Form U-13-60
Mutual and Subsidiary Service Companies
Revised February 7, 1980
ANNUAL REPORT
For the Period
Beginning January 1, 1994 and Ending December 31, 1994
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 35-42
Employee Pensions and Benefits Account 926 43
General Advertising Expenses Account 930.1 44
Miscellaneous General Expenses Account 930.2 45
Rents Account 931 46
Taxes Other than Income Taxes Account 408 47
Donations Account 426.1 48
Other Deductions Account 426.5 49
Notes to Statement of Income Schedule XVIII 50
LISTING OF INSTRUCTIONAL FILING REQUIREMENTS
Page
Description of Reports or Statements Number
ORGANIZATION CHART 51
METHODS OF ALLOCATION 52
ANNUAL STATEMENT OF COMPENSATION FOR USE OF CAPITAL BILLED 53-54
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
1994 1993
(In Thousands)
SERVICE COMPANY PROPERTY
101 Service company property (Schedule II) $ 23,601 $ 23,071
107 Construction work in progress (Schedule II) - -
__________________
Total Property $ 23,601 $ 23,071
__________________
108 Less accumulated provision for depreciation
and amortization of service company property
(Schedule III) $ 14,651 $ 13,473
__________________
Net Service Company Property $ 8,950 $ 9,598
__________________
INVESTMENTS
123 Investments in associate companies (Schedule IV) - -
124 Other investments (Schedule IV) - -
__________________
Total Investments - -
==================
CURRENT AND ACCRUED ASSETS
131 Cash $ 296 $ 675
134 Special deposits 2 2
135 Working funds 32 22
136 Temporary cash investments (Schedule IV) - -
141 Notes receivable - -
143 Accounts receivable 608 723
144 Accumulated provision for uncollectible accounts - -
146 Accounts receivable from associate companies
(Schedule V and XIV-Note 6) 322,664 525,869
152 Fuel stock expenses undistributed (Schedule VI) - -
154 Materials and supplies - -
163 Stores expense undistributed (Schedule VII) - -
165 Prepayments 170 44
174 Miscellaneous current and accrued assets
(Schedule VIII) 1 1
__________________
Total Current and Accrued Assets $323,773 $527,336
__________________
DEFERRED DEBITS
181 Unamortized debt expense $ - $ -
184 Clearing accounts - -
186 Miscellaneous deferred debits (Schedule IX) 4,071 3,384
188 Research, development, or demonstration
expenditures (Schedule X) - -
190 Accumulated deferred income taxes 2,824 2,226
__________________
Total Deferred Debits $ 6,895 $ 5,610
__________________
TOTAL ASSETS AND OTHER DEBITS $339,618 $542,544
==================
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
1994 1993
(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 4,028 2,378
233 Notes payable to associate companies
(Schedule XIII and XIV-Note 6) 310,185 516,199
234 Accounts payable to associate companies
(Schedule XIII and XIV-Note 6) 2,865 2,569
236 Taxes accrued 188 500
237 Interest accrued - -
238 Dividends declared - -
241 Tax collections payable 76 77
242 Miscellaneous current and accrued liabilities
(Schedule XIII) 2,355 1,992
__________________
Total Current and Accrued Liabilities $319,697 $523,715
__________________
DEFERRED CREDITS
253 Other deferred credits $ 3,414 $ 2,701
255 Accumulated deferred investment tax credits - -
__________________
Total Deferred Credits $ 3,414 $ 2,701
__________________
282 ACCUMULATED DEFERRED INCOME TAXES $ 1,866 $ 1,487
__________________
TOTAL LIABILITIES AND PROPRIETARY CAPITAL $339,618 $542,544
==================
6
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(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 4,214 - - - 4,214
306 Leasehold
Improvements 5,638 20 - - 5,658
307 Equipment(2) 7,223 743 143 - 7,823
308 Office
Furniture
and Equip-
ment 5,806 267 335 - 5,738
309 Automobiles,
Other
Vehicles and
Related
Garage Equip-
ment 78 17 39 - 56
310 Aircraft and
Airport
Equipment - - - - -
311 Other Service
Company
Property(3) - - - - -
____________________________________________________
Subtotal $ 23,071 $ 1,047 $ 517 $ - $ 23,601
____________________________________________________
107 Construction
Work in
Progress(4) - - - - -
____________________________________________________
Total $ 23,071 $ 1,047 $ 517 $ - $ 23,601
====================================================
(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 $ 732 $ 6,788
Software - 471
Typewriters, Calculators, Copiers & Duplicating 11 341
Office Services Printing and Stationery Equipment - 9
Controller's Department Computer Software - 128
Auditing Department Computer Software - 35
Employee Benefits Department Computer Software - 51
_______________________
TOTAL $ 743 $ 7,823
=======================
(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, 1994
(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 939 121 - 1 1,061
306 Leasehold
Improvements 1,774 303 - 5 2,082
307 Equipment 5,552 903 143 (7) 6,305
308 Office
Furniture and
Fixtures 5,137 355 335 1 5,158
