Form U-13-60
Mutual and Subsidiary Service Companies
Revised February 7, 1980
ANNUAL REPORT
For the Period
Beginning January 1, 1998 and Ending December 31, 1998
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.
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<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.
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<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 19-20
Notes to Financial Statements Schedule XIV 21-26
COMPARATIVE STATEMENT OF INCOME Schedule XV 27
Analysis of Billing - Associate Companies Account 457 28
Analysis of Billing - Non associate Companies Account 458 29
Analysis of Charges for Service - Associate
and Non associate Companies Schedule XVI 30
Schedule of Expense by Department or
Service Function Schedule XVII 31-42
Departmental Analysis of Salaries Account 920 43-46
Outside Services Employed Account 923 47-50
Employee Pensions and Benefits Account 926 51
General Advertising Expenses Account 930.1 52
Miscellaneous General Expenses Account 930.2 53
Rents Account 931 54
Taxes Other than Income Taxes Account 408 55
Donations Account 426.1 56
Other Deductions Account 426.5 57
Notes to Statement of Income Schedule XVIII 58
LISTING OF INSTRUCTIONAL FILING REQUIREMENTS
Page
Description of Reports or Statements Number
ORGANIZATION CHART 59
METHODS OF ALLOCATION 60
ANNUAL STATEMENT OF COMPENSATION FOR USE OF CAPITAL BILLED 61-62
SIGNATURE 63
EXHIBIT I 1
EXHIBIT II 1-6
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<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
1998 1997
(In Thousands)
SERVICE COMPANY PROPERTY
101 Service company property (Schedule II) $ 40,975 $ 39,994
107 Construction work in progress (Schedule II) - -
Total Property $ 40,975 $ 39,994
108 Less accumulated provision for depreciation
and amortization of service company property
(Schedule III) $ 13,961 $ 20,307
Net Service Company Property $ 27,014 $ 19,687
INVESTMENTS
123 Investments in associate companies (Schedule IV) - -
124 Other investments (Schedule IV) - -
Total Investments - -
CURRENT AND ACCRUED ASSETS
131 Cash $ 290 $ 1,017
134 Special deposits 2 2
135 Working funds 1 1
136 Temporary cash investments (Schedule IV) 82,000 25,400
141 Notes receivable - -
143 Accounts receivable 6,640 800
144 Accumulated provision for uncollectible accounts - -
146 Accounts receivable from associate companies
(Schedule V and XIV-Note 6) 580,621 591,165
152 Fuel stock expenses undistributed (Schedule VI) - -
154 Materials and supplies 15 -
163 Stores expense undistributed (Schedule VII) - -
165 Prepayments 187 1,109
174 Miscellaneous current and accrued assets
(Schedule VIII) - -
Total Current and Accrued Assets $669,756 $619,494
DEFERRED DEBITS
181 Unamortized debt expense $ - $ -
184 Clearing accounts 313 79
186 Miscellaneous deferred debits (Schedule IX) 16,398 18,155
188 Research, development, or demonstration
expenditures (Schedule X) - -
190 Accumulated deferred income taxes 6,883 6,556
Total Deferred Debits $ 23,594 $ 24,790
TOTAL ASSETS AND OTHER DEBITS $720,364 $663,971
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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
1998 1997
(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) $ 3,672 $ 8,912
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 $ 3,672 $ 8,912
CURRENT AND ACCRUED LIABILITIES
231 Notes payable $ - $ -
232 Accounts payable 15,545 26,692
233 Notes payable to associate companies
(Schedule XIII and XIV-Note 6) 659,857 595,454
234 Accounts payable to associate companies
(Schedule XIII and XIV-Note 6) 14,301 9,875
236 Taxes accrued (406) (299)
237 Interest accrued - -
238 Dividends declared - -
241 Tax collections payable (47) 32
242 Miscellaneous current and accrued liabilities
(Schedule XIII) 5,123 6,020
Total Current and Accrued Liabilities $694,373 $637,774
DEFERRED CREDITS
253 Other deferred credits $ 18,241 $ 13,504
255 Accumulated deferred investment tax credits - -
Total Deferred Credits $ 18,241 $ 13,504
282 ACCUMULATED DEFERRED INCOME TAXES $ 4,068 $ 3,771
TOTAL LIABILITIES AND PROPRIETARY CAPITAL $720,364 $663,971
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<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 - - (106) 4,164
306 Leasehold
Improvements 7,263 (104) - 117 7,276
307 Equipment(2) 20,577 9,772 5,808 (11) 24,530
308 Office
Furniture
and Equip-
ment 7,741 2,506 5,385 - 4,862
309 Automobiles,
Other
Vehicles and
Related
Garage Equip-
ment 31 - - - 31
310 Aircraft and
Airport
Equipment - - - - -
311 Other Service
Company
Property(3) - - - - -
SUBTOTAL $ 39,994 $ 12,174 $ 11,193 $ - $ 40,975
107 Construction
Work in
Progress(4) - - - - -
TOTAL $ 39,994 $ 12,174 $ 11,193 $ - $ 40,975
(1) Provide an explanation of those changes considered material:
Review of assets for entry into new accounting system required
some adjustments of balances as noted in the other changes column.
