Form U-13-60
Mutual and Subsidiary Service Companies
Revised February 7, 1980
ANNUAL REPORT
For the Period
Beginning January 1, 1996 and Ending December 31, 1996
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 - Non associate Companies Account 458 28
Analysis of Charges for Service - Associate
and Non associate 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 35-38
Employee Pensions and Benefits Account 926 39
General Advertising Expenses Account 930.1 40
Miscellaneous General Expenses Account 930.2 41
Rents Account 931 42
Taxes Other than Income Taxes Account 408 43
Donations Account 426.1 44
Other Deductions Account 426.5 45
Notes to Statement of Income Schedule XVIII 46
LISTING OF INSTRUCTIONAL FILING REQUIREMENTS
Page
Description of Reports or Statements Number
ORGANIZATION CHART 47
METHODS OF ALLOCATION 48
ANNUAL STATEMENT OF COMPENSATION FOR USE OF CAPITAL BILLED 49-50
SIGNATURE 51
EXHIBIT I
EXHIBIT II
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
1996 1995
(In Thousands)
SERVICE COMPANY PROPERTY
101 Service company property (Schedule II) $ 29,501 $ 23,776
107 Construction work in progress (Schedule II) - -
Total Property $ 29,501 $ 23,776
108 Less accumulated provision for depreciation
and amortization of service company property
(Schedule III) $ 17,491 $ 15,405
Net Service Company Property $ 12,010 $ 8,371
INVESTMENTS
123 Investments in associate companies (Schedule IV) - -
124 Other investments (Schedule IV) - -
Total Investments - -
CURRENT AND ACCRUED ASSETS
131 Cash $ 567 $ 1,084
134 Special deposits 2 2
135 Working funds 2 2
136 Temporary cash investments (Schedule IV) - -
141 Notes receivable - -
143 Accounts receivable 558 763
144 Accumulated provision for uncollectible accounts - -
146 Accounts receivable from associate companies
(Schedule V and XIV-Note 6) 532,095 376,280
152 Fuel stock expenses undistributed (Schedule VI) - -
154 Materials and supplies - -
163 Stores expense undistributed (Schedule VII) - -
165 Prepayments 1,294 256
174 Miscellaneous current and accrued assets
(Schedule VIII) - -
Total Current and Accrued Assets $534,518 $378,387
DEFERRED DEBITS
181 Unamortized debt expense $ - $ -
184 Clearing accounts 236 -
186 Miscellaneous deferred debits (Schedule IX) 17,219 10,404
188 Research, development, or demonstration
expenditures (Schedule X) - -
190 Accumulated deferred income taxes 5,928 3,622
Total Deferred Debits $ 23,383 $ 14,026
TOTAL ASSETS AND OTHER DEBITS $569,911 $400,784
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
1996 1995
(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) $ 14,151 $ 14,391
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 $ 14,151 $ 14,391
CURRENT AND ACCRUED LIABILITIES
231 Notes payable $ - $ -
232 Accounts payable 9,931 5,779
233 Notes payable to associate companies
(Schedule XIII and XIV-Note 6) 515,667 361,462
234 Accounts payable to associate companies
(Schedule XIII and XIV-Note 6) 9,792 2,502
236 Taxes accrued 1,180 764
237 Interest accrued - -
238 Dividends declared - -
241 Tax collections payable 100 54
242 Miscellaneous current and accrued liabilities
(Schedule XIII) 3,438 2,342
Total Current and Accrued Liabilities $540,108 $372,903
DEFERRED CREDITS
253 Other deferred credits $ 13,564 $ 12,224
255 Accumulated deferred investment tax credits - -
Total Deferred Credits $ 13,564 $ 12,224
282 ACCUMULATED DEFERRED INCOME TAXES $ 2,078 $ 1,256
TOTAL LIABILITIES AND PROPRIETARY CAPITAL $569,911 $400,784
6
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(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 4,241 29 - - 4,270
306 Leasehold
Improvements 5,658 21 - - 5,679
307 Equipment(2) 7,873 5,151 219 - 12,805
308 Office
Furniture
and Equip-
ment 5,873 909 191 - 6,591
309 Automobiles,
Other
Vehicles and
Related
Garage Equip-
ment 19 25 - - 44
310 Aircraft and
Airport
Equipment - - - - -
311 Other Service
Company
Property(3) - - - - -
subtotal $ 23,776 $ 6,135 $ 410 $ - $ 29,501
107 Construction
Work in
Progress(4) - - - - -
Total $ 23,776 $ 6,135 $ 410 $ - $ 29,501
(1) Provide an explanation of those changes considered material:
Not Applicable
7
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(In Thousands)
SCHEDULE II - CONTINUED
(2) Sub accounts are required for each class of equipment owned. The service
company shall provide a listing by sub account of equipment additions
during the year and the balance at the close of the year:
Balance at
Close of
Subaccount Description Additions Year
Computer Services Equipment
Hardware $ 5,148 $ 11,772
Software - 471
Typewriters, Calculators, Copiers & Duplicating 3 339
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 $ 5,151 $12,805
(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, 1996
(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 1,182 123 - - 1,305
306 Leasehold
Improvements 2,387 309 - - 2,696
307 Equipment 6,504 1,416 8 - 7,912
308 Office
Furniture and
Fixtures 5,320 238 - - 5,558
309 Automobiles,
Other
Vehicles and
Related
Garage Equip-
ment 12 8 - - 20
310 Aircraft and
Airport
Equipment - - - - -
311 Other Service
Company
Property - - - - -
TOTAL $ 15,405 $ 2,094 $ 8 $ - $ 17,491
(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, 1996
(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 $ - $ -
Account 124 - Other Investments - -
Account 136 - Temporary Cash Investments
$ - $ -
TOTAL $ - $ -
10
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(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
accommodation or convenience payments for associate companies, a
separate listing of total payments for each associate company by
subaccount should be provided.
