File Nos. 070-09389
070-09391
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO FORM U-1
Application
Under the
Public Utility Holding Company Act of 1935
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ROANOKE GAS COMPANY
519 Kimball Avenue, N.E., Roanoke, Virginia 24016
(540) 777-4427
and
RGC RESOURCES, INC.
519 Kimball Avenue, N.E., Roanoke, Virginia 24016
(540) 777-4427
(Names of companies filing this statement and addresses
of principal executive offices)
------------------------
John B. Williamson, III
President and Chief Executive Officer
Roanoke Gas Company
and
RGC Resources, Inc.
519 Kimball Avenue, N.E., Roanoke, Virginia 24016
(540) 777-3810
(Name and address of Agent for Service)
------------------------
Copy to:
Faith M. Wilson, Esq.
Nicholas C. Conte, Esq.
Woods, Rogers & Hazlegrove, P.L.C.
First Union Tower, Suite 1400
10 South Jefferson Street
Roanoke, Virginia 24011
(540) 983-7600
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This Amendment No. 1 to Form U-1 Application of Roanoke Gas Company and RGC
Resources, Inc. is for the purpose of filing, under Exhibit D-1, copies of all
applications to the Virginia State Corporation Commission and the West Virginia
Public Service Commission, as follows:
Exhibit D-1(a) Application of Roanoke Gas Company, Commonwealth Public
Service Corporation and Affiliated Interests for approval of
transactions under Virginia Code, Title 56, Chapters 4 and 5,
with all schedules.
Exhibit D-1(b) Application of Bluefield Gas Company for approval of
transactions under West Virginia Code Section 24-2-12, with
all schedules.
Roanoke Gas and Resources also hereby amend Item 4 of the Form U-1 filed
on October 16, 1998 to delete the reference to Chapter 3 (Issuance of Stocks,
Bonds, etc.) of Title 56 of the Virginia Code. The proposed merger and
reorganization will require the approval of the Virginia State Corporation
Commission pursuant to Chapter 4 (Regulation of Relations with Affiliated
Interests) and Chapter 5 (Utility Transfers Act) of Title 56 only. Virginia
State Corporation Commission approval under Chapter 3 of Title 56 is not
required.
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SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, each of the undersigned companies has duly caused this statement to be
signed on its behalf by the undersigned thereunto duly authorized.
ROANOKE GAS COMPANY
Date: November 2, 1998 By: s/John B. Williamson, III
---------------------------------
John B. Williamson, III
President and Chief Executive
Officer
RGC RESOURCES, INC.
Date: November 2, 1998 By: s/John B. Williamson, III
---------------------------------
John B. Williamson, III
President and Chief Executive
Officer
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
Exhibit D-1(a) Application of Roanoke Gas Company, Commonwealth Public
Service Corporation and Affiliated Interests for approval of
transactions under Virginia Code, Title 56, Chapters 4 and 5,
with all schedules.
Exhibit D-1(b) Application of Bluefield Gas Company for approval of
transactions under West Virginia Code Section 24-2-12, with
all schedules.
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Exhibit D-1(a)
COMMONWEALTH OF VIRGINIA
BEFORE THE STATE CORPORATION COMMISSION
APPLICATION OF
ROANOKE GAS COMPANY,
COMMONWEALTH PUBLIC
SERVICE CORPORATION, and CASE NO. PUA 980035
AFFILIATED INTERESTS
For approval of transactions
under Virginia Code, Title 56,
Chapters 4 and 5.
APPLICATION
Roanoke Gas Company ("Roanoke Gas"), Commonwealth Public Service
Corporation ("Commonwealth") and their affiliated interests, hereafter
identified (collectively "Applicants"), apply to the Commission for authority to
enter into certain transactions, including transactions requiring approval under
Virginia Code, Title 56, Chapter 4 (Regulation of Relations with Affiliated
Interests, Sections 56-76 through 56-87) and Chapter 5 (Utility Transfers Act,
Sections 56-88 through 56-92), in order to effect their merger, the
reorganization of their corporate structure and the creation of a holding
company. In support of this application, the Applicants represent as follows:
1. Roanoke Gas, a Virginia public service company, is engaged in the
retail distribution and sale of natural gas to approximately 48,600 customers in
Roanoke, Virginia and surrounding areas in Virginia. Roanoke Gas' service area
includes the cities of Roanoke and
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Salem, Virginia and surrounding regions in Virginia, including Roanoke County
and portions of Bedford, Botetourt, Franklin and Montgomery counties, Virginia.
2. Bluefield Gas Company ("Bluefield"), a West Virginia public service
corporation, is a wholly owned subsidiary of Roanoke Gas. Bluefield provides
natural gas service to approximately 4,100 customers located in and around
Bluefield, West Virginia. Bluefield's service area extends from Princeton, West
Virginia to the western most city limits of Bluefield, West Virginia.
3. Bluefield owns all of the issued and outstanding stock of Commonwealth,
a Virginia public service corporation, which provides natural gas service to
approximately 925 customers in Bluefield, Virginia and surrounding areas in
Virginia. Commonwealth's service area includes principally the Town of
Bluefield, Virginia and a portion of Tazewell County, Virginia.
4. Roanoke Gas also owns 100% of the outstanding common stock of
Diversified Energy Company ("Diversified"), a Virginia corporation which is not
a public utility, which is headquartered in Roanoke, Virginia, and which sells
propane and propane related products. Diversified serves approximately 10,500
active propane accounts in southwestern Virginia and southern West Virginia. In
addition to propane operations, Diversified maintains a natural gas marketing
business that assists large industrial customers in the purchase of natural gas.
5. Roanoke Gas currently provides managerial and other services, labor and
goods to Bluefield and Diversified under agreements approved by this Commission
and the West Virginia Public Service Commission.
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6. RGC Resources, Inc. ("Resources"), a Virginia corporation, is a wholly
owned subsidiary of Roanoke Gas and was incorporated on July 31, 1998, for the
purpose of accomplishing the proposed merger and reorganization. Resources owns
all of the outstanding common stock of RGC Acquisition Corp. ("Acquisition"), a
Virginia corporation which was formed on August 12, 1998, also for the purpose
of accomplishing the proposed merger and reorganization. Neither Resources nor
Acquisition owns any utility assets or engages in any business.
7. Roanoke Gas and Commonwealth, together with Bluefield, Diversified,
Resources and Acquisition, intend to accomplish the proposed merger and
reorganization by entering into an Agreement and Plan of Merger and
Reorganization whereby (i) Roanoke Gas will be merged into Acquisition, with
Roanoke Gas as the surviving corporation; (ii) the common stock of Acquisition
owned by Resources will be converted into the new common stock of Roanoke Gas;
(iii) the outstanding shares of Roanoke Gas common stock will be converted into
the right to receive, on a one-for-one basis, shares of Resources common stock
on the merger effective date; (iv) Bluefield, by means of a noncash dividend,
will transfer to Roanoke Gas all of the outstanding common stock of
Commonwealth; (v) Roanoke Gas, by means of a noncash dividend, will transfer to
Resources all of the outstanding common stock of Bluefield and Diversified; and
(vi) Commonwealth will be merged into Roanoke Gas. Following the merger and
reorganization, Roanoke Gas, Bluefield and Diversified will each be wholly owned
subsidiaries of Resources, and all of the outstanding common stock of Resources
will be owned by the former Roanoke Gas shareholders.
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8. Roanoke Gas and Resources have applied to the Securities and Exchange
Commission ("SEC") for the necessary approvals under Section 10 of the Public
Utility Holding Company Act of 1935 ("PUHCA"). Pursuant to 17 C. F. R. Section
250.2 under PUHCA, Resources intends, upon consummation of the merger and
reorganization, to file a claim of exemption as a holding company under Section
3(a)(1) of PUHCA, on the basis that Resources and every public utility
subsidiary thereof from which Resources derives, directly or indirectly, any
material part of its income are predominately intrastate in character and carry
on their business in Virginia, the state in which Resources and every such
material subsidiary are organized. The application filed with the SEC on Form
U-1 ("SEC Application"), with exhibits, is attached hereto as Schedule A. The
Agreement and Plan of Merger and Reorganization is attached as Exhibit B-1 to
the SEC Application. For a description of the present corporate structure of
Roanoke Gas and its affiliates and the proposed corporate structure following
the merger and reorganization, see Exhibit B-2 to the SEC Application.
9. The proposed restructuring will be in the public interest because it
will create a structure which can more effectively address the increased
competition in the energy industry, refocus various utility activities,
facilitate selective diversification into nonutility businesses, afford further
separation between the utility and nonutility businesses and provide additional
flexibility for financing. The two primary reasons for restructuring are to
better position Roanoke Gas to deal effectively with the competitive environment
developing within the energy industry and to best deploy shareholders' capital
both inside and outside of the utility industry. These objectives can most
effectively be accomplished through the proposed restructuring, as it provides
the necessary flexibility required to meet competitive challenges and to
diversify while
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further insulating the utility business from the risks of the nonutility
business by segregating the nonutility businesses into separate corporations
that will be direct subsidiaries of the holding company and not of Roanoke Gas.
Because nonutility businesses of the holding company will be conducted through
separate subsidiaries, any liabilities incurred by those subsidiaries will not
constitute liabilities of the utility subsidiaries. The corporate separation
also insures that all costs of a particular nonutility subsidiary will be
charged to that subsidiary and not allocated to any utility subsidiary.
Additional discussion of the reasons for the proposed restructuring and the ways
in which the public interest will be served may be found in the SEC Application
at Item 1.C. (Purpose and Benefits of the Proposed Merger and Reorganization).
10. All of the other parties to the Agreement and Plan of Merger and
Reorganization qualify as "affiliated interests" of both Roanoke Gas and
Commonwealth, as that term is defined at Va. Code Section 56-76. For the reasons
explained in the preceding paragraph and in the SEC Application, the agreement
is in the public interest. Applicants hereby verify that the copy of that
agreement attached as Exhibit B-1 to the SEC Application is a true and correct
copy, and request approval of the agreement under Va. Code Section 56-77 and
56-84.
11. Upon completion of the proposed restructuring, Bluefield, Diversified
and Resources will each qualify as an "affiliated interest" of Roanoke Gas, as
that term is defined at Va. Code Section 56-76. Applicants hereby request
approval of the following agreements between Roanoke Gas and its affiliated
interests under Va. Code Section 56-77 and 56-84:
a) Affiliate Agreement Between RGC Resources, Inc. and Roanoke Gas
Company that will cover executive, administrative, accounting, public relations,
information
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systems, data processing services, and other services provided by Roanoke Gas to
RGC Resources. A copy is attached hereto as Schedule B.
b) Affiliate Agreement Between Roanoke Gas Company and Bluefield Gas
Company that will cover executive, administrative, accounting public relations,
information systems, data processing services, and other operational services
provided by Roanoke Gas Company to Bluefield Gas Company and executive,
administrative service provided by Bluefield Gas to Roanoke Gas. A copy is
attached hereto as Schedule C.
c) Affiliate Agreement Between Roanoke Gas Company and Diversified
Energy that will cover executive, administrative, accounting, public relations,
information systems, data processing services, and other operational services
provided by Roanoke Gas Company to Diversified and executive, administrative,
and operational services provided by Diversified to Roanoke Gas. A copy is
attached hereto as Schedule D.
All of the above agreements allow for economies of scale in the operation
through shared management and centralized facilities; therefore these agreements
are in the public interest, both in the aggregate and individually. A copy of
each of the foregoing agreements is attached to this Application as indicated
above. Applicants hereby verify that each is a true and correct copy.
12. Pursuant to the Guidelines promulgated by the State Corporation
Commission, Division of Public Utility Accounting, a Transaction Summary under
Chapter 4 is attached hereto as Schedule E.
13. The following elements of the proposed restructuring will involve the
acquisition or disposition of control of a public utility, requiring Commission
approval under Va. Code Section 56
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- -88.1, and the acquisition or disposition of control of utility assets or
securities, requiring Commission approval under Va. Code Section 56-89.
1. Roanoke Gas' merger into Acquisition, with Roanoke Gas as the
surviving corporation;
2. the conversion of the common stock of Acquisition into the new
common stock of Roanoke Gas;
3. the conversion of the outstanding shares of Roanoke Gas common
stock into the right to receive, on a one-for-one basis,
shares of Resources common stock on the merger effective date;
4. Bluefield's transfer to Roanoke Gas, by means of a noncash
dividend, of all of the outstanding common stock of
Commonwealth;
5. Roanoke Gas' transfer to Resources, by means of a noncash
dividend, of all of the outstanding common stock of Bluefield
and Diversified; and
6. Commonwealth's merger into Roanoke Gas.
14. Each of the foregoing transactions is in the public interest, and none
will impair or jeopardize the provision of adequate service to the public at
just and reasonable rates. The Applicants hereby petition the Commission for
authority to acquire and dispose of control of a public utility, and to acquire
and dispose of control of utility assets or securities, in order to effect the
foregoing transactions and the proposed restructuring in whole, pursuant to
Va.Code Section 56-90.
15. Pursuant to the Guidelines promulgated by the State Corporation
Commission, Division of Public Utility Accounting, a Transaction Summary under
Chapter 5 is attached hereto as Schedule F.
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16. It is the intent and purpose of this Application to secure all
authority and approvals required under Virginia law from the State Corporation
Commission in order to effect the proposed restructuring as described in the SEC
Application. Applicants hereby request that the Commission provide all such
authority and approvals.
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WHEREFORE, Applicants respectfully petition the Commission for all
necessary authority, including all necessary approvals under Chapters 4 and 5 of
Title 56 of the Virginia Code, in order to effect the propose merger and
reorganization.
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Respectfully submitted, ROANOKE GAS COMPANY
By s/John B. Williamson, III
John B. Williamson, III
President and CEO
COMMONWEALTH OF VIRGINIA }
CITY OF ROANOKE }
I, Mildred V. Smith, Notary Public in and for the state and city
aforesaid, hereby certifies that his day appeared before me, John B. Williamson,
III, who, after being first duly sworn, made oath and said that the matters
contained in the foregoing Application and Schedules are true to the best of his
knowledge and belief.
Given under my hand and notarial seal this 19th day of October, 1998.
s/Mildred V. Smith
Notary Public
My Commission Expires: August 31, 2000
By s/Roger L. Baumgardner
Roger L. Baumgardner
Secretary and Treasurer
COMMONWEALTH OF VIRGINIA }
CITY OF ROANOKE }
I, Susan E. Miller, Notary Public in and for the state and city aforesaid,
hereby certifies that his day appeared before me, Roger L. Baumgardner, who,
after being first duly sworn, made oath and said that the matters contained in
the foregoing Application and Schedules are true to the best of his knowledge
and belief.
Given under my hand and notarial seal this 19th day of October, 1998.
s/Susan E. Miller
Notary Public
My Commission Expires: April 30, 2001
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COMMONWEALTH PUBLIC SERVICE
CORPORATION
By s/John B. Williamson, III
John B. Williamson, III
President and CEO
COMMONWEALTH OF VIRGINIA }
CITY OF ROANOKE }
I, Mildred V. Smith, Notary Public in and for the state and city
aforesaid, hereby certifies that his day appeared before me, John B. Williamson,
III, who, after being first duly sworn, made oath and said that the matters
contained in the foregoing Application and Schedules are true to the best of his
knowledge and belief.
Given under my hand and notarial seal this 19th day of October, 1998.
s/Mildred V. Smith
Notary Public
My Commission Expires: August 31, 2000
By s/Roger L. Baumgardner
Roger L. Baumgardner
Secretary and Treasurer
COMMONWEALTH OF VIRGINIA }
CITY OF ROANOKE }
I, Susan E. Miller, Notary Public in and for the state and city aforesaid,
hereby certifies that his day appeared before me, Roger L. Baumgardner, who,
after being first duly sworn, made oath and said that the matters contained in
the foregoing Application and Schedules are true to the best of his knowledge
and belief.
Given under my hand and notarial seal this 19th day of October, 1998.
s/Susan E. Miller
Notary Public
My Commission Expires: April 30, 2001
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BLUEFIELD GAS COMPANY
By s/John B. Williamson, III
John B. Williamson, III
President and CEO
COMMONWEALTH OF VIRGINIA }
CITY OF ROANOKE }
I, Mildred V. Smith, Notary Public in and for the state and city
aforesaid, hereby certifies that his day appeared before me, John B. Williamson,
III, who, after being first duly sworn, made oath and said that the matters
contained in the foregoing Application and Schedules are true to the best of his
knowledge and belief.
Given under my hand and notarial seal this 19th day of October, 1998.
s/Mildred V. Smith
Notary Public
My Commission Expires: August 31, 2000
By s/Roger L. Baumgardner
Roger L. Baumgardner
Secretary and Treasurer
COMMONWEALTH OF VIRGINIA }
CITY OF ROANOKE }
I, Susan E. Miller, Notary Public in and for the state and city aforesaid,
hereby certifies that his day appeared before me, Roger L. Baumgardner, who,
after being first duly sworn, made oath and said that the matters contained in
the foregoing Application and Schedules are true to the best of his knowledge
and belief.
Given under my hand and notarial seal this 19th day of October, 1998.
s/Susan E. Miller
Notary Public
My Commission Expires: April 30, 2001
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DIVERSIFIED ENERGY COMPANY
By s/John B. Williamson, III
John B. Williamson, III
President and CEO
COMMONWEALTH OF VIRGINIA }
CITY OF ROANOKE }
I, Mildred V. Smith, Notary Public in and for the state and city
aforesaid, hereby certifies that his day appeared before me, John B. Williamson,
III, who, after being first duly sworn, made oath and said that the matters
contained in the foregoing Application and Schedules are true to the best of his
knowledge and belief.
Given under my hand and notarial seal this 19th day of October, 1998.
s/Mildred V. Smith
Notary Public
My Commission Expires: August 31, 2000
By s/Roger L. Baumgardner
Roger L. Baumgardner
Secretary and Treasurer
COMMONWEALTH OF VIRGINIA }
CITY OF ROANOKE }
I, Susan E. Miller, Notary Public in and for the state and city aforesaid,
hereby certifies that his day appeared before me, Roger L. Baumgardner, who,
after being first duly sworn, made oath and said that the matters contained in
the foregoing Application and Schedules are true to the best of his knowledge
and belief.
Given under my hand and notarial seal this 19th day of October, 1998.
s/Susan E. Miller
Notary Public
My Commission Expires: April 30, 2001
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RGC RESOURCES, INC.
By s/John B. Williamson, III
John B. Williamson, III
President and CEO
COMMONWEALTH OF VIRGINIA }
CITY OF ROANOKE }
I, Mildred V. Smith, Notary Public in and for the state and city
aforesaid, hereby certifies that his day appeared before me, John B. Williamson,
III, who, after being first duly sworn, made oath and said that the matters
contained in the foregoing Application and Schedules are true to the best of his
knowledge and belief.
Given under my hand and notarial seal this 19th day of October, 1998.
s/Mildred V. Smith
Notary Public
My Commission Expires: August 31, 2000
By s/Roger L. Baumgardner
Roger L. Baumgardner
Secretary and Treasurer
COMMONWEALTH OF VIRGINIA }
CITY OF ROANOKE }
I, Susan E. Miller, Notary Public in and for the state and city aforesaid,
hereby certifies that his day appeared before me, Roger L. Baumgardner, who,
after being first duly sworn, made oath and said that the matters contained in
the foregoing Application and Schedules are true to the best of his knowledge
and belief.
Given under my hand and notarial seal this 19th day of October, 1998.
s/Susan E. Miller
Notary Public
My Commission Expires: April 30, 2001
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RGC ACQUISITION, CORP.
By s/John B. Williamson, III
John B. Williamson, III
President and CEO
COMMONWEALTH OF VIRGINIA }
CITY OF ROANOKE }
I, Mildred V. Smith, Notary Public in and for the state and city
aforesaid, hereby certifies that his day appeared before me, John B. Williamson,
III, who, after being first duly sworn, made oath and said that the matters
contained in the foregoing Application and Schedules are true to the best of his
knowledge and belief.