7
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 $ 7,114 $ 21,061
Computer Software 2,658 3,326
Typewriters, Calculators, Copiers & Duplicating - 143
TOTAL $ 9,772 $ 24,530
(3) Describe Other Service Company Property:
Not Applicable
(4) Describe Construction Work in Progress:
Not Applicable
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<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 1,428 123 - - 1,551
306 Leasehold
Improvements 3,040 578 - - 3,618
307 Equipment 9,943 3,360 5,808 12 7,507
308 Office
Furniture and
Fixtures 5,874 770 5,385 - 1,259
309 Automobiles,
Other
Vehicles and
Related
Garage Equip-
ment 22 4 - 26
310 Aircraft and
Airport
Equipment - - - - -
311 Other Service
Company
Property - - - - -
TOTAL $ 20,307 $ 4,835 $ 11,193 $ 12 $ 13,961
(1) Provide an explanation of those changes considered material:
Not Applicable
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<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 $ 82,000
TOTAL $ 25,400 $ 82,000
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<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 $ 287 $ 125
The East Ohio Gas Company 249,003 350,176
The Peoples Natural Gas Company 44,466 44,926
CNG Transmission Corporation 6,483 4,257
Hope Gas, Inc. 13,832 32,026
CNG Producing Company 1,618 25,403
CNG Power Company 14 3,789
CNG Energy Services Corporation 138,186 -
Virginia Natural Gas, Inc. 54,500 41,040
CNG Field Services Company 1 2,548
CNG Power Services Corporation 6 6,229
CNG Retail Services Corporation - 29,719
CNG Products & Services, Inc. - 1,349
CNG International Corporation 82,769 135
CNG Oil Gathering Corporation - 25,918
CNG Main Pass Gas Gathering Corporation - 12,981
TOTAL RECEIVABLES $591,165 $580,621
Total
Analysis of Convenience or Accommodation Payments: Payments
Consolidated Natural Gas Company $ 180
The East Ohio Gas Company 10,772
The Peoples Natural Gas Company 4,403
CNG Transmission Corporation 4,248
Hope Gas, Inc. 1,096
CNG Producing Company 4,455
CNG Power Company 1
CNG Energy Services Corporation 1,129
Virginia Natural Gas, Inc. 1,648
CNG Power Services Corporation 2
CNG Retail Services Corporation 120
CNG Products & Services, Inc. 20
CNG International Corporation 117
TOTAL PAYMENTS $ 28,191
The majority of these payments were for system insurance, system employee
benefit plans, system memberships, common financial system (CFS) consulting,
and training.
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<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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, 1998
(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, 1998
(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 $ - $ -
TOTAL $ - $ -
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<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 $ 12,195 $ 12,195
Pension Supplement Intangible Asset (Non-Qualified) 3,829 3,511
Deferred Compensation Expense 1,244 30
Curtailment Gain - FAS 88 418 418
Pension Supplement Intangible Asset (Qualified) 163 198
Miscellaneous 306 46
TOTAL $ 18,155 $ 16,398
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<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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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<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
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, 1998
(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 $ 1,506 $ - 240 $ 1,266
Consolidated Natural
Gas Company 1998 6.20% 5,000 5,000 - 5,000 -
Consolidated Natural
Gas Company 2003 6.10% 795 795 - - 795
Consolidated Natural
Gas Company 2008 6.75% 1,611 1,611 - - 1,611
Account 224 - Other Long-Term Debt: - - - - -
TOTAL $11,242 $ 8,912 $ - $ 5,240 $ 3,672
<FN>
(1) GIVE AN EXPLANATION OF DEDUCTIONS:
Current portion of the 9.5 % & 6.2% Long-Term Debt
moved to Account 233 - Notes Payable to Associate Companies.
</TABLE>
1
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ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 $486,924 $565,806
CNG Transmission Corporation 12,700 14,815
CNG Iroquois - 9,158
Consolidated System LNG Company 12,240 15,540
CNG Producing Company 36,155 -
CNG Pipeline - 1,335
CNG Research Company 265 40
CNG Coal Company 3,185 3,445
CNG Energy Services Corporation 38,455 -
CNG Field Services Company 5,530 -
CNG International Corporation - 1,768
CNG Power Company - 47,715
CNG Market Center Services - 235
TOTAL $595,454 $659,857
Account 234 - Accounts Payable to Associate Companies
Consolidated Natural Gas Company $ 6,819 $ 6,379
The East Ohio Gas Company 1,058 4,936
The Peoples Natural Gas Company 118 1,875
CNG Transmission Corporation 96 (65)
CNG Iroquois, Inc. - 38
Hope Gas, Inc. - 217
Consolidated System LNG Company 60 70
CNG Producing Company 37 80
CNG Pipeline - 6
CNG Coal Company 17 15
CNG Energy Services Corporation 685 -
Virginia Natural Gas, Inc. - 623
CNG Power Services Corporation 10 -
CNG Power Company - 198
CNG International Corporation - (41)
CNG Retail Servcies Corporation - (32)
CNG Market Center Services - 2
CNG Products & Services, Inc. 975 -
TOTAL $ 9,875 $ 14,301
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<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(In Thousands)
SCHEDULE XIII - CURRENT AND ACCRUED LIABILITIES
(Concluded)
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 242 - Miscellaneous Current and Accrued Liabilities
Accrued Vacation Pay $ 3,048 $ 3,172
Deferred Compensation (1) 1,377 -
Non-Qualified Pension Plans Liability 1,532 1,262
U. S. Savings Bond Deduction (2) 9 -
Incentive Compensation - 666
Lump Sum Severance Liability (3) - 100
Supplemental Pension Plans Liability 54 (73)
Miscellaneous - (4)
TOTAL $ 6,020 $ 5,123
Note: (1) Deferred Compensation was reclassified to account 253 in 1998.
(2) U. S. Savings Bond Deduction was reclassified to account 232
in 1998.
(3) Lump Sum Severance Liability was reclassified from account 253
in 1998.
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<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
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 (PUHCA).
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
21
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ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
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 $(2,456,000) and $(2,234,000) for
the years ended December 31, 1997 and 1998, 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 and cost sharing features 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, 1997 and 1998 was
$1,312,000 and $1,757,000 respectively, as determined by an independent
actuary.
22
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
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 1999 through 2003 are: $239,800, $239,800, $239,800, $239,800, and
$1,034,800.
The notes payable to the Parent Company bear interest at rates predicated on
and substantially equal to the effective cost of money to the Parent Company
secured through the issuance of its debt securities.
4. COMMITMENTS AND CONTINGENCIES
Lease arrangements of the Company are principally for office space, business
machines and transportation equipment. None of these arrangements,
individually or in the aggregate, are material capital leases. Rental expense,
which in large part represents minimum rentals, incurred in the years 1997 and
1998 was $6,192,000 and $7,697,000, 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 $35,514,000 and for
the years 1999 through 2003 are: $7,136,000; $7,209,000; $7,189,000;
$7,012,000 and $6,968,000. 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 1999 amounts to approximately $10,100,000. In
this connection, the Company has entered into certain contractual commitments.