Beginning Close
Description of Year of Year
Account 146 - Accounts Receivable from Associate
Companies
Consolidated Natural Gas Company $ 501 $ 992
The East Ohio Gas Company 117,032 242,559
The Peoples Natural Gas Company 57,467 66,296
CNG Transmission Corporation 2,503 9,007
Hope Gas, Inc. 2,562 12,663
West Ohio Gas Company 13,833 28,139
Consolidated System LNG Company 11 -
CNG Producing Company 464 2,514
CNG Research Company 9 1
CNG Coal Company 5 5
CNG Power Company 1,084 147
CNG Energy Services Corporation 110,634 98,160
Virginia Natural Gas, Inc. 70,170 70,427
CNG Storage Service Company 4 14
CNG Power Services Corporation 1 4
CNG Products & Services, Inc. - 252
CNG International, Inc. - 915
TOTAL $376,280 $532,095
Total
Analysis of Convenience or Accommodation Payments: Payments
Consolidated Natural Gas Company $ 51
The East Ohio Gas Company 7,042
The Peoples Natural Gas Company 3,152
CNG Transmission Corporation 6,636
Hope Gas, Inc. 872
West Ohio Gas Company 274
CNG Producing Company 9,286
CNG Power Company 2
CNG Energy Services Corporation 1,049
Virginia Natural Gas, Inc. 1,090
CNG Power Services Corporation 6
CNG Products & Services, Inc. 340
CNG International, Inc. 70
TOTAL PAYMENTS $ 29,870
The majority of these payments were for system insurance, system employee
benefit plans, system memberships and training.
11
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(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 $ - $ - $ -
TOTAL $ - $ - $ -
Summary:
Not Applicable
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<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(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 $ - $ - $ -
TOTAL $ - $ - $ -
13
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(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 $ - $ -
TOTAL $ - $ -
14
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(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 $ 5,491 $ 8,567
Pension Supplement Intangible Asset (Non-Qualified) 3,854 3,826
Deferred Compensation Expense 254 4,181
Curtailment Gain - FAS 88 418 418
Pension Supplement Intangible Asset (Qualified) 312 196
Prepaid IBM/LPC Maintenance 55 29
Miscellaneous 20 2
TOTAL $ 10,404 $ 17,219
15
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(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
Transportation $ 192
Residential and Commercial Gas Utilization 5
Co-Firing (113)
Industrial Gas Utilization (20)
Information (4)
Subtotal $ 60
Amount Billed to System Companies (60)
TOTAL $ -
16
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
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 $ -
Account 215 - Appropriated Retained Earnings $ -
TOTAL $ -
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 $ - $ - $ - $ -
17
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(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 $ 3,596 $ - $ 240 $ 3,356
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 $14,631 $14,391 $ - $ 240 $14,151
<FN>
(1) GIVE AN EXPLANATION OF DEDUCTIONS:
Current portion of Long-Term Debt moved to Account 233 - Notes Payable to Associate Companies.
