<PAGE>
- -------------------------------------------------------------------------------
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 2-35965
NORTH SHORE GAS COMPANY
(Exact name of registrant as specified in its charter)
ILLINOIS 36-1558720
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
122 SOUTH MICHIGAN AVENUE, CHICAGO, ILLINOIS 60603
(Address of principal executive offices) (Zip Code)
(312) 431-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 3,625,887 shares of Common
Stock, without par value, outstanding at January 31, 1994.
- -------------------------------------------------------------------------------
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
NORTH SHORE GAS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------- ----------------------
1993 1992 1993 1992
------- ------- ------- -------
(Thousands)
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Gas sales $ 46,304 $ 44,089 $ 149,648 $ 127,479
Transportation of customer-owned gas 3,265 3,553 11,464 11,373
Other 224 228 1,038 837
------- ------- ------- --------
Total Operating Revenues 49,793 47,870 162,150 139,689
------- ------- ------- --------
OPERATING EXPENSES:
Gas costs 30,732 28,125 96,408 76,003
Operation 5,299 6,266 23,197 23,318
Maintenance 649 771 3,149 3,040
Depreciation 1,554 1,470 6,276 5,790
Taxes - Income 2,356 2,141 5,004 4,924
- State and local revenue 3,166 3,285 10,503 9,646
- Other 495 523 2,153 2,174
------- ------- ------- --------
Total Operating Expenses 44,251 42,581 146,690 124,895
------- ------- ------- --------
OPERATING INCOME 5,542 5,289 15,460 14,794
------- ------- ------- --------
OTHER INCOME:
Interest Income 22 144 541 316
Miscellaneous 1,182 87 1,426 3,964
------- ------- ------- --------
Total Other Income 1,204 231 1,967 4,280
------- ------- ------- --------
GROSS INCOME 6,746 5,520 17,427 19,074
------- ------- ------- --------
INCOME DEDUCTIONS:
Interest on long-term debt 1,573 1,551 6,629 5,601
Other interest 155 271 364 672
Amortization of debt discount and expense 30 24 118 73
Miscellaneous 5 23 11 30
------- ------- ------- --------
Total Income Deductions 1,763 1,869 7,122 6,376
------- ------- ------- --------
NET INCOME APPLICABLE TO
COMMON STOCK $ 4,983 $ 3,651 $ 10,305 $ 12,698
------- ------- ------- --------
------- ------- ------- --------
</TABLE>
- --------------------------------------------------------------------------------
The Notes to Consolidated Financial Statements
are an integral part of these statements.
- 2 -
<PAGE>
NORTH SHORE GAS COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1993 September 30, 1992
(Unaudited) 1993 (Unaudited)
----------- ------------ ------------
(Thousands)
<S> <C> <C> <C>
PROPERTIES AND OTHER ASSETS
CAPITAL INVESTMENTS
Property, plant and equipment,
at original cost $ 250,873 $ 248,580 $ 229,404
Less - Accumulated depreciation 76,247 75,110 71,758
-------- -------- --------
Net property, plant and equipment 174,626 173,470 157,646
Gas supply advances and investments 117 117 124
-------- -------- --------
TOTAL CAPITAL INVESTMENTS - NET 174,743 173,587 157,770
-------- -------- --------
CURRENT ASSETS
Cash 1,627 472 2,115
Cash equivalents - - 650
Trust fund, utility construction - 4,243 20,922
Receivables -
Customers, net of allowance for
uncollectible accounts of $760,
$855, and $582, respectively 17,243 5,836 19,198
Other 5,395 3,835 1,072
Accrued unbilled revenues 10,242 3,839 9,385
Materials and supplies, at average cost 2,128 1,979 2,075
Gas in storage, at last-in, first-out cost 18,859 25,351 17,016
Gas costs recoverable through rate adjustments 7,202 8,479 10,219
Prepayments 206 397 213
-------- -------- --------
TOTAL CURRENT ASSETS 62,902 54,431 82,865
-------- -------- --------
DEFERRED CHARGES 11,443 7,413 7,676
-------- -------- --------
TOTAL PROPERTIES AND OTHER ASSETS $ 249,088 $ 235,431 $ 248,311
-------- -------- --------
-------- -------- --------
</TABLE>
- -------------------------------------------------------------------------------
The Notes to Consolidated Financial Statements
are an integral part of these statements.
- 3 -
<PAGE>
NORTH SHORE GAS COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1993 September 30, 1992
(Unaudited) 1993 (Unaudited)
----------- ------------ ------------
(Thousands, except share data)
<S> <C> <C> <C>
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common Stockholder's Equity:
Common stock, without par value
Authorized - 5,000,000 shares
Outstanding - 3,625,887 shares $ 24,757 $ 24,757 $ 24,757
Retained earnings 58,895 55,652 55,805
-------- -------- --------
Total Common Stockholder's Equity 83,652 80,409 80,562
Long-term debt, exclusive of sinking
fund payments and maturities due within one year 76,925 80,925 76,675
-------- -------- --------
TOTAL CAPITALIZATION 160,577 161,334 157,237
-------- -------- --------
CURRENT LIABILITIES
Interim loans 16,900 5,400 20,000
Account payable 17,706 16,296 15,174
Dividends payable on common stock 1,740 1,559 1,196
Customer gas service and credit deposits 4,112 4,583 7,230
Sinking fund payments and maturities
due within one year -
Long-term debt 4,000 4,000 4,500
Accrued taxes 4,587 3,013 5,110
Gas sales revenue refundable through rate adjustments 987 958 662
Accrued interest 1,180 2,100 1,313
Temporary LIFO liquidation credit 1,189 - 3,704
-------- -------- --------
TOTAL CURRENT LIABILITIES 52,401 37,909 58,889
-------- -------- --------
RESERVES AND DEFERRED CREDITS
Deferred income taxes - primarily
accelerated depreciation 14,988 14,184 21,395
Investment tax credits being amortized
over the average lives of related property 4,158 4,197 4,281
Other 16,964 17,807 6,509
-------- -------- --------
TOTAL RESERVES AND DEFERRED CREDITS 36,110 36,188 32,185
-------- -------- --------
TOTAL CAPITALIZATION AND LIABILITIES $ 249,088 $ 235,431 $ 248,311
-------- -------- --------
-------- -------- --------
</TABLE>
- -------------------------------------------------------------------------------
The Notes to Consolidated Financial Statements
are an integral part of these statements.
- 4 -
<PAGE>
NORTH SHORE GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
----------------------
1993 1992
------- -------
(Thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 4,983 $ 3,651
Adjustments to reconcile net income to net cash:
Depreciation 1,554 1,470
Deferred income taxes and investment tax credits - net 246 (197)
Change in other deferred credits and reserves (325) (152)
Change in deferred charges (4,030) (658)
Other - 1
------- -------
2,428 4,115
Change in certain current assets and liabilities:
Receivables - net (12,967) (15,172)
Accrued unbilled revenues (6,403) (6,314)
Gas in storage 6,492 8,355
Rate adjustments recoverable or refundable 1,306 (5,509)
Accounts payable 1,410 3,164
Customer gas service and credit deposits (471) 2,323
Accrued taxes 1,574 4,312
Accrued interest (920) (572)
Temporary LIFO liquidation credit 1,189 3,704
Other 43 158
------- -------
NET CASH USED IN OPERATING ACTIVITIES (6,319) (1,436)
------- -------
INVESTING ACTIVITIES:
Capital expenditures - construction (2,841) (2,070)
Other assets 131 86
------- -------
NET CASH USED IN INVESTING ACTIVITIES (2,710) (1,984)
------- -------
FINANCING ACTIVITIES:
Retirement of long-term debt (4,000) (316)
Interim loans - net 11,500 -
Issuance of long-term debt - 25,000
Trust fund, utility construction 4,243 (20,922)
Dividends paid on common stock (1,559) (762)
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,184 3,000
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,155 (420)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 472 3,185
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,627 $ 2,765
------- -------
------- -------
</TABLE>
- -------------------------------------------------------------------------------
( ) Denotes red figure.
The Notes to Consolidated Financial Statements
are an integral part of these statements.
- 5 -
<PAGE>
NORTH SHORE GAS COMPANY
PART I. FINANCIAL INFORMATION (Continued)
DECEMBER 31, 1993
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared by
North Shore Gas Company (Company) in conformity with the rules and regulations
of the Securities and Exchange Commission (SEC) and reflect all adjustments that
are, in the opinion of management, necessary to present fairly the results for
the interim periods herein and to prevent the information from being misleading.
Certain footnote disclosures and other information, normally included in
financial statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted from these interim financial
statements, pursuant to SEC rules and regulations. Therefore, the statements
should be read in conjunction with the consolidated financial statements and
related notes contained in the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1993.
The business of the Company is influenced by seasonal weather conditions
because a large element of the Company's customer load consists of gas used for
space heating. Weather-related deliveries can, therefore, have a significant
positive or negative impact on net income. Therefore, the results of operations
for the interim periods presented are not indicative of the results to be
expected for all or any part of the balance of the current fiscal year.
2. SIGNIFICANT ACCOUNTING POLICIES
2(a) Revenue Recognition
Gas sales revenues for retail customers are recorded on the accrual
basis for all gas delivered during the month, including an estimate for gas
delivered but unbilled at the end of each month.
2(b) Statement of Cash Flows
For purposes of the balance sheet and the statement of cash flows, the
Company considers all short-term liquid investments with maturities of
three months or less to be cash equivalents.
