Form U-13-60
Mutual and Subsidiary Service Companies
Revised February 7, 1980
ANNUAL REPORT
For the Period
Beginning January 1, 1993 and Ending December 31, 1993
TO THE
U. S. SECURITIES AND EXCHANGE COMMISSION
OF
CONSOLIDATED NATURAL GAS SERVICE COMPANY, INC.
A Subsidiary Service Company
Date of Incorporation: October 27, 1961
State or Sovereign Power under which Incorporated or Organized: Delaware
Location of Principal Executive Offices of Reporting Company:
CNG Tower
625 Liberty Avenue
Pittsburgh, PA 15222-3199
Name, title, and address of officer to whom correspondence concerning this
report should be addressed:
Stephen R. McGreevy, Vice President
Accounting and Financial Control
CNG Tower
625 Liberty Avenue
Pittsburgh, PA 15222-3199
Name of Principal Holding Company Whose Subsidiaries are served
by Reporting Company:
Consolidated Natural Gas Company
<PAGE>
INSTRUCTIONS FOR USE OF FORM U-13-60
1. TIME OF FILING. Rule 94 provides that on or before the first day of May in
each calendar year, each mutual service company and each subsidiary service
company as to which the Commission shall have made a favorable finding pursuant
to Rule 88, and every service company whose application for approval or
declaration pursuant to Rule 88 is pending shall file with the Commission an
annual report on Form U-13-60 and in accordance with the Instructions for that
form.
2. NUMBER OF COPIES. Each annual report shall be filed in duplicate. The
company should prepare and retain at least one extra copy for itself in case
correspondence with reference to the report become necessary.
3. PERIOD COVERED BY REPORT. The first report filed by any company shall
cover the period from the date the Uniform System of Accounts was required to
be made effective as to that company under Rules 82 and 93 to the end of that
calendar year. Subsequent reports should cover a calendar year.
4. REPORT FORMAT. Reports shall be submitted on the forms prepared by the
Commission. If the space provided on any sheet of such form is inadequate,
additional sheets may be inserted of the same size as a sheet of the form or
folded to such size.
5. MONEY AMOUNTS DISPLAYED. All money amounts required to be shown in
financial statements may be expressed in whole dollars, in thousands of dollars
or in hundred thousands of dollars, as appropriate and subject to provisions of
Regulation S-X (Section 210.3-01(b)).
6. DEFICITS DISPLAYED. Deficits and other like entries shall be indicated by
the use of either brackets or a parenthesis with corresponding reference in
footnotes. (Regulation S-X, Section 210.3-01(c)).
7. MAJOR AMENDMENTS OR CORRECTIONS. Any company desiring to amend or correct
a major omission or error in a report after it has been filed with the
Commission shall submit an amended report including only those pages,
schedules, and entries that are to be amended or corrected. A cover letter
shall be submitted requesting the Commission to incorporate the amended report
changes and shall be signed by a duly authorized officer of the company.
8. DEFINITIONS. Definitions contained in Instruction 01-8 to the Uniform
System of Accounts for Mutual Service Companies and Subsidiary Service
Companies, Public Utility Holding Company Act of 1935, as amended February 2,
1979 shall be applicable to words or terms used specifically within this Form
U-13-60.
9. ORGANIZATION CHART. The service company shall submit with each annual
report a copy of its current organization chart.
2
<PAGE>
10. METHODS OF ALLOCATION. The service company shall submit with each annual
report a listing of the currently effective methods of allocation being used by
the service company and on file with the Securities and Exchange Commission
pursuant to the Public Utility Holding Company Act of 1935.
11. ANNUAL STATEMENT OF COMPENSATION FOR USE OF CAPITAL BILLED. The service
company shall submit with each annual report a copy of the annual statement
supplied to each associate company in support of the amount of compensation for
use of capital billed during the calendar year.
12. ELECTRONIC FILERS. Electronic filers are subject to Regulation S-T and
the EDGAR Filer Manual. Any rule or instruction therein shall be controlling
unless otherwise specifically provided in rules or instructions pertaining to
the submission of this form.
Requirements as to multiple copies filed with the Commission do not apply
to electronic format documents.
Data that appears in tabular or columnar format shall be marked as
prescribed in the EDGAR Filer Manual.
Signatures shall be in typed form rather than manual format. See rule 13
of Regulation S-T.
3
<PAGE>
LISTING OF SCHEDULES AND ANALYSIS OF ACCOUNTS
Schedule or Page
Description of Schedules and Accounts Account Number Number
COMPARATIVE BALANCE SHEET Schedule I 5-6
Service Company Property Schedule II 7-8
Accumulated Provision for Depreciation and
Amortization of Service Company Property Schedule III 9
Investments Schedule IV 10
Accounts Receivable from Associate Companies Schedule V 11
Fuel Stock Expenses Undistributed Schedule VI 12
Stores Expense Undistributed Schedule VII 13
Miscellaneous Current and Accrued Assets Schedule VIII 14
Miscellaneous Deferred Debits Schedule IX 15
Research, Development, or Demonstration
Expenditures Schedule X 16
Proprietary Capital Schedule XI 17
Long-Term Debt Schedule XII 18
Current and Accrued Liabilities Schedule XIII 19
Notes to Financial Statements Schedule XIV 20-25
COMPARATIVE STATEMENT OF INCOME Schedule XV 26
Analysis of Billing - Associate Companies Account 457 27
Analysis of Billing - Nonassociate Companies Account 458 28
Analysis of Charges for Service - Associate
and Nonassociate Companies Schedule XVI 29
Schedule of Expense by Department or
Service Function Schedule XVII 30-33
Departmental Analysis of Salaries Account 920 34
Outside Services Employed Account 923 35-41
Employee Pensions and Benefits Account 926 42
General Advertising Expenses Account 930.1 43
Miscellaneous General Expenses Account 930.2 44
Rents Account 931 45
Taxes Other than Income Taxes Account 408 46
Donations Account 426.1 47
Other Deductions Account 426.5 48
Notes to Statement of Income Schedule XVIII 49
LISTING OF INSTRUCTIONAL FILING REQUIREMENTS
Page
Description of Reports or Statements Number
ORGANIZATION CHART 50
METHODS OF ALLOCATION 51
ANNUAL STATEMENT OF COMPENSATION FOR USE OF CAPITAL BILLED 52-53
4
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
SCHEDULE I - COMPARATIVE BALANCE SHEET
Give balance sheet of the Company as of December 31
of the current and prior year
As of
Account Assets and Other Debits December 31
Current Prior
1993 1992
(In Thousands)
SERVICE COMPANY PROPERTY
101 Service company property (Schedule II) $ 23,071 $ 22,168
107 Construction work in progress (Schedule II) - -
__________________
Total Property $ 23,071 $ 22,168
__________________
108 Less accumulated provision for depreciation
and amortization of service company property
(Schedule III) $ 13,473 $ 11,983
__________________
Net Service Company Property $ 9,598 $ 10,185
__________________
INVESTMENTS
123 Investments in associate companies (Schedule IV) - -
124 Other investments (Schedule IV) - -
__________________
Total Investments - -
==================
CURRENT AND ACCRUED ASSETS
131 Cash $ 675 $ 444
134 Special deposits 2 2
135 Working funds 22 23
136 Temporary cash investments (Schedule IV) - 12,500
141 Notes receivable - -
143 Accounts receivable 723 737
144 Accumulated provision for uncollectible accounts - -
146 Accounts receivable from associate companies
(Schedule V and XIV-Note 6) 525,869 531,010
152 Fuel stock expenses undistributed (Schedule VI) - -
154 Materials and supplies - -
163 Stores expense undistributed (Schedule VII) - -
165 Prepayments 44 134
174 Miscellaneous current and accrued assets
(Schedule VIII) 1 6
__________________
Total Current and Accrued Assets $527,336 $544,856
__________________
DEFERRED DEBITS
181 Unamortized debt expense $ - $ -
184 Clearing accounts - -
186 Miscellaneous deferred debits (Schedule IX) 3,384 3,294
188 Research, development, or demonstration
expenditures (Schedule X) - -
190 Accumulated deferred income taxes 2,226 213
__________________
Total Deferred Debits $ 5,610 $ 3,507
__________________
TOTAL ASSETS AND OTHER DEBITS $542,544 $558,548
==================
5
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
SCHEDULE I - COMPARATIVE BALANCE SHEET
As of
Account Liabilities and Proprietary Capital December 31
Current Prior
1993 1992
(In Thousands)
PROPRIETARY CAPITAL
201 Common stock issued (Schedule XI) $ 10 $ 10
211 Miscellaneous paid-in-capital (Schedule XI) - -
215 Appropriated retained earnings (Schedule XI) - -
216 Unappropriated retained earnings (Schedule XI) - -
__________________
Total Proprietary Capital $ 10 $ 10
__________________
LONG-TERM DEBT
223 Advances from associate companies (Schedule XII) $ 14,631 $ 14,631
224 Other long-term debt (Schedule XII) - -