309 Automobiles,
Other
Vehicles and
Related
Garage Equip-
ment 71 6 39 7 45
310 Aircraft and
Airport
Equipment - - - - -
311 Other Service
Company
Property - - - - -
_____________________________________________________
TOTAL $ 13,473 $ 1,688 $ 517 $ 7 $ 14,651
=====================================================
(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, 1994
(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
$ - $ -
_____________________
TOTAL $ - $ -
=====================
10
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(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 $ 141 $ 244
The East Ohio Gas Company 204,725 165,610
The Peoples Natural Gas Company 45,773 51,068
CNG Transmission Corporation 185,659 22,041
The River Gas Company(1) 4,727 -
Hope Gas, Inc. 9,738 6,848
West Ohio Gas Company 14,660 10,716
CNG Producing Company 429 361
CNG Research Company - 24
CNG Energy Company 7,910 7,820
CNG Energy Services Corporation(2) 23,835 24,136
Virginia Natural Gas, Inc. 28,270 33,795
CNG Storage Service Company 2 1
______________________
TOTAL $525,869 $322,664
======================
Total
Analysis of Convenience or Accommodation Payments: Payments
Consolidated Natural Gas Company $ 153
The East Ohio Gas Company 4,618
The Peoples Natural Gas Company 3,090
CNG Transmission Corporation 5,340
The River Gas Company 48
Hope Gas, Inc. 549
West Ohio Gas Company 240
CNG Producing Company 6,961
CNG Research Company 19
CNG Energy Company 22
CNG Gas Services Corporation 83
Virginia Natural Gas, Inc. 782
________
TOTAL PAYMENTS $ 21,905
========
The majority of these payments were for system insurance,
system employee benefit plans, system memberships and training.
NOTE: (1) In July 1994, The River Gas Company, a wholly owned subsidiary of
Consolidated Natural Gas, was merged into East Ohio Gas.
(2) Effective September 1, 1994, CNG Gas Services Corporation was
renamed CNG Energy Services Corporation.
11
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(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
12
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(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, 1994
(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 $ 1 $ 1
___________________
TOTAL $ 1 $ 1
===================
14
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(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
Prepaid Pension Costs $ 2,149 $ 3,359
Pension Supplement Intangible Asset 779 424
Prepaid IBM/LPC Maintenance 210 113
New York Office Leasehold Improvements 15 -
Deferred Compensation Expense 231 170
Miscellaneous - 5
_____________________
TOTAL $ 3,384 $ 4,071
=====================
15
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(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
Gas Supply $ 401
Transportation 313
Industrial Gas Utilization 280
Clean Air Compliance 238
Technology Transfer 225
Cofiring 192
Residential and Commercial Gas Utilization 136
Gas Operations 58
Power Plants 35
________
Subtotal $ 1,878
Amount Billed to System Companies (1,878)
________
TOTAL $ -
========
16
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
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, 1994
(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 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 $ - $ - $14,631
====================================================
<FN>
(1) GIVE AN EXPLANATION OF DEDUCTIONS:
</TABLE>
1
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company,Inc.
For the Year Ended December 31, 1994
(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 $361,129 $132,430
CNG Transmission Corporation - 3,740
Consolidated System LNG Company 42,895 54,920
CNG Producing Company 98,665 94,165
CNG Research Company 70 15
CNG Coal Company 5,435 5,215
CNG Energy Company 7,390 19,325
CNG Storage Service Company 615 375
______________________
TOTAL $516,199 $310,185
======================
Account 234 - Accounts Payable to Associate
Companies
Consolidated Natural Gas Company $ 1,900 $ 1,779
The East Ohio Gas Company 9 26
The Peoples Natural Gas Company 12 10
CNG Transmission Corporation 217 249
Hope Gas, Inc. - 4
Consolidated System LNG Company 129 266
CNG Producing Company 251 410
CNG Research Company 12 -
CNG Coal Company 17 25
CNG Energy Company 21 94
CNG Storage Service Company 1 2
______________________
TOTAL $ 2,569 $ 2,865
======================
Account 242 - Miscellaneous Current and Accrued
Liabilities
Accrued Vacation Pay $ 1,397 $ 1,545
Deferred Compensation 555 771
U. S. Savings Bond Deduction 4 -
Miscellaneous 36 39
______________________
TOTAL $ 1,992 $ 2,355
======================
19
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
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 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 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.
