<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-5540
PEOPLES ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
ILLINOIS 36-2642766
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
24TH FLOOR, 130 EAST RANDOLPH DRIVE, CHICAGO, ILLINOIS 60601-6207
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 240-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name on each exchange
Title of Each Class on which registered
------------------------------- -----------------------
Common Stock, without par value New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (#229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ X ]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant:
Approximately $ 1.27 billion computed on the basis of the closing market
price of $36.25 for a share of Common Stock on November 30, 1996.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, without par value, 34,979,807 shares outstanding at
November 30, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of Form 10-K
-------- -----------------
Portions of the Company's Notice of Annual Meeting and
Proxy Statement to be filed on or about December 27, 1996 Part III
<PAGE>
CONTENTS
Page
Item No. No.
- -------- ----
PART I
------
1. Business 3
2. Properties 8
3. Legal Proceedings 9
4. Submission of Matters to a Vote of Security Holders 9
Executive Officers of the Company 10
PART II
-------
5. Market for the Company's Common Stock and Related
Stockholder Matters 12
6. Selected Financial Data 13
7. Management's Discussion and Analysis of Results
of Operations and Financial Condition 14
8. Financial Statements and Supplementary Data 20
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 43
PART III
--------
10. Directors and Executive Officers of the Company 44
11. Executive Compensation 44
12. Security Ownership of Certain Beneficial Owners and
Management 44
13. Certain Relationships and Related Transactions 44
PART IV
-------
14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 45
Signatures 47
Exhibit Index 48
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<PAGE>
PEOPLES ENERGY CORPORATION
ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED SEPTEMBER 30, 1996
PART I
ITEM 1. BUSINESS
GENERAL
Peoples Energy Corporation (Company) is solely a holding company and does
not engage directly in any business of its own. Income is derived principally
from the Company's utility subsidiaries, The Peoples Gas Light and Coke Company
(Peoples Gas) and North Shore Gas Company (North Shore Gas).
The Company was incorporated in 1967 under the Illinois Business
Corporation Act and has its principal executive offices at 130 East Randolph
Drive, Chicago, Illinois 60601-6207 (Telephone 312-240-4000).
Peoples Gas, an operating public utility, is engaged primarily in the
purchase, storage, distribution, sale, and transportation of natural gas. It
has approximately 839,000 residential, commercial, and industrial retail sales
and transportation customers within the City of Chicago (City). Peoples Gas had
2,804 employees at September 30, 1996.
North Shore Gas, an operating public utility, is engaged primarily in the
purchase, storage, distribution, sale, and transportation of natural gas. It
has about 137,000 residential, commercial, and industrial retail sales and
transportation customers within its service area of approximately 275 square
miles, located in Northeastern Illinois. North Shore Gas had 245 employees at
September 30, 1996.
Peoples District Energy Corporation (Peoples District Energy), a wholly
owned subsidiary of the Company, is a 50 per cent participant in a partnership
that provides district energy services to the McCormick Place Exposition and
Convention Center in Chicago, Illinois (McCormick Place) under a long-term
contract with the Metropolitan Pier and Exposition Authority. (See Note 6 of
the Notes to Consolidated Financial Statements.) Neither the partnership nor
its partners are regulated as a public utility.
Three other wholly owned subsidiaries of the Company are Peoples Energy
Services Corporation (Peoples Energy Services), Peoples NGV Corp., and Peoples
Energy Resources Corp. (Peoples Energy Resources). Peoples Energy Services
offers natural gas and energy management related services. Peoples NGV Corp. is
a participant in a partnership that was formed to develop on-site fueling
services for natural gas-powered fleet vehicles. Peoples Energy Resources
pursues energy-related ventures. Neither the three subsidiaries nor any of
their partners are regulated as a public utility.
COMPETITION
Peoples Gas and North Shore Gas are authorized by statute and/or
certificates of public convenience and necessity to conduct operations in the
territories they serve. In addition, these subsidiaries operate under
franchises and license agreements granted them by the communities they serve.
Peoples Gas holds a perpetual, non-exclusive franchise from the City. North
Shore Gas' franchises with communities within its service territory are of
various terms and expiration dates.
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<PAGE>
Absent extraordinary circumstances, potential competitors are barred from
constructing competing gas distribution systems in the utility subsidiaries'
service territories by a judicial doctrine known as the "first in the field"
doctrine. In addition, the high cost of installing duplicate distribution
facilities would render the construction of a competing system impractical.
Competition in varying degrees exists between natural gas and other fuels
or forms of energy available to consumers in Peoples Gas' and North Shore Gas'
service areas. The capital cost of heating and cooling facilities in new high-
rise buildings is higher for gas than for electricity. This circumstance,
combined with stagnant high-rise construction activity, has adversely affected
the ability of Peoples Gas to attach commercial high-rise buildings.
State and federal regulators are currently evaluating ways in which the
generation and distribution of electricity may be deregulated so that end users
may purchase electricity from producers other than their local electric utility
and require such local utility to transport the electricity so purchased, a
concept commonly referred to as "retail wheeling." In the event retail
wheeling were permitted in the service territories of Peoples Gas and North
Shore Gas, the cost of electricity would be expected to decline, thereby
reducing the advantage of lower costs that natural gas currently enjoys over
electricity.
A substantial portion of the gas that Peoples Gas and North Shore Gas
deliver to their customers consists of gas that the subsidiaries' customers
purchase directly from producers and marketers rather than from the
subsidiaries. The direct customer purchases have no effect on net income
because the utilities provide transportation service for such gas volumes and
recover margins similar to those applicable to conventional gas sales.
A pipeline may seek to provide transportation service directly to end-
users. Such direct service by a pipeline to an end-user would bypass the local
distributor's service and reduce the distributor's earnings. However, none of
the subsidiaries' pipeline suppliers has undertaken any service bypassing the
subsidiaries. Both utility subsidiaries have a bypass rate approved by the
Illinois Commerce Commission (Commission) which allows the utilities to
renegotiate rates with customers that are potential bypass candidates. (See
Other Matters - Large Volume Gas Service Agreements in Item 7.)
Peoples District Energy competes in the heating and cooling market
through a partnership that provides unregulated district energy services.
(See Note 6 of the Notes to Consolidated Financial Statements.)
Peoples Energy Services competes in the offering of natural gas and energy
management related services. Peoples NGV Corp. competes, through a partnership,
in the development of unregulated on-site fueling services for natural gas-
powered fleet vehicles. Peoples Energy Resources competes in the pursuit of
energy-related ventures.
SALES AND RATES
Peoples Gas and North Shore Gas sell natural gas having an average heating
value of approximately 1,000 British thermal units (Btu's) per cubic foot.*
Sales are made and service rendered by Peoples Gas and North Shore Gas pursuant
to rate schedules on file with the Commission containing various service
classifications largely reflecting customers' different uses and levels of
consumption. The Gas Charge is determined in accordance with the provisions in
Rider 2, Gas Charge and Refund Adjustments, to recover
- --------------------------------------------------------------------------------
* All volumes of natural gas set forth in this report are stated on a 1,000 Btu
(per cubic foot) billing basis. (100 cubic feet = 1 therm; 10 therms = 1
Dekatherm -- Dth)
-4-
<PAGE>
the costs incurred by Peoples Gas and North Shore Gas to purchase, transport,
manufacture, and store gas supplies. The level of the Gas Charge under both
subsidiaries' rate schedules is adjusted monthly to reflect increases or
decreases in natural gas supplier charges, purchased storage service costs,
transportation charges, and liquefied petroleum gas costs. In addition, under
the tariffs of Peoples Gas and North Shore Gas, the difference for any month
between costs recoverable through the Gas Charge and the revenues billed to
customers under the Gas Charge is refunded to or recovered from customers.
Consistent with these tariff provisions, such difference for any month is
recorded either as a current liability or a current asset (with a contra entry
to Gas Costs). Peoples Gas and North Shore Gas have been recovering, through
their rates, pipeline charges billed for transition costs resulting from the
implementation of Federal Energy Regulatory Commission (FERC) Order No. 636.
(See Notes 1L, 2A, and 2B of the Notes to Consolidated Financial Statements.)
The business of the Company's utility subsidiaries is influenced by
seasonal weather conditions because a large element of the subsidiaries'
customer load consists of space heating. Weather-related deliveries can,
therefore, have a significant positive or negative impact on net income. (For
discussion of the effect of the seasonal nature of gas revenues on cash flow,
see Liquidity in Item 7.)
The basic marketing plans of Peoples Gas and North Shore Gas are to
maintain their existing shares in all market segments and develop opportunities
emerging from changes in the utility environment and technological equipment
advances for new, expanded, or current natural gas applications, including
cogeneration, prime movers, natural gas-fueled vehicles, and natural gas space
conditioning.
STATE LEGISLATION AND REGULATION
Peoples Gas and North Shore Gas are subject to the jurisdiction of and
regulation by the Commission, which has general supervisory and regulatory
powers over practically all phases of the public utility business in Illinois,
including rates and charges, issuance of securities, services and facilities,
systems of accounts, investments, safety standards, transactions with affiliated
interests, as defined in the Illinois Public Utilities Act, and other matters.
In 1994, the Commission entered orders providing for full recovery by the
Company of FERC Order 636 transition costs from the Company's gas service
customers. The Commission's orders have been appealed to the Illinois Supreme
Court. (See Notes 1L, 2A, and 2B of the Notes to Consolidated Financial
Statements.)
On November 8, 1995, the Commission issued orders approving changes in
rates for Peoples Gas and North Shore Gas. (See Note 2A of the Notes to
Consolidated Financial Statements.)
In August 1996, the Commission denied petitions of Peoples Gas and North
Shore Gas for approval of performance-based rate programs for gas costs. (See
Liquidity - Regulatory Actions in Item 7.)
FEDERAL LEGISLATION AND REGULATION
The Company is a holding company as defined in the Public Utility Holding
Company Act of 1935 (Act). By Order entered on December 6, 1968 (Holding
Company Act Release No. 16233), the Securities and Exchange Commission, pursuant
to Section 3(a)(1) of the Act, exempted the Company and its subsidiary companies
as such from the provisions of the Act, other than Section 9(a)(2) thereof.
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<PAGE>
Most of the gas distributed by Peoples Gas and North Shore Gas is
transported to the utilities' distribution systems by interstate pipelines. In
their provision of gas sales services (gathering, transportation and storage
services, and gas supply) pipelines are regulated by the FERC under the Natural
Gas Act and the Natural Gas Policy Act of 1978. (See "Sales and Rates" and
"Current Gas Supply" in Item 1.)
In 1992, the FERC issued Order No. 636 and successor orders that required
substantial restructuring of the service obligations of interstate pipelines.
(See Notes 1L, 2A, and 2B of the Notes to Consolidated Financial Statements.)
ENVIRONMENTAL MATTERS
The Company and its subsidiaries are subject to federal and state
environmental laws. Peoples Gas and North Shore Gas are conducting
environmental investigations and work at certain sites that were the location
of former manufactured gas plant operations. (See Note 3A of the Notes to
Consolidated Financial Statements.) In addition, North Shore Gas has
received a demand for payment of environmental response costs at a former
mineral processing site in Denver, Colorado. (See Note 3B of the Notes to
Consolidated Financial Statements.) Also, North Shore Gas was informed by
the Illinois Environmental Protection Agency (IEPA) that it was not in
compliance with certain provisions of the Illinois Environmental Protection
Act which prohibit water pollution within the State of Illinois. (See Note
3C of the Notes to Consolidated Financial Statements.)
CURRENT GAS SUPPLY
Peoples Gas and North Shore Gas have each entered into various long-term
and short-term firm gas supply contracts. When used in conjunction with
contract peaking and contract storage, Peoples Gas' company-owned storage, and
the peak-shaving facilities of the utilities, such supply is deemed sufficient
to meet current and foreseeable peak and annual market requirements.
Although the Company believes North American supply to be sufficient to
meet U.S. market demands for the foreseeable future, it is unable to quantify or
otherwise make specific representations regarding national supply availability.
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<PAGE>
The following tabulation shows the expected design peak-day availability of
gas in thousands of dekatherms (MDth) during the 1996-1997 heating season for
Peoples Gas and North Shore Gas:
<TABLE>
<CAPTION>
Peoples Gas North Shore Gas
---------------------------- ----------------------------
Design Peak-Day Year of Design Peak-Day Year of
Availability Contract Availability Contract
(MDth) Expiration (MDth) Expiration
--------------- ---------- --------------- ----------
<S> <C> <C> <C> <C>
Firm direct purchases (1) 640 1997-2000 96 1997-2000
Liquefied petroleum 40 40 (2)
Peaking Service:
Peoples Energy Resources 60 (3)
The Uno-Ven Co. 10 (4)
Storage gas:
Leased (5) 563 1998-2000 165 1998-2000
Peoples-Manlove (6) 993 63 (7)
Customer-owned (8) 225 45
----- ---
Total expected design
peak-day availability 2,531 409
----- ---
----- ---
</TABLE>
(1) Consists of firm gas purchases from non-pipeline suppliers delivered
utilizing firm pipeline transportation. The majority of the gas purchase
contracts are negotiated annually. The terms of the transportation
contracts vary with the longest term being 5 years.
(2) Reflects derating of capacity, as accepted by the Commission Staff in
Docket 91-0581.
(3) The contract with Peoples Energy Resources is for an initial term expiring
November 30, 1999; the contract continues in effect from year to year
thereafter unless canceled by either party upon 12 months' prior notice.
(4) The contract with The Uno-Ven Company is for an initial term ending
September 30, 1997; the contract continues in effect for an additional two
year term subject to cancellation by either party any time on or after
September 30, 1997 upon one year's prior notice.
(5) Consists of leased storage services required to meet design day
requirements with contract lengths varying from 3 to 5 years.
(6) Manlove Field, Peoples Gas' underground storage facility located near
Champaign, Illinois, has a seasonal top-gas capacity (excluding volumes
required to support late-season peaking requirements) of approximately
27,000 MDth, of which approximately 1,566 MDth is dedicated to North Shore
Gas. Peoples Gas also owns a liquefied natural gas (LNG) plant at Manlove
Field for the primary purpose of supporting late-season deliverability from
the storage facility. The LNG plant has a storage capacity of 2,000 MDth
and is capable of regasifying 300 MDth of gas per day. For the 1996-97
heating season, Manlove Field complex will have a maximum peak-day delivery
capability of approximately 1,056 MDth (including 63 MDth for the use of
North Shore Gas).
(7) The contract with Peoples Gas was for an initial term expiring May 1, 1990.
However, by its terms, the contract continues in effect unless canceled by
either party upon 120 days notice prior to April 30 of any year thereafter.
(8) Consists of gas supplies purchased directly from producers and marketers by
the utilities' commercial, industrial, and larger residential customers.
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<PAGE>
The sources of gas supply (including gas transported for customers) in MDth
for Peoples Gas and North Shore Gas for the three fiscal years ended September
30, 1996, 1995 and 1994, were as follows:
<TABLE>
<CAPTION>
Peoples Gas North Shore Gas
--------------------------- ---------------------------
1996 1995 1994 1996 1995 1994
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Natural Gas Pipeline Co. (Natural) (a) -- -- 14,378 -- -- 2,384
Other suppliers (b) 174,552 103,476 133,191 27,940 20,250 23,328
Synthetic natural gas (SNG) (c) -- 7,622 8,350 -- -- --
Liquefied petroleum gas produced 114 14 30 151 9 79
Customer-owned gas-received 93,141 93,225 91,187 12,777 12,379 12,017
Underground storage-net 228 28,352 (1,283) 468 3,103 (631)
Exchange gas-net (4,446) -- -- (104) -- --
Company use, franchise
requirements, and
unaccounted-for gas (3,169) (3,733) (4,261) (983) (636) (339)
------- ------- ------- ------ ------ ------
Total (d) 260,420 228,956 241,592 40,249 35,105 36,838
------- ------- ------- ------ ------ ------
------- ------- ------- ------ ------ ------
</TABLE>
(a) The DMQ-1 supply contract terminated on November 30, 1993.
(b) The utility subsidiaries purchase significant quantities of gas directly
from various suppliers. Commencing December 1, 1993, Natural unbundled its
rates and all purchases are from non-pipeline suppliers, including
purchases under a peaking service contract.
(c) The SNG facility terminated production during fiscal 1995. (See Note 4 of
the Notes to Consolidated Financial Statements.)
(d) See "Gas Sold and Transported" in Item 6.
SYNTHETIC NATURAL GAS SUPPLY
Peoples Gas owned and operated an SNG plant, the McDowell Energy Center,
located near Joliet, Illinois that used refinery fuel gas and a variety of
natural gas liquids, including ethane, naphtha, natural gasoline, normal butane,
propane, and ethane/propane mix as feedstock for the production of SNG. The SNG
facility terminated production in fiscal 1995. (See Note 4 of the Notes to
Consolidated Financial Statements.)
ITEM 2. PROPERTIES
All of the principal plants and properties of Peoples Gas and North Shore
Gas have been maintained in the ordinary course of business and are believed to
be in satisfactory operating condition. The distribution facilities serve the
City and other areas in Northeastern Illinois. Peoples Gas owns and operates an
underground gas storage reservoir and an LNG plant at Manlove Field located near
Champaign, Illinois. Peoples Gas also owns a transmission system that
transports gas from Manlove Field to Chicago. The underground storage reservoir
and LNG plant also serve North Shore Gas. General properties include a
substantial investment in office and service buildings, garages, repair shops,
and motor vehicles, together with the equipment, tools, and fixtures necessary
to conduct utility business.
-8-
<PAGE>
Most of the principal plants and properties of Peoples Gas and North Shore
Gas, other than mains, services, meters, regulators, and cushion gas in
underground storage, are located on property owned in fee. Substantially all
gas mains are located under public streets, alleys, and highways, or under
property owned by others under grants of easements. Meters and house regulators
in use and a portion of services are located on premises being served. Certain
storage wells and other facilities of the Manlove Field storage reservoir, and
certain portions of the transmission system are located on land held pursuant to
leases, easements, or permits.
Substantially all of the physical properties now owned or hereafter
acquired by Peoples Gas and North Shore Gas are subject to (a) the first-
mortgage lien of each company's mortgage to First Trust of Illinois, National
Association, as Trustee, to secure the principal amount of each company's
outstanding first mortgage bonds, respectively, and (b) in certain cases, other
exceptions and defects that do not interfere with the use of the property.
ITEM 3. LEGAL PROCEEDINGS
See Notes 2 and 3 of the Notes to Consolidated Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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EXECUTIVE OFFICERS OF THE COMPANY
The following is a list of the names, ages, and positions of the executive
officers of the Company. Executive officers were elected to serve for a term of
one year or until their successors are duly elected and qualified.
Age at
Name 11-30-96 Position with the Company
- ---------------------- -------- --------------------------------------------
Kenneth S. Balaskovits 54 Vice President and Controller (1993) of the
Company.
Mr. Balaskovits is also Vice President
and Controller and Director (1993) of
Peoples Gas and North Shore Gas. Mr.
Balaskovits has been an employee of the
Company and/or its subsidiaries since
1967.
Emmet P. Cassidy 63 Secretary and Treasurer (1989) of the
Company.
Mr. Cassidy is also Secretary and
Treasurer (1989) of Peoples Gas and North
Shore Gas. Prior to that, he was
Assistant Secretary and Assistant
Treasurer of the Company and both
subsidiaries (1981-1989). Mr. Cassidy has
been an employee of the Company and/or
its subsidiaries since 1955.
J. Bruce Hasch 58 President and Chief Operating Officer (1990)
and Director (1987) of the Company.
Mr. Hasch is also President and Chief
Operating Officer (1990) and a Director
(1986) of Peoples Gas and North Shore
Gas. Prior to becoming President, Mr.
Hasch was Executive Vice President
(1985-1990) of the Company and its
subsidiaries and Vice President
(1981-1985) of both subsidiary companies.
Mr. Hasch has been an employee of the
Company and/or its subsidiaries since
1960, including 16 years with Natural Gas
Pipeline Company of America, a former
subsidiary.
James Hinchliff 56 Senior Vice President and General Counsel
(1989) of the Company.
Mr. Hinchliff is also Senior Vice
President and General Counsel (1989) and
a Director (1985) of Peoples Gas and
North Shore Gas. Prior to that, he was
Vice President and General Counsel
(1984-1989) of the Company and of both
subsidiaries, and he was Assistant
General Counsel of the Company
(1979-1984) and of both subsidiaries
(1981-1984). Mr. Hinchliff has been an
employee of the Company and/or its
subsidiaries since 1972.
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<PAGE>
Age at
Name 11-30-96 Position with the Company
- ---------------------- -------- --------------------------------------------
Thomas M. Patrick 50 Executive Vice President (1996) of the
Company.
Mr. Patrick is also Executive Vice
President of Peoples Gas and North Shore
Gas. Prior to becoming Executive Vice
President, Mr. Patrick was Vice President
(1989-1996) of both subsidiaries. Mr.
Patrick has been an employee of the
Company and/or its subsidiaries since
1976.
Michael S. Reeves 61 Executive Vice President (1987) and Director
(1991) of the Company.
Mr. Reeves is also Executive Vice
President (1987) and Director (1988) of
Peoples Gas and North Shore Gas. Prior to
becoming Executive Vice President, Mr.
Reeves was Vice President (1977-1987) of
both subsidiaries. Mr. Reeves has been
an employee of the Company and/or its
subsidiaries since 1956.
Richard E. Terry 59 Chairman of the Board and Chief Executive
Officer (1990) and Director (1984) of the
Company.
Mr. Terry is also Chairman of the Board
and Chief Executive Officer (1990) and a
Director (1982) of Peoples Gas and North
Shore Gas. Prior to becoming Chairman,
Mr. Terry was President and Chief
Operating Officer (1987-1990), Executive
Vice President (1984-1987), and Vice
President and General Counsel (1981-1984)
of the Company and its subsidiaries. Mr.
Terry has been an employee of the Company
and/or its subsidiaries since 1972.
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<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The common stock of the Company is listed on the New York, Chicago, and
Pacific Stock Exchanges (trading symbol: PGL). At November 30, 1996, there were
27,756 registered shareholders.