Given under my hand and notarial seal this 19th day of October, 1998.
s/Mildred V. Smith
Notary Public
My Commission Expires: August 31, 2000
By s/Roger L. Baumgardner
Roger L. Baumgardner
Secretary and Treasurer
COMMONWEALTH OF VIRGINIA }
CITY OF ROANOKE }
I, Susan E. Miller, Notary Public in and for the state and city aforesaid,
hereby certifies that his day appeared before me, Roger L. Baumgardner, who,
after being first duly sworn, made oath and said that the matters contained in
the foregoing Application and Schedules are true to the best of his knowledge
and belief.
Given under my hand and notarial seal this 19th day of October, 1998.
s/Susan E. Miller
Notary Public
My Commission Expires: April 30, 2001
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Michael J. Quinan
WOODS, ROGERS & HAZLEGROVE, P.L.C.
First National Bank Building
823 E. Main Street, Suite 1200
Richmond, VA 23219
804 343-5020
Counsel for Roanoke Gas Company
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Schedule A
Form U-1 as filed by Roanoke Gas Company and RGC Resources, Inc. with the
Securities and Exchange Commission on October 16, 1998.
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Schedule B
AFFILIATE AGREEMENT BETWEEN
RGC RESOURCES, INC. AND
ROANOKE GAS COMPANY
THIS AFFILIATE AGREEMENT, made and entered into __________, 1999, by and
between RGC RESOURCES, INC., a Virginia corporation (RGC Resources), and ROANOKE
GAS COMPANY, a Virginia corporation (Roanoke Gas),
WITNESSETH:
WHEREAS, RGC Resources is a corporation organized and existing under the
laws of the state of Virginia, and is an exempt holding company under PUHCA,
with its principal place of business located at 519 Kimball Avenue, Roanoke,
Virginia 24030, and owns all of the common stock of Roanoke Gas Company.; and
WHEREAS, Roanoke Gas Company is a public service corporation organized to
provide natural gas service to customers in Roanoke, Virginia and surrounding
areas and Bluefield, Virginia and surrounding areas in Virginia with its
principal place of business located at 519 Kimball Avenue, Roanoke, Virginia
24030.
NOW THERFORE, in consideration of the promises and the mutual covenants
herein contained, and subject to the terms and conditions herein contained,
Roanoke Gas and RGC Resources agree as follows:
1. Roanoke Gas will provide executive, administrative, accounting, public
relations, information systems, data processing services, and other services to
RGC Resources; and
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2. RGC Resources and Roanoke Gas agree that expenses of RGC Resources
incurred by it on behalf of Roanoke Gas will be assigned to Roanoke Gas and
recorded in the accounting records of Roanoke Gas; and
3. RGC Resources and Roanoke Gas agree that expenses of Roanoke Gas
incurred by it on behalf of RGC Resources will be assigned to RGC Resources and
recorded in the accounting records of RGC Resources; and
4. Roanoke Gas will pay dividends to RGC Resources based on the dividend
policy and capital structure targets set by the Board of Directors of Roanoke
Gas Company.
5. Either party can terminate this Affiliate Agreement with a 60-day
notice to the other party and the approval of the Board of Directors of RGC
Resources.
In WITNESS WHEREOF, Roanoke Gas and RGC Resources have caused this
Ageement to be duly executed on the day and year first written above.
RGC RESOURCES, INC. ROANOKE GAS COMPANY
By By
Title Title
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Schedule C
AFFILIATE AGREEMENT BETWEEN
ROANOKE GAS COMPANY AND
BLUEFIELD GAS COMPANY
THIS AFFILIATE AGREEMENT, made and entered into __________, 1999, by and
between ROANOKE GAS COMPANY, a Virginia corporation (Roanoke Gas), and BLUEFIELD
GAS COMPANY, a West Virginia corporation (Bluefield Gas),
WITNESSETH:
WHEREAS, Roanoke Gas Company is a public service corporation organized to
provide natural gas service to customers in Roanoke, Virginia and surrounding
areas in Virginia with its principal place of business located at 519 Kimball
Avenue, Roanoke, Virginia 24030.
WHEREAS, Bluefield Gas is a public service corporation organized to
provide natural gas service to customers in Bluefield, West Virginia with its
principal place of business located at 4699 East Cumberland Road, P. O. Box 589,
Bluefield, West Virginia 24701.
NOW THERFORE, in consideration of the promises and the mutual covenants
herein contained, and subject to the terms and conditions herein contained,
Roanoke Gas and Bluefield Gas agree as follows:
1. Roanoke Gas will provide executive, administrative, accounting, public
relations, information systems, data processing services, and other operational
services to Bluefield Gas; and
2. Bluefield Gas may provide, from time to time, administrative and
operational services to Roanoke Gas; and
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3. Roanoke Gas and Bluefield Gas agree that expenses incurred by Roanoke
Gas on behalf of Bluefield Gas which are identifiable as directly assignable to
Bluefield Gas will be directly assigned to Bluefield Gas in Roanoke Gas and
Bluefield Gas accounting records.
4. Roanoke Gas and Bluefield Gas agree that expenses incurred by Bluefield
Gas on behalf of Roanoke Gas which are identifiable as directly assignable to
Roanoke Gas will be directly assigned to Roanoke Gas in Bluefield Gas and
Roanoke Gas accounting records.
5. Roanoke Gas and Bluefield Gas agree that expenses incurred by Roanoke
Gas on behalf of Bluefield Gas which are not identifiable as directly assigned
will be allocated to Bluefield Gas and recorded in the accounting records of
Roanoke Gas and Bluefield Gas according to Attachment A of this Agreement.
6. Roanoke Gas and Bluefield Gas agree that expenses incurred by Bluefield
Gas on behalf of Roanoke Gas which are not identifiable as directly assigned
will be allocated to Roanoke Gas and recorded in the accounting records of
Roanoke Gas and Bluefield Gas according to Attachment A of this Agreement.
7. Either party can terminate this Affiliate Agreement with a 60-day
notice to the other party and the approval of the Board of Directors of RGC
Resources.
In WITNESS WHEREOF, Roanoke Gas and Bluefield Gas have caused this
Agreement to be duly executed on the day and year first written above.
ROANOKE GAS COMPANY BLUEFIELD GAS COMPANY
By By
Title Title
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Attachment A
Page 1 of 5
AFFILIATE TRANSACTIONS ALLOCATIONS
1. The parties to the attached Affiliates Agreement will individually pay for
any directly assigned expenses associated with their operations.
2. Transmission Plant accounts will be directly assigned to the owner of such
assets.
3. Distribution Plant accounts 374 through 387 will be directly assigned to
the owner of such assets. The resulting allocations to each affiliate for
accounts 374 through 387 will, in aggregate, in referred to as the
Distribution Plant allocation factors.
4. LNG plant accounts will be directly assigned to Roanoke Gas Company.
5. Production Plant accounts will be directly assigned to Roanoke Gas
Company.
6. Other Plant accounts will be directly assigned to the entity that either
owns the asset or which causes the cost to be incurred. Jointly owned
other plant assets will be allocated to the affiliates based on the
overall Distribution Plant allocation factors.
7. Accumulated Depreciation is unique to each plant account and will follow
the assignment to the corresponding plant account.
8. Materials and Supplies accounts are unique to each plant account and will
follow the assignment to the corresponding plant account. Jointly owned
materials and supplies will be allocated to the affiliates based on the
overall Distribution Plant allocation factor.
9. Prepaid Gas and Stored Gas accounts will be directly assigned to the
affiliate for which the gas is purchased or stored. However, in the case
of the former Commonwealth Public Service, the gas delivered to Bluefield
will be allocated between Bluefield Gas and the former Commonwealth Public
service based on the ratio of billed volumes.
10. Whenever possible, Working Cash accounts will be directly assigned to each
affiliate. Jointly owned working cash which cannot be specifically
assigned to an affiliate will be allocated to the affiliates based on the
overall Distribution Plant allocation factors.
11. Deferred Income Tax accounts will be directly assigned to the affiliate
that owns the asset or liability from which the deferred income tax amount
derives.
12. Deferred Investment Tax accounts will be directly assigned to the
affiliate that owns the asset from which the deferred investment tax
credit was generated.
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Attachment A
Page 2 of 5
13. Supplier Refund and Deferred Gas accounts will be directly assigned to the
affiliate for which the gas is refunded or deferred. However, in the case
of the former Commonwealth Public Service, the supplier refunds and
deferred gas amounts for Bluefield gas will be allocated to the former
Commonwealth Public Service based on the ratio of billed volumes.
14. Customer Deposit accounts will be directly assigned to each affiliate.
15. The results of the allocations for item 3 through 15, above result in an
Overall Rate Base allocation factor for each of the affiliates.
16. Gas Cost accounts will be directly assigned to affiliate for which the gas
is purchased. However, in the case of the former Commonwealth Public
Service, the gas delivered to Bluefield will be allocated between
Bluefield Gas and the former Commonwealth Public service based on the
ratio of billed volumes.
17. Transmission Operations and Maintenance Expense accounts will be directly
assigned to the affiliate owning the corresponding asset. However, in the
case of the former Commonwealth Public Service, Bluefield Gas'
transmission operations and maintenance expense accounts will be allocated
to the former Commonwealth Public Service based on the ratio of billed
volumes.
18. Distribution Operating Expense accounts will be allocated to
affiliates as follows:
Account 870 - Supervision and Engineering - will be allocated to
each affiliate on the basis of exception time reporting.
Accounts 871 through 875 - Load Dispatching, Mains and Services
Expenses, and Measuring and Regulating Station Expenses will be
directly assigned to the owner of the asset for which the expense
was incurred.
Account 878 - Removing and Setting Meters will be directly assigned
to the utility for which the meters were removed or set. However, in
the case of the former Commonwealth Public Service, Bluefield Gas
account 878 will be allocated to the former Commonwealth Public
Service based on meter cost.
Account 879 through 881 - Customer Installation Expense, Maps and
Records, and Rents will be directly assigned to each affiliate.
However, in the case of the former Commonwealth Public Service,
Bluefield Gas accounts 879 through 881 will be allocated to the
former Commonwealth Public Service based on the number of customers.
<PAGE>
Attachment A
Page 3 of 5
The resulting overall Distribution Operating Expense allocations will be
known as the Distribution Operating Expense allocation factors.
19. Distribution Maintenance Expense accounts will be directly assigned to
each affiliate for which the expense was incurred. However, in the case of
the former Commonwealth Public Service, distribution maintenance expense
accounts of Bluefield Gas will be allocated to the former Commonwealth
Public Service on the basis of the average distribution plant balances.
20. LNG Operations and Maintenance Expense accounts will be directly assigned
to Roanoke Gas Company.
21. Production Expense accounts will be directly assigned to Roanoke Gas
Company.
22. Customer Accounts accounts will be allocated to affiliates as follows:
Account 901 - Supervision will be allocated to each
affiliate on the basis of a time study analysis.
Account 902 - Meter Reading will be directly assigned to each
affiliate based on the billings received from the meter reading
contractor or the direct charge of time spent. Any jointly incurred
meter reading expenses will be allocated to the affiliates for which
the expenses were incurred based on the number of customers.
Accounts 903 and 903.1 - Customer Service Labor and Meals will be
allocated to each affiliate on the basis of a time study analysis.
Account 903.2 - Credit Investigations will be directly assigned to
affiliates for which the investigations were performed. However, in
the case of the former Commonwealth Public Service, credit
investigations charged to Bluefield Gas will be allocated to the
former Commonwealth Public service based on the number of customers.
Accounts 903.3 - Non-pay Turnoff Expenses will be directly assigned
to each affiliate.
Accounts 903.4 - Billing Expenses will be directly assigned to each
affiliate based on the charges received from the billing contractor.
Account 903.5 - Office Expenses will be allocated to each affiliate
on the basis of a time study analysis.
<PAGE>
Attachment A
Page 4 of 5
Accounts 903.6, 903.8, and 904 - Collection Agencies, Collection
Expenses, and Uncollectible Accounts unique to each affiliate and
will be directly assigned.
Account 903.7 - Utilities will be directly assigned for property
that is separately owned and used by each affiliate. However,
utility expenses for joint use facilities will be allocated to each
affiliate based on square footage.
Accounts 903.9, and 905 through 910 - Other Expenses, Miscellaneous
Expenses, Customer Service Supervision, and Customer Assistance
Expense will be allocated to each affiliate on the basis of a time
study analysis.
Account 911 - Information and Safety Advertising will be directly
assigned to each affiliate.
Account 912 - Miscellaneous Customer Service Expense will be
allocated to each affiliate on the basis of a time study analysis.
23. Sales Expenses will be directly assigned to each affiliate.
24. Administrative and General accounts will be allocated to affiliates
as follows:
Account 920 - Administrative and General Salaries will
be allocated on the basis of exception time reporting or a time
study analysis.
Account 921.0 and 921.1 - Officer Expenses and Administrative
Assistant Expenses will be allocated to affiliates based on
exception time reporting or a time study analysis.
Account 921.2 - Facility Costs - Operating will be allocated to
affiliates on the basis of square footage of space.
Account 921.3 - Accounting Expenses will be allocated to affiliates
based on a time study.
Account 921.7 - Human Resources Expenses will be allocated to
affiliates on the basis of employee count.
Account 921.8 - Information System Expenses will be allocated to
affiliates based on a time study analysis.
Account 921.9 - Rates and Finance Expenses will be allocated to
affiliates based on exception time reporting.
<PAGE>
Attachment A
Page 5 of 5
Accounts 932.1 and 932.2 - Maintenance of General structures and
Improvements and Maintenance of General Plant Office Equipment will
be allocated to affiliates on the basis of square footage.
Account 923.9 - Professional Services will be directly assigned to
affiliates. However, any professional services related to
information systems will be allocated on the basis of Account 921.8.
<PAGE>
Schedule D
AFFILIATE AGREEMENT BETWEEN
ROANOKE GAS COMPANY AND
DIVERSIFIED ENERGY COMPANY
THIS AFFILIATE AGREEMENT, made and entered into__________, 1999, by and
between ROANOKE GAS COMPANY, a Virginia corporation (Roanoke Gas), and
DIVERSIFIED ENERGY COMPANY, a Virginia nonutility corporation (Diversified),
WITNESSETH:
WHEREAS, Roanoke Gas Company is a public service corporation organized to
provide natural gas service to customers in Roanoke, Virginia and surrounding
areas in Virginia with its principal place of business located at 519 Kimball
Avenue, Roanoke, Virginia 24030.
WHEREAS, Diversified is a nonutility corporation organized to sell energy
related products and services, primarily propane, in Virginia and West Virginia
with its principal place of business located at 519 Kimball Avenue, Roanoke,
Virginia 24030.
NOW THERFORE, in consideration of the promises and the mutual covenants
herein contained, and subject to the terms and conditions herein contained,
Roanoke Gas and Diversified agree as follows:
1. Roanoke Gas may provide executive, administrative, accounting, public
relations, information systems, data processing services, and other operational
services to Diversified; and
2. Diversified may provide, from time to time administrative and
operational services to Roanoke Gas; and
1
<PAGE>
3. Roanoke Gas and Diversified agree that expenses incurred by Roanoke Gas
on behalf of Diversified which are identifiable as directly assignable to
Diversified will be directly assigned to Diversified in Roanoke Gas and
Diversified accounting records.
4. Roanoke Gas and Diversified agree that expenses incurred by Diversified
on behalf of Roanoke Gas which are identifiable as directly assignable to
Roanoke Gas will be directly assigned to Roanoke Gas in Diversified and Roanoke
Gas accounting records.
5. Roanoke Gas and Diversified agree that expenses incurred by Roanoke Gas
on behalf of Diversified which are not identifiable as directly assigned will be
allocated to Diversified and recorded in the accounting records of Roanoke Gas
and Diversified according to Attachment A of this Agreement.
6. Roanoke Gas and Diversified agree that expenses incurred by Diversified
on behalf of Roanoke Gas which are not identifiable as directly assigned will be
allocated to Roanoke Gas and recorded in the accounting records of Roanoke Gas
and Diversified according to Attachment A of this Agreement.
7. Either party can terminate this Affiliate Agreement with a 60-day
notice to the other party and the approval of the Board of Directors of RGC
Resources.
In WITNESS WHEREOF, Roanoke Gas and Diversified have caused this Agreement
to be duly executed on the day and year first written above.
ROANOKE GAS COMPANY DIVERSIFIED ENERGY COMPANY
By By
Title Title
2
<PAGE>
Attachment A
Page 1 of 5
AFFILIATE TRANSACTIONS ALLOCATIONS
1. The parties to the attached Affiliates Agreement will individually pay for
any directly assigned expenses associated with their operations.
2. Transmission Plant accounts will be directly assigned to the owner of such
assets.
3. Distribution Plant accounts 374 through 387 will be directly assigned to
the owner of such assets. The resulting allocations to each affiliate for
accounts 374 through 387 will, in aggregate, in referred to as the
Distribution Plant allocation factors.
4. LNG plant accounts will be directly assigned to Roanoke Gas Company.
5. Production Plant accounts will be directly assigned to Roanoke Gas
Company.
6. Other Plant accounts will be directly assigned to the entity that either
owns the asset or which causes the cost to be incurred. Jointly owned
other plant assets will be allocated to the affiliates based on the
overall Distribution Plant allocation factors.
7. Accumulated Depreciation is unique to each plant account and will follow
the assignment to the corresponding plant account.
8. Materials and Supplies accounts are unique to each plant account and will
follow the assignment to the corresponding plant account. Jointly owned
materials and supplies will be allocated to the affiliates based on the
overall Distribution Plant allocation factor.
9. Prepaid Gas and Stored Gas accounts will be directly assigned to the
affiliate for which the gas is purchased or stored. However, in the case
of the former Commonwealth Public Service, the gas delivered to Bluefield
will be allocated between Bluefield Gas and the former Commonwealth Public
service based on the ratio of billed volumes.
10. Whenever possible, Working Cash accounts will be directly assigned to each
affiliate. Jointly owned working cash which cannot be specifically
assigned to an affiliate will be allocated to the affiliates based on the
overall Distribution Plant allocation factors.
11. Deferred Income Tax accounts will be directly assigned to the affiliate
that owns the asset or liability from which the deferred income tax amount
derives.
<PAGE>
Attachment A
Page 2 of 5
12. Deferred Investment Tax accounts will be directly assigned to the
affiliate that owns the asset from which the deferred investment tax
credit was generated.
13. Supplier Refund and Deferred Gas accounts will be directly assigned to the
affiliate for which the gas is refunded or deferred. However, in the case
of the former Commonwealth Public Service, the supplier refunds and
deferred gas amounts for Bluefield gas will be allocated to the former
Commonwealth Public Service based on the ratio of billed volumes.
14. Customer Deposit accounts will be directly assigned to each affiliate.
15. The results of the allocations for item 3 through 15, above result in an
Overall Rate Base allocation factor for each of the affiliates.
16. Gas Cost accounts will be directly assigned to affiliate for which the gas
is purchased. However, in the case of the former Commonwealth Public
Service, the gas delivered to Bluefield will be allocated between
Bluefield Gas and the former Commonwealth Public service based on the
ratio of billed volumes.
17. Transmission Operations and Maintenance Expense accounts will be directly
assigned to the affiliate owning the corresponding asset. However, in the
case of the former Commonwealth Public Service, Bluefield Gas'
transmission operations and maintenance expense accounts will be allocated
to the former Commonwealth Public Service based on the ratio of billed
volumes.
18. Distribution Operating Expense accounts will be allocated to affiliates
as follows:
Account 870 - Supervision and Engineering - will be allocated to
each affiliate on the basis of exception time reporting.
