UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 2-26983
THE PEOPLES GAS LIGHT AND COKE COMPANY
(Exact name of registrant as specified in its charter)
Illinois 36-1613900
(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: None
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:
None.
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, 24,817,566 shares outstanding at
November 30, 1997.
Documents Incorporated by Reference
None
CONTENTS
Page
Item No. No.
Part I
1. Business 3
2. Properties 7
3. Legal Proceedings 8
4. Submission of Matters to a Vote of Security Holders 8
Part II
5. Market for the Company's Common Stock and Related
Stockholder Matters 8
6. Selected Financial Data 9
7. Management's Discussion and Analysis of Results
of Operations and Financial Condition 10
8. Financial Statements and Supplementary Data 16
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 34
Part III
10. Directors and Executive Officers of the Company 35
11. Executive Compensation 37
12. Security Ownership of Certain Beneficial Owners and
Management 43
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
The Peoples Gas Light and Coke Company
ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED SEPTEMBER 30, 1997
PART I
ITEM 1. BUSINESS
GENERAL
The Peoples Gas Light and Coke Company (Company) is a corporation
created by a special act of the General Assembly of the State of Illinois
(State), approved February 12, 1855, as amended on February 7, 1865.
The Company, an operating public utility, is engaged primarily in the
purchase, storage, distribution, sale, and transportation of natural gas.
It has approximately 836,000 residential, commercial, and industrial
retail sales and transportation customers within the City of Chicago
(City). The Company had 2,602 employees at September 30, 1997.
At September 30, 1997, the common stock of the Company and of its
utility affiliate, North Shore Gas Company (North Shore Gas), was wholly
owned by Peoples Energy Corporation (Peoples Energy).
COMPETITION
The Company is authorized by statute and/or certificates of public
convenience and necessity to conduct operations in the territory that it
serves. The Company holds a perpetual, non-exclusive franchise from the
City.
Absent extraordinary circumstances, potential competitors are barred
from constructing competing gas distribution systems in the Company's
service territory 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 the Company's service
area. The capital cost of heating and cooling facilities in new high-
rise buildings is higher for gas than for electricity. This
circumstance, combined with relatively stagnant high-rise construction
activity, has adversely affected the ability of the Company to attach
commercial high-rise buildings.
On December 16, 1997, the State of Illinois enacted legislation to
restructure the electric market in Illinois. Under the legislation,
approximately one-third of non-residential electric customers, including
customers with very large loads, will be able to purchase electric power
from the supplier of their choice beginning on October 1, 1999. All non-
residential customers will have this choice by December 31, 2000. All
residential customers will be given choice on May 1, 2002. Customers
who buy their electricity from a supplier other than the local electric
utility will be required to pay transition charges to the utility
through the year 2006. These charges are intended to compensate the
electric utilities for revenues lost because of customers buying
electricity from other suppliers. The legislation also allows an
electric utility to issue bonds, in aggregate amounts up to 50% of its
Illinois jurisdictional capitalization, to be financed by a specific charge
to its customers. An electric utility also may transfer up to
15% of its assets to an affiliated or unaffiliated entity without
approval from the Illinois Commerce Commission. In return for these and
other benefits, electric utilities are required to reduce their
rates to residential customers. The state's two largest electric
utilities, including the utility that serves northeastern Illinois, must
reduce their residential rates by 15% on August 1, 1998 and by another 5%
on May 1, 2002. The legislation does not require electric utilities to
divest their power generation assets. It is too early to determine what
effects this restructuring of the electric market will have on the
competitive position of the Company.
In addition to restructuring the electric market, the legislation
provides for additional funding for assistance to low-income energy
users, including customers of the Company. The legislation creates a fund,
financed by charges to electric and gas customers of public utilities and
participating municipal utilities and electric co-ops, which
supplements currently available federal energy assistance.
A substantial portion of the gas that the Company delivers to its
customers consists of gas that the Company's customers purchase directly
from producers and marketers rather than from the Company. These direct
customer purchases have little effect on net income because the Company
provides transportation service for such gas volumes and recovers 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 Company's pipeline suppliers has undertaken any
service bypassing the Company. The Company has a bypass rate approved by
the Illinois Commerce Commission (Commission) which allows the Company to
renegotiate rates with customers that are potential bypass candidates.
(See Other Matters - Large Volume Gas Service Agreements in Item 7.)
SALES AND RATES
The Company sells 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 the Company pursuant to a rate schedule
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, to recover the costs incurred by the Company to purchase,
transport, manufacture, and store gas supplies. The level of the Gas
Charge under the Company's 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 the Company, 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). The Company also has been
recovering, through its 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 is influenced by seasonal weather
conditions because a large element of the Company's 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 plan of the Company is to maintain its existing
share 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
air-conditioning.
* 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)
STATE LEGISLATION AND REGULATION
The Company is 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 an order approving changes
in rates of the Company. (See Note 2A of the Notes to Consolidated
Financial Statements.)
FEDERAL LEGISLATION AND REGULATION
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 Public Utility Holding Company Act of 1935 (Act), exempted
Peoples Energy and its subsidiary companies as such (including the
Company) from the provisions of the Act, other than Section 9(a)(2)
thereof.
Most of the gas distributed by the Company is transported to the
Company's distribution system by interstate pipelines. In their
provision of gas 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.)
ENVIRONMENTAL MATTERS
The Company is subject to federal and state environmental laws. The
Company is conducting environmental investigations and work at certain
sites that were the location of former manufactured gas plant operations.
(See Note 3 of the Notes to Consolidated Financial Statements.)
CURRENT GAS SUPPLY
The Company has entered into various long-term and short-term firm gas
supply contracts. When used in conjunction with contract peaking and
contract storage, company-owned storage, and company-owned peak-shaving
facilities, 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.
