Form U-13-60
Mutual and Subsidiary Service Companies
Revised February 7, 1980
ANNUAL REPORT
For the Period
Beginning January 1, 1997 and Ending December 31, 1997
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 30-39
Departmental Analysis of Salaries Account 920 40-42
Outside Services Employed Account 923 43-47
Employee Pensions and Benefits Account 926 48
General Advertising Expenses Account 930.1 49
Miscellaneous General Expenses Account 930.2 50
Rents Account 931 51
Taxes Other than Income Taxes Account 408 52
Donations Account 426.1 53
Other Deductions Account 426.5 54
Notes to Statement of Income Schedule XVIII 55
LISTING OF INSTRUCTIONAL FILING REQUIREMENTS
Page
Description of Reports or Statements Number
ORGANIZATION CHART 56
METHODS OF ALLOCATION 57
ANNUAL STATEMENT OF COMPENSATION FOR USE OF CAPITAL BILLED 58-59
SIGNATURE 60
EXHIBIT I 1
EXHIBIT II 1-5
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
1997 1996
(In Thousands)
SERVICE COMPANY PROPERTY
101 Service company property (Schedule II) $ 39,994 $ 29,501
107 Construction work in progress (Schedule II) - -
Total Property $ 39,994 $ 29,501
108 Less accumulated provision for depreciation
and amortization of service company property
(Schedule III) $ 20,307 $ 17,491
Net Service Company Property $ 19,687 $ 12,010
INVESTMENTS
123 Investments in associate companies (Schedule IV) - -
124 Other investments (Schedule IV) - -
Total Investments - -
CURRENT AND ACCRUED ASSETS
131 Cash $ 1,017 $ 567
134 Special deposits 2 2
135 Working funds 1 2
136 Temporary cash investments (Schedule IV) 25,400 -
141 Notes receivable - -
143 Accounts receivable 800 558
144 Accumulated provision for uncollectible accounts - -
146 Accounts receivable from associate companies
(Schedule V and XIV-Note 6) 591,165 532,095
152 Fuel stock expenses undistributed (Schedule VI) - -
154 Materials and supplies - -
163 Stores expense undistributed (Schedule VII) - -
165 Prepayments 1,109 1,294
174 Miscellaneous current and accrued assets
(Schedule VIII) - -
Total Current and Accrued Assets $619,494 $534,518
DEFERRED DEBITS
181 Unamortized debt expense $ - $ -
184 Clearing accounts 79 236
186 Miscellaneous deferred debits (Schedule IX) 18,155 17,219
188 Research, development, or demonstration
expenditures (Schedule X) - -
190 Accumulated deferred income taxes 6,556 5,928
Total Deferred Debits $ 24,790 $ 23,383
TOTAL ASSETS AND OTHER DEBITS $663,971 $569,911
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<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
1997 1996
(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) $ 8,912 $ 14,151
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 $ 8,912 $ 14,151
CURRENT AND ACCRUED LIABILITIES
231 Notes payable $ - $ -
232 Accounts payable 26,692 9,931
233 Notes payable to associate companies
(Schedule XIII and XIV-Note 6) 595,454 515,667
234 Accounts payable to associate companies
(Schedule XIII and XIV-Note 6) 9,875 9,792
236 Taxes accrued (299) 1,180
237 Interest accrued - -
238 Dividends declared - -
241 Tax collections payable 32 100
242 Miscellaneous current and accrued liabilities
(Schedule XIII) 6,020 3,438
Total Current and Accrued Liabilities $637,774 $540,108
DEFERRED CREDITS
253 Other deferred credits $ 13,504 $ 13,564
255 Accumulated deferred investment tax credits - -
Total Deferred Credits $ 13,504 $ 13,564
282 ACCUMULATED DEFERRED INCOME TAXES $ 3,771 $ 2,078
TOTAL LIABILITIES AND PROPRIETARY CAPITAL $663,971 $569,911
6
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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 4,270 - - - 4,270
306 Leasehold
Improvements 5,679 1,584 - - 7,263
307 Equipment(2) 12,805 8,161 389 - 20,577
308 Office
Furniture
and Equip-
ment 6,591 1,161 11 - 7,741
309 Automobiles,
Other
Vehicles and
Related
Garage Equip-
ment 44 - 13 - 31
310 Aircraft and
Airport
Equipment - - - - -
311 Other Service
Company
Property(3) - - - - -
SUBTOTAL $ 29,501 $ 10,906 $ 413 $ - $ 39,994
107 Construction
Work in
Progress(4) - - - - -
TOTAL $ 29,501 $ 10,906 $ 413 $ - $ 39,994
(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, 1997
(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 Hardware $ 7,458 $ 18,841
Computer Software 667 1,352
Typewriters, Calculators, Copiers & Duplicating 36 375
Office Services Printing and Stationery Equipment - 9
TOTAL $ 8,161 $ 20,577
(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, 1997
(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 1,305 123 - - 1,428
306 Leasehold
Improvements 2,696 344 - - 3,040
307 Equipment 7,912 2,420 389 - 9,943
308 Office
Furniture and
Fixtures 5,558 327 11 - 5,874
309 Automobiles,
Other
Vehicles and
Related
Garage Equip-
ment 20 15 13 - 22
310 Aircraft and
Airport
Equipment - - - - -
311 Other Service
Company
Property - - - - -
TOTAL $ 17,491 $ 3,229 $ 413 $ - $ 20,307
(1) Provide an explanation of those changes considered material:
Not Applicable
9
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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 of
Description of Year Year
Account 123 - Investment in Associate Companies $ - $ -
Account 124 - Other Investments - -
Account 136 - Temporary Cash Investments
Bayerische Vereinsbank, NY $ - $ 25,400
TOTAL $ - $ 25,400
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<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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.