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.
Change in Tax Rule
In August 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.
20
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
SCHEDULE XIV - NOTES TO FINANCIAL STATEMENTS (Continued)
2. PENSION AND OTHER BENEFIT PROGRAMS
Pension Program
All employees of the Company are covered under the 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 $(192,000) and $(496,000) for the
years ended December 31, 1993 and 1994, respectively. The net pension costs,
which were determined by an independent actuary, are included in "Employee
pensions and benefits" in the Statement of Income.
As required by SFAS 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 the Company 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.
Effective January 1, 1993, the Company adopted the provisions of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions". SFAS
No. 106 requires that the estimated future costs of providing postretirement
benefits be recognized as an expense and a liability during the employees'
service periods.
21
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
SCHEDULE XIV - NOTES TO FINANCIAL STATEMENTS (Continued)
As permitted under 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 and 1994 was
$1,497,000 and $1,506,000 respectively, as determined by an independent
actuary. Prior to 1993, amounts paid for postretirement benefits were
recognized as an expense in the period paid.
Postemployment Benefits
Effective January 1, 1994, the Company adopted the provisions of SFAS 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. The adoption of this
standard did not 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 year 1995. The aggregate principal
amounts of the Company's long-term debt maturing in the years 1996 through 1999
are: $239,800; $239,800; $5,239,800 and $5,239,800.
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 1993 and
1994 was $6,272,000 and $5,741,000, respectively, and is included in the
Statement of Income. Contingent and sublease rentals were not material.
Future minimum rental payments in the aggregate amount to $60,389,000 and for
the years 1995 through 1999 are: $4,831,000; $4,804,000; $4,802,000;
$4,781,000 and $4,528,000. 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.
The approved capital budget for 1995 amounts to approximately $2,101,000. 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).
22
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
SCHEDULE XIV - NOTES TO FINANCIAL STATEMENTS (Continued)
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, 1994
SCHEDULE XIV - NOTES TO FINANCIAL STATEMENTS (Continued)
At December 31, 1994, the detail of the pool was as follows:
Investment in Pool (including interest)
Consolidated Natural Gas Company $133,643,000
CNG Transmission Corporation (Iroquois) 3,756,000
Consolidated System LNG Company 55,188,000
CNG Producing Company 94,570,000
CNG Research 15,000
CNG Coal Company 5,241,000
CNG Energy Company 19,419,000
CNG Storage Service Company 377,000 $312,209,000
____________
Consolidated Natural Gas Service Company 4,417,000
____________
Subtotal 316,626,000
____________
Less:
Borrowings from Pool (including interest)
The East Ohio Gas Company $164,171,000
The Peoples Natural Gas Company 50,064,000
CNG Transmission Corporation 20,301,000
Hope Gas, Inc. 6,679,000
West Ohio Gas Company 10,640,000
CNG Energy Company 7,757,000
CNG Gas Services Corporation 23,759,000
Virginia Natural Gas, Inc. 33,255,000
___________
Subtotal 316,626,000
____________
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, 1994
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,
1994, is as follows:
As Reported As Reported
Affiliated Accounts in Form U-13-60 in Form U5S Difference
Accounts Receivable $322,664,000 $310,196,000 $ 12,468,000
============
Notes Payable $310,185,000 - $310,185,000
Accounts Payable 2,865,000 - 2,865,000
Payables to Affiliated Companies - $300,582,000 (300,582,000)
____________
$ 12,468,000
============
25
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Years Ended December 31, 1994 and 1993
(In Thousands)
SCHEDULE XV - COMPARATIVE STATEMENT OF INCOME
Current Prior
Description Year Year
Account 1994 1993
INCOME
457 Services rendered to associate companies $55,387 $53,439
458 Services rendered to nonassociate companies - -
421 Miscellaneous income or loss 50 61
_________________
Total Income $55,437 $53,500
_________________
EXPENSE
920 Salaries and wages $20,628 $19,617
921 Office supplies and expenses 4,395 4,444
922 Administrative expense transferred - credit (178) (369)
923 Outside services employed 10,579 8,907
924 Property insurance - -
925 Injuries and damages 77 9
926 Employee pensions and benefits 6,455 7,042
928 Regulatory commission expense - -
930.1 General advertising expenses - -
930.2 Miscellaneous general expenses 2,077 2,108
931 Rents 5,741 6,272
932 Maintenance of structures and equipment 1,089 738
403 Depreciation and amortization expense 1,688 1,913
408 Taxes other than income taxes 1,587 1,483
409 Income taxes 220 430
410 Provision for deferred income taxes 514 731
411 Provision for deferred income taxes - credit (734) (717)
411.5 Investment tax credit - -
426.1 Donations - -
426.5 Other deductions 27 32
427 Interest on long-term debt - -
430 Interest on debt to associate companies 1,218 1,270
431 Other interest expense 54 34
435 Cumulative effect of accounting
change (SFAS No. 109) - (444)
_________________
Total Expense $55,437 $53,500
_________________
Net Income or (Loss) None None
=================
26
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(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
457-1 457-2(A) 457-3(B)
Consolidated Natural Gas Company $ 1,602 $ 786 $ 48 $ 2,436
The East Ohio Gas Company 11,112 4,076 351 15,539
The Peoples Natural Gas Company 5,411 2,003 173 7,587
CNG Transmission Corporation 10,010 3,886 317 14,213
Hope Gas, Inc. 1,358 525 42 1,925
West Ohio Gas Company 609 225 19 853
Consolidated System LNG Company 6 3 - 9
CNG Producing Company 3,913 1,550 113 5,576
CNG Research Company 82 34 2 118
CNG Coal Company 3 2 - 5
CNG Energy Company 984 431 26 1,441
CNG Gas Services Corporation 1,122 535 33 1,690
Virginia Natural Gas, Inc. 2,876 1,020 94 3,990
CNG Storage Service Company 3 2 - 5
(A) The amount of indirect costs
charged of $15,078 is net of
$50 miscellaneous income.