The following tabulation shows the expected design peak-day
availability of gas in thousands of dekatherms (MDth) during the 1997-
1998 heating season for the Company:
Design Peak-Day Year of
Availability Contract
Source (MDth) Expiration
Firm direct purchases (1) 608 1998-2000
Liquefied petroleum gas 40
Peaking Service:
Peoples Energy Resources 60 (2)
The Uno-Ven Co. 10 (3)
Storage gas:
Leased (4) 563 1998-2000
Peoples-Manlove (5) 993
Customer-owned gas (6) 260
Total expected design
peak-day availability 2,534
(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)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.
(3)The contract with The Uno-Ven Company was for an initial term ending
September 30, 1997; however, by its terms, 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.
(4)Consists of leased storage services required to meet design day
requirements with contract lengths varying from 3 to 5 years.
(5)Manlove Field, the Company's 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. The Company 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 1997-98 heating season,
Manlove Field complex will have a maximum design peak-day delivery
capability of approximately 1,056 MDth (including 63 MDth for the use
of North Shore Gas).
(6)Consists of gas supplies purchased directly from producers and
marketers by the Company's commercial, industrial, and larger residential
customers.
The sources of gas supply (including gas transported for customers) in
MDth for the Company for the three fiscal years ended September 30, 1997,
1996, and 1995, were as follows:
1997 1996 1995
Gas purchases 156,097 174,552 103,476
Synthetic natural gas (SNG) (a) - - 7,622
Liquefied petroleum gas produced 7 114 14
Customer-owned gas-received 91,476 93,141 93,225
Underground storage-net (3,786) 228 28,352
Exchange gas-net (39) (4,446) -
Company use and unaccounted-for gas (2,071) (3,169) (3,733)
Total (b) 241,684 260,420 228,956
(a)The SNG facility terminated production during fiscal 1995.
(b) See "Gas Sold and Transported" in Item 6.
SYNTHETIC NATURAL GAS SUPPLY
The Company 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.
ITEM 2. PROPERTIES
All of the principal plants and properties of the Company have been
maintained in the ordinary course of business and are believed to be in
satisfactory operating condition. The following is a brief description
of the principal plants and operating units of the Company.
The distribution system of the Company, at September 30, 1997,
consisted of approximately 4,000 miles of distribution mains and
necessary pressure regulators, approximately 495,000 services (pipe
connecting the mains with piping on the customers' premises), and
approximately 881,000 meters installed on customers' premises. The
Company has liquefied petroleum gasification and storage facilities. In
addition, it owns and has 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.
The Company has gas storage easements covering approximately 32,000
acres located at Manlove Field near Champaign, Illinois, overlying an
aquifer-type underground natural gas storage reservoir, together with
wells, pipes, compressors, dehydration, metering, and other equipment
required to operate the facility. At September 30, 1997, the Company had
approximately 129,000 MDth of gas stored in the reservoir, of which
approximately 95,500 MDth was cushion gas. (Cushion gas is gas injected
into the storage reservoir to hold back surrounding or underlying water
and to provide the pressure necessary to make the wells deliver inventory
gas at desired levels.)
Also located at Manlove Field is an LNG plant, which has a storage
capacity of 2,000 MDth and is capable of regasifying 300 MDth of gas per
day. Such gas, together with the gas withdrawn from the Manlove Field
reservoir, and the gas transmitted by Trunkline Gas Company, is carried
to Chicago in Company-owned transmission mains totaling 254 miles.
Most of the principal plants and properties of the Company, 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 in public streets and alleys. A small portion of the
distribution facilities is located on private property under easement
grants. 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. Such land rights, as well as the gas storage
easements for the reservoir, have been obtained from the apparent record
owners of the land involved, in some cases without joinder of all such
owners, and all such leases, easements, and permits may be subject to
mortgages or other liens to which the Company is not a party.
Substantially all of the physical properties now owned or hereafter
acquired by the Company are subject to (a) the first-mortgage lien of the
Company's mortgage to First Trust, National Association, as Trustee, to
secure the principal amount of the Company's outstanding first and
refunding mortgage bonds 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.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company is a wholly owned subsidiary of Peoples Energy.
<TABLE>
<CAPTION>
ITEM 6. SELECTED FINANCIAL DATA (a)
For fiscal years ended September 30, 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS (thousands)
Operating Revenues:
Residential $ 812,225 $ 757,598 $ 648,762 $ 820,383 $ 807,674
Commercial 127,029 122,825 101,436 139,078 135,838
Industrial 24,558 27,776 20,807 35,587 36,193
Transportation (b) 119,282 114,664 109,626 98,943 106,198
Other 16,390 13,712 18,312 17,181 15,517
Total Operating Revenues 1,099,484 1,036,575 898,943 1,111,172 1,101,420
Less- Gas costs 519,334 445,724 387,675 566,903 555,256
- Revenue taxes 115,430 110,421 100,562 121,773 121,051
Net Operating Revenues $ 464,720 $ 480,430 $ 410,706 $ 422,496 $ 425,113
Net Income applicable to common stock $ 85,098 $ 88,752 $ 53,666 $ 63,825 $ 63,637
Dividends declared on common stock $ 72,715 $ 52,117 $ 56,833 $ 55,343 $ 55,095
ASSETS AT YEAR-END (thousands)
Property, plant and equipment $ 1,819,567 $ 1,761,007 $ 1,815,407 $ 1,760,004 $ 1,702,401
Less - Accumulated depreciation 614,224 571,255 628,258 596,808 557,855
Net Property, Plant and Equipment $ 1,205,343 $ 1,189,752 $ 1,187,149 $ 1,163,196 $ 1,144,546
Total assets $ 1,557,627 $ 1,522,762 $ 1,561,481 $ 1,548,792 $ 1,506,107
Capital expenditures - construction $ 75,382 $ 72,194 $ 81,081 $ 74,623 $ 108,863
CAPITALIZATION AT YEAR-END (thousands)
Common equity $ 574,969 $ 564,182 $ 528,308 $ 531,475 $ 522,993
Long-term debt 462,400 462,400 549,150 549,150 447,150
Total Capitalization $ 1,037,369 $ 1,026,582 $ 1,077,458 $ 1,080,625 $ 970,143
CAPITALIZATION AT YEAR-END (per cent)
Common equity 55 55 49 49 54
Long-term debt 45 45 51 51 46
Total Capitalization 100 100 100 100 100
GAS SOLD AND TRANSPORTED (MDth)
Gas Sales:
Residential 121,258 131,339 111,509 122,648 124,190
Commercial 21,379 23,692 19,206 22,565 22,656
Industrial 4,515 5,873 4,357 6,320 6,670
Transportation (b) 94,532 99,516 93,884 90,059 87,952
Total Gas Sales and Transportation 241,684 260,420 228,956 241,592 241,468
Margin per Dth delivered 1.92 $ 1.84 $ 1.79 $ 1.75 $ 1.76
NUMBER OF CUSTOMERS (average)
Residential 781,169 783,782 784,290 786,271 787,672
Commercial 42,750 42,888 43,198 43,299 43,243
Industrial 2,816 2,839 2,963 3,125 3,260
Transportation (b) 9,300 9,671 9,308 8,768 8,335
Total Customers 836,035 839,180 839,759 841,463 842,510
DEGREE DAYS 6,806 7,080 5,897 6,701 6,679
Per cent of normal (6,536) 104 108 90 103 102
(a) The Company is a wholly owned subsidiary of Peoples Energy; therefore,
per-share data are omitted.
