and
shall be binding upon both parites; provided any notice of termination hereunder
be given in writing in accordance Paragraph C below.


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C.  Notices.  Notices  required  under this  Agreement,  except as  provided  in
Paragraph B above, shall be sent in writing as follows:

(a) Buyer:
Atlanta Gas Light Company
303 Peachtree Street, N. E.
Atlanta, Georgia 30308
Attn:   Steve Gunther

(b) Seller:
Washington Gas Light Company
6801 Industrial Road
Springfield, Virginia 22151
Attn: Stephen J.  Shaiko

Notice under this provision  shall be construed as given when sent to the proper
address by registered  mail with return  receipt;  but written  notice  actually
received  by other  means  shall be fully  effective.  When  speed of  notice is
essential,  written notice shall be preceded by other appropriate  communication
(telephone or facsimile).

VII.  LAW AND REGULATION

This  Agreement  shall be  subject  to  applicable  federal  and state  laws and
applicable  orders,  rules  and  regulations  of any  local,  state  or  federal
governmental authority having or asserting  jurisdiction;  provided that nothing
contained  herein  shall be  construed  as a waiver of any right to  question or
contest any such law, order, rule or regulation in any forum having jurisdiction
over the subject  matter.  This  Agreement is further  subject to all  necessary
regulatory  and  governmental  approvals  and permits  including  all  necessary
authorizations from FERC and other applicable federal,  state, county, and local
authorities.  The  parties  agree to use  their  best  efforts  to  obtain  such
approvals  and  permits  and to  cooperate  in good faith to execute  all papers
necessary to effectuate the mutual  obligations  contemplated  hereunder.  It is
understood that if the necessary regulatory  approvals cannot be obtained,  this
Agreement  shall  terminate,  and the parties shall have no other  obligation or
liability to each other.

VIII.  BILLING AND METERING


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A. Billing. On or before the tenth (10th) day of each month, Seller shall render
a bill to Buyer that shall  include a  statement  showing the amount due and any
imbalance quantities applicable to the preceding month, along with a computation
of the amount due and payable by Buyer.

B.  Payment.  Buyer  shall  remit to Seller all  amounts  due  pursuant  to this
Agreement,  on or before the twentieth  (20th) day of each month for service for
the  preceding  month.  If bills are not so paid, a late  payment  charge may be
added equal to one percent of the unpaid bill. At the end of each nominal thirty
(30) day billing interval thereafter,  Seller may add an additional late payment
charge equal to one and one-half percent of any unpaid amount.  Should a dispute
arise regarding the amount payable in any invoice rendered hereunder,  the owing
party shall pay the undisputed amount and notify the other party of any disputed
amount.  The parties  agree to negotiate  in good faith to mutually  resolve the
disputed  amount  in a timely  manner  with  interest  (determined  by the prime
commercial rate charged by Citibank, N.A., New York, New York) accruing from the
original due date on any  unverified  disputed  amount  determined to be a valid
amount due.

C. Measurements.  The volume and total heating value of Displacement  Quantities
delivered  to the Receipt  Point shall be  determined  by meters  installed  and
maintained  by either Cove Point or Seller at such  point.  The volume and total
heating value of Exchange  Quantities  delivered to the Delivery  Point shall be
determined by Seller's  Transporter(s)  under such  transporter's  FERC-approved
Tariffs.  If at the end of Term of this Agreement,  measurement records show the
existence of a Displacement  Imbalance,  Seller,  shall  reimburse  Buyer's cost
therefor, if Displacement Quantities exceed Exchange Quantities, and Buyer shall
reimburse  Seller's cost therefor, if Exchange  Quantities exceed  Displacement
Quantities.  To the extent the measurement  records show an imbalance at the end
of a month,  Seller shall,  within 30 days,  reimburse Buyer's costs therefor if
Displacement  Quantities exceed Exchange Quantities,  and Buyer shall, within 30
days,   reimburse   Seller's  costs  therefor  if  Exchange   Quantities  exceed
Displacement Quantities.