The common stock price range and dividends declared per common share by
quarters for fiscal 1996 and 1995 are as follows:
Stock Price
Fiscal ------------------------------------- Dividends
Quarters High Low Close Declared
-------- ------- ------- ------- ---------
1996
----
Fourth $36-1/8 $30-7/8 $34 $.46
Third 33-1/2 29-5/8 33-1/2 .46
Second 33-1/4 29-7/8 32-3/8 .46
First 32 27-1/8 31-3/4 .45
1995
----
Fourth $28-3/8 $25-3/8 $27-1/2 $.45
Third 27-1/8 24-3/4 25-7/8 .45
Second 27-7/8 24-1/4 25 .45
First 28-3/4 23-5/8 26-1/8 .45
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For fiscal years ended September 30, 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMON STOCK INFORMATION
Earnings per share $ 2.96 $ 1.78 $ 2.13 $ 2.11 $ 2.06
Cash dividends declared per share $ 1.83 $ 1.80 $ 1.795 $ 1.775 $ 1.75
Book value per share at year-end $ 19.48 $ 18.38 $ 18.39 $ 18.05 $ 17.72
Average shares outstanding (thousands) 34,942 34,901 34,854 34,809 34,151
- -------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS (thousands)
Operating Revenues:
Residential $ 883,100 $ 752,796 $ 951,037 $ 929,407 $ 784,677
Commercial 141,594 116,113 160,912 156,377 132,456
Industrial 32,075 24,128 41,979 41,354 34,595
Transportation of customer-owned gas (a) 128,876 122,814 110,128 117,949 132,745
Other 13,012 17,550 15,432 13,854 12,279
- -------------------------------------------------------------------------------------------------------------------
Total Operating Revenues 1,198,657 1,033,401 1,279,488 1,258,941 1,096,752
Less - Gas costs 529,875 457,436 669,039 646,351 531,845
- Revenue taxes 121,172 109,720 132,734 131,673 118,265
- -------------------------------------------------------------------------------------------------------------------
Net Operating Revenues $ 547,610 $ 466,245 $ 477,715 $ 480,917 $ 446,642
Net Income $ 103,438 $ 62,154 $ 74,399 $ 73,375 $ 70,384
- -------------------------------------------------------------------------------------------------------------------
ASSETS AT YEAR-END (thousands)
Property, plant and equipment $2,046,156 $2,088,277 $2,019,379 $1,950,981 $1,843,603
Less - Accumulated depreciation 665,077 715,208 677,447 632,965 599,965
- -------------------------------------------------------------------------------------------------------------------
Net Property, Plant and Equipment $1,381,079 $1,373,069 $1,341,932 $1,318,016 $1,243,638
Total assets $1,783,750 $1,822,492 $1,809,286 $1,765,870 $1,615,758
Capital expenditures - construction $ 85,620 $ 95,941 $ 87,218 $ 131,669 $ 118,084
- -------------------------------------------------------------------------------------------------------------------
CAPITALIZATION AT YEAR-END (thousands)
Common equity $ 681,185 $ 641,694 $ 641,378 $ 628,451 $ 616,271
Preferred stock of subsidiaries -- -- -- -- 12,850
Long-term debt of subsidiaries 527,064 621,874 626,075 528,075 489,553
- -------------------------------------------------------------------------------------------------------------------
Total Capitalization $1,208,249 $1,263,568 $1,267,453 $1,156,526 $1,118,674
- -------------------------------------------------------------------------------------------------------------------
FINANCIAL RATIOS (per cent)
Capitalization at Year-end:
Common equity 56 51 51 54 55
Preferred stock of subsidiaries -- -- -- -- 1
Long-term debt of subsidiaries 44 49 49 46 44
- -------------------------------------------------------------------------------------------------------------------
Total Capitalization 100 100 100 100 100
Return on common equity at year-end 15.2 9.7 11.6 11.7 11.4
- -------------------------------------------------------------------------------------------------------------------
GAS SOLD AND TRANSPORTED (MDth)
Gas Sales:
Residential 154,128 130,571 142,876 144,199 142,759
Commercial 27,390 22,079 26,206 26,185 26,239
Industrial 6,803 5,059 7,325 7,623 7,330
Transportation of customer-owned gas (a) 112,348 106,352 102,023 99,607 99,185
- -------------------------------------------------------------------------------------------------------------------
Total Gas Sales and Transportation 300,669 264,061 278,430 277,614 275,513
Margin per Dth delivered $ 1.82 $ 1.77 $ 1.72 $ 1.73 $ 1.62
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF CUSTOMERS (average)
Residential 910,236 906,881 905,461 904,316 904,374
Commercial 50,719 50,872 50,955 50,736 50,567
Industrial 3,696 3,783 3,927 4,069 3,938
Transportation (a) 11,348 10,934 10,247 9,734 9,500
- -------------------------------------------------------------------------------------------------------------------
Total Customers 975,999 972,470 970,590 968,855 968,379
- -------------------------------------------------------------------------------------------------------------------
DEGREE DAYS 7,080 5,897 6,701 6,679 6,320
Per cent of normal (6,536) 108 90 103 102 97
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes commercial, industrial, and larger residential customers.
-13-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
NET INCOME
Net income increased $41.3 million, to $103.4 million, in fiscal 1996 from
1995, due chiefly to weather that was 20 per cent colder than in 1995 and to
rate increases that went into effect on November 14, 1995 for Peoples Gas and
North Shore Gas (see Note 2A of the Notes to Consolidated Financial Statements).
In addition, net income benefited from a one-time gain associated with the
expiration of certain natural gas storage contracts (see Note 8 of the Notes to
Consolidated Financial Statements) and a net credit in pension expense. These
increases were partly offset by last year's recognition of the federal income
tax settlement (see Note 10D of the Notes to Consolidated Financial Statements)
and the current year's higher operating costs.
In 1995, net income decreased $12.2 million, to $62.2 million, due
principally to weather that was 12 per cent warmer than in 1994, decreasing net
income by $11.9 million. Also contributing to the year-to-year earnings decline
were increases in interest expense and certain operation and maintenance
expenses, together with an adjustment to income tax expense in the prior period.
Partially offsetting these items was a decrease in the provision for
uncollectible accounts, due mainly to lower revenues. In addition, fiscal 1995
benefited from the sale of certain oil and gas rights.
A summary of variations affecting income between years is presented below,
with explanations of significant differences following:
Fiscal 1996 Fiscal 1995
over 1995 over 1994
----------------- -----------------
Amount Amount
(000's) Per Cent (000's) Per Cent
- --------------------------------------------------------------------------------
Net operating revenues (a) $81,365 17.5 $(11,470) (2.4)
Operation and maintenance expenses 25,114 10.4 (17,886) (6.9)
Depreciation and amortization expense 4,227 6.4 1,724 2.7
Income taxes 27,895 97.1 (266) (0.9)
Other income and deductions 17,456 37.6 (15,953) (52.3)
Net income 41,284 66.4 (12,245) (16.5)
- --------------------------------------------------------------------------------
(a) Operating revenues, net of gas costs and revenue taxes.
NET OPERATING REVENUES
Gross revenues of Peoples Gas and North Shore Gas are affected by changes
in the unit cost of the subsidiaries' gas purchases and do not include the cost
of gas supplies for customers who purchase gas directly from producers and
marketers rather than from the subsidiaries. The direct customer purchases have
no effect on net income because the utilities provide transportation service for
such gas volumes and recover margins similar to those applicable to conventional
gas sales. Changes in the unit cost of gas do not significantly affect net
income because the utilities' tariffs provide for dollar-for-dollar recovery of
gas costs. (See Note 1L of the Notes to Consolidated Financial Statements.)
The utilities' tariffs also provide for dollar-for-dollar recovery of the cost
of revenue taxes imposed by the state and various municipalities.
-14-
<PAGE>
Since income is not significantly affected by changes in revenue from
customers' gas purchases from producers or marketers rather than from the
subsidiaries, changes in gas costs, or changes in revenue taxes, the discussion
below pertains to "net operating revenues" (operating revenues, net of gas costs
and revenue taxes). The Company considers net operating revenues to be a more
pertinent measure of operating results than gross revenues.
Net operating revenues increased $81.4 million, to $547.6 million, in 1996.
Natural gas deliveries increased 36.6 Bcf, to 300.7 Bcf, due to weather that was
20 per cent colder than in 1995 and over 8 per cent colder than normal. Net
operating revenues increased approximately $29 million ($17.5 million after
income taxes) as a result of the colder weather. Also, the aforementioned rate
increases for the Company's utility subsidiaries improved net operating revenues
by about $34.7 million ($20.9 million after income taxes).
In 1995, net operating revenues decreased $11.5 million, to $466.2 million,
due primarily to a decline in natural gas deliveries of 14.4 Bcf, to 264.1 Bcf,
reflecting weather that was 12 per cent warmer than in 1994 and 10 per cent
warmer than normal.
See Other Matters - Operating Statistics for details of selected financial
and operating information by gas service classification.
OPERATION AND MAINTENANCE EXPENSES
Operation and maintenance expenses increased $25.1 million, to $265.9
million, in 1996, due principally to the reduction of expense from the prior
year's recognition of about $14 million for an IRS settlement. (See Note 10D of
the Notes to Consolidated Financial Statements.) Also, the provision for
uncollectible accounts increased ($5.4 million), due largely to greater sales
revenue attributable to the colder weather and higher rates. In addition,
increases between years resulted from greater labor costs ($4.1 million),
outside services ($2.4 million), distribution system expenses ($3.1 million),
and environmental costs recovered through rates ($3.3 million). These increases
were offset, in part, by decreased pension costs ($12.9 million). (See Note 9A
of the Notes to Consolidated Financial Statements.)
In 1995, operation and maintenance expenses decreased $17.9 million, to
$240.8 million, due chiefly to recognizing the fiscal 1995 portion of an IRS
settlement as a reduction in expense and a decrease in the provision for
uncollectible accounts of $9.3 million, reflecting reduced sales revenue from
lower gas costs and warmer weather. These items were partially offset by
increased expenses for reengineering activities ($2.8 million) and the
distribution system ($2.6 million).
DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization expense increased $4.2 million, to $70.6
million, in 1996, due mainly to depreciable property additions and the
amortization of costs associated with the closing of the SNG Plant (see Note 4
of the Notes to Consolidated Financial Statements).
In 1995, depreciation and amortization increased $1.7 million, to $66.4
million, due chiefly to depreciable property additions.
INCOME TAXES
Income taxes, exclusive of the $5.8 million included in other income and
deductions, increased $27.9 million, to $56.6 million, in 1996, due principally
to higher pre-tax income.
In 1995, income taxes, exclusive of the $3.8 million included in other
income and deductions, declined $266,000, to $28.7 million, due primarily to
decreased pre-tax income. This decrease was mostly offset by
-15-
<PAGE>
the recording of the deferred tax effects of the income tax settlement in
operating expenses in 1995 together with an adjustment made in 1994 to reduce
taxes accrued. Also, the amortization of deferred tax credits was lower in
1995.
OTHER INCOME AND DEDUCTIONS
Other income and deductions decreased $17.5 million from the prior year,
due largely to the gain of $8.9 million, after income taxes, associated with the
expiration of certain natural gas storage contracts. (See Note 8 of the Notes
to Consolidated Financial Statements.) Additionally, the current year includes
lower interest on long-term debt resulting from the utility subsidiaries' early
redemption of first mortgage bonds. (See Note 15B of the Notes to Consolidated
Financial Statements.) These decreases were offset, in part, by decreased
interest income reflecting lower cash balances due mainly to the above mentioned
bond redemptions.
In 1995, other income and deductions increased $16 million, due principally
to the prior year's recognition in other income of $10.8 million, after income
taxes, for an IRS settlement. (See Notes 10D and 12 of the Notes to
Consolidated Financial Statements.) In addition, increased interest expense
resulted from the following items: amounts refundable to customers, long-term
debt, and budget accounts. These increases were partially offset by greater
interest income due primarily to larger cash balances and higher interest rates.
OTHER MATTERS
EFFECT OF WEATHER. Weather variations affect the volumes of gas delivered for
heating purposes and, therefore, can have a significant positive or negative
impact on net income and coverage ratios.
ACCOUNTING STANDARDS. In March 1995, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of ". This statement requires recognition of impairment losses on
long-lived assets when an asset's book value may not be recoverable. For
regulated companies, the statement requires that regulatory assets be probable
of recovery at every balance sheet date. This statement requires adoption no
later than the Company's 1997 fiscal year. The Company does not expect the
adoption of SFAS No. 121 to have a material effect on its financial position or
results of operations.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation". This statement requires companies to either recognize
compensation costs measured at fair value attributable to employee stock options
or similar equity instruments at the grant date in net income, or, in the
alternative, provide pro forma footnote disclosure on net income and earnings
per share. This statement requires adoption no later than the Company's 1997
fiscal year. The Company anticipates electing the pro forma footnote disclosure
provisions of this statement in 1997. Implementation is not expected to have a
material effect on pro forma net income or earnings per share.
FERC ORDER 636 COSTS. In 1992, the FERC issued Order No. 636 and successor
orders that required substantial restructuring of the service obligations of
interstate pipelines. (See Notes 1L, 2A, and 2B of the Notes to Consolidated
Financial Statements.)
In 1994, the Commission entered orders providing for full recovery by
Peoples Gas and North Shore Gas of FERC Order 636 transition costs from the
Companys' respective gas service customers. The Commission's orders have been
appealed to the Illinois Supreme Court. (See Notes 1L, 2A, and 2B of the Notes
to Consolidated Financial Statements.)
-16-
<PAGE>
REENGINEERING PROJECT. Peoples Gas and North Shore Gas are reengineering their
business processes with the goal of increasing efficiency, responsiveness to
customer needs, and cost effectiveness.
LARGE VOLUME GAS SERVICE AGREEMENTS. Peoples Gas has entered into gas service
contracts with certain large volume customers under a specific rate schedule
approved by the Commission. These contracts were negotiated to overcome the
potential threat of bypassing the utility's distribution system. The impact on
the net income of Peoples Gas as a result of these contracts is not material.
OPERATING STATISTICS. The following table represents gas distribution margin
components:
For fiscal years ended September 30,
---------------------------------------------
1996 1995 1994
---------- ---------- ----------
Operating Revenues (thousands):
Gas sales
Residential $ 883,100 $ 752,796 $ 951,037
Commercial 141,594 116,113 160,912
Industrial 32,075 24,128 41,979
---------- ---------- ----------
1,056,769 893,037 1,153,928
---------- ---------- ----------
Transportation
Residential 37,133 37,850 35,487
Commercial 51,251 50,318 45,819
Industrial 36,059 34,646 28,822
Contract Pooling 4,433 -- --
---------- ---------- ----------
128,876 122,814 110,128
---------- ---------- ----------
Other 13,012 17,550 15,432
---------- ---------- ----------
Total Operating Revenues 1,198,657 1,033,401 1,279,488
Less - Gas Costs 529,875 457,436 669,039
- Revenues Taxes 121,172 109,720 132,734
---------- ---------- ----------
Net Operating Revenues $ 547,610 $ 466,245 $ 477,715
---------- ---------- ----------
---------- ---------- ----------
Deliveries (MDth):
Gas Sales
Residential 154,128 130,571 142,876
Commercial 27,390 22,079 26,206
Industrial 6,803 5,059 7,325
---------- ---------- ----------
188,321 157,709 176,407
---------- ---------- ----------
Transportation (a)
Residential 26,521 24,811 25,066
Commercial 42,461 41,648 41,607
Industrial 43,366 39,893 35,350
---------- ---------- ----------
112,348 106,352 102,023
---------- ---------- ----------
Total Gas Sales
and Transportation 300,669 264,061 278,430
---------- ---------- ----------
---------- ---------- ----------
Margin per Dth delivered $ 1.82 $ 1.77 $ 1.72
(a) Volumes associated with contract pooling service are included in the
respective customer classes.
-17-
<PAGE>
LIQUIDITY
SOURCE OF FUNDS. The Company has access to outside capital markets and to
internal sources of funds that together provide sufficient resources to meet
capital requirements. It does not anticipate any changes that would materially
alter its current liquidity position.
Due to the seasonal nature of gas usage, a major portion of cash
collections occurs between December and May. Because of timing differences in
the receipt and disbursement of cash and the level of construction requirements,
the utility subsidiaries may borrow on a short-term basis. Short-term
borrowings are repaid with cash from operations, other short-term borrowings, or
refinanced on a permanent basis with debt or equity, depending on capital market
conditions and capital structure considerations.
CREDIT LINES. The utility subsidiaries have lines of credit of $129.4 million.
At September 30, 1996, the utility subsidiaries had unused credit available from
banks of $126.8 million. (See Note 14 of the Notes to Consolidated Financial
Statements.)
CASH FLOW ACTIVITIES. Net cash provided by operating activities in 1996
declined by $118.2 million, due principally to changes related to gas sales
revenue refundable, net receivables, and other assets. Such items were
partially offset by increases from net income, due mainly to colder weather and
the rate increases, and from accounts payable. In 1995, net cash provided by
operating activities increased by $22.9 million, due primarily to changes
related to gas in storage, other assets, and deferred income taxes. These items
were offset, in part, by changes in gas costs recoverable and net receivables.
In 1994, net cash provided by operating activities increased by approximately
$83.5 million, due principally to changes related to net receivables, gas costs
recoverable, and gas sales revenue refundable. Such items were partially offset
by decreases associated with deferred credits and accounts payable.
Net cash used in investing activities for 1996, 1995, and 1994 largely
represents the level of capital expenditures in the respective years.
Net cash used in financing activities in 1996 reflects the redemption of
previously issued debt. (See Note 15B of the Notes to Consolidated Financial
Statements.) In 1995, net cash used in financing activities includes drawdowns
from the trust fund associated with prior financing for utility construction
activities. Net cash used in financing activities in 1994 reflects the new debt
issues during the year for construction projects.
INDENTURE RESTRICTIONS. North Shore Gas' indenture relating to its first
mortgage bonds contains provisions and covenants restricting the payment of cash
dividends and the purchase or redemption of capital stock. At September 30,
1996, such restrictions amounted to $11.6 million out of North Shore Gas' total
retained earnings of $66.6 million; accordingly, $55 million are available for
dividends. (See Note 5 of the Notes to Consolidated Financial Statements.)
DISTRICT ENERGY. Peoples District Energy is a 50 per cent participant in a
partnership, Trigen-Peoples District Energy Company, that provides district
energy services to the McCormick Place exposition and convention center in
Chicago, Illinois. The partnership also intends to offer district energy
services to other large buildings in Chicago. The other partner is a subsidiary
of Trigen Energy Corporation (Trigen), a company whose primary business is
constructing and operating district energy facilities. Neither the partnership
nor its partners are regulated as a public utility. The Company and Trigen have
provided a joint and several limited guarantee to the owner and operator of
McCormick Place and also have certain limited obligations to the partnership's
lender under a Sponsors Support and Equity Contribution Agreement. (See Note 6
of the Notes to Consolidated Financial Statements.)
-18-
<PAGE>
INTEREST COVERAGE. The fixed charges coverage ratios for Peoples Gas for fiscal
1996, 1995, and 1994 were 4.84, 2.76, and 3.28, respectively. The corresponding
coverage ratios for North Shore Gas for the same periods were 5.62, 2.93, and
3.33, respectively. The increase in the ratio for the current fiscal year for
each Company reflects the redemption of long-term debt and higher pre-tax income
resulting from colder weather and the Commission approved rate increases. (See
Results of Operations - Net Income.) The ratios for fiscal years 1995 and 1994
for both utility subsidiaries include the recording of an IRS settlement in
income. (See Note 10D of the Notes to Consolidated Financial Statements.)
DEBT RATINGS. The long-term debt of both utility subsidiaries is rated Aa3 by
Moody's Investors Service and AA- by Standard & Poor's Corporation. There has
been no change in these ratings since fiscal 1985. The commercial paper of both
utilities has the top rating from the major rating agencies.
ENVIRONMENTAL MATTERS. The Company's utility subsidiaries are conducting
environmental investigations and work at certain sites that were the location of
former manufactured gas operations. (See Note 3A of the Notes to Consolidated
Financial Statements.)
In 1994, North Shore Gas received a demand from a responsible party under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended (CERCLA) for reimbursement, indemnification and contribution
for response costs incurred at a former mineral processing site in Denver,
Colorado. North Shore Gas filed a declaratory judgment action asking the court
to declare that North Shore Gas is not liable for response costs relating to the
site. (See Note 3B of the Notes to Consolidated Financial Statements.)
On November 14, 1995, the Illinois Attorney General filed a complaint in
the Circuit Court of Cook County naming North Shore Gas and four other parties
as defendants. The complaint alleges violations arising out of a gasoline
release that occurred in Wheeling, Illinois in June 1992 when a contractor who
was installing a pipeline for North Shore Gas accidentally struck a gasoline
pipeline owned by West Shore Pipeline Company. North Shore Gas is contesting
this suit. (See Note 3C of the Notes to Consolidated Financial Statements.)
REGULATORY ACTIONS. On November 8, 1995, the Commission issued orders approving
changes in rates of Peoples Gas and North Shore Gas. (See Note 2A of the Notes
to Consolidated Financial Statements.)
In 1995, Peoples Gas and North Shore Gas filed petitions with the
Commission for approval of performance-based rate programs (PBR Programs) for
gas costs. The objectives of the PBR Programs were to provide incentives to
minimize gas supply and capacity costs in a changing market and to pursue
innovative gas supply-related opportunities. Under specified conditions and up
to certain limits, Peoples Gas and North Shore Gas proposed to share equally
with gas sales customers the savings or costs from the PBR Programs. In August
1996, the utilities' petitions were denied by the Commission. Peoples Gas and
North Shore Gas are evaluating alternatives to the proposed PBR Programs.
CAPITAL RESOURCES
CAPITAL SPENDING. Capital expenditures for additions, replacements, and
improvements to the utility plant were $85.6 million in 1996, $95.9 million in
1995, and $87.2 million in 1994.
Expenditures in fiscal 1996 decreased $10.3 million from 1995 reflecting
the continuation of a cost containment program.
-19-
<PAGE>
In fiscal 1995, expenditures increased $8.7 million over 1994 and included
$11.2 million for computer and office equipment.
Capital expenditures for fiscal 1997 are expected to be about $89.1
million, an increase of $3.5 million from the 1996 level. The estimate of
expenditures for 1997 includes $11.4 million for Peoples Gas' remote automatic
meter reading project.
There are no sinking fund requirements for long-term debt included in
fiscal 1997. (See Note 15C of the Notes to Consolidated Financial Statements.)
The Company anticipates that the subsidiaries' future cash needs for
capital expenditures and sinking fund requirements and maturities will be met
through internally generated funds, intercompany loans from the Company,
borrowing arrangements with banks and/or the issuance of commercial paper on an
interim basis, and periodic long-term financing involving equity or the
subsidiaries' first mortgage bonds.
BONDS REDEEMED. On December 29, 1995, Peoples Gas redeemed, from general
corporate funds, approximately $87 million aggregate principal amount of the
City of Joliet's 1984 Gas Supply Revenue Bonds, Series A and B, which were
secured by Peoples Gas' Series U and V First and Refunding Mortgage Bonds. (See
Note 15B of the Notes to Consolidated Financial Statements.)
On February 1, 1996, North Shore Gas redeemed $8 million aggregate
principal amount of its Series I First Mortgage Bonds using the proceeds of a
short-term bank loan as well as other monies of North Shore Gas. (See Note 15B
of the Notes to Consolidated Financial Statements.)
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
----
Statement of Management's Responsibility 21
Report of Independent Public Accountants 22
Consolidated Statements of Income for fiscal years ended
September 30, 1996, 1995, and 1994 23
Consolidated Statements of Retained Earnings for fiscal
years ended September 30, 1996, 1995, and 1994 23
Consolidated Balance Sheets at September 30, 1996 and 1995 24
Consolidated Capitalization Statements at September 30, 1996
and 1995 25
Consolidated Statements of Cash Flows for fiscal years ended
September 30, 1996, 1995, and 1994 26
Notes to Consolidated Financial Statements 27
-20-
<PAGE>
STATEMENT OF MANAGEMENT'S RESPONSIBILITY
The financial statements and other financial information included in this
report were prepared by management, who is responsible for the integrity and
objectivity of presented data. The consolidated financial statements of the
Company and its subsidiaries were prepared in conformity with generally accepted
accounting principles and necessarily include some amounts that are based on the
best estimates and judgments of management.
The Company maintains internal accounting systems and related
administrative controls, along with internal audit programs, that are designed
to provide reasonable assurance that the accounting records are accurate and
assets are safeguarded from loss or unauthorized use. Consequently, management
believes that the accounting records and controls are adequate to produce
reliable financial statements.
Arthur Andersen LLP, the Company's independent public accountants approved
by the shareholders, as a part of their audit of the financial statements,
selectively reviews and tests certain aspects of internal accounting controls
solely to determine the nature, timing, and extent of their audit tests.
Management has made available to Arthur Andersen LLP all of the Company's
financial records and related data and believes that all representations made to
the independent public accountants during their audit were valid and
appropriate.
The Audit Committee of the Board of Directors, comprised of six outside
directors, meets periodically with management, the internal auditors, and Arthur
Andersen LLP, jointly and separately, to assure that appropriate
responsibilities are discharged. These meetings include discussion and review
of accounting principles and practices, internal accounting controls, audit
results, and the presentation of financial information in the annual report.
