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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 __

As of October 31, 2000, there were issued and outstanding 100 shares of the registrant's common stock, without par value, all of which were held, beneficially and of record, by Dominion Resources, Inc.

The Company had no material other comprehensive income reportable in accordance with Statement

of Financial Accounting Standards No. 130, Reporting Comprehensive Income, during the periods.

(1) With the exception of the Condensed Consolidated Balance Sheet at December 31, 1999, which is derived from the Consolidated Balance Sheet at that date which was included in Exhibit I to Consolidated Natural Gas Company's (CNG or the Company) Form 8-K filed with the Securities and Exchange Commission on January 27, 2000 (January 27, 2000 Form 8-K), the consolidated financial statements are unaudited. In the opinion of management, these unaudited consolidated financial statements contain all adjustments, including normal recurring accruals, necessary to present fairly the financial position as of September 30, 2000, the results of operations for the three months and nine months ended September 30, 2000 and 1999 and cash flows for the nine months ended September 30, 2000 and 1999.

The income statement for the nine months ended September 30, 2000 includes the effect of a retroactive restatement. See Note 7 to the consolidated financial statements. Certain amounts in the 1999 consolidated financial statements have been reclassified to conform to the 2000 presentation.

Because a major portion of the gas sold or transported by the Company's distribution and transmission operations is ultimately used for space heating, both revenues and earnings are subject to seasonal fluctuations. Because of the low seasonal demand for gas during the summer months, third quarter results are usually the least significant of the year for the Company. Seasonal fluctuations are further influenced by the timing of price relief granted under regulation to compensate for past cost increases.

The consolidated financial statements include the accounts of the Company and its subsidiaries, with all significant intercompany transactions and accounts being eliminated in consolidation.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

These financial statements should be read in conjunction with the consolidated financial statements, and notes thereto, included in the January 27, 2000 Form 8-K.

(2) In June 2000, the Financial Accounting Standards Board (FASB) issued SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, which amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 138 addresses a limited number of SFAS No. 133 implementation issues including expanded availability of exclusions of normal purchase and normal sale agreements from classification as derivatives.

Management has determined that certain contracts will be subject to fair value accounting under SFAS No. 133. A substantial portion of these contracts is used by CNG in its production and delivery of energy to its customers and involves various hedging strategies. The Company is currently documenting these hedging strategies and assessing effectiveness thereof in anticipation of implementation of the standard. The Company expects any ineffectiveness related to its hedging strategies to primarily result from the time value component of certain options as well as from basis risks that may not be hedged. In addition to these commodity contracts, CNG uses interest rate swaps to manage its cost of capital.

CNG will report a cumulative effect of a change in accounting principle in the first quarter of 2001. The effect of implementation will be to adjust stockholder's equity through other comprehensive income for effective cash flow hedging strategies and the remaining impact will affect earnings. CNG has not estimated the impact that will result from the adoption of SFAS No. 133, but believes it could be material, depending primarily on (1) market prices at January 1, 2001; (2) changes in the population of affected contracts between the date of this report and January 1, 2001; and (3) resolution of certain industry issues which may involve further interpretation by the Derivatives Implementation Group, a group sponsored by the FASB.

In September 2000, the FASB issued SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, which revises the standards for accounting and disclosure of securitizations and other transfers of financial assets and extinguishments of liabilities. With certain exceptions, the standard will be applied prospectively to transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31,

2001. The Company does not expect the adoption of this new standard to have a material impact on its financial condition or results of operations.

(3) On January 28, 2000, Dominion Resources, Inc. (Dominion) acquired all of the outstanding shares of CNG's common stock for $6.4 billion, consisting of approximately 87 million shares of Dominion common stock and approximately $2.9 billion of cash. The acquisition was completed by merging CNG into a new subsidiary of Dominion. The name of the new Dominion subsidiary was changed to Consolidated Natural Gas Company at the time of the merger.

4. 2000 Restructuring and Other Merger-Related Costs

Dominion and its subsidiaries developed and began the implementation of a plan to restructure the operations of the combined companies. The restructuring plan includes the following components:

• An involuntary severance program;
• A transition plan to implement operational changes to provide efficiencies, including the consolidation of post-merger operations and the integration of information technology systems;
• A voluntary early retirement program (the ERP).

