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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549-1004
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 2-1647
COMMONWEALTH GAS COMPANY
(Exact name of registrant as specified in its charter)
Massachusetts 04-1989250
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
800 Boylston Street, Boston, Massachusetts 02199
(Address of principal executive offices) (Zip Code)
(617) 424-2000
(Registrant's telephone number, including area code)
One Main Street, Cambridge, Massachusetts 02142
(Former name, address and fiscal year, if changed since last report.)
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 such 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.
Outstanding at
Class of Common Stock November 1, 1999
Common Stock, $25 par value 2,857,000 shares
The Company meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q as a wholly-owned subsidiary and is therefore filing this
Form with the reduced disclosure format.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
COMMONWEALTH GAS COMPANY
CONDENSED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
ASSETS
(Dollars in thousands - unaudited)
September 30, December 31,
1999 1998
PROPERTY, PLANT AND EQUIPMENT, at original cost $402,239 $392,612
Less - Accumulated depreciation 128,550 120,811
273,689 271,801
Add - Construction work in progress 4,125 1,066
277,814 272,867
GOODWILL 207,069 -
CURRENT ASSETS
Cash 9 427
Accounts receivable 14,959 39,741
Unbilled revenues 1,581 10,358
Inventories, at average cost 25,781 25,885
Prepaid taxes -
Property 6,014 3,135
Income 14,467 5,034
Other 320 874
63,131 85,454
DEFERRED CHARGES
Regulatory assets 57,998 19,616
Other 4,897 5,307
62,895 24,923
$610,909 $383,244
The accompanying notes are an integral part of these financial statements.
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COMMONWEALTH GAS COMPANY
CONDENSED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
CAPITALIZATION AND LIABILITIES
(Dollars in thousands - unaudited)
September 30, December 31,
1999 1998
CAPITALIZATION
Common Equity -
Common stock, $25 par value -
Authorized and outstanding -
2,857,000 shares $ 71,425 $ 71,425
Amounts paid in excess of par value 234,997 27,739
Retained earnings 7,746 17,998
314,168 117,162
Long-term debt, less current sinking
fund requirements 102,150 102,150
416,318 219,312
CURRENT LIABILITIES
Interim Financing -
Notes payable to banks 11,675 -
Advances from affiliates - 30,825
11,675 30,825
Other Current Liabilities -
Current sinking fund requirements 3,650 3,650
Accounts payable -
Affiliates 10,824 2,527
Other 16,240 27,153
Accrued taxes 5,959 3,251
Refundable gas costs 24,916 8,761
Other 12,323 11,696
73,912 57,038
85,587 87,863
DEFERRED CREDITS
Accumulated deferred income taxes 42,093 40,767
Unamortized investment tax credits 5,117 5,263
Postretirement benefits costs 23,989 -
Other 37,805 30,039
109,004 76,069
$610,909 $383,244
The accompanying notes are an integral part of these financial statements.
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COMMONWEALTH GAS COMPANY
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Dollars in thousands - unaudited)
Three Months Ended Nine Months Ended
1999 1998 1999 1998
GAS OPERATING REVENUES $ 31,372 $ 40,349 $195,590 $205,438
OPERATING EXPENSES
Cost of gas sold 22,733 25,309 102,739 113,472
Other operation and maintenance 22,164 19,284 64,128 59,341
Depreciation 1,362 1,083 7,948 7,583
Taxes -
Income (7,314) (3,469) 2,173 3,842
Local property 619 573 4,533 4,294
Payroll and other 641 583 2,405 2,321
40,205 43,363 183,926 190,853
OPERATING INCOME (8,833) (3,014) 11,664 14,585
OTHER INCOME 272 666 965 946
INCOME BEFORE INTEREST
CHARGES (8,561) (2,348) 12,629 15,531
INTEREST CHARGES
Long-term debt 2,104 2,186 6,311 6,558
Other interest charges 759 511 2,348 1,884
Allowance for borrowed funds
used during construction (39) (27) (63) (56)
2,824 2,670 8,596 8,386
NET (LOSS) INCOME (11,385) (5,018) 4,033 7,145
RETAINED EARNINGS -
Beginning of period 23,845 18,321 17,998 16,871
Dividends paid to parent (4,714) (1,429) (14,285) (12,142)
RETAINED EARNINGS -
End of period $ 7,746 $ 11,874 $ 7,746 $ 11,874
The accompanying notes are an integral part of these financial statements.