- 6 -
<PAGE>
NORTH SHORE GAS COMPANY
PART I. FINANCIAL INFORMATION (Continued)
DECEMBER 31, 1993
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
2(b) Statement of Cash Flows (Continued)
Income taxes paid, net of refunds, and interest paid (excluding
capitalized interest) were as follows:
<TABLE>
<CAPTION>
For the three months
ended December 31, 1993 1992
--------------------------------------------------------------
(Thousands)
<S> <C> <C>
Income taxes paid $1,157 $ 6
Interest paid 2,638 2,358
</TABLE>
2(c) Income Taxes
In March 1993, the Company adopted, effective October 1, 1992, the
liability method of accounting for deferred income taxes required by the
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." Under the liability method, deferred income taxes have been
recorded using currently enacted tax rates for the differences between the
tax basis of assets and liabilities and the basis reported in the financial
statements. Due to the effects of regulation on the Company, certain
adjustments made to deferred income taxes to reflect the adoption of SFAS
No. 109 are, in turn, debited or credited to regulatory assets or
liabilities. Such adjustments had no material impact on financial position
or results of operations of the Company.
2(d) Recovery of Gas Costs, Including Charges for Take-or-Pay
and Transition Costs
Under the tariffs of the Company, the difference for any fiscal year
between costs recoverable through the Gas Charge and revenues billed to
customers under the Gas Charge is refunded or recovered over a 12-month
billing cycle beginning the following January 1. Consistent with these
tariff provisions, such difference for any month is recorded either as a
current liability or as a current asset (with a contra entry to gas costs),
and the fiscal year-end balance is amortized over the 12-month period
beginning the following January 1.
- 7 -
<PAGE>
NORTH SHORE GAS COMPANY
PART I. FINANCIAL INFORMATION (Continued)
DECEMBER 31, 1993
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
2(d) Recovery of Gas Costs, Including Charges for Take-or-Pay
and Transition Costs (Continued)
The Illinois Commerce Commission (Commission) conducts annual
proceedings regarding, for each gas utility, the reconciliation of revenues
from the Gas Charge and related costs incurred for gas. In such
proceedings, costs recovered by a utility through the Gas Charge are
subject to challenge. Such proceedings regarding the Company for fiscal
years 1991 through 1993 are currently pending before the Commission.
Pursuant to Federal Energy Regulatory Commission (FERC) Order No. 500,
and successor orders, pipelines were allowed to direct-bill firm sales
customers for a portion of so-called "past" take-or-pay costs. These costs
arose from the settlement of liabilities under agreements between pipelines
and producers whereby pipelines were required to pay for contracted
supplies, whether or not they were taken. The Company has recovered all
take-or-pay charges, billed by its pipeline supplier, through the Gas
Charge. Although additional recoveries may be required in the future, any
amount is anticipated to be insignificant.
Pursuant to FERC Order No. 636 and successor orders, pipelines are
allowed to recover from their customers so-called transition costs. These
costs arise from the restructuring of pipeline service obligations required
by the 636 Orders. The Company is currently recovering pipeline charges
for transition costs through an existing provision of the Gas Charge.
Management believes that all such charges will be recoverable from
customers. (See Notes 4(a) and 4(b).)
3. COVENANTS REGARDING RETAINED EARNINGS
The Company's indenture relating to its first mortgage bonds contains
provisions and covenants restricting the payment of cash dividends and the
purchase or redemption of capital stock. At December 31, 1993, such
restrictions amounted to $11.6 million out of the Company's total retained
earnings of $58.9 million.
- 8 -
<PAGE>
NORTH SHORE GAS COMPANY
PART I. FINANCIAL INFORMATION (Continued)
DECEMBER 31, 1993
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
4. RATES AND REGULATION
4(a) Utility Rate Proceedings
On November 8, 1991, the Commission issued an order approving changes
in the Company's rates. These changes were designed to increase the
Company's annual revenues by approximately $5.3 million, exclusive of
additional charges for revenue taxes. The new rates were implemented on
November 11, 1991. The Company was allowed an 11.39 percent return on its
original-cost rate base, reflecting a 12.75 percent cost of common equity.
The Commission's order also adopted changes in rate design to align
revenues with the allocated cost of service for each class of customer and
approved standby charges for transportation customers receiving standby
service, as well as a rate for an optional storage service. In addition,
the order approved a rate mechanism by which the Company is recovering
through its rates, on an annual basis, costs associated with environmental
activities, principally the investigation and remediation of residues
associated with past manufactured gas operations. The Company's rate
provision also recovers charges for carrying such costs before recovery
through rates. Reimbursements of such costs from insurance carriers or
other entities are also reflected in rates on an annual basis. However,
the Company has been directed to amend this rate mechanism to be consistent
with the Commission's order in separate proceedings (see discussion below).
The Commission's order approving changes in the Company's rates was
appealed to the Illinois Appellate Court by several parties, including the
Company. On June 2, 1993, the Appellate Court entered its order granting
appellants' joint motion to dismiss the appeal.
On September 30, 1992, the Commission issued an order in its
consolidated proceedings, initiated in March 1991, regarding the
appropriate ratemaking treatment of costs incurred by Illinois utilities,
including the Company and Peoples Gas, in connection with the investigation
and treatment of residues associated with past manufactured gas operations
("environmental costs"). In its order, the Commission approved rate
recovery of environmental costs but required that such recovery occur over
a five-year period without recovery of carrying charges on unrecovered
balances. Reimbursements of environmental costs from insurance carriers or
other entities are to be netted against costs and reflected in rates over a
five-year period. The order also required that the Company amend the
environmental cost-recovery provisions of its tariff to conform with the
- 9 -
<PAGE>
NORTH SHORE GAS COMPANY
PART I. FINANCIAL INFORMATION (Continued)
DECEMBER 31, 1993
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
4. RATES AND REGULATION (Continued)
4(a) Utility Rate Proceedings (Continued)
order; such amendments would be applied prospectively. In November 1992,
several parties, including the Company and Peoples Gas, appealed the
Commission's order to the Illinois Appellate Court. Any change made
pursuant to the Appellate Court's order on appeal would have a prospective
effect only. The Commission stayed its requirement that the Company amend
the environmental cost-recovery provisions of its tariff to conform with
the order, pending the appeal of the Company's rate order entered on
November 8, 1991. The appeal was dismissed on June 2, 1993, and thereafter
the Company filed a motion for stay of the Commission's directive pending
appeal of the order in the consolidated proceedings. On October 27, 1993,
the motion was denied. Accordingly, the Company is filing an amendment to
its tariff conforming the environmental cost-recovery provisions to the
order in the consolidated proceedings. On December 29, 1993, the Third
District Appellate Court issued its opinion affirming the Commission's
order in the consolidated proceedings. On February 2, 1994, the Citizens
Utility Board, one of the appellants in the Third District Court's appeal,
filed a petition for leave to appeal the Third District Court's decision to
the Illinois Supreme Court.
On September 15, 1993, the Commission entered an order initiating an
investigation into the appropriate means of recovery by Illinois gas
utilities of pipeline charges for FERC Order No. 636 transition costs. The
Commission plans to issue a final order in this proceeding by February 15,
1994. (See Notes 2(d) and 4(b).)
4(b) FERC Orders 636, 636-A, and 636-B
On April 8, 1992, the FERC issued Order No. 636, and on August 3,
1992, the FERC issued Order No. 636-A. On November 27, 1992, the FERC
issued Order No. 636-B, which substantially confirmed Order Nos. 636 and
636-A. There are numerous appeals of the 636 Orders pending before the
Federal Circuit Courts of Appeal for the D.C. and Eleventh Circuits.
The 636 Orders require substantial restructuring of the service
obligations of interstate pipelines. Among other things, the 636 Orders
mandate "unbundling" of existing pipeline
- 10 -
<PAGE>
NORTH SHORE GAS COMPANY
PART I. FINANCIAL INFORMATION (Continued)
DECEMBER 31, 1993
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
4. RATES AND REGULATION (Continued)
4(b) FERC Orders 636, 636-A, and 636-B (Continued)
gas sales services. Mandatory unbundling requires pipelines to sell
separately the various components of their gas sales services (gathering,
transportation and storage services, and gas supply). These components
were previously combined or "bundled" in gas services such as those
purchased by the Company. To address concerns raised by utilities about
reliability of service to their service territories, the 636 Orders require
pipelines to offer a "no-notice" transportation service under which firm
transporters can receive delivery of gas up to their contractual capacity
level on any day without prior scheduling. Further, the 636 Orders provide
for mechanisms for pipelines to recover prudently incurred transition costs
associated with the restructuring process.
The FERC initiated individual restructuring proceedings for each
interstate pipeline. Each pipeline submitted a proposal to bring it into
compliance with the requirements of the 636 Orders. The restructured
tariffs of the principal pipeline serving the Company and Peoples Gas,
Natural Gas Pipeline Company of America (Natural), went into effect
December 1, 1993. Several appeals of the orders approving Natural's
restructured tariffs are pending before the Federal Circuit Court of Appeal
for the D.C. Circuit.
As part of the restructuring process, the Company elected necessary
levels of restructured services, including no-notice services, from the
menu of restructured services offered by Natural. Also during 1993, the
Company took the steps necessary to obtain reliable gas supply as a
replacement for the bundled merchant service supply which was no longer
available from Natural to any significant extent.