For the three- and nine-month periods ended September 30, 2000, CNG recognized $20.9 million and $226.2 million, respectively, of restructuring and other merger-related costs that included:

A reconciliation of the severance liability for the third quarter and nine months ended September 30, 2000 follows:

Three Months Ended      Nine Months Ended

 September 30, 2000       September 30, 2000

  (Millions of Dollars)

The change of control required settlement of certain employment contracts and payments under seismic licensing agreements used in the Company's oil and gas operations. The information technology related costs include accelerated depreciation of information technology systems that are expected to be abandoned on January 1, 2001 and related conversion costs. The lease termination and restructuring costs are being incurred as operations are streamlined and work locations are consolidated.

CNG is expected to incur additional charges relating to restructuring and other merger-related activities as business operations are consolidated and administrative functions are integrated.

Salaried employees of CNG and its subsidiaries, excluding officers, and employees of Virginia Natural Gas (VNG) and CNG International, who had attained age 52 and completed at least 12 years of service as of July 1, 2000 were eligible under the ERP. In addition, employees covered by several collective bargaining agreements were also eligible. The early retirement option provides up to three additional years of age and three additional years of employee service, subject to age and service maximums, for benefit formula purposes under the companies' postretirement medical and pension plans. During the second quarter of 2000, approximately 450 CNG employees elected to participate in the ERP, resulting in an expense approximating $61.7 million. This expense was offset, in part, by curtailment gains of $25.5 million attributable to reductions in expected future years of service as a result of ERP participation and involuntary employee terminations. Some of the ERP participants will also receive benefits under the involuntary severance package. Benefits under the involuntary severance package are subject to reduction as a result of coordination with the additional retirement plan benefits provided by the ERP.

1999 Restructuring and Other Merger-Related Costs

Shareholder approval of the merger with Dominion constituted a change of control as defined in the Company's then effective stock incentive plans. The change of control triggered acceleration of the vesting of stock options and certain other stock awards. Also, the change of control effectively granted limited stock appreciation rights to holders of vested stock options and certain other stock awards. Holders were permitted to elect to receive a cash payment in exchange for surrendering vested stock options and awards during the period July 1, 1999 through August 29, 1999. The amount to be paid to the holders was based on the value determined per the associated plans, which considered the option exercise price, award value, and the change of control price as defined in the plans. Based on the value of the vested options and awards expected to be surrendered and cashed out, the Company recognized a charge of $153.5 million during the second quarter of 1999. In addition, the Company recorded charges for other merger costs, including direct incremental costs (including fees of financial advisors, legal counsel and other costs). These charges totaled $7.7 million for the three months ended September 30, 1999 and $19.5 million for the nine months ended September 30, 1999. See Note (2) to the Consolidated Financial Statements included in the January 27, 2000 Form 8-K for additional information.

(5) During the quarter ended September 30, 2000, Dominion and its subsidiaries, including CNG, adopted a company-wide method of calculating the market related value of plan assets used to determine the expected return on plan assets, a component of net periodic pension cost. Under its new method, the market related value of plan assets would reflect the difference between actual investment returns and expected investment returns evenly over a four-year period. Prior to Dominion's acquisition of CNG, each company used different methods to determine the "calculated value" of market related value of plan assets. The former CNG method calculates the market related value of plan assets as the average of market values at the end of each of the preceding four years, with appropriate adjustments for receipts, disbursements, and investment income during the period. Dominion believes that the new method is preferable to continuing to use either or both of the former methods as the new method enhances the predictability of expected return on plan assets, provides consistent treatment of all investment gains and losses, and results in calculated market related plan asset values that are closer to market value as compared to values calculated under the previous methods.

The $30.8 million cumulative effect of the change on prior years (net of taxes of $11.4 million) is included in income of the nine months ended September 30, 2000. The effect of the change on the quarter ended September 30, 2000 was to increase net income $13.2 million; the effect of the change on the nine-months ended September 30, 2000 was to increase income before cumulative effect of a change in accounting principle $39.5 million and net income $70.3 million.

Had CNG retroactively applied the new method, on a pro forma basis, net income for the three months and nine months ended September 30, 1999 would have been $13.8 million and $78.5 million, respectively.

The effect of this change on the quarters ended March 31, 2000 and June 30, 2000 is as follows:

(6) Certain increases in prices by the Company and other rate-making issues are subject to final modification in regulatory proceedings. The related accumulated provisions pertaining to these matters were $33.1 million and $38.7 million at September 30, 2000, and December 31, 1999, respectively, including interest. These amounts are reported in

the Condensed Consolidated Balance Sheet under "Estimated rate contingencies and refunds" together with $1.0 million and $6.2 million, respectively, which are primarily refunds received from suppliers and refundable to customers under regulatory procedures.