Balance At Balance At
Beginning Close of
Description of Year Year
Account 146 - Accounts Receivable from Associate
Companies
Consolidated Natural Gas Company $ 992 $ 287
The East Ohio Gas Company 242,559 249,003
The Peoples Natural Gas Company 66,296 44,466
CNG Transmission Corporation 9,007 6,483
Hope Gas, Inc. 12,663 13,832
West Ohio Gas Company 28,139 -
CNG Producing Company 2,514 1,618
CNG Research Company 1 -
CNG Coal Company 5 -
CNG Power Company 147 14
CNG Energy Services Corporation 98,160 138,186
Virginia Natural Gas, Inc. 70,427 54,500
CNG Storage Service Company 14 1
CNG Power Services Corporation 4 6
CNG Products & Services, Inc. 252 -
CNG International, Inc. 915 82,769
TOTAL RECEIVABLES $532,095 $591,165
Total
Analysis of Convenience or Accommodation Payments: Payments
Consolidated Natural Gas Company $ 267
The East Ohio Gas Company 7,281
The Peoples Natural Gas Company 3,334
CNG Transmission Corporation 7,386
Hope Gas, Inc. 1,173
CNG Producing Company 6,279
CNG Research Company 1
CNG Power Company 2
CNG Energy Services Corporation 1,220
Virginia Natural Gas, Inc. 3,123
CNG Power Services Corporation 1
CNG Products & Services, Inc. 242
CNG International, Inc. 331
TOTAL PAYMENTS $ 30,640
The majority of these payments were for system insurance, system employee
benefit plans, system memberships, common financial system (CFS) consulting,
and training.
11
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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, 1997
(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 $ - $ - $ -
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<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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 of
Description of Year Year
Account 174 - Miscellaneous Current and
Accrued Assets
Interest-Federal Income Taxes $ - $ -
TOTAL $ - $ -
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<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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 of
Description of Year Year
Account 186 - Miscellaneous Deferred Debits
Prepaid Pension Costs $ 8,567 $ 12,195
Pension Supplement Intangible Asset (Non-Qualified) 3,826 3,829
Deferred Compensation Expense 4,181 1,244
Curtailment Gain - FAS 88 418 418
Pension Supplement Intangible Asset (Qualified) 196 163
Prepaid IBM/LPC Maintenance 29 50
Miscellaneous 2 256
TOTAL $ 17,219 $ 18,155
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<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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 $ -
TOTAL $ -
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ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
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 of
Description of Year (Loss) Paid Year
Account 216 - Unappropriated
Retained
Earnings
$ - $ - $ - $ -
TOTAL $ - $ - $ - $ -
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<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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 At
Class & Series of Interest Amount Beginning Deductions Close of
of Obligation Maturity Rate Authorized of Year Additions (1) Year
Account 223 - Advances from
Associate Companies:
<S> <C> <C> <C> <C>
<C> <C> <C>
Consolidated Natural
Gas Company 1998-2005 9.50% $ 3,836 $ 3,356 $ - $ 1,850 $ 1,506
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
Consolidated Natural
Gas Company 2008 6.750% 1,611 - 1,611 - 1,611
Account 224 - Other Long-Term Debt: - - - - - - -
TOTAL $16,242 $14,151 $ 1,611 $ 6,850 $ 8,912
<FN>
(1) GIVE AN EXPLANATION OF DEDUCTIONS:
Retirement of $1,611 of the 9.5% note which was replaced by a $1,611 6.75% note during 1997.
Current portion of Long-Term Debt moved to Account 233 - Notes Payable to Associate Companies.
</TABLE>
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<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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 of
Description of Year Year
Account 233 - Notes Payable to Associate Companies
Consolidated Natural Gas Company $415,652 $486,924
CNG Transmission Corporation 1,480 12,700
Consolidated System LNG Company 21,265 12,240
CNG Producing Company 54,735 36,155
CNG Research Company 90 265
CNG Coal Company 2,995 3,185
CNG Energy Services Corporation 19,450 38,455
CNG Storage Service Company - 5,530
TOTAL $515,667 $595,454
Account 234 - Accounts Payable to Associate Companies
Consolidated Natural Gas Company $ 8,579 $ 6,819
The East Ohio Gas Company 127 1,058
The Peoples Natural Gas Company 109 118
CNG Transmission Corporation 60 96
Hope Gas, Inc. 218 -
West Ohio Gas Company 1 -
Consolidated System LNG Company 105 60
CNG Producing Company 445 37
CNG Coal Company 42 17
CNG Energy Services Corporation 98 685
Virginia Natural Gas, Inc. 8 -
CNG Power Services Corporation - 10
CNG Products & Services, Inc. - 975
TOTAL $ 9,792 $ 9,875
Account 242 - Miscellaneous Current and Accrued Liabilities
Accrued Vacation Pay $ 1,309 $ 3,048
Deferred Compensation 994 1,377
Non-Qualified Pension Plans Liability 1,036 1,532
U. S. Savings Bond Deduction 1 9
Supplemental Pension Plans Liability 98 54
TOTAL $ 3,438 $ 6,020
19
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
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, 1997
SCHEDULE XIV - NOTES TO FINANCIAL STATEMENTS (Continued)
under federal income tax reglations. 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 are funded through
contributions to a grantor trust.
Pension expense (or credit), which includes the costs of defined benefit
pension plans and pension supplements, was $(1,827,000) and $(2,456,000) for
the years ended December 31, 1996 and 1997, 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 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.
The Company is amortizing the accumulated postretirement benefit obligation at
January 1, 1993 (transition obligation) over a 20-year period. Net periodic
postretirement benefit cost for the year ended December 31, 1996 and 1997 was
$1,166,000 and $1,312,000 respectively, as determined by an independent
actuary.
21
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
SCHEDULE XIV - NOTES TO FINANCIAL STATEMENTS (Continued)
3. LONG-TERM DEBT
The aggregate principal amounts of the Company's long-term debt maturing in the
years 1998 through 2002 are: $5,239,800, $5,239,800, $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.