</TABLE>
18
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(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 $220,192 $415,652
CNG Transmission Corporation 5,110 1,480
Consolidated System LNG Company 9,800 21,265
CNG Producing Company 101,835 54,735
CNG Research Company 30 90
CNG Coal Company 5,165 2,995
CNG Power Company 19,105 -
CNG Energy Services Corporation - 19,450
CNG Storage Service Company 225 -
TOTAL $361,462 $515,667
Account 234 - Accounts Payable to Associate Companies
Consolidated Natural Gas Company $ 1,512 $ 8,579
The East Ohio Gas Company 43 127
The Peoples Natural Gas Company 47 109
CNG Transmission Corporation 156 60
Hope Gas, Inc. 1 218
West Ohio Gas Company - 1
Consolidated System LNG Company 147 105
CNG Producing Company 492 445
CNG Coal Company 26 42
CNG Power Company 76 -
CNG Energy Services Corporation - 98
Virginia Natural Gas, Inc. - 8
CNG Storage Service Company 2 -
TOTAL $ 2,502 $ 9,792
Account 242 - Miscellaneous Current and Accrued Liabilities
Accrued Vacation Pay $ 1,214 $ 1,309
Deferred Compensation 747 994
Non-Qualified Pension Plans Liability 375 1,036
U. S. Savings Bond Deduction 1 1
Supplemental Pension Plans Liability - 98
Miscellaneous 5 -
TOTAL $ 2,342 $ 3,438
19
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
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 amended, as required by
the Public Utility Holding Company Act of 1935.
2. PENSION AND OTHER BENEFIT PROGRAMS
Pension Program
All employees of the Company are covered under the Consolidated Natural Gas
System's (the System) 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
20
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
SCHEDULE XIV - NOTES TO FINANCIAL STATEMENTS (Continued)
under federal income 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, and the payment of benefits to
certain retired executives under company-sponsored nonqualified employee
benefit plans. Certain of these nonqualified benefit plans have been partially
funded through contributions to a grantor trust.
Pension expense (or credit), which includes the costs of defined benefit
pension plans and pension supplements, was $(1,099,000) and $(1,827,000) for
the years ended December 31, 1995 and 1996, 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.
As permitted, the Company elected to amortize the accumulated postretirement
benefit obligation existing at January 1, 1993 (transition obligation) of
$8,246,000 over a 20-year period. Net periodic postretirement benefit cost for
the year ended December 31, 1995 and 1996 was $1,598,000 and $1,166,000
respectively, as determined by an independent actuary.
21
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
SCHEDULE XIV - NOTES TO FINANCIAL STATEMENTS (Continued)
3. WORKFORCE REDUCTION COSTS
During the fourth quarter of 1996 the Company recorded a provision for
severance and related benefits to be paid to affected employees in conjunction
with the Company's efforts to combine and streamline certain business
functions. As a result, the Company recorded a charge to expense in 1996 of
$1,014,000.
4. LONG-TERM DEBT
The aggregate principal amounts of the Company's long-term debt maturing in the
years 1997 through 2001 are: $239,800; $5,239,800 $5,239,800; $239,800 and
$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.
5. 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 1995 and
1996 was $5,460,000 and $5,571,000, 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 $51,866,000 and for
the years 1997 through 2001 are: $5,151,000; $4,956,000; $4,608,000;
$4,608,000 and $4,555,000. 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 1997 amounts to approximately $1,810,000. In
this connection, the Company has entered into certain contractual commitments.
22
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
SCHEDULE XIV - NOTES TO FINANCIAL STATEMENTS (Continued)
6. 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, 1996
SCHEDULE XIV - NOTES TO FINANCIAL STATEMENTS (Continued)
At December 31, 1996, the detail of the pool was as follows:
Investment in Pool (including interest)
Consolidated Natural Gas Company $417,605,000
CNG Transmission Corporation 1,496,000
Consolidated System LNG Company 21,364,000