23
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
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 PUHCA 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.
24
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
SCHEDULE XIV - NOTES TO FINANCIAL STATEMENTS (Continued)
At December 31, 1998, the detail of the pool was as follows:
Investment in Pool (including interest)
Consolidated Natural Gas Company $563,532,000
CNG Transmission Corporation 14,815,000
CNG Iroquois, Inc. 9,196,000
Consolidated System LNG Company 15,610,000
CNG Pipeline Company 1,341,000
CNG Research Company 40,000
CNG Coal Company 3,460,000
CNG International Corporation 1,768,000
CNG Power Company 47,918,000
CNG Market Center Services, Inc. 237,000
SUBTOTAL $657,917,000
Less:
Borrowings from Pool (including interest)
The East Ohio Gas Company $341,278,000
The Peoples Natural Gas Company 41,818,000
CNG Transmission Corporation 122,000
Hope Gas, Inc. 30,706,000
CNG Producing Company 23,294,000
CNG Power Company 3,766,000
Virginia Natural Gas, Inc. 39,133,000
CNG Products and Services, Inc. 1,317,000
CNG International Corporation 58,000
CNG Field Services Company 2,503,000
CNG Power Services Corporation 6,056,000
CNG Retail Services Corporation 29,439,000
CNG Oil Gathering Corporation 12,981,000
CNG Main Pass Gas Gathering Corporation 25,918,000 558,389,000
Consolidated Natural Gas Service Company 17,528,000
SUBTOTAL 575,917,000
TOTAL $ 82,000,000
Temporary Cash Investments $ 82,000,000
Interest Receivable - Money Pool -
TOTAL $ 82,000,000
25
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
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
and exclude the Service Company's Money Pool receivable due from the Service
Company as agent for the Pool and the payable amount due the pool at
December 31, 1998. The balance of the Service Company's portion of the pool is
detailed on page 25. The amounts reported in Form U5S include these balances.
A reconciliation of affiliated receivables and payables at December 31, 1998,
is as follows:
As Reported As Reported
Affiliated Accounts in Form U-13-60 in Form U5S Difference
Accounts Receivable $580,621,000 $598,149,000 $ 17,528,000
Notes Payable $659,857,000 - $659,857,000
Accounts Payable 14,301,000 - 14,301,000
Payables to Affiliated Companies - $691,686,000 (691,686,000)
$ 17,528,000
26
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Years Ended December 31, 1998 and 1997
(In Thousands)
SCHEDULE XV - COMPARATIVE STATEMENT OF INCOME
Current Prior
Description Year Year
Account 1998 1997
INCOME
457 Services rendered to associate companies $126,911 $104,211
458 Services rendered to nonassociate companies - -
421 Miscellaneous income or loss 26 31
TOTAL INCOME $126,937 $104,242
EXPENSE
912-13 Marketing and Advertising $ 3,491 $ 3,195
920 Salaries and wages 48,122 35,313
921 Office supplies and expenses 17,642 9,236
922 Administrative expense transferred - credit (3) (50)
923 Outside services employed 26,461 32,370
924 Property insurance 15 -
925 Injuries and damages 191 78
926 Employee pensions and benefits 9,455 6,353
928 Regulatory commission expense - -
930.1 General advertising expenses - -
930.2 Miscellaneous general expenses 1,920 1,810
931 Rents 7,697 6,192
932 Maintenance of structures and equipment 1,710 1,998
403 Depreciation and amortization expense 4,835 3,229
408 Taxes other than income taxes 3,587 2,984
409 Income taxes 30 (1,065)
410 Provision for deferred income taxes 1,358 1,172
411 Povision for deferred income taxes - credit (1,388) (107)
411.5 Investment tax credit - -
426.1 Donations - -
426.5 Other deductions 30 83
427 Interest on long-term debt - -
430 Interest on debt to associate companies 1,637 1,344
431 Other interest expense 147 107
TOTAL EXPENSE $126,937 $104,242
NET INCOME OR (LOSS) $ - $ -
27
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 $ 2,458 $ 383 $ 28 $ 2,869
The East Ohio Gas Company 36,734 7,116 573 44,423
The Peoples Natural Gas Company 14,542 2,670 235 17,447
CNG Transmission Corporation 21,022 4,601 333 25,956
Hope Gas, Inc. 4,653 855 76 5,584
Consolidated System LNG Company 2 2 - 4
CNG Producing Company 10,052 2,422 176 12,650
CNG Research Company 1 2 - 3
CNG Power Company 70 35 2 107
CNG Energy Services Corporation 4,267 479 36 4,782
Virginia Natural Gas, Inc. 8,353 1,234 126 9,713
CNG Field Services Company 70 11 1 82
CNG Power Services Corporation 197 28 2 227
CNG Products & Services, Inc. 42 15 1 58
CNG International Corporation 610 140 10 760
CNG Retail Services Corporation 1,916 292 38 2,246
(A) The amount of indirect costs
charged of $20,285 is net of
$26 miscellaneous income.
(B) Includes $225 which was directly
billed to associate companies
and $1,412 which was indirectly
billed to associate companies.