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 1996 and
1997 was $5,571,000 and $6,192,000, 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 $34,192,000 and for
the years 1998 through 2002 are: $6,908,000; $6,884,000; $6,877,000;
$6,847,000 and $6,676,000. 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 1998 amounts to approximately $19,055,000. 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, 1997
SCHEDULE XIV - NOTES TO FINANCIAL STATEMENTS (Continued)
5. MONEY POOL
The Parent Company and its subsidiaries participate in the 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, 1997
SCHEDULE XIV - NOTES TO FINANCIAL STATEMENTS (Continued)
At December 31, 1997, the detail of the pool was as follows:
Investment in Pool (including interest)
Consolidated Natural Gas Company $484,494,000
CNG Transmission Corporation 12,747,000
Consolidated System LNG Company 12,299,000
CNG Producing Company 36,172,000
CNG Research Company 266,000
CNG Coal Company 3,201,000
CNG Power Company 25,040,000
CNG Storage Service Company 2,975,000
CNG Power Services Corporation 5,540,000
CNG Retail Services Corporation 10,593,000
SUBTOTAL $593,327,000
Less:
Borrowings from Pool (including interest)
The East Ohio Gas Company $239,792,000
The Peoples Natural Gas Company 41,098,000
CNG Transmission Corporation 25,000
Hope Gas, Inc. 12,792,000
CNG Producing Company 101,000
CNG Power Company 1,206,000
CNG Energy Services Corporation 128,150,000
Virginia Natural Gas, Inc. 53,050,000
CNG Products and Services, Inc. 7,883,000
CNG International, Inc. 82,389,000
CNG Retail Services Corporation 4,000 566,490,000
Consolidated Natural Gas Service Company 1,437,000
SUBTOTAL 567,927,000
TOTAL $ 25,400,000
Temporary Cash Investments $ 25,400,000
Interest Receivable - Money Pool -
TOTAL $ 25,400,000
24
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
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,
1997, is as follows:
As Reported As Reported
Affiliated Accounts in Form U-13-60 in Form U5S Difference
Accounts Receivable $591,165,000 $591,627,000 $ 462,000
Notes Payable $595,454,000 - $595,454,000
Accounts Payable 9,875,000 - 9,875,000
Payables to Affiliated Companies - $605,791,000 (605,791,000)
$ 462,000
25
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Years Ended December 31, 1997 and 1996
(In Thousands)
SCHEDULE XV - COMPARATIVE STATEMENT OF INCOME
Current Prior
Description Year Year
Account 1997 1996
INCOME
457 Services rendered to associate companies $104,211 $ 60,154
458 Services rendered to nonassociate companies - -
421 Miscellaneous income or loss 31 113
TOTAL INCOME $104,242 $ 60,267
EXPENSE
912-13 Marketing and Advertising $ 3,195 $ -
920 Salaries and wages 35,313 22,672
921 Office supplies and expenses 9,236 5,236
922 Administrative expense transferred - credit (50) (51)
923 Outside services employed 32,370 13,189
924 Property insurance - -
925 Injuries and damages 78 76
926 Employee pensions and benefits 6,353 5,286
928 Regulatory commission expense - -
930.1 General advertising expenses - -
930.2 Miscellaneous general expenses 1,810 1,686
931 Rents 6,192 5,571
932 Maintenance of structures and equipment 1,998 997
403 Depreciation and amortization expense 3,229 2,497
408 Taxes other than income taxes 2,984 1,643
409 Income taxes (1,065) 1,485
410 Provision for deferred income taxes 1,172 (401)
411 Provision for deferred income taxes - credit (107) (1,084)
411.5 Investment tax credit - -
426.1 Donations - -
426.5 Other deductions 83 105
427 Interest on long-term debt - -
430 Interest on debt to associate companies 1,344 1,242
431 Other interest expense 107 118
TOTAL EXPENSE $104,242 $ 60,267
NET INCOME OR (LOSS) $ - $ -
26
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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 $ 2,845 $ 585 $ 40 $ 3,470
The East Ohio Gas Company 27,543 4,357 421 32,321
The Peoples Natural Gas Company 11,775 2,214 215 14,204
CNG Transmission Corporation 20,185 3,531 308 24,024
Hope Gas, Inc. 2,957 592 48 3,597
Consolidated System LNG Company 4 1 - 5
CNG Producing Company 8,020 1,123 89 9,232
CNG Research Company 9 1 - 10
CNG Coal Company 1 - - 1
CNG Power Company 129 21 2 152
CNG Energy Services Corporation 5,452 920 67 6,439
Virginia Natural Gas, Inc. 5,036 882 94 6,012
CNG Storage Service Company 12 2 - 14
CNG Power Services Corporation 13 2 - 15
CNG Products & Services, Inc. 3,027 723 51 3,801
CNG International, Inc. 775 130 9 914
(A) The amount of indirect costs
charged of $15,084 is net of
$31 miscellaneous income.
(B) Includes $300 which was directly
billed to associate companies
and $1,044 which was indirectly
billed to associate companies.