(7) At September 30, 2000, the Company's net assets held for sale include the net assets of VNG of $353.8 million. On October 6, 2000, the Company completed the sale of VNG to AGL Resources Inc. Cash proceeds from the sale amounted to $533 million. The gain on the sale of VNG will be reflected in fourth quarter results. CNG was required to spin-off or sell VNG pursuant to conditions set forth by the Virginia State Corporation Commission (Virginia Commission) and Federal Trade Commission in connection with their approval of the acquisition of CNG by Dominion.

At September 30, 2000, the Company's net assets held for sale also include the net assets of CNG International of $217.1 million. CNG International engages in energy-related activities outside of the United States and holds equity investments in Australia and Argentina. Consistent with its strategy to focus on its core business, in the first quarter of 2000, management committed to a plan of disposal for CNG International. The total loss related to CNG International, discussed below, for the nine months ended September 30, 2000 was $152.3 million ($98.9 million after tax). In the nine months ended September 30, 2000, the Company recognized a pretax loss of $35.1 million ($22.8 million after taxes) to write down the carrying amount of CNG International's Australian investments to estimated fair value less cost to sell. The Company's estimate is based principally on a discounted cash flow analysis. In addition, the Company believes it is probable that, as part of a sale, it will be required to make a $100 million equity contribution pursuant to the Equity Contribution Agreement discussed in Note 14 to the Consolidated Financial Statements included in the January 27, 2000 Form 8-K filed by CNG. Accordingly, the Company has recognized a $100 million ($65 million after taxes) charge in the nine months ended September 30, 2000. During the second quarter of 2000, the Company became aware of certain information that existed in the first quarter of 2000. However, the evaluation of such data was not completed until sometime thereafter. Management, therefore, has determined that recognition of the impairment and accrual for the probable equity contribution would most appropriately be reflected in the first quarter of 2000. As a result, the Company has restated the March 31, 2000 carrying value of CNG International's Australian investments and retroactively recognized a loss of $135.1 million ($87.8 million after taxes) in the first quarter of 2000. On August 24, 2000, the Company filed a Form 10-Q/A for the quarterly period ended March 31, 2000 to reflect this information.

On July 7, 2000, Sempra Energy International, a subsidiary of Sempra Energy, agreed to purchase CNG International's Argentine assets for $145.0 million. Based upon anticipated proceeds from the sale, the carrying amount of these investments was adjusted and an impairment loss of $17.2 million, $11.1 million after-tax, was recognized in the second quarter of 2000. On October 12, 2000, CNG International completed the sale of its Argentine assets to Sempra Energy International for $145.0 million in cash.

in the Form 10-Q previously filed for the quarterly period ended March 31, 2000. The restatement adjusts for the recognition during the first quarter of an impairment of certain equity investments in Australia held by CNG International and the accrual for a probable equity contribution to such investments. See Note 7 to the Consolidated Financial Statements. Accordingly, on August 24, 2000, the Company filed a Form10-Q/A for the quarterly period ended March 31, 2000.

Certain matters discussed in this Form 10-Q, including Management's Discussion and Analysis of Results of Operations, are "forward-looking statements" intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such because the context of the statement will include words such as Consolidated Natural Gas Company (CNG or the Company) "believes," "anticipates," "expects" or words of similar import. Similarly, statements that describe the Company's future plans, objectives or goals are also forward-looking statements. Such statements may address future events and conditions concerning the acquisition of the Company by Dominion Resources, Inc. (Dominion), capital expenditures, earnings, risk management, litigation, environmental matters, rate and other regulatory matters, liquidity and capital resources, and financial accounting and reporting matters. Actual results in each instance could differ materially from those currently anticipated in such statements, due to factors such as: natural gas and electric industry restructuring, including ongoing state and federal activities; the weather; demographics; general economic conditions and specific economic conditions in the Company's distribution service areas; developments in the legislative, regulatory and competitive environment in which the Company operates; and other circumstances affecting anticipated revenues and costs.

The financial statements included in this report reflect the retroactive restatement of the Company's financial statements included in the Form 10-Q previously filed for the quarterly period ended March 31, 2000. The restatement adjusts for the recognition during the first quarter of an impairment of certain equity investments in Australia held by CNG International and the accrual for a probable equity contribution to such investments. See Note 7 to consolidated financial statements. Accordingly, on August 24, 2000, the Company filed a Form10-Q/A for the quarterly period ended March 31, 2000.