TOTAL $104,989 $ 20,285 $ 1,637 $126,911
28
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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
29
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 $ 3,491 $ - $ 3,491 $ - $ - $ - $ 3,491 $ - $ 3,491
920 Salaries and Wages 47,044 1,078 48,122 - - - 47,044 1,078 48,122
921 Office Supplies and Expenses 15,903 1,739 17,642 - - - 15,903 1,739 17,642
922 Administrative Expense Transferred -
Credit (3) - (3) - - - (3) - (3)
923 Outside Services Employed 23,852 2,609 26,461 - - - 23,852 2,609 26,461
924 Property Insurance 14 1 15 - - - 14 1 15
925 Injuries and Damages - 191 191 - - - - 191 191
926 Employee Pensions and Benefits - 9,455 9,455 - - - - 9,455 9,455
928 Regulatory Commission Expense - - - - - - - - -
930.1 General Advertising Expenses - - - - - - - - -
930.2 Miscellaneous General Expenses 1,731 189 1,920 - - - 1,731 189 1,920
931 Rents 6,938 759 7,697 - - - 6,938 759 7,697
932 Maintenance of Structures and
Equipment 1,541 169 1,710 - - - 1,541 169 1,710
403 Depreciation and Amortization
Expense 4,358 477 4,835 - - - 4,358 477 4,835
408 Taxes Other than Income Taxes 106 3,481 3,587 - - - 106 3,481 3,587
409 Income Taxes - 30 30 - - - - 30 30
410 Provision for Deferred Income Taxes - 1,358 1,358 - - - - 1,358 1,358
411 Provision for Deferred Income Taxes Cr. - (1,388) (1,388) - - - - (1,388) (1,388)
411.5 Investment Tax Credit - - - - - - - - -
426.1 Donations - - - - - - - - -
426.5 Other Deductions 30 - 30 - - - 30 - 30
427 Interest on Long-Term Debt - - - - - - - - -
431 Other Interest Expense - 147 147 - - - - 147 147
TOTAL EXPENSES $105,005 $20,295 $125,300 $ - $ - $ - $105,005 $20,295 $125,300
Compensation for Use of Equity Capital
430 Interest on Debt to Associate
Companies 1,637 - - - 225 1,412 1,637
TOTAL COST OF SERVICE $126,937 $ - $ - $ - $105,230 $21,707 $126,937
INSTRUCTION: Total cost of service will equal for associate and nonassociate companies the total amount billed under their
separate anaylsis of billing schedules.
30
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 $ 3,491 $ - $ - $ - $ - $ - $ -
920 Salaries and Wages 48,122 1,078 2,181 754 728 278 1,070
921 Office Supplies and Expenses 17,642 408 386 199 165 32 185
922 Administrative Expense
Transferred Credit (3) - - - - - -
923 Outside Services Employed 26,461 68 815 183 79 29 348
924 Property Insurance 15 1 - - - - -
925 Injuries and Damages 191 191 - - - - -
926 Employee Pensions and Benefits 9,455 9,455 - - - - -
928 Regulatory Commission Expense - - - - - - -
930.1 General Advertising Expense - - - - - - -
930.2 Miscellaneous General Expenses 1,920 101 37 340 10 553 35
931 Rents 7,697 - 580 149 210 84 275
932 Maintenance of Structures
and Equipment 1,710 - 2 3 5 2 3
403 Depreciation and
Amortization Expense 4,835 - 93 41 42 14 51
408 Taxes Other Than Income Taxes 3,587 3,481 1 - - - -
409 Income Taxes 30 30 - - - - -
410 Provision for Deferred
Income Taxes 1,358 1,358 - - - - -
411 Provision for Deferred
Income Taxes - Credit (1,388) (1,388) - - - - -
411.5 Investment Tax Credit - - - - - - -
426.1 Donations - - - - - - -
426.5 Other Deductions 30 - 10 - - 1 2
427 Interest on Long-Term Debt - - - - - - -
430 Interest on Debt to
Associate Companies 1,637 1,412 - - - - -
431 Other Interest Expense 147 147 - - - - -
TOTAL EXPENSES $126,937 $ 16,342 $ 4,105 $ 1,669 $ 1,239 $ 993 $ 1,969
31
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
External
Affairs & Common Corporate Regulated Risk
Policy Corporate Financial General Fixed Measurement
Description of Items Development Affairs Systems Controller's Accounting Assets & Control
<S> <C> <C> <C> <C> <C> <C> <C>
912-13 Marketing and Advertising $ - $ - $ - $ - $ - $ - $ -
920 Salaries and Wages 575 379 236 1,136 711 563 114
921 Office Supplies and Expenses 322 89 243 115 45 47 7
922 Administrative Expense
Transferred Credit - - - - - - -
923 Outside Services Employed 195 17 1 13 4 - -
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 49 (4) 6 34 - 1 -
931 Rents 286 120 491 277 56 11 6
932 Maintenance of Structures
and Equipment 4 - 43 1 - - -
403 Depreciation and
Amortization Expense 44 13 630 44 12 2 -
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 10 2 - - - - -
427 Interest on Long-Term Debt - - - - - - -
430 Interest on Debt to
Associate Companies - - - - - - -
431 Other Interest Expense - - - - - - -
TOTAL EXPENSES $ 1,485 $ 616 $ 1,650 $ 1,620 $ 828 $ 624 $ 127
32
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
Strategic
Internal Human Employee Risk Financial
Description of Items Auditing Resources Benefits Treasurer's Tax Management Planning
<S> <C> <C> <C> <C> <C> <C> <C>
912-13 Marketing and Advertising $ - $ - $ - $ - $ - $ - $ -
920 Salaries and Wages 1,142 1,635 951 594 801 193 315
921 Office Supplies and Expenses 118 272 160 89 61 28 26
922 Administrative Expense
Transferred Credit (3) - - - - - -
923 Outside Services Employed 72 657 3,794 22 156 1 -
924 Property Insurance - - - 7 - 7 -
925 Injuries and Damages - - - - - - -
926 Employee Pensions and Benefits - - - - - - -
928 Regulatory Commission Expense - - - - - - -
930.1 General Advertising Expense - - - - - - -
930.2 Miscellaneous General Expenses 2 31 2 4 - 1 -
931 Rents 107 247 310 151 140 67 71
932 Maintenance of Structures
and Equipment 1 1 1 3 - - -
403 Depreciation and
Amortization Expense 31 45 64 216 23 15 12
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 - 2 - - - - -
427 Interest on Long-Term Debt - - - - - - -
430 Interest on Debt to
Associate Companies - - - - - - -