TOTAL $ 87,783 $ 15,084 $ 1,344 $104,211
27
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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
TOTAL $ - $ - $ - $ - $ - $ -
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, 1997
(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>
912-13 Marketing and Advertising $ 3,195 $ - $ 3,195 $ - $ - $ - $ 3,195 $ - $ 3,195
920 Salaries and Wages 32,974 2,339 35,313 32,974 2,339 35,313
921 Office Supplies and Expenses 8,624 612 9,236 8,624 612 9,236
922 Administrative Expense Transferred -
Credit (50) - (50) (50) - (50)
923 Outside Services Employed 30,227 2,143 32,370 30,227 2,143 32,370
924 Property Insurance - - - - - -
925 Injuries and Damages - 78 78 - 78 78
926 Employee Pensions and Benefits - 6,353 6,353 - 6,353 6,353
928 Regulatory Commission Expense - - - - - -
930.1 General Advertising Expenses - - - - - -
930.2 Miscellaneous General Expenses 1,690 120 1,810 1,690 120 1,810
931 Rents 5,782 410 6,192 5,782 410 6,192
932 Maintenance of Structures and
Equipment 1,866 132 1,998 1,866 132 1,998
403 Depreciation and Amortization
Expense 3,015 214 3,229 3,015 214 3,229
408 Taxes Other than Income Taxes 113 2,871 2,984 113 2,871 2,984
409 Income Taxes - (1,065) (1,065) - (1,065) (1,065)
410 Provision for Deferred Income Taxes - 1,172 1,172 - 1,172 1,172
411 Provision for Deferred Income Taxes Cr. - (107) (107) - (107) (107)
411.5 Investment Tax Credit - - - - - -
426.1 Donations - - - - - -
426.5 Other Deductions 61 22 83 61 22 83
427 Interest on Long-Term Debt - - - - - -
431 Other Interest Expense - 107 107 - 107 107
TOTAL EXPENSES $ 87,497 $15,401 $102,898 $ - $ - $ - $ 87,497 $15,401 $102,898
Compensation for Use of Equity Capital
430 Interest on Debt to Associate
Companies 1,344 - - - 300 1,044 1,344
TOTAL COST OF SERVICE $104,242 $ - $ - $ - $ 87,797 $16,445 $104,242
INSTRUCTION: Total cost of service will equal for associate and nonassociate
companies the total amount billed under their
separate anaylsis of billing schedules.
29
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
Total Executive Corporate Legal Secretary's Legal
Description of Items Amount Overhead Office Commun. Washington Pittsburgh
<S> <C> <C> <C> <C> <C> <C> <C>
912-13 Marketing and Advertising $ 3,195 $ - $ - $ - $ - $ - $ -
920 Salaries and Wages 35,313 - 1,622 621 633 232 1,245
921 Office Supplies and Expenses 9,236 155 345 138 139 32 247
922 Administrative Expense
Transferred Credit (50) - - (1) - - -
923 Outside Services Employed 32,370 (7) 63 346 28 13 589
924 Property Insurance - - - - - - -
925 Injuries and Damages 78 78 - - - - -
926 Employee Pensions and Benefits 6,353 6,353 - - - - -
928 Regulatory Commission Expense - - - - - - -
930.1 General Advertising Expense - - - - - - -
930.2 Miscellaneous General Expenses 1,810 (4) 18 432 4 641 5
931 Rents 6,192 - 485 109 256 70 216
932 Maintenance of Structures
and Equipment 1,998 - 16 2 11 - 7
403 Depreciation and
Amortization Expense 3,229 - 47 32 31 6 29
408 Taxes Other Than Income Taxes 2,984 2,871 1 - - - -
409 Income Taxes (1,065) (1,065) - - - - -
410 Provision for Deferred
Income Taxes 1,172 1,172 - - - - -
411 Provision for Deferred
Income Taxes - Credit (107) (107) - - - - -
411.5 Investment Tax Credit - - - - - - -
426.1 Donations - - - - - - -
426.5 Other Deductions 83 22 14 - 2 2 2
427 Interest on Long-Term Debt - - - - - - -
430 Interest on Debt to
Associate Companies 1,344 1,044 - - - - -
431 Other Interest Expense 107 107 - - - - -
TOTAL EXPENSES $104,242 $ 10,619 $ 2,611 $ 1,679 $ 1,104 $ 996 $ 2,340
30
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
External
Affairs & Common
Policy Financial Internal Human Employee
Description of Items Development Systems Controller's Auditing Resources Benefits Treasurer's
<S> <C> <C> <C> <C> <C> <C> <C>
912-13 Marketing and Advertising $ - $ - $ - $ - $ - $ - $ -
920 Salaries and Wages 906 167 1,621 1,026 1,205 1,204 450
921 Office Supplies and Expenses 275 129 244 185 199 164 78
922 Administrative Expense
Transferred Credit - - - (9) 3 - -
923 Outside Services Employed 286 845 24 16 582 2,115 25
924 Property Insurance - - - - - - -
925 Injuries and Damages - - - - - - -
926 Employee Pensions and Benefits - - - - - - -
928 Regulatory Commission Expense - - - - - - -
930.1 General Advertising Expense - - - - - - -
930.2 Miscellaneous General Expenses 183 8 40 1 58 5 -
931 Rents 308 320 232 86 190 241 153
932 Maintenance of Structures
and Equipment 8 131 2 13 4 5 2
403 Depreciation and
Amortization Expense 43 541 29 21 32 46 19
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 23 - - - 7 2 -
427 Interest on Long-Term Debt - - - - - - -
430 Interest on Debt to
Associate Companies - - - - - - -
431 Other Interest Expense - - - - - - -
TOTAL EXPENSES $ 2,032 $ 2,141 $ 2,192 $ 1,339 $ 2,280 $ 3,782 $ 727
31
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
Strategic Business &
Risk Financial Corporate Operations Investor Asset
Description of Items Tax Management Planning Planning Services Relations Management
<S> <C> <C> <C> <C> <C> <C> <C>
912-13 Marketing and Advertising $ - $ - $ - $ - $ - $ - $ -
920 Salaries and Wages 929 169 278 418 366 264 150
921 Office Supplies and Expenses 57 21 18 103 91 120 7
922 Administrative Expense
Transferred Credit - - - - - - -
923 Outside Services Employed 72 223 - 41 56 44 -
924 Property Insurance - - - - - - -