225 Unamortized premium on long-term debt - -
226 Unamortized discount on long-term debt-debit - -
__________________
Total Long-Term Debt $ 14,631 $ 14,631
__________________
CURRENT AND ACCRUED LIABILITIES
231 Notes payable $ - $ -
232 Accounts payable 2,378 2,431
233 Notes payable to associate companies
(Schedule XIII and XIV-Note 6) 516,199 533,659
234 Accounts payable to associate companies
(Schedule XIII and XIV-Note 6) 2,569 3,415
236 Taxes accrued 500 381
237 Interest accrued - -
238 Dividends declared - -
241 Tax collections payable 77 116
242 Miscellaneous current and accrued liabilities
(Schedule XIII) 1,992 1,927
__________________
Total Current and Accrued Liabilities $523,715 $541,929
__________________
DEFERRED CREDITS
253 Other deferred credits $ 2,701 $ 1,978
255 Accumulated deferred investment tax credits - -
__________________
Total Deferred Credits $ 2,701 $ 1,978
__________________
282 ACCUMULATED DEFERRED INCOME TAXES $ 1,487 $ -
__________________
TOTAL LIABILITIES AND PROPRIETARY CAPITAL $542,544 $558,548
==================
6
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
SCHEDULE II - SERVICE COMPANY PROPERTY
Balance At Retirements Balance At
Beginning or Other Close of
Description of Year Additions Sales Changes(1) Year
SERVICE COMPANY
PROPERTY
Account
301 Organization $ 1 $ - $ - $ - $ 1
303 Miscellaneous
Intangible
Plant - - - - -
304 Land and Land
Rights 111 - - - 111
305 Structures and
Improvements 4,211 3 - - 4,214
306 Leasehold
Improvements 5,637 1 - - 5,638
307 Equipment(2) 6,281 1,258 316 - 7,223
308 Office
Furniture
and Equip-
ment 5,780 43 17 - 5,806
309 Automobiles,
Other
Vehicles and
Related
Garage Equip-
ment 147 - 69 - 78
310 Aircraft and
Airport
Equipment - - - - -
311 Other Service
Company
Property(3) - - - - -
____________________________________________________
Subtotal $ 22,168 $ 1,305 $ 402 $ - $ 23,071
____________________________________________________
107 Construction
Work in
Progress(4) - - - - -
____________________________________________________
Total $ 22,168 $ 1,305 $ 402 $ - $ 23,071
====================================================
(1) Provide an explanation of those changes considered material:
Not Applicable
7
<PAGE>
SCHEDULE II - CONTINUED
(2) Subaccounts are required for each class of equipment owned. The service
company shall provide a listing by subaccount of equipment additions
during the year and the balance at the close of the year:
Balance at
Close of
Subaccount Description Additions Year
(In Thousands)
Computer Services Equipment
Hardware $ 1,169 $ 6,198
Software - 471
Typewriters, Calculators, Copiers & Duplicating 89 330
Office Services Printing and Stationery Equipment - 10
Controller's Department Computer Software - 128
Auditing Department Computer Software - 35
Employee Benefits Department Computer Software - 51
_______________________
TOTAL $ 1,258 $ 7,223
=======================
(3) Describe Other Service Company Property:
Not Applicable
(4) Describe Construction Work in Progress:
Not applicable.
8
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
SCHEDULE III
ACCUMULATED PROVISION FOR DEPRECIATION AND
AMORTIZATION OF SERVICE COMPANY PROPERTY
Additions Other
Charged Changes
Balance At to Add Balance At
Beginning Account (Deduct) Close of
Description of Year 403 Retirements (1) Year
Account
301 Organization $ - $ - $ - $ - $ -
303 Miscellaneous
Intangible
Plant - - - - -
304 Land and Land
Rights - - - - -
305 Structures and
Improvements 820 119 - - 939
306 Leasehold
Improvements 1,478 296 - - 1,774
307 Equipment 4,841 1,027 316 - 5,552
308 Office
Furniture and
Fixtures 4,698 456 17 - 5,137
309 Automobiles,
Other
Vehicles and
Related
Garage Equip-
ment 146 15 69 (21) 71
310 Aircraft and
Airport
Equipment - - - - -
311 Other Service
Company
Property - - - - -
_____________________________________________________
TOTAL $ 11,983 $ 1,913 $ 402 $ (21) $ 13,473
=====================================================
(1) Provide an explanation of those changes considered material:
9
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
SCHEDULE IV - INVESTMENTS
INSTRUCTIONS: Complete the following schedule concerning investments.
Under Account 124, "Other Investments", state each investment
separately, with description, including, the name of issuing
company, number of shares or principal amount, etc.
Under Account 136, "Temporary Cash Investments", list each
investment separately.
Balance At Balance At
Beginning Close
Description of Year of Year
Account 123 - Investment in Associate Companies None None
Account 124 - Other Investments None None
Account 136 - Temporary Cash Investments
Bayerische Verinsbank $12,500 $ -
_____________________
TOTAL $12,500 $ -
=====================
10
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
SCHEDULE V - ACCOUNTS RECEIVABLE FROM ASSOCIATE COMPANIES
INSTRUCTIONS: Complete the following schedule listing accounts receivable
from each associate company. Where the service company has
provided accomodation or convenience payments for associate
companies, a separate listing of total payments for each
associate company by subaccount should be provided.
Balance At Balance At
Beginning Close
Description of Year of Year
Account 146 - Accounts Receivable from Associate
Companies
Consolidated Natural Gas Company $ 203 $ 141
The East Ohio Gas Company 180,259 204,725
The Peoples Natural Gas Company 68,164 45,773
CNG Transmission Corporation 219,170 185,659
The River Gas Company 3,222 4,727
Hope Gas, Inc. 10,664 9,738
West Ohio Gas Company 11,499 14,660
CNG Producing Company 571 429
CNG Energy Company 7,906 7,910
CNG Gas Services Corporation 53 23,835
Virginia Natural Gas, Inc. 26,488 28,270
CNG Storage Service Company 2,811 2
______________________
TOTAL $531,010 $525,869
======================
Total
Analysis of Convenience or Accommodation Payments: Payments
Consolidated Natural Gas Company $ 35
The East Ohio Gas Company 3,746
The Peoples Natural Gas Company 4,924
CNG Transmission Corporation 4,609
The River Gas Company 57
Hope Gas, Inc. 437
West Ohio Gas Company 162
Consolidated System LNG Company 1
CNG Producing Company 4,754
CNG Energy Company 157
CNG Gas Services Corporation 23
Virginia Natural Gas, Inc. 510
________
TOTAL PAYMENTS $ 19,415
========
The majority of these payments were for system insurance,
system employee benefit plans, sub-lease rentals, system
memberships and training.
11
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
SCHEDULE VI - FUEL STOCK EXPENSES UNDISTRIBUTED
INSTRUCTIONS: Report the amount of labor and expenses incurred with respect
to fuel stock expenses during the year and indicate amount
attributable to each associate company. Under the section
headed "Summary" listed below give an overall report of the
fuel functions performed by the service company.
Description Labor Expenses Total
Account 152 - Fuel Stock Expenses Undistributed None None None
_________________________
TOTAL None None None
=========================
Summary:
Not Applicable
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<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
SCHEDULE VII - STORES EXPENSE UNDISTRIBUTED
INSTRUCTIONS: Report the amount of labor and expenses incurred with respect
to stores expense during the year and indicate amount
attributable to each associate company.
Description Labor Expenses Total
Account 163 - Stores Expense Undistributed None None None
_________________________
TOTAL None None None
=========================
13
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
SCHEDULE VIII - MISCELLANEOUS CURRENT AND ACCRUED ASSETS
INSTRUCTIONS: Provide detail of items in this account. Items less than
$10,000 may be grouped, showing the number of items in each
group.
Balance At Balance At
Beginning Close
Description of Year of Year
Account 174 - Miscellaneous Current and
Accrued Assets
Interest-Federal Income Taxes $ 5 $ 1
Interest Receivable - Money Pool 1 -
___________________
TOTAL $ 6 $ 1
===================
14
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
SCHEDULE IX - MISCELLANEOUS DEFERRED DEBITS
INSTRUCTIONS: Provide detail of items in this account. Items less than
$10,000 may be grouped by class showing the number of items
in each class.
Balance At Balance At
Beginning Close
Description of Year of Year
Account 186 - Miscellaneous Deferred Debits
Pension Supplement Intangible Asset $ 1,166 $ 779
Prepaid Pension Costs 1,244 2,149
Prepaid IBM/LPC Maintenance 314 210
New York Office Leasehold Improvements - 15
Deferred Compensation Expense 570 231
_____________________
TOTAL $ 3,294 $ 3,384
=====================
15
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
SCHEDULE X - RESEARCH, DEVELOPMENT, OR DEMONSTRATION EXPENDITURES
INSTRUCTIONS: Provide a description of each material research, development,
or demonstration project which incurred costs by the service
corporation during the year.