Under the 636 Orders, pipelines must make separate rate filings to
recover transition costs. There are four categories of such costs, the
largest of which for the Company is gas supply realignment (GSR) costs.
The Company is subject to charges for transition cost recovery by Natural.
Charges for Natural's transition costs commenced on January 1, 1994. While
the total amount of the transition costs expected to be billed to the
Company by Natural are uncertain at this time, such total amount is
expected to be substantial. The Company has accrued and deferred
transition costs incurred through
- 11-
<PAGE>
NORTH SHORE GAS COMPANY
PART I. FINANCIAL INFORMATION (Continued)
DECEMBER 31, 1993
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
4. RATES AND REGULATION (Continued)
4(b) FERC Orders 636, 636-A, and 636-B (Continued)
December 31, 1993. On February 1, 1994, Natural filed a Stipulation and
Agreement with the FERC addressing GSR costs. If approved by the FERC, the
Stipulation and Agreement would place a cap on the amount of GSR costs
recoverable by Natural from the Company.
The 636 Orders are not expected to have a material effect on financial
position or results of operations of the Company. (See Notes 2(d) and
4(a).)
5. ENVIRONMENTAL MATTERS
The Company, its predecessors, and certain former affiliates operated
facilities in the past for manufacturing gas and storing manufactured gas. In
connection with manufacturing and storing gas, various by-products and waste
materials were produced, some of which might have been disposed of on sites
where the facilities were located. Under certain laws and regulations relating
to the protection of the environment, the Company might be required to undertake
remedial action with respect to some of these materials, if found at the sites.
Two sites in Waukegan, Illinois, are the subjects of investigations (discussed
below) initiated by the United States Environmental Protection Agency (EPA).
In May 1990, the Company was notified by the EPA that the EPA had
documented the release or threatened release of hazardous substances,
pollutants, and contaminants at a site located in Waukegan, Illinois, where
manufactured gas and coking operations were formerly conducted (Waukegan I
Site). Also, the Company, General Motors Corporation (GMC), and Outboard Marine
Corporation were notified that each may be a potentially responsible party (PRP)
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended (commonly called Superfund) with respect to the Waukegan I
Site. A PRP is potentially liable for the cost of any investigative and/or
remedial work that the EPA determines is necessary.
In September 1990, the Company entered into an Administrative Order on
Consent (AOC) with the EPA and the Illinois Environmental Protection Agency
(IEPA) to implement and conduct a remedial investigation/feasibility study
(RI/FS) of the Waukegan I Site. The RI/FS is comprised of an investigation to
determine the nature and
- 12 -
<PAGE>
NORTH SHORE GAS COMPANY
PART I. FINANCIAL INFORMATION (Continued)
DECEMBER 31, 1993
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
5. ENVIRONMENTAL MATTERS (Continued)
extent of contamination at the site and a feasibility study to develop and
evaluate possible remedial actions. Other parties identified as PRPs did not
enter into the AOC. Under the terms of the AOC, the Company is responsible for
the cost of the RI/FS. The Company believes, however, that it will recover a
significant portion of the costs of the RI/FS from other entities. GMC has
agreed to share equally with the Company in funding of the RI/FS cost, without
prejudice to GMC's or the Company's right to seek a lesser cost responsibility
at a later date.
In September 1991, the Company, the Elgin, Joliet and Eastern Railway
(EJ&E), and the North Shore Sanitary District (NSSD) each received an
administrative order (AO) issued by the EPA. The AO directed all three entities
to remove and dispose of all visible free tar in a pit located within a separate
site in Waukegan, Illinois (Waukegan II Site) and to conduct a study to
determine the extent of contamination of the tar from the pit to the surrounding
property. The Company and EJ&E notified the EPA of their intent to comply with
the AO. The Company and EJ&E have agreed to fund, on an equal basis, the cost
of performing the work required by the AO, without prejudice to each company's
right to seek a lesser cost responsibility at a later date. EJ&E subsequently
refused to fund the cost of performing the work required by the AO. The Company
intends to pursue legal action against the other PRPs identified by the EPA and
all other entities that the Company believes are legally responsible for the
cost of performing the work required by the AO. All of the work required by the
AO has been completed. At this time, the Company cannot determine the final
contribution of each PRP to the cost of performing the work required by the AO.
The Company, in cooperation with the IEPA, is conducting investigations of
other sites (a total of three) to determine whether remedial action might be
necessary. The investigations were initiated pursuant to an informal request by
the IEPA. To the best of the Company's knowledge, similar informal requests
have been made by the IEPA to other major Illinois gas and electric utilities.
The Company has engaged environmental consulting firms to assist in the
Company's investigations. At this time, it is not known what, if any, remedial
action will be necessary at the sites or, if necessary, what the cost of any
such action would be.
The Company is accruing and deferring the costs it incurs in connection
with all of the sites, including related legal expenses, pending recovery
through rates or from insurance carriers or other
- 13 -
<PAGE>
NORTH SHORE GAS COMPANY
PART I. FINANCIAL INFORMATION (Continued)
DECEMBER 31, 1993
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
5. ENVIRONMENTAL MATTERS (Continued)
entities. As of December 31, 1993, the total of the costs deferred by the
Company, net of recoveries and amounts billed to other entities, was $6.1
million. This amount includes an estimate of the costs of completing the
studies required by the EPA at the Waukegan I Site and the Waukegan II Site and
the investigations initiated at the request of the IEPA at the other sites
referred to above. The amount also includes an estimate of the costs of
remediation at the Waukegan I Site, at the minimum amount of the current
estimated range of such costs. The costs of remediation at the other sites
cannot be determined until more is known about the nature and extent of
contamination and the remedial action, if any, to be required by the EPA or the
IEPA. While the Company intends to seek contribution by other entities for the
costs incurred at the sites, the extent of such contributions cannot be
determined at this time. Finally, the Company is currently researching its
insurance coverages and has initiated the claim process with respect to certain
carriers. At this time, management cannot determine the timing and extent of
the Company's recovery of costs from its insurance carriers. Accordingly, the
foregoing amount has not been reduced to reflect recoveries from insurance
carriers.
Costs incurred by the Company for environmental activities at the sites
will be recovered from insurance carriers or other entities or through rates for
utility service. Accordingly, management believes that the costs incurred by
the Company in connection with the sites will not have a material adverse effect
on its financial position or results of operations. The Company is authorized
to recover the costs of environmental activities under a rate mechanism approved
by the Commission. As of December 31, 1993, it had recovered $3.4 million of
such costs through rates. (See Note 4(a) for a discussion of proceedings
regarding the recovery of such costs through utility rates.)
6. TAX MATTERS
On September 30, 1993, the Company received notification from the Internal
Revenue Service (IRS) that settlement of past income tax returns had been
reached for fiscal years 1978 through 1990. The IRS settlement will result in a
payment of principal and interest to the Company in total amount of
approximately $3 million, or $2 million after income taxes. The Company has
received regulatory authorization to defer the recording of the settlement
amount in income for fiscal year 1993, and to record its portion of the
settlement amount in income for fiscal years 1994 and 1995. The Company has
represented to the Commission that, having received this accounting
authorization, it will not file a request for an increase in base rates before
December 1994. The regulatory treatment of the IRS settlement having been
resolved in November 1993, the Company included $1.4 million, or about $1
million after income taxes, in income for that month; the amount after income
taxes is included in Other Income - Miscellaneous. At December 31, 1993,
approximately $3 million and $1.4 million are included in Receivables - Other
and Reserves and Deferred Credits - Other, respectively. The Company will
amortize its remaining portion of the settlement amount in income in fiscal
year 1995, the effect of which will be to offset increases in costs that the
utility will incur during that year.
- 14 -
<PAGE>
NORTH SHORE GAS COMPANY
PART I. FINANCIAL INFORMATION (Continued)
DECEMBER 31, 1993
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
7. ISSUANCE OF BONDS
On October 29, 1992, the Illinois Development Finance Authority issued $25
million, in aggregate principal amount, of gas supply revenue bonds, which were
collateralized by an equal amount of the Company's 30-year first mortgage bonds,
and lent the proceeds to the Company for the purpose of financing the
construction of certain facilities within Lake and Cook Counties, Illinois. The
proceeds were held in a trust fund until drawn down by the Company for
reimbursement of construction expenditures. All assets financed through this
arrangement must be depreciated on a straight-line basis for tax purposes.
On March 30, 1993, the Company filed a shelf registration with the SEC for
the issuance of $40 million aggregate principal amount of first mortgage bonds.
On May 13, 1993, the Company issued a portion of those first mortgage bonds in
an aggregate principal amount of $15 million due May 1, 2003. Proceeds of the
offering were used to refund approximately $11 million aggregate principal
amount of the Company's previously issued first mortgage bonds and for general
corporate purposes. The Company expects to issue all or a portion of the
remaining bonds during fiscal 1994 and/or fiscal 1995. Proceeds of the future
offering will be used for general corporate purposes.
- 15 -
<PAGE>
NORTH SHORE GAS COMPANY
PART I. FINANCIAL INFORMATION (Continued)
DECEMBER 31, 1993
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. INTEREST-RATE ADJUSTMENTS
Effective November 1, 1993, the rate of interest on the Company's
Adjustable-Rate Bonds, Series J, was fixed at 8 percent. The Company exercised
its right to choose a rate period of a length different from the prior one-year
rate period of these bonds, and fixed the rate until maturity, November 1, 2020.