Accounts 871 through 875 - Load Dispatching, Mains and Services
Expenses, and Measuring and Regulating Station Expenses will be
directly assigned to the owner of the asset for which the expense
was incurred.
Account 878 - Removing and Setting Meters will be directly assigned
to the utility for which the meters were removed or set. However, in
the case of the former Commonwealth Public Service, Bluefield Gas
account 878 will be allocated to the former Commonwealth Public
Service based on meter cost.
Account 879 through 881 - Customer Installation Expense, Maps and
Records, and Rents will be directly assigned to each affiliate.
However, in the case of the
<PAGE>
Attachment A
Page 3 of 5
former Commonwealth Public Service, Bluefield Gas accounts 879
through 881 will be allocated to the former Commonwealth Public
Service based on the number of customers.
The resulting overall Distribution Operating Expense allocations will be
known as the Distribution Operating Expense allocation factors.
19. Distribution Maintenance Expense accounts will be directly assigned to
each affiliate for which the expense was incurred. However, in the case of
the former Commonwealth Public Service, distribution maintenance expense
accounts of Bluefield Gas will be allocated to the former Commonwealth
Public Service on the basis of the average distribution plant balances.
20. LNG Operations and Maintenance Expense accounts will be directly assigned
to Roanoke Gas Company.
21. Production Expense accounts will be directly assigned to Roanoke Gas
Company.
22. Customer Accounts accounts will be allocated to affiliates as follows:
Account 901 - Supervision will be allocated to each
affiliate on the basis of a time study analysis.
Account 902 - Meter Reading will be directly assigned to each
affiliate based on the billings received from the meter reading
contractor or the direct charge of time spent. Any jointly incurred
meter reading expenses will be allocated to the affiliates for which
the expenses were incurred based on the number of customers.
Accounts 903 and 903.1 - Customer Service Labor and Meals will be
allocated to each affiliate on the basis of a time study analysis.
Account 903.2 - Credit Investigations will be directly assigned to
affiliates for which the investigations were performed. However, in
the case of the former Commonwealth Public Service, credit
investigations charged to Bluefield Gas will be allocated to the
former Commonwealth Public service based on the number of customers.
Accounts 903.3 - Non-pay Turnoff Expenses will be directly assigned
to each affiliate.
<PAGE>
Attachment A
Page 4 of 5
Accounts 903.4 - Billing Expenses will be directly assigned to each
affiliate based on the charges received from the billing contractor.
Account 903.5 - Office Expenses will be allocated to each affiliate
on the basis of a time study analysis.
Accounts 903.6, 903.8, and 904 - Collection Agencies, Collection
Expenses, and Uncollectible Accounts unique to each affiliate and
will be directly assigned.
Account 903.7 - Utilities will be directly assigned for property
that is separately owned and used by each affiliate. However,
utility expenses for joint use facilities will be allocated to each
affiliate based on square footage.
Accounts 903.9, and 905 through 910 - Other Expenses, Miscellaneous
Expenses, Customer Service Supervision, and Customer Assistance
Expense will be allocated to each affiliate on the basis of a time
study analysis.
Account 911 - Information and Safety Advertising will be directly
assigned to each affiliate.
Account 912 - Miscellaneous Customer Service Expense will be
allocated to each affiliate on the basis of a time study analysis.
23. Sales Expenses will be directly assigned to each affiliate.
24. Administrative and General accounts will be allocated to affiliates
as follows:
Account 920 - Administrative and General Salaries will
be allocated on the basis of exception time reporting or a time
study analysis.
Account 921.0 and 921.1 - Officer Expenses and Administrative
Assistant Expenses will be allocated to affiliates based on
exception time reporting or a time study analysis.
Account 921.2 - Facility Costs - Operating will be allocated to
affiliates on the basis of square footage of space.
Account 921.3 - Accounting Expenses will be allocated to affiliates
based on a time study.
<PAGE>
Attachment A
Page 5 of 5
Account 921.7 - Human Resources Expenses will be allocated to
affiliates on the basis of employee count.
Account 921.8 - Information System Expenses will be allocated to
affiliates based on a time study analysis.
Account 921.9 - Rates and Finance Expenses will be allocated to
affiliates based on exception time reporting.
Accounts 932.1 and 932.2 - Maintenance of General structures and
Improvements and Maintenance of General Plant Office Equipment will
be allocated to affiliates on the basis of square footage.
Account 923.9 - Professional Services will be directly assigned to
affiliates. However, any professional services related to
information systems will be allocated on the basis of Account 921.8.
<PAGE>
Schedule E
Application of Roanoke Gas Company, Commonwealth Public Service
Corporation, and Affiliated Interests for Approval of Transactions
under Virginia Code, Title 56, Chapters 4 and 5.
TRANSACTION SUMMARY - CHAPTER 4
1) Describe, in detail, the affiliate relationship among the parties
involved.
Response:
RGC Resources is being established as a holding company with three initial
subsidiaries. The three subsidiaries are Roanoke Gas Company, Bluefield
Gas Company, and Diversified Energy. RGC Resources will own all of the
common stock of each of the three subsidiaries. Roanoke Gas Company is a
public service corporation organized to provide natural gas service to
customers in Roanoke, Virginia and surrounding areas in Virginia. After
restructuring it will also serve the area currently served by Commonwealth
Public Service Corporation. Bluefield Gas Company is a public service
corporation organized to provide natural gas service to customers in
Bluefield, West Virginia. Diversified Energy Company is a nonutility
corporation organized to sell energy products and services, primarily
propane, in Virginia and West Virginia.
2) Describe the conditions and terms of the agreement, including rights of
the parties to cancel and renewability.
Response:
The terms of the agreement are included in the application and in the
attached agreements. Any party to the affiliate agreements can terminate
the affiliate agreement, with the approval of the Board of Directors of
RGC Resources, who are also the Board of Directors of Roanoke Gas Company.
3) Why does the utility company need or why is the company providing the
service(s)/good(s)? What are the current or prior arrangements? Provide
specific details.
Response:
Roanoke Gas Company currently serves as the ultimate parent company
for Bluefield Gas Company, Commonwealth Public Service Corporation,
and Diversified Energy Company. The public utility owns the assets
that provide common or centralized services such as customer billing
software, centralized computer services, office space, etc., to the
other affiliates. The proposed organization places the primary
affiliate relationship with RGC Resources, a holding company, rather
than a regulated public service company and serves as an additional
means to isolate the regulated business from the nonregulated
business.
<PAGE>
4) For service(s)/good(s) received, show that the cost of the
service(s)/good(s) is at least comparable to the cost if obtained from a
non-affiliated entity and/or provided internally, both currently and in
the future. For service(s)/good(s) provided, show that the utility is
receiving compensation equal to or greater than that received from
non-affiliates where such services(s)/good(s) are provided to affiliates
and non-affiliates. Where such services(s)/good(s) are provided to
affiliates only, such pricing should be at the higher of cost or market.
Show that this is true for the proposed arrangement or provide
justification as to why the above guideline should not apply.
Response:
Given the nature of the services provided within the scope of the proposed
affiliate transactions, each affiliate will be providing and/or purchasing
services from its affiliate at cost. No profit other than return on rate
base will be included in the cost. No services will be provided that are
not already being provided under previously existing affiliate agreements.
5) How are the associated costs to be charged or allocated? Detailed
descriptions must be provided.
Response:
Allocations of costs to be charged are contained in the attached
Affiliates Agreements.
6) Provide assurance through safeguards in place that no unregulated
affiliate will be subsidized by the regulated company as a result of the
proposed transaction.
Response:
The attached Affiliates Agreements assure that no unregulated affiliate
will be subsidized by the regulated company as a result of the proposed
transaction.
7) Provide assurances that the utility is not exposing itself to greater
business risk as a result of the proposed arrangement. If the utility is
being exposed to a greater degree of business risk, show how the
arrangement would be in the public interest in spite of the additional
risk exposure.
Response:
The proposed reorganization is a means to further insulate the utility
from business risk of the nonutility affiliates. Because nonutility
business of the holding company will be conducted through separate
subsidiaries, any liabilities incurred by those subsidiaries will not
constitute liabilities of the utility subsidiaries. The corporate
separation also insures that all costs of a particular nonutility
subsidiary will be charged to that subsidiary and not allocated to any
utility subsidiary.
<PAGE>
8) Show that the agreement or arrangement is not detrimental to the Virginia
ratepayers. How is the transaction in the public interest? Be specific.
Response:
The proposed reorganization will not be detrimental to Virginia
ratepayers. As mentioned in the response to item number 7 above, the
proposed holding company structure actually provides for the insulation of
customers of Roanoke Gas from the risks of the nonutility businesses. Any
detriments which result from the restructuring and consequent segregation
of the utility and nonutility businesses will flow to the security holders
of RGC Resources and not to Roanoke Gas customers. The proposed holding
company structure also is intended to afford the flexibility for
maintaining the capital ratios of Roanoke Gas at levels determined to be
appropriate by regulatory authorities. This ability to adjust the
components of the capital structure of Roanoke Gas will help Roanoke Gas
maintain stable utility rates. Furthermore, the holding company structure
will facilitate the planning of financings best suited to the particular
needs and circumstances of the separate businesses and thus should improve
financing alternatives.
9) Provide additional support for the agreement/arrangement. Will the
service/contract result in lower operating costs, more efficiencies,
economies of scale or better quality service for the utility? Be specific.
Response:
In addition to the items mentioned in the responses to 7 and 8, above, the
Virginia customers will be able to share in the advantages of economies of
scale in purchases, shared management, and centralized facilities.
10) Show that the arrangement will not cause the utility to become involved in
a long term captive relationship.
Response:
Any of the requested affiliate relationships can be terminated with the
approval of the Board of Directors of RGC Resources, who are also the
Board of Directors of Roanoke Gas Company.
11) Costs should be directly assigned where possible. Direct charge allocation
should be emphasized for labor and other costs that can be identified with
a specific activity. Allocations based on a general allocator should be
limited to 5% of total charges if at all possible. If such assignments
deviate from the above guidelines, provide justification for such
deviation.
Response:
Complete descriptions of all allocation factors are contained in the
attached Affiliate Agreements.
<PAGE>
12) Section 56-233.1 of the Code of Virginia states that every public utility
shall use competitive bidding, to the extent possible, in its purchasing
practices. Show that competitive bidding has been used in connection with
the proposed arrangement. Provide names of vendors contacted and prices
quoted as well as copies of the bid requests.
Response:
Given the nature of the affiliate arrangements being proposed, competitive
bidding was not available and not appropriate. Moreover, as stated in
response to item 4 above, the services provided within the scope of the
proposed affiliate transactions will be provided and/or purchased from its
affiliate at cost. No profit other than return on rate base will be
included in the cost. Because most affiliate transactions are for shared
service of centralized management and corporate facilities owned by the
utility, no meaningful alternative exists.
13) Relative to leases with affiliates, the utility must justify leasing
versus buying as well as leasing from an affiliate versus leasing from a
third party. Provide an analysis to support company's proposal.
Response:
The utility will not be leasing from or to an affiliate.
14) Goods or services provided to an affiliate should be at the tariffed rate.
If this is not the case here, explain.
Response:
It is not anticipated that tariffed service will be provided to affiliates
at this time; if tariffed services are ever provided, they will be
provided at the tariffed rates.
<PAGE>
Schedule F
Application of Roanoke Gas Company, Commonwealth Public Service
Corporation, and Affiliated Interests for Approval of Transactions
under Virginia Code, Title 56, Chapters 4 and 5.
TRANSACTION SUMMARY - CHAPTER 5
1) Provide a copy of the agreement signed by the president or any vice
president and the secretary or any assistant secretary of the company.
Response:
Copies of the Affiliate Agreements are attached to this application.
2) Provide a clear summarization of the asset(s) in question.
Response:
There are no assets in question in the requested reorganization. This
application relates to transactions in securities.
3) Describe the proposed procedure and the terms and conditions of the
transaction to include:
a) Historical and current use of the property;
b) Proposed use of the property;
c) Original cost of the property;
d) Proposed sales price of the property and method of determining the
price; and
e) Proposed accounting treatment of the transaction as well as current
recording on company's books and records.
Response:
a) All assets of the Companies involved in the proposed transactions
have been used to provide natural gas utility service and/or to
provide propane sales and delivery to customers in parts of Virginia
and West Virginia.
b) All assets of the Companies involved in the proposed transactions
will continue to be used to provide natural gas utility service
and/or to provide propane sales and delivery to customers in parts
of Virginia and West Virginia.
<PAGE>
c) The original cost of the property in not applicable since the
ownership of assets will remain unchanged.
d) All assets are valued at the current booked amount.
e) The transaction will involve the transfer of the equity ownership of
Bluefield Gas Company from Roanoke Gas Company to the Holding
Company; the transfer of the equity ownership of Commonwealth Public
Service Corporation from Bluefield Gas Company to Roanoke Gas
Company; and the merger of Commonwealth Public Service Corporation
into Roanoke Gas Company. The transactions are straightforward and
will involve standard accounting practices for accounting for equity
transactions.
4) Provide assurances that adequate service to the public at just and
reasonable rates will not be impaired or jeopardized by the proposed
transfer.
Response:
Adequate service to the public at just and reasonable rates will not be
impaired or jeopardized by the proposed transfer. Customers of Roanoke Gas
Company and Commonwealth Public Service will see no change as a result of
the proposed transfer. At the time of the next Roanoke Gas Company rate
case or Annual Information Filing, whichever comes first, the Commission
and its Staff will have the opportunity to fully audit the combined data
of the two utilities. The rates of Commonwealth will be combined with the
rates of Roanoke Gas Company during the next Roanoke Gas Company rate
case.
5) Show that the sales price was arms-length and that the purchase will
result in a direct benefit to customers.
Response:
The transactions at issue constitute a restructuring, and do not involve a
sale or purchase. The direct benefits to customers will be the result of
economies of scale through the elimination of separate rate filings,
separate AGA and PGA filings, separate Annual Information Filings, and
improved gas purchasing power for the combined companies.
6) Provide schedule of plant, book depreciation, and contributed property
related to assets to be acquired up to current date (or date of purchase,
if acquisition has taken place).
<PAGE>
Response:
A schedule of plant, book depreciation, and contributed property related
to assets to be acquired up to current date (or date of purchase, if
acquisition has taken place) is not applicable.
7) Provide complete financial statements, to include Balance Sheet, Income
Statement and Cash Flow Statement, for the latest twelve-month period and
for the last five years.
Response:
The requested financial statements are included as Attachment 1 to this
Transaction Summary.
8) Are invoices available to verify plant figures? If not, why not?
Response:
Invoices to verify plant figures are not applicable to the requested
transaction.
9) In addition to the items described above, for applications requesting
approval of the acquisition/disposition of control, address the
anticipated impact of such action on the regulated company's rates and
service, capital structure, and access to capital and financial markets.
Discuss favorable and unfavorable economic impacts on the State of
Virginia to include employee levels, facilities, and services provided.
Will an additional investment be required to improve service quality?
Provide specific details on improvements needed. Provide the anticipated
impact on rates of such improvements currently and for the next ten years.
Response:
There will be no immediate impact on rates and service, capital structure
(except for the simple merger of Roanoke Gas and Commonwealth Public
Service) or access to capital and financial markets. In future rate cases,
the restructuring will afford continuing use of economies of scale and
increased financial flexibility that should result in lower rates and
better service. Likewise, there will be no immediate impacts on employee
levels, facilities and other interests of the State of Virginia. In the
long term, however, the public interest will be served by permitting a
strengthened public utility to serve customers, and by separating
non-utility businesses and permitting them increased flexibility.
<PAGE>
<TABLE>
<CAPTION>
Attachment 1
September 30, 1997
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Assets Company Company Company Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Utility plant:
In service $ 61,043,012 6,183,302 - (1,636,290) 65,590,024
Accumulated depreciation and
amortization (21,983,846) (2,168,975) - 1,539,858 (22,612,963)
- ---------------------------------------------------------------------------------------------------------------------------------
In service, net 39,059,166 4,014,327 - (96,432) 42,977,061
Construction work-in-progress 833,461 254,622 - - 1,088,083
- ---------------------------------------------------------------------------------------------------------------------------------
Utility plant, net 39,892,627 4,268,949 - (96,432) 44,065,144
- ---------------------------------------------------------------------------------------------------------------------------------
Nonutility property:
Propane - - 6,844,133 (209,764) 6,634,369
Accumulated depreciation and
amortization - - (2,816,185) 275,911 (2,540,274)
- ---------------------------------------------------------------------------------------------------------------------------------
Nonutility property, net - - 4,027,948 66,147 4,094,095
- ---------------------------------------------------------------------------------------------------------------------------------
Investment in subsidiaries 4,741,686 - - (4,741,686) -
- ---------------------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents 34,316 21,327 60,402 - 116,045
Accounts receivable, net 3,328,717 294,114 659,236 (93,083) 4,188,984
Inventories 6,186,842 1,100,969 139,770 - 7,427,581
Prepaid income taxes 227,904 - - (220,536) 7,368
Deferred income taxes 1,251,684 - 83,280 (127,969) 1,206,995
Purchased gas adjustments 70,961 516,496 - - 587,457
Other 313,603 17,368 89,703 - 420,674
- ---------------------------------------------------------------------------------------------------------------------------------
Total current assets 11,414,027 1,950,274 1,032,391 (441,588) 13,955,104
- ---------------------------------------------------------------------------------------------------------------------------------
Other assets 413,381 65,534 - - 478,915
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated
Roanoke Bluefield Highland
Liabilities and Stockholders' Gas Gas Propane
Equity Company Company Company Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capitalization:
Stockholders' equity:
Common stock $ 7,637,430 49,704 196,421 (246,125) 7,637,430
Capital in excess of par value 5,271,667 257,805 215,957 (473,762) 5,271,667
Retained earnings 7,687,854 1,735,957 2,317,427 (4,053,384) 7,687,854
Treasury stock - (1,300) - 1,300 -
- ---------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 20,596,951 2,042,166 2,729,805 (4,771,971) 20,596,951
Long-term debt, excluding current
installments 15,779,000 1,300,000 - - 17,079,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total capitalization 36,375,951 3,342,166 2,729,805 (4,771,971) 37,675,951
- ---------------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current installments of long-term debt 3,130,624 12,500 - - 3,143,124
Borrowings under lines of credit 4,400,000 1,756,000 973,000 - 7,129,000
Dividends payable 397,530 - - - 397,530
Accounts payable 4,258,068 537,578 809,785 (93,083) 5,512,348
Income taxes payable - 2,349 218,187 (220,536) -
Deferred income taxes - 127,969 - (127,969) -
Customer deposits 371,083 49,011 7,801 - 427,895
Accrued expenses 3,931,351 225,184 77,325 - 4,233,860
Refunds from suppliers - due customers 423,892 1,968 - - 425,860
- ---------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 16,912,548 2,712,559 2,086,098 (441,588) 21,269,617
- ---------------------------------------------------------------------------------------------------------------------------------
Deferred credits and other liabilities:
Deferred income taxes 2,697,567 213,330 235,035 - 3,145,932
Deferred investment tax credits 475,655 16,702 - - 492,357
Other deferred credits - - 9,401 - 9,401
- ---------------------------------------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities 3,173,222 230,032 244,436 - 3,647,690
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended September 30, 1997
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Gas utilities $ 51,725,010 6,474,653 - (357,482) 57,842,181
Propane operations - - 7,205,645 - 7,205,645
- ---------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 51,725,010 6,474,653 7,205,645 (357,482) 65,047,826
- ---------------------------------------------------------------------------------------------------------------------------------
Cost of gas:
Gas utilities 34,048,891 4,626,446 - - 38,675,337
Propane operations - - 3,907,568 - 3,907,568
- ---------------------------------------------------------------------------------------------------------------------------------
Total cost of gas 34,048,891 4,626,446 3,907,568 - 42,582,905
- ---------------------------------------------------------------------------------------------------------------------------------
Operating margin 17,676,119 1,848,207 3,298,077 (357,482) 22,464,921
- ---------------------------------------------------------------------------------------------------------------------------------
Other operating expenses:
Gas utilities:
Other operations 7,420,092 806,908 - (177,167) 8,049,833
Maintenance 1,223,634 239,130 - - 1,462,764
Taxes - general 2,135,177 321,222 - - 2,456,399
Taxes - income 827,084 30,880 - - 857,964
Depreciation and amortization 2,354,078 197,443 - (17,609) 2,533,912
Propane operations - - 2,863,670 (163,044) 2,700,626
- ---------------------------------------------------------------------------------------------------------------------------------
Total other operating expenses 13,960,065 1,595,583 2,863,670 (357,820) 18,061,498
- ---------------------------------------------------------------------------------------------------------------------------------
Operating earnings 3,716,054 252,624 434,407 338 4,403,423
Other income (deductions):
Gas utilities:
Interest income 11,654 - - (3,450) 8,204
Merchandising and jobbing, net 143,593 3,929 - - 147,522
Other deductions (81,013) (6,473) - - (87,486)
Taxes - income (37,233) (319) - - (37,552)
Propane operations, net - - 111,841 4,381 116,222
- ---------------------------------------------------------------------------------------------------------------------------------
Total other income (deductions) 37,001 (2,863) 111,841 931 146,910
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings before interest charges and equity
in earnings of subsidiaries $ 3,753,055 249,761 546,248 1,269 4,550,333
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest charges:
Gas utilities:
Long-term debt $ 1,637,741 103,257 - - 1,740,998
Other 339,404 103,347 - (1,307) 441,444
Propane operations - - 61,288 (3,277) 58,011
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest charges 1,977,145 206,604 61,288 (4,584) 2,240,453
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings before equity in earnings of
subsidiaries 1,775,910 43,157 484,960 5,853 2,309,880
Equity in earnings of subsidiaries 533,970 - - (533,970) -
- ---------------------------------------------------------------------------------------------------------------------------------
Net earnings 2,309,880 43,157 484,960 (528,117) 2,309,880
Retained earnings, beginning of year 6,948,623 1,692,800 1,832,467 (3,525,267) 6,948,623
Cash dividends declared (1,570,649) - - - (1,570,649)
- ---------------------------------------------------------------------------------------------------------------------------------
Retained earnings, end of year $ 7,687,854 1,735,957 2,317,427 (4,053,384) 7,687,854
=================================================================================================================================
</TABLE>
See accompanying independent auditors' report.