Description Amount
Account 188 - Research, Development, or Demonstration
Expenditures
Residential and Commercial Gas Utilization $ 508
Industrial Gas Utilization 344
Clean Air Compliance 217
Power Plants 170
Cofiring 163
Transportation 124
Technology Transfer 28
Gas Supply 6
________
Subtotal $ 1,560
Amount Billed to System Companies (1,560)
________
TOTAL $ -
========
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<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
SCHEDULE XI - PROPRIETARY CAPITAL
Outstanding
Number of Par or Stated Close of Period
Account Shares Value No. of Total
Number Class of Stock Authorized Per Share Shares Amount
201 Common Stock Issued 25,000 $100.00 100 $10,000
===========================================
INSTRUCTIONS: Classify amounts in each account with brief explanation,
disclosing the general nature of transactions which gave rise
to the reported amounts.
Description Amount
Account 211 - Miscellaneous Paid-In Capital None
____
Account 215 - Appropriated Retained Earnings None
====
TOTAL None
INSTRUCTIONS: Give particulars concerning net income or (loss) during the
year, distinguishing between compensation for the use of
capital owed or net loss remaining from servicing
nonassociates per the General Instructions of the Uniform
System of Accounts. For dividends paid during the year in
cash or otherwise, provide rate percentage, amount of
dividend, date declared and date paid.
Balance At Net Income Balance At
Beginning or Dividends Close
Description of Year (Loss) Paid of Year
Account 216 - Unappropriated
Retained
Earnings
- - - -
__________________________________________
TOTAL None None None None
==========================================
17
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
SCHEDULE XII - LONG-TERM DEBT
INSTRUCTIONS: Advances from associate companies should be reported separately for advances on notes, and advances on open
account. Names of associate companies from which advances were received shall be shown under the class and
series of obligation column. For Account 224 - Other long-term debt provide the name of creditor company or
organization, terms of the obligation, date of maturity, interest rate, and the amount authorized and
outstanding.
<CAPTION>
Terms of Oblig Date Balance At Balance
Class & Series of Interest Amount Beginning Deductions at Close
of Obligation Maturity Rate Authorized of Year Additions (1) of Year
Account 223 - Advances from
Associate Companies:
<S> <C> <C> <C> <C> <C> <C> <C>
*Consolidated Natural
Gas Company 1998 7.75% $ 900 $ 795 $ - $ 795 $ -
Consolidated Natural
Gas Company 1996-2011 9.50% 3,836 3,836 - - 3,836
Consolidated Natural
Gas Company 1999 8.900% 5,000 5,000 - - 5,000
Consolidated Natural
Gas Company 1998 6.200% 5,000 5,000 - - 5,000
Consolidated Natural
Gas Company 2003 6.100% 795 - 795 - 795
Account 224 - Other Long-Term Debt: - - - - - - -
____________________________________________________
TOTAL $15,531 $14,631 $ 795 $ 795 $14,631
====================================================
<FN>
(1) GIVE AN EXPLANATION OF DEDUCTIONS:
*Note was retired effective November 30, 1993 and new note was issued on November 30, 1993 for $795,000 at 6.100%.
</TABLE>
18
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company,Inc.
For the Year Ended December 31, 1993
(In Thousands)
SCHEDULE XIII - CURRENT AND ACCRUED LIABILITIES
INSTRUCTIONS: Provide balance of notes and accounts payable to each
associate company. Give description and amount of
miscellaneous current and accrued liabilities. Items less
than $10,000 may be grouped, showing the number of items in
each group.
Balance At Balance At
Beginning Close
Description of Year of Year
Account 233 - Notes Payable to Associate Companies
Consolidated Natural Gas Company $435,704 $361,129
Consolidated System LNG Company 42,550 42,895
CNG Producing Company 39,255 98,665
CNG Research Company 45 70
CNG Coal Company 5,435 5,435
CNG Energy Company 5,545 7,390
CNG Gas Services Corporation 5,125 -
CNG Storage Service Company - 615
______________________
TOTAL $533,659 $516,199
======================
Account 234 - Accounts Payable to Associate
Companies
Consolidated Natural Gas Company $ 2,766 $ 1,900
The East Ohio Gas Company 5 9
The Peoples Natural Gas Company 10 12
CNG Transmission Corporation 168 217
Consolidated System LNG Company 172 129
CNG Producing Company 101 251
CNG Research Comapny 155 12
CNG Coal Company 20 17
CNG Energy Company 15 21
CNG Gas Services Corporation 3 -
CNG Storage Service Company - 1
______________________
TOTAL $ 3,415 $ 2,569
======================
Account 242 - Miscellaneous Current and Accrued
Liabilities
Accrued Vacation Pay $ 1,335 $ 1,397
Deferred Compensation 451 555
U. S. Savings Bond Deduction - 4
Miscellaneous 141 36
______________________
TOTAL $ 1,927 $ 1,992
======================
19
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
SCHEDULE XIV - NOTES TO FINANCIAL STATEMENTS
INSTRUCTIONS: The space below is provided for important notes regarding the
financial statements or any account thereof. Furnish
particulars as to any significant contingent assets or
liabilities existing at the end of the year. Notes relating
to financial statements shown elsewhere in this report may be
indicated here by reference.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of Consolidated Natural Gas Service Company,
Inc. ("the Company") are summarized in this Note.
Property, Plant and Equipment and Depreciation
The property, plant and equipment accounts consist of investment in a Data
Center including computer equipment, office furniture and equipment, leasehold
improvements and other items which are stated at "original cost". Additions
and betterments are charged to the property accounts at cost. Upon normal
retirement of a plant asset, its cost is charged to accumulated depreciation
together with costs of removal less salvage. The costs of maintenance, repairs
and replacing minor items are charged principally to expense as incurred.
Depreciation and Amortization
Depreciation and amortization are recorded over the estimated service lives of
plant assets by application of straight-line or accelerated methods.
Income Taxes
The current provision for federal income taxes of the Company is its portion of
the estimated consolidated tax based on a consolidated return filed by
Consolidated Natural Gas Company (Parent Company). The Company's portion has
been determined pursuant to an intercompany tax allocation agreement, as
amended, entered into by the Parent Company and the System companies, as
required by the Public Utility Holding Company Act of 1935.
Change in Accounting
Effective January 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
The adoption of SFAS No. 109 changed the Company's method of accounting for
income taxes from the deferred method to an asset and liability approach.
Under SFAS No. 109, deferred tax liabilities and assets are recognized for the
expected future tax consequences attributable to temporary differences between
the carrying amounts of assets and liabilities and their tax bases. In
addition, such deferred tax asset and liability amounts are adjusted for the
effects of enacted changes in tax laws or rates. Under the previous income tax
accounting principle, deferred income taxes were generally provided for the tax
effects of timing differences between the recognition of revenue and expense
for income tax purposes and financial reporting purposes. Once recognized, tax
balances were not adjusted for subsequent changes in tax laws or rates.
The cumulative effect on years prior to 1993 of applying SFAS No. 109 amounted
to $444,000, and is included as a reduction to the 1993 deferred income tax
expense in the Statement of Income. This cumulative effect adjustment resulted
primarily from the reduction in previously recorded deferred income tax
balances. The application of SFAS No. 109 had no effect on reported pretax
earnings.
20
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
SCHEDULE XIV - NOTES TO FINANCIAL STATEMENTS (Continued)
Change in Tax Rule
On August 10, 1993, the federal corporate income tax rate was increased from
34% to 35%, retroactive to January 1, 1993. As required by SFAS No. 109,
existing deferred tax assets and liabilities were adjusted to reflect this
enacted tax rate change. As a result, deferred income tax expense was
increased in 1993 by $205,000.
2. PENSION AND OTHER BENEFIT PROGRAMS
Pension Program
All employees of the Company are covered under the Consolidated System's
qualified noncontributory defined benefit pension plans. Benefits payable
under the plans are based primarily on each employee's years of service, age
and base salary during the five years prior to retirement. The plans are
funded on an annual basis to the extent such funding is deductible under
federal income tax regulations. Plan assets consist primarily of equity
securities, fixed income securities and insurance contracts. The System
pension program also includes the payment of supplemental pension benefits to
certain retirees depending on retirement dates.
Pension expense (or credit), which includes the costs of defined benefit
pension plans and pension supplements, was $54,000 and $(192,000) for the years
ended December 31, 1992 and 1993, respectively. The net pension costs, which
were determined by an independent actuary, are included in "Employee pensions
and benefits" in the Statement of Income.
In accordance with the requirements of Statement of Financial Accounting
Standards No. 87, "Employers' Accounting for Pensions," the Company has
recognized a liability for the unfunded accumulated benefit obligation relating
to its supplemental pension benefit plans. An amount equal to the liability
has also been recognized as an intangible asset. Such amounts recognized are
subject to future revision based on both changes in assumptions and changes in
the financial status of the supplemental pension benefit plans.
Other Postretirement Benefits
In addition to pension plans, the Company sponsors defined benefit
postretirement plans covering both salaried and hourly employees and certain
dependents. The plans provide medical benefits as well as life insurance
coverage. These benefits are provided through insurance companies and other
providers with the annual cash outlays based on the claim experience of the
related plans.
Employees who retire from System companies on or after attaining age 55 and
having rendered at least 15 years of service, or employees retiring on or after
attaining age 65, are eligible to receive benefits under the plans. The plans
are both contributory and noncontributory, depending on age, retirement date,
the plan elected by the employee, and whether the employee is covered under a
collective bargaining agreement. Most of the medical plans contain cost-
sharing features such as deductibles and coinsurance. For certain of the
contributory medical plans, retiree contributions are adjusted annually.