CNG Producing Company 54,954,000
CNG Research 90,000
CNG Coal Company 3,037,000
CNG Power Company 17,997,000
CNG Storage Service Company 1,548,000
Subtotal $518,091,000
Less:
Borrowings from Pool (including interest)
The East Ohio Gas Company $239,308,000
The Peoples Natural Gas Company 64,356,000
CNG Transmission Corporation 5,737,000
Hope Gas, Inc. 12,173,000
West Ohio Gas Company 27,875,000
CNG Power Company 1,206,000
CNG Energy Services Corporation 96,032,000
Virginia Natural Gas, Inc. 69,521,000 516,208,000
Consolidated Natural Gas Service Company 1,883,000
Subtotal 518,091,000
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, 1996
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,
1996, is as follows:
As Reported As Reported
Affiliated Accounts in Form U-13-60 in Form U5S Difference
Accounts Receivable $532,095,000 $507,032,000 $ 25,063
Notes Payable $515,667,000 - $515,667,000
Accounts Payable 9,792,000 - 9,792,000
Payables to Affiliated Companies - $500,396,000 (500,396,000)
$ 25,063
25
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Years Ended December 31, 1996 and 1995
(In Thousands)
SCHEDULE XV - COMPARATIVE STATEMENT OF INCOME
Current Prior
Description Year Year
Account 1996 1995
INCOME
457 Services rendered to associate companies $60,154 $52,959
458 Services rendered to nonassociate companies - -
421 Miscellaneous income or loss 113 254
Total Income $60,267 $53,213
EXPENSE
920 Salaries and wages $22,672 $18,260
921 Office supplies and expenses 5,236 4,066
922 Administrative expense transferred - credit (51) (19)
923 Outside services employed 13,189 9,081
924 Property insurance - -
925 Injuries and damages 76 70
926 Employee pensions and benefits 5,286 9,004
928 Regulatory commission expense - -
930.1 General advertising expenses - -
930.2 Miscellaneous general expenses 1,686 1,447
931 Rents 5,571 5,460
932 Maintenance of structures and equipment 997 1,095
403 Depreciation and amortization expense 2,497 1,557
408 Taxes other than income taxes 1,643 1,654
409 Income taxes 1,485 1,406
410 Provision for deferred income taxes (401) (656)
411 Provision for deferred income taxes - credit (1,084) (750)
411.5 Investment tax credit - -
419.6 Curtailment Gain - FAS 88 - (418)
426.1 Donations - -
426.5 Other deductions 105 30
426.7 Curtailment Loss - FAS 106 - 682
427 Interest on long-term debt - -
430 Interest on debt to associate companies 1,242 1,186
431 Other interest expense 118 58
Total Expense $60,267 $53,213
Net Income or (Loss) $ - $ -
26
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(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 $ 2,454 $1,049 $ 60 $ 3,563
The East Ohio Gas Company 11,524 3,762 319 15,605
The Peoples Natural Gas Company 4,793 1,667 140 6,600
CNG Transmission Corporation 9,483 3,110 337 12,930
Hope Gas, Inc. 1,326 465 35 1,826
West Ohio Gas Company 685 239 19 943
Consolidated System LNG Company 5 3 - 8
CNG Producing Company 5,795 1,911 122 7,828
CNG Research Company 62 25 1 88
CNG Coal Company 28 13 1 42
CNG Power Company 193 62 4 259
CNG Energy Services Corporation 1,923 792 47 2,762
Virginia Natural Gas, Inc. 2,855 947 92 3,894
CNG Storage Service Company 20 7 - 27
CNG Power Services Corporation 4 2 - 6
CNG Products & Services, Inc. 436 198 12 646
CNG International, Inc. 2,140 934 53 3,127
(A) The amount of indirect costs
charged of $15,186 is net of
$113 miscellaneous income.
(B) Includes $300 which was directly
billed to associate companies
and $942 which was indirectly
billed to associate companies.
TOTAL $43,726 $15,186 $ 1,242 $60,154
27
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(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, 1996
(In Thousands)
<CAPTION>
SCHEDULE XVI - ANALYSIS OF CHARGES FOR SERVICE
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 $ 19,055 $ 3,617 $22,672 $19,055 $ 3,617 $22,672
921 Office Supplies and Expenses 4,415 821 5,236 4,415 821 5,236
922 Administrative Expense Transferred -
Credit (51) - (51) (51) - (51)
923 Outside Services Employed 11,120 2,069 13,189 11,120 2,069 13,189
924 Property Insurance - - - - - -
925 Injuries and Damages - 76 76 - 76 76
926 Employee Pensions and Benefits - 5,286 5,286 - 5,286 5,286