-21-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Shareholders of Peoples Energy Corporation:
We have audited the accompanying consolidated balance sheets and
consolidated capitalization statements of Peoples Energy Corporation (an
Illinois corporation) and subsidiary companies at September 30, 1996 and 1995,
and the related consolidated statements of income, retained earnings, and cash
flows for each of the three years in the period ended September 30, 1996. These
financial statements and the schedule referred to below are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Peoples Energy Corporation
and subsidiary companies at September 30, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1996, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement schedule listed
in Item 14(a)2 is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
The financial statement schedule has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion,
fairly states, in all material respects, the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 1, 1996
-22-
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Peoples Energy Corporation
- ------------------------------------------------------------------------------------------------------
For fiscal years ended September 30, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
(Thousands, except per-share amounts)
<S> <C> <C> <C>
Operating Revenues:
Gas sales $1,056,769 $ 893,037 $1,153,928
Transportation of customer-owned gas 128,876 122,814 110,128
Other 13,012 17,550 15,432
- ------------------------------------------------------------------------------------------------------
Total Operating Revenues 1,198,657 1,033,401 1,279,488
- ------------------------------------------------------------------------------------------------------
Operating Expenses:
Gas costs 529,875 457,436 669,039
Operation (see Note 10D) 220,298 199,095 220,765
Maintenance 45,642 41,731 37,947
Depreciation and amortization 70,635 66,408 64,684
Taxes - Income 56,620 28,725 28,991
- State and local revenue 121,172 109,720 132,734
- Other 22,001 21,700 20,450
- ------------------------------------------------------------------------------------------------------
Total Operating Expenses 1,066,243 924,815 1,174,610
- ------------------------------------------------------------------------------------------------------
Operating Income 132,414 108,586 104,878
- ------------------------------------------------------------------------------------------------------
Other Income and (Deductions):
Interest income 5,420 10,066 6,167
Interest on long-term debt of subsidiaries (37,826) (46,413) (45,044)
Other interest expense (5,114) (7,457) (3,012)
Income taxes (5,839) (3,831) (6,434)
Miscellaneous - net (see Note 12) 14,383 1,2031 7,844
- ------------------------------------------------------------------------------------------------------
Total Other Income and Deductions (28,976) (46,432) (30,479)
- ------------------------------------------------------------------------------------------------------
Net Income $ 103,438 $ 62,154 $ 74,399
- ------------------------------------------------------------------------------------------------------
Average Shares of Common Stock Outstanding 34,942 34,901 34,854
Earnings Per Share of Common Stock $ 2.96 $ 1.78 $ 2.13
- ------------------------------------------------------------------------------------------------------
</TABLE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
Peoples Energy Corporation
- ------------------------------------------------------------------------------------------------------
For fiscal years ended September 30, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C> <C>
Balance at Beginning of Year $ 364,581 $ 365,258 $ 353,432
Add - Net Income 103,438 62,154 74,399
Deduct - Dividends declared on common stock of $1.83,
$1.80, and $1.795 per share, respectively 63,954 62,831 62,573
- Additional minimum liability for
non-qualified pension plan, net of tax 761 -- --
- ------------------------------------------------------------------------------------------------------
Balance at End of Year $ 403,304 $ 364,581 $ 365,258
- ------------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
-23-
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Peoples Energy Corporation
- ------------------------------------------------------------------------------------------------------
At September 30, 1996 1995
- ------------------------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C>
PROPERTIES AND OTHER ASSETS
- ------------------------------------------------------------------------------------------------------
Capital Investments:
Property, plant and equipment, at original cost $2,046,156 $2,088,277
Less - Accumulated depreciation 665,077 715,208
- ------------------------------------------------------------------------------------------------------
Net property, plant and equipment 1,381,079 1,373,069
Other investments 12,348 10,367
- ------------------------------------------------------------------------------------------------------
Total Capital Investments - Net 1,393,427 1,383,436
- ------------------------------------------------------------------------------------------------------
Current Assets:
Cash 4,684 3,328
Cash equivalents 33,086 172,911
Receivables -
Customers, net of allowance for uncollectible
accounts of $26,211 and $19,013, respectively 68,675 56,715
Other 32,399 1,897
Accrued unbilled revenues 29,314 21,167
Materials and supplies, at average cost 16,128 16,466
Gas in storage, at last-in, first-out cost 65,502 100,547
Gas costs recoverable through rate adjustments 19,920 6,205
Prepayments 12,287 2,302
Other 900 1,337
- ------------------------------------------------------------------------------------------------------
Total Current Assets 282,895 382,875
- ------------------------------------------------------------------------------------------------------
Other Assets:
Regulatory assets of subsidiaries (see Note 1H) 91,498 39,706
Deferred charges 15,930 16,475
- ------------------------------------------------------------------------------------------------------
Total Other Assets 107,428 56,181
- ------------------------------------------------------------------------------------------------------
Total Properties and Other Assets $1,783,750 $1,822,492
- ------------------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES
- ------------------------------------------------------------------------------------------------------
Capitalization (see Consolidated Capitalization Statements) $1,208,249 $1,263,568
- ------------------------------------------------------------------------------------------------------
Current Liabilities:
Interim loans of subsidiaries 2,625 900
Accounts payable 147,972 102,377
Dividends payable on common stock 16,082 15,711
Customer gas service and credit deposits 42,390 40,577
Sinking fund payments and maturities, due within one year -
Long-term debt of subsidiaries -- 4,000
Accrued taxes 32,821 28,160
Gas sales revenue refundable through rate adjustments 13,921 79,502
Accrued interest 10,796 12,796
- ------------------------------------------------------------------------------------------------------
Total Current Liabilities 266,607 284,023
- ------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Deferred income taxes - primarily accelerated depreciation (see Note 10C) 230,948 208,424
Investment tax credits being amortized over
the average lives of related property 35,439 38,132
Other 42,507 28,345
- ------------------------------------------------------------------------------------------------------
Total Deferred Credits and Other Liabilities 308,894 274,901
- ------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $1,783,750 $1,822,492
- ------------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
-24-
<PAGE>
CONSOLIDATED CAPITALIZATION STATEMENTS
<TABLE>
<CAPTION>
Peoples Energy Corporation
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At September 30, 1996 1995
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(Thousands, except number of shares)
<S> <C> <C>
Common Stockholders' Equity:
Common stock, without par value -
Authorized 60,000,000 shares
Outstanding 34,960,399 and 34,913,426 shares, respectively $ 277,881 $ 277,113
Retained earnings (see Consolidated Statements
of Retained Earnings) 403,304 364,581
- ------------------------------------------------------------------------------------------------------------
Total Common Stockholders' Equity 681,185 641,694
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Long-Term Debt:
Exclusive of sinking fund payments and maturities
due within one year
The Peoples Gas Light and Coke Company
First and Refunding Mortgage Bonds -
8% Series U, due June 1, 1999 -- 43,375
(redeemed on December 29, 1995 - See Note 15B)
8% Series V, due June 1, 1999 -- 43,375
(redeemed on December 29, 1995 - See Note 15B)
Adjustable-Rate Series W (4% and 4.2% through
September 30, 1996 and September 30, 1995, respectively),
due October 1, 1999 (see Note 15A) 10,400 10,400
6.875% Series X, due March 1, 2015 50,000 50,000
7.50% Series Y, due March 1, 2015 50,000 50,000
7.50% Series Z, due March 1, 2015 50,000 50,000
8.10% Series BB, due May 1, 2020 75,000 75,000
6.37% Series CC, due May 1, 2003 75,000 75,000
5-3/4% Series DD, due December 1, 2023 75,000 75,000
Adjustable-Rate Series EE (3.85% and 4.95% through
November 30, 1996 and November 30, 1995, respectively),
due December 1, 2023 (see Note 15A) 27,000 27,000
6.10% Series FF, due June 1, 2025 50,000 50,000
North Shore Gas Company
First Mortgage Bonds -
10.20% Series I, due October 27, 1997 -- 8,000
(redeemed on February 1, 1996 - See Note 15B)
8% Series J due November 1, 2020 24,734 24,774
6-3/8% Series K, due October 1, 2022 24,930 24,950
6.37% Series L, due May 1, 2003 15,000 15,000
- ------------------------------------------------------------------------------------------------------------
Total Long-Term Debt 527,064 621,874
- ------------------------------------------------------------------------------------------------------------
Total Capitalization $1,208,249 $1,263,568
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
-25-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Peoples Energy Corporation
- -------------------------------------------------------------------------------------------------
For fiscal years ended September 30, 1996 1995 1994
- -------------------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 103,438 $ 62,154 $ 74,399
Adjustments to reconcile net income to net cash:
Depreciation and amortization 70,635 66,408 64,684
Deferred income taxes and investment tax
credits - net 13,669 10,556 (11,334)
Change in deferred credits and other liabilities 20,324 (9,522) (24,846)
Change in other assets (47,029) (1,607) (19,753)
Other 85 63 41
Change in current assets and liabilities:
Receivables - net (41,766) 16,875 36,427
Accrued unbilled revenues (8,147) (1,245) 10,116
Materials and supplies 338 7,389 1,797
Gas in storage 35,044 50,458 (6,000)
Gas costs recoverable (13,715) 8,221 37,100
Prepayments (9,985) (251) 390
Accounts payable 45,595 (6,758) (9,085)
Customer gas service and credit deposits 1,813 (4,843) 2,344
Accrued taxes 4,661 (776) 1,022
Gas sales revenue refundable (65,581) 28,559 42,723
Accrued interest (2,001) (146) 2,571
- -------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 107,378 225,535 202,596
- -------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Capital expenditures of subsidiaries - construction (85,620) (95,941) (87,218)
Other assets 2,063 (1,603) (1,382)
Other capital investments (2,827) (123) 633
Other temporary cash investments 200 (100) 100
Other long-term cash investments -- 5,982 (601)
- -------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (86,184) (91,785) (88,468)
- -------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Interim loans of subsidiaries - net 1,725 -- (67,700)
Issuance of long-term debt of subsidiaries -- 50,000 102,000
Trust fund - utility construction -- 31,493 (27,250)
- bond redemption 237 (237) --
Retirement of long-term debt of subsidiaries (98,810) (54,201) (4,000)
Redemption of preferred stock of subsidiaries -- -- (3,400)
Dividends paid on common stock (63,583) (62,810) (62,378)
Proceeds from issuance of common stock 768 993 1,100
- -------------------------------------------------------------------------------------------------
Net Cash Used in Financing Activities (159,663) (34,762) (61,628)
- -------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (138,469) 98,988 52,500
Cash and Cash Equivalents at Beginning of Year 176,239 77,251 24,751
- -------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 37,770 $ 176,239 $ 77,251
- -------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
-26-
<PAGE>
PEOPLES ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1A Principles of Consolidation
All subsidiaries are included in the consolidated financial statements.
All significant intercompany transactions have been eliminated in consolidation.
Certain items previously reported for years prior to 1996 have been reclassified
to conform with the current-year presentation.
1B Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
1C Concentration of Credit Risk
Peoples Gas provides natural gas service to approximately 839,000 customers
within the City. North Shore Gas provides natural gas service to about 137,000
customers within approximately 275 square miles in Northeastern Illinois.
Credit risk for each utility is spread over a diversified base of residential,
commercial, and industrial retail sales and transportation customers.
Peoples Gas and North Shore Gas encourage customers to participate in their
long-standing budget payment programs, which allow the cost of higher gas
consumption levels associated with the heating season to be spread over a 12-
month billing cycle. Customers' payment records are continually monitored and
credit deposits are required, when appropriate, to minimize uncollectible write-
offs.
1D Revenue Recognition
Gas sales revenues are recorded on the accrual basis for all gas delivered
during the month, including an estimate for gas delivered but unbilled at the
end of each month.
1E Property, Plant and Equipment
Property, plant and equipment is stated at original cost and includes
appropriate amounts of payroll taxes, employee benefit costs, administrative
costs, and an allowance for funds used during construction.
1F Accounts Payable
The Company utilizes controlled disbursement banking arrangements under
which certain bank accounts have negative book balances due to checks in
transit. The negative balances are classified as Accounts Payable.
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<PAGE>
1G Maintenance and Depreciation
The Company's utility subsidiaries charge the cost of maintenance and
repairs of property and minor renewals and improvements of property to
maintenance expense. When depreciable property is retired, its original cost is
charged to the accumulated provision for depreciation.
The provision for depreciation substantially reflects the systematic
amortization of the original cost of depreciable property over estimated useful
lives on the straight-line method. Additionally, actual dismantling cost, net
of salvage, is included in the provision for depreciation in the month incurred.
The amounts provided are designed to cover not only losses due to wear and tear
that are not restored by maintenance, but also losses due to obsolescence and
inadequacy.
The provision for depreciation, expressed as an annual percentage of
original cost of depreciable property, is as follows:
For fiscal years ended September 30, 1996 1995 1994
------------------------------------ ---- ---- ----
Peoples Gas 3.6% 3.6% 3.6%
North Shore Gas 3.1 3.1 3.2
Consolidated 3.5 3.5 3.6
1H Regulated Operations
Peoples Gas' and North Shore Gas' utility operations are subject to
regulation by the Commission. Regulated operations are accounted for in
accordance with SFAS No. 71, "Accounting for the Effects of Certain Types of
Regulation." This standard controls the application of generally accepted
accounting principles for companies whose rates are determined by an independent
regulator such as the Commission. Regulatory assets represent certain costs
that are expected to be recovered from customers through the ratemaking process.
When incurred, such costs are deferred as assets in the balance sheet and
subsequently recorded as expenses when those same amounts are reflected in
rates.
The following regulatory assets of subsidiaries were reflected in Other
Assets in the Consolidated Balance Sheets at September 30, 1996 and 1995:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C>
Environmental costs, net of recoveries (see Note 3A) $19,384 $18,349
Transition costs from pipeline supplier (see Note 2B) 40,438 8,000
Deferred interest on customer refunds -- 2,512
Regulatory income tax assets (see Note 1I) 4,339 3,680
Energy conservation plan expenses -- 1,136
Discount, premium, expenses, and loss on reacquired bonds 3,483 3,089
SNG plant - decommissioning 23,156 1,982
Other 698 958
- -------------------------------------------------------------------------------------
Total regulatory assets of subsidiaries $91,498 $39,706
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</TABLE>
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<PAGE>
1I Income Taxes
The Company follows the liability method of accounting for deferred income
taxes. Under the liability method, deferred income taxes have been recorded
using currently enacted tax rates for the differences between the tax basis of
assets and liabilities and the basis reported in the financial statements. Due
to the effects of regulation on Peoples Gas and North Shore Gas, certain
adjustments made to deferred income taxes are, in turn, debited or credited to
regulatory assets or liabilities. (See Note 10C.)
Each Company within the consolidated group nets its income tax related
regulatory assets and liabilities. At September 30, 1996 and 1995, net
regulatory income tax assets recorded in Other Assets amounted to $4.3 million
and $3.7 million, while net regulatory income tax liabilities recorded in Other
Liabilities equaled $5.5 million and $5.9 million, respectively.
Investment tax credits have been deferred and are being amortized through
credits to income over the book lives of related property.
The preceding deferred-tax and tax-credit accounting conforms with
regulations of the Commission.
1J Gas in Storage
Storage injections are priced at the fiscal-year average of costs of
natural gas purchased and produced. Withdrawals from storage are priced on the
last-in, first-out (LIFO) cost method. The estimated current replacement cost
of gas in inventory at September 30, 1996 and 1995 exceeded the LIFO cost by
approximately $91 million and $134 million, respectively.
1K Statement of Cash Flows
For purposes of the balance sheet and the statement of cash flows, the
Company considers all short-term liquid investments with maturities of three
months or less to be cash equivalents.
Income taxes and interest paid (excluding capitalized interest) were as
follows:
For fiscal years ended September 30, 1996 1995 1994
------------------------------------ ---- ---- ----
(Thousands)
Income taxes paid $44,187 $16,448 $50,160
Interest paid 41,386 47,732 44,970
1L Recovery of Gas Costs, Including Charges for Transition Costs
Under the tariffs of Peoples Gas and North Shore Gas, the difference for
any month between costs recoverable through the Gas Charge and revenues billed
to customers under the Gas Charge is refunded to or recovered from customers.
Consistent with these tariff provisions, such difference for any month is
recorded either as a current liability or as a current asset (with a contra
entry to Gas Costs).
The Commission conducts annual proceedings regarding, for each gas utility,
the reconciliation of revenues from the Gas Charge and related costs incurred
for gas. In such proceedings, costs recovered by a utility through the Gas
Charge are subject to challenge. Such proceedings, regarding Peoples Gas and
North Shore Gas for fiscal years 1993 through 1996, are currently pending before
the Commission.
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<PAGE>
Pursuant to FERC Order No. 636 and successor orders, pipelines are allowed
to recover from their customers so-called transition costs. These costs arise
from the restructuring of pipeline service obligations required by the 636
Orders. The utilities are currently recovering pipeline charges for transition
costs through the Gas Charge. (See Notes 2A and 2B.)
2. RATES AND REGULATION
2A Utility Rate Proceedings
PEOPLES GAS' RATE ORDER. On November 8, 1995, the Commission issued an order
approving changes in rates of Peoples Gas that are designed to increase
annual revenues by approximately $30.8 million, exclusive of additional
charges for revenue taxes. Peoples Gas was allowed a rate of return on
original-cost rate base of 9.19 per cent, which reflects an 11.10 per cent
cost of common equity. The new rates were implemented on November 14, 1995.
A group of industrial transportation customers has appealed the Commission's
order to the Illinois Appellate Court. Any change made by the Appellate
Court would have a prospective effect only.
NORTH SHORE GAS' RATE ORDER. On November 8, 1995, the Commission issued an
order approving changes in rates of North Shore Gas that are designed to
increase annual revenues by approximately $5.6 million, exclusive of
additional charges for revenue taxes. North Shore Gas was allowed a rate of
return on original-cost rate base of 9.75 per cent, which reflects an 11.30
per cent cost of common equity. The new rates were implemented on November
14, 1995. A group of industrial transportation customers has appealed the
Commission's order to the Illinois Appellate Court. Any change made by the
Appellate Court would have a prospective effect only.
FERC ORDER 636 COST RECOVERY. In 1994, the Commission issued orders
concluding its investigation into the appropriate means of recovery by
Illinois gas utilities of pipeline charges for FERC Order 636 transition
costs. The orders provided for the full recovery of transition costs from
Peoples Gas' and North Shore Gas' gas service customers. The Commission
directed that, effective November 1, 1994, gas supply realignment (GSR) costs
(one of the four categories of transition costs) be recovered on a uniform
volumetric basis from all transportation and sales customers. In 1995, the
Illinois Appellate Court affirmed the Commission's order. A group of
industrial transportation customers has filed a petition with the Illinois
Supreme Court for leave to appeal the Appellate Court's decision. If the
Illinois Supreme Court accepts the appeal, any changes made by it to the
Commission's orders would have a prospective effect only. (See Notes 1L and
2B.)
2B FERC Orders 636, 636-A, and 636-B
FERC Order 636 and successor orders require pipelines to make separate rate
filings to recover transition costs. There are four categories of such costs,
the largest of which for Peoples Gas and North Shore Gas is GSR costs. The
utilities are subject to charges for transition cost recovery by Natural.
Charges by Natural for transition costs commenced on January 1, 1994. On
September 29, 1994, the FERC approved a Stipulation and Agreement (Agreement)
filed by Natural. The Agreement placed a cap on the amount of GSR costs
recoverable by Natural from Peoples Gas and North Shore Gas. For Peoples Gas,
that cap is approximately $103 million and for North Shore Gas, that cap is
approximately $25 million. At the conclusion of the billing period under the
Agreement (November 30, 1997), Natural
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<PAGE>
must reconcile amounts collected under the Agreement with GSR costs it incurred.
Peoples Gas and North Shore Gas are currently recovering transition costs
through the Gas Charge. At September 30, 1996, Peoples Gas and North Shore Gas
have made payments of $70.3 million and $17.3 million, and have accrued an
additional $32.7 million and $7.7 million, respectively, toward the caps.
The 636 Orders are not expected to have a material effect on financial
position or results of operations of the Company or its subsidiaries. (See
Notes 1L and 2A.)
3. ENVIRONMENTAL MATTERS
3A Former Manufactured Gas Plant Operations
The Company's utility subsidiaries, their predecessors, and certain former
affiliates operated facilities in the past at multiple sites for the purpose of
manufacturing gas and storing manufactured gas (Manufactured Gas Sites). In
connection with manufacturing and storing gas, various by-products and waste
materials were produced, some of which might have been disposed of rather than
sold. Under certain laws and regulations relating to the protection of the
environment, the subsidiaries might be required to undertake remedial action
with respect to some of these materials. Three of the Manufactured Gas Sites
are discussed in more detail below. Peoples Gas and North Shore Gas, under the
supervision of the IEPA, are conducting investigations of 29 Manufactured Gas
Sites. These investigations may require the utility subsidiaries to perform
additional investigation and remediation. The investigations are in a
preliminary stage and are expected to occur over an extended period of time.
In 1990, North Shore Gas entered into an Administrative Order on Consent
(AOC) with the United States Environmental Protection Agency (EPA) and the IEPA
to implement and conduct a remedial investigation/feasibility study (RI/FS) of a
Manufactured Gas Site located in Waukegan, Illinois, where manufactured gas and
coking operations were formerly conducted (Waukegan Site). The RI/FS is
comprised of an investigation to determine the nature and extent of
contamination at the Waukegan Site and a feasibility study to develop and
evaluate possible remedial actions. North Shore Gas entered into the AOC after
being notified by the EPA that North Shore Gas, General Motors Corporation (GMC)
and Outboard Marine Corporation were each a potentially responsible party (PRP)
under CERCLA with respect to the Waukegan Site. A PRP is potentially liable for
the cost of any investigative and/or remedial work that the EPA determines is
necessary. Other parties identified as PRPs did not enter into the AOC.
Under the terms of the AOC, North Shore Gas is responsible for the cost of
the RI/FS. North Shore Gas believes, however, that it will recover a
significant portion of the costs of the RI/FS from other entities. GMC has
agreed to share equally with North Shore Gas in funding of the RI/FS cost,
without prejudice to GMC's or North Shore Gas' right to seek a lesser cost
responsibility at a later date.
Peoples Gas has observed what appear to be gas purification wastes on a
Manufactured Gas Site in Chicago, formerly called the 110th Street Station, and
property contiguous thereto (110th Street Station Site). Peoples Gas has fenced
the 110th Street Station Site and is conducting a study under the supervision of
the IEPA to determine the feasibility of a limited removal action.
The current owner of a site in Chicago, formerly called Pitney Court
Station, filed suit against Peoples Gas in federal district court under CERCLA.
The suit seeks recovery of the past and future costs of investigating and
remediating the site and an order directing Peoples Gas to remediate the site.
Peoples Gas is contesting this suit.
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<PAGE>
The utility subsidiaries are accruing and deferring the costs they incur in
connection with all of the Manufactured Gas Sites, including related legal
expenses, pending recovery through rates or from insurance carriers or other
entities. At September 30, 1996, the total of the costs deferred by the
subsidiaries, net of recoveries and amounts billed to other entities, was $19.4
million. This amount includes an estimate of the costs of completing the
studies required by the EPA at the Waukegan Site and the investigations being
conducted under the supervision of the IEPA referred to above. The amount also
includes an estimate of the costs of remediation at the Waukegan Site and at the
110th Street Station site in Chicago, at the minimum amount of the current
estimated range of such costs. The costs of remediation at the other sites
cannot be determined at this time. While each subsidiary intends to seek
contribution from other entities for the costs incurred at the sites, the full
extent of such contributions cannot be determined at this time.