A major portion of the gas sold or transported by the Company's distribution and transmission operations is ultimately used for space heating. As a result, earnings are affected by seasonality and changes in the weather. Because most of the operating subsidiaries are subject to price regulation by federal or state commissions, earnings can be affected by regulatory delays when price increases are sought through general rate filings to recover certain higher costs of operation.

CNG's net income for the third quarter of 2000 was $49.3 million, compared with $10.8 million in the third quarter of 1999. Net income in the current year quarter benefited from higher prices for gas, oil and by-products, increased gas production and lower operation expense. The lower operation expense was due in large part to higher pension credits due to the change in the method of accounting for calculating the market-related value of pension plan assets used to determine the expected return on plan assets, a component of net periodic pension cost. See Note 5 to the consolidated financial statements for a discussion of this accounting change. These positive factors were only partially offset by higher restructuring and other merger-related costs and increased depreciation and amortization expense.

For the nine months ended September 30, 2000, CNG's net income was $78.5 million, compared with $69.8 million in 1999. Net income for the nine months of 2000 includes $30.8 million for the cumulative effect of the change in accounting for calculating the market-related value of pension plan assets. Income before the cumulative effect of the accounting change was $47.7 million. Similar to the quarter, the first nine months of 2000 benefited from higher product prices, increased gas production and lower operation expense, partially offset by higher restructuring and other merger-related costs and increased depreciation and amortization expense. In addition, the current year period was adversely impacted by the impairment of foreign investments held for sale. See Note 7 to the consolidated financial statements and the Divestitures section of this Discussion and Analysis for more information.

Regulated gas sales revenues increased $59.7 million to $181.1 million in the third quarter of 2000 compared to 1999. Average sales rates for all three customer groups increased compared to the 1999 quarter reflecting higher purchased gas prices. Overall gas sales volumes increased primarily due to higher sales to residential customers, due in part to cooler weather near the end of the quarter. For the nine months ended September 30, 2000, regulated gas sales revenues increased $95.1 million to $1.04 billion, as compared to 1999, reflecting higher average sales rates for all three customer groups offset somewhat by lower overall sales volumes. Sales volumes for residential and commercial customers were down for the first nine months of 2000, reflecting milder weather in the first quarter of 2000, while industrial sales volumes were higher.

Nonregulated gas sales revenues increased $182.3 million to $297.4 million for the third quarter of 2000 and increased $370.6 million to $743.8 million for the nine months ended September 30, 2000, as compared to 1999, due to higher prices, increased gas production and higher sales volumes by Dominion Field Services. These increased sales volumes reflect, in part, the transfer of gas marketing operations from Dominion to CNG during the second quarter of 2000.

Gas transportation and storage revenues were $107.7 million for the third quarter of 2000, little changed compared to $107.9 million for the 1999 quarter. For the first nine months of 2000, as compared to 1999, gas transportation and storage revenues decreased $12.8 million to $399.6 million. Gas transportation revenues decreased reflecting primarily changes in amounts reserved for rate contingencies as compared to 1999. The decrease in gas transportation revenues was partially offset by increased gas storage revenue for both the third quarter and first nine months of 2000, as compared to 1999.

For the third quarter of 2000, other operating revenues were $143.1 million, a $10.6 million increase over the same quarter in 1999. Other operating revenues increased $117.7 million to $437.8 million for the first nine months of 2000, as compared to 1999. Revenues from the sale of oil and condensate production increased $1.9 million and $21.8 million for the quarter and nine months ended September 30, 2000, respectively, due to higher prices partially offset by lower production, as compared to 1999. Brokered oil sales increased $9.5 million and $61.8 million for the third quarter and first nine months of 2000, respectively, as compared to the same periods in 1999, reflecting lower volumes but a sharp rise in oil prices. Revenues from the sale of products extracted from natural gas increased $1.3 million for the third quarter of 2000, and increased $30.9 million in the first nine months of 2000, as compared to the same periods in 1999. These increases reflect lower volumes more than offset by higher by-product sales prices.