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COMMONWEALTH GAS COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Dollars in thousands - unaudited)
1999 1998
OPERATING ACTIVITIES
Net income $ 4,033 $ 7,145
Effects of noncash items -
Depreciation and amortization 9,405 9,297
Deferred income taxes and investment
tax credits, net 275 (583)
Change in working capital, exclusive of cash,
advances to affiliates and interim financing 38,779 24,210
All other operating items (6,310) 1,894
Net cash provided by operating activities 46,182 41,963
INVESTING ACTIVITIES
Additions to property, plant and equipment
(exclusive of AFUDC) (13,165) (12,654)
Net cash used for investing activities (13,165) (12,654)
FINANCING ACTIVITIES
Payment of dividends (14,285) (12,142)
Proceeds from (payment of) short-term borrowings 11,675 (25,600)
Proceeds from (payments to) affiliates (30,825) 6,575
Net cash used for financing activities (33,435) (31,167)
Net decrease in cash (418) (1,858)
Cash at beginning of period 427 1,867
Cash at end of period $ 9 $ 9
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of capitalized amounts) $ 8,237 $ 8,035
Income taxes $ 10,432 $ 9,837
The accompanying notes are an integral part of these financial statements.
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COMMONWEALTH GAS COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(1) General Information
Commonwealth Gas Company (the Company) is a wholly-owned subsidiary
of NSTAR. NSTAR is the new holding company that was formed, effective
August 25, 1999 after receipt of all necessary approvals and upon
completion of a merger transaction between Commonwealth Energy System
(COM/Energy, formerly the parent of the Company) and BEC Energy (formerly
the parent company of Boston Edison Company). The merger creates an
energy delivery company, that includes the Company, serving approximately
1.3 million customers located in Massachusetts including more than one
million electric customers in 81 communities and 240,000 gas customers in
51 communities. NSTAR is an exempt public utility holding company under
the provisions of the Public Utility Holding Company Act of 1935 and, in
addition to its investment in the Company, has interests in other utility
and several nonregulated companies.
The Company's operations are involved in the distribution and sale
of natural gas at retail to approximately 240,000 customers in a 1,067
square-mile area which includes 51 communities in eastern, southeastern
and central Massachusetts including New Bedford, Cambridge, Plymouth and
Worcester. The approximate year-round population of this service area is
1,128,000.
The Company has 584 employees including 402 (69%) who are
represented by three collective bargaining units with contracts in place
until March and June of 2002 and April of 2003.
(2) Significant Accounting Policies
(a) Principles of Accounting
The Company's significant accounting policies are described in Note
2 of Notes to Financial Statements included in its 1998 Annual Report on
Form 10-K filed with the Securities and Exchange Commission. For interim
reporting purposes, the Company follows these same basic accounting
policies but considers each interim period as an integral part of an
annual period and makes allocations of certain expenses to interim
periods based upon estimates of revenue from firm sales for the year.
Generally, certain expenses which relate to more than one interim
period are allocated to other periods to more appropriately match
revenues and expenses. Principal items of expense which are allocated
other than on the basis of passage of time are depreciation and property
taxes. These expenses are recorded for interim reporting purposes based
upon projected gas revenue.
The unaudited financial statements for the periods ended September
30, 1999 and 1998 reflect, in the opinion of the Company, all adjustments
necessary to summarize fairly the results for such periods. In addition,
certain prior period amounts are reclassified from time to time to
conform with the presentation used in the current period's financial
statements.
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COMMONWEALTH GAS COMPANY
The results for interim periods are not necessarily indicative of
results for the entire year because of variations in gas consumption due
to the heating season and also because of the Company's seasonal rate
structure.
(b) Regulatory Assets and Liabilities
The Company is regulated as to rates, accounting and other matters
by the Massachusetts Department of Telecommunications and Energy (DTE).
The Company has established various regulatory assets in cases where
the DTE has permitted or is expected to permit recovery of specific costs
over time.