21
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
SCHEDULE XIV - NOTES TO FINANCIAL STATEMENTS (Continued)
Change in Accounting
As required, the Company adopted Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," effective January 1, 1993. This standard required a change from the
practice of recognizing such costs on a pay-as-you-go basis to an accrual
method. Under the standard, the estimated future costs of providing
postretirement benefits are recognized as an expense and a corresponding
liability during the employees' service periods. For the current contributory
postretirement medical plans, the calculations under SFAS No. 106 anticipate
future changes in cost-sharing that are included in the written plan.
As permitted by the standard, the Company elected to amortize the accumulated
postretirement benefit obligation existing at the date of adoption of
$8,246,000 (transition obligation) over a 20-year period. Net periodic
postretirement benefit cost for the year ended December 31, 1993 was $1,497,000
as determined by an independent actuary. Prior to 1993, amounts paid for
postretirement benefits were recognized as an expense in the period paid.
FASB Statement No. 112
In November 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits." This Statement covers benefits such as salary
continuation, severance pay and disability-related benefits provided to
inactive and former employees prior to retirement. The standard requires the
accrual of a liability for the postemployment benefit obligations if certain
specified conditions are met. Statement No. 112 is effective for fiscal years
beginning after December 15, 1993. Based on management's current estimates and
assumptions, the adoption of the standard is not expected to have a material
effect on the Company's financial position, results of operations or cash
flows.
3. LONG-TERM DEBT
There is no long-term debt maturing in the years 1994 and 1995. The aggregate
principal amounts of the Company's long-term debt maturing in the years 1996
through 1998 are: $239,800; $239,800; and $6,034,800.
The notes payable to the Parent Company bear interest at rates predicated on
and substantially equal to the effective cost of money to the Parent Company
secured through the issuance of its debt securities.
4. COMMITMENTS AND CONTINGENCIES
Lease arrangements of the Company are principally for office space, business
machines and transportation equipment. None of these arrangements,
individually or in the aggregate, are material capital leases. Rental expense,
which in large part represents minimum rentals, incurred in the years 1992 and
1993 was $6,431,000 and $6,272,000, respectively, which is so reflected in the
Statement of Income. Contingent and sublease rentals were not material.
Future minimum rental payments in the aggregate amount to $65,810,000 and for
the years 1994 through 1998 are: $4,982,000; $4,862,000; $4,775,000;
$4,783,000 and $4,780,000. The Company has the option to purchase equipment
from International Business Machines, Inc. at fair market value of the leased
property exercisable at any time.
22
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
SCHEDULE XIV - NOTES TO FINANCIAL STATEMENTS (Continued)
The approved capital budget for 1994 amounts to approximately $1,318,000. In
this connection, the Company has entered into certain contractual commitments.
5. MONEY POOL
Since 1986, the Parent Company and its subsidiaries have participated in the
Consolidated Natural Gas System Money Pool ("Pool") which is administered by
the Company on behalf of the participants. The operation of the Pool was
authorized by the Securities and Exchange Commission in Public Utility Holding
Company Act of 1935 Release No. 24128 (File No. 70-7258).
Participants contribute the amount of their available funds to the Pool based
on cash flow projections. The short-term financing requirements of
participants, with the exception of the Parent Company, are satisfied by
advances from the Pool. After satisfaction of the borrowing needs of
participants and after any possible prepayment of outstanding indebtedness, the
Company, as agent for the Pool, invests the excess funds on a short-term basis.
Participants providing funds to the Pool share in the interest earned on these
investments on a basis proportionate to their investment in the Pool.
Participants borrowing from the Pool pay interest generally at a rate
equivalent to the effective cost of short-term borrowings to the Parent
Company. Participants may withdraw their investments in the Pool at any time.
Borrowings from the Pool are payable on demand, and may be prepaid at any time
without premium or penalty.
23
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
SCHEDULE XIV - NOTES TO FINANCIAL STATEMENTS (Continued)
At December 31, 1993, the detail of the pool was as follows:
Investment in Pool (including interest)
Consolidated Natural Gas Company $362,423,000
Consolidated System LNG Company 43,017,000
CNG Producing Company 98,913,000
CNG Research 70,000
CNG Coal Company 5,450,000
CNG Energy Company 7,411,000
CNG Storage Service Company 617,000 $517,901,000
____________
Consolidated Natural Gas Service Company 3,780,000
____________
Subtotal 521,681,000
____________
Less:
Borrowings from Pool (including interest)
The East Ohio Gas Company $203,563,000
The Peoples Natural Gas Company 44,687,000
CNG Transmission Corporation 185,042,000
The River Gas Company 4,663,000
Hope Gas, Inc. 9,651,000
West Ohio Gas Company 14,585,000
CNG Energy Company 7,777,000
CNG Gas Services Corporation 23,645,000
Virginia Natural Gas, Inc. 28,068,000 521,681,000
___________
____________
Subtotal 521,681,000
____________
Total $ -
============
Temporary Cash Investments $ -
Interest Receivable - Money Pool -
____________
Total $ -
============
24
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
SCHEDULE XIV - NOTES TO FINANCIAL STATEMENTS (Concluded)
6. AFFILIATED ACCOUNTS
The amounts reported in this Form U-13-60 are on a general ledger account
basis. Affiliated company receivables and payables are detailed on Schedule V,
page 11, and Schedule XIII, page 19, respectively. The amounts reported in
Form U5S are on a summary basis with right of offset and groupings of similar
items. A reconciliation of affiliated receivables and payables at December 31,
1993, is as follows:
As Reported As Reported
Affiliated Accounts in Form U-13-60 in Form U5S Difference
Accounts Receivable $525,869,000 $517,648,000 $ 8,221,000
============
Notes Payable $516,199,000 - $516,199,000
Accounts Payable 2,569,000 - 2,569,000
Payables to Affiliated Companies - $510,547,000 (510,547,000)
____________
$ 8,221,000
============
25
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Years Ended December 31, 1993 and 1992
(In Thousands)
SCHEDULE XV - COMPARATIVE STATEMENT OF INCOME
Current Prior
Description Year Year
Account 1993 1992
INCOME
457 Services rendered to associate companies $53,439 $49,331
458 Services rendered to nonassociate companies - -
421 Miscellaneous income or loss 61 10
_________________
Total Income $53,500 $49,341
_________________
EXPENSE
920 Salaries and wages $19,617 $18,957
921 Office supplies and expenses 4,444 3,791
922 Administrative expense transferred - credit (369) (273)
923 Outside services employed 8,907 8,135
924 Property insurance - -
925 Injuries and damages 9 166
926 Employee pensions and benefits 7,042 6,548
928 Regulatory commission expense - -
930.1 General advertising expenses - -
930.2 Miscellaneous general expenses 2,108 286
931 Rents 6,272 6,431
932 Maintenance of structures and equipment 738 650
403 Depreciation and amortization expense 1,913 1,769
408 Taxes other than income taxes 1,483 1,453
409 Income taxes 430 (441)
410 Provision for deferred income taxes 731 798
411 Provision for deferred income taxes - credit (717) (358)
411.5 Investment tax credit - -
426.1 Donations - -
426.5 Other deductions 32 24
427 Interest on long-term debt - -
430 Interest on debt to associate companies 1,270 1,381
431 Other interest expense 34 24
435 Cumulative effect of accounting
change (SFAS No. 109) (444) -
_________________
Total Expense $53,500 $49,341
_________________
Net Income or (Loss) None None
=================
26
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
ANALYSIS OF BILLING
ASSOCIATE COMPANIES - ACCOUNT 457
Direct Indirect Compensation Total
Costs Costs For Use Amount
Name of Associate Company Charged Charged of Capital Billed
457-1(A) 457-2(B) 457-3(C)
Consolidated Natural Gas Company $ 1,174 $ 641 $ 39 $ 1,854
The East Ohio Gas Company 10,272 4,270 364 14,906
The Peoples Natural Gas Company 4,829 2,048 172 7,049
CNG Transmission Corporation 8,324 3,725 287 12,336
The River Gas Company 233 99 8 340
Hope Gas, Inc. 1,417 622 49 2,088
West Ohio Gas Company 628 259 23 910
Consolidated System LNG Company 10 6 - 16
CNG Producing Company 4,366 1,997 151 6,514
CNG Research Company 170 92 6 268
CNG Coal Company 6 3 - 9
CNG Energy Company 1,135 548 33 1,716
CNG Gas Services Corporation 742 391 24 1,157
Virginia Natural Gas, Inc. 2,993 1,165 114 4,272
CNG Storage Service Company 3 1 - 4
(A) The amount of direct costs
charged $36,302 is net of $23
miscellaneous income.
(B) The amount of indirect costs
charged $15,866 is net of $38
miscellaneous income.
(C) Includes $310 which was directly
billed to associated companies
and $960 which was indirectly
billed to associated companies.