Peoples Gas and North Shore Gas have filed suit against a number of
insurance carriers for the recovery of environmental costs relating to the
utilities' former manufactured gas operations. The suit asks the court to
declare that the insurers are liable under policies in effect between 1937 and
1986 for costs incurred or to be incurred by the utilities in connection with
five Manufactured Gas Sites in Chicago and Waukegan. The utilities are also
asking the court to award damages stemming from the insurers' breach of their
contractual obligation to defend and indemnify the utilities against these
costs. At this time, management cannot determine the timing and extent of the
subsidiaries' recovery of costs from their insurance carriers. Accordingly, the
costs deferred at September 30, 1996 have not been reduced to reflect recoveries
from insurance carriers.
Costs incurred by Peoples Gas or North Shore Gas for environmental
activities relating to former manufactured gas operations will be recovered from
insurance carriers or other entities or through rates for utility service.
Accordingly, management believes that the costs incurred by the subsidiaries in
connection with former manufactured gas operations will not have a material
adverse effect on financial position or results of operations of the
subsidiaries. Peoples Gas and North Shore Gas are recovering the costs of
environmental activities relating to the utilities' former manufactured gas
operations, including carrying charges on the unrecovered balances, under rate
mechanisms approved by the Commission. At September 30, 1996, the subsidiaries
had recovered $8 million of such costs through rates.
3B Former Mineral Processing Site in Denver, Colorado
In 1994, North Shore Gas received a demand from the S.W. Shattuck Chemical
Company, Inc. (Shattuck), a responsible party under CERCLA, for reimbursement,
indemnification and contribution for response costs incurred at a former mineral
processing site in Denver, Colorado. Shattuck is a wholly owned subsidiary of
Salomon, Inc. (Salomon). The demand alleges that North Shore Gas is a
successor-in-interest to certain companies that were allegedly responsible
during the period 1934-1941 for the disposal of mineral processing wastes
containing radium and other hazardous substances at the site. The cost of the
remedy at the site has been estimated by Shattuck to be approximately
$31 million. Salomon has provided financial assurance for the performance of
the remediation at the site.
North Shore Gas does not believe that it has liability for the response
costs, but cannot determine the matter with certainty. At this time, North
Shore Gas cannot reasonably estimate what range of loss, if any, may occur. In
the event that North Shore Gas incurred liability, it would pursue reimbursement
from insurance carriers, other responsible parties, if any, and through its
rates for utility service.
North Shore Gas filed a declaratory judgment action against Salomon in the
District Court for the Northern District of Illinois. The suit asks the court
to declare that North Shore Gas is not liable for response costs incurred or to
be incurred at the Denver site. Salomon has filed a counterclaim for costs
incurred and to be incurred by Salomon and Shattuck with respect to the site.
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<PAGE>
3C Gasoline Release in Wheeling, Illinois
In June 1995, North Shore Gas received a letter from the IEPA informing
North Shore Gas that it was not in compliance with certain provisions of the
Illinois Environmental Protection Act which prohibit water pollution within the
State of Illinois. On November 14, 1995, the Illinois Attorney General filed a
complaint in the Circuit Court of Cook County naming North Shore Gas and four
other parties as defendants. The complaint alleges that the violations are the
result of a gasoline release that occurred in Wheeling, Illinois in June 1992
when a contractor who was installing a pipeline for North Shore Gas accidentally
struck a gasoline pipeline owned by West Shore Pipeline Company. North Shore
Gas is contesting this suit. Management does not believe the outcome of this
suit will have a material adverse effect on financial position or results of
operations of the Company or North Shore Gas.
4. SNG PLANT CLOSING
Peoples Gas has closed its synthetic gas-making plant located near Joliet,
Illinois. The decision was made after a cost-benefit analysis was performed,
which showed that, as of December 1, 1995, it would not be cost-effective to use
the plant as a source of gas, given new, more economical supply arrangements to
become effective on that date. Those supply arrangements were the result of
initiatives undertaken by the utilities to restructure their gas supply
portfolios in response to FERC Order 636. The rates approved by the Commission
in Peoples Gas' most recent rate case reflect the annual effect of a five-year
amortization of the undepreciated investment in the plant and decommissioning
expenses. The plant closing did not have a material effect on financial
position or results of operations of the Company or Peoples Gas.
5. COVENANTS REGARDING RETAINED EARNINGS
North Shore Gas' indenture relating to its first mortgage bonds contains
provisions and covenants restricting the payment of cash dividends and the
purchase or redemption of capital stock. At September 30, 1996, such
restrictions amounted to $11.6 million out of North Shore Gas' total retained
earnings of $66.6 million; accordingly, $55 million are available for dividends.
6. DISTRICT ENERGY
Peoples District Energy is a 50 per cent participant in a partnership,
Trigen-Peoples District Energy Company, that provides heating and cooling
services to McCormick Place under a long-term contract (Agreement) with the
Metropolitan Pier and Exposition Authority (MPEA).
The Company and Trigen Energy Corporation (Trigen) have provided a joint
and several guarantee to the MPEA of the partnership's performance of its
obligations under the Agreement. The guarantee covers all obligations of the
partnership, including liabilities arising from an interruption of service to
McCormick Place, insolvency of the partnership, or other partnership default.
The guarantee is limited in the aggregate to $11 million, except for an
additional $4 million to $8 million in the event of insolvency of the
partnership or the installation (pursuant to enforcement of lender or MPEA
remedies) of any other operator of the district energy plant in lieu of the
partnership, and except for the partnership's obligations relating to the
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<PAGE>
letter of credit in favor of the MPEA described in the following sentence and
costs to the extent incurred by the MPEA in connection with the enforcement of
obligations of the partnership or the guarantors. To secure its obligations
under the Agreement, the partnership is obligated to provide, maintain, and
reinstate a letter of credit upon which the MPEA can draw to pay its costs,
expenses, and damages, up to $4 million per incident, principally in the event
of the partnership's failure to cure timely an interruption of service.
The partnership has obtained a $28 million construction and term loan to
finance construction of a major portion of the project. After completion of
construction of the project (expected in January 1997) and prior to January
1998, the construction loans will be converted to a term loan with a 20-year
maturity. In connection with the financing, the Company, Trigen, and the
partnership executed a Sponsors Support and Equity Contribution Agreement
(Sponsors Support Agreement).
Under the Sponsors Support Agreement, the Company and Trigen have certain
contractual obligations to the lender that could require payment by each of the
Company and Trigen of 50 per cent of the outstanding loan obligations upon the
occurrence of certain events relating to material destruction of the project,
condemnation of the project, purchase of the project by the MPEA pursuant to
provisions of the Agreement and default by the partnership, the Company or
Trigen of certain of their respective obligations to the MPEA.
7. LONG-TERM LEASE
In October 1993, Peoples Gas entered into a 15-year operating lease to
relocate its headquarters office. The relocation was substantially completed in
February 1995 prior to the expiration of the old lease.
The rental obligation consists of a base rent of $2.3 million plus
operating expenses and taxes. The base rent escalates by 2 per cent each year
through the 10th year. Base rent in the 11th year is approximately $3.6 million
with annual increases of 2 per cent each year through the 15th year. Rental
expense is comparable with the former lease at Peoples Gas' previous
headquarters location.
Rental expenses under the lease arrangements were $6.5 million, $6.4
million, and $6.1 million for fiscal years 1996, 1995, and 1994, respectively.
8. EXPIRATION OF STORAGE CONTRACTS
Peoples Gas and North Shore Gas had certain natural gas storage contracts
with Natural that expired on or before December 1, 1995. Associated with the
expiration of the contracts in fiscal 1996, the utilities realized a gain, after
income taxes, of approximately $8.9 million.
9. RETIREMENT AND POSTEMPLOYMENT BENEFITS
9A Pension Benefits
The Company and its subsidiaries participate in two defined benefit pension
plans covering substantially all employees. These plans provide pension
benefits that generally are based on an employee's length of service,
compensation during the five years preceding retirement, and social security
benefits.
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<PAGE>
Peoples Gas and North Shore Gas make annual contributions to the plans based
upon actuarial determinations and in consideration of tax regulations and
funding requirements under federal law.
The Company also has non-qualified pension plans that provide employees
with pension benefits in excess of qualified plan limits imposed by federal tax
law.
Net pension cost for all plans for fiscal 1996, 1995, and 1994 included the
following components:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------------
(Millions)
<S> <C> <C> <C>
Service cost - benefits earned during year $13.7 $14.4 $15.8
Interest cost on projected benefit obligations 32.6 29.9 30.0
Actual return on plan assets (gain) loss (68.8) (85.0) (15.0)
Net amortization and deferral 22.1 45.5 (25.5)
Settlement accounting (7.7) -- --
- ----------------------------------------------------------------------------------------------------
Net pension cost (credit) $(8.1) $ 4.8 $ 5.3
- ----------------------------------------------------------------------------------------------------
</TABLE>
In 1996, the Company recognized a net gain of $7.7 million from the
settlement of portions of pension plan obligations.
The calculation of pension cost assumed a long-term rate of return on
assets of 8.5 per cent for 1996 and 7.5 per cent for 1995 and 1994. The
settlement accounting cost was determined using a discount rate of 7.5 per cent
and assumed future compensation increases of 4.5 per cent per year.
The following table shows the estimated funded status of the Company's
pension plans at September 30, 1996 and 1995:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------------------------
(Millions)
<S> <C> <C>
Plan assets at market value $577.5 $578.0
- -------------------------------------------------------------------------------------
Actuarial present value of plan benefits:
Vested 298.4 307.2
Non-vested 33.4 45.7
- -------------------------------------------------------------------------------------
Accumulated benefit obligation 331.8 352.9
Effect of projected future compensation increases 75.8 100.0
- -------------------------------------------------------------------------------------
Projected benefit obligation 407.6 452.9
- -------------------------------------------------------------------------------------
Excess of plan assets over projected benefit obligation 169.9 125.1
Less:
Unrecognized transition asset 23.7 27.2
Unrecognized prior service cost (4.6) (5.1)
Unrecognized net gain 144.0 105.8
Recognition of non-qualified plan additional minimum liability (1.9) --
- -------------------------------------------------------------------------------------
Accrued pension asset (liability) $ 4.9 $ (2.8)
- -------------------------------------------------------------------------------------
</TABLE>
-35-
<PAGE>
The projected benefit obligation and plan assets at September 30, 1996 are
based on a July 1 measurement date using a discount rate of 7.5 per cent, and
assumed future compensation increases of 4.5 per cent per year. The projected
benefit obligation and plan assets at September 30, 1995 are based on an October
1 measurement date using a discount rate of 7 per cent, and assumed future
compensation increases of 5 per cent per year. Plan assets consist primarily of
marketable equity and fixed-income securities.
9B Other Postretirement Benefits
The Company and its subsidiaries also provide certain health care and life
insurance benefits for retired employees. Substantially all employees may
become eligible for such benefit coverage if they reach retirement age while
working for the Companies. The plans are funded based upon actuarial
determinations and in consideration of tax regulations. The Company accrues
the expected costs of such benefits during the employees' years of service.
Net postretirement benefit cost for all plans for fiscal 1996, 1995, and
1994 included the following components:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------------
(Millions)
<S> <C> <C> <C>
Service cost - benefits earned during year $ 3.4 $ 2.7 $ 3.1
Interest cost on projected benefit obligation 7.8 7.9 7.7
Actual return on plan assets (gain) loss (3.1) (3.7) (0.3)
Amortization of transition obligation 4.9 4.9 4.9
Net amortization and deferral 1.2 2.5 (0.2)
- ----------------------------------------------------------------------------------------------------
Net postretirement benefit cost $ 14.2 $ 14.3 $ 15.2
- ----------------------------------------------------------------------------------------------------
</TABLE>
The calculation of postretirement benefit cost assumed a long-term rate of
return on assets of 7.5 per cent for 1994 through 1996.
Of the above total postretirement costs recognized for fiscal years 1996,
1995, and 1994, $6.2 million, $6.4 million, and $8.5 million, respectively, was
funded through trust funds for future benefit payments.
-36-
<PAGE>
The following table sets forth the estimated funded status for the
postretirement health care and life insurance plans at September 30, 1996 and
1995:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------------------------
(Millions)
<S> <C> <C>
Plan assets at market value $ 35.6 $ 32.6
- -------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation (APBO):
Retirees 65.6 71.6
Fully eligible active plan participants 18.7 14.5
Other active plan participants 31.8 26.9
- -------------------------------------------------------------------------------------
Total APBO 116.1 113.0
- -------------------------------------------------------------------------------------
Excess (deficiency) of plan assets over the APBO (80.5) (80.4)
Less:
Unrecognized transition obligation
(being amortized over 20 years) (83.8) (88.8)
Unrecognized net gain 11.9 7.6
Contributions: 7-1-96 to 9-30-96 8.1 --
- -------------------------------------------------------------------------------------
Accrued postretirement benefit asset (liability) $ (0.5) $ 0.8
- -------------------------------------------------------------------------------------
</TABLE>
The total APBO and plan assets at September 30, 1996 are based on a July 1
measurement date using a discount rate of 7.5 per cent and assumed future
compensation increases of 4.5 per cent per year. The September 30, 1995 total
APBO and plan assets are based on an October 1 measurement date using a discount
rate of 6.5 per cent and assumed future compensation increases of 5 per cent per
year. Plan assets consist primarily of marketable equity and fixed-income
securities.
For measurement purposes, a health care cost trend rate of 9.6 per cent was
assumed for fiscal 1997, and that rate thereafter will decline to 4.75 per cent
in 2003 and subsequent years. The health care cost trend rate assumption has a
significant effect on the amounts reported. Increasing the assumed health care
cost trend rate by one percentage point for each future year would have
increased the APBO at September 30, 1996, by $8.9 million and the aggregate of
service and interest cost components of the net periodic postretirement benefit
cost by $1.2 million annually.
-37-
<PAGE>
10. TAX MATTERS
10A Provision for Income Taxes
Total income tax expense as shown on the Consolidated Statements of Income
is composed of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
For fiscal years ended September 30, 1996 1995 1994
- -------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C> <C>
Current:
Federal $40,341 $18,328 $38,438
State 8,534 3,323 8,419
- -------------------------------------------------------------------------------------
Total current income taxes 48,875 21,651 46,857
- -------------------------------------------------------------------------------------
Deferred:
Federal 12,781 9,847 (8,582)
State 3,551 2,917 (987)
- -------------------------------------------------------------------------------------
Total deferred income taxes 16,332 12,764 (9,569)
- -------------------------------------------------------------------------------------
Investment tax credits - net:
Federal (2,824) (1,975) (2,017)
State 161 213 252
- -------------------------------------------------------------------------------------
Total investment tax credits - net (2,663) (1,762) (1,765)
- -------------------------------------------------------------------------------------
Total provision for income taxes 62,544 32,653 35,523
Less - Included in operation expense 85 97 98
- -------------------------------------------------------------------------------------
Net provision for income taxes $62,459 $32,556 $35,425
- -------------------------------------------------------------------------------------
</TABLE>
10B Tax Rate Reconciliation
The following is a reconciliation between the computed federal income tax
expense (tax rate of 35 per cent times pre-tax book income) and the total
provision for federal income tax expenses:
<TABLE>
<CAPTION>
For fiscal years ended September 30, 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
Per Cent Per Cent Per Cent
of of of
Amount Pre-tax Amount Pre-tax Amount Pre-tax
(000's) Income (000's) Income (000's) Income
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Computed federal income
tax expense $53,808 35.00 $30,924 35.00 $35,783 35.00
Amortization of investment
tax credits (2,824) (1.84) (1,975) (2.24) (2,017) (1.97)
Amortization of deferred taxes (823) (0.54) (932) (1.05) (1,951) (1.91)
Nontaxable-tax settlement -- -- (1,965) (2.22) (1,965) (1.92)
Other, net 137 0.09 148 0.17 (2,011) (1.97)
- -------------------------------------------------------------------------------------------------------------------
Total provision for federal
income taxes $50,298 32.71 $26,200 29.66 $27,839 27.23
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
-38-
<PAGE>
10C Deferred Income Taxes
Set forth in the table below are the temporary differences which gave rise
to the net deferred income tax liabilities (see Note 1I):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
At September 30, 1996 1995
- -------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C>
Deferred tax liabilities:
Property - accelerated depreciation and
other property related items $236,919 $230,542
Other 25,129 8,745
- -------------------------------------------------------------------------------------
Total deferred income tax liabilities 262,048 239,287
- -------------------------------------------------------------------------------------
Deferred tax assets:
Unamortized investment tax credits (14,056) (15,124)
Uncollectible accounts (10,562) (7,706)
Other (6,482) (8,033)
- -------------------------------------------------------------------------------------
Total deferred income tax assets (31,100) (30,863)
- -------------------------------------------------------------------------------------
Net deferred income tax liabilities $230,948 $208,424
- -------------------------------------------------------------------------------------
</TABLE>
10D Income Tax Settlement
On September 30, 1993, the Company received notification from the IRS that
settlement of past income tax returns had been reached for fiscal years 1978
through 1990. The IRS settlement resulted in payments of principal and interest
to the Company in 1994 of approximately $28 million, or $21.6 million after
income taxes. Both Peoples Gas and North Shore Gas received regulatory
authorization to defer the recognition of the settlement amount in income for
fiscal year 1993, and to recognize its portion of the settlement amount in
income for fiscal years 1994 and 1995. Each utility represented to the
Commission that, having received this accounting authorization, it would not
file a request for an increase in base rates before December 1994. The
regulatory treatment of the IRS settlement having been resolved in November
1993, Peoples Gas and North Shore Gas together included $14 million, or $10.8
million after income taxes, in income in 1994. The amount after income taxes
was included in Other Income - Miscellaneous. At September 30, 1994,
approximately $14 million was included in Deferred Credits and Other
Liabilities - Other.
As a result of the Commission's accounting authorization, the fiscal year
1995 portion of the settlement amount for Peoples Gas and North Shore Gas was
amortized (credited) to operation expense. The effect was to offset increases
in costs that the utilities would incur during the year. In fiscal 1995, the
utilities together amortized approximately $14 million, or $10.8 million after
income taxes.
11. ASSETS SUBJECT TO LIEN
The Indenture of Mortgage, dated January 2, 1926, as supplemented, securing
the first and refunding mortgage bonds issued by Peoples Gas, constitutes a
direct, first-mortgage lien on substantially all property owned by Peoples Gas.
The Indenture of Mortgage, dated April 1, 1955, as supplemented, securing the
first mortgage bonds issued by North Shore Gas, constitutes a direct, first-
mortgage lien on substantially all property owned by North Shore Gas.
-39-
<PAGE>
12. OTHER INCOME AND DEDUCTIONS - MISCELLANEOUS
<TABLE>
<CAPTION>
For fiscal years ended September 30, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C> <C>
Amortization of net gain on sale of Peoples Gas Building $ -- $ 576 $ 1,151
Interest on amounts recoverable from customers 224 119 2,495
Income tax settlement (see Note 10D) -- -- 14,164
Gain on expiration of gas storage contracts (see Note 8) 14,810 -- --
Amortization of gain (loss) on reacquired bonds (120) 240 273
Other (531) 268 (239)
- ----------------------------------------------------------------------------------------------------
Total other income and deductions - miscellaneous $14,383 $1,203 $17,844
- ----------------------------------------------------------------------------------------------------
</TABLE>
13. CAPITAL COMMITMENTS
Total contract and purchase order commitments of the Company and its
subsidiaries at September 30, 1996, amounted to approximately $4.1 million.
14. SHORT-TERM BORROWINGS AND CREDIT LINES
<TABLE>
<CAPTION>
At September 30, 1996 1995
- -------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C>
Bank Loans
Peoples Gas
8.75% due November 6, 1995 $ -- $ 900
8.25% due February 11, 1997 700 --
- -------------------------------------------------------------------------------------
Commercial Paper
North Shore Gas
due October 1, 1996 $ 1,925 $ --
- -------------------------------------------------------------------------------------
Available lines of credit
Unused bank lines $ 126,775 $ 130,150
- -------------------------------------------------------------------------------------
</TABLE>
Short-term cash needs of Peoples Gas and North Shore Gas are met through
intercompany loans from the Company, bank loans, and/or the issuance of
commercial paper. The outstanding total amount of bank loans and commercial
paper issuances cannot at any time exceed total bank credit then in effect.
At September 30, 1996 and 1995, the utility subsidiaries had combined lines
of credit totaling $129.4 million and $131.1 million, respectively. Of these
totals, North Shore Gas could borrow up to $30 million. Agreements covering $92
million of the total at September 30, 1996 will expire on June 25, 1997; the
agreement covering the remaining $37.4 million will expire on January 31, 1998.
Such lines of credit cover projected short-term credit needs of the subsidiaries
and support the long-term debt treatment of Peoples Gas' adjustable-rate
mortgage bonds. (See Note 15A.) Payment for the lines of credit is by fee.
-40-
<PAGE>
15. LONG-TERM DEBT
15A Interest-Rate Adjustments
The rate of interest on the City of Joliet 1984 Series C Bonds, which are
secured by Peoples Gas' Adjustable-Rate First Mortgage Bonds, Series W, is
subject to adjustment annually on October 1. Owners of the Series C Bonds have
the right to tender such bonds at par during a limited period prior to that
date. Peoples Gas is obligated to purchase any such bonds tendered if they
cannot be remarketed. All Series C Bonds that were tendered prior to October 1,
1996, have been remarketed. The interest rate on such bonds is 3.95 per cent
for the period October 1, 1996, through September 30, 1997.
The rate of interest on the City of Chicago 1993 Series B Bonds, which are
secured by Peoples Gas' Adjustable-Rate First Mortgage Bonds, Series EE, is
subject to adjustment annually on December 1. Owners of the Series B Bonds have
the right to tender such bonds at par during a limited period prior to that
date. Peoples Gas is obligated to purchase any such bonds tendered if they
cannot be remarketed. The interest rate on such bonds is 3.85 per cent for the
period December 1, 1995, through November 30, 1996.
Peoples Gas classifies these adjustable-rate bonds as long-term liabilities
since it would refinance them on a long-term basis if they could not be
remarketed. In order to ensure its ability to do so, on February 1, 1994,
Peoples Gas established a $37.4 million three year line of credit with The
Northern Trust Company which has since been extended to January 31, 1998. (See
Note 14.)
15B Bonds Redeemed
On December 29, 1995, Peoples Gas redeemed, from general corporate funds,
approximately $87 million aggregate principal amount of the City of Joliet's
1984 Gas Supply Revenue Bonds, Series A and B, which were secured by Peoples
Gas' Series U and V First and Refunding Mortgage Bonds.
On February 1, 1996, North Shore Gas redeemed $8 million aggregate
principal amount of its Series I First Mortgage Bonds using the proceeds of a
short-term bank loan as well as other monies of North Shore Gas.
15C Sinking Fund Requirements and Maturities of Subsidiaries
At September 30, 1996, long-term debt sinking fund requirements and
maturities for the next five years are:
<TABLE>
<CAPTION>
Peoples North
Fiscal Year Gas Shore Gas Consolidated
- -------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C> <C>
1997 $ -- $ -- $ --
1998 -- -- --
1999 -- -- --
2000 10,400 -- 10,400
2001 -- -- --
</TABLE>
-41-
<PAGE>
15D Fair Value of Financial Instruments
At September 30, 1996, the carrying amount of the Company's long-term debt
of $527.1 million had an estimated fair value of $561.9 million. At September
30, 1995, the carrying amount of the Company's long-term debt of $621.9 million
had an estimated fair value of $660.4 million. The estimated fair value of the
Company's long-term debt is based on yields for issues with similar terms and
remaining maturities. Since Peoples Gas and North Shore Gas are subject to
regulation, any gains or losses related to the difference between the carrying
amount and the fair value of financial instruments would not be realized by the
Company's shareholders. The carrying amount of all other financial instruments
approximates fair value.
16. PREFERRED STOCK
The Company has five million shares of Preferred Stock, no par value,
authorized for issuance, of which none was issued and outstanding at September
30, 1996.