431 Other Interest Expense - - - - - - -
TOTAL EXPENSES $ 1,470 $ 2,890 $ 5,282 $ 1,086 $ 1,181 $ 312 $ 424
33
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
Business & Planning & System
Corporate Operations Investor Asset New York Information Services
Description of Items Planning Services Relations Management Office Services Staff
<S> <C> <C> <C> <C> <C> <C> <C>
912-13 Marketing and Advertising $ - $ - $ - $ - $ - $ - $ -
920 Salaries and Wages 341 298 279 141 6 1,522 1,328
921 Office Supplies and Expenses 11 71 130 13 19 383 223
922 Administrative Expense
Transferred Credit - - - - - - -
923 Outside Services Employed 50 - 197 - - 220 157
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 4 1 138 - 5 50 8
931 Rents 93 93 49 15 125 250 91
932 Maintenance of Structures
and Equipment 1 - 1 - 1 4 (6)
403 Depreciation and
Amortization Expense 16 18 8 2 9 39 16
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 $ 516 $ 481 $ 802 $ 171 $ 165 $ 2,468 $ 1,817
34
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
Data
I/T Admin. &
Description of Items Knowledge Trainning Information Purchasing Facility Operations Network
Center & Develop. Services Services Support Services
<S> <C> <C> <C> <C> <C> <C> <C>
912-13 Marketing and Advertising $ - $ - $ - $ - $ - $ - $ -
920 Salaries and Wages 2 4 9 1,408 589 2 750
921 Office Supplies and Expenses 6 11 21 250 127 - 1,302
922 Administrative Expense
Transferred Credit - - - - - - -
923 Outside Services Employed - - - 101 109 - 1,504
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 - - - 11 1 - -
931 Rents - - - 108 143 - 227
932 Maintenance of Structures
and Equipment - - - 4 294 - 290
403 Depreciation and
Amortization Expense 16 3 27 20 65 - 1,058
408 Taxes Other Than Income Taxes 2 - 1 - - - -
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 - -
427 Interest on Long-Term Debt - - - - - - -
430 Interest on Debt to
Associate Companies - - - - - - -
431 Other Interest Expense - - - - - - -
TOTAL EXPENSES $ 26 $ 18 $ 58 $ 1,902 $ 1,330 $ 2 $ 5,131
35
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
Operations
Data Support & Tele- Energy Retail
Description of Items Center Production Security System commun- Services Company
Operations Conntrol Management Admin. ications IT IT
<S> <C> <C> <C> <C> <C> <C> <C>
912-13 Marketing and Advertising $ - $ - $ - $ - $ - $ - $ -
920 Salaries and Wages 2,099 343 273 562 1,040 663 158
921 Office Supplies and Expenses 2,861 23 12 841 117 248 2
922 Administrative Expense
Transferred Credit - - - - - - -
923 Outside Services Employed 1,725 56 5 138 27 1,558 -
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 1 - 3 28 - -
931 Rents 498 46 34 45 118 20 -
932 Maintenance of Structures
and Equipment 408 - - 198 47 24 -
403 Depreciation and
Amortization Expense 1,217 13 18 18 9 18 -
408 Taxes Other Than Income Taxes 102 - - - - - -
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 225 - - - - - -
431 Other Interest Expense - - - - - - -
TOTAL EXPENSES $ 9,137 $ 482 $ 342 $ 1,805 $ 1,386 $ 2,531 $ 160
36
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 912 52 405 382 659 95 235
921 Office Supplies and Expenses 289 4 155 888 398 60 239
922 Administrative Expense
Transferred Credit - - - - - - -
923 Outside Services Employed 1,769 - 19 2,267 1,268 154 644
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 - 1 2 1 - -
931 Rents - - - - 19 - -
932 Maintenance of Structures
and Equipment 52 - - - 3 - -
403 Depreciation and
Amortization Expense 7 - - 1 3 1 -
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 $ 3,031 $ 56 $ 580 $ 3,540 $ 2,351 $ 310 $ 1,118
37
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
Trans-
Corporate SCADA Year portation CNGT
Description of Items IT CAMP CFS / GM 2000 . / GSS IT
<S> <C> <C> <C> <C> <C> <C> <C>
912-13 Marketing and Advertising $ - $ - $ - $ - $ - $ - $ -
920 Salaries and Wages 1,205 1,152 1,286 823 478 959 607
921 Office Supplies and Expenses 290 240 188 657 157 247 686
922 Administrative Expense
Transferred Credit - - - - - - -
923 Outside Services Employed 790 2,144 1,192 107 463 87 2,010
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 - 7 2 92 2
931 Rents 163 62 14 1 120 6 3
932 Maintenance of Structures
and Equipment 5 (6) (1) 32 (1) 23 101
403 Depreciation and
Amortization Expense 48 13 10 - 20 - -
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 $ 2,502 $ 3,607 $ 2,689 $ 1,627 $ 1,239 $ 1,414 $ 3,409
38
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
CNGT Cash Mgmt.
Engineering Accounts General & Customer System
Description of Items & Field Ops. Payable Services Payroll Payment Fleet
<S> <C> <C> <C> <C> <C> <C>
912-13 Marketing and Advertising $ - $ - $ - $ - $ - $ -
920 Salaries and Wages 1,218 501 507 645 794 129
921 Office Supplies and Expenses 129 9 486 66 61 69
922 Administrative Expense
Transferred Credit - - - - - -
923 Outside Services Employed 112 - 36 49 31 16
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 2
931 Rents 4 120 483 134 143 25
932 Maintenance of Structures
and Equipment 36 - 92 3 4 1
403 Depreciation and
Amortization Expense 12 16 68 29 28 24
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 $ 1,512 $ 646 $ 1,672 $ 926 $ 1,063 $ 266
39
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(In Thousands)
SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION
BY
DEPARTMENT OR SERVICE FUNCTION
<CAPTION>
Large Market
Marketing Mass Customer Technical Planning & Marketing
Description of Items Staff Marketing Market Marketing Analysis Commun.