________________________________________
TOTAL $36,302 $15,867 $ 1,270 $53,439
========================================
27
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
ANALYSIS OF BILLING
NONASSOCIATE COMPANIES - ACCOUNT 458
Name of Direct Indirect Compensation Excess Total
Nonassociate Cost Cost For Use Total or Amount
Company Charged Charged Of Capital Cost Deficiency Billed
458-1 458-2 458-3 458-4
None
INSTRUCTION: Provide a brief description of the services rendered to each
nonassociate company:
Not Applicable
28
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
SCHEDULE XVI - ANALYSIS OF CHARGES FOR SERVICE
<CAPTION>
ASSOCIATE AND NONASSOCIATE COMPANIES
Associate Nonassociate
Company Charges Company Charges Total Charges for Service
Direct Indirect Direct Indirect Direct Indirect
Description of Items Cost Cost Total Cost Cost Total Cost Cost Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
920 Salaries and Wages $ 16,107 $ 3,510 $19,617 $16,107 $ 3,510 $19,617
921 Office Supplies and Expenses 3,529 915 4,444 3,529 915 4,444
922 Administrative Expense Transferred -
Credit (318) (51) (369) (318) (51) (369)
923 Outside Services Employed 5,759 3,148 8,907 5,759 3,148 8,907
924 Property Insurance - - - - - -
925 Injuries and Damages 44 (35) 9 44 (35) 9
926 Employee Pensions and Benefits 1,537 5,505 7,042 1,537 5,505 7,042
928 Regulatory Commission Expense - - - - - -
930.1 General Advertising Expenses - - - - - -
930.2 Miscellaneous General Expenses 2,028 80 2,108 2,028 80 2,108
931 Rents 4,965 1,307 6,272 4,965 1,307 6,272
932 Maintenance of Structures and Equipment 652 86 738 652 86 738
403 Depreciation and Amortization Expense 1,643 270 1,913 1,643 270 1,913
408 Taxes Other than Income Taxes 350 1,133 1,483 350 1,133 1,483
409 Income Taxes - 430 430 - 430 430
410 Provision for Deferred Income Taxes - 731 731 - 731 731
411 Provision for Deferred Income Taxes Cr. - (717) (717) - (717) (717)
411.5 Investment Tax Credit - - - - - -
426.1 Donations - - - - - -
426.5 Other Deductions 24 8 32 24 8 32
427 Interest on Long-Term Debt - - - - - -
431 Other Interest Expense 5 29 34 5 29 34
435 Cumulative effect of accounting change - (444) (444) - (444) (444)
______________________________________________________________________________
INSTRUCTION: Total cost of service will equal
for associate and nonassociate
companies the total amount billed
under their separate analysis of
billing schedules.
TOTAL EXPENSES $36,325 $15,905 $52,230 $36,325 $15,905 $52,230
===============================================================================
Compensation for Use of Equity Capital
430 Interest on Debt to Associate
Companies 1,270 1,270
TOTAL COST OF SERVICE $53,500 $53,500
============================================================
29
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
Rates & Government
Total Executive Corp. Legal Regulatory Legal Public Affairs
Description of Items Amount Overhead Office Commun. Washington Affairs Secretary's Pgh. Affairs Washington
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
920 Salaries and Wages $19,617 $ - $ 1,578 $ 420 $ 615 $ 1,022 $ 255 $ 1,197 $ 197 $ 421
921 Office Supplies and
Expenses 4,444 138 237 119 139 218 47 150 36 130
922 Administrative
Expense Trans-
ferred Credit (369) (8) (2) - - 3 - - - -
923 Outside Services
Employed 8,907 2,368 165 230 19 178 17 319 19 57
924 Property Insurance - - - - - - - - - -
925 Injuries and Damage 9 (35) - - - - - - - -
926 Employee Pensions
and Benefits 7,042 5,505 - - - - - - - -
928 Regulatory Commis-
sion Expense - - - - - - - - - -
930.1 General Advertising
Expense - - - - - - - - - -
930.2 Miscellaneous
General Expenses 2,108 (20) 16 701 7 1 796 34 89 29
931 Rents 6,272 - 449 90 241 207 70 157 100 171
932 Maintenance of
Structures and
Equipment 738 - 11 2 17 3 4 3 1 7
403 Depreciation and
Amortization
Expense 1,913 - 91 16 40 37 12 35 6 23
408 Taxes Other Than
Income Taxes 1,483 1,132 1 - - - - - - -
409 Income Taxes 430 430 - - - - - - - -
410 Provision for
Deferred Income
Taxes 731 731 - - - - - - - -
411 Provision for
Deferred Income
Taxes - Credit (717) (717) - - - - - - - -
411.5 Investment Tax
Credit - - - - - - - - - -
426.1 Donations - - - - - - - - - -
426.5 Other Deductions 32 - 12 - - 1 1 10 - 2
427 Interest on Long-
Term Debt - - - - - - - - - -
430 Interest on Debt
to Associate
Companies 1,270 961 - - - - - - - -
431 Other Interest
Expense 34 27 7 - - - - - - -
435 Cumulative Effect of (444) (444) - - - - - - - -
Accounting Change ______________________________________________________________________________________________
TOTAL EXPENSES = $53,500 $10,068 $ 2,565 $ 1,578 $ 1,078 $ 1,670 $ 1,202 $ 1,905 $ 448 $ 840
==============================================================================================
</TABLE>
30
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
Corportate
Information Information Internal Human Employee
Description of Items Controller's Systems Services Auditing Resources Benefits Medical Treasurer's Tax
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
920 Salaries and Wages $ 1,338 $ 1,107 $ 3,559 $ 1,188 $ 406 $ 708 $ 217 $ 1,019 $ 599
921 Office Supplies and
Expenses 99 178 929 182 118 126 36 329 59
922 Administrative
Expense Trans-
ferred Credit 85 - (386) (157) 5 107 - 166 1
923 Outside Services
Employed 6 246 1,890 10 525 602 16 37 64
924 Property Insurance - - - - - - - - -
925 Injuries and Damages - - 44 - - - - - -
926 Employee Pensions
and Benefits - - 1,537 - - - - - -
928 Regulatory Commis-
sion Expense - - - - - - - - -
930.1 General Advertising
Expense - - - - - - - - -
930.2 Miscellaneous
General Expenses 20 12 18 1 37 3 3 2 3
931 Rents 278 229 1,135 104 107 184 75 206 113
932 Maintenance of
Structures and
Equipment 4 47 391 2 1 6 1 12 3
403 Depreciation and
Amortization
Expense 57 97 850 24 24 65 10 33 17
408 Taxes Other Than
Income Taxes - - 346 - - - - - -
409 Income Taxes - - - - - - - - -
410 Provision for
Deferred Income
Taxes - - - - - - - - -
411 Provision for
Deferred Income
Taxes - Credit - - - - - - - - -
411.5 Investment Tax
Credit - - - - - - - - -
426.1 Donations - - - - - - - - -
426.5 Other Deductions 1 - - - 1 - 1 1 -
427 Interest on Long-
Term Debt - - - - - - - - -
430 Interest on Debt
to Associate
Companies - - 309 - - - - - -
431 Other Interest
Expense - - - - - - - - -
435 Cumulative Effect of - - - - - - - - -
Accounting Change ____________________________________________________________________________________________
TOTAL EXPENSES = $ 1,888 $ 1,916 $ 10,622 $ 1,354 $ 1,224 $ 1,801 $ 359 $ 1,805 $ 859
============================================================================================
</TABLE>
31
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
Corporate
Strategic Geological Environmental
Risk Financial Corporate Library Service Energy Market
Description of Items Management Planning Planning Services Engineering Services Marketing Development Research
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
920 Salaries and Wages $ 249 $ 227 $ 411 $ 87 $ 147 $ 540 $ 760 $ 150 $ 371
921 Office Supplies and
Expenses 61 23 33 43 31 194 236 58 118
922 Administrative
Expense Trans-
ferred Credit - - - - - - 3 - (13)
923 Outside Services
Employed 83 4 101 82 3 2 247 383 1,189
924 Property Insurance - - - - - - - - -
925 Injuries and Damages - - - - - - - - -
926 Employee Pensions
and Benefits - - - - - - - - -
928 Regulatory Commis-
sion Expense - - - - - - - - -
930.1 General Advertising
Expense - - - - - - - - -
930.2 Miscellaneous
General Expenses 2 - 29 - - 1 61 1 7
931 Rents 82 44 100 35 38 110 141 23 79
932 Maintenance of
Structures and
Equipment 1 6 3 4 1 12 3 1 5
403 Depreciation and
Amortization
Expense 17 9 12 8 5 21 34 6 11
408 Taxes Other Than
Income Taxes - - - 4 - - - - -
409 Income Taxes - - - - - - - - -
410 Provision for
Deferred Income
Taxes - - - - - - - - -
411 Provision for
Deferred Income
Taxes - Credit - - - - - - - - -
411.5 Investment Tax
Credit - - - - - - - - -
426.1 Donations - - - - - - - - -