17. COMMON STOCK
<TABLE>
<CAPTION>
For fiscal years ended September 30, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares outstanding - beginning of year 34,913,426 34,868,069 34,822,842
Shares issued:
Employee Stock Purchase Plan 21,516 32,221 35,570
Long-Term Incentive Compensation Plan 110,700 16,650 13,345
Other Deferred Compensation Plans 1,471 1,367 1,278
Shares reacquired (86,714) (4,881) (4,966)
- ----------------------------------------------------------------------------------------------------
Shares outstanding - end of year 34,960,399 34,913,426 34,868,069
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Reserved At September 30, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Direct Purchase and Investment Plan 1,500,000 1,036,891 1,036,891
Employee Stock Purchase Plan 997,997 1,019,51 31,051,734
Long-Term Incentive Compensation Plan 741,930 852,630 469,280
- ----------------------------------------------------------------------------------------------------
Total shares reserved 3,239,927 2,909,034 2,557,905
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Stock
Non-Qualified Appreciation
Long-Term Incentive Compensation Plan Price Range Stock Options Rights (SARs)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at September 30, 1993 $25.69-30.38 64,400 64,400
- ----------------------------------------------------------------------------------------------------
Granted $ 30.88 52,700 52,700
Exercised 30.38 (1,200) (1,200)
- ----------------------------------------------------------------------------------------------------
Outstanding at September 30, 1994 $25.69-30.88 115,900 115,900
- ----------------------------------------------------------------------------------------------------
Granted $ 25.69 71,500 71,500
Exercised -- -- --
- ----------------------------------------------------------------------------------------------------
Outstanding at September 30, 1995 $25.69-30.88 187,400 187,400
- ----------------------------------------------------------------------------------------------------
Granted $ 27.50 90,200 90,200
Exercised 25.69-30.88 (92,500) (88,700)
Forfeited 27.50 (5,300) (5,300)
- ----------------------------------------------------------------------------------------------------
Outstanding at September 30, 1996 $25.69-30.88 179,800 183,600
- ----------------------------------------------------------------------------------------------------
</TABLE>
-42-
<PAGE>
Restricted stock awards granted to officers of the company during the last
three fiscal years are as follows: 1996, 18,200 shares; 1995, 16,650 shares; and
1994, 12,625 shares. At September 30, 1996, there were 562,130 shares available
for future grant under options or restricted stock awards. At September 30,
1996, there were 664,050 SARs available for future grant.
18. QUARTERLY FINANCIAL DATA (UNAUDITED)
The fluctuation in quarterly results is primarily due to the seasonal
nature of the gas distribution business. The first three quarters of fiscal
1996 include weather that was 34 per cent, 12 per cent, and 26 per cent colder
than the respective similar prior quarters. Also, results for all four quarters
of fiscal 1996 reflect the positive impact of the Commission approved rate
orders. (See Note 2A.) The fiscal 1995 portion of an IRS settlement was
amortized to operation expense over that entire year. (See Note 10D.)
<TABLE>
<CAPTION>
Earnings
Operating Operating Per
Fiscal Quarters Revenues Income Net Income Share
- -------------------------------------------------------------------------------------
(Thousands, except per-share amounts)
<S> <C> <C> <C> <C>
1996
Fourth $133,996 $(1,877) $ (8,940) $ (.26)
Third 248,500 19,474 14,247 .41
Second 498,556 69,663 62,015 1.77
First 317,605 45,154 36,116 1.03
- -------------------------------------------------------------------------------------
1995
Fourth $114,705 $(1,918) $(13,355) $ (0.38)
Third 187,187 16,330 4,563 0.13
Second 424,386 57,953 45,819 1.31
First 307,123 36,221 25,127 0.72
</TABLE>
Quarterly earnings-per-share amounts are based on the weighted average
common shares outstanding for each quarter and, therefore, might not equal the
amount computed for the total year.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
-43-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Information relating to the directors of the Company is set forth under the
caption "Information Concerning Nominees for Election as Directors" of the
Company's Proxy Statement, to be filed with the SEC on or about December 27,
1996, and to be distributed in connection with the Company's Annual Meeting of
Shareholders to be held on February 28, 1997. Such information is incorporated
herein by reference.
Information relating to the executive officers of the Company is set forth
in Part I of this report under the caption "Executive Officers of the Company."
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation is set forth under the
captions "Executive Compensation" and "Report on Executive Compensation" of the
Company's Proxy Statement, to be filed with the SEC on or about December 27,
1996, and to be distributed in connection with the Company's Annual Meeting of
Shareholders to be held on February 28, 1997. Such information is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to this item is set forth under the caption "Share
Ownership of Director Nominees, and Executive Officers" of the Company's Proxy
Statement, to be filed with the SEC on or about December 27, 1996, and to be
distributed in connection with the Company's Annual Meeting of Shareholders to
be held on February 28, 1997. Such information is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
-44-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements: Page
----
See Part II, Item 8. 20
2. Financial Statement Schedules:
Schedule
Number
--------
VIII Valuation and Qualifying Accounts 46
3. Exhibits:
See Exhibit Index on page 48.
(b) Reports on Form 8-K filed during the final quarter of fiscal year 1996:
None.
-45-
<PAGE>
SCHEDULE VIII
PEOPLES ENERGY CORPORATION AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS
(Thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- ---------------------------------------- -------- -------- -------- --------
Additions Deductions
--------- ----------
Charged Charges for the
Balance to costs purpose for which the Balance
at beginning and reserves or deferred at end of
Description of period expenses credits were created period
- ---------------------------------------- ------------ --------- --------------------- ---------
Fiscal Year Ended September 30, 1996
------------------------------------
<S> <C> <C> <C> <C>
RESERVES (deducted from assets in
balance sheet):
Uncollectible items $19,013 $28,146 $20,948 $26,211
Fiscal Year Ended September 30, 1995
------------------------------------
RESERVES (deducted from assets in
balance sheet):
Uncollectible items $24,289 $22,740 $28,016 $19,013
Fiscal Year Ended September 30, 1994
------------------------------------
RESERVES (deducted from assets in
balance sheet):
Uncollectible items $19,789 $32,016 $27,516 $24,289
</TABLE>
-46-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
PEOPLES ENERGY CORPORATION
Date: December 19, 1996 By: /s/ RICHARD E. TERRY
----------------- -------------------------------------
Richard E. Terry
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated on December 19, 1996.
/s/ RICHARD E. TERRY Chairman of the Board and Chief
- ---------------------- Executive Officer and Director
Richard E. Terry (Principal Executive Officer)
/s/ KENNETH S. BALASKOVITS Vice President and Controller
- ---------------------------- (Principal Financial and Accounting
Kenneth S. Balaskovits Officer)
/s/ J. BRUCE HASCH Director
- ---------------------
J. Bruce Hasch
/s/ MICHAEL S. REEVES Director
- -----------------------
Michael S. Reeves
/s/ PASTORA SAN JUAN CAFFERTY Director
- -------------------------------
Pastora San Juan Cafferty
/s/ FRANKLIN A. COLE Director
- ----------------------
Franklin A. Cole
/s/ FREDERICK C. LANGENBERG Director
- -----------------------------
Frederick C. Langenberg
/s/ H. J. LIVINGSTON, JR. Director
- ---------------------------
H. J. Livingston, Jr.
/s/ WILLIAM G. MITCHELL Director
- -------------------------
William G. Mitchell
/s/ EARL L. NEAL Director
- ------------------
Earl L. Neal
/s/ RICHARD P. TOFT Director
- ---------------------
Richard P. Toft
/s/ ARTHUR R. VELASQUEZ Director
- -------------------------
Arthur R. Velasquez
-47-
<PAGE>
PEOPLES ENERGY CORPORATION AND SUBSIDIARY COMPANIES
EXHIBIT INDEX
(a) The exhibits listed below are filed herewith and made a part hereof:
Exhibit
Number Description of Document
------- ---------------------------------------------------------------
3(a) Amendment to the By-Laws of the Registrant, dated May 1, 1996.
3(b) Amendment to the By-Laws of the Registrant, dated August 7,
1996.
3(c) By-Laws of the Registrant, as amended, dated August 7, 1996.
10(a) Firm Transportation Service Agreement under Rate Schedule FTS-1
between Peoples Gas and ANR Pipeline Company, dated as of
September 20, 1995.
10(b) Firm Transportation Service Agreement under Rate Schedule FTS
between Peoples Gas and Natural Gas Pipeline Company of
America, dated as of February 21, 1996.
10(c) Firm Transportation Service Agreement under Rate Schedule FTS
between Peoples Gas and Natural Gas Pipeline Company of
America, dated as of February 21, 1996.
10(d) Firm Transportation Service Agreement under Rate Schedule FTS-1
between North Shore Gas and ANR Pipeline Company, dated as of
October 25, 1995.
23 Arthur Andersen LLP consent to incorporation by reference in
Registration Statement Nos. 2-82760, 2-88307, 33-6369, and 33-
63193.
27 Financial Data Schedule
99 Form 11-K for the Employee Stock Purchase Plan of the
Registrant for the fiscal year ended September 30, 1996.
(b) Exhibits listed below have been filed heretofore with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended,
and/or the Securities Exchange Act of 1934, as amended, and are
incorporated herein by reference. The file number and exhibit number of
each such exhibit are stated in the description of such exhibits.
3(d) Articles of Incorporation of the Registrant, as amended on
March 3, 1995 (Registrant Form 10-K for the fiscal year ended
September 30, 1995, Exhibit 3(b)).
4(a) The Peoples Gas Light and Coke Company First and Refunding
Mortgage, dated January 2, 1926, from Chicago By-Product Coke
Company to Illinois Merchants Trust Company, Trustee, assumed
by The Peoples Gas Light and Coke Company (Peoples) by
Indenture dated March 1, 1928 (Peoples - May 17, 1935, Exhibit
B-6a, Exhibit B-6b A-2 File No. 2-2151, 1936); Supplemental
Indenture dated as of May 20, 1936, (Peoples - Form 8-K for the
year 1936, Exhibit B-6f); Supplemental
-48-
<PAGE>
PEOPLES ENERGY CORPORATION AND SUBSIDIARY COMPANIES
EXHIBIT INDEX (Continued)
4(a) Indenture dated as of March 10, 1950 (Peoples - Form 8-K for
cont. the month of March cont.1950, Exhibit B-6i); Supplemental
Indenture dated as of June 1, 1951 (Peoples - File No. 2-8989,
Post-Effective, Exhibit 7-4(b)); Supplemental Indenture dated
as of July 15, 1966 (Peoples - Form 8-K for the month of July
1966, Exhibit 2); Supplemental Indenture dated as of August 15,
1967 (Peoples - File No. 2-26983, Post-Effective, Exhibit 2-4);
Supplemental Indenture dated as of September 15, 1970 (Peoples
- File No. 2-38168, Post-Effective Exhibit 2-2); Supplemental
Indenture dated as of April 1, 1972 (Peoples - File No. 2-
43367, Post-Effective Exhibit 2-2); Supplemental Indenture
dated as of July 15, 1973 (Peoples - File No. 2-48430, Exhibit
4-2); Supplemental Indenture dated as of June 1, 1984, and
Supplemental Indenture dated as of October 1, 1984 (Peoples -
Form 10-K for fiscal year ended September 30, 1984, Exhibits 4-
1, 4-2 and 4-3, respectively); Supplemental Indentures dated
March 1, 1985, (Peoples - Form 10-K for fiscal year ended
September 30, 1985, Exhibits 4-1, 4-2, 4-3, 4-4, respectively);
Supplemental Indenture dated May 1, 1990 (Peoples - Form 10-K
for the fiscal year ended September 30, 1990, Exhibit 4);
Supplemental Indenture dated as of April 1, 1993 (Peoples -
Form 8 dated as of May 5, 1993, Exhibit 1); Supplemental
Indenture dated as of December 1, 1993 (Peoples - Form 10-Q for
the quarterly period ended December 31, 1993, Exhibits 4(a) and
4(b)).
4(b) North Shore Gas Company (North Shore) Indenture, dated as of
April 1, 1955, from North Shore to Continental Bank, National
Association, as Trustee; Third Supplemental Indenture, dated as
of December 20, 1963 (North Shore - File No. 2-35965, Exhibit
4-1); Fifth Supplemental Indenture dated as of February 1, 1970
(North Shore - File No. 2-35965, Exhibit 4-2); Sixth
Supplemental Indenture dated as of October 1, 1973 (North
Shore) - Form 10-K for the fiscal year ended September 30,
1980, Exhibit 4-3); Seventh Supplemental Indenture dated as of
February 15, 1977 (North Shore - Form 10-K for the fiscal year
ended September 30, 1980, Exhibit 4-4; Eighth Supplemental
Indenture dated as of September 15, 1980 (North Shore - Form
10-K for the fiscal year ended September 30, 1980, Exhibit 4-
5); Ninth Supplemental Indenture dated as of December 1, 1987
(North Shore - Form 10-K for the fiscal year ended September
30, 1987, Exhibit 4); Tenth Supplemental Indenture dated as of
November 1, 1990 (North Shore - Form S-3 Registration Statement
No. 33-37332, Exhibit 4b); and Eleventh Supplemental Indenture
dated as of October 1, 1992 (North Shore - Form 10-K for the
fiscal year ended September 30, 1992, Exhibit 4): Twelfth
Supplemental Indenture dated as of April 1, 1993 (North Shore -
Form 8-K dated April 23, 1993, Exhibit 4).
10(e) Firm Transportation Service Agreement Under Rate Schedule FT
between Peoples Gas and Trunkline Gas Company, dated as of
December 1, 1993 (Registrant Form 10-K for the fiscal year
ended September 30, 1994, Exhibit 10(d)). Trust Under
Executive Deferred Compensation Plan and Supplemental
Retirement Benefit Plan, Part A and Part B, of the Registrant,
effective September 25, 1995.
-49-
<PAGE>
PEOPLES ENERGY CORPORATION AND SUBSIDIARY COMPANIES
EXHIBIT INDEX (Continued)
10(e) (Registrant Form 10-K for fiscal year ended September 30, 1995,
cont. Exhibit 10(a)); cont. ETS Service Agreement between Peoples Gas
and ANR Pipeline Company, dated September 21, 1994.
(Registrant Form 10-K for fiscal year ended September 30, 1995,
Exhibit 10(b)); FSS Service Agreement between Peoples Gas and
ANR Pipeline Company, dated September 21, 1994. (Registrant
Form 10-K for fiscal year ended September 30, 1995, Exhibit
10(c)); Storage Rate Schedule NSS Agreement between Peoples Gas
and Natural Gas Pipeline Company of America, dated October 19,
1995. (Registrant Form 10-K for fiscal year ended September
30, 1995, Exhibit 10(d)); Transportation Rate Schedule FTS
Agreement between Peoples Gas and Natural Gas Pipeline Company
of America, dated October 19, 1995. (Registrant Form 10-K for
fiscal year ended September 30, 1995, Exhibit 10(e)); Storage
Rate Schedule DSS Agreement between Peoples Gas and Natural Gas
Pipeline Company of America, dated December 1, 1995.
(Registrant Form 10-K for fiscal year ended September 30, 1995,
Exhibit 10(f)); Transportation Rate Schedule FTS Agreement
between Peoples Gas and Natural Gas Pipeline Company of
America, dated December 1, 1995. (Registrant Form 10-K for
fiscal year ended September 30, 1995, Exhibit 10(g)); Firm
Transportation Service Agreement Under Rate Schedule FT between
Peoples Gas and Trunkline Gas Company, dated as of April 1,
1995. (Registrant Form 10-K for fiscal year ended
September 30, 1995, Exhibit 10(h)); Quick Notice Transportation
Service Agreement Under Rate Schedule QNT between Peoples Gas
and Trunkline Gas Company, dated as of December 1, 1995.
(Registrant Form 10-K for fiscal year ended September 30, 1995,
Exhibit 10(i)); Quick Notice Transportation Service Agreement
Under Rate Schedule QNT between Peoples Gas and Trunkline Gas
Company, dated as of December 1, 1995. (Registrant Form 10-K
for fiscal year ended September 30, 1995, Exhibit 10(j)); ETS
Service Agreement between North Shore Gas and ANR Pipeline
Company, dated September 21, 1994. (Registrant Form 10-K for
fiscal year ended September 30, 1995, Exhibit 10(k)); FSS
Service Agreement between North Shore Gas and ANR Pipeline
Company, dated September 21, 1994. (Registrant Form 10-K for
fiscal year ended September 30, 1995, Exhibit 10(l));
Transportation Rate Schedule FTS Agreement between North Shore
Gas and Natural Gas Pipeline Company of America, dated
September 22, 1995. (Registrant Form 10-K for fiscal year
ended September 30, 1995, Exhibit 10(m)); Storage Rate Schedule
NSS Agreement between North Shore Gas and Natural Gas Pipeline
Company of America, dated October 19, 1995. (Registrant Form
10-K for fiscal year ended September 30, 1995, Exhibit 10(n));
Transportation Rate Schedule FTS Agreement between North Shore
Gas and Natural Gas Pipeline Company of America, dated October
19, 1995. (Registrant Form 10-K for fiscal year ended
September 30, 1995, Exhibit 10(o)); Storage Rate Schedule DSS
Agreement between North Shore Gas and Natural Gas Pipeline
Company of America, dated December 1, 1995. (Registrant Form
10-K for fiscal year ended September 30, 1995, Exhibit 10(p)).
-50-
<PAGE>
PEOPLES ENERGY CORPORATION AND SUBSIDIARY COMPANIES
EXHIBIT INDEX (Continued)
10(f) Lease dated October 20, 1993, between Prudential Plaza
Associates, as Landlord, and Peoples Gas, as Tenant (Registrant
Form 10-Q for the quarterly period ended December 31, 1993,
Exhibit 10(a)).
10(g) Construction Guaranty Agreement dated December 16, 1992, by the
Company and Trigen Energy Corporation (Registrant Form 10-Q for
the quarterly period ended December 31, 1993, Exhibit 10(f));
Service Guaranty Agreement dated December 16, 1992, by the
Company and Trigen Energy Corporation (Registrant Form 10-Q for
the quarterly period ended December 31, 1993, Exhibit 10(g)).
10(h) Short-Term Incentive Compensation Plan of the Registrant, as
amended on December 7, 1994 (Registrant Form 10-K for the
fiscal year ended September 30, 1994, Exhibit 10(a)); Executive
Deferred Compensation Plan of the Registrant, effective October
1, 1994 (Registrant Form 10-K for the fiscal year ended
September 30, 1994, Exhibit 10(b)); Supplemental Retirement
Benefit Plan, Part A, Part B and Part C, of the Registrant,
effective December 7, 1994 (Registrant Form 10-K for the fiscal
year ended September 30, 1994, Exhibit 10(c)); Long-Term
Incentive Compensation Plan (File No. 33-63193, Form S-8 filed
on October 4, 1995).
21 Subsidiaries of the Registrant (Registrant Form 10-K for the
fiscal year ended September 30, 1982, Exhibit 22).
-51-
<PAGE>
Exhibit 3(a)
PEOPLES ENERGY CORPORATION
CONSIDER AMENDMENTS TO THE BY-LAWS OF THE COMPANY
After discussion, on motion duly made and seconded, the following
resolutions were unanimously adopted:
RESOLVED, That this Board of Directors hereby approves
amendment to the Company's By-Laws, such amendment to be effective May
1, 1996 by replacing Section 2.4 of Article II of the By-Laws in its
entirety with the following:
SECTION 2.4. NOTICE OF MEETINGS. Written or printed notice
stating the place, date and hour of each annual or special meeting of
the shareholders, and, in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be given not less
than 10 nor more than 60 days before the date of the meeting, except
as otherwise provided in this section or by statute. Notice of any
meeting of the shareholders may be waived by any shareholder. At any
meeting of the shareholders of the Company, only such business shall
be conducted as shall have been brought before the meeting (1) by or
at the direction of the Board of Directors or (2) by any shareholder
of the Company who is a holder of record at the time of giving the
notice provided for in this section, who shall be entitled to vote at
the meeting, and who complies with the notice procedures set forth in
this section. For business to be properly brought before a
shareholders' meeting by a shareholder, timely written notice shall be
made to the Secretary of the Company. The shareholder's notice shall
be delivered to, or mailed and received at, the principal office of
the Company not less than 60 days nor more than 90 days prior to the
meeting; provided, however, in the event that less than 70 days notice
or prior public disclosure of the date of the meeting is given or made
to shareholders, notice by the shareholder to be timely must be
received not later than the close of business on the tenth day
following the day on which the notice of the date of the meeting was
mailed or the public disclosure was made; provided further however,
notice by the shareholder to be timely must be received in any event
not later than the close of business on the seventh day preceding the
day on
<PAGE>
which the meeting is to be held. The shareholder's notice shall set
forth (1) a brief description of the business desired to be brought
before the meeting and the reasons for considering the business, and
(2) (a) the name and address, as they appear on the Company's books,
of the shareholder, (b) the class and number of shares of capital
stock of the Company owned by the shareholder, and (c) any material
interest of the shareholder in the proposed business. The shareholder
shall also comply with all applicable requirements of the Securities
Exchange Act of 1934 (the "1934 Act") and the rules and regulations
thereunder with respect to the matters set forth in this section. If
the chairman of the meeting shall determine and declare at the meeting
that the proposed business was not brought before the meeting in
accordance with the procedures prescribed by this section, the
business shall not be considered. The notice procedures set forth in
this section 2.4 do not change or limit any procedures the Company may
require in accordance with applicable law with respect to the
inclusion of matters in the Company's proxy statement.
and
RESOLVED FURTHER, That this Board of Directors hereby
approves amendment to the Company's By-Laws, such amendment to be
effective May 1, 1996, by replacing Section 3.1 of Article III of the
By-Laws in its entirety with the following:
SECTION 3.1. NUMBER AND ELECTION. The business and affairs
of the Company shall be managed and controlled by a Board of
Directors, eleven (11) in number, none of whom need to be a
shareholder, which number may be altered from time to time by
amendment of these by-laws, but shall never be less than three (3).
Except as provided in the Articles of Incorporation, the directors
shall be elected by the shareholders entitled to vote at the annual
meeting of such shareholders and each director shall be elected to
serve for a term of one (1) year and thereafter until a successor
shall be elected and shall qualify. Only persons who are nominated in
accordance with the procedures set forth in this section shall be
eligible to be nominated as directors at any meeting of the
shareholders of the Company. At any meeting of the shareholders of
the Company, nominations of persons for election to the Board of
Directors may be made (1) by or at
<PAGE>
the direction of the Board of Directors or (2) by any shareholder of
the Company who is a holder of record at the time of giving the notice
provided for in this section, who shall be entitled to vote at the
meeting, and who complies with the notice procedures set forth in this
section. For a nomination to be properly brought before a
shareholders' meeting by a shareholder, timely written notice shall be
made to the Secretary of the Company. The shareholder's notice shall
be delivered to, or mailed and received at, the principal office of
the Company no less than 60 days nor more than 90 days prior to the
meeting; provided, however, in the event that less than 70 days notice
or prior public disclosure of the date of the meeting is given or made
to shareholders, notice by the shareholder to be timely must be
received not later than the close of business on the tenth day
following the day on which the notice of the date of the meeting was
mailed or the public disclosure was made; provided further, however,
notice by the shareholder to be timely must be received in any event
not later than the close of business on the seventh day preceding the
day on which the meeting is to be held. The shareholder's notice
shall set forth (1) as to each person whom the shareholder proposes to
nominate for election or reelection as a director, all information
relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise
required by applicable law (including the person's written consent to
being named as a nominee and to serving as a director if elected), and
(2) (a) the name and address, as they appear on the Company's books,
of the shareholder, (b) the class and number of shares of capital
stock of the Company owned by the shareholder, and (c) a description
of all arrangements or understandings between the shareholder and each
nominee and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to be
made by the shareholder. The shareholder shall also comply with all
applicable requirements of the 1934 Act and the rules and regulations
thereunder with respect to the matters set forth in this section. If
the chairman of the meeting shall determine and declare at the meeting
that a nomination was not made in accordance with the procedures
prescribed by this section, the nomination shall not be accepted.