Operating expenses, excluding income taxes, increased $182.0 million to $621.6 million for the third quarter of 2000 as compared to the third quarter of 1999. Purchased gas increased $174.5 million to $245.6 million for the third quarter of 2000 reflecting both increased volumes and higher prices. Liquids, capacity and other products purchased increased $6.1 million, to $80.1 million, due primarily to increased prices for oil purchased to satisfy brokered oil sales. Restructuring and other merger-related costs of $20.9 million and $7.7 million for the third quarters of 2000 and 1999, respectively, were incurred in connection with the acquisition of CNG by Dominion (see Note 4 to the consolidated financial statements and the Other Information section of this Discussion and Analysis). Combined operation and maintenance expense in the third quarter of 2000 was $129.7 million, a decrease of $26.9 million compared to the prior year quarter. This decrease reflects higher pension credits due to the change in the method of accounting for calculating the market-related value of pension plan assets and lower labor costs, offset partially by administrative and corporate support costs provided by Dominion's services company not present in the prior year. Depreciation and amortization increased $12.4 million, to $108.2 million, due chiefly to the acquisition of additional producing properties in late 1999 and early 2000. Taxes, other than income taxes, increased $2.7 million, to $37.1 million, due primarily to higher excise taxes.

Operating expenses, excluding income taxes, increased $423.6 million to $2.3 billion for the first nine months of 2000 as compared to 1999. Purchased gas increased $348.5 million, to $953.4 million for the nine months ended September 30, 2000, reflecting both increased volumes and higher prices. Liquids, capacity and other products purchased increased $53.4 million, to $246.9 million, due primarily to increased prices for oil purchased to satisfy brokered oil sales. Restructuring and other merger-related costs of $226.2 million and $173.0 million for the nine months ended September 30, 2000 and 1999, respectively, were incurred in connection with the acquisition of CNG by Dominion (see Note 4 to the consolidated financial statements and the Other Information section of this Discussion and Analysis). Combined operation and maintenance expense in the first nine months of 2000 was $412.3 million compared to $475.4 million in the prior year period. The decrease reflects higher pension credits due to the change in the method of accounting for calculating the market-related value of pension plan assets and reduced labor expenses, offset by increased reserves for uncollectible accounts and administrative and corporate support costs provided by Dominion's services company not present in the prior year. In addition, maintenance expense decreased reflecting workover expenses at one of the Company's deep water properties in 1999. Depreciation and amortization increased $40.5 million, to $318.2 million, due chiefly to the acquisition of additional producing properties in late 1999 and early 2000. Taxes, other than income taxes, decreased $8.9 million, to $134.8 million, reflecting primarily the discontinuance of Pennsylvania gross receipts tax as of January 1, 2000. This decrease in gross receipts taxes was accompanied by a decrease in revenues as customer collections for this tax ceased for gas services provided on or after January 1, 2000.

For the third quarter of 2000, the Company reported other income of $14.0 million as compared to $5.9 million for 1999. For the first nine months of 2000, the Company reported other deductions of $121.5 million, as compared to other income of $10.7 million in 1999. Interest revenues were higher in both current year periods due to higher earnings on hedge-related brokerage accounts. Other-net increased in both current year periods due in part to higher income from equity and other investments. The first nine months of 2000 includes the $152.3 million pretax loss representing impairments of CNG International's Australian and Argentine investments and the accrual for a probable equity contribution associated with the Australian investments. See Note 7 to the consolidated financial statements and the Divestitures section of this Discussion and Analysis for more information.

Total interest charges increased in the quarter and nine months ended September 30, 2000, as compared to 1999, reflecting higher levels of long-term debt, and both higher borrowings and interest rates on commercial paper during the comparative periods.

The Company's Distribution segment reported operating income before income taxes of $9.0 million for the third quarter of 2000, compared to an operating loss before income taxes of $23.3 million in the same quarter in 1999. For the first nine months of 2000, the Company's Distribution segment reported operating income before income taxes of $195.9 million, compared to $136.2 million for the period in 1999. The higher earnings in both the third quarter and first nine months of 2000 were due in large part to higher pension credits resulting from the change in the method of accounting for calculating the market-related value of pension plan assets and lower labor costs.