925 Injuries and Damages - - - - - - -
926 Employee Pensions and Benefits - - - - - - -
928 Regulatory Commission Expense - - - - - - -
930.1 General Advertising Expense - - - - - - -
930.2 Miscellaneous General Expenses 1 2 1 7 2 122 -
931 Rents 116 51 50 96 72 40 12
932 Maintenance of Structures
and Equipment 1 - - 2 3 2 -
403 Depreciation and
Amortization Expense 13 9 6 11 14 4 3
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 - - - - - - -
TOTAL EXPENSES $ 1,189 $ 475 $ 353 $ 678 $ 604 $ 596 $ 172
32
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
Planning &
Facility Residential New York Facility Information Information
Description of Items Operations Services Office Services Services Purchasing Services
<S> <C> <C> <C> <C> <C> <C> <C>
912-13 Marketing and Advertising $ - $ 5 $ - $ - $ - $ - $ -
920 Salaries and Wages 79 1,302 38 64 1,739 359 343
921 Office Supplies and Expenses 11 357 21 86 255 31 145
922 Administrative Expense
Transferred Credit - - - - - - -
923 Outside Services Employed - 84 - 50 333 34 182
924 Property Insurance - - - - - - -
925 Injuries and Damages - - - - - - -
926 Employee Pensions and Benefits - - - - - - -
928 Regulatory Commission Expense - - - - - - -
930.1 General Advertising Expense - - - - - - -
930.2 Miscellaneous General Expenses - 8 6 3 17 - 40
931 Rents 23 37 125 761 226 29 17
932 Maintenance of Structures
and Equipment - 3 1 109 45 3 1
403 Depreciation and
Amortization Expense 5 6 10 112 49 1 26
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 - - - - - - -
427 Interest on Long-Term Debt - - - - - - -
430 Interest on Debt to
Associate Companies - - - - - - -
431 Other Interest Expense - - - - - - -
TOTAL EXPENSES $ 118 $ 1,802 $ 201 $ 1,185 $ 2,664 $ 457 $ 756
33
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
Retail Data Admin. Data Tele- Energy
Company Facility & Operations Network Center commun- Services
Description of Items IT Services Support Services Operations ications IT
<S> <C> <C> <C> <C> <C> <C> <C>
912-13 Marketing and Advertising $ - $ - $ - $ - $ - $ - $ -
920 Salaries and Wages - 293 1,350 1,085 1,579 850 427
921 Office Supplies and Expenses 1 101 190 709 727 187 136
922 Administrative Expense
Transferred Credit - - - - (42) (1) -
923 Outside Services Employed - 6 529 3,576 2,570 25 2,192
924 Property Insurance - - - - - - -
925 Injuries and Damages - - - - - - -
926 Employee Pensions and Benefits - - - - - - -
928 Regulatory Commission Expense - - - - - - -
930.1 General Advertising Expense - - - - - - -
930.2 Miscellaneous General Expenses - 7 1 2 5 1 6
931 Rents - 345 139 311 232 9 2
932 Maintenance of Structures
and Equipment 1 50 5 273 588 123 12
403 Depreciation and
Amortization Expense - 75 34 449 1,306 - -
408 Taxes Other Than Income Taxes - - - - 110 - -
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 - 2 - - - 1 -
427 Interest on Long-Term Debt - - - - - - -
430 Interest on Debt to
Associate Companies - - - - 300 - -
431 Other Interest Expense - - - - - - -
TOTAL EXPENSES $ 2 $ 879 $ 2,248 $ 6,405 $ 7,375 $ 1,195 $ 2,775
34
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
CNGP LDC
CNGP Shared Shared EOG PNG Hope VNG
Description of Items IT Systems Systems IT IT IT IT
<S> <C> <C> <C> <C> <C> <C> <C>
912-13 Marketing and Advertising $ - $ - $ - $ - $ - $ - $ -
920 Salaries and Wages 330 214 263 461 780 86 303
921 Office Supplies and Expenses 74 62 34 44 45 3 27
922 Administrative Expense
Transferred Credit - - - - - - -
923 Outside Services Employed 1,092 554 134 3,550 1,825 233 717
924 Property Insurance - - - - - - -
925 Injuries and Damages - - - - - - -
926 Employee Pensions and Benefits - - - - - - -
928 Regulatory Commission Expense - - - - - - -
930.1 General Advertising Expense - - - - - - -
930.2 Miscellaneous General Expenses - - 1 2 1 1 -
931 Rents - - 2 4 - - -
932 Maintenance of Structures
and Equipment 22 38 - - - - -
403 Depreciation and
Amortization Expense - - - - - - -
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 - - - - - - -
TOTAL EXPENSES $ 1,518 $ 868 $ 434 $ 4,061 $ 2,651 $ 323 $ 1,047
35
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
Cash Mgmt. CNGT
Corporate Accounts General & Customer Eng. & CNGT
Description of Items IT Payable Services Payroll Payment . Field Oper. IT
<S> <C> <C> <C> <C> <C> <C> <C>
912-13 Marketing and Advertising $ - $ - $ - $ - $ - $ - $ -
920 Salaries and Wages 2,207 183 288 310 338 521 2,045
921 Office Supplies and Expenses 179 115 397 44 40 76 382
922 Administrative Expense
Transferred Credit - - - - - - -
923 Outside Services Employed 3,113 3 59 109 16 3,429 637
924 Property Insurance - - - - - - -
925 Injuries and Damages - - - - - - -
926 Employee Pensions and Benefits - - - - - - -
928 Regulatory Commission Expense - - - - - - -
930.1 General Advertising Expense - - - - - - -
930.2 Miscellaneous General Expenses - 2 - 2 4 1 3
931 Rents 179 47 135 71 67 - 31
932 Maintenance of Structures
and Equipment 4 5 95 21 18 47 200
403 Depreciation and
Amortization Expense 35 3 1 11 7 - -
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 - - - - - - -
TOTAL EXPENSES $ 5,717 $ 358 $ 975 $ 568 $ 490 $ 4,074 $ 3,298
36
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
Large Market
System Marketing Mass Customer Technical Planning & Marketing
Description of Items Fleet Staff Marketing Market Marketing Analysis Commun.