(B) Includes $300 which was directly
billed to associate companies
and $918 which was indirectly
billed to associate companies.
________________________________________
TOTAL $39,091 $15,078 $ 1,218 $55,387
========================================
27
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(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, 1994
(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 $ 17,286 $ 3,342 $20,628 $17,286 $ 3,342 $20,628
921 Office Supplies and Expenses 3,511 884 4,395 3,511 884 4,395
922 Administrative Expense Transferred -
Credit (140) (38) (178) (140) (38) (178)
923 Outside Services Employed 7,318 3,261 10,579 7,318 3,261 10,579
924 Property Insurance - - - - - -
925 Injuries and Damages 25 52 77 25 52 77
926 Employee Pensions and Benefits 1,712 4,743 6,455 1,712 4,743 6,455
928 Regulatory Commission Expense - - - - - -
930.1 General Advertising Expenses - - - - - -
930.2 Miscellaneous General Expenses 1,952 125 2,077 1,952 125 2,077
931 Rents 4,557 1,184 5,741 4,557 1,184 5,741
932 Maintenance of Structures and Equipment 995 94 1,089 995 94 1,089
403 Depreciation and Amortization Expense 1,477 211 1,688 1,477 211 1,688
408 Taxes Other than Income Taxes 373 1,214 1,587 373 1,214 1,587
409 Income Taxes - 220 220 - 220 220
410 Provision for Deferred Income Taxes - 514 514 - 514 514
411 Provision for Deferred Income Taxes Cr. - (734) (734) - (734) (734)
411.5 Investment Tax Credit - - - - - -
426.1 Donations - - - - - -
426.5 Other Deductions 20 7 27 20 7 27
427 Interest on Long-Term Debt - - - - - -
431 Other Interest Expense 5 49 54 5 49 54
______________________________________________________________________________
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 $39,091 $15,128 $54,219 $39,091 $15,128 $54,219
===============================================================================
Compensation for Use of Equity Capital
430 Interest on Debt to Associate
Companies 1,218 1,218
TOTAL COST OF SERVICE $55,437 $55,437
============================================================
29
</TABLE
<PAGE>
</TABLE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(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 $20,628 $ - $ 1,691 $ 455 $ 644 $ 1,082 $ 222 $ 1,218 $ 206 $ 429
921 Office Supplies and
Expenses 4,395 184 207 123 147 166 43 259 35 133
922 Administrative
Expense Trans-
ferred Credit (178) - (6) 2 - 6 - 41 - -
923 Outside Services
Employed 10,579 2,248 68 309 14 182 112 574 76 43
924 Property Insurance - - - - - - - - - -
925 Injuries and Damage 77 52 - - - - - - - -
926 Employee Pensions
and Benefits 6,455 4,744 - - - - - - - -
928 Regulatory Commis-
sion Expense - - - - - - - - - -
930.1 General Advertising
Expense - - - - - - - - - -
930.2 Miscellaneous
General Expenses 2,077 - 18 661 7 7 741 34 96 54
931 Rents 5,741 - 418 99 231 197 65 175 98 172
932 Maintenance of
Structures and
Equipment 1,089 - 18 1 18 2 1 6 2 9
403 Depreciation and
Amortization
Expense 1,688 - 70 17 42 33 9 32 5 26
408 Taxes Other Than
Income Taxes 1,587 1,214 1 - - - - - - -
409 Income Taxes 220 220 - - - - - - - -
410 Provision for
Deferred Income
Taxes 514 514 - - - - - - - -
411 Provision for
Deferred Income
Taxes - Credit (734) (734) - - - - - - - -
411.5 Investment Tax
Credit - - - - - - - - - -
426.1 Donations - - - - - - - - - -
426.5 Other Deductions 27 - 11 - - 1 1 4 5 1
427 Interest on Long-
Term Debt - - - - - - - - - -
430 Interest on Debt
to Associate
Companies 1,218 918 - - - - - - - -
431 Other Interest
Expense 54 48 6 - - - - - - -
435 Cumulative Effect of - - - - - - - -
Accounting Change ______________________________________________________________________________________________