D. Inspection of Records. Each party shall have the right at reasonable hours to
examine the books,  records, and charges of the other to the extent necessary to
verify the accuracy of any statement,  charge,  or  computation  made under this
Agreement.  In the  event an error is  discovered  in the  amount  billed in any
statement  rendered by Seller,  such error shall be adjusted thirty (30) days of
the determination thereof; provided


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that claim therefor shall have been made within sixty (60) days from the date of
discovery of such error. No error will be adjusted after twenty-four (24) months
from the date of such statement.

E. Metering  Equipment.  The parties  understand that the metering  equipment of
Seller's  Transporters  shall be utilized to measure the receipt and delivery of
Exchange  Quantities under this Agreement.  The parties further  understand that
either  Cove Point  LNG's or Seller's  metering  equipment  shall be utilized to
measure the receipt of Displacement  Quantities.  The parties agree to use their
best efforts and their rights under  transportation  agreements  with interstate
pipelines and Cove Point LNG to obtain necessary measurement data and records to
verify the accurate measurement of receipts and deliveries hereunder,  including
the taking of appropriate  steps to correct any  inaccurate  readings as soon as
possible.  The parties  agree to be bound by the proper  implementation  of FERC
approved  Tariffs of  Seller's  Transporters  and Cove Point LNG  regarding  the
measurement of receipts and deliveries under this Agreement.

X.  FORCE MAJEURE

A. Effect of Force Majeure.  Neither party to this Agreement shall be liable for
any damage or loss that may occur due to any Force  Majeure  as defined  herein;
provided  that the party whose  ability to perform is affected by Force  Majeure
promptly  notifies the other party of the Force Majeure and that such party uses
all  reasonable  efforts to remedy the  situation  and to restore its ability to
perform.  In the event either party is rendered  unable,  wholly or in part,  by
Force Majeure to carry out its obligations under this Agreement,  other than the
obligations  of such party to make  payment of amounts due  hereunder,  then the
obligations  of both  parties  hereto,  so far as they  are  affected  by  Force
Majeure, shall be suspended during the continuance of such Force Majeure.

B. Definition. The term "Force Majeure" as used herein, and as applied to either
party hereto,  shall include the passage of laws or promulgation of regulations,
acts of God, strikes,  lockouts, or other labor disturbances,  acts of sabotage,
acts of the public  enemy,  war,  blockades,  insurrections,  riots,  epidemics,
fires, floods, washouts,  arrests, civil disturbances,  explosions,  breakage or
accidents to machinery or lines of pipe,  failure of  electrical  generating  or
transmission facilities and equipment,  freezing of wells or pipelines,  partial
or entire failure to such wells, or any other cause,  whether of the kind herein
enumerated, or otherwise, not reasonably within the control of the party


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claiming  Force  Majeure and which by exercise  of due  diligence  such party is
unable to prevent or overcome.  It is  understood  that  settlement  of strikes,
lockouts,  or labor  disturbances shall be entirely within the discretion of the
affected party,  and that the above  requirement that any Force Majeure shall be
remedied  with all  reasonable  dispatch  shall not  require the  settlement  of
strikes,  lockouts,  or labor  disturbances  by  acceding  to the demands of any
opposing  party  when  such  course is  inadvisable  in the sole  discretion  or
judgment of the party experiencing such strikes, lockouts or labor disturbances.

XI.  CONFIDENTIALITY

The  parties  agree to treat  this  Agreement  on a  confidential  basis and not
publicly  disclose it to any party  without  the consent of the other;  provided
that each party, after notice to the other party and after making all reasonable
efforts to protect  confidentiality  including seeking an appropriate protective
order,  may disclose the Agreement to appropriate  parties in connection  with a
regulatory proceeding to which such party is, or may become, subject.