928 Regulatory Commission Expense - - - - - -
930.1 General Advertising Expenses - - - - - -
930.2 Miscellaneous General Expenses 1,421 265 1,686 1,421 265 1,686
931 Rents 4,697 874 5,571 4,697 874 5,571
932 Maintenance of Structures and Equipment 841 156 997 841 156 997
403 Depreciation and Amortization Expense 2,105 392 2,497 2,105 392 2,497
408 Taxes Other than Income Taxes 53 1,590 1,643 53 1,590 1,643
409 Income Taxes - 1,485 1,485 - 1,485 1,485
410 Provision for Deferred Income Taxes - (401) (401) - (401) (401)
411 Provision for Deferred Income Taxes Cr. - (1,084) (1,084) - (1,084) (1,084)
411.5 Investment Tax Credit - - - - - -
419 Curtailment Gain - - - - - -
426.1 Donations - - - - - -
426.5 Other Deductions 105 - 105 105 - 105
426.7 Curtailment Loss - - - - - -
427 Interest on Long-Term Debt - - - - - -
431 Other Interest Expense - 118 118 - 118 118
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 $43,761 $15,264 $59,025 $43,761 $15,264 $59,025
Compensation for Use of Equity Capital
430 Interest on Debt to Associate
Companies 1,242 1,242
TOTAL COST OF SERVICE $60,267 $60,267
29
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION> External
Affairs
Total Executive Corp. Legal Network Legal & Policy
Description of Items Amount Overhead Office Commun. Washington Services Secretary's Pgh. Development
<S> <C> <C> <C> <C> <C>
<C> <C> <C> <C>
920 Salaries and Wages $22,672 $ - $ 3,539 $ 576 $ 724 $ 306 $ 251 $ 1,221 $1,040
921 Office Supplies and
Expenses 5,236 224 366 103 143 238 38 245 240
922 Administrative
Expense Trans-
ferred Credit (51) - - - - - - - -
923 Outside Services
Employed 13,189 127 2,218 243 25 1,574 97 977 342
924 Property Insurance - - - - - - - - -
925 Injuries and Damage 76 76 - - - - - - -
926 Employee Pensions
and Benefits 5,286 5,286 - - - - - - -
928 Regulatory Commis-
sion Expense - - - - - - - - -
930.1 General Advertising
Expense - - - - - - - - -
930.2 Miscellaneous
General Expenses 1,686 (3) 71 488 4 1 567 7 99
931 Rents 5,571 - 483 98 230 279 62 179 336
932 Maintenance of
Structures and
Equipment 997 - 12 2 9 34 - 8 8
403 Depreciation and
Amortization
Expense 2,497 - 48 22 31 257 7 28 39
408 Taxes Other Than
Income Taxes 1,643 1,590 - - - - - - -
409 Income Taxes 1,485 1,485 - - - - - - -
410 Provision for
Deferred Income
Taxes (401) (401) - - - - - - -
411 Provision for
Deferred Income
Taxes - Credit (1,084) (1,084) - - - - - - -
411.5 Investment Tax
Credit - - - - - - - - -
419 Curtailment Gain - - - - - - - - -
426.1 Donations - - - - - - - - -
426.5 Other Deductions 105 - 26 - 1 - 2 2 55
426.75 Curtailment Loss - - - - - - -
427 Interest on Long
Term Debt - - - - - - - - -
430 Interest on Debt
to Associate
Companies 1,242 942 - - - - - - -
431 Other Interest
Expense 118 118 - - - - - - -
TOTAL EXPENSES $60,267 $8,360 $ 6,673 $ 1,532 $ 1,167 $ 2,689 $ 1,024 $ 2,667 $ 2,159
30
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(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 Treasurer's Tax
<S> <C> <C> <C> <C> <C> <C> <C>
920 Salaries and Wages $ 1,516 $ 3,690 $ 1,033 $ 1,198 $ 1,188 $ 1,065 $ 992
921 Office Supplies and
Expenses 74 1,381 127 237 170 186 64
922 Administrative
Expense Trans-
ferred Credit 176 (676) 6 27 260 147 2
923 Outside Services
Employed 35 2,257 7 269 1,074 32 27
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 21 13 16 36 6 6 1
931 Rents 251 599 92 175 234 198 113
932 Maintenance of
Structures and
Equipment 1 685 1 3 15 6 3
403 Depreciation and
Amortization
Expense 30 1,254 26 24 54 27 13
408 Taxes Other Than
Income Taxes - 51 - - - - -
409 Income Taxes - - - - - - -
410 Provision for
Deferred Income
Taxes - - - - - - -
411 Provision for
Deferred Income
Taxes - Credit - - - - - - -
411.5 Investment Tax
Credit - - - - - - -
419 Curtailment Gain - - - - - - -
426.1 Donations - - - - - - -
426.5 Other Deductions - - - 4 - 9 -
426.75 Curtailment Loss - - - - - - -
427 Interest on Long-
Term Debt - - - - - - -
430 Interest on Debt
to Associate
Companies - 300 - - - - -
431 Other Interest
Expense - - - - - - -
TOTAL EXPENSES $ 2,104 $ 9,554 $ 1,308 $ 1,973 $ 3,001 $ 1,676 $ 1,215
31
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
Strategic Business & Intl.