<PAGE>
<TABLE>
<CAPTION>
Year Ended September 30, 1997
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Earnings before equity in earnings of
subsidiaries $ 1,775,910 43,157 484,960 5,853 2,309,880
Adjustments to reconcile earnings before
equity in earnings of subsidiaries to net
cash provided by operating activities:
Depreciation and amortization 2,508,069 217,491 527,308 (5,853) 3,247,015
Loss (gain) on disposal of utility plant
and nonutility property - 1,347 (2,308) - (961)
Loss on sale of other asset 3,293 - - - 3,293
Write-down of other asset 4,230 - - - 4,230
Write-off of regulatory assets 132,523 - - - 132,523
Decrease (increase) in purchased gas
adjustments 1,292,427 (97,294) - - 1,195,133
Changes in assets and liabilities which
provided (used) cash, exclusive of
changes shown separately 1,623,770 25,098 (177,547) - 1,471,321
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating
activities 7,340,222 189,799 832,413 - 8,362,434
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to utility plant in service and
under construction and nonutility
property (5,118,473) (608,106) (2,326,222) - (8,052,801)
Proceeds from disposal of property 19,461 2,037 28,596 - 50,094
Cost of removal of utility plant, net (122,378) (36,477) - - (158,855)
Proceeds from sale of other asset 141,969 - - - 141,969
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities $ (5,079,421) (642,546) (2,297,626) - (8,019,593)
- ---------------------------------------------------------------------------------------------------------------------------------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from financing activities:
Retirement of long-term debt and payments
on obligations under capital leases $ (631,923) (37,500) - - (669,423)
Net borrowings (repayments) under lines of
credit (990,000) 493,500 937,000 - 476,500
Proceeds from issuance of common stock 882,719 - - - 882,719
Cash dividends paid (1,549,914) - - - (1,549,914)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing
activities (2,289,118) 456,000 937,000 - (860,118)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents (28,317) 3,253 (492,213) - (517,277)
Cash and cash equivalents, beginning of year 62,633 18,074 552,615 - 633,322
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 34,316 21,327 60,402 - 116,045
=================================================================================================================================
Changes in assets and liabilities which
provided (used) cash, exclusive of
changes show separately:
Accounts receivable and customer
deposits, net (43,138) (31,243) 133,186 (324,871) (266,066)
Inventories (115,423) 84,623 5,805 - (24,995)
Prepaid income taxes 55,280 128,959 - 105,914 290,153
Other noncurrent assets 42,163 41,567 - - 83,730
Accounts payable 901,980 (266,553) (379,417) 324,871 580,881
Income taxes payable - 2,349 103,565 (105,914) -
Accrued expenses and other current
assets, net 1,146,216 8,787 (76,844) - 1,078,159
Refunds from suppliers - due customers 403,692 (1,697) - - 401,995
Deferred taxes, including amortization of
deferred investment tax credits (767,000) 58,306 26,757 - (681,937)
Other deferred credits - - 9,401 - 9,401
- ---------------------------------------------------------------------------------------------------------------------------------
$ 1,623,700 25,098 (177,547) - 1,471,321
=================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Supplemental disclosures of cash flows information:
Cash paid during the year for:
Interest $ 1,808,364 206,028 56,085 (4,584) 2,065,893
=================================================================================================================================
Income taxes, net of refunds $ 1,576,037 (178,900) 178,815 - 1,575,952
=================================================================================================================================
</TABLE>
See accompanying independent auditors' report.
<PAGE>
<TABLE>
<CAPTION>
September 30, 1996
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Assets Company Company Company Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Utility plant:
In service $ 56,383,086 5,708,109 - (1,636,290) 60,454,905
Accumulated depreciation (20,284,597) (2,060,050) - 1,522,249 (20,822,298)
- ---------------------------------------------------------------------------------------------------------------------------------
In service, net 36,098,489 3,648,059 - (114,041) 39,632,507
Construction work-in-progress 1,080,817 197,182 - - 1,277,999
- ---------------------------------------------------------------------------------------------------------------------------------
Utility plant, net 37,179,306 3,845,241 - (114,041) 40,910,506
- ---------------------------------------------------------------------------------------------------------------------------------
Nonutility property:
Propane - - 4,613,394 (209,764) 4,403,630
Accumulated depreciation - - (2,358,072) 287,667 (2,070,405)
- ---------------------------------------------------------------------------------------------------------------------------------
Nonutility property, net - - 2,255,322 77,903 2,333,225
- ---------------------------------------------------------------------------------------------------------------------------------
Investment in subsidiaries 4,207,716 - - (4,207,716) -
- ---------------------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents 62,633 18,074 552,615 - 633,322
Accounts receivable, net 3,218,139 264,160 793,062 (417,954) 3,857,407
Inventories 6,071,419 1,185,592 145,575 - 7,402,586
Prepaid income taxes 283,184 128,959 - (114,622) 297,521
Deferred income taxes 386,424 - 68,162 (75,230) 379,356
Purchased gas adjustments 1,363,388 419,202 - - 1,782,590
Other 440,620 21,897 17,409 - 479,926
- ---------------------------------------------------------------------------------------------------------------------------------
Total current assets 11,825,807 2,037,884 1,576,823 (607,806) 14,832,708
- ---------------------------------------------------------------------------------------------------------------------------------
Other assets 737,559 107,101 - - 844,660
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated
Roanoke Bluefield Highland
Liabilities and Stockholders' Gas Gas Propane
Equity Company Company Company Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capitalization:
Stockholders' equity:
Common stock $ 7,379,215 49,704 196,421 (246,125) 7,379,215
Capital in excess of par value 4,647,163 257,805 215,957 (473,762) 4,647,163
Retained earnings 6,948,623 1,692,800 1,832,467 (3,525,267) 6,948,623
Treasury stock - (1,300) - 1,300 -
- ---------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 18,975,001 1,999,009 2,244,845 (4,243,854) 18,975,001
Long-term debt, excluding current
maturities 18,909,624 1,312,500 - - 20,222,124
- ---------------------------------------------------------------------------------------------------------------------------------
Total capitalization 37,884,625 3,311,509 2,244,845 (4,243,854) 39,197,125
- ---------------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities of long-term debt 631,923 37,500 - - 669,423
Borrowings under lines of credit 5,390,000 1,262,500 - - 6,652,500
Dividends payable 376,795 - - - 376,795
Accounts payable 3,356,088 804,131 1,189,202 (417,954) 4,931,467
Income taxes payable - - 114,622 (114,622) -
Deferred income taxes - 75,230 - (75,230) -
Customer deposits 303,643 50,300 8,441 - 362,384
Accrued expenses 2,912,152 220,926 81,875 - 3,214,953
Refunds from suppliers - due customers 20,200 3,665 - - 23,865
- ---------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 12,990,801 2,454,252 1,394,140 (607,806) 16,231,387
- ---------------------------------------------------------------------------------------------------------------------------------
Deferred credits and other liabilities:
Deferred income taxes 2,560,842 206,793 193,160 - 2,960,795
Deferred investment tax credits 514,120 17,672 - - 531,792
- ---------------------------------------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities 3,074,962 224,465 193,160 - 3,492,587
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended September 30, 1996
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Gas utilities $ 53,842,491 6,501,716 - (276,800) 60,067,407
Propane operations - - 5,703,466 - 5,703,466
- ---------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 53,842,491 6,501,716 5,703,466 (276,800) 65,770,873
- ---------------------------------------------------------------------------------------------------------------------------------
Cost of gas:
Gas utilities 36,094,989 4,668,115 - - 40,763,104
Propane operations - - 2,976,974 - 2,976,974
- ---------------------------------------------------------------------------------------------------------------------------------
Total cost of gas 36,094,989 4,668,115 2,976,974 - 43,740,078
- ---------------------------------------------------------------------------------------------------------------------------------
Operating margin 17,747,502 1,833,601 2,762,492 (276,800) 22,030,795
- ---------------------------------------------------------------------------------------------------------------------------------
Other operating expenses:
Gas utilities:
Other operations 7,338,842 782,312 - (64,943) 8,056,211
Maintenance 1,674,242 194,038 - - 1,868,280
Taxes - general 2,100,584 301,184 - - 2,401,768
Taxes - income 866,408 97,487 - - 963,895
Depreciation and amortization 2,123,995 188,061 - (17,609) 2,294,447
Propane operations - - 2,606,503 (195,613) 2,410,890
- ---------------------------------------------------------------------------------------------------------------------------------
Total other operating expenses 14,104,071 1,563,082 2,606,503 (278,165) 17,995,491
- ---------------------------------------------------------------------------------------------------------------------------------
Operating earnings 3,643,431 270,519 119,989 1,365 4,035,304
Other income (deductions):
Gas utilities:
Interest income - 274 - - 274
Merchandising and jobbing, net 88,144 11,190 - - 99,334
Other deductions (112,101) (8,438) - - (120,539)
Taxes - income (19,650) (2,836) - - (22,486)
Propane operations, net - - 116,669 4,488 121,157
- ---------------------------------------------------------------------------------------------------------------------------------
Total other income (deductions) (43,607) 190 116,669 4,488 77,740
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings before interest charges and equity
in earnings of subsidiaries $ 3,599,824 270,709 236,658 5,853 4,113,044
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest charges:
Gas utilities:
Long-term debt $ 1,539,041 82,620 - - 1,621,661
Other 258,790 33,511 - - 292,301
Propane operations - - 2,410 - 2,410
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest charges 1,797,831 116,131 2,410 - 1,916,372
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings before equity in earnings of
subsidiaries 1,801,993 154,578 234,248 5,853 2,196,672
Equity in earnings of subsidiaries 394,679 - - (394,679) -
- ---------------------------------------------------------------------------------------------------------------------------------
Net earnings 2,196,672 154,578 234,248 (388,826) 2,196,672
Retained earnings, beginning of year 6,243,028 1,538,222 1,598,219 (3,136,441) 6,243,028
Cash dividends declared (1,491,077) - - - (1,491,077)
- ---------------------------------------------------------------------------------------------------------------------------------
Retained earnings, end of year $ 6,948,623 1,692,800 1,832,467 (3,525,267) 6,948,623
=================================================================================================================================
</TABLE>
See accompanying independent auditors' report.
<PAGE>
<TABLE>
<CAPTION>
Year Ended September 30, 1996
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Earnings before equity in earnings of
subsidiaries $ 1,801,993 154,578 234,248 5,853 2,196,672
Adjustments to reconcile earnings before
equity in earnings of subsidiaries to net
cash provided by (used in) operating
activities:
Depreciation and amortization 2,268,229 203,769 344,169 (5,853) 2,810,314
Loss (gain) on disposal of utility plant
and nonutility property - 2,471 (6,673) - (4,202)
Increase in purchased gas adjustments (1,349,694) (669,895) - - (2,019,589)
Changes in assets and liabilities which
provided (used) cash, exclusive of
changes and noncash transactions
shown separately (3,884,318) (78,832) 354,275 - (3,608,875)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating
activities (1,163,790) (387,909) 926,019 - (625,680)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to utility plant in service and
under construction and nonutility
property (4,281,600) (580,896) (677,877) 17,396 (5,522,977)
Proceeds from disposal of property 16,076 9,139 34,692 (17,396) 42,511
Cost of removal of utility plant, net (325,140) (98,081) - - (423,221)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities $ (4,590,664) (669,838) (643,185) - (5,903,687)
- ---------------------------------------------------------------------------------------------------------------------------------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from financing activities:
Retirement of long-term debt and payments
on obligations under capital leases $ (629,415) (550,000) - - (1,179,415)
Net borrowings (repayments) under lines of
credit (7,154,000) 1,551,000 (107,000) - 8,598,000
Proceeds from issuance of common stock 714,234 - - - 714,234
Cash dividends paid (1,473,025) - - - (1,473,025)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing
activities 5,765,794 1,001,000 (107,000) - 6,659,794
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents 11,340 (56,747) 175,834 - 130,427
Cash and cash equivalents, beginning of year 51,293 74,821 376,781 - 502,895
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 62,633 18,074 552,615 - 633,322
=================================================================================================================================
Changes in assets and liabilities which
provided (used) cash, exclusive of
changes show separately:
Accounts receivable and customer
deposits, net (576,731) 2,684 (64,240) 291,721 (346,566)
Inventories (1,821,447) (167,025) (66,120) - (2,054,592)
Prepaid income taxes (283,184) (128,959) - 114,622 (297,521)
Accounts payable (1,102,672) 224,080 557,133 (291,721) (613,180)
Income taxes payable (49,144) (234,056) (78,588) (114,622) (476,410)
Accrued expenses and other current
assets (149,654) 23,638 14,408 - (111,608)
Refunds from suppliers - due customers (587,575) (71,411) - - (658,986)
Other noncurrent assets 177,796 (16,860) - - 160,936
Deferred taxes, including amortization of
deferred investment tax credits 508,293 289,077 (8,318) - 789,052
- ---------------------------------------------------------------------------------------------------------------------------------
$ (3,884,318) (78,832) 354,275 - (3,608,875)
=================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Supplemental disclosures of cash flows
information:
Cash paid during the year for:
Interest $ 1,381,362 110,029 2,410 - 1,493,801
=================================================================================================================================
Income taxes $ 710,093 174,261 263,965 - 1,148,319
=================================================================================================================================
Noncash transactions:
Roanoke Gas Company and Bluefield Gas
Company refinanced $8,000,000 and
$1,300,000, respectively, of current
installments of long-term debt and
borrowings under lines of credit as
long-term debt (see note 4).
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying independent auditors' report.
<PAGE>
<TABLE>
<CAPTION>
ROANOKE GAS COMPANY AND SUBSIDIARIES
Consolidating Schedule of Balance Sheet Information
September 30, 1995
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Assets Company Company Company Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Utility plant:
In service $ 53,090,805 5,379,659 - (1,636,290) 56,834,174
Accumulated depreciation (18,733,361) (2,033,695) - 1,504,640 (19,262,416)
- ---------------------------------------------------------------------------------------------------------------------------------
In service, net 34,357,444 3,345,964 - (131,650) 37,571,758
Construction work-in-progress 499,427 35,680 - - 535,107
- ---------------------------------------------------------------------------------------------------------------------------------
Utility plant, net 34,856,871 3,381,644 - (131,650) 38,106,865
- ---------------------------------------------------------------------------------------------------------------------------------
Nonutility property:
Propane - - 3,991,397 (209,764) 3,781,633
Accumulated depreciation - - (2,041,765) 299,423 (1,742,342)
- ---------------------------------------------------------------------------------------------------------------------------------
Nonutility property, net - - 1,949,637 89,659 2,039,291
- ---------------------------------------------------------------------------------------------------------------------------------
Investment in subsidiaries 3,813,037 - - (3,813,037) -
- ---------------------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents 51,293 74,821 376,781 - 502,895
Accounts receivable, net 2,591,585 268,299 729,453 (126,233) 3,463,104
Inventories 4,249,972 1,018,567 79,455 - 5,347,994
Deferred income taxes 734,107 188,873 44,752 - 967,732
Purchased gas adjustments 13,694 - - (13,694) -
Other 149,864 23,767 7,559 - 181,190
- ---------------------------------------------------------------------------------------------------------------------------------
Total current assets 7,790,515 1,574,327 1,238,000 (139,927) 10,462,915
- ---------------------------------------------------------------------------------------------------------------------------------
Other assets 915,355 90,241 - - 1,005,596
- ---------------------------------------------------------------------------------------------------------------------------------
$ 47,375,778 5,046,212 3,187,632 (3,994,955) 51,614,667
=================================================================================================================================
</TABLE>
See accompanying independent auditors' report.