(b) Includes commercial, industrial, and larger residential customers.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Net Income
Net income decreased $3.7 million, to $85.1 million, in fiscal 1997
from 1996, due principally to decreased gas deliveries due to weather
that was four per cent warmer than the previous fiscal year and
conservation. Also hindering this year's comparative results was the
year-ago period's gain on the expiration of gas storage contracts (see
Note 5 of the Notes to Consolidated Financial Statements), increased
computer support services, and increased depreciation and amortization
expense. Partially offsetting these decreases were a decrease in pension
expense (see Note 6A of the Notes to Consolidated Financial Statements),
a full year effect of the company's November 1995 rate increase (see Note
2A of the Notes to the Consolidated Financial Statements), and increased
other operating revenue and a tax accrual adjustment.
In 1996, net income applicable to common stock increased $35.1
million, to $88.8 million, due principally to weather that was 20 per
cent colder than in 1995 and to a rate increase that went into effect on
November 14, 1995 for the Company (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 5 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 7D of the Notes to Consolidated Financial
Statements) and the current year's higher operating costs.
A summary of variations affecting income between years is presented
below, with explanations of significant differences following:
Fiscal 1997 Fiscal 1996
over 1996 over 1995
Amount Amount
(000's) Per Cent (000's) Per Cent
Net operating revenues (a) $(15,710) (3.3) $69,724 17.0
Operation and maintenance expenses (15,330) (6.6) 18,925 8.9
Depreciation and amortization expense 3,069 4.9 3,836 6.5
Income taxes (2,832) (5.7) 24,886 101.3
Other income and deductions (3,801) (14.0) 13,444 33.2
Net income applicable to common stock (3,654) (4.1) 35,086 65.4
(a) Operating revenues, net of gas costs and revenue taxes.
Net Operating Revenues
Gross revenues of the Company are affected by changes in the unit cost
of the Company's 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 Company. The direct customer purchases
have no effect on net income because the Company provides transportation
service for such gas volumes and recovers margins similar to those
applicable to conventional gas sales. Except for the effect of customer
conservation that may result from substantial increases in the commodity
cost of gas supplies, changes in the unit cost of gas do not
significantly affect net income because the Company's tariffs provide for
dollar-for-dollar recovery of gas costs. (See Note 1L of the Notes to
Consolidated Financial Statements.) The Company's tariffs also provide
for dollar-for-dollar recovery of the cost of revenue taxes imposed by
the State and the City.
Since income is not significantly affected by changes in revenue from
customers' gas purchases from producers or marketers rather than from the
Company, changes in gas costs (except for the effect of customer
conservation that may result from substantial increases in the commodity
cost of gas supplies), 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 decreased $15.7 million, to $464.7 million, in
1997. Natural gas deliveries decreased 18.7 bcf, to 241.7 bcf, due to
weather that was four per cent warmer than in 1996 and conservation. Net
operating revenues decreased approximately $23.1 million ($13.9 million
after income taxes) as a result of warmer weather and conservation.
However, a full year effect of the company's rate increase improved net
operating revenues by approximately $4.0 million ($2.4 million after
income taxes).
In 1996, net operating revenues increased $69.7 million, to $480.4
million. Natural gas deliveries increased 31.5 bcf, to 260.4 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 $25
million ($15.1 million after income taxes) as a result of the colder
weather. Also, the Company's aforementioned rate increase improved net
operating revenues by about $29.7 million ($17.9 million after income
taxes).
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 decreased $15.3 million, to $217.0
million, in 1997, due primarily to a $17.8 million decrease in pension
expense caused by changes in settlement accounting attributed to
employees choosing early retirement and actuarial assumptions (see Note
6A of the Notes to Consolidated Financial Statements.) and also lower
reengineering expenses ($2.1 million). In addition, reductions in costs
associated with liability insurance premiums and claim settlements ($1.6
million) and group insurance expense ($1.5 million). These decreases
were partially offset by an increase in payments for outside services
($3.2 million) and higher administrative and general expenses.
In 1996, operation and maintenance expenses increased $18.9 million,
to $232.4 million, due chiefly to the reduction of expense from the prior
year's recognition of about $12.7 million for an IRS settlement. (See
Note 7D of the Notes to Consolidated Financial Statements.) Also, the
provision for uncollectible accounts increased ($5.3 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 ($3.8 million), outside services ($2.4 million), distribution
system expenses ($2.6 million), and environmental costs recovered through
rates ($2 million). These increases were offset, in part, by decreased
pension costs ($12.9 million). (See Note 6A of the Notes to Consolidated
Financial Statements.)