TOTAL EXPENSES = $55,437 $ 9,408 $ 2,502 $ 1,667 $ 1,103 $ 1,676 $ 1,194 $ 2,343 $ 523 $ 867
==============================================================================================
</TABLE>
30
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
Information Internal Human Employee
Description of Items Controller's Technology Auditing Resources Benefits Medical Treasurer's Tax
<S> <C> <C> <C> <C> <C> <C> <C> <C>
920 Salaries and Wages $ 1,395 $ 4,706 $ 942 $ 691 $ 1,083 $ 162 $ 1,182 $ 648
921 Office Supplies and
Expenses 89 1,125 120 267 141 25 173 53
922 Administrative
Expense Trans-
ferred Credit 357 (1,198) - 14 515 - 238 3
923 Outside Services
Employed 37 2,337 1 509 650 11 249 69
924 Property Insurance - - - - - - - -
925 Injuries and Damages - 25 - - - - - -
926 Employee Pensions
and Benefits - 1,711 - - - - - -
928 Regulatory Commis-
sion Expense - - - - - - - -
930.1 General Advertising
Expense - - - - - - - -
930.2 Miscellaneous
General Expenses 16 26 4 28 4 4 12 12
931 Rents 270 829 89 143 221 65 224 116
932 Maintenance of
Structures and
Equipment 11 691 2 30 31 56 4 6
403 Depreciation and
Amortization
Expense 53 814 24 29 74 9 40 15
408 Taxes Other Than
Income Taxes - 370 - - - - - -
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 -
427 Interest on Long-
Term Debt - - - - - - - -
430 Interest on Debt
to Associate
Companies - 300 - - - - - -
431 Other Interest
Expense - - - - - - - -
435 Cumulative Effect of - - - - - - -
Accounting Change ____________________________________________________________________________________________
TOTAL EXPENSES = $ 2,229 $ 11,736 $ 1,182 $ 1,712 $ 2,719 $ 333 $ 2,122 $ 922
============================================================================================
</TABLE>
31
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(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 $ 301 $ 252 $ 459 $ 91 $ 157 $ 531 $ 784 $ 136 $ 374
921 Office Supplies and
Expenses 51 20 29 53 34 152 212 41 123
922 Administrative
Expense Trans-
ferred Credit 16 - - - - - 2 (3) -
923 Outside Services
Employed 63 15 209 91 5 5 715 441 1,466
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 4 1 54 1 - 2 72 2 21
931 Rents 66 47 93 41 29 102 120 27 82
932 Maintenance of
Structures and
Equipment 2 13 1 2 1 1 4 - 1
403 Depreciation and
Amortization
Expense 15 8 11 8 4 15 33 4 12
408 Taxes Other Than
Income Taxes - - - 2 - - - - -
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 -
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 = $ 518 $ 356 $ 856 $ 289 $ 230 $ 808 $ 1,943 $ 648 $ 2,079
===========================================================================================
</TABLE>
32
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(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 $ 232 $ 143 $ 68 $ 57 $ 287
921 Office Supplies and
Expenses 134 13 5 29 209
922 Administrative
Expense Trans-
ferred Credit - - - - (165)
923 Outside Services
Employed 18 - 11 - 51
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 181 - - 24 (9)
931 Rents 44 12 23 125 1,518
932 Maintenance of
Structures and
Equipment - 1 2 2 171
403 Depreciation and
Amortization
Expense 9 2 6 11 258
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 = $ 618 $ 171 $ 115 $ 248 $ 2,320
========================================================
</TABLE>
33
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(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 $ 1,691 $ 189 $ 1,502 None 5
Corporate Communications 455 12 443 8
Legal - Washington 644 2 642 9
Rates & Regulatory Affairs 1,082 18 1,064 16
Secretary's 222 111 111 5
Legal - Pittsburgh 1,218 62 1,156 12
Public Affairs 206 9 197 3
Government Affairs-
Washington 429 - 429 3
Controller's 1,395 132 1,263 26