<PAGE>
<TABLE>
<CAPTION>
Schedule 1
Consolidated
Roanoke Bluefield Highland
Liabilities and Stockholders' Gas Gas Propane
Equity Company Company Company Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capitalization:
Stockholders' equity:
Common stock $ 7,162,560 49,704 196,421 (246,125) 7,162,560
Capital in excess of par value 4,149,584 257,805 215,957 (473,762) 4,149,584
Retained earnings 6,243,028 1,538,222 1,598,219 (3,136,441) 6,243,028
Treasury stock - (1,300) - 1,300 -
- ---------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 17,555,172 1,844,431 2,010,597 (3,855,028) 17,555,172
Long-term debt, excluding current
maturities 16,741,547 762,500 - - 17,504,047
- ---------------------------------------------------------------------------------------------------------------------------------
Total capitalization 34,296,719 2,606,931 2,010,597 (3,855,028) 35,059,219
- ---------------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities of long-term debt 629,415 550,000 - - 1,179,415
Notes payable to banks 1,036,000 299,000 107,000 - 1,442,000
Dividends payable 358,743 - - - 358,743
Accounts payable 4,458,760 580,051 632,069 (126,233) 5,544,647
Income taxes payable 49,144 234,056 193,210 - 476,410
Customer deposits 253,820 51,756 9,071 - 314,647
Accrued expenses 2,771,050 199,158 57,617 - 3,027,825
Refunds from suppliers - due customers 607,775 75,076 - - 682,851
Purchased gas adjustments - 250,693 - (13,694) 236,999
- ---------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 10,164,707 2,239,790 998,967 (139,927) 13,263,537
- ---------------------------------------------------------------------------------------------------------------------------------
Deferred credits and other liabilities:
Deferred income taxes 2,362,553 180,849 178,068 - 2,721,470
Deferred investment tax credits 551,799 18,642 - - 570,441
- ---------------------------------------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities 2,914,352 199,491 178,068 - 3,291,911
- ---------------------------------------------------------------------------------------------------------------------------------
$ 47,375,778 5,046,212 3,187,632 (3,994,955) 51,614,667
=================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ROANOKE GAS COMPANY AND SUBSIDIARIES Schedule 2
Consolidated Schedule of Earnings and Retained Earnings Information
Year Ended September 30, 1995
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Gas utilities $ 39,230,251 5,055,000 - (223,514) 44,061,737
Propane operations - - 4,550,610 (1,200) 4,549,410
- ---------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 39,230,251 5,055,000 4,550,610 (224,714) 48,611,147
- ---------------------------------------------------------------------------------------------------------------------------------
Cost of gas:
Gas utilities 23,579,354 3,448,153 - - 27,027,507
Propane operations - - 2,147,776 - 2,147,776
- ---------------------------------------------------------------------------------------------------------------------------------
Total cost of gas 23,579,354 3,448,153 2,147,776 - 29,175,283
- ---------------------------------------------------------------------------------------------------------------------------------
Operating margin 15,650,897 1,606,847 2,402,834 (224,714) 19,435,864
- ---------------------------------------------------------------------------------------------------------------------------------
Other operating expenses:
Gas utilities:
Other operations 7,114,487 669,941 - (57,817) 7,726,611
Maintenance 1,069,629 163,437 - - 1,233,066
Taxes - general 1,806,196 276,700 - - 2,082,896
Taxes - income 624,297 87,140 - - 711,437
Depreciation and amortization 1,984,036 167,061 - (17,609) 2,133,488
Propane operations - - 2,173,994 (147,886) 2,026,108
- ---------------------------------------------------------------------------------------------------------------------------------
Total other operating expenses 12,598,645 1,364,279 2,173,994 (223,312) 15,913,606
- ---------------------------------------------------------------------------------------------------------------------------------
Operating earnings 3,052,252 242,568 228,840 (1,402) 3,522,258
Other income (deductions):
Gas utilities:
Interest income 18,272 8,380 - - 26,652
Merchandising and jobbing, net 124,125 (3,650) - - 120,475
Other deductions (135,035) (7,354) - - (142,389)
Taxes - income (14,721) 174 - - (14,547)
Propane operations, net - - 182,203 7,255 189,458
- ---------------------------------------------------------------------------------------------------------------------------------
Total other income (deductions) (7,359) (2,450) 182,203 7,255 179,649
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings before interest charges and equity
in earnings of subsidiaries $ 3,044,893 240,118 411,043 5,853 3,701,907
(Continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ROANOKE GAS COMPANY AND SUBSIDIARIES Schedule 2, Continued
Consolidated Schedule of Earnings and Retained Earnings Information
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest charges:
Gas utilities:
Long-term debt $ 1,590,703 89,375 - - 1,680,078
Other 208,043 23,099 - - 231,142
Propane operations - - 13,447 - 13,447
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest charges 1,798,746 112,474 13,447 - 1,924,667
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings before equity in earnings of
subsidiaries 1,246,147 127,644 397,596 5,853 1,777,240
Equity in earnings of subsidiaries 531,093 - - (531,093) -
- ---------------------------------------------------------------------------------------------------------------------------------
Net earnings 1,777,240 127,644 397,596 (525,240) 1,777,240
Retained earnings, beginning of year 5,881,869 1,410,578 1,300,623 (2,711,201) 5,881,869
Cash dividends (1,416,081) - (100,000) 100,000 (1,416,081)
- ---------------------------------------------------------------------------------------------------------------------------------
Retained earnings, end of year $ 6,243,028 1,538,222 1,598,219 (3,136,441) 6,243,028
=================================================================================================================================
</TABLE>
See accompanying independent auditors' report.
<PAGE>
<TABLE>
<CAPTION>
Schedule 3
ROANOKE GAS COMPANY AND SUBSIDIARIES
Consolidating Schedule of Cash Flows Information
Year Ended September 30, 1995
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Earnings before equity in earnings of
subsidiaries $ 1,246,147 127,644 397,596 5,853 1,777,240
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 2,109,213 182,869 276,899 (5,853) 2,563,128
Loss on disposal of utility plant and
nonutility property - 3,500 1,323 - 4,823
Gain on sale of other asset - - (67,556) - (67,556)
Decrease in purchased gas adjustments 758,207 173,215 - - 931,422
Dividends received 100,000 - - (100,000) -
Changes in assets and liabilities which
provided (used) cash, exclusive of
changes and noncash transactions
shown separately 2,713,022 387,979 38,959 - 3,139,960
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 6,926,589 875,207 647,221 (100,000) 8,349,017
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to utility plant in service and
under construction and nonutility
property (4,463,672) (572,032) (573,588) - (5,609,292)
Proceeds from disposal of property 58,882 - 11,521 - 70,403
Cost of removal of utility plant, net (116,429) (6,094) - - (122,253)
Proceeds from collection of note receivable - - 490,000 - 490,000
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities $ (4,521,219) (578,126) (72,067) - (5,171,412)
- ---------------------------------------------------------------------------------------------------------------------------------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule 3, Continued
ROANOKE GAS COMPANY AND SUBSIDIARIES
Consolidating Schedule of Cash Flows Information
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from financing activities:
Proceeds form issuance of long-term debt $ 2,000,000 700,000 - - 2,700,000
Retirement of long-term debt and payments
on obligations under capital leases (1,074,703) (50,000) - - (1,124,703)
Net repayments under line of credit
agreement (2,718,000) (932,000) (143,000) - (3,793,000)
Proceeds from issuance of common stock 773,544 - - - 773,544
Common stock issuance costs (4,450) - - - (4,450)
Cash dividends paid (1,403,370) - (100,000) 100,000 (1,403,370)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (2,426,979) (282,000) (243,000) 100,000 (2,851,979)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents (21,609) 15,081 332,154 - 325,626
Cash and cash equivalents, beginning of year 72,902 59,740 44,627 - 177,269
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 51,293 74,821 376,781 - 502,895
=================================================================================================================================
Changes in assets and liabilities which
provided (used) cash, exclusive of
changes show separately:
Accounts receivable and customer
deposits, net (235,884) 167,768 (181,092) (55,719) (304,927)
Inventories 867,995 160,435 (71) - 1,028,359
Prepaid income taxes 786,596 (295,114) (230,873) - 260,609
Accounts payable 29,949 89,879 48,619 55,719 224,166
Income taxes payable 49,144 234,056 193,210 - 476,410
Accrued expenses and other current
assets 1,664,342 116,938 229,886 - 2,011,166
Refunds from suppliers - due customers 122,346 61,607 - - 183,953
Other noncurrent assets (231,807) (45,532) - - (277,339)
Deferred taxes, including amortization of
deferred investment tax credits (227,343) (102,058) (20,720) - (350,121)
Other deferred credits (112,316) - - - (112,316)
- ---------------------------------------------------------------------------------------------------------------------------------
$ 2,713,022 387,979 38,959 - 3,139,960
=================================================================================================================================
(Continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule 3, Continued
ROANOKE GAS COMPANY AND SUBSIDIARIES
Consolidating Schedule of Cash Flows Information
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Supplemental disclosures of cash flows
information:
Cash paid during the year for:
Interest $ 1,743,871 110,498 13,447 - 1,867,816
=================================================================================================================================
Income taxes, net of refunds $ 142,936 250,082 282,400 - 675,418
=================================================================================================================================
Noncash transactions:
A capital lease obligation of $21,119 was incurred in 1995 when Roanoke
Gas Company entered into an equipment lease.
A note receivable of $490,000 was received in 1994 by Highland Propane
Company upon the sale of a building, resulting in a deferred gain of
$67,556. The note was paid in full and the deferred gain recognized in
1995.
</TABLE>
See accompanying independent auditors' report.
<PAGE>
<TABLE>
<CAPTION>
ROANOKE GAS COMPANY AND SUBSIDIARIES
Consolidating Schedule of Balance Sheet Information
September 30, 1994
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Assets Company Company Company Eliminations Consolidated
------ ------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Utility plant:
In service $ 49,130,292 4,740,736 - (1,636,290) 52,234,738
Accumulated depreciation (17,071,921) (1,880,708) - 1,487,031 (17,465,598)
-------------- --------------- ------------- -------------- --------------
In service, net 32,058,371 2,860,028 - (149,259) 34,769,140
Construction work-in-progress 365,376 129,858 - - 495,234
-------------- --------------- ------------- -------------- --------------
Utility plant, net 32,423,747 2,989,886 - (149,259) 35,264,374
-------------- --------------- ------------- -------------- --------------
Nonutility property:
Propane - - 3,578,103 (209,764) 3,368,339
Accumulated depreciation - - (1,912,316) 311,179 (1,601,137)
-------------- --------------- ------------- -------------- --------------
Nonutility property, net - - 1,665,787 101,415 1,767,202
-------------- --------------- ------------- -------------- --------------
Investment in subsidiaries 3,381,944 - - (3,381,944) -
-------------- --------------- ------------- -------------- --------------
Current assets:
Cash and cash equivalents 72,902 59,740 44,627 - 177,269
Accounts receivable, net 2,375,308 439,042 547,314 (181,952) 3,179,712
Inventories 5,117,967 1,179,002 79,384 - 6,376,353
Deferred income taxes 91,372 60,519 8,400 - 160,291
Prepaid income taxes 786,596 - - (525,987) 260,609
Purchased gas adjustments 771,901 - - (77,478) 694,423
Other 281,820 18,214 180,923 - 480,957
-------------- --------------- ------------- -------------- --------------
Total current assets 9,497,866 1,756,517 860,648 (785,417) 11,329,614
-------------- --------------- ------------- -------------- --------------
Other assets 683,548 44,709 490,000 - 1,218,257
$ 45,987,105 4,791,112 3,016,435 (4,215,205) 49,579,447
============== =============== ============= ============== ==============
</TABLE>
See accompanying independent auditors' report.
<PAGE>
<TABLE>
<CAPTION>
Schedule 1
ROANOKE GAS COMPANY AND SUBSIDIARIES
Consolidating Schedule of Balance Sheet Information
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Liabilities Company Company Company Eliminations Consolidated
----------- ------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Capitalization:
Stockholders' equity:
Common stock $ 6,911,715 49,704 196,421 (246,125) 6,911,715
Capital in excess of par value 3,631,335 257,805 215,957 (473,762) 3,631,335
Retained earnings 5,881,869 1,410,578 1,300,623 (2,711,201) 5,881,869
Treasury stock - (1,300) - 1,300 -
-------------- --------------- ------------- -------------- --------------
Total stockholders' equity 16,424,919 1,716,787 1,713,001 (3,429,788) 16,424,919
Long-term debt, excluding current
maturities 15,802,400 612,500 - - 16,414,900
-------------- --------------- ------------- -------------- --------------
Total capitalization 32,227,319 2,329,287 1,713,001 (3,429,788) 32,839,819
-------------- --------------- ------------- -------------- --------------
Current liabilities:
Current maturities of long-term debt 622,146 50,000 - - 672,146
Notes payable to banks 3,754,000 1,231,000 250,000 - 5,235,000
Dividends payable 346,032 - - - 346,032
Accounts payable 4,428,811 490,172 583,450 (181,952) 5,320,481
Customer deposits 273,428 54,730 8,024 - 336,182
Accrued expenses 1,238,664 76,667 1,095 - 1,316,426
Refunds from suppliers - due customers 485,429 13,469 - - 498,898
Accrued income taxes - 295,114 230,873 (525,987) -
Purchased gas adjustments - 77,478 - (77,478) -
-------------- --------------- ------------- -------------- --------------
Total current liabilities 11,148,510 2,288,630 1,073,442 (785,417) 13,725,165
-------------- --------------- ------------- -------------- --------------
Deferred credits and other liabilities:
Deferred income taxes 1,909,482 153,583 162,436 - 2,225,501
Deferred investment tax credits 589,478 19,612 - - 609,090
Other deferred credits 112,316 - 67,556 - 179,872
-------------- --------------- ------------- -------------- --------------
Total deferred credits and
other liabilities 2,611,276 173,195 229,992 - 3,014,463
-------------- --------------- ------------- -------------- --------------
$ 45,987,105 4,791,112 3,016,435 (4,215,205) 49,579,447
============== =============== ============= ============== ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule 2
ROANOKE GAS COMPANY AND SUBSIDIARIES
Consolidated Schedule of Earnings and Retained Earnings Information
Year Ended September 30, 1994
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Gas utilities $ 47,401,721 6,309,549 - (185,963) 53,525,307
Propane operations - - 4,675,350 (4,800) 4,670,550
-------------- --------------- ------------- -------------- --------------
Total operating revenues 47,401,721 6,309,549 4,675,350 (190,763) 58,195,857
-------------- --------------- ------------- -------------- --------------
Cost of gas:
Gas utilities 31,589,387 4,520,168 - - 36,109,555
Propane operations - - 2,183,805 - 2,183,805
-------------- --------------- ------------- -------------- --------------
Total cost of gas 31,589,387 4,520,168 2,183,805 - 38,293,360
-------------- --------------- ------------- -------------- --------------
Operating margin 15,812,334 1,789,381 2,491,545 (190,763) 19,902,497
-------------- --------------- ------------- -------------- --------------
Other operating expenses:
Gas utilities:
Other operations 7,333,890 624,376 - (66,273) 7,891,993
Maintenance 1,277,139 210,653 - - 1,487,792
Taxes - general 1,956,108 439,271 - - 2,395,379
Taxes - income 535,208 111,234 - - 646,442
Depreciation and amortization 1,814,234 149,047 - (17,609) 1,945,672
Propane operations - - 2,105,694 (107,742) 1,997,952
-------------- --------------- ------------- -------------- --------------
Total other operating expenses 12,916,579 1,534,581 2,105,694 (191,624) 16,365,230
-------------- --------------- ------------- -------------- --------------
Operating earnings 2,895,755 254,800 385,851 861 3,537,267
Other income (deductions):
Gas utilities:
Interest income 23,382 1,144 - (1,619) 22,907
Merchandising and jobbing, net 43,096 7,638 - - 50,734
Other deductions (118,726) (5,929) - - (124,655)
Taxes - income 7,804 (2,196) - - 5,608
Propane operations, net - - 95,191 5,299 100,490
-------------- --------------- ------------- -------------- --------------
Total other income (deductions) (44,444) 657 95,191 3,680 55,084
-------------- --------------- ------------- -------------- --------------
Earnings before interest charges
and equity in earnings of
subsidiaries $ 2,851,311 255,457 481,042 4,541 3,592,351
(Continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule 2, Continued
ROANOKE GAS COMPANY AND SUBSIDIARIES
Consolidated Schedule of Earnings and Retained Earnings Information
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Interest charges:
Gas utilities:
Long-term debt $ 1,574,256 41,423 - - 1,615,679
Other 196,747 46,029 - - 242,776
Propane operations - - 58,110 (1,312) 56,798
-------------- --------------- ------------- -------------- --------------
Total interest charges 1,771,003 87,452 58,110 (1,312) 1,915,253
-------------- --------------- ------------- -------------- --------------
Earnings before equity in
earnings of subsidiaries 1,080,308 168,005 422,932 5,853 1,677,098
Equity in earnings of subsidiaries 596,790 - - (596,790) -
-------------- --------------- ------------- -------------- --------------
Net earnings 1,677,098 168,005 422,932 (590,937) 1,677,098
Retained earnings, beginning of year 5,559,097 1,242,573 877,691 2,120,264 5,559,097
Cash dividends (1,354,326) - - - (1,354,326)
-------------- --------------- ------------- -------------- --------------
Retained earnings, end of year $ 5,881,869 1,410,578 1,300,623 (2,711,201) 5,881,869
============== =============== ============= ============== ==============
</TABLE>
See accompanying independent auditors' report.
<PAGE>
<TABLE>
<CAPTION>
Schedule 3
ROANOKE GAS COMPANY AND SUBSIDIARIES
Consolidating Schedule of Cash Flows Information
Year Ended September 30, 1994
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Earnings before equity in earnings of
subsidiaries $ 1,080,308 168,005 422,932 5,853 1,677,098
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 1,915,726 170,883 253,701 (5,853) 2,334,457
Gain on disposal of assets - - (364) - (364)
Decrease in purchased gas adjustments 1,064,572 322,453 - - 1,387,025
Decrease in gas cost recoverable from
customers 177,554 41,889 - - 219,443
Decrease in gas cost payable to
suppliers (177,554) (41,889) - - (219,443)
Changes in assets and liabilities which
provided (used) cash, exclusive of
changes and noncash transactions
shown separately (476,246) (314,064) 469,895 - (320,415)
-------------- --------------- ------------- -------------- --------------
Net cash provided by
operating activities 3,584,360 347,277 1,146,164 - 5,077,801
-------------- --------------- ------------- -------------- --------------
Cash flows from investing activities:
Additions to utility plant in service and
under construction and nonutility
property (4,522,216) (607,361) (388,698) - (5,518,275)
Proceeds from disposal of property 27,411 779 5,606 - 33,796
Cost of removal of utility plant, net (172,395) (12,513) - - (184,908)
-------------- --------------- ------------- -------------- --------------
Net cash used in investing
activities $ (4,667,200) (619,095) (383,092) - (5,669,387)
-------------- --------------- ------------- -------------- --------------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule 3, Continued
ROANOKE GAS COMPANY AND SUBSIDIARIES
Consolidating Schedule of Cash Flows Information
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of long-term debt $ 2,000,000 - - - 2,000,000
Retirement of long-term debt (1,399,000) (50,000) (1,000,000) - (2,449,000)
Payments on obligations under capital
leases (21,696) - - - (21,696)
Net borrowings (repayments) under line of
credit agreements (246,000) 231,000 250,000 - 235,000
Proceeds from issuance of common stock 1,563,334 - - - 1,563,334
Common stock issuance costs (113,850) - - - (113,850)
Cash dividends paid (1,330,619) - - - (1,330,619)
-------------- --------------- ------------- -------------- --------------
Net cash provided by (used in)
financing activities 452,169 181,000 (750,000) - (116,831)
-------------- --------------- ------------- -------------- --------------
Net increase (decrease) in cash and cash
equivalents (630,671) (90,818) 13,072 - (708,417)
Cash and cash equivalents, beginning of year 703,573 150,558 31,555 - 885,686
Cash and cash equivalents, end of year $ 72,902 59,740 44,627 - 177,269
============== =============== ============= ============== ==============
Changes in assets and liabilities which
provided (used) cash, exclusive of
changes shown separately:
Accounts receivable and customer
deposits, net 806,907 (188,393) (281,864) 62,881 399,531
Inventories (113,539) (65,714) 4,145 - (175,108)
Prepaid income taxes (207,842) 190,801 174,224 - 157,183
Accounts payable 264,506 (131,545) 367,732 (62,881) 437,812
Accrued expenses and other current
assets (405,503) (25,900) 203,818 - (227,585)
Refunds from suppliers - due customers (497,216) 611 - - (496,605)
Other noncurrent assets (102,161) 4,111 - - (116,050)
Deferred taxes, including amortization of
deferred investment tax credits (203,398) (98,035) 1,840 - (299,593)
-------------- --------------- ------------- -------------- --------------
$ (476,246) (314,064) 469,895 - (320,415)
============== =============== ============= ============== ==============
(Continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule 3, Continued
ROANOKE GAS COMPANY AND SUBSIDIARIES
Consolidating Schedule of Cash Flows Information
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Supplemental disclosures of cash flows
information:
Cash paid (received) during the year for:
Interest $ 2,166,930 82,852 58,416 (1,619) 2,306,579
============== =============== ============= ============== ==============
Income taxes, net of refunds $ 938,645 20,665 63,004 - 1,022,314
============== =============== ============= ============== ==============
Noncash transactions:
A capital lease obligation of $7,925 was
incurred in 1994 when Roanoke Gas
Company entered into an equipment lease.