Total distribution throughput in the third quarter of 2000 decreased 1.4 Bcf, to 52.7 Bcf. Gas sales volumes increased 2.2 Bcf to 17.4 Bcf reflecting higher residential gas sales volumes. This increase was offset by a 3.6 Bcf decrease in transport volumes to 35.3 Bcf, related primarily to industrial and residential customers. Total distribution throughput for the nine month period of 2000 was 301.6 Bcf, flat compared to 301.8 Bcf in the 1999 period. Gas sales volumes decreased 1.0 Bcf to 149.4 Bcf reflecting lower residential gas sales volumes due to comparatively milder weather during the first quarter of 2000 compared to 1999. This decrease was offset by a .8 Bcf increase in transport volumes to 152.2 Bcf, related primarily to residential and off-system customers.

Operating income before income taxes of the Transmission segment in the third quarter of 2000 was $50.9 million, compared to $35.7 million in the third quarter of 1999. For the first nine months of 2000, operating income before income taxes was $181.8 million, compared to $146.9 million in 1999. The quarter and year-to-date results reflect increased nonregulated gas sales volumes and prices, as well as higher prices for natural gas by-products. Gas transportion revenues decreased primarily as a result of changes in amounts reserved for rate contingencies as compared to the third quarter and nine months ended September 30, 1999. Lower operation expense due to higher pension credits resulting from the change in the method of accounting for calculating the market-related value of pension plan assets also contributed to the higher earnings in both current year periods.

The Exploration and Production segment reported operating income before income taxes of $72.2 million in the third quarter of 2000, compared to $34.8 million in 1999. These results reflect higher gas and oil wellhead prices and a 21 percent increase in gas production. The Company's average gas wellhead price increased $.87 to $3.13 per thousand cubic feet (Mcf) in the third quarter of 2000 over 1999. Gas production was 45.9 Bcf, up 7.9 Bcf from 1999. The Company's average oil price was $19.21 per barrel in the third quarter of 2000, compared to $15.22 in the prior year period. Oil production of 1.7 million barrels in the third quarter of 2000 was down 0.3 million barrels as compared to 1999 levels.

For the nine months ended September 30, 2000, the Exploration and Production segment reported operating income before income taxes of $189.3 million, compared to $84.6 million in 1999. These results reflect higher gas and oil wellhead prices and a 12 percent increase in gas production. The Company's average gas wellhead price increased $.72 to $2.88 per Mcf for the first nine months of 2000 over 1999. Gas production was 128.3 Bcf, up 13.7 Bcf from 1999. The Company's average oil price was $17.61 per barrel in the first nine months of 2000, compared to $11.88 in the prior year period. Oil production of 5.5 million barrels in the first nine months of 2000 was down 0.9 million barrels as compared to 1999 levels.

Dominion and its subsidiaries developed and began the implementation of a plan to restructure the operations of the combined companies. Restructuring activities include workforce reductions and the consolidation of post-merger operations and information technology systems. For the three- and nine-month periods ended September 30, 2000, the Company recognized $20.9 million and $226.2 million, respectively, of restructuring and other merger-related costs as discussed below:

Under the restructuring plan, approximately 400 employee positions at CNG and its subsidiaries have been identified for elimination. Through September 30, 2000, the Company has recorded $28.2 million in employee severance related costs, a reduction from amounts originally estimated in the first quarter of 2000. The revision reflects the effects of coordination of benefits under the severance and early retirement programs and lower than expected employee credited service and salaries. At September 30, 2000, a total of 347 positions had been eliminated, and $13.5 million of severance benefits had been paid.

During the second quarter of 2000, approximately 450 CNG employees elected to participate in the early retirement program, resulting in an expense approximating $61.7 million. This expense was offset, in part, by curtailment gains of $25.5 million attributable to reductions in expected future years of service as a result of ERP participation and involuntary employee terminations.

In connection with the implementation of Dominion's new enterprise-wide price risk management strategy, CNG designated its portfolio of derivative contracts that existed at January 28, 2000 as held for purposes other than hedging for accounting purposes and entered into "offsetting" contracts for those contracts in the January 28, 2000 portfolio that would not be settled during the first quarter of 2000. The mark-to-market accounting for these contracts held for purposes other than hedging resulted in the recognition of losses of $55.1 million for the nine months ended September 30, 2000. Due to the Company's establishing the offsetting portfolio of derivative contracts, absent any not yet identified future losses from credit risk exposure, no additional material losses are expected to be realized as these derivative contracts mature through 2003. See Note 10 to the consolidated financial statements for further discussion.

Other merger related costs charged during the nine months ended September 30, 2000 totaled $106.7 million and included settlement of certain employment contracts and payments under seismic licensing agreements due to change of control, merger-related transaction costs and fees, lease termination and restructuring costs and accelerated depreciation of information technology systems that will be abandoned on January 1, 2001 and related conversion costs.