426.5 Other Deductions - - - - - - 1 1 -
427 Interest on Long-
Term Debt - - - - - - - - -
430 Interest on Debt
to Associate
Companies - - - - - - - - -
431 Other Interest
Expense - - - - - - - - -
435 Cumulative Effect of - - - - - - - - -
Accounting Change ___________________________________________________________________________________________
TOTAL EXPENSES = $ 495 $ 313 $ 689 $ 263 $ 225 $ 880 $ 1,486 $ 623 $ 1,767
===========================================================================================
</TABLE>
32
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
Investor Asset Facility New York Facility
Description of Items Relations Management Operations Office Services
<S> <C> <C> <C> <C> <C>
920 Salaries and Wages $ 254 $ 123 $ 68 $ 91 $ 293
921 Office Supplies and
Expenses 135 8 6 31 197
922 Administrative
Expense Trans-
ferred Credit - - - - (173)
923 Outside Services
Employed 28 1 - - 16
924 Property Insurance - - - - -
925 Injuries and Damages - - - - -
926 Employee Pensions
and Benefits - - - - -
928 Regulatory Commis-
sion Expense - - - - -
930.1 General Advertising
Expense - - - - -
930.2 Miscellaneous
General Expenses 217 - - 32 6
931 Rents 59 16 19 123 1,487
932 Maintenance of
Structures and
Equipment 2 - 3 1 181
403 Depreciation and
Amortization
Expense 11 2 7 9 324
408 Taxes Other Than
Income Taxes - - - - -
409 Income Taxes - - - - -
410 Provision for
Deferred Income
Taxes - - - - -
411 Provision for
Deferred Income
Taxes - Credit - - - - -
411.5 Investment Tax
Credit - - - - -
426.1 Donations - - - - -
426.5 Other Deductions - - - - -
427 Interest on Long-
Term Debt - - - - -
430 Interest on Debt
to Associate
Companies - - - - -
431 Other Interest
Expense - - - - -
435 Cumulative Effect of - - - - -
Accounting Change _______________________________________________________
TOTAL EXPENSES = $ 706 $ 150 $ 103 $ 287 $ 2,331
========================================================
</TABLE>
33
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
DEPARTMENTAL ANALYSIS OF SALARIES - ACCOUNT 920
Departmental Salary Expense Number of
Name of Department Included in Amounts Billed To Personnel
Indicate each department Total Parent Other Non End of
or service function. Amount(A) Company Associates Associates Year
Executive Office $ 1,578 $ 144 $ 1,434 None 6
Corporate Communications 420 7 413 10
Legal - Washington 615 - 615 9
Rates & Regulatory Affairs 1,022 3 1,019 16
Secretary's 255 101 154 5
Legal - Pittsburgh 1,197 37 1,160 13
Public Affairs 197 5 192 3
Government Affairs-
Washington 421 6 415 5
Controller's 1,338 110 1,228 26
Information Systems 1,107 - 1,107 25
Corporate Information
Services 3,559 - 3,559 78
Internal Auditing 1,188 7 1,181 20
Human Resources 406 10 396 9
Employee Benefits 708 - 708 19
Medical 217 - 217 4
Treasurer's 1,019 22 997 19
Tax 599 43 556 9
Risk Management 249 1 248 4
Strategic Financial
Planning 227 146 81 4
Corporate Planning 411 2 409 7
Library Services 87 - 87 3
Corporate Geological
Engineering Services 147 4 143 2
Energy Services 540 2 538 7
Marketing 760 2 758 13
Environmental Market
Development 150 - 150 3
Research 371 - 371 4
Investor Relations 254 8 246 4
Asset Management 123 1 122 1
Facility Operations 68 - 68 5
New York Office 91 - 91 2
Facility Services 293 - 293 11
_____________________________________________
TOTAL $19,617 $ 661 $18,956 None 346
=============================================
(A) Excludes Vacation, Holiday and Other Paid Absences which are included
in Account 926, Page 42.
34
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923
INSTRUCTIONS: Provide a breakdown by subaccount of outside services
employed. If the aggregate amounts paid to any one payee
and included within one subaccount is less than $25,000,
only the aggregate number and amount of all such payments
included within the subaccount need be shown. Provide a
subtotal for each type of service.
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Address Associate Amount
Legal Services:
Buchanan Ingersoll, P.C. 5800 USX Tower NA $ 125
600 Grant Street
Pittsburgh, PA 15219
Cahill, Gordon & Reindel,P.C. Eighty Pine Street NA 48
New York, NY 10005
Pearne, Gordon, McCoy, P.O. Box 72028 NA 34
& Granger Cleveland, OH 44192
Miscellaneous (12 items
less than $25,000) - NA 56
_______
TOTAL $ 263
_______
Tax Services:
Ivins, Phillips & Barker,P.C. 1700 Pennsylvania Avenue NA $ 52
Washington, DC 20006
Miscellaneous (2 item
less than $25,000) - NA 10
_______
TOTAL $ 62
_______
Auditing Services:
Price Waterhouse & Company 600 Grant Street
Suite 4500
Pittsburgh, PA 15219 NA $ 128
_______
Other Special Services:
CNG Transmission Corporation 445 West Main Street A $ 2,289
Clarksburg, WV 26301
International Business 1300 East Ninth Street NA 822
Machines Cleveland, OH 44114
35
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Continued)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Address Associate Amount
Other Special Services (Cont.)
Towers Perrin, Inc. P.O. Box 8500, S-6110 NA 522
Philadelphia, PA 19178
Hunter Group, Inc. P.O. Box 17110 NA 272
Baltimore, MD 21203-7110
National Fuel Distribution Tishman Building NA 166
Corporation 10 Lafayette Square
Buffalo, NY 14203
Data Resource Management, 203 Chaucer Court South NA 145
Inc. Sewickley, PA 15143
Pittsburgh Business Chamber of Commerce Bldg. NA 141
Consultants 411 Seventh Avenue
Suite 1401A
Pittsburgh, PA 15219
Comdisco Disaster Recovery 6111 N. River Road NA 131
Services, Inc. Rosemont, IL 60018-4992
BMC Software, Inc. NCNB Texas National Bank NA 129
P.O. Box 298761
Houston, TX 77298-0761
Implementation Management P.O. Box 337 NA 121
Assoc., Inc. Brighton, CO 80601
Witalis Burke Liberty Center NA 109
Associates, Inc. Suite 450
Pittsburgh, PA 15222
KCS Computer Services, Inc. 400 Penn Center Blvd. NA 89
Suite 320
Pittsburgh, PA 15235-5603
36
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Continued)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Address Associate Amount
Other Special Services (Cont.)
Computer Associates P.O. Box 360355 NA 80
International, Inc. Pittsburgh, PA 15251-6355
Hill and Knowlton P.O. Box 8500-4445 NA 79
Philadelphia, PA 19178
Jampole Communications, Inc. 1401 Forbes Avenue NA 76
Pittsburgh, PA 15219
Kissel-Blake, Inc. 25 Broadway NA 64
New York, NY 10004
Ogrodnik & Company 5690 Loretta Drive NA 64
Youngstown, OH 44512
Legent Corporation Two Allegheny Center NA 61
Pittsburgh, PA 15212-5494
Omega Systems Omega Building NA 54
160 N. Craig Street
Pittsburgh, PA 15213
Bowden & Co., Inc. 5000 Rockside Road NA 53
Cleveland, OH 44131-2172
Dun & Bradstreet, Inc. P.O. Box 75364 NA 52
Chicago, IL 60675
Insurance Archaeology Group 240 Madison Avenue NA 50
New York, NY 10016
Gartner Group, Inc. 56 Top Gallant Road NA 40
P.O. Box 10212
Stamford, CT 06904-2212
Forrester Research, Inc. One Brattle Square NA 39
Cambridge, MA 02138
37
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Continued)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Address Associate Amount
Other Special Services (Cont.)
Viasoft 3033 North 44th Street NA 36
Phoenix, AZ 85018
Hennegan 1001 Plum Street NA 35
Cincinnati, OH 45202
CIS Corporation Penn Center West Two NA 34
Suite 430
Pittsburgh, PA 15276
Professional Services Group The Hartley Rose Building NA 34
425 First Avenue
Pittsburgh, PA 15219-1321
People Soft, Inc. 1331 North California Blvd. NA 33
Walnut Creek, CA 94596
Chas M. Henry Printing Maple Avenue at Tunnel St. NA 30
P.O. Box 68
Greensburg, PA 15601-0068
DRI/McGraw-Hill P.O. Box 5-0210 NA 29
Woburn, MA 01815-0210
Markpoint Creative Services, 5819 Forward Avenue NA 29
Inc. Pittsburgh, PA 15217-2301
Alzed Enterprises Limited Four Gateway Center NA 29
Suite 205
Pittsburgh, PA 15222
Kelly Temporary Services, P.O. Box 777 C9995 NA 28
Inc. Philadelphia, PA 19175-9995
Cambridge Energy Research Charles Square NA 27
Associates, Inc. 20 University Road
Cambridge, MA 02138
38
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Continued)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Address Associate Amount
Other Special Services (Cont.)