<S> <C> <C> <C> <C> <C> <C> <C>
912-13 Marketing and Advertising $ - $ 2 $ 460 $ 62 $ 68 $ - $ 2,598
920 Salaries and Wages 30 319 117 138 107 80 109
921 Office Supplies and Expenses 25 210 31 39 61 72 278
922 Administrative Expense
Transferred Credit - - - - - - -
923 Outside Services Employed 20 2 111 241 268 190 716
924 Property Insurance - - - - - - -
925 Injuries and Damages - - - - - - -
926 Employee Pensions and Benefits - - - - - - -
928 Regulatory Commission Expense - - - - - - -
930.1 General Advertising Expense - - - - - - -
930.2 Miscellaneous General Expenses 5 6 23 31 3 - 83
931 Rents 20 90 6 (29) - 1 -
932 Maintenance of Structures
and Equipment 1 1 - - - - -
403 Depreciation and
Amortization Expense - 17 - - - - -
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 - - - - - - -
TOTAL EXPENSES $ 101 $ 647 $ 748 $ 482 $ 507 $ 343 $ 3,784
37
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
Regulated Engineering Engineering Engineering
Bus. Sup. Materials Engineering Codes and Environ- Technical Engineering
Description of Items Group Management Staff Standards mental Support Auditing
<S> <C> <C> <C> <C> <C> <C> <C>
912-13 Marketing and Advertising $ - $ - $ - $ - $ - $ - $ -
920 Salaries and Wages 1,032 108 98 121 472 262 -
921 Office Supplies and Expenses 182 20 82 21 380 38 1
922 Administrative Expense
Transferred Credit - - - - - - -
923 Outside Services Employed 258 - - 39 26 - -
924 Property Insurance - - - - - - -
925 Injuries and Damages - - - - - - -
926 Employee Pensions and Benefits - - - - - - -
928 Regulatory Commission Expense - - - - - - -
930.1 General Advertising Expense - - - - - - -
930.2 Miscellaneous General Expenses 5 - 1 6 - - -
931 Rents 52 5 25 18 23 19 -
932 Maintenance of Structures
and Equipment 7 - 8 - - - -
403 Depreciation and
Amortization Expense 68 - - 2 1 3 -
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 6 - - - - - -
427 Interest on Long-Term Debt - - - - - - -
430 Interest on Debt to
Associate Companies - - - - - - -
431 Other Interest Expense - - - - - - -
TOTAL EXPENSES $ 1,610 $ 133 $ 214 $ 207 $ 902 $ 322 $ 1
38
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
Gas Supply Gas Supply Gas Supply Gas
Area Mkt. Area Gas Supply Reg. Support Supply
Description of Items Acquisition Acquisition Planning & Accounting Staff
<S> <C> <C> <C> <C> <C>
912-13 Marketing and Advertising $ - $ - $ - $ - $ -
920 Salaries and Wages 196 217 89 231 244
921 Office Supplies and Expenses 136 21 72 128 213
922 Administrative Expense
Transferred Credit - - - - -
923 Outside Services Employed 38 1 6 26 15
924 Property Insurance - - - - -
925 Injuries and Damages - - - - -
926 Employee Pensions and Benefits - - - - -
928 Regulatory Commission Expense - - - - -
930.1 General Advertising Expense - - - - -
930.2 Miscellaneous General Expenses 1 - - 1 6
931 Rents 1 - - - 66
932 Maintenance of Structures
and Equipment - - - - 108
403 Depreciation and
Amortization Expense - - (3) 1 74
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 - - - - -
TOTAL EXPENSES $ 372 $ 239 $ 164 $ 387 $ 726
39
</TABLE>
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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
Regular Services
Executive Office $ 1,622 $ 492 $ 1,130 $ - 7
Corporate Communications 621 32 589 12
Legal - Washington 633 18 615 8
Secretary's 232 61 171 4
Legal - Pittsburgh 1,245 153 1,092 13
External Affairs and
Policy Development 906 115 791 12
Common Financial Systems 167 - 167 2
Controller's 1,621 207 1,414 29
Internal Auditing 1,026 6 1,020 18
Human Resources 1,205 37 1,168 14
Employee Benefits 1,204 16 1,188 20
Treasurer's 450 95 355 5
Tax 929 252 677 8
Risk Management 169 - 169 3
Strategic Financial
Planning 278 274 4 4
Corporate Planning 418 64 354 6
Business and Operations
Services 366 12 354 3
Investor Relations 264 16 248 3
Asset Management 150 19 131 1
Facility Operations 79 - 79 -
Residential Services 1,302 - 1,302 43
New York Office 38 - 38 1
Facility Services 64 - 64 -
SUBTOTAL $14,989 $ 1,869 $13,120 $ - 216
System Services Group
(SSG) (Page 41) 16,384 43 16,341 387
Regulated Business Support
Group (RBSG) (Page 42) 3,940 2 3,938 112
TOTAL $35,313 $ 1,914 $33,399 $ - 715
(A) Excludes Vacation, Holiday and Other Paid Absences which are included
in Account 926, Page 48.
40
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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
System Services Group (SSG)
Planning and Information
Services $ 1,739 $ 19 $ 1,720 $ - 19
Purchasing 359 1 358 19
Information Services 343 - 343 10
Retail Company -
Information Technology - - - -
Facility Services 293 - 293 11
Data Administration and
Operations Support 1,350 1 1,349 25
Network Services 1,085 9 1,076 22
Data Center Operations 1,579 3 1,576 44
Telecommunications 850 - 850 17
Energy Services -
Information Technology 427 - 427 7
CNGP - Information
Technology 330 - 330 6
CNGP Shared Systems 214 - 214 7
LDC Shared Systems 263 10 253 6
EOG - Information
Technology 461 - 461 10
PNG - Information
Technology 780 - 780 17
Hope - Information
Technology 86 - 86 2
VNG - Information
Technology 303 - 303 4
Corporate - Information
Technology 2,207 - 2,207 39
Accounts Payable 183 - 183 12
General Services 288 - 288 14
Payroll 310 - 310 14
Cash Management and
Customer Payment 338 - 338 21
CNGT - Engineering and
Field Operations 521 - 521 10
CNGT - Information
Technology 2,045 - 2,045 48
System Fleet 30 - 30 3
SUBTOTAL SSG $16,384 $ 43 $16,341 $ - 387
(A) Excludes Vacation, Holiday and Other Paid Absences which are included
in Account 926, Page 48.