9. RETIREMENT AND OTHER POSTEMPLOYMENT BENEFITS
In December 1990, the Financial Accounting Standards Board (FASB) issued
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." The Company adopted SFAS No. 106 effective October 1, 1993. SFAS
No. 106 requires the accrual of the expected costs of such benefits during the
employees' years of service. The Accumulated Postretirement Benefit Obligation
at October 1, 1993, was approximately $8.6 million. The unfunded obligation
will be amortized over 20 years. The estimated cost for fiscal 1994 is
approximately $1.4 million.
- 16 -
<PAGE>
NORTH SHORE GAS COMPANY
PART I. FINANCIAL INFORMATION (Continued)
DECEMBER 31, 1993
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
9. RETIREMENT AND OTHER POSTEMPLOYMENT BENEFITS (Continued)
The following table sets forth the funded status for the postretirement
health care and life insurance plans as of October 1, 1993, reconciled with the
amounts contained in the Company's Balance Sheet at December 31, 1993:
<TABLE>
<CAPTION>
Accumulated postretirement benefit obligation (APBO): (millions)
<S> <C>
Retirees $ 4.0
Fully Eligible Active Plan Participants 2.0
Other Active Plan Participants 2.6
----------
Total APBO as of October 1, 1993 8.6
Less: Plan Assets at Market Value 0.1
APBO in Excess of Plan Assets 8.5
Unrecognized Transition Obligation (8.5)
Accrued Postretirement Benefit Cost at October 1, 1993 0.0
Cost, Net of Funding, October to December 31, 1993 0.2
----------
Accrued Postretirement Benefit Cost at December 31, 1993 $ 0.2
----------
----------
Discount rate 7.0%
Rate of compensation increase 5.0%
Expected long-term rate of return on plan assets 7.5%
</TABLE>
For measurement purposes, a health care cost trend rate of 11 percent was
assumed for fiscal 1994, and that rate thereafter will decline to 4.25 percent
in 2003 and subsequent years. The health care cost trend rate assumption has a
significant effect on the amounts reported. Increasing the assumed health care
cost trend rate by one percentage point in each year would increase the APBO as
of October 1, 1993, by $0.6 million and the aggregate of service and interest
cost components of the net periodic postretirement benefit cost by $0.1 million
annually.
Due to expected regulatory treatment, the adoption of SFAS No. 106 will not
have a material effect on financial position or results of operations.
- 17 -
<PAGE>
NORTH SHORE GAS COMPANY
PART I. FINANCIAL INFORMATION (Continued)
DECEMBER 31, 1993
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
9. RETIREMENT AND OTHER POSTEMPLOYMENT BENEFITS (Continued)
In November 1992, the FASB issued SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." This statement requires the accrual of certain
benefits provided to former or inactive employees after employment but before
retirement. Adoption of SFAS No. 112 is required by the Company no later than
fiscal 1995. The Company does not expect the adoption of SFAS No. 112 to have a
material effect on financial position or results of operations.
10. GAIN ON DISPOSITION OF PROPERTY
In June 1992, the Company completed the sale of certain property at its
former Deerfield sub-shop. The sale resulted in a $3.8 million gain, net of
selling expenses and income taxes.
- 18 -
<PAGE>
NORTH SHORE GAS COMPANY
PART I. FINANCIAL INFORMATION (Continued)
DECEMBER 31, 1993
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
NET INCOME
Net income applicable to common stock increased $1.3 million, to $5.0
million, for the current three-month period and decreased $2.4 million, to $10.3
million, for the current 12-month period. Both current periods include the
recording, in income, of one-half of an IRS settlement (increasing net income by
about $1 million). A similar amount from the settlement will be recorded in
income during fiscal 1995. (See Note 6 of the Notes to Consolidated Financial
Statements.) Also, the prior 12-month period included the $3.8 million net gain
on the sale of certain property. (See Note 10 of the Notes to Consolidated
Financial Statements.)
A summary of variations affecting income between periods is presented
below, with explanations of significant differences following:
<TABLE>
<CAPTION>
Three Months Ended 12 Months Ended
December 31, December 31,
1993 Over 1992 1993 Over 1992
----------------- ---------------
(Thousands of dollars) Amount % Amount %
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net operating revenues* $ (565) (3.4) $ 1,199 2.2
Operation and maintenance expenses (1,089) (15.5) (12) --
Depreciation expense 84 5.7 486 8.4
Income taxes 215 10.0 80 1.6
Other income 973 421.2 (2,313) (54.0)
Income deductions (106) (5.7) 746 11.7
Net Income Applicable to Common Stock 1,332 36.5 (2,393) (18.8)
- ------------------------------------------------------------------------------------------------------
<FN>
( ) Denotes red figure.
* Operating revenues, net of gas costs and revenue taxes.
</TABLE>
- 19 -
<PAGE>
NORTH SHORE GAS COMPANY
PART I. FINANCIAL INFORMATION (Continued)
DECEMBER 31, 1993
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (Continued)
RESULTS OF OPERATIONS (Continued)
NET OPERATING REVENUES
Gross revenues of the Company have been affected in recent years by some
customers who purchase gas directly from producers and marketers, rather than
from the Company, and also by changes in the unit cost of the Company's gas
purchases. These direct customer purchases have no effect on net income because
the Company provides transportation service for such gas volumes and recovers
margins similar to those applicable to conventional gas sales. Changes in the
unit cost of gas do not significantly affect net income because the Company's
tariffs provide for dollar-for-dollar recovery of gas costs. (See Note 2(d) of
the Notes to Consolidated Financial Statements.) The Company's tariffs also
provide for dollar-for-dollar recovery of the cost of revenue taxes imposed by
the State and various municipalities.
Since income is not significantly affected by changes in revenue from
customers' direct gas purchases rather than from the Company, changes in gas
costs, or changes in revenue taxes, the discussion below pertains to "net
operating revenues" (operating revenues, net of gas costs and revenue taxes).
The Company considers net operating revenues to be a more pertinent measure of
operating results than gross revenues.
Net operating revenues decreased $565,000, to $15.9 million, for the
three-month period, due mainly to a reduction of environmental clean-up costs
recovered through rates.
Net operating revenues increased $1.2 million, to $55.2 million, for the
12-month period due chiefly to the impact of weather that was five percent
colder than the year-ago period, offset in part, by a decline in other gas
deliveries and lower environmental clean-up costs recovered in rates.
OPERATION AND MAINTENANCE
Operation and maintenance expenses decreased $1.1 million, to $5.9 million,
for the current three-month period, due primarily to lower environmental
clean-up costs and reduced injuries and damages expenses.
- 20 -
<PAGE>
NORTH SHORE GAS COMPANY
PART I. FINANCIAL INFORMATION (Continued)
DECEMBER 31, 1993
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (Continued)
RESULTS OF OPERATIONS (Continued)
DEPRECIATION EXPENSE
Depreciation expense increased $84,000, to $1.6 million, and $486,000, to
$6.3 million, for the current three- and 12-month periods, respectively, due
chiefly to higher depreciable property balances.
INCOME TAXES
Income taxes (exclusive of the $324,000 included in other income related to
the IRS settlement) increased $215,000, to $2.4 million, and $80,000, to $5.0
million, in the current three- and 12-month periods, respectively, due
principally to higher pre-tax income.
OTHER INCOME
Other income increased $973,000, to $1.2 million, in the three-month period
and decreased $2.3 million, to $2.0 million, in the 12-month period. Both
current periods include recording the IRS settlement of about $1 million after
income taxes. (See Note 6 of the Notes to Consolidated Financial Statements.)
In addition, the prior 12-month period included the net gain on the sale of
certain property at Deerfield. (See Note 10 of the Notes to Consolidated
Financial Statements.)
INCOME DEDUCTIONS
Income deductions decreased $106,000, to $1.8 million, for the current
three-month period, due mainly to reduced interest on interim loans.
Income deductions increased $746,000, to $7.1 million, for the current
12-month period, due primarily to increased interest on long-term debt,
partially offset by lower interest on interim loans, amounts refundable to
customers, and budget accounts.
OTHER MATTERS
Weather variations affect the volumes of gas delivered for heating purposes
and, therefore, can have a significant positive or negative impact on net
income.
- 21 -
<PAGE>
NORTH SHORE GAS COMPANY
PART I. FINANCIAL INFORMATION (Continued)
DECEMBER 31, 1993
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (Continued)
RESULTS OF OPERATIONS (Continued)
OTHER MATTERS (CONTINUED)
On September 30, 1993, the Company received notification from the IRS that
settlement of past income tax returns had been reached for fiscal years 1978
through 1990. The IRS settlement will result in a payment of principal and
interest to the Company in total amount of approximately $3 million, or $2
million after income taxes. (See Note 6 of the Notes to Consolidated Financial
Statements.)
In March 1993, the Company adopted, effective October 1, 1992, the
liability method of accounting for deferred income taxes required by SFAS No.
109. (See Note 2(c) of the Notes to Consolidated Financial Statements.)
In November 1992, the FASB issued SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." This statement requires the accrual of certain
benefits provided to former or inactive employees after employment but before
retirement. SFAS No. 112 requires adoption by the Company no later than fiscal
1995. (See Note 9 of the Notes to Consolidated Financial Statements.)
Effective October 1, 1993, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." This statement
requires the accrual of the expected costs of such benefits during the
employees' years of service. (See Note 9 of the Notes to Consolidated Financial
Statements.)