/s/ E. P. Cassidy
------------------
Secretary
<PAGE>
Exhibit 3(b)
PEOPLES ENERGY CORPORATION
CONSIDER AMENDMENT TO BY-LAWS OF THE COMPANY
After discussion, on motion duly made and seconded, the following resolution was
unanimously adopted:
RESOLVED, That this Board of Directors hereby approves
amendment to the Company's By-Laws, such amendment to be effective
August 7, 1996 by replacing Section 7.1 of Article VII of the By-Laws
in its entirety with the following:
SECTION 7.1. CONTRACTS AND OTHER INSTRUMENTS. All
contracts or obligations of the Company shall be in writing and shall
be signed either by the Chairman of the Board, the President, or any
Vice President and, unless the Board shall otherwise determine and
direct, the seal of the Company shall be attached thereto, duly
attested by the Secretary or an Assistant Secretary, except contracts
entered into in the ordinary course of business where the amount
involved is less than Five Hundred Thousand Dollars ($500,000), and
except contracts for the employment of servants or agents, which
contracts so excepted may be entered into by the Chairman of the
Board, the President, any Vice President, or by such officers or
agents as the Chairman of the Board or the President may designate and
authorize. Unless the Board shall otherwise determine and direct, all
checks or drafts and all promissory notes shall be signed by two
officers of the Company. When prescribed by the Board, bonds,
promissory notes, and other obligations of the Company may bear the
facsimile signature of the officer who is authorized to sign such
instruments and, likewise, may bear the facsimile signature of the
Secretary or an Assistant Secretary.
/s/ E. P. Cassidy
----------------------
Secretary
<PAGE>
Exhibit 3(c)
BY-LAWS
OF
PEOPLES ENERGY CORPORATION
AMENDED AUGUST 7, 1996
<PAGE>
PEOPLES ENERGY CORPORATION
BY-LAWS
ARTICLE I - OFFICES
ARTICLE II - MEETINGS OF SHAREHOLDERS
ARTICLE III - DIRECTORS AND COMMITTEES
ARTICLE IV - OFFICERS
ARTICLE V - INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
ARTICLE VI - CERTIFICATES OF STOCK AND THEIR
TRANSFER
ARTICLE VII - MISCELLANEOUS (CONTRACTS)
ARTICLE VIII - AMENDMENT OR REPEAL OF BY-LAWS
<PAGE>
PEOPLES ENERGY CORPORATION
INDEX
PAGE
A
Amendment of By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . 18
Appointment of Officers . . . . . . . . . . . . . . . . . . . . . . . 10
Assistant Controller, Duties of. . . . . . . . . . . . . . . . . . . . 13
Assistant General Counsel, Duties of . . . . . . . . . . . . . . . . . 13
Assistant Secretary, Duties of . . . . . . . . . . . . . . . . . . . . 13
Assistant Treasurer, Duties of . . . . . . . . . . . . . . . . . . . . 13
Assistant Vice President, Duties of. . . . . . . . . . . . . . . . . . 12
B
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 5
C
Certificates of Stock and Their Transfer . . . . . . . . . . . . . . . 15
Chairman of the Board, Duties of . . . . . . . . . . . . . . . . . . . 11
Chairman of the Executive Committee. . . . . . . . . . . . . . . . . . 8
Committees
Executive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Controller, Duties of . . . . . . . . . . . . . . . . . . . . . . . 13
Contracts, Execution of . . . . . . . . . . . . . . . . . . . . . . . 17
D
Directors and Committees . . . . . . . . . . . . . . . . . . . . . . . 5
E
Election of Directors . . . . . . . . . . . . . . . . . . . . . . . . 5
Election of Officers . . . . . . . . . . . . . . . . . . . . . . . . . 10
Executive Committee. . . . . . . . . . . . . . . . . . . . . . . . . . 8
F
Fees and Compensation . . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
PEOPLES ENERGY CORPORATION
PAGE
G
General Counsel, Duties of . . . . . . . . . . . . . . . . . . . . . . 13
I
Indemnification of Directors, Officers, Employees
and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
M
Meetings
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . 9
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
N
Notice of Meetings
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
O
Officers
Appointed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Elected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Offices, Two or More Held By One Person. . . . . . . . . . . . . . . . 10
P
President, Duties of . . . . . . . . . . . . . . . . . . . . . . . . . 11
Presiding Officer
Board Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Shareholders Meetings . . . . . . . . . . . . . . . . . . . . . . . 5
Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Q
Quorum
Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
<PAGE>
PEOPLES ENERGY CORPORATION
PAGE
S
Secretary, Duties of . . . . . . . . . . . . . . . . . . . . . . . 12
Signatures to Checks, Drafts, etc. . . . . . . . . . . . . . . . . . . 17
Stock, Certificates of and their Transfer. . . . . . . . . . . . . . . 15
T
Treasurer, Duties. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
V
Vice President, Duties of. . . . . . . . . . . . . . . . . . . . . . . 12
Voting
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Stock Owned by Company . . . . . . . . . . . . . . . . . . . . . . . 18
<PAGE>
BY-LAWS
OF
PEOPLES ENERGY CORPORATION
ARTICLE I
OFFICES
SECTION 1.1. PRINCIPAL OFFICE. The principal office of the Company
shall be in the City of Chicago, County of Cook and State of Illinois.
SECTION 1.2. OTHER OFFICES. The Company may also have offices at
such other places both within and without the State of Illinois as the Board of
Directors may from time to time determine or the business of the Company may
require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 2.1. ANNUAL MEETING. The annual meeting of the shareholders
shall be held on the fourth Friday of the month of February in each year, if not
a legal holiday, or, if a legal holiday, then on the next succeeding business
day, for the purpose of electing directors and for the transaction of such other
business as may come before the meeting. If the election of directors shall not
be held on the day herein designated for the annual meeting, or at any
adjournment thereof, the Board of Directors shall cause such election to be held
at a special meeting of the shareholders as soon thereafter as convenient.
SECTION 2.2. SPECIAL MEETINGS. Except as otherwise prescribed by
statute, special meetings of the shareholders for any purpose or purposes, may
be
<PAGE>
- 2 -
called by the Chairman of the Board, the Vice Chairman of the Executive
Committee, the Executive Committee or the President. Such request shall state
the purpose or purposes of the proposed meeting.
SECTION 2.3. PLACE OF MEETINGS. Each meeting of the shareholders
for the election of the directors shall be held at the principal office of the
Company in the City of Chicago, Illinois, unless the Board of Directors shall by
resolution designate another place as the place of such meeting. Meetings of
shareholders for any other purpose may be held at such place, and at such time
as shall be determined by the Chairman of the Board, or the President, or in
their absence, by the Secretary, and stated in the notice of the meeting or in a
duly executed waiver of notice thereof.
SECTION 2.4. NOTICE OF MEETINGS. Written or printed notice stating
the place, date and hour of each annual or special meeting of the shareholders,
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be given not less than 10 nor more than 60 days before
the date of the meeting, except as otherwise provided in this section or by
statute. Notice of any meeting of the shareholders may be waived by any
shareholder. At any meeting of the shareholders of the Company, only such
business shall be conducted as shall have been brought before the meeting (1) by
or at the direction of the Board of Directors or (2) by any shareholder of the
Company who is a holder of record at the time of giving the notice provided for
in this section, who shall be entitled to vote at the meeting, and who complies
with the notice procedures set forth in this section. For business to be
properly brought before a shareholders' meeting by a shareholder, timely written
notice shall be made to the Secretary of the Company. The shareholder's notice
shall be
<PAGE>
- 3 -
delivered to, or mailed and received at, the principal office of the Company
not less than 60 days nor more than 90 days prior to the meeting; provided,
however, in the event that less than 70 days notice or prior public disclosure
of the date of the meeting is given or made to shareholders, notice by the
shareholder to be timely must be received not later than the close of business
on the tenth day following the day on which the notice of the date of the
meeting was mailed or the public disclosure was made; provided further however,
notice by the shareholder to be timely must be received in any event not later
than the close of business on the seventh day preceding the day on which the
meeting is to be held. The shareholder's notice shall set forth (1) a brief
description of the business desired to be brought before the meeting and the
reasons for considering the business, and (2) (a) the name and address, as they
appear on the Company's books, of the shareholder, (b) the class and number of
shares of capital stock of the Company owned by the shareholder, and (c) any
material interest of the shareholder in the proposed business. The shareholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934 (the "1934 Act") and the rules and regulations thereunder with
respect to the matters set forth in this section. If the chairman of the
meeting shall determine and declare at the meeting that the proposed business
was not brought before the meeting in accordance with the procedures prescribed
by this section, the business shall not be considered. The notice procedures
set forth in this section 2.4 do not change or limit any procedures the Company
may require in accordance with applicable law with respect to the inclusion of
matters in the Company's proxy statement.
<PAGE>
- 4 -
SECTION 2.5. QUORUM. The holders of a majority of the shares issued
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall be requisite for, and shall constitute, a quorum at all meetings
of the shareholders of the Company for the transaction of business, except as
otherwise provided by statute or these by-laws. If a quorum shall not be
present or represented at any meeting of the shareholders, the shareholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting if the adjournment is for thirty days or less or
unless after that adjournment a new record date is fixed, until a quorum shall
be present or represented. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally noticed.
SECTION 2.6. PROXIES. At every meeting of the shareholders, each
shareholder having the right to vote thereat shall be entitled to vote in person
or by proxy. Such proxy shall be appointed by an instrument in writing
subscribed by such shareholder and bearing a date not more than eleven months
prior to such meeting, unless such proxy provides for a longer period, and shall
be filed with the Secretary of the Company before, or at the time of, the
meeting.
SECTION 2.7. VOTING. At each meeting of the shareholders, each
shareholder shall be entitled to one vote for each share of stock entitled to
vote thereat which is registered in the name of such shareholder on the books of
the Company. At all elections of directors of the Company, the holders of
shares of stock of the Company shall be entitled to cumulative voting. When a
quorum is present at any meeting of the
<PAGE>
- 5 -
shareholders, the vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the meeting shall be
sufficient for the transaction of any business, unless otherwise provided by
statute, the Articles of Incorporation or these by-laws.
SECTION 2.8. PRESIDING OFFICER. The presiding officer of any
meeting of the shareholders shall be the Chairman of the Board or, in the case
of the absence of the Chairman of the Board, the President.
ARTICLE III
DIRECTORS AND COMMITTEES
SECTION 3.1. NUMBER AND ELECTION. The business and affairs of the
Company shall be managed and controlled by a Board of Directors, eleven (11) in
number, none of whom need to be a shareholder, which number may be altered from
time to time by amendment of these by-laws, but shall never be less than three
(3). Except as provided in the Articles of Incorporation, the directors shall
be elected by the shareholders entitled to vote at the annual meeting of such
shareholders and each director shall be elected to serve for a term of one (1)
year and thereafter until a successor shall be elected and shall qualify. Only
persons who are nominated in accordance with the procedures set forth in this
section shall be eligible to be nominated as directors at any meeting of the
shareholders of the Company. At any meeting of the shareholders of the Company,
nominations of persons for election to the Board of Directors may be made (1) by
or at the direction of the Board of Directors or (2) by any shareholder of the
Company who is a holder of record at the time of giving the notice provided for
in this section, who shall be entitled to vote at the meeting, and
<PAGE>
- 6 -
who complies with the notice procedures set forth in this section. For a
nomination to be properly brought before a shareholders' meeting by a
shareholder, timely written notice shall be made to the Secretary of the
Company. The shareholder's notice shall be delivered to, or mailed and received
at, the principal office of the Company no less than 60 days nor more than 90
days prior to the meeting; provided, however, in the event that less than 70
days notice or prior public disclosure of the date of the meeting is given or
made to shareholders, notice by the shareholder to be timely must be received
not later than the close of business on the tenth day following the day on which
the notice of the date of the meeting was mailed or the public disclosure was
made; provided further, however, notice by the shareholder to be timely must be
received in any event not later than the close of business on the seventh day
preceding the day on which the meeting is to be held. The shareholder's notice
shall set forth (1) as to each person whom the shareholder proposes to nominate
for election or reelection as a director, all information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required by applicable law (including the person's
written consent to being named as a nominee and to serving as a director if
elected), and (2) (a) the name and address, as they appear on the Company's
books, of the shareholder, (b) the class and number of shares of capital stock
of the Company owned by the shareholder, and (c) a description of all
arrangements or understandings between the shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder. The shareholder
shall also comply with all applicable requirements of the 1934 Act and the rules
and
<PAGE>
- 7 -
regulations thereunder with respect to the matters set forth in this section.
If the chairman of the meeting shall determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by this
section, the nomination shall not be accepted.
SECTION 3.2. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held immediately, or as soon as practicable, after the annual
meeting of the shareholders in each year for the purpose of electing officers
and for the transaction of such other business as may be deemed necessary, and
regular meetings of the Board shall be held at such date and time and at such
place as the Board of Directors may from time to time determine. Not less than
two days' notice of all regular meetings of the Board, except the meeting to be
held after the annual meeting of shareholders which shall be held without other
notice than this by-law, shall be given to each director personally or by mail
or telegram.
SECTION 3.3. SPECIAL MEETINGS. Special meetings of the Board may be
called at any time by the Chairman of the Board, the President, or by any two
directors, by causing the Secretary to mail to each director, not less than
three days before the time of such meeting, a written notice stating the time
and place of such meeting. Notice of any meeting of the Board may be waived by
any director.
SECTION 3.4. QUORUM. At each meeting of the Board of Directors, the
presence of not less than a majority of the total number of directors specified
in Section 3.1 hereof shall be necessary and sufficient to constitute a quorum
for the transaction of business, and the act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be
<PAGE>
- 8 -
otherwise specifically provided by statute. If a quorum shall not be present at
any meeting of directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present. In determining the presence of a quorum at a meeting
of the directors or a committee thereof for the purpose of authorizing a
contract or transaction between the Company and one or more of its directors, or
between the Company and any other corporation, partnership, association, or
other organization in which one or more of the directors of this Company are
directors or officers, or have a financial interest in such other organization,
such interested director or directors may be counted in determining a quorum.
SECTION 3.5. PRESIDING OFFICER. The presiding officer of any
meeting of the Board of Directors shall be the Chairman of the Board. In the
case of the absence of the Chairman of the Board, for reasons other than
provided in Section 4.3, the President shall act in his place and stead. In the
case of the temporary absence of both the Chairman of the Board and the
President, the Vice Chairman of the Executive Committee or, in his absence, any
other director elected by vote of a majority of the directors present at the
meeting, shall act as chairman of the meeting.
SECTION 3.6. EXECUTIVE COMMITTEE. The Executive Committee of the
Board of Directors shall consist of the Chairman of the Board who shall be the
Chairman of the Executive Committee, and each of the nonmanagement directors.
The Chairman of the Board shall select a Vice Chairman of the Executive
Committee subject to the approval of the Board of Directors of the Company. The
Executive Committee shall, in the recess of the Board, have all the powers of
the Board except
<PAGE>
- 9 -
those powers which, under the law of the State of Illinois, may not be exercised
by such Committee and shall keep a record of its proceedings and report the same
to the Board. The Executive Committee may meet at any place whenever required
by a member of the Committee and may act by the consent of a majority of its
members, although not formally convened.
SECTION 3.7. OTHER COMMITTEES. The Board may appoint other
committees, standing or special, from time to time from among its own members or
otherwise, and may confer such powers on such committees as the Board may
determine and may revoke such powers and terminate the existence of such
committees at its pleasure.
Section 3.8. ACTION WITHOUT MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors, or any committee
thereof, may be taken without a meeting if all members of the Board or of such
committee, as the case may be, consent thereto in writing and such writing or
writings are filed with the minutes of the proceedings of the Board or such
committee.
SECTION 3.9. FEES AND COMPENSATION OF DIRECTORS. Directors shall
not receive any stated salary for their services as such; but, by resolution of
the Board of Directors, reasonable fees, with or without expenses of attendance,
may be allowed. Members of the Board shall be allowed their reasonable
traveling expenses when actually engaged in the business of the Company, to be
audited and allowed as in other cases of demands against the Company. Members
of standing or special committees may be allowed fees and expenses for attending
committee meetings.
<PAGE>
- 10 -
Nothing herein contained shall be construed to preclude any director from
serving the Company in any other capacity and receiving compensation therefor.
ARTICLE IV
OFFICERS
SECTION 4.1. ELECTION OF OFFICERS. There shall be elected by the
Board of Directors in each year the following officers: a Chairman of the
Board; a President; such number of Senior Vice Presidents, such number of
Executive Vice Presidents, such number of Vice Presidents and such number of
Assistant Vice Presidents as the Board at the time may decide upon; a Secretary;
such number of Assistant Secretaries as the Board at the time may decide upon; a
Treasurer; such number of Assistant Treasurers as the Board at the time may
decide upon; a Controller; and such number of Assistant Controllers as the Board
at the time may decide upon; a General Counsel; and such number of Assistant
General Counsel as the Board at the time may decide upon. Any two or more
offices may be held by one person, except that the offices of President and
Secretary may not be held by the same person. All officers shall hold their
respective offices during the pleasure of the Board.
SECTION 4.2. APPOINTMENT OF OFFICERS. The Board of Directors, the
Executive Committee, the Chairman of the Board, or the President may from time
to time appoint such other officers as may be deemed necessary, including one or
more Vice Presidents, one or more Assistant Vice Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, one or more Assistant
Controllers and one or more Assistant General Counsel, and such other agents and
employees of the Company as may be deemed proper. Such officers, agents and
employees shall
<PAGE>
- 11 -
have such authority, perform such duties and receive such compensation as the
Board of Directors, the Executive Committee or, in the case of appointments made
by the Chairman of the Board or the President, as the Chairman of the Board or
the President, may from time to time prescribe and determine. The Board of
Directors or the Executive Committee may from time to time authorize any officer
to appoint and remove agents and employees, to prescribe their powers and duties
and to fix their compensation therefor.
SECTION 4.3. DUTIES OF CHAIRMAN OF THE BOARD. The Chairman of the
Board shall be the chief executive officer of the Company and shall have control
and direction of the management and affairs of the Company and may execute all
contracts, deeds, assignments, certificates, bonds or other obligations for and
on behalf of the Company, and sign certificates of stock and records of
certificates required by law to be signed by the Chairman of the Board. When
present, the Chairman of the Board shall preside at all meetings of the Board
and of the shareholders. In the absence of the Chairman of the Board, due to
his permanent disability, death, resignation or removal from office, the Vice
Chairman of the Executive Committee shall promptly convene the Executive
Committee to select a nominee for that office and submit said nominee's name to
the Board of Directors for their consideration.
SECTION 4.4. DUTIES OF PRESIDENT. Subject to the Control and
direction of the Chairman of the Board, and to the control of the Board, the
President shall have general management of all the business of the Company, and
he shall have such other powers and perform such other duties as may be
prescribed for him by the Board or be delegated to him by the Chairman of the
Board. He shall possess the same power as
<PAGE>
- 12 -
the Chairman of the Board to sign all certificates, contracts and other
instruments of the Company. In case of the absence or disability of the
President, or in case of his death, resignation or removal from office, the
powers and duties of the President shall devolve upon the Chairman of the Board
during absence or disability, or until the vacancy in the office of President
shall be filled.
SECTION 4.5. DUTIES OF VICE PRESIDENT. Each of the Senior Vice
Presidents, Executive Vice Presidents, Vice Presidents and Assistant Vice
Presidents shall have such powers and duties as may be prescribed for him by the
Board, or be delegated to him by the Chairman of the Board or by the President.
Each of such officers shall possess the same power as the President to sign all
certificates, contracts and other instruments of the Company.
SECTION 4.6. DUTIES OF SECRETARY. The Secretary shall have the
custody and care of the corporate seal, records and minute books of the
Company. He shall attend the meetings of the Board, of the Executive Committee,
and of the shareholders, and duly record and keep the minutes of the
proceedings, and file and take charge of all papers and documents belonging to
the general files of the Company, and shall have such other powers and duties as
are commonly incident to the office of Secretary or as may be prescribed for him
by the Board, or be delegated to him by the Chairman of the Board or by the
President.
SECTION 4.7. DUTIES OF TREASURER. The Treasurer shall have charge
of, and be responsible for, the collection, receipt, custody and disbursement of
the funds of the Company, and shall deposit its funds in the name of the Company
in such banks, trust companies or safety deposit vaults as the Board may direct.
He shall have the
<PAGE>
- 13 -
custody of the stock record books and such other books and papers as in the
practical business operations of the Company shall naturally belong in the
office or custody of the Treasurer, or as shall be placed in his custody by the
Board, the Chairman of the Board, the President, or any Vice President, and
shall have such other powers and duties as are commonly incident to the office
of Treasurer, or as may be prescribed for him by the Board, or be delegated to
him by the Chairman of the Board or by the President.
SECTION 4.8. DUTIES OF CONTROLLER. The Controller shall have
control over all accounting records pertaining to moneys, properties, materials
and supplies of the Company. He shall have Charge of the bookkeeping and
accounting records and functions, the related accounting information systems and
reports and executive supervision of the system of internal accounting controls,
and such other powers and duties as are commonly incident to the office of
Controller or as may be prescribed by the Board, or be delegated to him by the
Chairman of the Board or by the President.
SECTION 4.9. DUTIES OF GENERAL COUNSEL. The General Counsel shall
have full responsibility for all legal advice, counsel and services for the
Company and its subsidiaries including employment and retaining of attorneys and
law firms as shall in his discretion be necessary or desirable and shall have
such other powers and shall perform such other duties as from time to time may
be assigned to him by the Board, the Chairman of the Board or the President.
SECTION 4.10. DUTIES OF ASSISTANT SECRETARY, ASSISTANT TREASURER,
ASSISTANT CONTROLLER AND ASSISTANT GENERAL COUNSEL. The Assistant Secretary,
Assistant Treasurer, Assistant Controller and Assistant General Counsel shall
assist
<PAGE>
- 14 -
the Secretary, Treasurer, Controller, and General Counsel, respectively, in the
performance of the duties assigned to each and shall for such purpose have the
same powers as his principal. He shall also have such other powers and duties
as may be prescribed for him by the Board, or be delegated to him by the
Chairman of the Board or by the President.
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
SECTION 5.1. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES.
The Company shall indemnify, to the fullest extent permitted under the laws of
the State of Illinois and any other applicable laws, as they now exist or as
they may be amended in the future, any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including, without limitation, an action by or in the right of the Company), by
reason of the fact that he or she is or was a director, officer or employee of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding.
SECTION 5.2. ADVANCEMENT OF EXPENSES TO DIRECTORS, OFFICERS AND
EMPLOYEES. Expenses incurred by such a director, officer or employee in
defending a civil or criminal action, suit or proceeding shall be paid by the
Company in advance of the final disposition of such action, suit or proceeding
to the fullest extent permitted
<PAGE>
- 15 -
under the laws of the State of Illinois and any other applicable laws, as they
now exist or as they may be amended in the future.
SECTION 5.3. INDEMNIFICATION AND ADVANCEMENT OF EXPENSES TO AGENTS.
The board of directors may, by resolution, extend the provisions of this Article
V regarding indemnification and the advancement of expenses to any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding by reason of the fact he or she is or
was an agent of the Company or is or was serving at the request of the Company
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise.
SECTION 5.4. RIGHTS NOT EXCLUSIVE. The rights provided by or granted
under this Article V are not exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled.
SECTION 5.5. CONTINUING RIGHTS. The indemnification and advancement
of expenses provided by or granted under this Article V shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of that person.