Information Technology 4,706 - 4,706 101
Internal Auditing 942 54 888 19
Human Resources 691 8 683 13
Employee Benefits 1,083 2 1,081 23
Medical 162 - 162 1
Treasurer's 1,182 47 1,135 19
Tax 648 56 592 8
Risk Management 301 1 300 5
Strategic Financial
Planning 252 197 55 4
Corporate Planning 459 6 453 6
Library Services 91 - 91 2
Corporate Geological
Engineering Services 157 4 153 2
Energy Services 531 1 530 8
Marketing 784 1 783 12
Environmental Market
Development 136 - 136 2
Research 374 - 374 5
Investor Relations 232 7 225 3
Asset Management 143 - 143 1
Facility Operations 68 - 68 2
New York Office 57 - 57 1
Facility Services 287 - 287 9
_____________________________________________
TOTAL $20,628 $ 919 $19,709 None 333
=============================================
(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, 1994
(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 $ 130
600 Grant Street
Pittsburgh, PA 15219
Babst, Calland, Clements Two Gateway Center NA 122
& Zomnir Pittsburgh, PA 15222
Cahill, Gordon & Reindel,P.C. Eighty Pine Street NA 96
New York, NY 10005
Pearne, Gordon, McCoy, 1200 Leader Building NA 90
& Granger Cleveland, OH 44114
Miscellaneous (16 items
less than $25,000) - NA 113
_______
TOTAL $ 551
_______
Tax Services:
Ivins, Phillips & Barker,P.C. 1700 Pennsylvania Avenue NA $ 66
Washington, DC 20006
Miscellaneous (1 item
less than $25,000) - NA 1
_______
TOTAL $ 67
_______
Auditing Services:
Price Waterhouse, LLP 600 Grant Street
Suite 4500
Pittsburgh, PA 15219 NA $ 58
_____
35
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Continued)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Address Associate Amount
Other Special Services:
CNG Transmission Corporation 445 West Main Street A $ 2,202
Clarksburg, WV 26301
International Business 1300 East Ninth Street NA 843
Machines Cleveland, OH 44114
Hunter Group, Inc. P.O. Box 17110 NA 433
Baltimore, MD 21203-7110
Towers Perrin, Inc. P.O. Box 8500, S-6110 NA 340
Philadelphia, PA 19178
Data Resource Management, 203 Chaucer Court South NA 242
Inc. Sewickley, PA 15143
United Distribution Co. C/O East Ohio Gas Company NA 181
Tax Department
P.O. Box 5759
Cleveland, OH 44101-9973
Witalis Burke 34th & Ligonier Streets NA 178
Associates, Inc. Pittsburgh, PA 15201
Markpoint Creative Services, 5819 Forward Avenue NA 159
Inc. Pittsburgh, PA 15217-2301
Brandegee, Inc. Box 1032 NA 156
Pittsburgh, PA 15264-1032
Pittsburgh Business Chamber of Commerce Bldg. NA 152
Consultants, Inc. 411 Seventh Avenue
Suite 1401A
Pittsburgh, PA 15219
Kissel-Blake, Inc. 25 Broadway NA 139
New York, NY 10004
36
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Continued)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Address Associate Amount
Other Special Services (Cont.)
Comdisco Disaster Recovery P.O. Box 91753 NA 119
Services, Inc. Chicago, IL 60693
Implementation Management P.O. Box 337 NA 117
Associates, Inc. Brighton, CO 80601
Legent Corporation Dept. #1709 NA 109
Columbus, OH 43271-1709
Mainsail Associates, Inc. 294 Washington Street NA 106
Suite 429
Boston, MA 02108
M & I Data Service Accounting Department NA 105
Bin 440
Milwaukee, WI 53288-0440
Computer Associates P.O. Box 360355 NA 84
International, Inc. Pittsburgh, PA 15251-6355
Alzed Enterprises Limited Four Gateway Center NA 71
Suite 205
Pittsburgh, PA 15222
Oracle Corporation P.O. Box 71028 NA 69
Chicago, IL 60694-1028
Southern Gas Association 3030 LBJ Freeway NA 67
Suite 1300, L.B. 60
Dallas, TX 75234
Professional Services Group The Hartley Rose Building NA 64
425 First Avenue
Pittsburgh, PA 15219-1321
37
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Continued)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Address Associate Amount
Other Special Services (Cont.)