<S> <C> <C> <C> <C> <C> <C>
912-13 Marketing and Advertising $ 3 $ 961 $ 37 $ 104 $ - $ 2,386
920 Salaries and Wages 658 366 412 243 245 282
921 Office Supplies and Expenses 148 824 224 152 308 335
922 Administrative Expense
Transferred Credit - - - - - -
923 Outside Services Employed 110 118 (69) (63) 419 107
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 10 78 59 66 15 79
931 Rents 294 6 8 1 - -
932 Maintenance of Structures
and Equipment 10 - (1) - - -
403 Depreciation and
Amortization Expense 246 - - - - -
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 $ 1,479 $ 2,353 $ 670 $ 503 $ 987 $ 3,189
40
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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
Description of Items Group Management Staff Standards mental Support
<S> <C> <C> <C> <C> <C> <C>
912-13 Marketing and Advertising $ - $ - $ - $ - $ - $ -
920 Salaries and Wages 1,022 203 372 342 1,025 462
921 Office Supplies and Expenses 43 13 38 36 156 76
922 Administrative Expense
Transferred Credit - - - - - -
923 Outside Services Employed 30 2 - - 52 24
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 5 3 2 16 5
931 Rents 85 13 65 48 78 45
932 Maintenance of Structures
and Equipment - - - - 2 -
403 Depreciation and
Amortization Expense 37 2 7 8 9 15
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 1 - - - - -
427 Interest on Long-Term Debt - - - - - -
430 Interest on Debt to
Associate Companies - - - - - -
431 Other Interest Expense - - - - - -
TOTAL EXPENSES $ 1,220 $ 238 $ 485 $ 436 $ 1,338 $ 627
41
</TABLE>
<PAGE>
<TABLE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 407 469 283 485 551
921 Office Supplies and Expenses 1 27 62 37 176
922 Administrative Expense
Transferred Credit - - - - -
923 Outside Services Employed 16 7 - 183 66
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 1 - - 6
931 Rents 1 - 1 1 161
932 Maintenance of Structures
and Equipment - - 1 - 19
403 Depreciation and
Amortization Expense - - 7 - 242
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 $ 427 $ 504 $ 354 $ 706 $ 1,221
42
</TABLE>
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 Company Associates Associates Year
Regular Services
Executive Office $ 2,181 $ 427 $ 1,754 $ - 9
Corporate Communications 754 20 734 - 13
Legal - Washington 728 8 720 - 8
Secretary's 278 71 207 - 5
Legal - Pittsburgh 1,070 46 1,024 - 15
External Affairs and
Policy Development 575 14 561 - 8
Corporate Affairs 379 124 255 - 4
Common Financial Systems 236 2 234 - 1
Controller's 1,136 169 967 - 21
Corp. General Accounting 711 9 702 - 17
Regulated Fixed Assets 563 - 563 - 11
Risk Measurement & Control 114 3 111 - -
Internal Auditing 1,142 14 1,128 - 21
Human Resources 1,635 25 1,610 - 18
Employee Benefits 951 5 946 - 10
Treasurer's 594 30 564 - 18
Tax 801 108 693 - 8
Risk Management 193 16 177 - 1
Strategic Financial
Planning 315 251 64 - -
Corporate Planning 341 3 338 - 2
Business and Operations
Services 298 15 283 - 3
Investor Relations 279 12 267 - 3
Asset Management 141 27 114 - -
New York Office 6 - 6 - -
SUBTOTAL $15,421 $ 1,399 $14,022 $ - 196
System Services Group
(SSG) (Page 44) 23,796 74 23,722 - 409
Regulated Business Support
Group (RBSG) (Page 46) 7,827 - 7,827 - 107
TOTAL $47,044 $ 1,473 $45,571 $ - 712
43
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 Company Associates Associates Year
System Services Group (SSG)
Planning and Information
Services $ 1,522 $ 3 $ 1,519 $ - 17
System Services Staff 1,328 3 1,325 - 10
Knowledge Center 2 - 2 - -
I/T Tranning & Development 4 - 4 - 2
Information Services 9 - 9 - 12
Purchasing 1,408 3 1,405 - 24
Facility Services 589 4 585 - 11
Data Administration and
Operations Support 2 - 2 - -
Network Services 750 - 750 - 10
Data Center Operations 2,099 11 2,088 - 46
Operations Support/
Production Control 343 - 343 - 10
Security Management 273 1 272 - -
System Administration 562 - 562 - 11
Telecommunications 1,040 2 1,038 - 19
Energy Services -
Information Technology 663 34 629 - 8
Retail Company -
Information Technology 158 - 158 - -
CNGP - Information
Technology 912 - 912 - 15
CNGP Shared Systems 52 - 52 - -
LDC Shared Systems 405 - 405 - 8
Information Technology:
EOG 382 - 382 - 7
PNG 659 - 659 - 13
Hope 95 - 95 - 2
VNG 235 - 235 - 4
Corporate 1,205 1 1,204 - 10
CAMP 1,152 - 1,152 - 17
CFS 1,286 4 1,282 - 15
SCADA/GM 823 - 823 - 15
Year 2000 478 1 477 - 8
Transportation/GSS 959 - 959 - 16
CNGT - Information -
Technology 607 - 607 - 9
CNGT - Engineering and -
Field Operations 1,218 - 1,218 - 21
Processing Services
Group (See page 45) 2,576 7 2,569 - 69
SUBTOTAL SSG $23,796 $ 74 $23,722 $ - 409
44
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 Company Associates Associates Year
System Services Group (SSG)
(Continued)
Processing Services Group (PSG)
Accounts Payable 501 - 501 - 15
General Services 507 2 505 - 13
Payroll 645 1 644 - 17
Cash Management and -
Customer Payment 794 4 790 - 21
System Fleet 129 - 129 - 3
SUBTOTAL PSG $ 2,576 $ 7 $ 2,569 $ - 69
45
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 Company Associates Associates Year
Regulated Business Support Group (RBSG)
Marketing Staff $ 658 $ - $ 658 $ - 7
Mass Marketing 366 - 366 - 6
Large Customer Market 412 - 412 - 6
Technical Marketing 243 - 243 - 4
Market Planning and
Analysis 245 245 - 4
Marketing Communications 282 - 282 - 5
Regulated Business Support
Group 1,022 - 1,022 - 7
Materials Management 203 - 203 - 3
Engineering Staff 372 - 372 - 7
Engineering Codes and
Standards 342 - 342 - 5
Engineering Environmental 1,025 - 1,025 - 15
Engineering Technical
Support 462 462 - 7
Gas Supply Area Acquisition 407 - 407 - 4
Gas Supply Market Area
Acquisition 469 - 469 - 6
Gas Supply Planning 283 - 283 - 4
Gas Supply Regulatory
Support and Accounting 485 - 485 - 10
Gas Supply Staff 551 - 551 - 7
SUBTOTAL RBSG $ 7,827 $ - $ 7,827 $ - 107
46