Depreciation and Amortization Expense
Deprecation and amortization expense increased $3.1 million, to $66.1
million, in 1997, due largely to depreciable property additions.
In 1996, depreciation and amortization expense increased $3.8 million,
to $63 million, due mainly to depreciable property additions and the
amortization of costs associated with the closing of the SNG plant.
Income Taxes
Income taxes, exclusive of the $1.7 million included in other income
and deductions, declined $2.8 million, to $46.6 million, primarily due to
a tax accrual adjustment.
In 1996, income taxes, exclusive of the $4.1 million included in other
income and deductions, increased $24.9 million, to $49.4 million, due
primarily to higher pre-tax income.
Other Income and Deductions
Other income and deductions increased $3.8 million, from the prior
year, due principally to the prior period's gain associated with the
expiration of natural gas storage contracts. (See Note 5 of the Notes to
Consolidated Financial Statements.) Partially offsetting this increase
were reductions in interest expense on long-term debt resulting from
early redemption of first mortgage bonds (see Note 12B of the Notes to
Consolidated Financial Statements) and decreased amounts refunded to
customers.
In 1996, other income and deductions decreased $13.4 million from the
prior year, due largely to the gain of $6.7 million, after income taxes,
associated with the expiration of certain natural gas storage contracts.
(See Note 5 of the Notes to Consolidated Financial Statements.)
Additionally, the current year includes lower interest on long-term debt
resulting from the Company's early redemption of first mortgage bonds.
(See Note 12B 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 redemption.
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.
FERC Order 636 Costs. 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.)
Large-Volume Gas Service Agreements. The Company 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 contracts will not have a material adverse
effect on the financial position or results of operations of the Company.
Small-Volume Transportation Service. On June 25, 1997, the Commission
allowed Riders SVT and AGG to go into effect for the Company, which will
initiate a two year pilot program designed to provide transportation
service to certain small-volume industrial and commercial customers of
the utility as well as to some of its large residential customers. The
Commission also ordered a concurrent investigation of the program to
ascertain if program adjustments or revisions are required.
Operating Statistics. The following table represents gas distribution
margin components:
For fiscal years ended September 30, 1997 1996 1995
Operating Revenues (thousands):
Gas sales
Residential $ 812,225 $ 757,598 $ 648,762
Commercial 127,029 122,825 101,436
Industrial 24,558 27,776 20,807
963,812 908,199 771,005
Transportation
Residential 34,028 35,281 36,617
Commercial 43,090 44,944 43,459
Industrial 25,890 30,376 29,550
Contract Pooling 15,868 4,063 -
Other 406 - -
119,282 114,664 109,626
Other 16,390 13,712 18,312
Total Operating Revenues 1,099,484 1,036,575 898,943
Less- Gas Costs (519,334) 445,724 387,675
- Revenues Taxes (115,430) 110,421 100,562
Net Operating Revenues $ 464,720 $ 480,430 $ 410,706
Deliveries (MDth):
Gas Sales
Residential 121,258 131,339 111,509
Commercial 21,379 23,692 19,206
Industrial 4,515 5,873 4,357
147,152 160,904 135,072
Transportation (a)
Residential 25,154 25,106 24,232
Commercial 36,628 37,316 36,130
Industrial 32,516 37,094 33,522
Other 234 - -
94,532 99,516 93,884
Total Gas Sales and Transportation $ 241,684 260,420 228,956
Margin per Dth delivered $ 1.92 $ 1.84 $ 1.79
(a) Volumes associated with contract pooling service are included in the
respective customer classes.
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 Company 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 Company has lines of credit of approximately
$129.4 million of which North Shore Gas may borrow up to $30 million. At
September 30, 1997, the Company and North Shore Gas had unused credit
available from banks of $126.5 million. (See Note 11 of the Notes to
Consolidated Financial Statements.)
Cash Flow Activities. Net cash provided by operating activities in 1997
increased by $78.2 million, due primarily to changes in other assets, gas
costs refundable and recoverable, and net receivables. Partially
offsetting these items were changes in accounts payable and gas in
storage. In 1996, net cash provided by operating activities declined by
$133.2 million, due primarily 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 increase, and from accounts payable. In 1995, net cash provided by
operating activities increased by $25.9 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.
Net cash used in investing activities for 1997, 1996, and 1995 mainly
represents the level of capital expenditures in the respective years.
Net cash used in financing activities in 1997 reflects dividends paid
to the common stockholder. In 1996, net cash used in financing
activities reflects the redemption of previously issued debt. (See Note
12B of the Notes to Consolidated Financial Statements.) In 1995 net cash
used in financing activities included drawdowns from the trust fund
associated with prior financing for utility construction activities.
Interest Coverage. The fixed charges coverage ratios for the Company for
fiscal 1997, 1996, and 1995 were 5.01, 4.84, and 2.76, respectively. The
increase in the ratio in the current fiscal year is due primarily to
lower interest expense on amounts refundable to customers and on long-
term debt. The increase in the ratio for fiscal year 1996 reflects the
redemption of long-term debt and higher pre-tax income resulting from
colder weather and the Commission approved rate increase. (See Results
of Operations - Net Income.) The ratio for fiscal year 1995 includes the
recording of an IRS settlement in income. (See Note 7D of the Notes to
Consolidated Financial
Statements.)
Debt Ratings. The long-term debt of the Company has been rated Aa3 by
Moody's Investors Service and AA- by Standard & Poor's Ratings Group
since fiscal 1985. On November 25, 1997, Moody's raised the Company's
long-term debt rating to Aa2. The commercial paper of the Company has
the top rating from both agencies.
Environmental Matters. The Company is conducting environmental
investigations and work at certain sites that were the location of former
manufactured gas operations. (See Note 3 of the Notes to Consolidated
Financial Statements.)