A note receivable of $490,000 was
received in 1994 by Highland Propane
Company upon the sale of a building,
resulting in a deferred gain of $67,556.
A regulatory asset of $20,484 and a
regulatory liability of $112,316 were
recorded in 1994 by Bluefield Gas
Company and Roanoke Gas Company,
respectively, via adjustment of the
deferred income tax liability upon
adoption of Statement 109.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ROANOKE GAS COMPANY AND SUBSIDIARIES
Consolidating Schedule of Balance Sheet Information
September 30, 1993
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Assets Company Company Company Eliminations Consolidated
------ ------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Utility plant:
In service $ 45,080,965 4,159,812 - (1,636,290) 47,604,487
Accumulated depreciation (15,930,809) (1,757,878) - 1,469,422 (16,219,265)
-------------- --------------- ------------- -------------- --------------
In service, net 29,150,156 2,401,934 - (166,868) 31,385,222
Construction work-in-progress 514,192 139,740 - - 653,932
-------------- --------------- ------------- -------------- --------------
Utility plant, net 29,664,348 2,541,674 - (166,868) 32,039,154
-------------- --------------- ------------- -------------- --------------
Nonutility property:
Propane - - 3,688,092 (209,764) 3,478,328
Accumulated depreciation - - (1,729,616) 322,935 (1,406,681)
-------------- --------------- ------------- -------------- --------------
Nonutility property, net - - 1,958,476 113,171 2,071,647
-------------- --------------- ------------- -------------- --------------
Investment in subsidiaries 2,785,154 - - (2,785,154) -
-------------- --------------- ------------- -------------- --------------
Current assets:
Cash 703,573 150,558 31,555 - 885,686
Accounts receivable, net 3,152,671 250,269 265,837 (119,071) 3,549,706
Gas cost recoverable from customers 177,554 41,889 - - 219,443
Inventories 5,004,428 1,113,288 83,529 - 6,201,245
Deferred income taxes - - 9,505 (9,505) -
Prepaid income taxes 578,754 - - (160,962) 417,792
Purchased gas adjustments 1,836,473 244,975 - - 2,081,448
Other 279,017 21,799 400,068 - 700,884
-------------- --------------- ------------- -------------- --------------
Total current assets 11,732,470 1,822,778 790,494 (289,538) 14,056,204
-------------- --------------- ------------- -------------- --------------
Other assets 563,387 28,336 - - 591,723
$ 44,745,359 4,392,788 2,748,970 (3,128,389) 48,758,728
============== =============== ============= ============== ==============
</TABLE>
See accompanying independent auditors' report.
<PAGE>
<TABLE>
<CAPTION>
Schedule 1
ROANOKE GAS COMPANY AND SUBSIDIARIES
Consolidating Schedule of Balance Sheet Information
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Liabilities Company Company Company Eliminations Consolidated
----------- ------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Capitalization:
Stockholders' equity:
Common stock $ 3,223,255 49,704 196,421 (246,125) 3,223,255
Capital in excess of par value 5,870,311 257,805 215,957 (473,762) 5,870,311
Retained earnings 5,559,097 1,242,573 877,691 (2,120,264) 5,559,097
Treasury stock - (1,300) - 1,300 -
-------------- --------------- ------------- -------------- --------------
Total stockholders' equity 14,652,663 1,548,782 1,290,069 (2,838,851) 14,652,663
Long-term debt, excluding current
maturities 14,867,999 662,500 1,000,000 - 16,530,499
-------------- --------------- ------------- -------------- --------------
Total capitalization 29,520,662 2,211,282 2,290,069 (2,838,851) 31,183,162
-------------- --------------- ------------- -------------- --------------
Current liabilities:
Current maturities of long-term debt 969,318 50,000 - - 1,019,318
Notes payable 4,000,000 1,000,000 - - 5,000,000
Gas cost payable to suppliers 177,554 41,889 - - 219,443
Dividends payable 322,325 - - - 322,325
Accounts payable 4,164,305 621,717 215,718 (119,071) 4,882,669
Customer deposits 243,884 54,350 8,411 - 306,645
Accrued expenses 1,641,364 106,152 16,422 - 1,763,938
Refunds from suppliers - due customers 982,645 12,858 - - 995,503
Accrued income taxes - 104,313 56,649 (160,962) -
Deferred income taxes 276,389 57,981 - (9,505) 324,865
-------------- --------------- ------------- -------------- --------------
Total current liabilities 12,777,784 2,049,260 297,200 (289,538) 14,834,706
-------------- --------------- ------------- -------------- --------------
Deferred credits and other liabilities:
Deferred income taxes 1,822,373 111,664 161,701 - 2,095,738
Deferred investment tax credits 624,540 20,582 - - 645,122
-------------- --------------- ------------- -------------- --------------
Total deferred credits and
other liabilities 2,446,913 132,246 161,701 - 2,740,860
-------------- --------------- ------------- -------------- --------------
$ 44,745,359 4,392,788 2,748,970 (3,128,389) 48,758,728
============== =============== ============= ============== ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule 2
ROANOKE GAS COMPANY AND SUBSIDIARIES
Consolidated Schedule of Earnings and Retained Earnings Information
Year Ended September 30, 1993
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Gas utilities $ 47,713,131 5,978,958 - (186,570) 53,505,519
Propane operations - - 4,214,960 (4,800) 4,210,160
-------------- --------------- ------------- -------------- --------------
Total operating revenues 47,713,131 5,978,958 4,214,960 (191,370) 57,715,679
-------------- --------------- ------------- -------------- --------------
Cost of gas:
Gas utilities 32,904,886 4,349,410 - - 37,254,296
Propane operations - - 2,164,353 - 2,164,353
-------------- --------------- ------------- -------------- --------------
Total cost of gas 32,904,886 4,349,410 2,164,353 - 39,418,649
-------------- --------------- ------------- -------------- --------------
Operating margin 14,808,245 1,629,548 2,050,607 (191,370) 18,297,030
-------------- --------------- ------------- -------------- --------------
Other operating expenses:
Gas utilities:
Other operations 6,586,221 615,880 - (75,704) 7,126,397
Maintenance 1,279,408 197,981 - - 1,477,389
Taxes - general 1,859,689 389,845 - - 2,249,534
Taxes - income 543,576 95,476 - - 639,052
Depreciation and amortization 1,656,863 126,842 - (17,609) 1,766,096
Propane operations - - 1,907,203 (103,910) 1,803,293
-------------- --------------- ------------- -------------- --------------
Total other operating expenses 11,925,757 1,426,024 1,907,203 (197,223) 15,061,761
-------------- --------------- ------------- -------------- --------------
Operating earnings 2,882,488 203,524 143,404 5,853 3,235,269
Other income and deductions:
Gas utilities:
Interest income 4,785 488 - (1,206) 4,067
Merchandising and jobbing, net 136,531 8,574 - - 145,105
Other deductions (110,147) (5,199) - - (115,346)
Taxes - income (19,253) (1,396) - - (20,649)
Propane operations, net - - 16,267 - 16,267
-------------- --------------- ------------- -------------- --------------
Total other income and
deductions 11,916 2,467 16,267 (1,206) 29,444
-------------- --------------- ------------- -------------- --------------
Earnings before interest charges
and equity in earnings of
subsidiaries 2,894,404 205,991 159,671 4,647 3,264,713
(Continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule 2 (Continued)
ROANOKE GAS COMPANY AND SUBSIDIARIES
Consolidated Schedule of Earnings and Retained Earnings Information
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Interest charges:
Gas utilities:
Long-term debt $ 1,558,703 14,173 - - 1,572,876
Other 153,134 49,415 - (767) 201,782
Propane operations - - 49,158 (439) 48,719
-------------- --------------- ------------- -------------- --------------
Total interest charges 1,711,837 63,588 49,158 (1,206) 1,823,377
-------------- --------------- ------------- -------------- --------------
Earnings before equity in
earnings of subsidiaries 1,182,567 142,403 110,513 5,853 1,441,336
Equity in earnings of subsidiaries 258,769 - - (258,769) -
-------------- --------------- ------------- -------------- --------------
Net earnings 1,441,336 142,403 110,513 (252,916) 1,441,336
Retained earnings, beginning of year 5,399,557 1,170,434 907,178 (2,077,612) 5,399,557
Cash dividends (1,281,796) (70,264) (140,000) 210,264 (1,281,796)
-------------- --------------- ------------- -------------- --------------
Retained earnings, end of year $ 5,559,097 1,242,573 877,691 (2,120,264) 5,559,097
============== =============== ============= ============== ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule 3
ROANOKE GAS COMPANY AND SUBSIDIARIES
Consolidating Schedule of Cash Flows Information
Year Ended September 30, 1993
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Earnings before equity in earnings of
subsidiaries $ 1,182,567 142,403 110,513 5,853 1,441,336
Adjustments to reconcile net earnings to net
cash provided by (used in) operating
activities:
Depreciation and amortization 1,741,743 152,713 257,957 (5,853) 2,146,560
(Gain) loss on disposal of assets - 1,678 (8,468) - (6,790)
(Increase) decrease in purchased gas
adjustments (18,806) (323,563) - - (342,369)
Decrease in gas cost recoverable from
customers 3,150 3,036 - - 6,186
Decrease in gas cost payable to
suppliers (3,150) (3,036) - - (6,186)
Dividends received 210,264 - - (210,264) -
Changes in assets and liabilities which
provided (used) cash, exclusive of
changes and noncash transactions
shown separately 113,438 (208,401) (155,529) - (250,492)
-------------- --------------- ------------- -------------- --------------
Total adjustments 2,046,639 (377,573) 93,960 (216,117) 1,546,909
-------------- --------------- ------------- -------------- --------------
Net cash provided by (used in)
operating activities 3,229,206 (235,170) 204,473 (210,264) 2,988,245
-------------- --------------- ------------- -------------- --------------
Cash flows from investing activities:
Additions to utility plant in service and
under construction and nonutility
property (2,998,798) (511,991) (284,712) - (3,795,501)
Proceeds from disposal of property 15,336 6,951 18,899 - 41,186
Cost of removal of utility plant, net (117,601) (28,217) - - (145,818)
-------------- --------------- ------------- -------------- --------------
Net cash used in investing
activities (3,101,063) (533,257) (265,813) - (3,900,133)
-------------- --------------- ------------- -------------- --------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule 3 (Continued)
ROANOKE GAS COMPANY AND SUBSIDIARIES
Consolidating Schedule of Cash Flows Information
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of long-term debt - 500,000 - - 500,000
Retirement of long-term debt (949,000) (50,000) - - (999,000)
Payments on obligations under capital
lease (1,637) - - - (1,637)
Net borrowings under line of credit
agreements 800,000 500,000 - - 1,300,000
Proceeds from issuance of common stock 316,793 - - - 316,793
Cash dividends paid (1,276,952) (70,264) (140,000) 210,264 (1,276,952)
-------------- --------------- ------------- -------------- --------------
Net cash provided by (used in)
financing activities (1,110,796) 879,736 (140,000) 210,264 (160,796)
-------------- --------------- ------------- -------------- --------------
Net increase (decrease) in cash and cash
equivalents (982,653) 111,309 (201,340) - (1,072,684)
Cash and cash equivalents, beginning of year 1,686,226 39,249 232,895 - 1,958,370
Cash and cash equivalents, end of year 703,573 150,558 31,555 - 885,686
============== =============== ============= ============== ==============
Changes in assets and liabilities which
provided (used) cash, exclusive of
changes shown separately:
Accounts receivable and customer
deposits, net (571,456) (57,880) 196,874 (28,856) (461,318)
Inventories (1,886,676) (248,664) 50,643 - (2,084,697)
Prepaid income taxes 713,801 (29,388) (17,762) - 666,651
Accounts payable 1,309,975 74,652 1,532 28,856 1,415,015
Accrued expenses and other current
assets 169,584 (58,961) (381,631) - (271,008)
Refunds from suppliers - due customers 408,901 13,768 - - 422,669
Other noncurrent assets (7,527) (24,888) - - (32,415)
Deferred taxes, including amortization of
deferred investment tax credits (23,164) 122,960 (5,185) - 94,611
-------------- --------------- ------------- -------------- --------------
$ 113,438 (208,401) (155,529) - (250,492)
============== =============== ============= ============== ==============
</TABLE>
See accompanying independent auditors' report.
<PAGE>
<TABLE>
<CAPTION>
Schedule 3 (Continued)
ROANOKE GAS COMPANY AND SUBSIDIARIES
Consolidating Schedule of Cash Flows Information
Consolidated
Roanoke Bluefield Highland
Gas Gas Propane
Company Company Company Eliminations Consolidated
------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Supplemental disclosures of cash flows
information:
Cash paid (received) during the year for:
Interest $ 1,698,126 65,240 49,158 (1,206) 1,811,318
Income taxes, net of refunds (127,808) 3,300 93,673 - (30,835)
Noncash transactions:
A capital lease obligation of $114,954 was
incurred when Roanoke Gas Company
entered into an equipment lease.
</TABLE>
<PAGE>
Exhibit D-1(b)
PUBLIC SERVICE COMMISSION
OF WEST VIRGINIA
CHARLESTON
CASE NO. 98-1304-G-PC
BLUEFIELD GAS COMPANY
Application for approval of transactions
under W. Va. Code Section 24-2-12
APPLICATION OF BLUEFIELD GAS COMPANY
FOR APPROVAL OF TRANSACTIONS
UNDER W. VA. CODE SECTION 24-2-12
Bluefield Gas Company ("Bluefield Gas") applies to the Commission
for consent and approval to enter into certain transactions under W. Va. Code
Section 24-2-12 in order to effect the reorganization of its corporate structure
for purposes of creating a holding company and to enter into certain agreements
with affiliates. In support of this Application, Bluefield Gas represents the
following:
1. Bluefield Gas, a West Virginia public service company, is engaged
in the retail distribution and sale of natural gas to approximately 4,100
customers in Bluefield, West Virginia. Bluefield's service area extends from
Princeton, West Virginia to the western most city limits of Bluefield, West
Virginia.
2. Bluefield Gas is a wholly owned subsidiary of Roanoke Gas Company
("Roanoke Gas").
3. Bluefield owns all of the issued and outstanding stock of
Commonwealth Public Service Corporation ("Commonwealth"), a Virginia public
service corporation, which
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<PAGE>
provides natural gas service to approximately 925 customers in Bluefield,
Virginia and surrounding areas in Virginia. Commonwealth's service area includes
principally the Town of Bluefield, Virginia and a portion of Tazewell County,
Virginia.
4. Roanoke Gas also owns 100% of the outstanding common stock of
Diversified Energy Company ("Diversified"), a Virginia corporation which is not
a public utility, which is headquartered in Roanoke, Virginia, and which sells
propane and propane related products. Diversified serves approximately 10,500
active propane accounts in southwestern Virginia and southern West Virginia. In
addition to propane operations, Diversified maintains a natural gas marketing
business that assists large industrial customers in the purchase of natural gas.
5. Roanoke Gas currently provides managerial and other services,
labor and goods to Bluefield under agreements approved by this Commission and
the Virginia State Corporation Commission.
6. RGC Resources, Inc. ("Resources"), a Virginia corporation, is a
wholly owned subsidiary of Roanoke Gas and was incorporated on July 31, 1998,
for the purpose of accomplishing the proposed merger and reorganization.
Resources owns all of the outstanding common stock of RGC Acquisitions,
Inc.("Acquisition"), a Virginia corporation which was formed on August 12, 1998,
also for the purpose of accomplishing the proposed merger and reorganization.
Neither Resources nor Acquisitions owns any utility assets or engages in any
business.
7. Roanoke Gas, Bluefield, Resources and Acquisition intend to
accomplish the proposed merger and reorganization by entering into an Agreement
and Plan of Merger and
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<PAGE>
Reorganization whereby (i) Roanoke Gas will be merged into Acquisition, with
Roanoke Gas as the surviving corporation; (ii) the common stock of Acquisition
owned by Resources will be converted into the new common stock of Roanoke Gas;
(iii) the outstanding shares of Roanoke Gas common stock will be converted into
the right to receive, on a one-for-one basis, shares of Resources common stock
on the merger effective date; (iv) Bluefield, by means of a noncash dividend,
will transfer to Roanoke Gas all of the outstanding common stock of
Commonwealth; (v) Roanoke Gas, by means of a noncash dividend, will transfer to
Resources all of the outstanding common stock of Bluefield and Diversified; and
(vi) Commonwealth will be merged into Roanoke Gas. Following the merger and
reorganization, Roanoke and Bluefield will each be wholly owned subsidiaries of
Resources, and all of the outstanding common stock of Resources will be owned by
the former Roanoke Gas shareholders.
8. Roanoke Gas and Resources have applied to the Securities and
Exchange Commission ("SEC") for the necessary approvals under Section 10 of the
Public Utility Holding Company Act of 1935 ("PUCHA"). Pursuant to 17 C.F.R.
Section 250.2 under PUHCA, Resources intends, upon consummation of the merger
and reorganization, to file a claim of exemption as a holding company under
Section 3(a)(1) of PUCHA, on the basis that Resources and every public utility
subsidiary thereof from which Resources derives, directly or indirectly, any
material part of its income are predominately intrastate in character and carry
on their business in Virginia, the state in which Resources and every such
material subsidiary are organized. The application filed with the SEC on Form
U-1 ("SEC Application"), with exhibits, is attached to the original of this
Application as Schedule A and is incorporated in this Application. Because of
the size of that document, copies of the exhibits to the SEC Application have
not been attached to all of the
-3-
<PAGE>
copies of the SEC Application. Two additional copies of the SEC Application,
with exhibits, are being forwarded for filing in this case, and additional
copies of the exhibits to the SEC Application will be supplied upon request. The
Agreement and Plan of Merger and Reorganization is attached as Exhibit B-1 to
the SEC Application. For a description of the present corporate structure of
Bluefield Gas and its affiliates and the proposed corporate structure following
the merger and reorganization, see Exhibit B-2 to the SEC Application.
9. The proposed restructuring will be in the public interest because
it will create a structure which can more effectively address the increased
competition in the energy industry, refocus various utility activities,
facilitate selective diversification into nonutility businesses, afford further
separation between the utility and nonutility businesses and provide additional
flexibility for financing. The two primary reasons for restructuring are to
better position Bluefield Gas to deal effectively with the competitive
environment developing within the energy industry and to best deploy
shareholders' capital both inside and outside of the utility industry. These
objectives can most effectively be accomplished through the proposed
restructuring, as it provides the necessary flexibility required to meet
competitive challenges and to diversify while further insulating the utility
business from the risks of the nonutility business by segregating the nonutility
businesses into separate corporations that will be direct subsidiaries of the
holding company and not of Bluefield Gas. Because nonutility businesses of the
holding company will be conducted through separate subsidiaries, any liabilities
incurred by those subsidiaries will not constitute liabilities of the utility
subsidiaries. The corporate separation also insures that all costs of a
particular nonutility subsidiary will be charges to that subsidiary and not
allocated to any utility subsidiary. Additional discussion of the reasons for
the proposed
-4-
<PAGE>
restructuring and the ways in which the public interest will be served may
be found in the SEC Application at Item 1.C. (Purpose and Benefits of the
Proposed Merger and Reorganization).
10. All of the other parties to the Agreement and Plan of Merger and
Reorganization qualify as "affiliated Interests" of Bluefield Gas. For the
reasons explained in the preceding paragraph and in the SEC Application, the
agreement does not adversely affect the public interest.