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 $ 189
Cahill, Gordon & Reindel Legal Servcies NA 119
Miscellaneous (27 items
less than $100,000) - NA 418
TOTAL $ 726
Tax Services:
Ivins, Phillips & Barker Tax Consultants NA $ 105
Miscellaneous (no items
less than $100,000) -
TOTAL $ 105
Auditing Services:
Miscellaneous (1 item
less than $100,000) Audit Services NA $ 13
TOTAL $ 13
47
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Continued)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Description Associate Amount
Other Special Services:
Wang Laboratories, Inc Computer Consultants/ NA $ 7,405
Services
Towers Perrin, Inc. Human Resources, NA 3,763
Compensation & Benefits
Deloitte & Touche Consulting Computer Consultants/ NA 1,782
Services
Oracle Corporation Computer Consultants/ NA 929
Services
PricewaterhouseCoopers Computer Consultants/ NA 594
Services
Compuware Corporation Computer Consultants/ NA 579
Services
Phoenix Solutions, Inc. Computer Consultants/ NA 449
Services
Ascent Consulting Group Computer Consultants/ NA 353
Services
Integral Strategies Inc. Computer Consultants/ NA 349
Services
Heidrick & Struggles Inc. Management Consultants NA 348
Walker Information Marketing Consultants NA 327
International Business Computer Consultants/ NA 317
Machines Corporation Services
Modis, Inc. Computer Consultants/ NA 313
Services
Sequent Computer Computer Consultants/ NA 285
Systems, Inc. Services
Viasoft Computer Consultants/ NA 268
Services
48
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Continued)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Description Associate Amount
Other Special Services (Cont.):
CONAG Finance Inc. Computer Services NA $ 219
Miz Data Systems, Inc. Computer Consultants/ NA 213
Services
Georgeson & Company, Inc. Shareholder Services NA 208
Hewitt Associates Human Resources, NA 173
Compensation & Benefits
MAPSA Legislative Consultants/ NA 169
Services
Geschke Kasper & Associates Computer Consultants/ NA 162
Inc. Services
Pegasys Technologies, Inc. Computer Consultants/ NA 155
Services
Metro Information Services Computer Consultants/ NA 152
Services
Peoplesoft Inc. Computer Consultants/ NA 148
Services
PKB Creative Printing Services NA 145
Network of Consulting Computer Consultants/ NA 142
Professionals Services
NOLA Computer Services, Inc. Computer Consultants/ NA 131
Services
Keane Inc. Computer Consultants/ NA 129
Services
Spencer Stuart Management Consultants NA 125
Source Services Corporation Computer Consultants/ NA 119
Services
Software & Scanning Services Computer Consultants/ NA 107
Services
49
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(In Thousands)
OUTSIDE SERVICES EMPLOYED - ACCOUNT 923 (Continued)
Relationship
"A"=Associate
"NA"=Non
From Whom Purchased Description Associate Amount
Other Special Services (Cont.):
Programmer Resources, Inc. Computer Consultants/ NA $ 103
Services
Miscellaneous (400 items
less than $100,000) - NA 4,956
TOTAL $25,617
GRAND TOTAL $26,461
50
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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
Workforce Reduction $ 3,760
Medical Benefit Plans 2,624
Thrift Plans 2,157
Retirement Benefits 1,904
Education Refunds 118
Employee Stock Ownership Plan (ESOP) 74
Other 61
Pension Expense (1,157)
Employee Contributions (86)
TOTAL $ 9,455
51
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 $ -
52
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 $ 643
Annual Shareholders Report 320
Transfer Agent Expenses 229
Miscellaneous Expenses - Business Meeting/Group Meals 203
Other Shareholder and SEC Reports 115
Security Analyst Meeting Expenses 114
Proxy Solicitation Expenses 97
Other Shareholder Expenses 61
Debenture Trustee Expenses 53
Stock Listing Fees 49
Dividend Disbursing Expenses 36
TOTAL $ 1,920
5
<<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(In Thousands)
RENT - 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 $ 6,642
Computer Equipment Rental 346
Miscellaneous Rents 288
Communications Equipment Rental 156
Apartment Rents 148
Garage Rents 117
TOTAL $ 7,697
54
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 $ 236
Real & Personal Property Taxes 112
Pittsburgh Business Privilege Tax 101
Other Miscellaneous Taxes (26)
SUBTOTAL $ 423
(B) U. S. Government Taxes
Federal Social Security Tax $ 3,120
Federal Unemployment Tax 44
SUBTOTAL $ 3,164
TOTAL $ 3,587
55
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 $ -
56
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
(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 $ 30
TOTAL $ 30
57
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
For the Year Ended December 31, 1998
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 21-26.
58
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
ORGANIZATION CHART - 1998
See Exhibit I filed herewith.
59
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
METHODS OF ALLOCATION
See Exhibit II filed herewith.
60
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
(In Thousands)
For the Year Ended December 31, 1998
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 $ 51 1% $ 2
The East Ohio Gas Company 3,261 34% 77
The Peoples Natural Gas Company 2,070 22% 49
CNG Transmission Corporation 547 6% 13
Hope Gas, Inc. 697 7% 16
Consolidated System LNG Company - * *
CNG Producing Company 325 3% 7
CNG Research Company - * *
CNG Power Company - * *
CNG Energy Services Corporation 98 1% 2
Virginia Natural Gas, Inc. 1,690 18% 41
CNG Field Services Company - * *
CNG Power Services Corporation - * *
CNG Products & Services, Inc. - - -
CNG International Corporation 1 - -
CNG Retail Services Corporation 749 8% 18
TOTAL $ 9,489 100% $ 225
*These System Companies were excluded from allocation since there were no
direct charges for Data Center Operations or was less than $1,000.
61
<PAGE>
ANNUAL REPORT OF: Consolidated Natural Gas Service Company, Inc.