Risk Financial Corporate Operations Library Distribution Business
Description of Items Management Planning Planning Services Services Services Develop. Research
<S> <C> <C> <C> <C> <C>
<C> <C> <C>
920 Salaries and Wages $ 151 $ 302 $ 505 $ 673 $ 95 $ 438 $ 797 $ 21
921 Office Supplies and
Expenses 19 17 24 69 58 79 593 9
922 Administrative
Expense Trans-
ferred Credit 7 - - - - - - -
923 Outside Services
Employed 40 1 120 23 104 41 381 60
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 1 - 13 45 - 5 98 -
931 Rents 50 42 85 73 31 62 40 3
932 Maintenance of
Structures and
Equipment - - - 4 - 19 1 -
403 Depreciation and
Amortization
Expense 11 5 12 17 26 45 7 4
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 - - - - - - - -
419 Curtailment Gain - - - - - - - -
426.1 Donations - - - - - - - -
426.5 Other Deductions - - - - - 4 2 -
426.75 Curtailment Loss - - - - - - - -
427 Interest on Long-
Term Debt - - - - - - - -
430 Interest on Debt
to Associate
Companies - - - - - - - -
431 Other Interest
Expense - - - - - - - -
TOTAL EXPENSES $ 279 $ 367 $ 759 $ 904 $ 316 $ 693 $ 1,919 $ 97
32
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
Investor Asset Facility Residential Common New York Facility
Description of Items Relations Management Operations Services Fin Systems Office Services
<S> <C> <C> <C> <C> <C> <C> <C>
920 Salaries and Wages $ 284 $ 167 $ 126 $ 239 $ 398 $ 45 $ 92
921 Office Supplies and
Expenses 108 4 9 27 193 25 166
922 Administrative
Expense Trans-
ferred Credit - - - - - - -
923 Outside Services
Employed 103 - 2 5 - - 179
924 Property Insurance - - - - 2,916 - -
925 Injuries and Damages - - - - - - -
926 Employee Pensions
and Benefits - - - - - - -
928 Regulatory Commis-
sion Expense - - - - - - -
930.1 General Advertising
Expense - - - - - - -
930.2 Miscellaneous
General Expenses 168 - - - 18 6 (1)
931 Rents 50 11 54 42 195 124 1,380
932 Maintenance of
Structures and
Equipment 1 - 1 7 13 - 164
403 Depreciation and
Amortization
Expense 5 1 8 5 286 11 194
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 - - - - - - -
419 Curtailment Gain - - - - - - -
426.1 Donations - - - - - - -
426.5 Other Deductions - - - - - - -
426.75 Curtailment Loss - - - - - - -
427 Interest on Long-
Term Debt - - - - - - -
430 Interest on Debt
to Associate
Companies - - - - - - -
431 Other Interest
Expense - - - - - - -
TOTAL EXPENSES $ 719 $ 183 $ 200 $ 325 $ 4,019 $ 211 $ 2,174
33
</TABLE>
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(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 $ 3,539 $ 453 $ 3,086 $ - 9
Corporate Communications 576 30 546 9
Legal - Washington 724 13 711 7
Network Services 306 - 306 6
Secretary's 251 116 135 4
Legal - Pittsburgh 1,221 47 1,174 11
External Affairs &
Policy Development 1,040 181 859 10
Controller's 1,516 130 1,386 23
Information Technology 3,690 - 3,690 76
Internal Auditing 1,033 1 1,032 18
Human Resources 1,198 26 1,172 12
Employee Benefits 1,188 2 1,186 21
Treasurer's 1,065 49 1,016 19
Tax 992 139 853 7
Risk Management 151 1 150 3
Strategic Financial
Planning 302 258 44 4
Corporate Planning 505 4 501 5
Business & Operations
Services 673 5 668 5
Library Services 95 - 95 2
Distribution Services 438 4 434 2
International
Business Development 797 14 783 4
Research 21 8 13 -
Investor Relations 284 12 272 3
Asset Management 167 1 166 1
Facility Operations 126 - 126 3
Residential Services 239 - 239 6
Common Financial Systems 398 - 398 2
New York Office 45 - 45 1
Facility Services 92 - 92 3
TOTAL $22,672 $ 1,494 $21,178 $ - 276
(A) Excludes Vacation, Holiday and Other Paid Absences which are included
in Account 926, Page 39.
34
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(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 $100,000, 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 Description Associate Amount
Legal Services:
Buchanan Ingersoll, P.C. Legal Services NA $ 407
Cahill, Gordon & Legal Services NA 190
Reindel, P.C.