ARTICLE VI
CERTIFICATES OF STOCK AND THEIR TRANSFER
SECTION 6.1. CERTIFICATES OF STOCK. The certificates of stock of
the Company shall be in such form as may be determined by the Board of
Directors, shall be numbered and shall be entered in the books of the Company as
they are issued. They shall exhibit the holder's name and number of shares and
shall be signed by the
<PAGE>
- 16 -
Chairman of the Board, the President or a Vice President and also by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
and shall bear the corporate seal or a facsimile thereof. If a certificate is
countersigned by a transfer agent or registrar, other than the Company itself or
its employee, any other signature or countersignature on the certificate may be
facsimiles. In case any officer of the Company, or any officer or employee of
the transfer agent or registrar, who has signed or whose facsimile signature has
been placed upon such certificate ceases to be an officer of the Company, or an
officer or employee of the transfer agent or registrar, before such certificate
is issued, said certificate may be issued with the same effect as if the officer
of the Company, or the officer or employee of the transfer agent or registrar,
had not ceased to be such at the date of issue.
SECTION 6.2. TRANSFER OF STOCK. Upon surrender to the Company of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, and upon payment of applicable
taxes with respect to such transfer, it shall be the duty of the Company,
subject to such rules and regulations as the Board of Directors may from time to
time deem advisable concerning the transfer and registration of certificates for
shares of stock of the Company, to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon its
books.
SECTION 6.3. SHAREHOLDERS OF RECORD. The Company shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or
<PAGE>
- 17 -
interest in such share or shares on the part or any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
statute.
SECTION 6.4. LOST, DESTROYED OR STOLEN CERTIFICATES. The Board of
Directors, in individual cases or by general resolution, may direct a new
certificate or certificates to be issued by the Company as a replacement for a
certificate or certificates for a like number of shares alleged to have been
lost, destroyed or stolen, upon the making of an affidavit of that fact by the
person claiming the certificate or certificates of stock to be lost, destroyed
or stolen. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, destroyed or stolen
certificate or certificates, or his legal representative, to give the Company a
bond in such form and amount as it may direct as indemnity against any claim
that may be made against the Company with respect to the certificate or
certificates alleged to have been lost, destroyed or stolen.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. CONTRACTS AND OTHER INSTRUMENTS. All contracts or
obligations of the Company shall be in writing and shall be signed either by the
Chairman of the Board, the President, or any Vice President and, unless the
Board shall otherwise determine and direct, the seal of the Company shall be
attached thereto, duly attested by the Secretary or an Assistant Secretary,
except contracts entered into in the ordinary course of business where the
amount involved is less than Five Hundred Thousand Dollars ($500,000), and
except contracts for the employment
<PAGE>
- 18 -
of servants or agents, which contracts so excepted may be entered into by the
Chairman of the Board, the President, any Vice President, or by such officers or
agents as the Chairman of the Board or the President may designate and
authorize. Unless the Board shall otherwise determine and direct, all checks or
drafts and all promissory notes shall be signed by two officers of the Company.
When prescribed by the Board, bonds, promissory notes, and other obligations of
the Company may bear the facsimile signature of the officer who is authorized to
sign such instruments and, likewise, may bear the facsimile signature of the
Secretary or an Assistant Secretary.
SECTION 7.2. VOTING STOCK OWNED BY COMPANY. Any or all shares owned
by the Company in any other corporation, and any or all voting trust
certificates owned by the Company calling for or representing shares of stock of
any other corporation, may be voted by the Chairman of the Board, the President,
any Vice President, the Secretary or the Treasurer, either in person or by
written proxy given to any person in the name of the Company at any meeting of
the shareholders of such corporation, or at any meeting of voting trust
certificate holders, upon any question that may be presented at any such
meeting. Any such officer, or anyone so representing him by written proxy, may
on behalf of the Company waive any notice of any such meeting required by any
statute or by-law and consent to the holding of such meeting without notice.
ARTICLE VIII
AMENDMENT OR REPEAL OF BY-LAWS
These by-laws may be added to, amended or repealed at any regular or
special meeting of the Board by a vote of a majority of the membership of the
Board.
<PAGE>
Date: September 20, 1995 Contract No. 24350
Exhibit 10(a)
FTS - 1 SERVICE AGREEMENT
This AGREEMENT is entered into by ANR Pipeline Company
(Transporter) and The Peoples Gas Light and Coke Company (Shipper)
WHEREAS, Shipper has requested Transporter to transport Gas on its behalf and
Transporter represents that it is willing to transport Gas under the terms and
conditions of this Agreement.
NOW, THEREFORE, Transporter and Shipper agree that the terms below, together
with the terms and conditions of Transporter's applicable Rate Schedule and
General Terms and Conditions of Transporter's FERC Gas Tariff constitute the
transportation service to be provided and the rights and obligations of Shipper
and Transporter.
1. AUTHORITY FOR TRANSPORTATION SERVICE:
284G - Blanket
2. RATE SCHEDULE: FIRM TRANSPORTATION SERVICE (FTS - 1)
3. CONTRACT QUANTITIES:
Primary Routes - see Exhibit attached hereto.
Such Contract Quantities shall be reduced for scheduling purposes, but
not for billing purposes, by the Contract Quantities that Shipper has
released through Transporter's capacity release program for the period
of any release.
4. TERM OF AGREEMENT:
11/01/1995 to
10/31/2000
5. RATES:
Maximum rates, charges, and fees shall be applicable for the
entitlements and quantities delivered pursuant to this Agreement
unless Transporter has advised Shipper in writing or by ANR Xpedite
that it has agreed otherwise.
It is further agreed that Transporter may seek authorization from the
Commission and/or other appropriate body at any time and from time to
time to change any rates, charges or other provisions in the
applicable Rate Schedule and General Terms and
<PAGE>
Date: September 20, 1995 Contract No. 24350
Conditions of Transporter's FERC Gas Tariff, and Transporter shall
have the right to place such changes in effect in accordance with the
Natural Gas Act. This Agreement shall be deemed to include such
changes and any changes which become effective by operation of law and
Commission order. Nothing contained herein shall be construed to deny
Shipper any rights it may have under the Natural Gas Act, including
the right to participate fully in rate or other proceedings by
intervention or otherwise to contest increased rates in whole or in
part.
6. INCORPORATION BY REFERENCE
The provisions of Transporter's applicable Rate Schedule and the
General Terms and Conditions of Transporter's FERC Gas Tariff are
specifically incorporated herein by reference and made a part hereof.
7. NOTICES:
All notices can be given by telephone or other electronic means,
however, such notice shall be confirmed in writing at the addresses
below or through ANR Xpedite. Shipper or Transporter may change the
addresses below by written notice to the other without the necessity
of amending this agreement:
TRANSPORTER:
ANR PIPELINE COMPANY
500 Renaissance Center
Detroit, Michigan 48243
Attentions: Gas Control (Nominations)
Volume Management (Statements)
Cash Control (Payments)
Marketing Administration (All Other Matters)
SHIPPER:
THE PEOPLES GAS LIGHT AND COKE CO. (Shipper Name)
----------------------------------
130 East Randolph, 22nd Floor (Address)
----------------------------------
Chicago, IL 60601-6207 (City, State, Zip)
----------------------------------
Attention: Eckhard Blaumueller
-------------------
Telephone: (312) 240-7057
-------------------
Fax: (312) 240-4211
-------------------
2
<PAGE>
Date: September 20, 1995 Contract No. 24350
INVOICES AND STATEMENTS:
THE PEOPLES GAS LIGHT AND COKE CO. (Shipper Name)
-----------------------------------
130 East Randolph, 22nd Floor (Address)
-----------------------------------
Chicago, IL 60601-6207 (City, State, Zip)
-----------------------------------
Attention: Eckhard Blaumueller
--------------------
Telephone: (312) 240-7057
--------------------
Fax: (312) 240-4211
--------------------
NOMINATIONS:
THE PEOPLES GAS LIGHT AND COKE CO. (Shipper Name)
----------------------------------
130 East Randolph, 22nd Floor (Address)
----------------------------------
Chicago, IL 60601-6207 (City, State, Zip)
----------------------------------
Attention: Eckhard Blaumueller
-------------------
Telephone: (312) 240-7057
-------------------
Fax: (312) 240-4211
-------------------
Mechanical Dialing
Device No(s)
----------------------
ALL OTHER MATTERS:
THE PEOPLES GAS LIGHT AND COKE CO. (Shipper Name)
----------------------------------
130 East Randolph, 22nd Floor (Address)
----------------------------------
Chicago, IL 60601-6207 (City, State, Zip)
----------------------------------
Attention: Eckhard Blaumueller
-------------------
Telephone: (312) 240-7057
-------------------
Fax: (312) 240-4211
-------------------
8. FURTHER AGREEMENT
A. The rate for all quantities of gas transported on the
Primary Route(s) up to the Primary Route MDQ(s) under this
Agreement shall be the current FERC Tariff Rates in effect
not to exceed $0.15 per dth on a 100% load factor basis
inclusive of Volumetric Buyout/Buydown, GRI, Dakota and
Transition Costs. In
3
<PAGE>
Date: September 20, 1995 Contract No. 24350
addition, Shipper will be charged ACA, fuel and any other
related fees or surcharges.
B. All quantities associated with Secondary Receipt Points,
Secondary Delivery Points, Secondary Routes and the releases
of the capacity under this Agreement will be at Maximum
Tariff Rates plus all other related fees, surcharges and
fuel.
C. Shipper and any Agent of Shipper agree that the rates stated
herein shall be confidential and shall be maintained
confidentially by Shipper and any Agent of Shipper. Shipper
may disclose such rates only if such disclosure is required
by law and Shipper requests confidential or privileged
treatment under applicable statutes, rules and regulations,
and provides reasonable notice to Transporter prior to such
disclosure. Any unauthorized disclosure of the rates stated
herein shall have the effect of terminating from the date
the discounted rate is disclosed any rate discounts
reflected herein such that, for the remaining term of this
Agreement, Shipper shall be required to pay Transporter the
maximum applicable rate for service, as well as all other
charges, surcharges or direct bill applicable to such
service.
D. Shipper waives its right to segment its FTS-1 capacity
during the term of this Agreement.
E. If the FTS-1 Agreement (No. 24400) between Transporter and
Shipper is terminated after one (1) year of service, this
Agreement shall be amended to change the Primary Delivery
Point to East Joliet only with a 100% load factor rate of
$0.12 per dth inclusive of Volumetric Buyout/Buydown, GRI,
Dakota and Transition Costs. In addition, Shipper will be
charged ACA, fuel and any other related fees or surcharges.
F. During the November 1, 1995 to April 30, 1996, October
through April (1996 - 2000) and October 1-31, 2000 periods,
Shipper can nominate up to 60,000 dth/day from Crystal Falls
to either Maumee East/Col Gas OH or East Joliet as long as
the total combined nomination does not exceed 60,000
dth/day.
G. Consistent with provisions of its Tariff, Transporter is
willing to contract on Shipper's behalf for capacity
required on third party transporters, or for other services
to effectuate Shipper's receipt of gas on third party
facilities and delivery of gas to Transporter's facilities.
Shipper must advise Transporter prior to commencement of
such third party transportation of its desire to have
Transporter act in such a capacity.
Shipper agrees to pay all charges related to such third
party transportation arrangements pursuant to Transporter's
Tariff.
4
<PAGE>
Date: September 20, 1995 Contract No. 24350
H. To the extent Shipper desires to utilize receipt/delivery
points pursuant to Part 284 B (Section 311 of the NGPA and
Section 284.102 of the Commission's regulations), Shipper
must execute a separate agreement with Transporter and
Shipper must also certify that the transportation of gas
will be on behalf of either an "intrastate pipeline" or a
"local distribution company."
9. OPERATIONAL FLOW ORDERS
Shipper hereby guarantees to Transporter that each contract it has
entered into in connection with the Gas to be transported under this
Agreement contains a provision that permits Transporter to issue an
effective Operational Flow Order pursuant to Section 8 of the General
Terms and Conditions. Shipper shall also guarantee for any supply
contract for Gas that is transported via Viking Gas Transmission
Company, that Transporter shall be designated a third party
beneficiary.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their respective Officers or Representatives thereunto duly authorized to be
effective as of the date stated above.
SHIPPER: The Peoples Gas Light and TRANSPORTER: ANR Pipeline Company
Coke Company
By: /s/ T. M. Patrick By: /s/ Linda M. Maiorana
-------------------- ----------------------------
Title: Vice President Title: Assistant Vice President
-------------------- ----------------------------
Date: 10/04/95 Date: 10/05/95
-------------------- ----------------------------
5
<PAGE>
<TABLE>
<S> <C> <C>
PRIMARY ROUTE EXHIBIT Contract No. 24350
To Agreement Between Contract Rate FTS-1
ANR Pipeline Company (Transporter) Contract Date September 20, 1995
and The Peoples Gas Light and Coke Company (Shipper) Amendment Date -
</TABLE>
<TABLE>
<CAPTION>
RECEIPT RECEIPT DELIVERY DELIVERY MDQ
NUMBER NAME NUMBER NAME (DTH) EFFECTIVE PERIOD
- --------- ------------------------- ---------- --------------------------- ------ ------------------------
<S> <C> <C> <C> <C> <C>
037000700 Crystal Falls/Fortune Lk 037044750 Maumee East/Col Gas OH (1) 60000 11/01/95 to 04/30/96
032200100 East Joliet
037000700 Crystal Falls/Fortune Lk 032200100 East Joliet 60000 MAY - SEPTEMBER
(1996 - 2000)
037000700 Crystal Falls/Fortune Lk 037044750 Maumee East/Col Gas OH (1) 60000 OCTOBER - APRIL
032200100 East Joliet (1996 - 2000)
037000700 Crystal Falls/Fortune Lk 037044750 Maumee East/Col Gas OH (1) 60000 10/01/2000 to 10/31/2000
032200100 East Joliet
</TABLE>
(1) The Primary Delivery Point of Maumee East/Col Gas OH can be used during the
months of October through April only; the Primary Delivery Point of East
Joliet can be used through the term of the Agreement.
<PAGE>
Exhibit 10 (b)
Contract No. 111397
NATURAL GAS PIPELINE COMPANY OF AMERICA (Natural)
TRANSPORTATION RATE SCHEDULE FTS AGREEMENT DATED February 21, 1996
UNDER SUBPART G OF PART 284 OF THE FERC'S REGULATIONS
1. SHIPPER is: THE PEOPLES GAS LIGHT & COKE COMPANY, a LOCAL DISTRIBUTION
COMPANY.
2. (a) MDQ totals: 20,000 MMBTU per day.
(b) Service option selected (check any or all):
[ ] LN [ ] SW [ ] NB
3. TERM: March 01, 1996 through April 30, 1997.
4. Service will be ON BEHALF OF: [X] Shipper or [ ] Other.
5. The ULTIMATE END USERS are customers within any state in the continental
U.S.; or (specify state)
_____________________________________________________________________
6. [ ] This Agreement supersedes and cancels a _____________Agreement dated
________
[ ] Capacity rights for this Agreement were released from Natural's
Transportation Rate Schedule Agreement (KT #) dated and are subject to any
recall/return provisions in Natural's Capacity Release Package ID #.
[X] Service and reservation charges commence the latter of:
(a) March 01, 1996, and
(b) the date capacity to provide the service hereunder is available on
Natural's System.
[ ] Other: ___________________________________________
7. SHIPPER'S ADDRESSES NATURAL'S ADDRESSES
General Correspondence:
-----------------------
THE PEOPLES GAS LIGHT & COKE COMPANY NATURAL GAS PIPELINE COMPANY OF
AMERICA
WILLIAM MORROW ATTENTION: GAS TRANSPORTATION
SERVICES
GAS SUPPLY CONTRACTS 3200 SOUTHWEST FREEWAY 77027-7523
130 E RANDOLPH DRIVE P.O. BOX 283 77001-0283
CHICAGO, IL 60601-6207 HOUSTON, TEXAS
Statements/Invoices/Accounting Related Materials:
-------------------------------------------------
THE PEOPLES GAS LIGHT & COKE COMPANY NATURAL GAS PIPELINE COMPANY OF
AMERICA
TONY COMPTON ATTENTION: GAS ACCOUNTING
DEPARTMENT
GAS SUPPLY CONTRACTS 701 EAST 22ND STREET
130 E RANDOLPH DRIVE LOMBARD, ILLINOIS 60148
CHICAGO, IL 60601-6207
<PAGE>
Payments:
---------
NATURAL GAS PIPELINE COMPANY OF AMERICA
P.O. BOX 2910
CAROL STREAM, ILLINOIS 60132-2910
FOR WIRE TRANSFER OR ACH:
DEPOSITORY INSTITUTION: CITIBANK N.A.
ABA ROUTING #: 021000089
ACCOUNT #: 4067-6195
8. The above stated Rate Schedule, as revised from time to time, controls this
Agreement and is incorporated herein. The attached Exhibits A, B, and C
(for firm service only) are a part of this Agreement. NATURAL AND SHIPPER
ACKNOWLEDGE THAT THIS AGREEMENT IS SUBJECT TO THE PROVISIONS OF NATURAL'S
FERC GAS TARIFF AND APPLICABLE FEDERAL LAW. TO THE EXTENT THAT STATE LAW IS
APPLICABLE, NATURAL AND SHIPPER EXPRESSLY AGREE THAT THE LAWS OF THE STATE
OF ILLINOIS SHALL GOVERN THE VALIDITY, CONSTRUCTION, INTERPRETATION AND
EFFECT OF THIS CONTRACT, EXCLUDING, HOWEVER, ANY CONFLICT OF LAWS RULE
WHICH WOULD APPLY THE LAW OF ANOTHER STATE. This Agreement states the
entire agreement between the parties and no waiver, representation, or
agreement shall affect this Agreement unless it is in writing. Shipper
shall provide the actual end user purchaser name(s) to Natural if Natural
must provide them to FERC.
AGREED TO BY:
NATURAL GAS PIPELINE COMPANY OF AMERICA THE PEOPLES GAS LIGHT & COKE
COMPANY
"Natural" "Shipper"
By: /s/ Stephen G. Weiman By: /s/ T. M. Patrick
-------------------------------- ---------------------------
Name: Stephen G. Weiman Name: Thomas M. Patrick
-------------------------------- -------------------------
Title: Attorney in Fact Title: Vice President
-------------------------------- ------------------------
<PAGE>
EXHIBIT A
DATED: February 21, 1996
EFFECTIVE DATE: March 01, 1996
COMPANY: THE PEOPLES GAS LIGHT & COKE COMPANY
CONTRACT: 111397
<TABLE>
<CAPTION>
RECEIPT POINT/S
County/Parish PIN MDQ
Name / Location Area State No. Zone (MMBtu/d)
---------------- -------------- ------ ---- ---- ----------
<S> <C> <C> <C> <C> <C>
PRIMARY RECEIPT POINT/S
1. OASIS/NGPL WARD WARD TX 5003 01 20,000
INTERCONNECT WITH OASIS PIPE LINE
COMPANY ON TRANSPORTER'S LOCKRIDGE
GATHERING SYSTEM IN SEC. 93, BLOCK
34, H.& T.C.R.R. SURVEY, WARD COUNTY,
TEXAS.
</TABLE>
SECONDARY RECEIPT POINT/S
All secondary receipt points, and the related priorities and volumes, as
provided under the Tariff provisions governing this Agreement.
RECEIPT PRESSURE, ASSUMED ATMOSPHERIC PRESSURE
Natural gas to be delivered to Natural at the Receipt Point/s shall be at a
delivery pressure sufficient to enter Natural's pipeline facilities at the
pressure maintained from time to time, but Shipper shall not deliver gas at a
pressure in excess of the Maximum Allowable Operating Pressure (MAOP) stated for
each Receipt Point. The measuring party shall use or cause to be used an assumed
atmospheric pressure corresponding to the elevation at such Receipt Point/s.
RATES
Except as provided to the contrary in any written agreement(s) between the
parties in effect during the term hereof, Shipper shall pay Natural the maximum
rate and all other lawful charges as specified in Natural's applicable rate
schedule.
FUEL GAS AND GAS LOST AND UNACCOUNTED FOR PERCENTAGE (%)
A-1
<PAGE>
EXHIBIT A (CONT'D)
DATED: February. 21, 1996
EFFECTIVE DATE: March 01, 1996
COMPANY: THE PEOPLES GAS LIGHT & COKE COMPANY
CONTRACT: 111397
Shipper will be assessed the applicable percentage for Fuel Gas and Gas
Lost and Unaccounted For.
TRANSPORTATION OF LIQUIDS
Transportation of liquids may occur at permitted points identified in
Natural's current Catalog of Receipt and Delivery Points, but only if the
parties execute a separate liquids agreement.
A-2
<PAGE>
EXHIBIT B
DATED: February 21, 1996
EFFECTIVE DATE: March 01, 1996
COMPANY: THE PEOPLES GAS LIGHT & COKE COMPANY
CONTRACT: 111397
DELIVERY POINT/S
<TABLE>
<CAPTION>
County/Parish PIN MDQ
Name / Location Area State No Zone (MMBtu/d)
---------------- -------------- ------ ---- ---- ----------
<S> <C> <C> <C> <C> <C>
PRIMARY DELIVERY POINT/S
1. PGLC/NGPL ROGERS PARK COOK COOK IL 4174 06 20,000
INTERCONNECT WITH THE PEOPLES GAS
LIGHT AND COKE COMPANY ON TRANSPORTER'S
HOWARD STREET LINE IN SEC. 36-T41N-R13E,
COOK, COUNTY, ILLINOIS.
</TABLE>
SECONDARY DELIVERY POINTS
All secondary delivery points, and the related priorities and volumes, as
provided under the Tariff provisions governing this Agreement.
DELIVERY PRESSURE, ASSUMED ATMOSPHERIC PRESSURE
Natural gas to be delivered by Natural to Shipper, or for Shipper's
account, at the Delivery Point/s shall be at the pressure available in Natural's
pipeline facilities from time to time. The measuring party shall use or cause to
be used an assumed atmospheric pressure corresponding to the elevation at such
Delivery Point/s.
B-1
<PAGE>
EXHIBIT C
DATED: February 21, 1996
EFFECTIVE DATE: March 01, 1996
COMPANY: THE PEOPLES GAS LIGHT & COKE COMPANY
CONTRACT: 111397
Pursuant to Natural's tariff, an MDQ exists for each primary transportation
path segment and direction under the Agreement. Such MDQ is the maximum daily
quantity of gas which Natural is obligated to transport on a firm basis along a
primary transportation path segment.
A primary transportation path segment is the path between a primary
receipt, delivery, or node point and the next primary receipt, delivery, or node
point. A node point is the point of interconnection between two or more of
Natural's pipeline facilities.
A segment is a section of Natural's pipeline system designated by a segment
number whereby the Shipper under the terms of their agreement based on the
points within the segment identified on Exhibit C has throughput capacity
rights.
The segment numbers listed on Exhibit C reflect this Agreement's path
corresponding to Natural's most recent Pipeline System Map which identifies
segments and their corresponding numbers. All information provided in this
Exhibit C is subject to the actual terms and conditions of Natural's Tariff.
C-1
<PAGE>
EXHIBIT C
DATED: February 21, 1996
EFFECTIVE DATE: March 01, 1996
COMPANY: THE PEOPLES GAS LIGHT & COKE COMPANY
CONTRACT: 111397
Segment Upstream Forward/Backward Flow Through
Number Segment Haul (Contractual) Capacity
-------- -------- ------------------ --------------
8 9 F 20,000
9 0 F 0
10 8 F 20,000
11 10 F 20,000
12 11 F 20,000
13 12 F 20,000
14 13 F 20,000
30 14 F 20,000
C-2
<PAGE>
Exhibit 10 (c)
Contract No. 111398
NATURAL GAS PIPELINE COMPANY OF AMERICA (Natural)
TRANSPORTATION RATE SCHEDULE FTS AGREEMENT DATED February 21, 1996
UNDER SUBPART G OF PART 284 OF THE FERC'S REGULATIONS
1. SHIPPER is: THE PEOPLES GAS LIGHT & COKE COMPANY, a LOCAL DISTRIBUTION
COMPANY.