CNG is expected to incur additional charges relating to restructuring and other merger-related activities as business operations are consolidated and administrative functions are integrated. The planned workforce reductions and the accelerated depreciation in 2000 of information technology systems that will be abandoned on January 1, 2001 should avoid future annualized operating costs of approximately $61 million that would have otherwise been incurred.

During the second quarter of 1999, the Company recorded a charge of $153.5 million for compensation expenses associated with the cash settlements of vested stock options and other stock awards pursuant to change of control provisions in the Company's then effective stock incentive plans in connection with the approval by shareholders of the merger with Dominion. In addition, the Company recorded charges for other merger costs, including direct incremental costs (including fees of financial advisors, legal counsel and other costs). These charges totaled $19.5 million for the nine months ended September 30, 1999.

See Note 4 to the consolidated financial statements for further discussion of 2000 and 1999 restructuring and other merger-related costs.

On October 6, 2000, the Company completed the sale of VNG to AGL Resources Inc. Cash proceeds from the sale amounted to $533 million. The gain on the sale of VNG will be reflected in fourth quarter results. CNG was required to spin-off or sell VNG pursuant to conditions set forth by the Virginia State Corporation Commission and Federal Trade Commission in connection with their approval of the acquisition of CNG by Dominion.

CNG International engages in energy-related activities outside of the United States and at September 30, 2000, held equity investments in Australia and Argentina. Consistent with its strategy to focus on its core business, in the first quarter of 2000, management committed to a plan of disposal for CNG International. The Company recognized losses related to CNG International for the nine months ended September 30, 2000 of $152.3 million ($98.9 million after tax). The Company believes it is probable that, as part of a sale of its Australian investments, it will be required to make a $100 million equity contribution pursuant to the Equity Contribution Agreement discussed in Note 14 to the Consolidated Financial Statements included in the January 27, 2000 Form 8-K filed by CNG. See Note 7 to the Consolidated Financial Statements.

On July 7, 2000, Sempra Energy International, a subsidiary of Sempra Energy, agreed to purchase CNG International's Argentine assets. On October 12, 2000, CNG International completed the sale of its Argentine assets to Sempra Energy International for $145.0 million in cash.

Retail natural gas competition is now common place across several of the states where the Company maintains distribution operations. In Ohio, a natural gas customer choice program is being offered throughout the service territory of East Ohio Gas. Pennsylvania natural gas utility customers are now entering the second year in which they have the opportunity to choose their supplier.

In June 2000, the Financial Accounting Standards Board (FASB) issued SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, which amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 138 addresses a limited number of SFAS No. 133 implementation issues including expanded availability of exclusions of normal purchase and normal sale agreements from classification as derivatives.

Management has determined that certain contracts will be subject to fair value accounting under SFAS No. 133. A substantial portion of these contracts is used by CNG in its production and delivery of energy to its customers and involves various hedging strategies. The Company is currently documenting these hedging strategies and assessing effectiveness thereof in anticipation of implementation of the standard. The Company expects any ineffectiveness related to its hedging strategies to primarily result from the time value component of certain options as well as from basis risks that may not be hedged. In addition to these commodity contracts, CNG uses interest rate swaps to manage its cost of capital.

CNG will report a cumulative effect of a change in accounting principle in the first quarter of 2001. The effect of implementation will be to adjust stockholder's equity through other comprehensive income for effective cash flow hedging strategies and the remaining impact will affect earnings. CNG has not estimated the impact that will result from the adoption of SFAS No. 133, but believes it could be material, depending primarily on (1) market prices at January 1, 2001; (2) changes in the population of affected contracts between the date of this report and January 1, 2001; and (3) resolution of certain industry issues which may involve further interpretation by the Derivatives Implementation Group, a group sponsored by the FASB.

ITEM 5. OTHER INFORMATION

As previously reported, Dominion and CNG reached an agreement with AGL Resources, Inc. regarding the sale of VNG. On October 6, 2000, the Company completed the sale. See Note (7) to the Consolidated Financial Statements for more detail.

During the second quarter of 2000, CNG reached an agreement to sell its Argentine natural gas and electricity assets to Sempra Energy International for $145 million, and on October 12, 2000 the Company completed the sale. See Note (7) to the Consolidated Financial Statements for more detail.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

(b) Reports on Form 8-K:

None

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.