Reid & Priest L.L.P. Legal Services NA 103
Miscellaneous (19 items
less than $100,000) - NA 252
TOTAL $ 952
Tax Services:
Miscellaneous (4 items
less than $100,000) - NA 25
TOTAL $ 25
Auditing Services:
Miscellaneous (1 item
less than $100,000) Audit Services NA 38
TOTAL $ 38
35
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Continued)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Description Associate Amount
Other Special Services:
McKinsey & Company, Inc. Management Consultants NA $ 2,037
Deloitte & Touche LLP Computer Consultants/ NA 1,963
Services
I-Net, Inc. Computer Consultants/ NA 1,529
Services
Towers Perrin, Inc. Human Resources, NA 1,095
Compensation & Benefits
International Business Computer Consultants/ NA 790
Machines Corporation Services
Oracle Corporation Computer Consultants/ NA 742
Services
BMC Software Inc. Computer Consultants/ NA 212
Services
Peoples Natural Gas Mailroom, Medical & HR A 209
Services
National Fuel Gas Gov't & Public Affairs NA 162
Distribution Corporation Consultants
Pancoast Temporary Employment Services NA 145
Services, Inc.
PeopleSoft, Inc. Computer Consultants NA 145
36
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Continued)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Description Associate Amount
Other Special Services (Cont.):
Implementation Management Management Consultants NA $ 138
Associates, Inc.
CNG Producing Company Oracle Unix Services & A 133
Other Misc. Services
Computer Associates Computer Consultants/ NA 119
International, Inc. Services
Miz Data Systems, Inc. Computer Consultants/ NA 115
Services
Northeastern Executive Employment Services NA 111
Group, Inc.
Miscellaneous (3 items
less than $100,000) - A 82
Miscellaneous (233 items
less than $100,000) - NA 2,387
TOTAL $12,114
Research Services:
Blue Bird Body Co. Natural Gas Vehicle NA 200
Project
37
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Continued)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Description Associate Amount
Research Services (Cont.):
Miscellaneous (1 item -
less than $100,000) A $ 18
Miscellaneous (2 items
less than $100,000 - NA 57
Gas Research Institute Project Cost Sharing NA (172)
Miscellaneous Credits (3 items
less than $100,000) - NA (43)
TOTAL $ 60
GRAND TOTAL $13,189
38
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(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 $ 1,307
Vacation 1,298
Workforce Reduction 1,134
Alternate Thrift Trust 938
Holiday 822
Workmen's Compensation Insurance 253
Flex Dollars 249
Disability Benefits 240
Contributory Group Life Insurance 215
Survivor Benefit Insurance 172
Miscellaneous Welfare Expense 134
Flex Benefit Administration Fees 104
Other Paid Absences 91
Educational Refunds 73
Dental Insurance 53
Employee Medical Programs 30
Pension Expense (1,827)
TOTAL $ 5,286
39
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(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
$ -
TOTAL $ -
40
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(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 $ 426
Other Miscellaneous Expenses 284
Transfer Agent Expenses 258
Other Shareholder Reports 170
Miscellaneous Expenses - Business Meeting/Group Meals 160
Security Analyst Meeting Expenses 133
Debenture Trustee Expenses 71
Stock Listing Fees 68
Proxy Solicitation Expenses 46
Other Shareholder Expenses 40
Dividend Disbursing & Reinvesting Expenses 30
TOTAL $ 1,686
41
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(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 $ 4,759
Office Equipment Rental - Computer 185
Office Equipment Rental - Other 87
Automobile Rental 142
Miscellaneous Rents 398
TOTAL $ 5,571
42
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(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 $ 93
Pittsburgh Business Privilege Tax 53
Ohio Real & Personal Property Taxes 53
Other Franchise Tax 26
Ohio Franchise Tax 15
District of Columbia Personal Property Tax 9
New York Commercial Rent - Occupancy Tax 5
District of Columbia Franchise Tax 2
Other Miscellaneous Taxes 2
New York State Franchise Tax 1
SUBTOTAL $ 259
(B) U. S. Government Taxes
Federal Social Security Tax $ 1,326
Federal Unemployment Tax 58
SUBTOTAL $ 1,384
TOTAL $ 1,643
43
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(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
TOTAL $ -
44
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
(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 (175 Items) $ 105
TOTAL $ 105
45
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1996
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.
46
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
ORGANIZATION CHART - 1996
See Exhibit I filed herewith.
47
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
METHODS OF ALLOCATION
See Exhibit II filed herewith.
48
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
(In Thousands)
For the Year Ended December 31, 1996
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 2,922 35% 106
The Peoples Natural Gas Company 1,252 15% 46
CNG Transmission Corporation 2,197 27% 80
Hope Gas, Inc. 228 3% 8
West Ohio Gas Company 139 2% 5
Consolidated System LNG Company - * *
CNG Producing Company 358 4% 13
CNG Research Company - * *
CNG Coal Company - * *
CNG Power Company 3 - -
CNG Energy Services Corporation 55 1% 2
Virginia Natural Gas, Inc. 1,082 13% 39
CNG Storage Service Company - - -
CNG Power Services Corporation - * *
CNG Products & Services, Inc. 16 - 1
CNG International, Inc. - - -
TOTAL $ 8,252 100% $ 300
*These System Companies were excluded from allocation since there were no
direct charges for Corporate Information Services Department.