Regulatory Actions. On November 8, 1995, the Commission issued an order
approving changes in rates of the Company. (See Note 2A of the Notes to
Consolidated Financial Statements.)
Year 2000. The Company is modifying all of its computer programs to be
year 2000 compatible. The Company does not believe that the amount of
expenditures it will incur in connection with its year 2000 modification
will have a material adverse effect on the financial position or results
of operations of the Company.
CAPITAL RESOURCES
Capital Spending. Capital expenditures for additions, replacements, and
improvements to the utility plant were $75.4 million in 1997, $72.2
million in 1996, and $81.1 million in 1995.
Expenditures in fiscal 1997 increased $3.2 million from 1996
reflecting an increase of $12.6 million for a new customer information
system, offset, in part, by the continuation of a cost containment
program. In fiscal 1996, expenditures decreased $8.9 million from 1995
reflecting the continuation of a cost containment program.
Capital expenditures for fiscal 1998 are expected to be about $99.2
million, an increase of $23.8 million from the 1997 level. The estimate
of expenditures for 1998 includes $26.0 million for the customer
information system and $13.5 million for the remote automatic meter
reading project.
There are no sinking fund requirements for long-term debt in fiscal
1998. (See Note 12C of the Notes to Consolidated Financial Statements.)
The Company anticipates that future cash needs for capital
expenditures and debt maturities will be met through internally generated
funds, intercompany loans from Peoples Energy, borrowing arrangements
with banks and/or the issuance of commercial paper on an interim basis,
and periodic long-term financing involving first mortgage bonds or equity
from Peoples Energy.
Bonds Redeemed. On December 29, 1995, the Company 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 the Company's Series U and V First and Refunding Mortgage
Bonds. (See Note 12B of the Notes to Consolidated Financial Statements.)
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
Statement of Management's Responsibility 17
Report of Independent Public Accountants 18
Consolidated Statements of Income for fiscal years ended
September 30, 1997, 1996, and 1995 19
Consolidated Statements of Retained Earnings for fiscal
years ended September 30, 1997, 1996, and 1995 19
Consolidated Balance Sheets at September 30, 1997 and 1996 20
Consolidated Capitalization Statements at September 30, 1997
and 1996 21
Consolidated Statements of Cash Flows for fiscal years ended
September 30, 1997, 1996, and 1995 22
Notes to Consolidated Financial Statements 23
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 the 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 Peoples Energy's shareholders, as a part of its audit of the
financial statements, selectively reviews and tests certain aspects of
internal accounting controls solely to determine the nature, timing, and
extent of 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 its audit were valid and appropriate.
The Audit Committee of the Board of Directors of Peoples Energy,
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 of Peoples
Energy.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Peoples Gas Light and Coke Company:
We have audited the accompanying consolidated balance sheets and
consolidated capitalization statements of The Peoples Gas Light and Coke
Company (an Illinois corporation, hereinafter referred to as the Company
and a wholly owned subsidiary of Peoples Energy Corporation) and
subsidiary companies at September 30, 1997 and 1996, and the related
consolidated statements of income, retained earnings, and cash flows for
each of the three years in the period ended September 30, 1997. 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 the Company
and subsidiary companies at September 30, 1997 and 1996, and the results
of their operations and cash flows for each of the three years in the
period ended September 30, 1997, 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
October 31, 1997
CONSOLIDATED STATEMENTS OF INCOME
The Peoples Gas Light and Coke Company
For fiscal years ended September 30, 1997 1996 1995
(Thousands)
Operating Revenues:
Gas sales $ 963,812 $ 908,199 $ 771,005
Transportation 119,282 114,664 109,626
Other 16,390 13,712 18,312
Total Operating Revenues 1,099,484 1,036,575 898,943
Operating Expenses:
Gas costs 519,334 445,724 387,675
Operation 172,333 189,949 174,701
Maintenance 44,693 42,407 38,730
Depreciation and amortization 66,075 63,006 59,170
Taxes - Income 46,612 49,444 24,558
- State and local revenue 115,430 110,421 100,562
- Other 19,040 19,804 19,369
Total Operating Expenses 983,517 920,755 804,765
Operating Income 115,967 115,820 94,178
Other Income and (Deductions):
Allowance for funds used during construction 267 23 -
Interest income 4,152 4,030 8,669
Interest on long-term debt (31,094) (32,889) (40,507)
Other interest expense (2,195) (4,163) (6,079)
Income taxes (1,657) (4,089) (3,606)
Miscellaneous - net (see Note 9) (342) 10,020 1,011
Total Other Income and Deductions (30,869) (27,068) (40,512)
Net Income Applicable to Common Stock $ 85,098 $ 88,752 $ 53,666
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
The Peoples Gas Light and Coke Company
For fiscal years ended September 30, 1997 1996 1995
(Thousands)
Balance at Beginning of Year $ 398,875 $ 363,001 $ 366,168
Add - Net Income 85,098 88,752 53,666
Deduct- Dividends declared on common stock 72,715 52,117 56,833
- Additional minimum liability for
non-qualified pension plan, net of tax 1,596 761 -
Balance at End of Year $ 409,662 $ 398,875 $ 363,001
The Notes to Consolidated Financial Statements are an integral part of
these statements.