XII.  MISCELLANEOUS TERMS

A.  Integration  of  Agreement.  This  instrument  and the  documents  expressly
incorporated  herein by reference  constitute the entire  Agreement  between the
parties regarding the Displacement Services contemplated. No statement, promise,
or  inducement  made by  either  party  or agent of  either  party  which is not
contained  in this  Agreement  shall be  binding  herein.  Subject  to the other
provisions of this Agreement,  this Agreement may not be enlarged,  modified, or
altered except in writing signed by both parties.

B.  Severability.  If  any  part,  term,  or  provision  of  this  Agreement  is
specifically  held  by a court  or  regulatory  authority  to be  illegal  or in
conflict  with  applicable  law or  regulation,  the  validity of the  remaining
portions or provisions  affected,  and the rights and obligations of the parties
shall  be  construed  and  enforced  as if the  Agreement  did not  contain  the
particular part, term, or provision so held to be illegal or in conflict.

C. Waiver. No waiver by either party of any one or more defaults by the other in
the  performance  of any  provisions  of  this  Agreement  shall  operate  or be
construed as a waiver of any future  default or  defaults,  whether of a like or
different


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character.  If either party should be in default of any of its obligations under
this  Agreement or violates any of the terms or  conditions  hereof and fails to
correct or cure same  within  thirty (30) days after  receipt of written  notice
from the other  party,  in addition to all other  legal and  equitable  remedies
available to the non-defaulting  party, this Agreement may be terminated by such
non-defaulting  party  thereafter on fifteen (15) days written notice of same to
the defaulting party. Notwithstanding anything in the Agreement to the contrary,
any  remedies  afforded  in this  Agreement  shall be  taken  and  construed  as
cumulative, that is in addition to every other remedy provided herein or by law.

D. Headings.  Article headings have been inserted for the purpose of convenience
and ready reference. They do not purport to, and shall not be deemed to, define,
limit, or extend the scope or extent of the Articles to which they pertain.

E.  Assignability  and  Effect.  There  shall  be no  assignment,  transfer,  or
subcontracting  of this Agreement,  nor of any interest in this  Agreement,  nor
delegation of duties hereunder, except upon written consent of the party against
which such assignment,  delegation,  or subcontracting  would, in the absence of
this provision, be effective, such consent not to be unreasonably withheld.

F.  Succession.  This  Agreement  shall  inure to the benefit of, and be binding
upon, the heirs, executors,  administrators,,  assignees,  and successors of the
respective parties.

G.  Indemnification.  Each party hereunder agrees to indemnify,  defend and hold
harmless the other from and against all liabilities,  suits, actions,,  damages,
costs and expenses (including,  but not limited to, reasonable  attorneys' fees)
resulting  from or arising  out of acts,  omissions,  negligence,  breach of any
statutory duty, or intentional misconduct by itself, its officers, its employees
or  agents  of the  indemnifying  party  occurring  in the  performance  of this
Agreement.

H. Applicable Law. This Agreement shall be construed in accordance with the laws
of Virginia.

I. Possession.  Solely for purposes of this Agreement, (i) Buyer shall be deemed
to be in control and possession of gas  transported  hereunder prior to delivery
to Seller at the Receipt  Point and after  redelivery  to Buyer at the  Delivery
Point, and (ii)


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Seller  shall be deemed  to be in  control  and  possession  of gas  transported
hereunder after delivery to Seller at the Receipt Point.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized officers, as of the day and year first written above.

                                                             Seller:


                                            WASHINGTON GAS LIGHT COMPANY
Witness:
By:      /S/  Kathleen McKee                By: /S/ J. M. Schepis
         Secretary                          Senior Vice President
         (Title)                            (Title)

                                                              Buyer:

                                            ATLANTA GAS LIGHT COMPANY
Witness
By:      /S/  Eileen G. Stanek              By: /S/  Stephen J. Gunther
         Director Federal Regulatory Affairs    Vice President
         (Title)                                (Title)



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