In 1992, the FERC issued Order No. 636 and successor orders that require
substantial restructuring of the service obligations of interstate pipelines.
(See Notes 2(d), 4(a), and 4(b) of the Notes to Consolidated Financial
Statements.)
On September 15, 1993, the Commission entered an order initiating an
investigation into the appropriate means of recovery by Illinois gas utilities
of pipeline charges for FERC Order No. 636 transition costs. The Commission
plans to issue a final order in this proceeding by February 15, 1994. (See
Notes 2(d), 4(a), and 4(b) of the Notes to Consolidated Financial Statements.)
- 22 -
<PAGE>
NORTH SHORE GAS COMPANY
PART I. FINANCIAL INFORMATION (Continued)
DECEMBER 31, 1993
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (Continued)
LIQUIDITY AND CAPITAL RESOURCES
INDENTURE RESTRICTIONS. The Company's indenture relating to its first mortgage
bonds contains provisions and covenants restricting the payment of cash
dividends and the purchase or redemption of capital stock. At December 31,
1993, such restrictions amounted to $11.6 million out of total retained earnings
of $58.9 million. (See Note 3 of the Notes to Consolidated Financial
Statements.)
INTEREST COVERAGE. The Company's fixed charges coverage ratios for the 12
months ended December 31, 1993, and for fiscal 1993 and 1992 were 3.20, 2.91,
and 4.20, respectively. The current 12-month period ratio reflects the
recording of the Company's fiscal 1994 portion of the IRS settlement in income.
(See Note 6 of the Notes to Consolidated Financial Statements.) The fiscal 1992
ratio includes the net gain on the sale of property at Deerfield. (See Note 10
of the Notes to Consolidated Financial Statements.)
ENVIRONMENTAL MATTERS. The Company is conducting environmental investigations
and work at certain sites that were the location of former manufactured gas
operations. (See Note 5 of the Notes to Consolidated Financial Statements.)
In February 1994, the Company received a demand from a responsible party
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, for reimbursement, indemnification and contribution for
response costs incurred at a site in Denver, Colorado. The demand alleges that
the Company is a successor-in-interest to certain companies that were allegedly
responsible during the period 1934-1941 for the disposal of mineral processing
wastes containing radium and other hazardous substances at the site. The demand
further alleges that the United States Environmental Protection Agency has
estimated the cost of the remedy at the site to be approximately $26.6 million.
Because the Company has just received this claim and has not yet had the
opportunity to review the merits of the contentions raised in the claim, it is
currently unable to determine what liability, if any, it may have for costs
relating to the site.
REGULATORY ACTIONS. On September 30, 1992, the Commission issued an order in
its consolidated proceedings, initiated in March 1991, regarding the appropriate
ratemaking treatment of environmental costs incurred by Illinois utilities,
including the Company. In its order, the Commission approved rate recovery of
environmental costs but required that such recovery occur over a five-year
period without recovery of carrying charges on unrecovered balances. The
Commission also required that the Company amend the environmental cost-recovery
provisions of its tariff to conform with the order. (See Note 4(a) of the Notes
to Consolidated Financial Statements.)
BONDS ISSUED. On March 30, 1993, the Company filed a shelf registration with
the SEC for the issuance of $40 million aggregate principal amount of first
mortgage bonds. On May 13, 1993, the Company issued a portion of those first
mortgage bonds in an aggregate principal amount of $15 million due May 1, 2003.
(See Note 7 of the Notes to Consolidated Financial Statements.)
- 23 -
<PAGE>
NORTH SHORE GAS COMPANY
PART I. FINANCIAL INFORMATION (Continued)
DECEMBER 31, 1993
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (Continued)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
CREDIT LINES. On February 1, 1994, Peoples Gas' lines of credit were reduced
to approximately $154 million from $184 million in effect since November 1,
1993. The Company may borrow up to $20 million of the aggregate $154 million.
- 24 -
<PAGE>
NORTH SHORE GAS COMPANY
PART II. OTHER INFORMATION
DECEMBER 31, 1993
Item 1. LEGAL PROCEEDINGS
See Note 5 of the Notes to Consolidated Financial Statements for a
discussion of matters pertaining to environmental investigations of certain
Company sites that were formerly the locations of manufactured gas production
and storage operations.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit
Number Description of Document
------- -----------------------
10(a) Firm Transportation Service Agreement Under
Rate Schedule S-2 between the Company and
Natural Gas Pipeline Company of America,
dated as of December 1, 1993.
10(b) Firm Transportation Service Agreement Under
Rate Schedule FTS between the Company and
Natural Gas Pipeline Company of America,
dated as of December 1, 1993.
b. Reports on Form 8-K filed during the quarter ended December 31,
1993
None
- 25 -
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
North Shore Gas Company
--------------------------------
(Registrant)
February 11, 1994 By: K. S. Balaskovits
--------------------- --------------------------------
(Date) K. S. Balaskovits
Vice President and Controller
(Same as Above)
--------------------------------
Principal Accounting Officer
- 26 -
<PAGE>
EXHIBIT 10(A)
Contract No. 105573
NATURAL GAS PIPELINE COMPANY OF AMERICA (Natural)
TRANSPORTATION RATE SCHEDULE S-2
AGREEMENT DATED December 01, 1993
UNDER SUBPART G of Part 284 OF THE FERC'S REGULATIONS
1. SHIPPER is: NORTH SHORE GAS COMPANY, a local distribution company
2. MDQ totals: 60,000 MMBtu per day.
3. TERM: December 01, 1993 through November 30, 1995
4. Service will be ON BEHALF OF:
[X] Shipper or
[ ] Other: , a
5. The ULTIMATE END USERS are (check one):
[ ] customers of the following LDC/pipeline company(ies):
___________________________________ ;
[ ] customers in these states:
_________________________________________________________ ; or
[X] customers within any state in the continental U.S.
6. [ ] This Agreement supersedes and cancels a _____________________
Agreement dated __________
[ ] Capacity rights for this Agreement were released from
[X] [for firm service only] Service and reservation charges commence the
latter of:
(a) December 01, 1993, and
(b) the date capacity to provide the service hereunder is
available on Natural's System.
[X] Other: SHIPPER IS CONVERTING A PORTION OF THE SERVICE AGREEMENT DATED
APRIL 10, 1992, WITH NATURAL FROM SALES SERVICE TO TRANSPORTATION
UNDER THIS AGREEMENT .
7. SHIPPER'S ADDRESSES Natural'S ADDRESSES
GENERAL CORRESPONDENCE:
NORTH SHORE GAS CO. NATURAL GAS PIPELINE COMPANY OF AMERICA
ATTN: Eckhard Blaumueller Attention: Gas Transportation Services
122 S. Michigan Avenue 3200 Southwest Freeway 77027-7523
Room 915 P. 0. Box 283 77001-0283
Chicago, Illinois 60603 Houston, Texas
STATEMENTS/INVOICES/ACCOUNTING RELATED MATERIALS:
NORTH SHORE GAS CO. NATURAL GAS PIPELINE COMPANY OF AMERICA
ATTN: Eckhard Blaumueller Attention: Gas Accounting Department
122 S. Michigan Ave. 701 East 22nd Street
Chicago, Illinois 60603 Lombard, Illinois 60148
PAYMENTS:
NATURAL GAS PIPELINE COMPANY OF AMERICA
Attention: Controller
701 East 22nd Street
Lombard, Illinois 60148
8. The above stated Rate Schedule, as revised from time to time, controls this
Agreement and is incorporated herein. The attached Exhibits A, B, and C
(for firm service only) are a part of this Agreement. THIS AGREEMENT SHALL
BE CONSTRUED AND GOVERNED BY THE LAWS OF ILLINOIS, AND NO STATE LAW SHALL
APPLY TO REACH A DIFFERENT RESULT. This Agreement states the entire
agreement between the parties and no waiver, representation, or agreement
shall affect this Agreement unless it is in wrIting. Shipper shall provide
the actual end user purchaser name(s) to Natural if Natural must provide
them to FERC.
AGREED TO BY:
NORTH SHORE GAS NATURAL GAS PIPELINE COMPANY OF AMERICA
BY: /s/ Thomas M. Patrick BY:
----------------------------- --------------------------------
NAME: Thomas M. Patrick NAME:
----------------------------- --------------------------------
TITLE: Vice President TITLE:
----------------------------- --------------------------------
<PAGE>
Exhibit A
Dated DECEMBER 01, 1993
COMPANY : NORTH SHORE GAS CO.
CONTRACT: 105573
<TABLE>
<CAPTION>
County/Parish PIN MDQ
Name / Location Area State No. Zone (MMBtu)
--------------- ------------- ----- --- ---- -------
<S> <C> <C> <C> <C> <C>
PRIMARY RECEIPT POINT/S
- -----------------------
1. AMOCO/NGPL EAST MAXINE LIVE OAK LIVE OAK TX 444 04 250
-------------------------------
INTERCONNECT WITH AMOCO ON TRANSPORTER'S
EAST MAXINE LATERAL IN DR. C. F. SIMMONS
NUECES RIVER VALLEY FARM SUBDIVISION
BLOCK 77, SURVEY NO. 18.
2. ASSOCNAT/NGPL RUSH SPRINGS GRADY GRADY OK 3071 02 282
--------------------------------
INTERCONNECT WTH SHIPPER'S DESIGNEE,
ASSOCIATED NATURAL GAS, INC. IN SEC.
7-T4N-R7W, GRADY COUNTY, OKLAHOMA.