Select Software, Inc. 1305 2nd Street South NA 26
Nampa, ID 83651
D'Elia Wittkofski, Inc. One Market Street NA 25
Pittsburgh, PA 15222
Miscellaneous (2 items
less than $25,000) - A 6
Miscellaneous (185 items
less than $25,000) - NA 845
TOTAL $ 6,894
_______
Research Services:
Gas Research Institute P.O. Box 91806 NA $ 215
Chicago, IL 60693
Berkau & Associates 1701 21st Avenue South NA 204
Suite 418
Nashville, TN 37212
Power Contracting, Inc. 55th Street & A V R R NA 194
Pittsburgh, PA 15201
American Gas Association 1515 Wilson Boulevard NA 131
Arlington, VA 22209
Gilbert Commonwealth, Inc. P.O. Box 1498 NA 127
Reading, PA 19603
Energy Systems Associates 300 Gateway Two NA 115
Corporation Pittsburgh, PA 15222
39
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Concluded)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Address Associate Amount
Research Services (Cont.)
ONSI Corporation 195 Governors Highway NA 103
P.O. Box 1148
South Windsor, CT 06074
Cummins Engine Company, Inc. Box 3005 NA 100
Columbus, IN 47202-3005
Arthur D. Little, Inc. Acorn Park NA 84
Cambridge, MA 02140-2390
Columbia Gas of Ohio, Inc. P.O. Box 117 NA 43
Columbus, OH 43216-0117
Fuels Utilization 1840 Gateway Three NA 42
Research (FURI) Pittsburgh, PA 15222
Carnegie Mellon University Office Of Sponsored Research NA 39
5000 Forbes Avenue
Pittsburgh, PA 15213-3890
Tecogen, Inc. P.O. Box 73455 NA 36
Chicago, IL 60673-7455
Industrial Gas Technology 1515 Wilson Boulevard NA 35
Commercialization Center Arlington, VA 22209
Trimblehouse 4658 Old Peachtree Road NA 31
Norcross, GA 30071
Equitable Gas Allegheny Center Mall NA (25)
Suite 2000
Pittsburgh, PA 15212-5352
Viking Systems 2070 William Pitt Way NA (34)
Pittsburgh, PA 15238
40
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Concluded)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Address Associate Amount
Research Services (Cont.)
Consumers Gas P.O. Box 650 NA (39)
Scarborough, Ontario
M1K 5E3, Canada
Atlanta Gas Light Company 235 Peachtree Street NA (50)
P.O. Box 4569
Atlanta, GA 30302
American Gas Cooling 1515 Wilson Boulevard NA (67)
Arlington, VA 22209
Duquesne Light Payment Processing Center NA (101)
Pittsburgh, PA 15267-0001
Miscellaneous (2 items -
less than $25,000) A 20
Miscellaneous (123 items -
less than $25,000) NA 357
_______
TOTAL $ 1,560
_______
GRAND TOTAL $ 8,907
=======
41
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
EMPLOYEE PENSIONS AND BENEFITS - ACCOUNT 926
INSTRUCTIONS: Provide a listing of each pension plan and benefit program
provided by the service company. Such listing should be
limited to $25,000.
Description Amount
Medical Insurance $ 2,479
Vacation 1,363
Alternate Thrift Trust 1,055
Holiday 950
Contributory Group Life Insurance 314
Disability Benefits 290
Survivor Benefit Insurance 260
Miscellaneous Welfare Expense 176
Educational Refunds 125
Dental Insurance 88
Workmen's Compensation Insurance 68
Other Paid Absences 66
Pension Expense (192)
______
TOTAL $ 7,042
=======
42
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
GENERAL ADVERTISING EXPENSES-ACCOUNT 930.1
INSTRUCTIONS: Provide a listing of the amount included in Account 930.1,
"General Advertising Expenses", classifying the items
according to the nature of the advertising and as defined in
the account definition. If a particular class includes an
amount in excess of $3,000 applicable to a single payee,
show separately the name of the payee and the aggregate
amount applicable thereto.
Description Name of Payee Amount
None
____
TOTAL None
====
43
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
MISCELLANEOUS GENERAL EXPENSES - ACCOUNT 930.2
INSTRUCTIONS: Provide a listing of the amount included in Account 930.2,
"Miscellaneous General Expenses", classifying such expenses
according to their nature. Payments and expenses permitted
by Section 321 (b) (2) of the Federal Election Campaign Act,
as amended by Public Law 94-283 in 1976 (2 U.S.C. Section 441
(b) (2)) shall be separately classified.
Description Amount
Annual Shareholders Report $ 557
Debenture Trustee Expenses 221
Security Analyst Meeting Expenses 218
Other Shareholder Reports 197
Miscellaneous Expenses - Business Meeting/Group Meals 192
Registar & Transfer Agent Expenses 177
Other Miscellaneous Expenses 165
Dividend Disbursing & Reinvesting Expenses 130
Proxy Solicitation Expenses 119
Stock Listing Fees 60
Other Shareholder Expenses 54
Personnel Agency Fees 18
_______
TOTAL $ 2,108
=======
44
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
RENTS - ACCOUNT 931
INSTRUCTIONS: Provide a listing of the amount included in Account 931,
"Rents", classifying such expenses by major groupings of
property, as defined in the account definition of the
Uniform System of Accounts.
Type of Property Amount
Office Rents $ 5,061
Office Equipment Rental - Computer 639
Office Equipment Rental - Other 44
Automobile Rental 165
Miscellaneous Rents 363
_______
TOTAL $ 6,272
=======
45
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
TAXES OTHER THAN INCOME TAXES - ACCOUNT 408
INSTRUCTIONS: Provide an analysis of Account 408, "Taxes Other Than Income
Taxes". Separate the analysis into two groups: (1) other
than U. S. Government taxes, and (2) U. S. Government taxes.
Specify each of the various kinds of taxes and show the
amounts thereof. Provide a subtotal for each class of tax.
Kind of Tax Amount
(A) Other Than U. S. Government Taxes
State Unemployment Tax $ 70
Pittsburgh Business Privilege Tax 46
Ohio Real & Personal Property Taxes 44
Other Franchise Taxes 13
District of Columbia Personal Property Tax 9
Other 3
_______
SUBTOTAL $ 185
_______
(B) U. S. Government Taxes
Federal Social Security Tax $ 1,276
Federal Unemployment Tax 22
_______
SUBTOTAL $ 1,298
_______
TOTAL $ 1,483
=======
46
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
DONATIONS - ACCOUNT 426.1
INSTRUCTIONS: Provide a listing of the amount included in Account 426.1,
"Donations", classifying such expenses by its purpose. The
aggregate number and amount of all items of less than $3,000
may be shown in lieu of details.
Name of Recipient Purpose of Donation Amount
None
____
TOTAL None
====
47
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
(In Thousands)
OTHER DEDUCTIONS - ACCOUNT 426.5
INSTRUCTIONS: Provide a listing of the amount included in Account 426.5,
"Other Deductions", classifying such expenses according to
their nature.
Description Name of Payee Amount
Miscellaneous (134 Items) $ 32
______
TOTAL $ 32
======
48
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1993
SCHEDULE XVIII - NOTES TO STATEMENT OF INCOME
INSTRUCTIONS: The space below is provided for important notes regarding
the statement of income or any account thereof. Furnish
particulars as to any significant increase in services
rendered or expenses incurred during the year. Notes
relating to financial statements shown elsewhere in this
report may be indicated here by reference.
See Notes to Financial Statements, Schedule XIV, page 20-25.
49
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
ORGANIZATION CHART - 1993
See Exhibit I filed herewith.
50
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
METHODS OF ALLOCATION
See Exhibit II filed herewith.
51
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
(In Thousands)
For the Year Ended December 31, 1993
ANNUAL STATEMENT OF COMPENSATION FOR USE OF CAPITAL BILLED
Total Annual
Direct Allocation
Billing of of Direct
Company Information Services Percent Interest
Consolidated Natural Gas Company $ - * $ *
The East Ohio Gas Company 3,747 34% 106
The Peoples Natural Gas Company 1,686 15% 48
CNG Transmission Corporation 2,179 20% 61
The River Gas Company 89 1% 3
Hope Gas, Inc. 401 4% 11
West Ohio Gas Company 260 2% 7
Consolidated System LNG Company - * *
CNG Producing Company 1,051 10% 30
CNG Research Company - * *
CNG Coal Company - * *
CNG Energy Company 3 - -
CNG Gas Services Corporation 1 - -
Virginia Natural Gas, Inc. 1,529 14% 43
CNG Storage Service Company - - -
___________________________________
TOTAL $10,946 100% $ 309
===================================
*These System Companies were excluded from allocation since there were no
direct charges for Corporate Information Services Department.
