NOTICE TO THE PUBLIC OF (1) CENERAL RATE APPLICATION (2) REQUEST FOR CONSIDERATION OF

NOTICE TO THE PUBLIC OF (1) CENERAL RATE APPLICATION (2) REQUEST FOR CONSIDERATION OF

PERFORMANCE-BASED RATEMAKING METHODOLOGY AND (3) REQUEST FOR EXEMPTION FROM THE

AFFILIATES ACT (CODE OF VA. § 56-77 et seq.)

BY COMMONWEALTH GAS SERVICES. INC.

On May 9,1997, Commonwealth Gas Service, Inc. ("Commonwealth" or "Company") filed an application, pursuant to Va. Code § 56-235.6. for a performance-based form of regulation. The application also proposed substantial changes to its current rates and charges. Revisions to the application were filed by Commonwealth on May 20,1997. On June 13,1997, the Commission entered a Preliminary Order suspending the Company's proposed tariff revisions. In the application. Commonwealth proposed anew pilot program, the "Commonwealth Choice Program," in which certain residential and small business and industrial customers would, for a two-year period, be offered the opportunity to secure gas from suppliers other than the Company. Certain costs of this program would be recovered from the general body of ratepayers through a "Stranded Cost Recovery" mechanism proposed by the Company.

On May 27,1997, Commonwealth and its affiliate. Commonwealth Energy Services Corporation ("CESC"), filed a joint application for exemption from requirements imposed by Va. Code § 56-77 el seq., which regulate relations between utilities and their affiliates, in order that CESC could participate competitively in the Commonwealth Choice Program. That application has been docketed as Case No. PUA970027. Interested persons are invited to submit comments on this application, referring to Case No. PUA970027, on or before August 29,1997.

On June 13, 1997, Commonwealth submitted a letter to the Clerk of the Commission proposing a bifurcation of its application. According to the letter, 58,539,171 of the proposed rate increase is the amount necessary to recover the Company's cost of service under the Commission's Rules Governing Utility Rate Increase Applications and Annual Informational Filings ("Rules"), 20 VAC-5-200-30, and Va. Code § 56-235.2 et seq. The balahce of the rate increase proposed by the Company, 51,545,785, is subject to the performance plan described in the prepared direct testimony of Commonwealth Witness Robert E. Homer. Proposed rate increases for the 12-month periods ending September 30,1999 and 2000 are also subject to the performance plan.

The Company's application is available for public inspection, during regular business hours, at each of its offices and at the Commission's Document Control Center, 1300 East Main Street, Richmond, Virginia.

On July 28,1997, the Commission entered its Order for Notice and Hearings, in which it ruled on procedural questions raised by the Company’s application granting, in part, the Company's request to bifurcate the proceeding.

The Commission has scheduled three public hearings to consider the matters raised by Commonwealth in its application. The first hearing will consider the sole issue of whether implementation of the Commonwealth Choice Program is "necessary in order to acquire information which is or may be in the public interest," as required by Va. Code § 56-234. If the Commission should find the program may be implemented, the issue of recovery of associated costs will be considered in the hearing on Phase I matters. This first hearing is scheduled for September 17,1997, beginning at 10:00 a m., in the Commission's courtroom in the Tyler Building, 1300 East Main Street, Richmond, Virginia. Protestants interested in participating in this hearing shall follow the procedural schedule set out in the Order for Notice and Hearings. Interested persons are invited to submit comments, or requests to intervene and address the Commission, on the Commonwealth Choice Program on or before August 29, 1997, and serve a copy of such pleading on the Company. In the absence of any request to intervene and address the Commission, the Commission may act upon review of the documents filed in the case.

The second public hearing scheduled will consider the bulk of the Company's proposed rate increase, including, if necessary, that portion associated with the Commonwealth Choice Program. The public hearing in Phase I is scheduled for February 23,1998, beginning at 10:00 a.m., in the Commission's courtroom in the Tyler Building, 1300 East Main Street, Richmond, Virginia. Interested persons are invited to submit comments on Phase I matters on or before January 23,1998. Any person who would like to be heard on these matters may appear at the Commission's courtroom at 9:45 a.m. on the day of the hearing and register such request with Commission's Bailiff on forms that the Bailiff will provide.

The final public hearing, scheduled for June 16,1998, will consider matters associated with Phase II, the proposed performance-based ratemaking plan, and rates associated with this proposal. Interested persons are invited to submit comments on Phase II matters on or before May 5,1998. Any person who would like to be heard on these matters may appear at the Commission's courtroom at 9:45 a.m. on the day of the hearing and register such request with Commission's courtroom at 9:45 a.m. on the day of the hearing and register such request with the Commission's Bailiff on forms that the Bailiff will provide.

Any person who expects or intends to participate as a Protestant in the public hearings scheduled for Phase I or Phase II should promptly obtain a copy of the Order for Notice and Hearings for full details of the procedural schedule established for those hearings. Any person who expects or intends to participate by intervention in the hearing scheduled for the pilot Commonwealth Choice Program should also review the order for Notice and hearings for full details of procedural requirements in that matter.

Individuals with disabilities who require an accommodation to participate in the hearing should contact the Commission at least seven days before the scheduled hearing date by calling 1-800-552-7945 (voice) or 1-800-371-9206 (TDD)

All written communications to the Commission regarding any of the matters in this notice should be directed to William J Bridge, Clerk of the Commission, P.O Box 211$, Richmond, Virginia 23218, and should refer to Case No. PUE970455, except for those communications that concern the Company's requested exemption from the affiliates act. Case No PUA970Q27. Documents required to be served on the Company should be addressed to Edward L. Flippen, Esquire, Mays U Valentine, P.O. Box 1122, Richmond, Virginia 2321$.