11. Upon completion of the proposed restructuring, Roanoke Gas,
Diversified, and Resources will each qualify as an "affiliated interest" of
Bluefield Gas. Applicants hereby request approval of the following agreements
between Bluefield Gas and it's affiliated interests:
a) Affiliate Agreement Between RGC Resources, Inc. and
Bluefield Gas Company that will cover executive,
administrative, accounting and other services provided to
Bluefield Gas from RGC Resources. A copy is attached hereto as
Schedule B.
b) Affiliate Agreement Between Roanoke Gas Company
and Bluefield Gas Company which will cover executive,
administrative, accounting, public relations, information
systems, data processing services, and other operational
services provided by Roanoke Gas to Bluefield Gas and
executive, administrative, and operational services provided
by Bluefield Gas to Roanoke Gas. A copy is attached hereto as
Schedule C.
c) Affiliate Agreement Between Bluefield Gas Company and
Diversified Energy which will cover executive, administrative,
accounting, and other operational service by Bluefield Gas
to Diversified and executive,
-5-
<PAGE>
administrative, and operational services provided by
Diversified to Bluefield Gas. A copy is attached hereto
as Schedule D.
These agreements are in the public interest, both in the aggregate
and individually. A copy of each of the foregoing agreements is attached to this
Application as indicated above.
12. The following elements of the proposed restructuring will
involve the disposition of control of a utility's assets or securities, and may
require Commission approval under W. Va. Code Section 24-2-12.
a) Bluefield's transfer to Roanoke Gas, by means of a noncash
dividend, of all of the outstanding common stock of
Commonwealth; and
b) Roanoke Gas' transfer to Resources, by means of a noncash
dividend, of all of the outstanding common stock of
Bluefield and Diversified.
13. As set forth above, all of the transactions involved in the
corporate reorganization and the agreements between Bluefield Gas and its
affiliates, and the terms and conditions thereof, are reasonable and none of the
parties thereto is given an undue advantage over the other. For the reasons
previously noted in this Application and related Exhibits, these transactions do
not adversely affect the public interest in this State. Further, none of these
transactions or affiliate agreements will impair or jeopardize the provision of
adequate service to the public at just and reasonable rates. The Applicants
hereby petition the Commission for authority to acquire and dispose of control
of utility assets or securities, in order to effect the foregoing transactions
and the proposed restructuring in whole, pursuant to W. Va. Code Section
24-2-12.
-6-
<PAGE>
14. It is the intent and purpose of this Application to secure all
authority and approvals required from the Commission under West Virginia law in
order to effect the proposed restructuring as described in the SEC Application.
Applicant hereby requests that the Commission provide all such authority and
approvals.
WHEREFORE, Applicant respectfully petitions the Commission for all
necessary authority, including all necessary consent and approval under W. Va.
Code Section 24-2-12, in order to effect the proposed merger and reorganization
and to enter into the agreements with affiliate entities.
Respectfully submitted,
BLUEFIELD GAS COMPANY
By Counsel
s/Michael A. Albert
Michael A. Albert
s/Thomas N. McJunkin
Thomas N. McJunkin
JACKSON & KELLY
1600 Laidley Tower
P. O. Box 553
Charleston, West Virginia 25322
Counsel for Bluefield Gas Company
-7-
<PAGE>
Schedule A
Form U-1 as filed by Roanoke Gas Company and RGC Resources, Inc. with the
Securities and Exchange Commission on October 16, 1998.
<PAGE>
Schedule B
AFFILIATE AGREEMENT BETWEEN
RGC RESOURCES, INC. AND
BLUEFIELD GAS COMPANY
THIS AFFILIATE AGREEMENT, made and entered into ____________, 1999, by and
between RGC RESOURCES, INC., a Virginia corporation (RGC Resources), and
BLUEFIELD GAS COMPANY, a West Virginia corporation authorized to do business in
Virginia (Bluefield Gas),
WITNESSETH:
WHEREAS, RGC Resources is a corporation organized and existing under the
laws of the state of Virginia,and is an exempt holding company under PUHCA, with
its principal place of business located at 519 Kimball Avenue, Roanoke, Virginia
24030, and owns all of the common stock of Bluefield Gas Company; and
WHEREAS, Bluefield Gas Company is a public service corporation organized
to provide natural gas service to customers in Bluefield, West Virginia with its
principal place of business located at 4699 East Cumberland Road, P.O. Box 589,
Bluefield, West Virginia 24701.
NOW THERFORE, in consideration of the promises and the mutual covenants
herein contained, and subject to the terms and conditions herein contained,
Bluefield Gas and RGC Resources agree as follows:
1. Bluefield Gas may provide administrative and operations services to
RGC Resources; and
1
<PAGE>
2. RGC Resources and Bluefield Gas agree that expenses of RGC Resources
incurred by it on behalf of Bluefield Gas will be assigned to Bluefield Gas and
recorded in the accounting records of Bluefield Gas; and
3. RGC Resources and Bluefield Gas agree that expenses of Bluefield Gas
incurred by it on behalf of RGC Resources will be assigned to RGC Resources and
recorded in the accounting records of RGC Resources; and
4. Bluefield Gas will pay dividends to RGC Resources based on the dividend
policy and capital structure targets set by the Board of Directors of Bluefield
Gas Company.
5. Either party can terminate this Affiliate Agreement with a 60-day
notice to the other party and the approval of the Board of Directors of RGC
Resources.
In WITNESS WHEREOF, Bluefield Gas and RGC Resources have caused this
Ageement to be duly executed on the day and year first written above.
RGC RESOURCES, INC. BLUEFIELD GAS COMPANY
By By
Title Title
2
<PAGE>
Schedule C
AFFILIATE AGREEMENT BETWEEN
ROANOKE GAS COMPANY AND
BLUEFIELD GAS COMPANY
THIS AFFILIATE AGREEMENT, made and entered into __________, 1999, by and
between ROANOKE GAS COMPANY, a Virginia corporation (Roanoke Gas), and BLUEFIELD
GAS COMPANY, a West Virginia corporation (Bluefield Gas),
WITNESSETH:
WHEREAS, Roanoke Gas Company is a public service corporation organized to
provide natural gas service to customers in Roanoke, Virginia and surrounding
areas in Virginia with its principal place of business located at 519 Kimball
Avenue, Roanoke, Virginia 24030.
WHEREAS, Bluefield Gas is a public service corporation organized to
provide natural gas service to customers in Bluefield, West Virginia with its
principal place of business located at 4699 East Cumberland Road, P. O. Box 589,
Bluefield, West Virginia 24701.
NOW THERFORE, in consideration of the promises and the mutual covenants
herein contained, and subject to the terms and conditions herein contained,
Roanoke Gas and Bluefield Gas agree as follows:
1. Roanoke Gas will provide executive, administrative, accounting, public
relations, information systems, data processing services, and other operational
services to Bluefield Gas; and
2. Bluefield Gas may provide, from time to time, administrative and
operational services to Roanoke Gas; and
1
<PAGE>
3. Roanoke Gas and Bluefield Gas agree that expenses incurred by Roanoke
Gas on behalf of Bluefield Gas which are identifiable as directly assignable to
Bluefield Gas will be directly assigned to Bluefield Gas in Roanoke Gas and
Bluefield Gas accounting records.
4. Roanoke Gas and Bluefield Gas agree that expenses incurred by Bluefield
Gas on behalf of Roanoke Gas which are identifiable as directly assignable to
Roanoke Gas will be directly assigned to Roanoke Gas in Bluefield Gas and
Roanoke Gas accounting records.
5. Roanoke Gas and Bluefield Gas agree that expenses incurred by Roanoke
Gas on behalf of Bluefield Gas which are not identifiable as directly assigned
will be allocated to Bluefield Gas and recorded in the accounting records of
Roanoke Gas and Bluefield Gas according to Attachment A of this Agreement.
6. Roanoke Gas and Bluefield Gas agree that expenses incurred by Bluefield
Gas on behalf of Roanoke Gas which are not identifiable as directly assigned
will be allocated to Roanoke Gas and recorded in the accounting records of
Roanoke Gas and Bluefield Gas according to Attachment A of this Agreement.
7. Either party can terminate this Affiliate Agreement with a 60-day
notice to the other party and the approval of the Board of Directors of RGC
Resources.
In WITNESS WHEREOF, Roanoke Gas and Bluefield Gas have caused this
Agreement to be duly executed on the day and year first written above.
ROANOKE GAS COMPANY BLUEFIELD GAS COMPANY
By By
Title Title
2
<PAGE>
Attachment A
Page 1 of 5
AFFILIATE TRANSACTIONS ALLOCATIONS
1. The parties to the attached Affiliates Agreement will individually
pay for any directly assigned expenses associated with their
operations.
2. Transmission Plant accounts will be directly assigned to the owner
of such assets.
3. Distribution Plant accounts 374 through 387 will be directly
assigned to the owner of such assets. The resulting allocations to
each affiliate for accounts 374 through 387 will, in aggregate, in
referred to as the Distribution Plant allocation factors.
4. LNG plant accounts will be directly assigned to Roanoke Gas Company.
5. Production Plant accounts will be directly assigned to Roanoke Gas
Company.
6. Other Plant accounts will be directly assigned to the entity that
either owns the asset or which causes the cost to be incurred.
Jointly owned other plant assets will be allocated to the affiliates
based on the overall Distribution Plant allocation factors.
7. Accumulated Depreciation is unique to each plant account and will
follow the assignment to the corresponding plant account.
8. Materials and Supplies accounts are unique to each plant account and
will follow the assignment to the corresponding plant account.
Jointly owned materials and supplies will be allocated to the
affiliates based on the overall Distribution Plant allocation
factor.
9. Prepaid Gas and Stored Gas accounts will be directly assigned to the
affiliate for which the gas is purchased or stored. However, in the
case of the former Commonwealth Public Service, the gas delivered to
Bluefield will be allocated between Bluefield Gas and the former
Commonwealth Public service based on the ratio of billed volumes.
10. Whenever possible, Working Cash accounts will be directly assigned
to each affiliate. Jointly owned working cash which cannot be
specifically assigned to an affiliate will be allocated to the
affiliates based on the overall Distribution Plant allocation
factors.
11. Deferred Income Tax accounts will be directly assigned to the
affiliate that owns the asset or liability from which the deferred
income tax amount derives.
<PAGE>
Attachment A
Page 2 of 5
12. Deferred Investment Tax accounts will be directly assigned to the
affiliate that owns the asset from which the deferred investment tax
credit was generated.
13. Supplier Refund and Deferred Gas accounts will be directly assigned
to the affiliate for which the gas is refunded or deferred. However,
in the case of the former Commonwealth Public Service, the supplier
refunds and deferred gas amounts for Bluefield gas will be allocated
to the former Commonwealth Public Service based on the ratio of
billed volumes.
14. Customer Deposit accounts will be directly assigned to each
affiliate.
15. The results of the allocations for item 3 through 15, above result
in an Overall Rate Base allocation factor for each of the
affiliates.
16. Gas Cost accounts will be directly assigned to affiliate for which
the gas is purchased. However, in the case of the former
Commonwealth Public Service, the gas delivered to Bluefield will be
allocated between Bluefield Gas and the former Commonwealth Public
service based on the ratio of billed volumes.
17. Transmission Operations and Maintenance Expense accounts will be
directly assigned to the affiliate owning the corresponding asset.
However, in the case of the former Commonwealth Public Service,
Bluefield Gas' transmission operations and maintenance expense
accounts will be allocated to the former Commonwealth Public Service
based on the ratio of billed volumes.
18. Distribution Operating Expense accounts will be allocated to
affiliates as follows:
Account 870 - Supervision and Engineering will be allocated
to each affiliate on the basis of exception time reporting.
Accounts 871 through 875 - Load Dispatching, Mains and
Services Expenses, and Measuring and Regulating Station
Expenses will be directly assigned to the owner of the asset
for which the expense was incurred.
Account 878 - Removing and Setting Meters will be directly
assigned to the utility for which the meters were removed or
set. However, in the case of the former Commonwealth Public
Service, Bluefield Gas account 878 will be allocated to the
former Commonwealth Public Service based on meter cost.
Account 879 through 881 - Customer Installation Expense, Maps
and Records, and Rents will be directly assigned to each
affiliate. However, in
<PAGE>
Attachment A
Page 3 of 5
the case of the former Commonwealth Public Service, Bluefield
Gas accounts 879 through 881 will be allocated to the former
Commonwealth Public Service based on the number of customers.
The resulting overall Distribution Operating Expense allocations
will be known as the Distribution Operating Expense allocation
factors.
19. Distribution Maintenance Expense accounts will be directly assigned
to each affiliate for which the expense was incurred. However, in
the case of the former Commonwealth Public Service, distribution
maintenance expense accounts of Bluefield Gas will be allocated to
the former Commonwealth Public Service on the basis of the average
distribution plant balances.
20. LNG Operations and Maintenance Expense accounts will be directly
assigned to Roanoke Gas Company.
21. Production Expense accounts will be directly assigned to Roanoke Gas
Company.
22. Customer Accounts accounts will be allocated to affiliates as
follows:
Account 901 - Supervision will be allocated to each
affiliate on the basis of a time study analysis.
Account 902 - Meter Reading will be directly assigned to each
affiliate based on the billings received from the meter
reading contractor or the direct charge of time spent. Any
jointly incurred meter reading expenses will be allocated to
the affiliates for which the expenses were incurred based on
the number of customers.
Accounts 903 and 903.1 - Customer Service Labor and Meals will
be allocated to each affiliate on the basis of a time study
analysis.
Account 903.2 - Credit Investigations will be directly
assigned to affiliates for which the investigations were
performed. However, in the case of the former Commonwealth
Public Service, credit investigations charged to Bluefield Gas
will be allocated to the former Commonwealth Public service
based on the number of customers.
Accounts 903.3 - Non-pay Turnoff Expenses will be directly
assigned to each affiliate.
Accounts 903.4 - Billing Expenses will be directly assigned to
each affiliate based on the charges received from the billing
contractor.
<PAGE>
Attachment A
Page 4 of 5
Account 903.5 - Office Expenses will be allocated to each
affiliate on the basis of a time study analysis.
Accounts 903.6, 903.8, and 904 - Collection Agencies,
Collection Expenses, and Uncollectible Accounts unique to each
affiliate and will be directly assigned.
Account 903.7 - Utilities will be directly assigned for
property that is separately owned and used by each affiliate.
However, utility expenses for joint use facilities will be
allocated to each affiliate based on square footage.
Accounts 903.9, and 905 through 910 - Other Expenses,
Miscellaneous Expenses, Customer Service Supervision, and
Customer Assistance Expense will be allocated to each
affiliate on the basis of a time study analysis.
Account 911 - Information and Safety Advertising will be
directly assigned to each affiliate.
Account 912 - Miscellaneous Customer Service Expense will be
allocated to each affiliate on the basis of a time study
analysis.
23. Sales Expenses will be directly assigned to each affiliate.
24. Administrative and General accounts will be allocated to
affiliates as follows:
Account 920 - Administrative and General Salaries will be
allocated on the basis of exception time reporting or a time
study analysis.
Account 921.0 and 921.1 - Officer Expenses and Administrative
Assistant Expenses will be allocated to affiliates based on
exception time reporting or a time study analysis.
Account 921.2 - Facility Costs - Operating will be allocated
to affiliates on the basis of square footage of space.
Account 921.3 - Accounting Expenses will be allocated to
affiliates based on a time study.
Account 921.7 - Human Resources Expenses will be allocated to
affiliates on the basis of employee count.
<PAGE>
Attachment A
Page 5 of 5
Account 921.8 - Information System Expenses will be allocated
to affiliates based on a time study analysis.
Account 921.9 - Rates and Finance Expenses will be allocated
to affiliates based on exception time reporting.
Accounts 932.1 and 932.2 - Maintenance of General structures
and Improvements and Maintenance of General Plant Office
Equipment will be allocated to affiliates on the basis of
square footage.
Account 923.9 - Professional Services will be directly
assigned to affiliates. However, any professional services
related to information systems will be allocated on the basis
of Account 921.8.
<PAGE>
Schedule D
AFFILIATE AGREEMENT BETWEEN
BLUEFIELD GAS COMPANY AND
DIVERSIFIED ENERGY COMPANY
THIS AFFILIATE AGREEMENT, made and entered into __________, 1999,
by and between BLUEFIELD GAS COMPANY, a West Virginia corporation (Bluefield
Gas), and DIVERSIFIED ENERGY COMPANY, a Virginia nonutility corporation
(Diversified),
WITNESSETH:
WHEREAS, Bluefield Gas Company is a public service corporation
organized to provide natural gas service to customers in Bluefield, West
Virginia with its principal place of business located at 4699 East Cumberland
Road, P.O. Box 589, Bluefield, West Virginia 24701.
WHEREAS, Diversified is a nonutility corporation organized to sell
energy products and services, primarily propane, in Virginia and West Virginia
with its principal place of business located at 519 Kimball Avenue, Roanoke,
Virginia 24030.
NOW THERFORE, in consideration of the promises and the mutual
covenants herein contained, and subject to the terms and conditions herein
contained, Bluefield Gas and Diversified agree as follows:
1. Bluefield Gas may provide executive, administrative,
accounting, and other operational services to Diversified; and
2. Diversified may provide, from time to time administrative and
operational services to Bluefield Gas; and
1
<PAGE>
3. Bluefield Gas and Diversified agree that expenses incurred by
Bluefield Gas on behalf of Diversified which are identifiable as directly
assignable to Diversified will be directly assigned to Diversified in Bluefield
Gas and Diversified accounting records.
4. Bluefield Gas and Diversified agree that expenses incurred by
Diversified on behalf of Bluefield Gas which are identifiable as directly
assignable to Bluefield Gas will be directly assigned to Bluefield Gas in
Diversified and Bluefield Gas accounting records.
5. Bluefield Gas and Diversified agree that expenses incurred by
Bluefield Gas on behalf of Diversified which are not identifiable as directly
assigned will be allocated to Diversified and recorded in the accounting records
of Bluefield Gas and Diversified according to Attachment A of this Agreement.
6. Bluefield Gas and Diversified agree that expenses incurred by
Diversified on behalf of Bluefield Gas which are not identifiable as directly
assigned will be allocated to Bluefield Gas and recorded in the accounting
records of Bluefield Gas and Diversified according to Attachment A of this
Agreement.
7. Either party can terminate this Affiliate Agreement with a 60-day
notice to the other party and the approval of the Board of Directors of RGC
Resources.
In WITNESS WHEREOF, Bluefield Gas and Diversified have caused this
Agreement to be duly executed on the day and year first written above.
BLUEFIELD GAS COMPANY DIVERSIFIED ENERGY COMPANY
By By
Title Title
2
<PAGE>
Attachment A
Page 1 of 5
AFFILIATE TRANSACTIONS ALLOCATIONS
1. The parties to the attached Affiliates Agreement will individually
pay for any directly assigned expenses associated with their
operations.
2. Transmission Plant accounts will be directly assigned to the owner
of such assets.
3. Distribution Plant accounts 374 through 387 will be directly
assigned to the owner of such assets. The resulting allocations to
each affiliate for accounts 374 through 387 will, in aggregate, in
referred to as the Distribution Plant allocation factors.
4. LNG plant accounts will be directly assigned to Roanoke Gas Company.
5. Production Plant accounts will be directly assigned to Roanoke Gas
Company.
6. Other Plant accounts will be directly assigned to the entity that
either owns the asset or which causes the cost to be incurred.
Jointly owned other plant assets will be allocated to the affiliates
based on the overall Distribution Plant allocation factors.
7. Accumulated Depreciation is unique to each plant account and will
follow the assignment to the corresponding plant account.
8. Materials and Supplies accounts are unique to each plant account and
will follow the assignment to the corresponding plant account.
Jointly owned materials and supplies will be allocated to the
affiliates based on the overall Distribution Plant allocation
factor.
9. Prepaid Gas and Stored Gas accounts will be directly assigned to the
affiliate for which the gas is purchased or stored. However, in the
case of the former Commonwealth Public Service, the gas delivered to
Bluefield will be allocated between Bluefield Gas and the former
Commonwealth Public service based on the ratio of billed volumes.