3. BOWEN #1 GRADY GRADY OK 1468 02 697
--------------
INTERCONNECT WITH SHIPPER OR ITS
PRODUCER(S)/SUPPLIER(S) AT OR NEAR THE
BOWEN #1 WELL ON TRANSPORTER'S CHITWOOD
GATHERING SYSTEM IN SEC. 5-T5N-R6W,
GRADY COUNTY, OKLAHOMA.
4. BRIDGEPORT PLT OUTLET MEC/NGPL WISE WISE TX 1850 02 6,683
-----------------------------------
AT THE TAILGATE OF THE MITCHELL ENERGY
BRIDGEPORT PLANT IN THE P. NICHOLAS,
A-654, WISE COUNTY, TEXAS.
5. ENRON/NGPL REFUGIO REFUGIO TX 6490 04 829
------------------
INTERCONNECT WITH ENRON CORP. LOCATED IN
THE JAMES POWER & JAMES HEWITSON SURVEY,
A-53, REFUGIO COUNTY, TEXAS.
</TABLE>
A-1
<PAGE>
Exhibit A (CONT'D)
Dated DECEMBER 01, 1993
COMPANY : NORTH SHORE GAS CO.
CONTRACT: 105573
<TABLE>
<CAPTION>
County/Parish PIN MDQ
Name / Location Area State No. Zone (MMBtu)
--------------- ------------- ----- --- ---- -------
<S> <C> <C> <C> <C> <C>
PRIMARY RECEIPT POINT/S
- -----------------------
6. ENSERCH/NGPL ROUSE MASTER WASHITA WASHITA OK 1448 02 73
---------------------------------
INTERCONNECT WITH ENSERCH EXPLORATION AT
OR NEAR THE ROUSE MASTER METER ON
TRANSPORTER'S SOUTH WEST BURNS FLAT
GATHERING SYSTEM IN SEC. 23-T10N-R19E,
WASHITA COUNTY, OKLAHOMA
7. HADSON/NGPL EDDY EDDY NM 3681 05 1,397
----------------
INTERCONNECT WITH HADSON GAS SYSTEM
INC. ON TRANSPORTER'S BIG EDDY GATHERING
SYSTEM IN SEC. 31-T22S-R27E, EDDY
COUNTY, NEW MEXICO. UPSTREAM OF
TRANSPORTER'S B.S. #23.
8. HOOKER PLT OUTLT P&P GAS/NGPL TEXAS TEXAS OK 1295 02 109
-----------------------------------
INTERCONNECT AT THE OUTLET OF THE PARKER
AND PARSLEY GAS PROCESSING HOOKER
PURIFICATION PLANT ON TRANSPORTER'S
HOOKER GATHERING SYSTEM IN SEC.
8-T4N-R17E, TEXAS COUNTY, OKLAHOMA.
9. INDIAN BASIN PLT MARATHON/NGPL EDDY EDDY NM 1753 05 5,000
-----------------------------------
OUTLET OF MARATHON'S INDIAN BASIN PLANT
IN SEC. 23-T21S-R23E, EDDY COUNTY, NEW
MEXICO.
10. KAISER/NGPL T.C.H.#1 LEA LEA NM 3509 05 127
------------------------
INTERCONNECT WITH SHIPPER OR ITS
PRODUCER(S)/SUPPLIER(S) AT OR NEAR THE
KAISER-FRANCIS OIL COMPANY'S T.C.H.#1
WELL ON TRANSPORTER'S PERMIAN BASIN
MAINLINE IN SEC. 1-T16S-R33E, LEA
COUNTY, NEW MEXICO.
</TABLE>
A-2
<PAGE>
Exhibit A (CONT'D)
Dated DECEMBER 01, 1993
COMPANY : NORTH SHORE GAS CO.
CONTRACT: 105573
<TABLE>
<CAPTION>
County/Parish PIN MDQ
Name / Location Area State No. Zone (MMBtu)
--------------- ------------- ----- --- ---- -------
<S> <C> <C> <C> <C> <C>
PRIMARY RECEIPT POINT/S
- -----------------------
11. KN ENERG/NGPL INTER #1 HEMPHILL HEMPHILL TX 969 02 1,603
------------------------------
INTERCONNECT WITH KN ENERGY, INC. ON
TRANSPORTER'S BUFFALO WALLOW GATHERING
SYSTEM IN SEC. 22, BLOCK M-1, H.&
G.N.R.R. SURVEY, HEMPHILL COUNTY, TEXAS.
UPSTREAM OF TRANSPORTER'S P.P.#163
12. LA GLORIA MOBIL/NGPL JIM WELLS JIM WELLS TX 439 04 1,272
------------------------------
AT OR NEAR THE TAILGATE OF MOBIL'S LA
GLORIA GAS PLANT ON TRANSPORTER'S LA
GLORIA-MOBIL LATERAL IN LOT #1, SUBD. OF
LANDS ADJ. TO TOWN OF LA GLORIA, JIM
WELLS COUNTY, TEXAS.
13. LLANO/NGPL INTER #2 LEA LEA NM 7591 05 3,603
-----------------------
INTERCONNECT WITH LLANO, INC. ON
TRANSPORTER'S PERMIAN BASIN LINE IN SEC.
9-T22S-R34E, LEA COUNTY, NEW MEXICO.
14. MCCARICK/NGPL CLAYTON LIVE OAK LIVE OAK TX 425 04 1,692
------------------------------
INTERCONNECT WITH MCCARICK OIL COMPANY
LOCATED ON TRANSPORTER'S CLAYTON LATERAL
IN THE DR. C.F. SIMMONS NUECES RIVER
VALLEY FARM SUBDIVISION, BLOCK 77,
SURVEY NO. 18, LIVE OAK COUNTY, TEXAS.
15. MRT/NGPL MILLS RANCH WHEELER WHEELER TX 3033 02 1,187
----------------------------
INTERCONNECT WITH MISSISSIPPI RIVER
TRANSMISSION CORPORATION IN SEC. 2,
A.B.&M. SURVEY.
</TABLE>
A-3
<PAGE>
Exhibit A (CONT'D)
Dated DECEMBER 01, 1993
COMPANY : NORTH SHORE GAS CO.
CONTRACT: 105573
<TABLE>
<CAPTION>
County/Parish PIN MDQ
Name / Location Area State No. Zone (MMBtu)
--------------- ------------- ----- --- ---- -------
<S> <C> <C> <C> <C> <C>
PRIMARY RECEIPT POINT/S
- -----------------------
16. MTPC/NGPL HAGIST RANCH DUVAL DUVAL TX 6216 04 2,381
----------------------------
INTERCONNECT WITH MIDCON TEXAS PIPELINE
COMPANY IN OR NEAR THE B.S.&F. SURVEY
267, A-113.
17. MTPC/NGPL SOUTH TEXAS P/L NUECES NUECES TX 6213 04 4,581
--------------------------------
INTERCONNECT WITH MIDCON TEXAS PIPELINE
COMPANY IN THE ANDRES F. DE LA FUENTE
SURVEY, A-111, NUECES COUNTY, TEXAS.
18. MYERS #1-27 GRADY GRADY OK 2940 02 84
-----------------
INTERCONNECT WITH SHIPPER OR ITS
PRODUCER(S)/SUPPLIER(S) IN SEC.
27-T4N-R7W, GRADY COUNTY, OKLAHOMA.
19. N BORDER/NGPL KEOKUK KEOKUK IA 8090 01 5,036
--------------------
INTERCONNECT WITH NORTHERN BORDER
PIPELINE COMPANY ON TRANSPORTER'S
AMARILLO LINE IN SEC. 30-T76N-R10W,
KEOKUK COUNTY, IOWA.
20. NGPL/NGPL C.S. 112 INLET MOORE MOORE TX 3355 02 755
------------------------------
TRANSFER POINT FOR TRANSPORTATION
SERVICE AGREEMENTS ON TRANSPORTER'S
AMARILLO MAINLINE IN SEC. 1 OF THE T.T.
R.R. SURVEY, MOORE COUNTY, TEXAS.
21. NGPL/TPC GAGE GAGE NE 2900 01 731
-------------
INTERCONNECT WITH TRAILBLAZER PIPELINE
IN SEC. 15-T4N-R6E, GAGE COUNTY,
NEBRASKA.
</TABLE>
A-4
<PAGE>
Exhibit A (CONT'D)
Dated DECEMBER 01, 1993
COMPANY : NORTH SHORE GAS CO.
CONTRACT: 105573
<TABLE>
<CAPTION>
County/Parish PIN MDQ
Name / Location Area State No. Zone (MMBtu)
--------------- ------------- ----- --- ---- -------
<S> <C> <C> <C> <C> <C>
PRIMARY RECEIPT POINT/S
- -----------------------
22. NNG/NGPL MILLS MILLS IA 203 01 3,198
--------------
INTERCONNECT WITH NORTHERN NATURAL GAS
COMPANY IN SEC. 26-T72N-R43W, MILLS
COUNTY, IOWA
23. OASIS/NGPL WARD WARD TX 5003 05 1,818
---------------
INTERCONNECT WITH OASIS PIPE LINE
COMPANY ON TRANSPORTER'S LOCKRIDGE
GATHERING SYSTEM IN SEC.93, BLOCK 34,
H.&T.C.R.R. SURVEY, WARD COUNTY, TEXAS
24. SABINEPL/NGPL HENRY PLT VERMILION VERMILION LA 3592 03 2,440
---------------------------------
INTERCONNECT WITH SABINE PIPELINE
COMPANY'S GAS PLANT ON TRANSPORTER'S
LOUISIANA MAINLINE IN SEC. 21-T13S-R4E,
VERMILION PARISH, LOUISIANA.