41
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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
Regulated Business Support Group (RBSG)
Marketing Staff $ 319 $ - $ 319 $ - 10
Mass Marketing 117 - 117 5
Large Customer Market 138 - 138 6
Technical Marketing 107 - 107 4
Market Planning and
Analysis 80 80 3
Marketing Communications 109 - 109 5
Regulated Business Support
Group 1,032 2 1,030 8
Materials Management 108 - 108 3
Engineering Staff 98 - 98 5
Engineering Codes and
Standards 121 - 121 5
Engineering Environmental 472 - 472 16
Engineering Technical
Support 262 262 7
Engineering Auditing - - - -
Gas Supply Area Acquisition 196 - 196 6
Gas Supply Market Area
Acquisition 217 - 217 8
Gas Supply Planning 89 - 89 2
Gas Supply Regulatory
Support and Accounting 231 - 231 11
Gas Supply Staff 244 - 244 8
SUBTOTAL RBSG $ 3,940 $ 2 $ 3,938 $ - 112
(A) Excludes Vacation, Holiday and Other Paid Absences which are included
in Account 926, Page 48.
42<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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 $ 242
Miscellaneous (21 items
less than $100,000) - NA 217
TOTAL $ 459
Tax Services:
Miscellaneous (3 items
less than $100,000) Tax Consultants NA $ 44
TOTAL $ 44
Auditing Services:
Miscellaneous (1 item
less than $100,000) Audit Services NA $ 56
TOTAL $ 56
43
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Continued)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Description Associate Amount
Other Special Services:
I-Net, Inc. Computer Consultants/ NA $11,016
Services
Towers Perrin, Inc. Human Resources, NA 2,324
Compensation & Benefits
International Business Computer Consultants/ NA 973
Machines Corporation Services
Realogic, Inc. Computer Consultants/ NA 839
Services
Eagles International, Inc. Computer Consultants/ NA 632
Services
BMC Software Inc. Computer Consultants/ NA 585
Services
Oracle Corporation Computer Consultants/ NA 577
Services
Wang Laboratories, Inc. Computer Consultants/ NA 526
Services
Computer Professionals, Inc. Computer Consultants/ NA 406
Services
Integral Strategies, Inc. Human Resources, NA 401
Compensation & Benefits
A. C. Coy Company Computer Consultants/ NA 396
Services
Computer Associates Computer Consultants/ NA 382
International, Inc. Services
Source Services Corporation Employment Services NA 363
Hunter Group, Inc. Human Resources, NA 328
Compensation & Benefits
Peoples Natural Gas Mailroom, Printing, Human A 327
Resources & Other Services
44
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Continued)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Description Associate Amount
Other Special Services (Cont.):
Deloitte & Touche LLP Computer Consultants/ NA $ 311
Services
Network of Consulting Computer Consultants/ NA 294
Professionals Services
Robert J DePaul & Computer Consultants/ NA 292
Associates, Inc. Services
Keane, Inc. Computer Consultants/ NA 289
Services
Pancoast Temporary Employment Services NA 288
Services, Inc.
Actium Technologies, Inc. Computer Consultants/ NA 277
Services
Wyse Advertising, Inc. Marketing Consultants NA 259
Sequent Computer Computer Consultants/ NA 249
Systems, Inc. Services
ComputerPeople, Inc. Computer Consultants/ NA 225
Services
Implementation Management Management Consultants NA 220
Associates, Inc.
Bell Advertising Service Marketing, Gov't & Public NA 216
Affairs, Investor Relations
Consultants
PKB Creative Printing Services NA 214
Digital Consulting and Computer Consultants/ NA 195
Software Services, Inc. Services
Computer Professsionals Computer Consultants/ NA 193
Unlimited Services
America's Registry, Inc. Computer Consultants/ NA 189
Services
45
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Continued)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Description Associate Amount
Other Special Services (Cont.):
Pegasys Technologies, Inc. Computer Consultants/ NA $ 189
Services
Software & Scanning Services Computer Consultants/ NA 181
Services
Miz Data Systems, Inc. Computer Consultants/ NA 180
Services
Industrial Center Inc. Marketing Consultants NA 174
Valmet Automation (USA) Inc. Computer Consultants/ NA 173
Services
York Triathlon Consortium Marketing Consultants NA 154
Fund
Northeastern Executive Employment Services NA 144
Group, Inc.