49
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
(In Thousands)
For The Year Ended December 31, 1996
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 $ 1,109 7% $ 60 $ 60
The East Ohio Gas Company 3,975 25% 213 319
The Peoples Natural Gas
Company 1,761 11% 94 140
CNG Transmission Corporation 3,367 21% 257 337
Hope Gas, Inc. 491 3% 27 35
West Ohio Gas Company 253 2% 14 19
Consolidated System LNG
Company 3 - - -
CNG Producing Company 2,020 13% 109 122
CNG Research Company 26 - 1 1
CNG Coal Company 14 - 1 1
CNG Power Company 66 - 4 4
CNG Energy Services Corporation 837 5% 45 47
Virginia Natural Gas, Inc. 1,000 6% 53 92
CNG Storage Service Company 7 - - -
CNG Power Services Corporation 2 - - -
CNG Products & Services, Inc. 210 1% 11 12
CNG International, Inc. 987 6% 53 53
TOTAL $ 16,128 100% $ 942 $ 1,242
50
<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)
By: Stephen R. McGreevy
(Signature of Signing Officer)
Stephen R. McGreevy, Vice President
Accounting and Financial Control
(Printed Name and Title of Signing Officer)
Date: April 29, 1997
51
CONSOLIDATED NATURAL GAS SERVICE COMPANY, INC. Exhibit I
Organization Chart
Board of Directors
Chairman and
Chief Executive Officer
Senior Vice President and
Chief Financial Officer
Vice President,
Accounting and Financial Control
Controller
Treasurer
Vice President,
Taxes and Strategic Financial Planning
Vice President, System Services Group
Vice President, Planning
Sr. Vice President and General Counsel
Vice President and
Assistant General Counsel-Washington, DC
Vice President and
Assistant General Counsel-Pittsburgh
Vice President,
External Affairs & Policy Development
Vice President,
Business & Operations Services
Corporate Secretary
Vice President,
Regulated Business Support Group
Vice President,
Human Resources and Administration
Effective March 1, 1997
52
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 Total regulated company operating expenses,
excluding purchase gas expense, other purchased
products and royalties, for 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.
Business and Operations Throughput volumes for CNG Affiliates for the
Services 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 Total operating expenses, excluding purchased
all System Companies gas expense, other purchased products and
except Service royalties, for the preceding year ended
Company) December 31st.
All operating companies Operating revenue deductions booked 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 retail companies Volume of gas sold at retail during the
preceding year ended December 31st.
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.
5
<TABLE> <S> <C>
<ARTICLE> OPUR2
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PER-BOOK
<NET-SERVICE-COMPANY-PROPERTY> 12,010
<TOTAL-INVESTMENTS> 0
<TOTAL-CURRENT-ASSETS> 536,911
<TOTAL-DEFERRED-DEBITS> 23,383
<OTHER-ASSETS-AND-DEBITS> 0
<TOTAL-ASSETS-AND-DEBITS> 569,911
<TOTAL-PROPRIETARY-CAPITAL> 10
<TOTAL-LONG-TERM-DEBT> 14,151
<NOTES-PAYABLE> 0
<NOTES-PAYABLE-ASSOCIATE-COMP> 515,677
<OTHER-CURR-AND-ACCRUED-LIAB> 24,431
<TOTAL-DEFERRED-CREDITS> 13,564
<DEFERRED-INCOME-TAX> 2,078
<TOT-LIABIL-AND-PROPRIET-CAP> 569,911
<SERVICES-ASSOCIATE-COMPANIES> 60,154
<SERVICES-NON-ASSOCIATE-COMP> 0
<MISC-INCOME-OR-LOSS> 113
<TOTAL-INCOME> 60,267
<SALARIES-AND-WAGES> 22,672
<EMPLOYEE-PENSION-AND-BENEFIT> 5,286
<OTHER-EXPENSES> 32,309
<TOTAL-EXPENSES> 60,267
<NET-INCOME> 0
<TOTAL-EXPENSES-DIRECT-COST> 43,761
<TOTAL-EXPENSES-INDIRECT-COST> 16,506
<TOT-EXP-DIRECT-AND-INDIRECT> 60,267
<PERSONNEL-END-OF-YEAR> 276
</TABLE>