Omega Systems Omega Building NA 62
160 N. Craig Street
Pittsburgh, PA 15213
Ogrodnik & Company 7155 Fairground Boulevard NA 60
Canfield, OH 44406-1584
Jampole Communications, Inc. 1401 Forbes Avenue NA 60
Pittsburgh, PA 15219
BMC Software, Inc. NCNB Texas National Bank NA 58
P.O. Box 298761
Houston, TX 77298-0761
Olsten Staffing Services P.O. Box 8906 NA 57
Melville, NY 11747-8906
Kelly Temporary Services, P.O. Box 7777 C9995 NA 53
Inc. Philadelphia, PA 19175-9995
Dun & Bradstreet, Inc. P.O. Box 75364 NA 53
Chicago, IL 60675
Bowden & Co., Inc. 5000 Rockside Road NA 52
Cleveland, OH 44131-2172
Gartner Group, Inc. 56 Top Gallant Road NA 52
P.O. Box 10212
Stamford, CT 06904-2212
Forrester Research, Inc. One Brattle Square NA 50
Cambridge, MA 02138
D'Elia Wittkofski, Inc. One Market Street NA 45
Pittsburgh, PA 15222
38
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Continued)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Address Associate Amount
Other Special Services (Cont.)
Hill and Knowlton P.O. Box 8500-4445 NA 42
Philadelphia, PA 19178
EPD Design Group 938 Penn Avenue NA 41
Suite 301
Pittsburgh, PA 15222
Business Objects, Inc. U.S. Headquarters NA 39
20813 Stevens Creek Boulevard
Suite 100
Cupertino, a, PA 19178
Viasoft 3033 North 44th Street NA 38
Phoenix, AZ 85018
York Triathlon Consortium c/o Rushmore Trust & Savings NA 36
4922 Fairont Avenue
Bethesda, MD 20814-6076
Charan Associates, Inc. 12655 N. Central Expressway NA 35
Suite 103
Dallas, TX 75243
Stivers Temporary Personnel 200 West Monroe Street NA 32
Chicago, IL 60606
Berkau & Associates 1701 21st Avenue South NA 32
Suite 418
Nashville, TN 37212
Hayes, Domenici & Nunn 1311 A. Dolley Madison Blvd. NA 31
McLean, VA 22101
People Soft, Inc. 1331 North California Blvd. NA 29
Walnut Creek, CA 94596
DRI/McGraw-Hill P.O. Box 5-0210 NA 29
Woburn, MA 01815-0210
39
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Continued)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Address Associate Amount
Other Special Services (Cont.)
MK Consulting Services, Inc. Penn Center West Four NA 27
Suite 108
Pittsburgh, PA 15276
Miscellaneous (2 items
less than $25,000) - A 5
Miscellaneous (185 items
less than $25,000) NA 1,071
_______
TOTAL $ 8,025
_______
Research Services:
Gas Research Institute P.O. Box 91806 NA $ 329
Chicago, IL 60693
Berkau & Associates 1701 21st Avenue South NA 263
Suite 418
Nashville, TN 37212
Institute of Gas Technology, P.O. Box 91127 NA 200
Inc. Chicago, IL 60693
Energy Systems Associates 300 Gateway Two NA 186
Corporation Pittsburgh, PA 15222
Process Systems International Department 600-0625W NA 132
Inc. P.O. Box 94020
Palatine, IL 60094-4020
Drexel, Inc. 6000 East Berry Street NA 125
Fort Worth, TX 76119
Cummins Engine Company, Inc. Box 3005 NA 100
Columbus, IN 47202-3005
American Gas Association 1515 Wilson Boulevard NA 80
Arlington, VA 22209
40
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Concluded)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Address Associate Amount
Research Services (Cont.)
Advanced Mechanical 176 Waltham Street NA 47
Technologies, Inc. Watertown, MA 02172
Advanced Technologies 2964 Falmouth Road NA 44
Management, Inc. Cleveland, OH 44122
Teledyne Brown Engineering P.O. Box 36011 8M NA 44
Pittsburgh, PA 15251-6118
CNG Transmission Corporation 445 West Main Street NA 33
Clarksburg, WV 26301
Continental Controls, Inc. 6300 Hillcroft Avenue NA 32
Suite 400
Houston, TX 77081
Advanced Manufacturing Center 1751 East 23rd Street NA 32
Cleveland, OH 44114
Minnesota Valley Engineering 407 Seventh Street, NW NA 30
New Prague, MN 56071
Columbia Gas of Ohio, Inc. P.O. Box 117 NA 28
Columbus, OH 43216-0117
Carnegie Mellon University Office Of Sponsored Research NA 25
5000 Forbes Avenue
Pittsburgh, PA 15213-3890
Allegheny County Treasurer Mary Alice McDonough NA (37)
Lot Block: 1-C-1662-1514
Code & Line: 102 00683
Pittsburgh, PA 15219-2497
41
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Concluded)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Address Associate Amount
Research Services (Cont.)