52
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
(In Thousands)
For The Year Ended December 31, 1993
ANNUAL STATEMENT OF COMPENSATION FOR USE OF CAPITAL BILLED
(Continued)
Total Annual Allocation Total
Indirect Costs of Indirect Allocation
Company Billed Percent Interest of Interest
Consolidated Natural Gas
Company $ 679 4% $ 39 $ 39
The East Ohio Gas Company 4,528 27% 258 364
The Peoples Natural Gas
Company 2,172 13% 124 172
CNG Transmission Corporation 3,950 23% 226 287
The River Gas Company 106 1% 5 8
Hope Gas, Inc. 660 4% 38 49
West Ohio Gas Company 274 2% 16 23
Consolidated System LNG
Company 6 - - -
CNG Producing Company 2,118 13% 121 151
CNG Research Company 97 1% 6 6
CNG Coal Company 3 - - -
CNG Energy Company 582 3% 33 33
CNG Gas Services Corporation 415 2% 24 24
Virginia Natural Gas, Inc. 1,236 7% 71 114
CNG Storage Service Company 2 - - -
____________________________________________
TOTAL $ 16,828 100% $ 961 $ 1,270
============================================
53
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
SIGNATURE CLAUSE
Pursuant to the requirements of the Public Utility Holding Company Act of
1935 and the rules and regulations of the Securities and Exchange
Commission issued thereunder, the undersigned company has duly caused this
report to be signed on its behalf by the undersigned officer thereunto duly
authorized.
Consolidated Natural Gas Service Company, Inc.
(Name of Reporting Company)
STEPHEN R. MCGREEVY
By:__________________________________________
(Signature of Signing Officer)
Stephen R. McGreevy, Vice President
Accounting and Financial Control
_____________________________________________
(Printed Name and Title of Signing Officer)
Date: April 28, 1994
54
CONSOLIDATED NATURAL GAS SERVICE COMPANY, INC. Exhibit I
Organization Chart
Board of Directors
Chairman and
Chief Executive Officer
Executive Vice President and
Chief Financial Officer
Vice President
Accounting and Financial Control
Controller
Vice President and Treasurer
Vice President
Taxes and Strategic Financial Planning
Sr. Vice President, Administration
Vice President
Human Resources and
Administrative Services
Vice President
Government Affairs
Sr. Vice President and General Counsel
Vice President
Rates and Regulatory Affairs
Vice President
Risk Management
Vice President and
Assistant General Counsel-Washington, DC
Vice President and
Assistant General Counsel-Pittsburgh
Corporate Secretary
Vice President
Marketing and Technology
Vice President, Planning
Effective March 1, 1994
CONSOLIDATED NATURAL GAS SERVICE COMPANY, INC. Exhibit II
Methods of Allocation
Method of Allocating Cost among companies receiving service under this and
similar service contracts with Consolidated Natural Gas Service Company,
Inc.
1. The costs of rendering service by the Service Corporation will include
all costs of doing business including interest on debt but excluding a
return for the use of equity capital for which no charge will be made
to System companies.
2. (a) The Service Corporation will maintain a separate record of the
expenses of each department. The expenses of each department will
include:
(i) those expenses that are directly attributable to such
department, and
(ii) an appropriate portion of those office and housekeeping
expenses that are not directly attributable to a department
but which are necessary to the operation of such department.
(b) Expenses of the department will include salaries and wages of
employees, rent and utilities, materials and supplies,
depreciation, and all other expenses attributable to the department
excluding, however, employee welfare expenses. The expenses of a
department will not include:
(i) those incremental out-of-pocket expenses that are incurred for
the direct benefit and convenience of an individual company or
group of companies;
(ii) Service Corporation overhead expenses, including expenses of
the corporate secretary's department that are attributable to
maintaining the corporate existence of the Service
Corporation, franchise and other general taxes, employee
welfare expenses, and all other incidental overhead expenses
including those auditing fees, internal auditing department
expenses and accounting department expenses attributable to
the Service Corporation.
(c) The Service Corporation will establish annual budgets for
controlling the expenses of each department and for determining
estimated costs to be included in interim monthly billing.
1
<PAGE>
CONSOLIDATED NATURAL GAS SERVICE COMPANY, INC. Exhibit II
(Continued)
Methods of Allocation
3. (a) Employees in each department will be divided into two classes:
(i) Those employees rendering service to System companies, and
(ii) Those office and general service employees, such as
secretaries, stenographers, telephone operators and file
clerks, who generally assist employees in Class A or render
other housekeeping services and who are not engaged directly
in rendering service to each Company or a group of companies.
(b) Expenses set forth in Section 2 above (which exclude sickness and
disability benefits, paid absences, and other welfare expenses)
will be separated to show:
(i) salaries and wages of Class A employees, and
(ii) all other expenses of the department.
(c) There will be attributed to each dollar of a Class A employee's
salary or wage, that percentage of all other expenses of his
department (as defined in (b) above), that his salary or wage is to
the total Class A salaries and wages of that department.
(d) Class A employees in each department will maintain a record of the
time they are employed in rendering service to each company or
group of companies. An hourly rate will be determined by dividing
the total expense attributable to a Class A employee as determined
under subsection (c) above by the productive hours reported by such
employee.
4. The charge to the Company for a particular service will be determined
by multiplying the hours reported by Class A employees in rendering
such service to each Company by the hourly rates applicable to such
employees. When such employees render service to a group of companies,
the charge to each Company will be determined by multiplying the hours
attributable to the Company under the allocation formulas set forth in
Section 9 of this Exhibit by the hourly rates applicable to such
employees.
5. To the extent appropriate and practical, the foregoing computations of
hourly rates and charges may be determined for groups of employees
within reasonable salary range limits.
6. Those expenses of the Service Corporation that are not included in the
annual expense of a department under Section 2 above will be charged to
System companies receiving service as follows:
2
<PAGE>
CONSOLIDATED NATURAL GAS SERVICE COMPANY, INC. Exhibit II
(Continued)
Methods of Allocation
(a) Incremental out-of-pocket costs incurred for the direct benefit and
convenience of a company or group of companies will be charged
directly to such company or group of companies. Such costs
incurred for a group of companies will be allocated on the basis of
an appropriate formula.
(b) Service Corporation overhead expenses referred to in Section 2
above will be charged to the Company in the proportion that the
charges made to the Company for costs, other than those set forth
in this Section 6, are to the total of such charges to all
companies receiving service.
7. Notwithstanding the foregoing basis of determining cost allocations for
billing purposes, cost allocations for certain services involving
machine operations and production units will be determined on an
appropriate basis established by the Service Corporation relating to
the direct use of machine equipment or production units.
8. Monthly bills will be issued for the services rendered to the Company
on an estimated basis. Such estimate will normally be predicated on
service department budgets and estimated productive hours of employees
for the year. At the end of each year, estimated figures will be
revised to reflect actual experience during such year and adjustments
will be made in amounts billed to give effect to such revision.
9. When Class A employees render services to a group of companies, the
following formulas shall be used to allocate the time of such employees
to the individual companies receiving such service:
(a) Department formulas to be used when employees render services to
all companies participating in such service, for the services
indicated:
Service Department
or Function Basis of Allocation
Computer Services The number of residential and commercial
(Revenue System) customers at the end of the preceding
calendar year.
Employee Benefits The number of employee and annuitant accounts
as of the preceding December 31st.
Human Resources The number of employees as of the preceding
December 31st.
3
<PAGE>
Exhibit II
(Continued)
CONSOLIDATED NATURAL GAS SERVICE COMPANY, INC.
Methods of Allocation
Service Department
or Function Basis of Allocation
Corporate Planning Total investment in utility plant (as defined
by FERC and State Commissions) booked at
preceding December 31st.
Risk Management Insurance premiums for the preceding year
ended December 31st.
Market Development Gross revenues from the sale of natural gas
excluding intercompany sales booked during
the preceding year ended December 31st.
Rates Utility company gross revenues booked during
the preceding year ended December 31st.
Research Gross revenues from the sale of natural gas,
including intercompany sales, booked during
the preceding year ended December 31st.
Tax The sum of the total income and total
deductions as reported for Federal Income Tax
purposes on the last return filed.
Corporate Secretary/ The weighted average the previous three
Investor Relations years of total service company billings.
(Effective 1/1/93)
(b) Formulas to be used in the absence of a department formula or when
service rendered by employees is for a different group of companies
than those companies regularly participating in such service:
Company Group Basis of Allocation
All companies (includes Operating revenue deductions booked during
all System Companies the preceding year ended December 31st.
except Service
Corporation)
All operating companies Operating revenue deductions booked during
the preceding year ended December 31st.
All retail companies Volume of gas sold at retail during the
preceding year ended December 31st.
4
<PAGE>
Exhibit II
(Concluded)
CONSOLIDATED NATURAL GAS SERVICE COMPANY, INC.
Methods of Allocation
Company Group Basis of Allocation
All wholesale companies Gross revenues from sales for resale booked
during the preceding year ended December
31st.
All companies pur- Volume of gas purchased from non-affiliated
chasing gas from non- pipeline companies during the preceding year
affiliated companies ended December 31st.
All companies purchasing Volume of gas purchased from individual
gas from an individual pipeline company during the preceding year
non-affiliated pipeline ended December 31st.
company
All companies having Gross investment in transmission plant
transmission lines booked at preceding December 31st.
All production companies Production plant budget for the current year
of allocation.
Appalachian production Gross investment in Appalachian production
companies plant booked at preceding December 31st.
All storage companies Gross investment in storage plant, excluding
non-current inventory, booked at preceding
December 31st.
All Companies/ The weighted average of the previous three
Shareholder Activities years of total Service Company billings.
(Effective 1/1/93)
(c) If the use of a basis of allocation would result in an inequity
because of a change in operations or organization then the Service
Corporation may adjust the basis to effect an equitable
distribution.