The principal regulatory assets included in deferred charges were as
follows:
September 30, December 31,
1999 1998
(Dollars in thousands)
Postretirement benefits costs $31,778 $ 8,568
Merger costs 13,481 -
Environmental costs 6,533 5,080
FERC Order 636 transition costs 6,206 5,968
$57,998 $19,616
The increase in the regulatory asset related to postretirement
benefits reflects the impact of the immediate recognition of the Company's
previously unrecognized postretirement benefit obligation ($24 million)
pursuant to the requirements of purchase accounting. The merger costs
include severance costs ($5.9 million) associated with a voluntary
separation program (VSP) offered to employees as a result of the merger,
pension curtailment costs ($4 million) resulting from the VSP and other
costs to achieve the merger ($3.6 million).
The principal regulatory liabilities, reflected in deferred credits-
other, relate to income taxes ($7.9 million at September 30, 1999 and $8
million at December 31, 1998) and previously unrecognized pension costs
established pursuant to the requirements of purchase accounting as a
result of the merger ($8.5 million at September 30, 1999).
(3) Commitments
(a) Litigation
In the normal course of its business, the Company is involved in
various legal matters. Management is unable to fully determine a range of
reasonably possible legal costs in excess of amounts accrued. Based on
the information currently available, it does not believe that it is
probable that any such additional costs will have a material impact on its
financial position. However, it is reasonably possible that additional
legal costs that may result from a change in estimates could have a
material impact on the results of a reporting period in the near term.
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COMMONWEALTH GAS COMPANY
Item 2. Management's Discussion and Analysis of Results of Operations
The following is a discussion of certain significant factors which have
affected operating revenues, expenses and net income during the periods
included in the accompanying Condensed Statements of Income. This discussion
should be read in conjunction with the Notes to Condensed Financial Statements
appearing elsewhere in this report.
A summary of the period to period changes in the principal items included
in the Condensed Statements of Income for the three and nine months ended
September 30, 1999 and 1998 and total throughput for these periods is shown
below:
Three Months Nine Months
Ended September 30, Ended September 30,
1999 and 1998 1999 and 1998
Increase (Decrease)
(Dollars in thousands)
Gas Operating Revenues $(8,977) (22.2)% $ (9,848) (4.8)%
Operating Expenses -
Cost of gas sold (2,576) (10.2) (10,733) (9.5)
Other operation and maintenance 2,880 14.9 4,787 8.1
Depreciation 279 25.8 365 4.8
Taxes -
Federal and state income (3,845) (110.8) (1,669) (43.4)
Local property and other 104 9.0 323 4.9
(3,158) (7.3) (6,927) (3.6)
Operating Income (5,819) (193.1) (2,921) (20.0)
Other Income (394) (59.2) 19 2.0
Income Before Interest Charges (6,213) (264.6) (2,902) (18.7)
Interest Charges 154 5.8 210 2.5
Net Income $(6,367) (126.9) $ (3,112) (43.6)
Firm Unit Sales - BBTU (1,021) (39.2) (151) (0.7)
The following is a summary of total throughput for the periods indicated:
Total Throughput - In Billions of British Thermal Units (BBTU)
Total
Interruptible Total Trans- Through-
Firm and Other Sales portation put
Three Months Ended
September 30, 1999 1,581 589 2,170 2,996 5,166
September 30, 1998 2,602 959 3,561 2,456 6,017
Nine Months Ended
September 30, 1999 22,016 3,329 25,345 8,916 34,261
September 30, 1998 22,167 3,876 26,043 7,855 33,898
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COMMONWEALTH GAS COMPANY
Operating Revenues and Unit Sales
Operating revenues for the current quarter decreased by $9 million due
primarily to the decrease in total unit sales and a $2.6 million decrease in
the cost of gas sold offset, in part, by a $400,000 increase in transportation
revenues. The cost of gas delivered to customers is collected on a fully
reconciling basis. Therefore, this decrease in revenue has no impact on net
income. For the current nine-month period, operating revenues decreased by
$9.8 million due to a $10.7 million decrease in the cost of gas sold and a
decrease in total unit sales partially offset by higher transportation
revenues ($3.4 million).
The decreases in unit sales for both current periods reflect the weather
conditions experienced throughout the region during those periods. The
fluctuation in interruptible and other sales reflects the competitive market
that exists today in the natural gas industry.