CONSOLIDATED BALANCE SHEETS
The Peoples Gas Light and Coke Company
At September 30, 1997 1996
(Thousands)
Properties and Other Assets
Capital Investments:
Property, plant and equipment, at original cost $1,819,567 $1,761,007
Less - Accumulated depreciation 614,224 571,255
Net property, plant and equipment 1,205,343 1,189,752
Other investments 5,470 6,607
Total Capital Investments - Net 1,210,813 1,196,359
Current Assets:
Cash and cash equivalents 18,509 17,537
Temporary cash investments 15,500 500
Receivables -
Customers, net of allowance for uncollectible
accounts of $28,959 and $25,279, respectively 67,330 63,152
Other 40,159 32,045
Accrued unbilled revenues 20,109 25,534
Materials and supplies, at average cost 13,225 14,017
Gas in storage, at last-in, first-out cost 67,536 55,876
Gas costs recoverable through rate adjustments 3,328 17,420
Prepayments 39,802 11,897
Total Current Assets 285,498 237,978
Other Assets:
Regulatory assets (see Note 1H) 45,612 76,176
Deferred charges 15,704 12,249
Total Other Assets 61,316 88,425
Total Properties and Other Assets $1,557,627 $1,522,762
Capitalization and Liabilities
Capitalization (see Consolidated Capitalization Statement $1,037,369 $1,026,582
Current Liabilities:
Interim loans 700 700
Accounts payable 113,502 121,653
Dividends payable on common stock 32,015 13,153
Customer gas service and credit deposits 39,753 37,121
Accrued taxes 19,056 31,242
Gas sales revenue refundable through rate adjustments 14,484 10,734
Accrued interest 8,763 8,758
Total Current Liabilities 228,273 223,361
Deferred Credits and Other Liabilities:
Deferred income taxes - primarily accelerated depreciatio 229,225 211,623
Investment tax credits being amortized over
the average lives of related property 30,350 31,696
Other 32,410 29,500
Total Deferred Credits and Other Liabilities 291,985 272,819
Total Capitalization and Liabilities $1,557,627 $1,522,762
The Notes to Consolidated Financial Statements are an integral part of
these statements.
CONSOLIDATED CAPITALIZATION STATEMENTS
The Peoples Gas Light and Coke Company
At September 30, 1997 1996
(Thousands, except number of shares)
Common Stockholder's Equity:
Common stock, without par value -
Authorized 40,000,000 shares
Outstanding 24,817,566 shares $ 165,307 $ 165,307
Retained earnings (see Consolidated Statements
of Retained Earnings) 409,662 398,875
Total Common Stockholder's Equity 574,969 564,182
Long-Term Debt:
Exclusive of sinking fund payments and maturities
due within one year
First and Refunding Mortgage Bonds -
Adjustable-Rate Series W (3.95% and 4% through
September 30, 1997 and September 30, 1996, respectively),
due October 1, 1999 (see Note 12A) 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 (3.70% and 3.85% through
November 30, 1997 and November 30, 1996, respectively),
due December 1, 2023 (see Note 12A) 27,000 27,000
6.10% Series FF, due June 1, 2025 50,000 50,000
Total Long-Term Debt 462,400 462,400
Total Capitalization $ 1,037,369 $ 1,026,582
The Notes to Consolidated Financial Statements are an integral part of
these statements.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Peoples Gas Light and Coke Company
For fiscal years ended September 30, 1997 1996 1995
(Thousands)
<S> <C> <C> <C>
Operating Activities:
Net Income $ 85,098 $ 88,752 $ 53,666
Adjustments to reconcile net income to net cash:
Depreciation and amortization 66,075 63,006 59,170
Deferred income taxes and investment tax credits - net 16,398 14,169 7,295
Change in deferred credits and other liabilities 2,768 18,923 (8,305)
Change in other assets 21,496 (50,395) (2,327)
Other - 74 55
Change in current assets and liabilities:
Receivables - net (12,292) (40,390) 17,356
Accrued unbilled revenues 5,425 (7,083) (890)
Materials and supplies 792 (174) 7,721
Gas in storage (11,660) 26,275 41,433
Gas costs recoverable 14,092 (15,288) 9,892
Prepayments (27,905) (9,970) (279)
Accounts payable (8,151) 33,960 (7,334)
Customer gas service and credit deposits 2,632 2,109 (4,531)
Accrued taxes (12,186) 4,280 271
Gas sales revenue refundable 3,750 (57,824) 27,391
Accrued interest 5 (2,267) 821
Net Cash Provided by Operating Activities 146,337 68,157 201,405
Investing Activities:
Capital expenditures of subsidiaries - construction (75,382) (72,194) (81,081)
Other assets (11) 11,497 (2,042)
Other capital investments (1,118) (2,416) 1,153
Other temporary cash investments (15,000) 100 -
Net Cash Used in Investing Activities (91,511) (63,013) (81,970)
Financing Activities:
Interim loans - net - (200) -
Issuance of long-term debt - - 50,000
Retirement of long-term debt - (86,750) (50,000)
Trust fund - utility construction - - 31,493
- bond redemption - 237 (237)
Dividends paid on common stock (53,854) (53,109) (56,584)
Net Cash Used in Financing Activities (53,854) (139,822) (25,328)
Net Increase (Decrease) in Cash and Cash Equivalents 972 (134,678) 94,107
Cash and Cash Equivalents at Beginning of Year 17,537 152,215 58,108
Cash and Cash Equivalents at End of Year $ 18,509 $ 17,537 $152,215
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of
these statements.
The Peoples Gas Light and Coke Company
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 1997 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
The Company provides natural gas service to approximately
836,000 customers within the City. Credit risk for the Company
is spread over a diversified base of residential, commercial, and
industrial retail sales and transportation customers.
The Company encourages customers to participate in its long-
standing budget payment program that allows 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 capitalized labor costs, 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.
1G Maintenance and Depreciation
The Company charges 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 1997 1996 1995
September 30,
Provision for depreciation 3.7% 3.6% 3.6%
1H Regulated Operations
The Company's 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 were reflected in Other Assets
in the Consolidated Balance Sheets at September 30, 1997 and
1996:
1997 1996
(Thousands)
Environmental costs, net of recoveries (see Note 3) $ 10,821 $ 12,218
Transition costs from pipeline supplier (see Note 2B) 6,921 32,692
Regulatory income tax assets (see Note 1I) 7,146 4,340
Discount, premium, expenses, and loss on reacquired bonds 2,909 3,247
SNG plant - decommissioning 17,543 23,156
Other 272 523
Total regulatory assets $ 45,612 $ 76,176
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 the Company, certain
adjustments made to deferred income taxes are, in turn, debited
or credited to regulatory assets or liabilities. (See Note 7C.)