10. Whenever possible, Working Cash accounts will be directly assigned
to each affiliate. Jointly owned working cash which cannot be
specifically assigned to an affiliate will be allocated to the
affiliates based on the overall Distribution Plant allocation
factors.
11. Deferred Income Tax accounts will be directly assigned to the
affiliate that owns the asset or liability from which the deferred
income tax amount derives.
<PAGE>
Attachment A
Page 2 of 5
12. Deferred Investment Tax accounts will be directly assigned to the
affiliate that owns the asset from which the deferred investment tax
credit was generated.
13. Supplier Refund and Deferred Gas accounts will be directly assigned
to the affiliate for which the gas is refunded or deferred. However,
in the case of the former Commonwealth Public Service, the supplier
refunds and deferred gas amounts for Bluefield gas will be allocated
to the former Commonwealth Public Service based on the ratio of
billed volumes.
14. Customer Deposit accounts will be directly assigned to each
affiliate.
15. The results of the allocations for item 3 through 15, above result
in an Overall Rate Base allocation factor for each of the
affiliates.
16. Gas Cost accounts will be directly assigned to affiliate for which
the gas is purchased. However, in the case of the former
Commonwealth Public Service, the gas delivered to Bluefield will be
allocated between Bluefield Gas and the former Commonwealth Public
service based on the ratio of billed volumes.
17. Transmission Operations and Maintenance Expense accounts will be
directly assigned to the affiliate owning the corresponding asset.
However, in the case of the former Commonwealth Public Service,
Bluefield Gas' transmission operations and maintenance expense
accounts will be allocated to the former Commonwealth Public Service
based on the ratio of billed volumes.
18. Distribution Operating Expense accounts will be allocated to
affiliates as follows:
Account 870 - Supervision and Engineering will be allocated
to each affiliate on the basis of exception time reporting.
Accounts 871 through 875 - Load Dispatching, Mains and
Services Expenses, and Measuring and Regulating Station
Expenses will be directly assigned to the owner of the asset
for which the expense was incurred.
Account 878 - Removing and Setting Meters will be directly
assigned to the utility for which the meters were removed or
set. However, in the case of the former Commonwealth Public
Service, Bluefield Gas account 878 will be allocated to the
former Commonwealth Public Service based on meter cost.
Account 879 through 881 - Customer Installation Expense, Maps
and Records, and Rents will be directly assigned to each
affiliate. However, in
<PAGE>
Attachment A
Page 3 of 5
the case of the former Commonwealth Public Service, Bluefield
Gas accounts 879 through 881 will be allocated to the former
Commonwealth Public Service based on the number of customers.
The resulting overall Distribution Operating Expense allocations
will be known as the Distribution Operating Expense allocation
factors.
19. Distribution Maintenance Expense accounts will be directly assigned
to each affiliate for which the expense was incurred. However, in
the case of the former Commonwealth Public Service, distribution
maintenance expense accounts of Bluefield Gas will be allocated to
the former Commonwealth Public Service on the basis of the average
distribution plant balances.
20. LNG Operations and Maintenance Expense accounts will be directly
assigned to Roanoke Gas Company.
21. Production Expense accounts will be directly assigned to Roanoke Gas
Company.
22. Customer Accounts accounts will be allocated to affiliates as
follows:
Account 901 - Supervision will be allocated to each
affiliate on the basis of a time study analysis.
Account 902 - Meter Reading will be directly assigned to each
affiliate based on the billings received from the meter
reading contractor or the direct charge of time spent. Any
jointly incurred meter reading expenses will be allocated to
the affiliates for which the expenses were incurred based on
the number of customers.
Accounts 903 and 903.1 - Customer Service Labor and Meals will
be allocated to each affiliate on the basis of a time study
analysis.
Account 903.2 - Credit Investigations will be directly
assigned to affiliates for which the investigations were
performed. However, in the case of the former Commonwealth
Public Service, credit investigations charged to Bluefield Gas
will be allocated to the former Commonwealth Public service
based on the number of customers.
Accounts 903.3 - Non-pay Turnoff Expenses will be directly
assigned to each affiliate.
Accounts 903.4 - Billing Expenses will be directly assigned to
each affiliate based on the charges received from the billing
contractor.
<PAGE>
Attachment A
Page 4 of 5
Account 903.5 - Office Expenses will be allocated to each
affiliate on the basis of a time study analysis.
Accounts 903.6, 903.8, and 904 - Collection Agencies,
Collection Expenses, and Uncollectible Accounts unique to each
affiliate and will be directly assigned.
Account 903.7 - Utilities will be directly assigned for
property that is separately owned and used by each affiliate.
However, utility expenses for joint use facilities will be
allocated to each affiliate based on square footage.
Accounts 903.9, and 905 through 910 - Other Expenses,
Miscellaneous Expenses, Customer Service Supervision, and
Customer Assistance Expense will be allocated to each
affiliate on the basis of a time study analysis.
Account 911 - Information and Safety Advertising will be
directly assigned to each affiliate.
Account 912 - Miscellaneous Customer Service Expense will be
allocated to each affiliate on the basis of a time study
analysis.
23. Sales Expenses will be directly assigned to each affiliate.
24. Administrative and General accounts will be allocated to
affiliates as follows:
Account 920 - Administrative and General Salaries will be
allocated on the basis of exception time reporting or a time
study analysis.
Account 921.0 and 921.1 - Officer Expenses and Administrative
Assistant Expenses will be allocated to affiliates based on
exception time reporting or a time study analysis.
Account 921.2 - Facility Costs - Operating will be allocated
to affiliates on the basis of square footage of space.
Account 921.3 - Accounting Expenses will be allocated to
affiliates based on a time study.
Account 921.7 - Human Resources Expenses will be allocated to
affiliates on the basis of employee count.
<PAGE>
Attachment A
Page 5 of 5
Account 921.8 - Information System Expenses will be allocated
to affiliates based on a time study analysis.
Account 921.9 - Rates and Finance Expenses will be allocated
to affiliates based on exception time reporting.
Accounts 932.1 and 932.2 - Maintenance of General structures
and Improvements and Maintenance of General Plant Office
Equipment will be allocated to affiliates on the basis of
square footage.
Account 923.9 - Professional Services will be directly
assigned to affiliates. However, any professional services
related to information systems will be allocated on the basis
of Account 921.8.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 001
<NAME> RGC Resources, Inc.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 45,878,189
<OTHER-PROPERTY-AND-INVEST> 6,191,252
<TOTAL-CURRENT-ASSETS> 14,174,308
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 837,571
<TOTAL-ASSETS> 67,081,320
<COMMON> 8,861,795
<CAPITAL-SURPLUS-PAID-IN> 8,629,787
<RETAINED-EARNINGS> 9,719,102
<TOTAL-COMMON-STOCKHOLDERS-EQ> 27,210,684
0
0
<LONG-TERM-DEBT-NET> 20,700,000
<SHORT-TERM-NOTES> 1,295,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 5,313
<OTHER-ITEMS-CAPITAL-AND-LIAB> 17,870,323
<TOT-CAPITALIZATION-AND-LIAB> 67,081,320
<GROSS-OPERATING-REVENUE> 59,688,847
<INCOME-TAX-EXPENSE> 1,444,120
<OTHER-OPERATING-EXPENSES> 53,450,652
<TOTAL-OPERATING-EXPENSES> 54,894,772
<OPERATING-INCOME-LOSS> 4,794,075
<OTHER-INCOME-NET> 146,425
<INCOME-BEFORE-INTEREST-EXPEN> 4,940,500
<TOTAL-INTEREST-EXPENSE> 2,159,436
<NET-INCOME> 2,781,064
0
<EARNINGS-AVAILABLE-FOR-COMM> 2,781,064
<COMMON-STOCK-DIVIDENDS> 1,752,765
<TOTAL-INTEREST-ON-BONDS> 695,931
<CASH-FLOW-OPERATIONS> 8,795,317
<EPS-PRIMARY> 1.70
<EPS-DILUTED> 1.70
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 001
<NAME> RGC Resources, Inc.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 0
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 0
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 0
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 0
<TOTAL-COMMON-STOCKHOLDERS-EQ> 0
0
0
<LONG-TERM-DEBT-NET> 0
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 0
<TOT-CAPITALIZATION-AND-LIAB> 0
<GROSS-OPERATING-REVENUE> 0
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 0
<TOTAL-OPERATING-EXPENSES> 0
<OPERATING-INCOME-LOSS> 0
<OTHER-INCOME-NET> 0
<INCOME-BEFORE-INTEREST-EXPEN> 0
<TOTAL-INTEREST-EXPENSE> 0
<NET-INCOME> 0
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 002
<NAME> Roanoke Gas Company
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 41,299,457
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 11,142,997
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 3,114,320
<TOTAL-ASSETS> 55,556,774
<COMMON> 8,861,795
<CAPITAL-SURPLUS-PAID-IN> 6,585,934
<RETAINED-EARNINGS> 8,149,345
<TOTAL-COMMON-STOCKHOLDERS-EQ> 23,594,074
0
0
<LONG-TERM-DEBT-NET> 17,770,000
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 5,313
<OTHER-ITEMS-CAPITAL-AND-LIAB> 14,254,387
<TOT-CAPITALIZATION-AND-LIAB> 55,556,774
<GROSS-OPERATING-REVENUE> 45,850,656
<INCOME-TAX-EXPENSE> 905,102
<OTHER-OPERATING-EXPENSES> 41,224,130
<TOTAL-OPERATING-EXPENSES> 42,129,232
<OPERATING-INCOME-LOSS> 3,721,424
<OTHER-INCOME-NET> 41,311
<INCOME-BEFORE-INTEREST-EXPEN> 3,762,735
<TOTAL-INTEREST-EXPENSE> 1,836,066
<NET-INCOME> 1,926,669
0
<EARNINGS-AVAILABLE-FOR-COMM> 1,926,669
<COMMON-STOCK-DIVIDENDS> 1,752,765
<TOTAL-INTEREST-ON-BONDS> 695,931
<CASH-FLOW-OPERATIONS> 6,412,382
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 002
<NAME> Roanoke Gas Company
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 4,165,457
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 11,276,997
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 3,114,320
<TOTAL-ASSETS> 55,556,774
<COMMON> 8,861,795
<CAPITAL-SURPLUS-PAID-IN> 6,585,934
<RETAINED-EARNINGS> 8,149,345
<TOTAL-COMMON-STOCKHOLDERS-EQ> 23,597,074
0
0
<LONG-TERM-DEBT-NET> 17,700,000
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 5,313
<OTHER-ITEMS-CAPITAL-AND-LIAB> 14,254,387
<TOT-CAPITALIZATION-AND-LIAB> 55,556,774
<GROSS-OPERATING-REVENUE> 45,850,656
<INCOME-TAX-EXPENSE> 905,102
<OTHER-OPERATING-EXPENSES> 41,224,130
<TOTAL-OPERATING-EXPENSES> 42,129,232
<OPERATING-INCOME-LOSS> 3,721,424
<OTHER-INCOME-NET> 41,311
<INCOME-BEFORE-INTEREST-EXPEN> 3,762,735
<TOTAL-INTEREST-EXPENSE> 1,836,066
<NET-INCOME> 1,926,669
0
<EARNINGS-AVAILABLE-FOR-COMM> 1,926,669
<COMMON-STOCK-DIVIDENDS> 1,752,765
<TOTAL-INTEREST-ON-BONDS> 695,931
<CASH-FLOW-OPERATIONS> 6,412,382
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 003
<NAME> Bluefield Gas Company
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 3,598,074
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 1,177,514
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 57,211
<TOTAL-ASSETS> 4,832,799
<COMMON> 49,704
<CAPITAL-SURPLUS-PAID-IN> 220,564
<RETAINED-EARNINGS> 1,430,381
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,700,649
0
0
<LONG-TERM-DEBT-NET> 1,300,000
<SHORT-TERM-NOTES> 876,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 956,150
<TOT-CAPITALIZATION-AND-LIAB> 4,832,799
<GROSS-OPERATING-REVENUE> 5,988,945
<INCOME-TAX-EXPENSE> 101,200
<OTHER-OPERATING-EXPENSES> 5,544,861
<TOTAL-OPERATING-EXPENSES> 5,646,061
<OPERATING-INCOME-LOSS> 342,884
<OTHER-INCOME-NET> (1,798)
<INCOME-BEFORE-INTEREST-EXPEN> 341,086
<TOTAL-INTEREST-EXPENSE> 197,400
<NET-INCOME> 143,686
0
<EARNINGS-AVAILABLE-FOR-COMM> 143,686
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 895,444
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 003
<NAME> Bluefield Gas Company
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,598,074
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 1,177,514
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 57,211
<TOTAL-ASSETS> 4,832,799
<COMMON> 49,704
<CAPITAL-SURPLUS-PAID-IN> 220,564
<RETAINED-EARNINGS> 1,430,381
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,700,649
0
0
<LONG-TERM-DEBT-NET> 1,300,000
<SHORT-TERM-NOTES> 876,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 956,150
<TOT-CAPITALIZATION-AND-LIAB> 4,832,799
<GROSS-OPERATING-REVENUE> 5,988,945
<INCOME-TAX-EXPENSE> 101,200
<OTHER-OPERATING-EXPENSES> 5,544,861
<TOTAL-OPERATING-EXPENSES> 5,646,061
<OPERATING-INCOME-LOSS> 342,884
<OTHER-INCOME-NET> (1,798)
<INCOME-BEFORE-INTEREST-EXPEN> 341,086
<TOTAL-INTEREST-EXPENSE> 197,400
<NET-INCOME> 143,686
0
<EARNINGS-AVAILABLE-FOR-COMM> 143,686
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 895,444
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 004
<NAME> Diversified Energy Company
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 0
<OTHER-PROPERTY-AND-INVEST> 6,133,922
<TOTAL-CURRENT-ASSETS> 1,407,449
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 393,983
<TOTAL-ASSETS> 7,935,354
<COMMON> 196,421
<CAPITAL-SURPLUS-PAID-IN> 833,622
<RETAINED-EARNINGS> 2,995,034
<TOTAL-COMMON-STOCKHOLDERS-EQ> 4,025,117
0
0
<LONG-TERM-DEBT-NET> 1,700,000
<SHORT-TERM-NOTES> 419,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,791,237
<TOT-CAPITALIZATION-AND-LIAB> 7,935,354
<GROSS-OPERATING-REVENUE> 7,575,518
<INCOME-TAX-EXPENSE> 396,050
<OTHER-OPERATING-EXPENSES> 6,529,995
<TOTAL-OPERATING-EXPENSES> 6,926,045
<OPERATING-INCOME-LOSS> 649,473
<OTHER-INCOME-NET> 99,899
<INCOME-BEFORE-INTEREST-EXPEN> 749,372
<TOTAL-INTEREST-EXPENSE> 126,108
<NET-INCOME> 623,264
0
<EARNINGS-AVAILABLE-FOR-COMM> 623,264
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 1,217,963
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.38
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 004
<NAME> Diversified Energy Company
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 0
<OTHER-PROPERTY-AND-INVEST> 6,133,922
<TOTAL-CURRENT-ASSETS> 1,407,449
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 393,983
<TOTAL-ASSETS> 7,935,354
<COMMON> 196,421
<CAPITAL-SURPLUS-PAID-IN> 833,622
<RETAINED-EARNINGS> 2,995,034
<TOTAL-COMMON-STOCKHOLDERS-EQ> 4,025,117
0
0
<LONG-TERM-DEBT-NET> 1,700,000
<SHORT-TERM-NOTES> 419,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,791,237
<TOT-CAPITALIZATION-AND-LIAB> 7,935,354
<GROSS-OPERATING-REVENUE> 7,575,518
<INCOME-TAX-EXPENSE> 396,050
<OTHER-OPERATING-EXPENSES> 6,529,995
<TOTAL-OPERATING-EXPENSES> 6,926,045
<OPERATING-INCOME-LOSS> 649,473
<OTHER-INCOME-NET> 99,899
<INCOME-BEFORE-INTEREST-EXPEN> 749,372
<TOTAL-INTEREST-EXPENSE> 126,108
<NET-INCOME> 623,264
0
<EARNINGS-AVAILABLE-FOR-COMM> 623,264
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 1,217,963
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.38
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 005
<NAME> Commonwealth Public Service Corporation
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 1,063,883
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> (63,824)
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 20,663
<TOTAL-ASSETS> 1,020,722
<COMMON> 500
<CAPITAL-SURPLUS-PAID-IN> 37,241
<RETAINED-EARNINGS> 625,904
<TOTAL-COMMON-STOCKHOLDERS-EQ> 663,645
0
0
<LONG-TERM-DEBT-NET> 0
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 357,077
<TOT-CAPITALIZATION-AND-LIAB> 1,020,722
<GROSS-OPERATING-REVENUE> 1,463,234
<INCOME-TAX-EXPENSE> 41,768
<OTHER-OPERATING-EXPENSES> 1,339,003
<TOTAL-OPERATING-EXPENSES> 1,380,771
<OPERATING-INCOME-LOSS> 82,463
<OTHER-INCOME-NET> (181)
<INCOME-BEFORE-INTEREST-EXPEN> 82,282
<TOTAL-INTEREST-EXPENSE> 690
<NET-INCOME> 81,592
0
<EARNINGS-AVAILABLE-FOR-COMM> 81,592
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 269,528
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 005
<NAME> Commonwealth Public Service Corporation
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,063,883
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> (63,824)
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 20,663
<TOTAL-ASSETS> 1,020,722
<COMMON> 500
<CAPITAL-SURPLUS-PAID-IN> 37,241
<RETAINED-EARNINGS> 625,904
<TOTAL-COMMON-STOCKHOLDERS-EQ> 663,645
0
0
<LONG-TERM-DEBT-NET> 0
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 357,077
<TOT-CAPITALIZATION-AND-LIAB> 1,020,722
<GROSS-OPERATING-REVENUE> 1,463,234
<INCOME-TAX-EXPENSE> 41,768
<OTHER-OPERATING-EXPENSES> 1,339,003
<TOTAL-OPERATING-EXPENSES> 1,380,771
<OPERATING-INCOME-LOSS> 82,463
<OTHER-INCOME-NET> (181)
<INCOME-BEFORE-INTEREST-EXPEN> 82,282
<TOTAL-INTEREST-EXPENSE> 690
<NET-INCOME> 81,592
0
<EARNINGS-AVAILABLE-FOR-COMM> 81,592
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 269,528
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 006
<NAME> RGC Acquisition Corp.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 0
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 0
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 0
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 0
<TOTAL-COMMON-STOCKHOLDERS-EQ> 0
0
0
<LONG-TERM-DEBT-NET> 0
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 0
<TOT-CAPITALIZATION-AND-LIAB> 0
<GROSS-OPERATING-REVENUE> 0
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 0
<TOTAL-OPERATING-EXPENSES> 0
<OPERATING-INCOME-LOSS> 0
<OTHER-INCOME-NET> 0
<INCOME-BEFORE-INTEREST-EXPEN> 0
<TOTAL-INTEREST-EXPENSE> 0
<NET-INCOME> 0
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE
GAS COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE
QUARTER ENDED JUNE 30, 1998, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 006
<NAME> RGC Acquisition Corp.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 0
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 0
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 0
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 0
<TOTAL-COMMON-STOCKHOLDERS-EQ> 0
0
0
<LONG-TERM-DEBT-NET> 0
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 0
<TOT-CAPITALIZATION-AND-LIAB> 0
<GROSS-OPERATING-REVENUE> 0
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 0
<TOTAL-OPERATING-EXPENSES> 0
<OPERATING-INCOME-LOSS> 0
<OTHER-INCOME-NET> 0
<INCOME-BEFORE-INTEREST-EXPEN> 0
<TOTAL-INTEREST-EXPENSE> 0
<NET-INCOME> 0
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