25. SAL DEL REY-MC CORMACK HIDALGO HIDALGO TX 453 04 941
------------------------------
INTERCONNECT WITH SHIPPER OR ITS
PRODUCER(S)/SUPPLIER(S) ON TRANSPORTER'S
SAL DEL REY LATERAL IN THE SAN SALVADOR
DEL TULE GRANT, JUAN JOSE BALLI SURVEY,
A-29O, HIDALGO COUNTY, TEXAS.
26. SNEED B-12 MOORE MOORE TX 1614 05 3,607
----------------
INTERCONNECT WITH SHIPPER OR ITS
PRODUCER(S)/SUPPLIER(S) AT OR NEAR THE
SNEED #B-12 WELL ON TRANSPORTER'S
PANHANDLE GATHERING SYSTEM IN SEC. 5 OF
THE J.S. JOHNSON SURVEY, MOORE COUNTY,
TEXAS, UPSTREAM OF TRANSPORTER'S B.S.
#2, C.S. #112 AND C.P. #170.
</TABLE>
A-5
<PAGE>
Exhibit A (CONT'D)
Dated DECEMBER 01, 1993
COMPANY : NORTH SHORE GAS CO.
CONTRACT: 105573
<TABLE>
<CAPTION>
County/Parish PIN MDQ
Name / Location Area State No. Zone (MMBtu)
--------------- ------------- ----- --- ---- -------
<S> <C> <C> <C> <C> <C>
PRIMARY RECEIPT POINT/S
- -----------------------
27. STINGRAY/NGPL CAMERON CAMERON LA 5433 03 2,510
---------------------
INTERCONNECT WITH STINGRAY PIPELINE IN
SEC. 27-T14S-R13W, CAMERON PARISH,
LOUISIANA.
28. TEX SW/NGPL WASHITA WASHITA OK 3695 02 457
-------------------
INTERCONNECT WITH TEXAS SOUTHWESTERN
GAS CORPORATION ON TRANSPORTER'S OKLAHOMA
EXTENSION MAINLINE IN OR NEAR SEC.
1-TBN-R19W, WASHITA COUNTY, OKLAHOMA.
29. TRANSCO/NGPL WHARTON WHARTON TX 967 04 4,899
--------------------
INTERCONNECT WITH TRANSCONTINENTAL GAS
PIPELINE COMPANY IN H.&T.C.R.R. SURVEY,
A-186.
30. TUBB #1-1 WINKLER WINKLER TX 1620 05 762
-----------------
INTERCONNECT WITH SHIPPER OR ITS
PRODUCER(S)/SUPPLIER(S) AT OR NEAR THE
ATLANTIC TUBB #1-1 WELL ON TRANSPORTER'S
CRITTENDON GATHERING SYSTEM IN SEC. 1
BLOCK C24, WINKLER COUNTY, TEXAS.
31. WILLAMAR PLT AMOCO/NGPL WILLACY WILLACY TX 457 04 218
-------------------------------
OUTLET OF AMOCO'S WILLAMAR PLANT VIA
TRANSPORTER'S WILLAMAR LATERAL IN THE
SAN JUAN DE CARRICITOS GRANT, WILLACY
COUNTY, TEXAS.
</TABLE>
A-6
<PAGE>
Exhibit A (CONT'D)
Dated DECEMBER 01, 1993
COMPANY : NORTH SHORE GAS CO.
CONTRACT: 105573
<TABLE>
<CAPTION>
County/Parish PIN MDQ
Name / Location Area State No. Zone (MMBtu)
--------------- ------------- ----- --- ---- -------
<S> <C> <C> <C> <C> <C>
PRIMARY RECEIPT POINT/S
- -----------------------
31. YOUNG TRUST #1-4 HEMPHILL HEMPHILL TX 989 02 778
-------------------------
INTERCONNECT WITH THE FACILITIES OF
SHIPPER'S DESIGNEE ON TRANSPORTER'S
WASHITA CREEK LATERAL IN SEC. 4, H.&
G.N.R.R. SURVEY, BLOCK M-1. UPSTREAM OF
TRANSPORTER'S P.P. #163.
</TABLE>
SECONDARY RECEIPT POINT/S
- -------------------------
All secondary receipt points, and the related priorities and volumes, as
provided under the Tariff provisions governing this agreement.
Rates
-----
Except as provided to the contrary in any written agreement(s) between the
parties in effect during the term hereof, Shipper shall pay Natural the maximum
rate and all other lawful charges as specified in Natural's firm service rate
schedules.
Fuel Gas and Gas Lost and Unaccounted For Percentage (%)
--------------------------------------------------------
Shipper will be assessed the applicable percentage for Fuel Gas and Gas
Lost and Unaccounted for.
Transportation of Liquids
-------------------------
Transportation of liquids may occur at permitted points identified in
Natural's current Catalog of Receipt and Delivery Points, but only if the
parties execute a separate liquids agreement.
A-7
<PAGE>
Exhibit B
Dated DECEMBER 01, 1993
COMPANY : NORTH SHORE GAS CO.
CONTRACT: 105573
<TABLE>
<CAPTION>
County/Parish PIN MDQ
Name / Location Area State No. Zone (MMBtu)
--------------- ------------- ----- --- ---- -------
<S> <C> <C> <C> <C> <C>
PRIMARY DELIVERY POINT/S
- ------------------------
1. NO SHORE/NGPL GRAYSLAKE LAKE LAKE IL 1 01 60,000
----------------------------
INTERCONNECT WITH NORTH SHORE GAS
COMPANY LOCATED IN SEC. 12-T44N-R10E,
LAKE COUNTY, ILLINOIS.
LAKE, IL.
</TABLE>
SECONDARY DELIVERY POINT/S
- --------------------------
All secondary delivery points, and the related priorities and volumes, as
provided under the Tariff provisions governing this agreement.
B-1
<PAGE>
EXHIBIT C DATED DECEMBER 01, 1993
PRIMARY TRANSPORTATION PATH SEGMENT MDQs
COMPANY : NORTH SHORE GAS CO.
CONTRACT: 105573
Pursuant to Natural's tariff, an MDQ exists for each primary transportation
path segment and direction under the Agreement. Such MDQ is the maximum daily
quantity of gas which Natural is obligated to transport on a firm basis along a
primary transportation path segment.
A primary transportation path segment is the path between a primary
receipt, delivery or node point and the next primary receipt, delivery or node
point. A node point is the point of interconnection between two or more of
Natural's pipeline facilities.
A map of Natural's pipeline system showing these primary transportation
path segment MDQ's, and the direction to which each applies, is attached.
C-1
<PAGE>
NATURAL GAS PIPELINE CO. OF AMERICA
FTS PATH MAP - EXHIBIT C DATED DECEMBER 12-01-93
--------
SHIPPER : NORTH SHORE GAS CO.
CONTRACT NO.: 105573
MDQ : 60,000 MMBTU/D
Exhibit C depicts the relevant portion, including compressor stations, of
Natural Gas Pipeline Company of America's transmission system, the primary
receipt and delivery points under the transportation agreement, the volumes
associated with each point, and the transportation path defined by the primary
receipt and delivery points. Exhibit C also specifies the Maximum Daily Quantity
under the transportation agreement.
C-2
<PAGE>
Contract No. 105580
NATURAL GAS PIPELINE COMPANY OF AMERICA (Natural)
TRANSPORTATION RATE SCHEDULE FTS
AGREEMENT DATED December 01, 1993
UNDER SUBPART G of Part 284 OF THE FERC'S REGULATIONS
1. SHIPPER is: NORTH SHORE GAS COMPANY, a local dIstribution company
2. MDQ totals: 75,180 MMBtu per day.
3. TERM: December 01, 1993 through November 30, 1995
4. ServIce will be ON BEHALF OF:
[X] Shipper or
[ ] Other: , a
5. The ULTIMATE END USERS are (check one):
[ ] customers of the following LDC/pipeline company(ies):
___________________________________ ;
[ ] customers in these states:
_________________________________________________________ ; or
[X] customers within any state In the continental U.S.
6. [ ] This Agreement supersedes and cancels a _____________________
Agreement dated __________
[ ] Capacity rights for this Agreement were released from
[X] [for firm service only] Service and reservation charges commence the
latter of:
(a) December 01, 1993, and
(b) the date capacity to provide the service hereunder is
available on Natural's System.
[X] Other: SHIPPER IS CONVERTING A PORTION OF THE SERVICE AGREEMENT DATED
APRIL 10, 1992, WITH NATURAL FROM SALES SERVICE TO TRANSPORTATION
UNDER THIS AGREEMENT.