Each Company within the consolidated group nets its income tax
related regulatory assets and liabilities. At September 30, 1997
and 1996, net regulatory income tax assets recorded in Other
Assets amounted to $7.1 million and $4.3 million, while net
regulatory income tax liabilities recorded in Other Liabilities
equaled $0 and $50,000, 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 supply. 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, 1997 and
1996 exceeded the LIFO cost by approximately $88 million and
$78 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 1997 1996 1995
September 30,
(Thousands)
Income taxes paid $45,781 $35,096 $15,501
Interest paid 32,017 36,267 41,378
1L Recovery of Gas Costs, Including Charges for Transition Costs
Under the tariffs of the Company, 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).
For each gas utility, the Commission conducts annual
proceedings regarding, 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 the Company
for fiscal years 1996 and 1997 are currently pending before the
Commission.
Pursuant to FERC Order No. 636 and successor orders, pipelines
are allowed to recover from their customers transition costs.
These costs arise from the restructuring of pipeline service
obligations required by the 636 Orders. The Company is currently
recovering pipeline charges for transition costs through the Gas
Charge. (See Notes 2A and 2B.)
1M Recovery of Costs of Environmental Activities Relating to
Former Manufactured Gas Operations
The Company is recovering the costs of environmental
activities relating to its former manufactured gas operations,
including carrying charges on the unrecovered balances, under a
rate mechanism approved by the Commission. For each utility with
such a rate mechanism, the Commission conducts annual proceedings
regarding the reconciliation of revenues from the rate mechanism
and related costs. In such proceedings, costs recovered by a
utility through the rate mechanism are subject to challenge.
Such proceedings, regarding the Company for fiscal years 1994
through 1996 are currently pending before the Commission. (See
Note 3.)
2. RATES AND REGULATION
2A Utility Rate Proceedings
Rate Order. On November 8, 1995, the Commission issued an order
approving changes in rates of the Company that were designed to
increase annual revenues by approximately $30.8 million,
exclusive of additional charges for revenue taxes. The Company
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.
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 the Company's gas service
customers. The Commission directed that 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. A group of industrial transportation
customers has filed a petition with the Illinois Supreme Court
appealing the Commission's orders. 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. Under a
Stipulation and Agreement (Agreement) filed by Natural Gas
Pipeline Company of America (Natural) and approved by FERC,
Natural's charges to the Company for GSR transition costs are
subject to a cap of approximately $103 million. At September 30,
1997, the Company had made payments of $96.1 million and had
accrued an additional $6.9 million toward the cap.
The 636 Orders are not expected to have a material effect on
financial position or results of operations of the Company. (See
Notes 1L and 2A.)
3. ENVIRONMENTAL MATTERS
The Company, its 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 Company might be required to undertake remedial
action with respect to some of these materials. Two of the
Manufactured Gas Sites are discussed in more detail below. The
Company, under the supervision of the Illinois Environmental
Protection Agency (IEPA), is conducting investigations of an
additional 27 Manufactured Gas Sites. These investigations may
require the Company to perform additional investigation and
remediation. The investigations are in a preliminary stage and
are expected to occur over an extended period of time.
The Company 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). The Company 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 the Company in federal district
court under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended. The suit
seeks recovery of the past and future costs of investigating and
remediating the site and an order directing the Company to
remediate the site. The Company is contesting this suit.
The Company is accruing and deferring the costs it incurs 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, 1997, the
total of the costs deferred by the Company, net of recoveries and
amounts billed to other entities, was $10.8 million. This amount
includes an estimate of the costs of 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 110th Street Station Site, 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 the
Company 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.
The Company has filed suit against a number of insurance
carriers for the recovery of environmental costs relating to its
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
Company in connection with three Manufactured Gas Sites in
Chicago. The Company is also asking the court to award damages
stemming from the insurers' breach of their contractual
obligation to defend and indemnify the Company against these
costs. At this time, management cannot determine the timing and
extent of the Company's recovery of costs from its insurance
carriers. Accordingly, the costs deferred at September 30, 1997
have not been reduced to reflect recoveries from insurance
carriers.
Costs incurred by the Company 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 Company in connection with former manufactured
gas operations will not have a material adverse effect on the
financial position or results of operations of the Company. The
Company is recovering the costs of environmental activities
relating to its former manufactured gas operations, including
carrying charges on the unrecovered balances, under a rate
mechanism approved by the Commission. At September 30, 1997, it
had recovered $5.4 million of such costs through rates.
4. LONG-TERM LEASE
In October 1993, the Company entered into a 15-year operating
lease for its headquarters office.
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 expenses for the headquarters office were $6.4 million,
$6.5 million, and $6.4 million, for fiscal years 1997, 1996, and
1995, respectively.
5. EXPIRATION OF GAS STORAGE CONTRACTS
The Company had certain natural gas storage contracts with
Natural that expired on or before December 1, 1995. Associated
with the expiration of the contracts during fiscal 1996, the
Company realized a gain, of approximately $11.1 million ($6.7
million after income taxes).
6. RETIREMENT AND POSTEMPLOYMENT BENEFITS
6A Pension Benefits
The Company participates 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. Annual contributions
are made 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 1997, 1996, and 1995
included the following components:
1997 1996 1995
(Millions)
Service cost - benefits earned during year $ 10.9 $ 12.7 $ 13.4
Interest cost on projected benefit obligations 27.5 30.6 27.9
Actual return on plan assets (gain) (104.0) (64.9) (80.5)
Net amortization and deferral 56.5 20.4 43.2
Settlement accounting (17.7) (7.8) -
Net pension cost (credit) $ (26.8) $ (9.0) $ 4.0
In 1997 and 1996, the Company recognized net gains of $17.7
million and $7.8 million, respectively, from the settlement of
portions of pension plan obligations.