(In Thousands)
For The Year Ended December 31, 1998
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 $ 409 2% $ 26 $ 28
The East Ohio Gas Company 7,612 35% 496 573
The Peoples Natural Gas
Company 2,856 13% 186 235
CNG Transmission Corporation 4,921 23% 320 333
Hope Gas, Inc. 915 4% 60 76
Consolidated System LNG
Company 2 - - -
CNG Producing Company 2,590 12% 169 176
CNG Research Company 2 - - -
CNG Power Company 38 - 2 2
CNG Energy Services Corporation 512 2% 34 36
Virginia Natural Gas, Inc. 1,320 6% 85 126
CNG Field Services Company 11 - 1 1
CNG Power Services Corporation 30 - 2 2
CNG Products & Services, Inc. 16 - 1 1
CNG International Corporation 149 1% 10 10
CNG Retail Services Corporation 312 2% 20 38
TOTAL $ 21,695 100% $ 1,412 $ 1,637
62
<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 28, 1999
63
CONSOLIDATED NATURAL GAS SERVICE COMPANY, INC. Exhibit I
Organization Chart
Board of Directors
Chairman and
Chief Executive Officer
Senior Vice President Non-Regulated Business
and Chief Financial Officer
Vice President,
Accounting and Financial Control
Controller
Vice President,Taxes
Vice President and Treasurer
Vice President, System Services Group
Vice President, Corporate Planning
Vice President, Investor Relations
Vice President, Regulated Energy Management
Senior Vice President and General Counsel
Vice President and
Assistant General Counsel-Washington, DC
Vice President,
External Affairs & Policy Development
Vice President,
Corporate Human Resources
Corporate Secretary
Senior Vice President,
Regulated Business
Effective December 31, 1998
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
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.
Corporate Planning:
- Capital Budgets Total investment in utility plant (as defined
by FERC and State Commissions) booked at
preceding December 31st.
- - Operating & Total operating expenses, excluding purchase gas
Maintenance Budgets expense, other purchased products and royalties,
for the preceding year ended December 31st.
3
<PAGE>
CONSOLIDATED NATURAL GAS SERVICE COMPANY, INC. Exhibit II
(Continued)
Methods of Allocation
Service Department
or Function Basis of Allocation
Business and Operations Throughput gas volumes for CNG Affiliates for
Services the preceding year ended December 31st.
Risk Management Insurance premiums for 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.
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 for the
prior years ended December 31st.
System Services Group:
Information Technology:
LDC Computer Applications Number of residential and commercial
customers at the end of the preceding
year ended December 31st.
Other Computer Number of users or usage of specific computer
Applications system at the end of the preceding year ended
December 31st.
Network Computer Number of network devises at the end of the
Applications preceding year ended December 31st.
Telecommunication Number of telecommunication units at the end
Applications of the preceding year ended December 31st.
Facility Services: Square footage of office space as of the
Building Services preceding year ended December 31st.
4
<PAGE>
CONSOLIDATED NATURAL GAS SERVICE COMPANY, INC. Exhibit II
(Continued)
Methods of Allocation
Service Department
or Function Basis of Allocation
Processing Services:
Payroll Number of employees at December 31st.
Cash Management & Number of customer payments processed during
Customer Payment the preceding year ended December 31st.
Processing
Accounts Payable Number of accounts payable documents processed
during the preceding year ended December 31st.
Fleet Administration Number of vehicles at December 31st.
Purchasing Dollar value of national contract purchases for
the preceding year ended December 31st.
Regulated Business Support Group:
Engineering Services:
General Services Pipeline footage as of the preceding year
ended December 31st.
Transportation and Total investment in storage and transmission
Storage Services plant as of the preceding year ended
December 31st
Gas Supply: Gas volumes purchased for each affiliate for the
preceding year ended December 31st.
LDC Marketing:
Shared Projects Annual marketing plan budget for the current
year of allocation.
Other Indirect Costs Total marketing direct and shared project costs
billed to each affiliate for the preceding year
ended December 31st.
Materials Management Material inventory assets as of the preceding
ended December 31st.
System Accounting:
Financial Accounting and Number of journal entries processed, reports
Reporting generated and account code combinations for the
preceding year ended December 31st.
Regulated Fixed Assets Regulated companies fixed assets added, retired
or transferred during the preceding year ended
December 31st.
5
<PAGE>
CONSOLIDATED NATURAL GAS SERVICE COMPANY, INC. Exhibit II
(Continued)
Methods of Allocation
(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.
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.
6
<TABLE> <S> <C>
<ARTICLE> OPUR2
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<BOOK-VALUE> PER-BOOK
<NET-SERVICE-COMPANY-PROPERTY> 27,014
<TOTAL-INVESTMENTS> 0
<TOTAL-CURRENT-ASSETS> 669,756
<TOTAL-DEFERRED-DEBITS> 23,594
<OTHER-ASSETS-AND-DEBITS> 0
<TOTAL-ASSETS-AND-DEBITS> 720,364
<TOTAL-PROPRIETARY-CAPITAL> 10
<TOTAL-LONG-TERM-DEBT> 3,672
<NOTES-PAYABLE> 0
<NOTES-PAYABLE-ASSOCIATE-COMP> 659,857
<OTHER-CURR-AND-ACCRUED-LIAB> 34,516
<TOTAL-DEFERRED-CREDITS> 18,241
<DEFERRED-INCOME-TAX> 4,068
<TOT-LIABIL-AND-PROPRIET-CAP> 720,364
<SERVICES-ASSOCIATE-COMPANIES> 126,911
<SERVICES-NON-ASSOCIATE-COMP> 0
<MISC-INCOME-OR-LOSS> 26
<TOTAL-INCOME> 126,937
<SALARIES-AND-WAGES> 48,122
<EMPLOYEE-PENSION-AND-BENEFIT> 9,455
<OTHER-EXPENSES> 69,360
<TOTAL-EXPENSES> 126,937
<NET-INCOME> 0
<TOTAL-EXPENSES-DIRECT-COST> 105,230
<TOTAL-EXPENSES-INDIRECT-COST> 21,707
<TOT-EXP-DIRECT-AND-INDIRECT> 126,937
<PERSONNEL-END-OF-YEAR> 712
</TABLE>