Other Operation and Maintenance
Other operation and maintenance increased by $2.9 million (14.9%) and $4.8
million (8.1%) in the current quarter and nine-month period, respectively, due
to the recognition of costs allocated to the Company that relate to various
compensation plans whose benefits have vested as a result of a change in
control at the parent company level ($930,000) and amortization charges
related to goodwill and merger costs ($608,000) (see merger discussion below).
Another factor contributing to the increase in the current quarter was higher
maintenance costs associated with the Company's distribution system
($390,000). Also, contributing to the increase in the current nine-month
period were higher costs associated with a services company affiliate which
provides accounting, legal, computer-related and other services (approximately
$856,000), higher maintenance costs associated with the Company's
distribution system ($587,000) and an increase in the provision for bad debts
($143,000).
Taxes
The decrease in federal and state income taxes for both current periods
was due to the level of pre-tax income. Local property and other taxes
increased due primarily to higher tax rates and valuations in the Company's
service territory.
Other Income
The decrease in other income for the current three-month period was due
primarily to lower sales associated with the Company's merchandising program
for water heaters and heating systems.
Environmental Matters
The Company is participating in the assessment of a number of former
manufactured gas plant (MGP) sites and alleged MGP waste disposal locations to
determine if and to what extent such sites have been contaminated and whether
the Company may be responsible for remedial actions. The DTE has approved
recovery of costs associated with MGP sites from customers. The Company is
also involved in certain other known or potentially contaminated sites where
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COMMONWEALTH GAS COMPANY
the associated costs may not be recoverable in rates. For further information
on other related environmental matters, refer to the Company's 1998 Annual
Report on Form 10-K.
Merger with BEC Energy
NSTAR, an exempt public utility holding company, was created after
completion of a merger transaction between BEC Energy (BEC) and Commonwealth
Energy System (COM/Energy) on August 25, 1999. The utility industry has
continued to change in response to legislative and regulatory mandates that
are aimed at lowering prices for energy by creating a more competitive market-
place. These pressures have resulted in an increasing trend in the utility
industry to seek competitive advantages and other benefits through business
combinations. NSTAR is focusing its utility operations on the transmission
and distribution of energy following the sale of BEC's fossil generating
facilities to Sithe Energies in May 1998, BEC's nuclear generation facility to
Entergy Nuclear Generating Company in July 1999 and substantially all of
COM/Energy's generating facilities to Southern Company in December 1998.
The utility companies of NSTAR form an energy delivery company serving
approximately 1.3 million customers located in Massachusetts, including more
than one million electric customers in 81 communities
and 240,000 gas customers in 51 communities.
The merger became effective after receipt of various regulatory approvals.
The Federal Energy Regulatory Commission approved the merger on June 24, 1999.
The Nuclear Regulatory Commission approved the transfer of control of subsid-
iary Canal Electric Company's interest in the Seabrook nuclear plant from
COM/Energy to NSTAR on August 11, 1999. The Securities and Exchange
Commission issued its approval on August 24, 1999.
An integral part of the merger is the rate plan that was filed by the
retail utility subsidiaries of BEC and COM/Energy in February 1999 and
approved by the DTE on July 27, 1999. Significant elements of the rate plan
include a four-year distribution rate freeze (after an adjustment to the
distribution rates of affiliates Cambridge Electric Light Company and
Commonwealth Electric Company to collect the appropriate level of distribution
costs that is offset by a reduction in the transition charge that was
previously approved by the DTE), recovery of the acquisition premium
(goodwill) over 40 years and recovery of transaction and integration costs
(costs to achieve) over 10 years.
The merger was accounted for by BEC as an acquisition of COM/Energy under
the purchase method of accounting. The goodwill amounted to approximately
$478 million while the original estimate of costs to achieve the merger was
$111 million to be amortized over 10 years. This estimate, which has been
allocated among the retail utility subsidiaries of NSTAR, will be reconciled
to actual costs and any difference is expected to be recovered over the
remainder of the amortization period. The amount of goodwill attributed to
the Company was approximately $207 million to be amortized over 40 years.
A group of four intervenors and the Massachusetts Attorney General filed
two separate appeals of the DTE's rate plan order with the Massachusetts
Supreme Judicial Court (SJC) in August 1999. While management anticipates
that the DTE's decision to approve the rate plan will be upheld by the SJC, it
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COMMONWEALTH GAS COMPANY
is unable to determine the ultimate outcome of these appeals or their impact
on the rate plan.