2. (a) MDQ totals: 65,000 MMBTU per day.
(b) Service option selected (check any or all):
[ ] LN [ ] SW [ ] NB
3. TERM: March 01, 1996 through April 30, 1997.
4. Service will be ON BEHALF OF: [X ] Shipper or [ ] Other.
5. The ULTIMATE END USERS are customers within any state in the continental
U.S.; or (specify state)
_________________________________________________________________________
6. [ ] This Agreement supersedes and cancels a _______________Agreement
dated_____
[ ] Capacity rights for this Agreement were released from Natural's
Transportation Rate Schedule Agreement (KT #) dated and are subject to any
recall/return provisions in Natural's Capacity Release Package ID #.
[X] Service and reservation charges commence the latter of:
(a) March 01, 1996, and
(b) the date capacity to provide the service hereunder is available
on Natural's System.
[ ] Other: _______________
7. SHIPPER'S ADDRESSES NATURAL'S ADDRESSES
GENERAL CORRESPONDENCE:
THE PEOPLES GAS LIGHT & COKE COMPANY NATURAL GAS PIPELINE COMPANY OF AMERICA
WILLIAM MORROW ATTENTION: GAS TRANSPORTATION SERVICES
GAS SUPPLY CONTRACTS 3200 SOUTHWEST FREEWAY 77027-7523
130 E RANDOLPH DRIVE P.O. BOX 283 77001-0283
CHICAGO, IL 60601-6207 HOUSTON, TEXAS
STATEMENTS/INVOICES/ACCOUNTING RELATED MATERIALS:
THE PEOPLES GAS LIGHT & COKE COMPANY NATURAL GAS PIPELINE COMPANY OF AMERICA
TONY COMPTON ATTENTION: GAS ACCOUNTING DEPARTMENT
GAS SUPPLY CONTRACTS 701 EAST 22ND STREET
130 E RANDOLPH DRIVE LOMBARD, ILLINOIS 60148
CHICAGO, IL 60601-6207
PAYMENTS:
NATURAL GAS PIPELINE COMPANY OF AMERICA
<PAGE>
P.O. BOX 2910
CAROL STREAM, ILLINOIS 60132-2910
FOR WIRE TRANSFER OR ACH:
DEPOSITORY INSTITUTION: CITIBANK N.A.
ABA ROUTING #: 021000089
ACCOUNT #: 4067-6195
8. The above stated Rate Schedule, as revised from time to time, controls this
Agreement and is incorporated herein. The attached Exhibits A, B, and C
(for firm service only) are a part of this Agreement. NATURAL AND SHIPPER
ACKNOWLEDGE THAT THIS AGREEMENT IS SUBJECT TO THE PROVISIONS OF NATURAL'S
FERC GAS TARIFF AND APPLICABLE FEDERAL LAW. TO THE EXTENT THAT STATE LAW IS
APPLICABLE, NATURAL AND SHIPPER EXPRESSLY AGREE THAT THE LAWS OF THE STATE
OF ILLINOIS SHALL GOVERN THE VALIDITY, CONSTRUCTION, INTERPRETATION AND
EFFECT OF THIS CONTRACT, EXCLUDING, HOWEVER, ANY CONFLICT OF LAWS RULE
WHICH WOULD APPLY THE LAW OF ANOTHER STATE. This Agreement states the
entire agreement between the parties and no waiver, representation, or
agreement shall affect this Agreement unless it is in writing. Shipper
shall provide the actual end user purchaser name(s) to Natural if Natural
must provide them to FERC.
AGREED TO BY:
NATURAL GAS PIPELINE COMPANY OF AMERICA THE PEOPLES GAS LIGHT & COKE COMPANY
"Natural" "Shipper"
By: /S/ STEPHEN G. WEINMAN By: /S/ THOMAS M. PATRICK
-------------------------------- --------------------------------
Name: STEPHEN G. WEINMAN Name: THOMAS M. PATRICK
------------------------------ ------------------------------
Title: ATTORNEY IN FACT Title: VICE PRESIDENT
----------------------------- ------------------------------
<PAGE>
EXHIBIT A
DATED: February 21, 1996
EFFECTIVE DATE: March 01, 1996
COMPANY: THE PEOPLES GAS LIGHT & COKE COMPANY
CONTRACT: 111398
RECEIPT POINT/S
<TABLE>
<CAPTION>
County/Parish PIN MDQ
NAME / LOCATION AREA STATE NO. ZONE (MMBTU/D)
--------------- ------------- ----- --- ---- ---------
PRIMARY RECEIPT POINT/S
- -----------------------
<S> <C> <C> <C> <C> <C>
1. LA GLORIA MOBIL/NGPL JIM WELLS JIM WELLS TX 439 04 15,000
AT OR NEAR THE TAILGATE OF MOBIL'S
LA GLORIA GAS PLANT ON TRANSPORTER'S
LA GLORIA-MOBIL LATERAL IN LOT
#1, SUBD. OF LANDS ADJ. TO TOWN OF
LA GLORIA, JIM WELLS COUNTY, TEXAS.
2. TRANSAM/NGPL NE THMPSNVILLE JIM HOGG JIM HOGG TX 1041 04 15,000
INTERCONNECT WITH TRANSAMERICAN GAS
TRANSMISSION CORPORATION IN BLOCK
4, "LAS ANIMAS" HEIRS OF FELIPE
DE LA PENA SURVEY, JIM HOGG COUNTY,
TEXAS.
3. MTPC/NGPL TORO GRANDE JACKSON JACKSON TX 7088 04 30,000
INTERCONNECT WITH MIDCON TEXAS PIPELINE
COMPANY ON TRANSPORTER'S GULF COAST
MAINLINE IN OR NEAR THE C.W. HAHL
SUBDIVISION OF BURNS RANCHES, J.J.
LINN SURVEY, A-213, JACKSON COUNTY, TEXAS.
4. MTPC/NGPL LOS MOGOTES JIM HOGG JIM HOGG TX 25777 04 5,000
INTERCONNECT WITH MIDCON TEXAS PIPELINE
CORP. ESCOBAS-LOS MAGOTES LATERAL
IN THE REUBEN HOBEINS SUBDIVlSION/FELIE
DE LA PENA GRANT, ZAPATA COUNTY,
TEXAS. (CUSTODY TRANSFER POINT).
</TABLE>
A-1
<PAGE>
EXHIBIT A (CONT'D)
DATED: February 21, 1996
EFFECTIVE DATE: March 01, 1996
COMPANY: THE PEOPLES GAS LIGHT & COKE COMPANY
CONTRACT: 111398
SECONDARY RECEIPT POINT/S
All secondary receipt points, and the related priorities and volumes, as
provided under the Tariff provisions governing this Agreement.
RECELPT PRESSURE, ASSUMED ATMOSPHERIC PRESSURE
Natural gas to be delivered to Natural at the Receipt Point/s shall be at a
delivery pressure sufficient to enter Natural's pipeline facilities at the
pressure maintained from time to time, but Shipper shall not deliver gas at a
pressure in excess of the Maximum Allowable Operating Pressure (MAOP) stated for
each Receipt Point. Tne measuring party shall use or cause to be used an
assumed atmospheric pressure corresponding to the elevation at such Receipt
Point/s.
RATES
Except as provided to the contrary in any written agreement(s) between the
parties in effect during the term hereof, Shipper shall pay Natural the maximum
rate and all other lawful charges as specified in Natural's applicable rate
schedule.
FUEL GAS AND GAS LOST AND UNACCOUNTED FOR PERCENTAGE (%)
Shipper will be assessed the applicable percentage for Fuel Gas and Gas
Lost and Unaccounted For.
TRANSPORTATION OF LIQUIDS
Transportation of liquids may occur at permitted points identified in
Natural's current Catalog of Receipt and Delivery Points, but only if the
parties execute a separate liquids agreement.
A-2
<PAGE>
EXHIBIT B
DATED: February. 21, 1996
EFFECTIVE DATE: March 01, 1996
COMPANY: THE PEOPLES GAS LIGHT & COKE COMPANY
CONTRACT: 111398
DELIVERY POINT/S
<TABLE>
<CAPTION>
County/Parish PIN MDQ
NAME / LOCATION AREA STATE NO. ZONE (MMBTU/D)
--------------- ------------- ----- --- ---- ---------
PRIMARY DELIVERY POINT/S
<S> <C> <C> <C> <C> <C>
1. PGLC/NGPL ROGERS PARK COOK COOK IL 4174 06 65,000
INTERCONNECT WITH THE PEOPLES GAS
LIGHT AND COKE COMPANY ON TRANSPORTER'S
HOWARD STREET LINE IN SEC. 36-T41N-R13E,
COOK, COUNTY, ILLINOIS.
</TABLE>
SECONDARY DELIVERY POINT/S
All secondary delivery points, and the related priorities and volumes, as
provided under the Tariff provisions governing this Agreement.
DELIVERY PRESSURE ASSUMED ATMOSPHERIC PRESSURE
Natural gas to be delivered by Natural to Shipper, or for Shipper's
account, at the Delivery Point/s shall be at the pressure available in Natural's
pipeline facilities from time to time. The measuring party shall use or cause to
be used an assumed atmospheric pressure corresponding to the elevation at such
Delivery Point/s.
B-1
<PAGE>
EXHIBIT C
DATED: February 21, 1996
EFFECTIVE DATE: March 01, 1996
COMPANY: THE PEOPLES GAS LIGHT & COKE COMPANY
CONTRACT: 111398
Pursuant to Natural's tariff, an MDQ exists for each primary transportation
path segment and direction under the Agreement. Such MDQ is the maximum daily
quantity of gas which Natural is obligated to transport on a firm basis along a
primary transportation path segment.
A primary transportation path segment is the path between a primary
receipt, delivery, or node point and the next primary receipt, delivery, or node
point. A node point is the point of interconnection between two or more of
Natural's pipeline facilities.
A segment is a section of Natural's pipeline system designated by a segment
number whereby the Shipper under the terms of their agreement based on the
points within the segment identified on Exhibit C has throughput capacity
rights.
The segment numbers listed on Exhibit C reflect this Agreement's path
corresponding to Natural's most recent Pipeline System Map which identifies
segments and their corresponding numbers. All information provided in this
Exhibit C is subject to the actual terms and conditions of Natural's Tariff.
C-1
<PAGE>
EXHIBIT C
DATED: February 21, 1996
EFFECTIVE DATE: March 01, 1996
COMPANY: THE PEOPLES GAS LIGHT & COKE COMPANY
CONTRACT: 111398
Segment Upstream Forward/Backward Flow Through
Number Segment Haul (Contractual) Capacity
------ ------- ------------------ ------------
18 0 F 0
20 18 F 20,000
22 20 F 35,000
26 22 F 65,000
27 26 F 65,000
28 27 F 65,000
30 28 F 65,000
C-2
<PAGE>
Exhibit 10 (d)
DATE: OCTOBER 25, 1995 CONTRACT NO. 24950
FTS - 1 SERVICE AGREEMENT
This AGREEMENT is entered into by ANR Pipeline Company
(Transporter) and North Shore Gas Company (Shipper)
WHEREAS, Shipper has requested Transporter to transport Gas on its behalf and
Transporter represents that it is willing to transport Gas under the terms and
conditions of this Agreement.
NOW, THEREFORE, Transporter and Shipper agree that the terms below, together
with the terms and conditions of Transporter's applicable Rate Schedule and
General Terms and Conditions of Transporter's FERC Gas Tariff constitute the
transportation service to be provided and the rights and obligations of Shipper
and Transporter.
1. AUTHORITY FOR TRANSPORTATION SERVICE:
284G - Blanket
2. RATE SCHEDULE: FIRM TRANSPORTATION SERVICE (FTS - 1)
3. CONTRACT QUANTITIES:
Primary Routes - see Exhibit attached hereto.
Such Contract Quantities shall be reduced for scheduling purposes, but not
for billing purposes, by the Contract Quantities that Shipper has released
through Transporter's capacity release program for the period of any
release.
4. TERM OF AGREEMENT:
11/01/1995 to
10/31/2000
5. RATES:
Maximum rates, charges, and fees shall be applicable for the entitlements
and quantities delivered pursuant to this Agreement unless Transporter has
advised Shipper in writing or by ANR Xpedite that it has agreed otherwise.
<PAGE>
DATE: OCTOBER 25, 1995 CONTRACT NO. 24950
It is further agreed that Transporter may seek authorization from the
Commission and/or other appropriate body at any time and from time to time
to change any rates, charges or other provisions in the applicable Rate
Schedule and General Terms and Conditions of Transporter's FERC Gas Tariff,
and Transporter shall have the right to place such changes in effect in
accordance with the Natural Gas Act. This Agreement shall be deemed to
include such changes and any changes which become effective by operation of
law and Commission order. Nothing contained herein shall be construed to
deny Shipper any rights it may have under the Natural Gas Act, including
the right to participate fully in rate or other proceedings by intervention
or otherwise to contest increased rates in whole or in part.
6. INCORPORATION BY REFERENCE
The provisions of Transporter's applicable Rate Schedule and the General
Terms and Conditions of Transporter's FERC Gas Tariff are specifically
incorporated herein by reference and made a part hereof.
7. NOTICES:
All notices can be given by telephone or other electronic means, however,
such notice shall be confirmed in writing at the addresses below or through
ANR Xpedite. Shipper or Transporter may change the addresses below by
written notice to the other without the necessity of amending this
agreement:
TRANSPORTER:
ANR PIPELINE COMPANY
500 Renaissance Center
Detroit, Michigan 48243
Attentions: Gas Control (Nominations)
Volume Management (Statements)
Cash Control (Payments)
Marketing Administration (All Other Matters)
SHIPPER:
NORTH SHORE GAS COMPANY (Shipper Name)
----------------------------------
130 East Randolph, 22nd Floor (Address)
----------------------------------
Chicago, IL 60601-6207 (City, State, Zip)
----------------------------------
Attention: Raulando C. deLara
---------------------
Telephone: (312) 240-7057
---------------------
Fax: (312) 240-4211
---------------------
2
<PAGE>
DATE: OCTOBER 25, 1995 CONTRACT NO. 24950
INVOICES AND STATEMENTS:
THE PEOPLES GAS LIGHT AND COKE CO. (Shipper Name)
----------------------------------
130 East Randolph, 22nd Floor (Address)
----------------------------------
Chicago, IL 60601-6207 (City, State, Zip)
----------------------------------
Attention: Raulando C. deLara
---------------------
Telephone: (312) 240-7057
---------------------
Fax: (312) 240-4211
---------------------
NOMINATIONS:
THE PEOPLES GAS LIGHT AND COKE CO. (Shipper Name)
----------------------------------
130 East Randolph, 22nd Floor (Address)
----------------------------------
Chicago, IL 60601-6207 (City, State, Zip)
----------------------------------
Attention: Jerome J. Slechta
---------------------
Telephone: (312) 240-7057
---------------------
Fax: (312) 240-4211
---------------------
Mechanical Dialing
Device No(s)
-------------------------------
ALL OTHER MATTERS:
THE PEOPLES GAS LIGHT AND COKE CO. (Shipper Name)
----------------------------------
130 East Randolph, 22nd Floor (Address)
----------------------------------
Chicago, IL 60601-6207 (City, State, Zip)
----------------------------------
Attention: Raulando C. deLara
---------------------
Telephone: (312) 240-7057
---------------------
Fax: (312) 240-4211
---------------------
3
<PAGE>
DATE: OCTOBER 25, 1995 CONTRACT NO. 24950
8. FURTHER AGREEMENT
A. The rate for all quantities of gas transported on the Primary Route(s)
up to the Primary Route MDQ(s) under this Agreement shall be the
current FERC Tariff Rates in effect not to exceed $0.15 per dth on a
100% load factor basis inclusive of Volumetric Buyout/Buydown, GRI,
Dakota and Transition Costs. In addition, Shipper will be charged
ACA, fuel and any other related fees or surcharges.
B. All quantities associated with Secondary Receipt Points, Secondary
Delivery Points, Secondary Routes and the releases of the capacity
under this Agreement will be at Maximum Tariff Rates plus all other
related fees, surcharges and fuel.
C. Shipper and any Agent of Shipper agree that the rates stated herein
shall be confidential and shall be maintained confidentially by
Shipper and any Agent of Shipper. Shipper may disclose such rates only
if such disclosure is required by law and Shipper requests
confidential or privileged treatment under applicable statutes, rules
and regulations, and provides reasonable notice to Transporter prior
to such disclosure. Any unauthorized disclosure of the rates stated
herein shall have the effect of terminating from the date the
discounted rate is disclosed any rate discounts reflected herein such
that, for the remaining term of this Agreement, Shipper shall be
required to pay Transporter the maximum applicable rate for service,
as well as all other charges, surcharges or direct bill applicable to
such service.
D. Shipper waives its right to segment its FTS-1 capacity during the term
of this Agreement.
E. If FTS-1 Agreement No. 24400 is terminated after one (1) year of
service, this Agreement shall be amended to change the Primary
Delivery Point to East Joliet only with a 100% load factor rate of
$0.12 per dth inclusive of Volumetric Buyout/Buydown, GRI, Dakota and
Transition Costs. In addition, Shipper will be charged ACA, fuel and
any other related fees or surcharges.
F. During the November 1, 1995 to April 30, 1996, October through April
(1996 - 2000) and October 1-31, 2000 periods, Shipper can nominate up
to 37,500 dth/day from Crystal Falls to either Monclova or East Joliet
as long as the total combined nomination does not exceed 37,500
dth/day.
4
<PAGE>
DATE: OCTOBER 25, 1995 CONTRACT NO. 24950
G. Consistent with provisions of its Tariff, Transporter is willing to
contract on Shipper's behalf for capacity required on third party
transporters, or for other services to effectuate Shipper's receipt of
gas on third party facilities and delivery of gas to Transporter's
facilities.
Shipper must advise Transporter prior to commencement of such third
party transportation of its desire to have Transporter act in such a
capacity.
Shipper agrees to pay all charges related to such third party
transportation arrangements pursuant to Transporter's Tariff.
H. To the extent Shipper desires to utilize receipt/delivery points
pursuant to Part 284 B (Section 311 of the NGPA and Section 284.102 of
the Commission's regulations), Shipper must execute a separate
agreement with Transporter and Shipper must also certify that the
transportation of gas will be on behalf of either an "intrastate
pipeline" or a "local distribution company."
9. OPERATIONAL FLOW ORDERS
Shipper hereby guarantees to Transporter that each contract it has entered
into in connection with the Gas to be transported under this Agreement
contains a provision that permits Transporter to issue an effective
Operational Flow Order pursuant to Section 8 of the General Terms and
Conditions. Shipper shall also guarantee for any supply contract for Gas
that is transported via Viking Gas Transmission Company, that Transporter
shall be designated a third party beneficiary.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their respective Officers or Representatives thereunto duly authorized to be
effective as of the date stated above.
North Shore
SHIPPER: Gas Company TRANSPORTER: ANR Pipeline Company
By: /s/ T. M. Patrick By: /s/ Linda M. Maiorana
------------------------------ -----------------------------
Title: Vice President Title: Assistant Vice President
------------------------------ -----------------------------
Date: 11/13/95 Date: 11/16/95
------------------------------ -----------------------------
<PAGE>
PRIMARY ROUTE EXHIBIT Contract No. 24950
To Agreement Between Contract Rate FTS-1
ANR Pipeline Company (Transporter) Contract Date October 25, 1995
and North Shore Gas Company (Shipper) Amendment Date -
<TABLE>
<CAPTION>
RECEIPT RECEIPT DELIVERY DELIVERY MDQ
NUMBER NAME NUMBER NAME (DTH) EFFECTIVE PERIOD
- ---------- ------------------------ ---------- ------------- ------ ---------------------
<S> <C> <C> <C> <C> <C>
037000700 Crystal Falls/Fortune Lk 032110400 Monclova (1) 37500 11/01/95 to 04/30/96
032200100 East Joliet
037000700 Crystal Falls/Fortune Lk 032200100 East Joliet 37500 MAY - SEPTEMBER
(1996 - 2000)
037000700 Crystal Falls/Fortune Lk 032110400 Monclova (1) 37500 OCTOBER - APRIL
032200100 East Joliet (1996 - 2000)
037000700 Crystal Falls/Fortune Lk 032110400 Moncolva (1) 37500 10/01/2000 to 10/31/2000
032200100 East Joliet
</TABLE>
(1) The Primary Delivery Point of Monclova can be used during the months of
October through April only; the Primary Delivery Point of East Joliet can be
used through the term of the Agreement.
<PAGE>
Exhibit 23
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report, dated November 1, 1996, included in this Form 10-K,
into Peoples Energy Corporation's previously filed Registration Statement File
Nos. 2-82760, 33-6369, 33-17701, 33-63193, and 333-09993.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois,
December 19, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM CONSOLIDATED STATEMENTS OF INCOME, CONSOLIDATED BALANCE
SHEETS, CONSOLIDATED STATEMENTS OF CASH FLOWS, CONSOLIDATED
CAPITALIZATION STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,381,079
<OTHER-PROPERTY-AND-INVEST> 12,348
<TOTAL-CURRENT-ASSETS> 282,895
<TOTAL-DEFERRED-CHARGES> 15,930
<OTHER-ASSETS> 91,498
<TOTAL-ASSETS> 1,783,750
<COMMON> 277,881
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 403,304
<TOTAL-COMMON-STOCKHOLDERS-EQ> 681,185
0
0
<LONG-TERM-DEBT-NET> 527,064
<SHORT-TERM-NOTES> 700
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 1,925
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 572,876
<TOT-CAPITALIZATION-AND-LIAB> 1,783,750
<GROSS-OPERATING-REVENUE> 1,198,657
<INCOME-TAX-EXPENSE> 56,620
<OTHER-OPERATING-EXPENSES> 1,009,623
<TOTAL-OPERATING-EXPENSES> 1,066,243
<OPERATING-INCOME-LOSS> 132,414
<OTHER-INCOME-NET> 13,964
<INCOME-BEFORE-INTEREST-EXPEN> 146,378
<TOTAL-INTEREST-EXPENSE> 42,940
<NET-INCOME> 103,438
0
<EARNINGS-AVAILABLE-FOR-COMM> 103,438
<COMMON-STOCK-DIVIDENDS> 63,583
<TOTAL-INTEREST-ON-BONDS> 37,826
<CASH-FLOW-OPERATIONS> 107,378
<EPS-PRIMARY> 2.96
<EPS-DILUTED> 2.96
</TABLE>
<PAGE>
Exhibit 99
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
---------------------------
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 2-82760
A. Full title of the plan and address of the plan, if different from that of
the issuer named below:
PEOPLES ENERGY CORPORATION
EMPLOYE STOCK PURCHASE PLAN
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
Peoples Energy Corporation
130 East Randolph Drive
Chicago, Illinois 60601
<PAGE>
This Form 11-K is being filed for informational purposes only.
ITEM 1. AN AUDITED STATEMENT OF FINANCIAL CONDITION AS OF THE END OF THE
LATEST TWO FISCAL YEARS OF THE PLAN.
Not applicable. Employes' payments for Company stock are neither
segregated nor held for investment.
ITEM 2. AN AUDITED STATEMENT OF INCOME AND CHANGES IN PLAN EQUITY FOR EACH OF
THE LATEST THREE FISCAL YEARS OF THE PLAN.
Not applicable. See above.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Peoples Energy Corporation has duly caused this annual report to be signed on
its behalf by the undersigned hereunto duly authorized.
Peoples Energy Corporation
Employe Stock Purchase Plan
---------------------------
(Name of Plan)
Date: December 19, 1996 By /s/ Emmet P. Cassidy
------------------ ----------------------
(Signature)
Emmet P. Cassidy
Secretary and Treasurer
Peoples Energy Corporation