7. SHIPPER'S ADDRESSES Natural'S ADDRESSES
GENERAL CORRESPONDENCE:
NORTH SHORE GAS CO. NATURAL GAS PIPELINE COMPANY OF AMERICA
ATTN: Eckhard Blaumueller Attention: Gas Transportation Services
122 S. Michigan Avenue 3200 Southwest Freeway 77027-7523
Room 915 P. 0. Box 283 77001-0283
Chicago, Illinois 60603 Houston, Texas
STATEMENTS/INVOICES/ACCOUNTING RELATED MATERIALS:
NORTH SHORE GAS CO. NATURAL GAS PIPELINE COMPANY OF AMERICA
ATTN: Eckhard Blaumueller Attention: Gas Accounting Department
122 S. Michigan Ave. 701 East 22nd Street
Chicago, Illinois 60603 Lombard, Illinois 60148
PAYMENTS:
NATURAL GAS PIPELINE COMPANY OF AMERICA
Attention: Controller
701 East 22nd Street
Lombard, Illinois 60148
8. The above stated Rate Schedule, as revised from time to time, controls this
Agreement and is incorporated herein. The attached Exhibits A, B, and C
(for firm service only) are a part of this Agreement. THIS AGREEMENT SHALL
BE CONSTRUED AND GOVERNED BY THE LAWS OF ILLINOIS, AND NO STATE LAW SHALL
APPLY TO REACH A DIFFERENT RESULT. This Agreement states the entire
agreement between the parties and no waiver, representation, or agreement
shall affect this Agreement unless it is in wrIting. Shipper shall provide
the actual end user purchaser name(s) to Natural if Natural must provide
them to FERC.
AGREED TO BY:
NORTH SHORE GAS COMPANY NATURAL GAS PIPELINE COMPANY OF AMERICA
BY: /s/ Thomas M. Patrick BY:
-------------------------- --------------------------------
NAME: Thomas M. Patrick NAME:
-------------------------- --------------------------------
TITLE: Vice President TITLE:
-------------------------- --------------------------------
<PAGE>
Exhibit A
Dated DECEMBER 01, 1993
COMPANY : NORTH SHORE GAS CO.
CONTRACT : 105580
<TABLE>
<CAPTION>
County/Parish PIN MDQ
Name / Location Area State No. Zone (MMBtu)
--------------- ------------- ----- --- ---- -------
<S> <C> <C> <C> <C> <C>
PRIMARY RECEIPT POINT/S
- -----------------------
1. ARKLA/NGPL HOT SPRING HOT SPRING AR 3853 01 5,180
---------------------
INTERCONNECT WITH ARKLA ENERGY RESOURCES
ON TRANSPORTER'S GULF COAST MAINLINE IN
SEC. 22-T5S-R17W, HOT SPRING COUNTY,
ARKANSAS.
2. BRIDGEPORT PLT OUTLET MEC/NGPL WISE WISE TX 1850 02 5,000
-----------------------------------
AT THE TAILGATE OF THE MITCHELL ENERGY
BRIDGEPORT PLANT IN THE P. NICHOLAS,
A-654, WISE COUNTY, TEXAS.
3. ENRON/NGPL REFUGIO REFUGIO TX 6490 04 3,987
------------------
INTERCONNECT WITH ENRON CORP. LOCATED IN
THE JAMES POWER & JAMES HEWITSON SURVEY,
A-53, REFUGIO COUNTY, TEXAS.
4. LA GLORIA MOBIL/NGPL JIM WELLS JIM WELLS TX 439 04 8,164
------------------------------
AT OR NEAR THE TAILGATE OF MOBIL'S LA
GLORIA GAS PLANT ON TRANSPORTER'S LA
GLORIA-MOBIL LATERAL IN LOT #1, SUBD. OF
LANDS ADJ. TO TOWN OF LA GLORIA, JIM WELLS
COUNTY, TEXAS.
5. N BORDER/NGPL KEOKUK KEOKUK IA 8090 01 5,108
---------------------
INTERCONNECT WITH NORTHERN BORDER
PIPELINE COMPANY ON TRANSPORTER'S
AMARILLO LINE IN SEC. 30-T76N-R10W,
KEOKUK COUNTY, IOWA.
6. NNG/NGPL MILLS MILLS IA 203 01 5,000
----------------
INTERCONNECT WITH NORTHERN NATURAL GAS
COMPANY IN SEC. 26-T72N-R43W, MILLS
COUNTY, IOWA.
</TABLE>
A-1
<PAGE>
Exhibit A (CONT'D)
Dated DECEMBER 01, 1993
COMPANY : NORTH SHORE GAS CO.
CONTRACT : 105580
<TABLE>
<CAPTION>
County/Parish PIN MDQ
Name / Location Area State No. Zone (MMBtu)
--------------- ------------- ----- --- ---- -------
<S> <C> <C> <C> <C> <C>
PRIMARY RECEIPT POINT/S
- -----------------------
7. SABINE PL/NGPL HENRY PLT VERMILION VERMILION LA 3592 03 20,000
----------------------------------
INTERCONNECT WITH SABINE PIPELINE
COMPANY'S GAS PLANT ON TRANSPORTER'S
LOUISIANA MAINLINE IN SEC. 21-T13S-R4E,
VERMILION PARISH, LOUISIANA.
8. TRANSOK/NGPL INTER #2 BECKHAM BECKHAM OK 5556 02 9,892
-----------------------------
INTERCONNECT WITH TRANSOK ON
TRANSPORTER'S OKLAHOMA EXTENSION
MAINLINE AT OR NEAR SEC. 26-T10N-R23W,
BECKHAM COUNTY, OKLAHOMA.
9. VALTRANS/NGPL JIM HOGG JIM HOGG TX 24001 04 2,849
------------------------
INTERCONNECT WITH VALERO TRANSMISSION
CO. ON TRANSPORTER'S NORTHEAST
THOMPSONVILLE LATERAL IN THE NW QUADRANT
OF "LAS AMINAS" HRS. OF SAN FELIPE DE LA
PENA SURVEY, A-244, JIM HOGG COUNTY, TEXAS.
10. VALTRANS/NGPL INTER #2 TAP PANOLA PANOLA TX 3352 01 10,000
---------------------------------
INTERCONNECT WITH VALERO TRANSMISSION
COMPANY ON TRANSPORTER'S GULF COAST
MAINLINE IN THE J.A. WILLIAMS SURVEY,
A-717, PANOLA COUNTY, TEXAS.
</TABLE>
SECONDARY RECEIPT POINT/S
- -------------------------
All secondary receipt points, and the related priorities and volumes, as
provided under the Tariff provisions governing
this agreement.
A-2
<PAGE>
Exhibit A (CONT'D)
Dated DECEMBER 01, 1993
COMPANY : NORTH SHORE GAS CO.
CONTRACT : 105580
<TABLE>
<CAPTION>
County/Parish PIN MDQ
Name / Location Area State No. Zone (MMBtu)
--------------- ------------- ----- --- ---- -------
<S> <C> <C> <C> <C> <C>
PRIMARY RECEIPT POINT/S
- -----------------------
</TABLE>
Rates
-----
Except as provided to the contrary in any written agreement(s) between
the parties in effect during the term hereof, Shipper shall pay Natural the
maximum rate and all other lawful charges as specified in Natural's firm
service rate schedules.
Fuel Gas and Gas Lost and Unaccounted For Percentage (%)
--------------------------------------------------------
Shipper will be assessed the applicable percentage for Fuel Gas and
Gas Lost and Unaccounted for.
Transportation of Liquids
-------------------------
Transportation of liquids may occur at permitted points identified in
Natural's current Catalog of Receipt and Delivery Points, but only if the
parties execute a separate liquids agreement.
A-3
EXHIBIT B
Dated DECEMBER 01, 1993
COMPANY : NORTH SHORE GAS CO.
CONTRACT : 105580
<TABLE>
<CAPTION>
County/Parish PIN MDQ
Name / Location Area State No. Zone (MMBtu)
--------------- ------------- ----- --- ---- -------
<S> <C> <C> <C> <C> <C>
PRIMARY DELIVERY POINT/S
- -----------------------
1. NO SHORE/NGPL GRAYSLAKE LAKE LAKE IL 1 01 75,180
----------------------------
INTERCONNECT WITH NORTH SHORE GAS
COMPANY LOCATED IN SEC. 12-T44N-R10E,
LAKE COUNTY, ILLINOIS.
LAKE, IL
</TABLE>
SECONDARY DELIVERY POINT/S
- --------------------------
All secondary delivery points, and the related priorities and volumes,
as provided under the Tariff provisions governing this agreement.
B-1
<PAGE>
EXHIBIT C DATED DECEMBER 01, 1993
PRIMARY TRANSPORTATION PATH SEGMENT MDQs
COMPANY : NORTH SHORE GAS CO.
CONTRACT : 105580
Pursuant to Natural's tariff, an MDQ exists for each primary transportation
path segment and direction under the Agreement. Such MDQ is the maximum daily
quantity of gas which Natural is obligated to transport on a firm basis along a
primary transportation path segment.
A primary transportation path segment is the path between a primary
receipt, delivery or node point and the next primary receipt, delivery or node
point. A node point is the point of interconnection between two or more of
Natural's pipeline facilities.
A map of Natural's pipeline system showing these primary transportation
path segment MDQs, and the direction to which each applies, is attached.
C-1
<PAGE>
NATURAL GAS PIPELINE CO. OF AMERICA
FTS PATH MAP - EXHIBIT C DATED 12-01-93
SHIPPER : NORTH SHORE
CONTRACT NO.: 105580
MDQ : 75,180 MMBTU
Exhibit C depicts the relevant portion, including compressor stations, of
Natural Gas Pipeline Company of America's transmission system, the primary
receipt and delivery points under the transportation agreement, the volumes
associated with each point, and the transportation path defined by the primary
receipt and delivery points. Exhibit C also specifies the Maximum Daily
Quantity under the transportation agreement.
C-2