Year 2000
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any computer
program that has date sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a temporary
inability to process transactions or engage in normal business activities.
The Company and its affiliates (the companies) have been involved in Year 2000
compliancy since 1996. While the recent merger with BEC Energy has led to
some integrated planning efforts, the companies have essentially continued to
resolve Year 2000 issues independently of BEC Energy.
The companies have followed a five-phase process in its Year 2000 compli-
ance efforts, as follows: Awareness (through a series of internal announce-
ments to employees and through contacts with vendors); Inventory (all comput-
ers, applications and embedded systems that could potentially be affected by
the Year 2000 problem); Assessment (all applications or components and the
impact on overall business operations and a plan to correct deficiencies and
the cost to do so); Remediation (the modification, upgrade or replacement of
deficient hardware and software applications and infrastructure
modifications); and Testing (a detailed, comprehensive testing program for the
modified critical component, system or software that involves the planning,
execution and analysis of results).
The companies' inventory phase required an assessment of all date sensi-
tive information and transaction processing computer systems and determined
that approximately 90% of their software systems needed some modifications or
replacement. Plans were developed, implemented, and all of these systems have
been modified, upgraded or replaced.
The companies have also inventoried their non-information technology
systems that may be date sensitive (facilities, electric and gas operations,
energy supply/production and distribution) that use embedded technology such
as micro-controllers and micro-processors. The companies have completed their
assessment of these non-information technology systems and determined that 20%
of these systems required remediation or replacement. The companies have
reported to the North American Electric Reliability Council (NERC) that they
met the NERC target date of June 30, 1999 for 100% readiness of all their
mission critical components required for the continued safe and reliable
delivery of electricity into the Year 2000. The companies' gas and other
operations are also at a 100% completion level for all mission critical issues
regarding Year 2000 readiness.
Modifying and testing the companies' information and transaction process-
ing systems from 1996 through 2000 is currently expected to cost approximately
$10.3 million, including approximately $8.3 million incurred through September
30, 1999. Year 2000 costs have been expensed as incurred and will continue to
be funded from operations.
In addition to their internal efforts, the companies have initiated formal
communications with their significant suppliers to determine the extent to
which the companies may be vulnerable to their suppliers' failure to correct
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COMMONWEALTH GAS COMPANY
their own Year 2000 issues. The companies have ranked their vendors in terms
of importance and have received adequate responses from all of their
"critical" and "high" rated vendors. Failure of the companies' significant
suppliers to address Year 2000 issues could have a material adverse effect on
the companies' operations, although it is not possible at this time to
quantify the amount of business that might be lost or the costs that could be
incurred by the companies. Contact with all other vendors is continuing and
inadequate responses are being pursued by the companies.
In addition, parts of the global infrastructure, including national
banking systems, electrical power grids, gas pipelines, transportation facili-
ties, communications and governmental activities, may not be fully functional
after 1999. Infrastructure failures could significantly reduce the companies'
ability to acquire energy and their ability to serve their customers as ef-
fectively as they are now being served. The companies have identified the
elements of the infrastructure that are critical to their operations and have
requested and obtained information as to the expected Year 2000 readiness of
these elements.
The companies have completed the development of their Year 2000 contingen-
cy plans for all operational areas that may be effected by Year 2000 issues.
The companies' gas and electric operations currently have emergency operating
plans, as well as information technology disaster recovery plans, as compo-
nents of their standard operating procedures. These plans have been enhanced,
identifying potential Year 2000 risks to normal operations and the appropriate
response to these potential failures. These plans also include actions to be
taken in the event of third party and infrastructure failures with regard to
the Year 2000 event, although in certain cases, there may be no practical
alternative course of action available to the companies. The implementation
of the contingency plans will continue throughout the remainder of 1999.
The companies are working with other energy industry entities, both
regionally and nationally, with respect to Year 2000 readiness and is cooper-
ating in the development of local and wide-scale contingency planning.