Natinal Fuel Gas Gov't & Public Affairs NA 140
Distribution Corporation Consultants
Mainsail Associates, Inc. Human Resources, NA 133
Compensation & Benefits
Evolutionary Technologies Computer Consultants/ NA 125
International, Inc. Services
Soft Link, Inc. Computer Consultants/ NA 122
Services
Advanced Computing Computer Consultants/ NA 120
Techniques, Inc. Services
Covey Leadership Center, Inc. Human Resources, NA 113
Compensation & Benefits
KCS Computer Services, Inc. Computer Consultants/ NA 110
Services
Midwest Presort Mailing Messenger and Mailing NA 109
Services, Inc. Services
46
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Continued)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Description Associate Amount
Other Special Services (Cont.):
Information Technology Human Resources, NA $ 109
Professionals, Inc. Compensation & Benefits
Ascent Consulting Group II Computer Consultants/ NA 107
Services
Mastech Systems Corporation Computer Consultants/ NA 103
Services
Price Waterhouse Management Consultants NA 103
Miscellaneous (3 items
less than $100,000) - A 129
Miscellaneous (423 items
less than $100,000) - NA 5,307
TOTAL $31,811
Research Services:
TOTAL $ -
GRAND TOTAL $32,370
47
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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
Vacation $ 2,717
Alternate Thrift Trust 1,760
Medical Insurance 1,632
Holiday 1,590
Flex Benefit Expense 490
Disability Benefits 313
Contributory Group Life Insurance 229
Survivor Benefit Insurance 196
Flex Benefit Administration Fees 171
Other Paid Absences 145
Educational Refunds 98
Employee Medical Programs 57
Other 47
Pension Expense (2,456)
Workforce Reduction Adjustment (439)
Miscellaneous Welfare Expense (197)
TOTAL $ 6,353
48
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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 $ -
49
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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
Other Miscellaneous Expenses $ 413
Annual Shareholders Report 349
Transfer Agent Expenses 256
Miscellaneous Expenses - Business Meeting/Group Meals 215
Other Shareholder and SEC Reports 128
Security Analyst Meeting Expenses 125
Proxy Solicitation Expenses 100
Other Shareholder Expenses 72
Debenture Trustee Expenses 65
Stock Listing Fees 57
Dividend Disbursing & Reinvesting Expenses 30
TOTAL $ 1,810
50
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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 $ 5,208
Office Equipment Rental - Computer 260
Office Equipment Rental - Other 118
Automobile Rental 159
Miscellaneous Rents 447
TOTAL $ 6,192
51
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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 $ 195
Pittsburgh Business Privilege Tax 125
Ohio Real & Personal Property Taxes 112
District of Columbia Personal Property Tax 8
District of Columbia Franchise Tax 4
Other Miscellaneous Taxes 4
SUBTOTAL $ 448
(B) U. S. Government Taxes
Federal Social Security Tax $ 2,490
Federal Unemployment Tax 46
SUBTOTAL $ 2,536
TOTAL $ 2,984
52
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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 $ -
53
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
(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 (153 Items) $ 83
TOTAL $ 83
54
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1997
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.
55
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
ORGANIZATION CHART - 1997
See Exhibit I filed herewith.
56
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
METHODS OF ALLOCATION
See Exhibit II filed herewith.
57
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
(In Thousands)
For the Year Ended December 31, 1997
ANNUAL STATEMENT OF COMPENSATION FOR USE OF CAPITAL BILLED
Total Annual
Direct Billing Allocation
Of Data Center of Direct
Company Operations Percent Interest
Consolidated Natural Gas Company $ - * $ *
The East Ohio Gas Company 2,913 40% 119
The Peoples Natural Gas Company 1,511 20% 62
CNG Transmission Corporation 1,570 21% 64
Hope Gas, Inc. 183 3% 7
Consolidated System LNG Company - * *
CNG Producing Company 260 4% 11
CNG Research Company - * *
CNG Coal Company - * *
CNG Power Company - * *
CNG Energy Services Corporation 81 1% 3
Virginia Natural Gas, Inc. 816 11% 33
CNG Storage Service Company - * *
CNG Power Services Corporation - * *
CNG Products & Services, Inc. 28 - 1
CNG International, Inc. 1 - -
TOTAL $ 7,363 100% $ 300
*These System Companies were excluded from allocation since there were no
direct charges for Data Center Operations.
58
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
(In Thousands)
For The Year Ended December 31, 1997
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 $ 625 4% $ 40 $ 40
The East Ohio Gas Company 4,659 29% 302 421
The Peoples Natural Gas
Company 2,367 15% 153 215
CNG Transmission Corporation 3,775 23% 244 308
Hope Gas, Inc. 632 4% 41 48
Consolidated System LNG
Company 1 - - -
CNG Producing Company 1,202 7% 78 89
CNG Research Company 1 - - -
CNG Coal Company - - - -
CNG Power Company 24 - 2 2
CNG Energy Services Corporation 984 6% 64 67
Virginia Natural Gas, Inc. 942 6% 61 94
CNG Storage Service Company 2 - - -
CNG Power Services Corporation 2 - - -
CNG Products & Services, Inc. 773 5% 50 51
CNG International, Inc. 139 1% 9 9
TOTAL $ 16,128 100% $ 1,044 $ 1,344
59
<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 24, 1998
60
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
Vice President,
Taxes and Strategic Financial Planning
Vice President, System Services Group
Vice President, Corporate Planning
Vice President, Investor Relations
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,
Corporate Human Resources
Effective December 31, 1997
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>
CONSOLIDATED NATURAL GAS SERVICE COMPANY, INC. Exhibit II
(Continued)
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>
CONSOLIDATED NATURAL GAS SERVICE COMPANY, INC. Exhibit II
(Continued)
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
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<ARTICLE> OPUR2
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<BOOK-VALUE> PER-BOOK
<NET-SERVICE-COMPANY-PROPERTY> 19,687
<TOTAL-INVESTMENTS> 0
<TOTAL-CURRENT-ASSETS> 619,494
<TOTAL-DEFERRED-DEBITS> 24,790
<OTHER-ASSETS-AND-DEBITS> 0
<TOTAL-ASSETS-AND-DEBITS> 663,971
<TOTAL-PROPRIETARY-CAPITAL> 10
<TOTAL-LONG-TERM-DEBT> 8,912
<NOTES-PAYABLE> 0
<NOTES-PAYABLE-ASSOCIATE-COMP> 595,454
<OTHER-CURR-AND-ACCRUED-LIAB> 42,320
<TOTAL-DEFERRED-CREDITS> 13,504
<DEFERRED-INCOME-TAX> 3,771
<TOT-LIABIL-AND-PROPRIET-CAP> 663,971
<SERVICES-ASSOCIATE-COMPANIES> 104,211
<SERVICES-NON-ASSOCIATE-COMP> 0
<MISC-INCOME-OR-LOSS> 31
<TOTAL-INCOME> 104,242
<SALARIES-AND-WAGES> 35,313
<EMPLOYEE-PENSION-AND-BENEFIT> 6,353
<OTHER-EXPENSES> 62,576
<TOTAL-EXPENSES> 104,242
<NET-INCOME> 0
<TOTAL-EXPENSES-DIRECT-COST> 87,797
<TOTAL-EXPENSES-INDIRECT-COST> 16,445
<TOT-EXP-DIRECT-AND-INDIRECT> 104,242
<PERSONNEL-END-OF-YEAR> 715
</TABLE>