Miscellaneous (2 items -
less than $25,000) A 12
Miscellaneous (167 items -
less than $25,000) A 173
_______
TOTAL $ 1,878
_______
GRAND TOTAL $10,579
=======
42
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(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 $ 1,726
Vacation 1,492
Alternate Thrift Trust 1,092
Holiday 832
Miscellaneous Welfare Expense 488
Contributory Group Life Insurance 353
Survivor Benefit Insurance 326
Disability Benefits 295
Educational Refunds 88
Workmen's Compensation Insurance 78
Other Paid Absences 71
Dental Insurance 65
Employee Medical Programs 45
Pension Expense (496)
______
TOTAL $ 6,455
=======
43
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(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
====
44
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(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 $ 501
Other Miscellaneous Expenses 275
Registar & Transfer Agent Expenses 254
Miscellaneous Expenses - Business Meeting/Group Meals 214
Other Shareholder Reports 193
Security Analyst Meeting Expenses 154
Proxy Solicitation Expenses 136
Other Shareholder Expenses 133
Dividend Disbursing & Reinvesting Expenses 104
Stock Listing Fees 64
Debenture Trustee Expenses 39
Personnel Agency Fees 10
_______
TOTAL $ 2,077
=======
4
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(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 $ 5,025
Office Equipment Rental - Computer 191
Office Equipment Rental - Other 32
Automobile Rental 111
Miscellaneous Rents 382
_______
TOTAL $ 5,741
=======
46
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(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 $ 73
Pittsburgh Business Privilege Tax 60
Ohio Real & Personal Property Taxes 51
District of Columbia Personal Property Tax 9
Other 2
_______
SUBTOTAL $ 195
_______
(B) U. S. Government Taxes
Federal Social Security Tax $ 1,371
Federal Unemployment Tax 21
_______
SUBTOTAL $ 1,392
_______
TOTAL $ 1,587
=======
47
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(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
====
48
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
(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 (95 Items) $ 27
______
TOTAL $ 27
======
49
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1994
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.
50
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
ORGANIZATION CHART - 1994
See Exhibit I filed herewith.
51
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
METHODS OF ALLOCATION
See Exhibit II filed herewith.
52
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
(In Thousands)
For the Year Ended December 31, 1994
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 4,168 34% 103
The Peoples Natural Gas Company 2,068 17% 51
CNG Transmission Corporation 3,241 27% 80
Hope Gas, Inc. 381 3% 10
West Ohio Gas Company 217 2% 5
Consolidated System LNG Company - * *
CNG Producing Company 781 6% 19
CNG Research Company - * *
CNG Coal Company - * *
CNG Energy Company 2 - -
CNG Gas Services Corporation 3 - -
Virginia Natural Gas, Inc. 1,305 11% 32
CNG Storage Service Company - - -
___________________________________
TOTAL $12,166 100% $ 300
===================================
*These System Companies were excluded from allocation since there were no
direct charges for Corporate Information Services Department.
53
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
(In Thousands)
For The Year Ended December 31, 1994
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 $ 834 5% $ 48 $ 48
The East Ohio Gas Company 4,325 27% 248 351
The Peoples Natural Gas
Company 2,125 13% 122 173
CNG Transmission Corporation 4,123 26% 237 317
Hope Gas, Inc. 557 3% 32 42
West Ohio Gas Company 239 2% 14 19
Consolidated System LNG
Company 3 - - -
CNG Producing Company 1,644 10% 94 113
CNG Research Company 36 - 2 2
CNG Coal Company 2 - - -
CNG Energy Company 456 3% 26 26
CNG Gas Services Corporation 567 4% 33 33
Virginia Natural Gas, Inc. 1,082 7% 62 94
CNG Storage Service Company 2 - - -
____________________________________________
TOTAL $ 15,995 100% $ 918 $ 1,218
============================================
54
<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, 1995
55
CONSOLIDATED NATURAL GAS SERVICE COMPANY, INC. Exhibit I
Organization Chart
Board of Directors
Chairman and
Chief Executive Officer
Vice Chairman and
Chief Financial Officer
Senior Vice President Financial
Vice President
Accounting and Financial Control
Controller
Vice President and Treasurer
Vice President
Taxes and Strategic Financial Planning
Sr. Vice President and General Counsel
Vice President
Rates and Regulatory Affairs
Vice President and
Assistant General Counsel-Washington, DC
Vice President and
Assistant General Counsel-Pittsburgh
Vice President
Government Affairs
Vice President
Human Resources and Administrative Services
Corporate Secretary
Vice President
Marketing and Technology
Vice President, Planning
Effective February 1, 1995
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.
(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.
(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.