While the companies believe their efforts to address the Year 2000 issue
will allow them to be successful in avoiding any material adverse effect on
the companies' operations or financial condition, they recognize that failing
to resolve Year 2000 issues on a timely basis would, in a "most reasonably
likely worst case scenario," significantly limit their ability to acquire and
distribute energy and process their daily business transactions for a period
of time, especially if such failure is coupled with third party or infra-
structure failures. Similarly, the companies could be significantly effected
by the failure of one or more significant suppliers, customers or components
of the infrastructure to conduct their respective operations after 1999.
Adverse affects on the companies could include, among other things, business
disruption, increased costs, loss of business and other similar risks.
The foregoing discussion regarding Year 2000 project timing, effective-
ness, implementation and costs includes forward-looking statements that are
based on management's current evaluation using available information. Factors
that might cause material changes include, but are not limited to, the avail-
ability of key Year 2000 personnel, the readiness of third parties, and the
companies' ability to respond to unforeseen Year 2000 complications.
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COMMONWEALTH GAS COMPANY
Forward-Looking Statements
This discussion contains statements which, to the extent it is not a
recitation of historical fact, constitute "forward-looking statements" and is
intended to be subject to the safe harbor protection provided by the Private
Securities Litigation Reform Act of 1995. A number of important factors
affecting the Company's business and financial results could cause actual
results to differ materially from those reflected in the forward-looking
statements or projected amounts. Those factors include the ultimate impact of
the merger, developments in the legislative, regulatory and competitive
environment, certain environmental matters, demands for capital and the
availability of cash from various sources.
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COMMONWEALTH GAS COMPANY
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any pending material legal proceeding.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Filed herewith:
Exhibit 27 - Financial Data Schedule
27.1 - Schedule UT
Exhibit 99 - Additional Exhibits
99.1 - Report of Independent Accountants
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the three months ended
September 30, 1999.
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COMMONWEALTH GAS COMPANY
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMONWEALTH GAS COMPANY
(Registrant)
R. J. WEAFER, JR.
Robert J. Weafer, Jr.
Vice President, Controller
and Chief Accounting
Officer
Date: November 15, 1999
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet, statement of income, statement of retained earnings and
statement of cash flows contained in Form 10-Q of Commonwealth Gas Company for
the nine months ended September 30, 1999 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000022620
<NAME> COMMONWEALTH GAS COMPANY
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<PERIOD-TYPE> 9-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 277,814
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 63,131
<TOTAL-DEFERRED-CHARGES> 62,895
<OTHER-ASSETS> 207,069
<TOTAL-ASSETS> 610,909
<COMMON> 71,425
<CAPITAL-SURPLUS-PAID-IN> 234,997
<RETAINED-EARNINGS> 7,746
<TOTAL-COMMON-STOCKHOLDERS-EQ> 314,168
0
0
<LONG-TERM-DEBT-NET> 102,150
<SHORT-TERM-NOTES> 11,675
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 3,650
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 179,266
<TOT-CAPITALIZATION-AND-LIAB> 610,909
<GROSS-OPERATING-REVENUE> 195,590
<INCOME-TAX-EXPENSE> 2,173
<OTHER-OPERATING-EXPENSES> 181,753
<TOTAL-OPERATING-EXPENSES> 183,926
<OPERATING-INCOME-LOSS> 11,664
<OTHER-INCOME-NET> 965
<INCOME-BEFORE-INTEREST-EXPEN> 12,629
<TOTAL-INTEREST-EXPENSE> 8,596
<NET-INCOME> 4,033
0
<EARNINGS-AVAILABLE-FOR-COMM> 4,033
<COMMON-STOCK-DIVIDENDS> 14,285
<TOTAL-INTEREST-ON-BONDS> 6,311
<CASH-FLOW-OPERATIONS> 46,182
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
Exhibit 99.1
Report of Independent Accountants
To the Board of Directors of Commonwealth Gas Company:
We have reviewed the accompanying condensed balance sheet of Commonwealth Gas
Company as of September 30, 1999 and the related condensed statements of
income for the three and nine-month periods ended September 30, 1999 and
condensed cash flows for the nine-month period ended September 30, 1999. We
did not perform a review of the condensed statements of income for the three
and nine-month periods ended September 30, 1998 and cash flows for the nine-
month period ended September 30, 1998. These financial statements are the
responsibility of management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for accounting
and financial matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them to
be in conformity with generally accepted accounting principles.
Hartford, Connecticut PricewaterhouseCoopers LLP
November 15, 1999