The calculation of pension cost assumed a long-term rate of
return on assets of 9.0 per cent for 1997, 8.5 per cent for 1996
and 7.5 per cent for 1995. The settlement accounting cost for
1997 and 1996 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, 1997 and 1996:
1997 1996
(Millions)
Plan assets at market value $ 547.7 $ 547.4
Actuarial present value of plan benefits:
Vested 246.9 279.8
Non-vested 30.9 31.1
Accumulated benefit obligation 277.8 310.9
Effect of projected future compensation increases 76.0 70.5
Projected benefit obligation 353.8 381.4
Excess of plan assets over projected benefit obligation 193.9 166.0
Less:
Unrecognized transition asset 18.4 23.3
Unrecognized prior service cost (5.6) (4.5)
Unrecognized net gain 145.4 139.5
Non-qualified plan contributions: 7-1-97 to 9-30-97 1.5 -
Recognition of non-qualified plan additional minimum liability (4.5) (1.9)
Accrued pension asset $ 32.7 $ 5.8
The projected benefit obligation and plan assets at September
30, 1997 and 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. Plan assets consist
primarily of marketable equity and fixed-income securities.
6B Other Postretirement Benefits
The Company also provides 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 company. The plans
are funded based upon actuarial determinations and in
consideration of tax regulations and funding requirements under
federal law. The Company accrues the expected costs of such
benefits during the employees' years of service.
Net postretirement benefit cost for all plans for fiscal 1997,
1996, and 1995 included the following components:
1997 1996 1995
(Millions)
Service cost - benefits earned during year $ 2.9 $ 3.1 $ 2.5
Interest cost on projected benefit obligation 7.9 7.1 7.2
Actual return on plan assets (gain) (6.2) (2.9) (3.6)
Amortization of transition obligation 4.5 4.5 4.5
Net amortization and deferral 3.1 1.1 2.4
Net postretirement benefit cost $ 12.2 $ 12.9 $ 13.0
The calculation of postretirement benefit cost assumed a long-
term rate of return on assets of 9.0 per cent for 1997 and 7.5
per cent for 1996 and 1995.
Of the above total postretirement costs recognized for fiscal
years 1997, 1996, and 1995, $5.5 million, $5.6 million, and
$5.7 million, respectively, were funded through trust funds for
future benefit payments.
The following table sets forth the estimated funded status for
the postretirement health care and life insurance plans at
September 30, 1997 and 1996:
1997 1996
(Millions)
Plan assets at market value $ 44.9 $ 33.7
Accumulated postretirement benefit obligation (APBO):
Retirees 62.7 59.8
Fully eligible active plan participants 13.4 17.2
Other active plan participants 29.2 29.2
Total APBO 105.3 106.2
Deficiency of plan assets over the APBO (60.4) (72.5)
Less:
Unrecognized transition obligation
(being amortized over 20 years) (72.1) (76.5)
Unrecognized net gain 19.3 11.8
Contributions: July 1 to September 30 7.1 7.3
Accrued postretirement benefit (liability) $ (0.5) $ (0.5)
The total APBO and plan assets at September 30, 1997 and 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. Plan assets consist primarily of marketable
equity and fixed-income securities.
For measurement purposes, a health care cost trend rate of 7.9 per
cent was assumed for fiscal 1998, and that rate thereafter will
decline gradually 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, 1997, by $7.7 million and the aggregate of
service and interest cost components of the net periodic
postretirement benefit cost by $1.2 million annually.
7. TAX MATTERS
7A Provision for Income Taxes
Total income tax expense as shown on the Consolidated Statements of
Income is composed of the following:
For fiscal years ended September 30, 1997 1996 1995
(Thousands)
Current:
Federal $ 26,036 $ 32,590 $ 17,311
State 5,850 6,859 3,208
Total current income taxes 31,886 39,449 20,519
Deferred:
Federal 14,049 13,121 7,115
State 3,746 3,554 2,243
Total deferred income taxes 17,795 16,675 9,358
Investment tax credits - net:
Federal (1,524) (2,635) (1,784)
State 11 12 167
Total investment tax credits - (1,412) (2,506) (1,617)
Total provision for income taxes 48,269 53,618 28,260
Less - Included in operation expense - 85 96
Net provision for income taxes $ 48,269 $ 53,533 $ 28,164
7B 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, 1997 1996 1995
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 $43,281 35.00 $46,140 35.00 $26,708 35.00
Amortization of investment
tax credits (1,524) (1.23) (2,635) (2.00) (1,784) (2.34)
Nontaxable-tax settlement - - - - (1,772) (2.32)
Accrual adjustment (2,000) (1.62) - - - -
Other, net (1,196) (0.97) (429) (0.32) (510) (0.67)
Total provision for federal
income taxes $38,561 31.18 $43,076 32.68 $22,642 29.67
</TABLE>
7C 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):
At September 30, 1997 1996
(Thousands)
Deferred tax liabilities:
Property - accelerated depreciation and
other property related items $ 226,537 $ 214,875
Other 33,249 24,167
Total deferred income tax liabilities 259,786 239,042
Deferred tax assets:
Uncollectible accounts (11,651) (10,191)
Unamortized investment tax credits (12,049) (12,572)
Other (6,861) (4,656)
Total deferred income tax assets (30,561) (27,419)
Net deferred income tax liabilities $ 229,225 $ 211,623
7D 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 $25 million, or $19.4 million after income taxes. The
Company 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. The Company 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.
As a result of the Commission's accounting authorization, the
fiscal year 1995 portion of the settlement amount for the Company was
amortized (credited) to operation expense. The effect was to offset
increases in costs that the Company would incur during the year. In
fiscal 1995, the Company amortized approximately $12.7 million, or
$9.7 million after income taxes.
8. ASSETS SUBJECT TO LIEN
The Indenture of Mortgage, dated January 2, 1926, as supplemented,
securing the first and refunding mortgage bonds issued by the
Company, constitutes a direct, first-mortgage lien on substantially
all property owned by the Company.
9. OTHER INCOME AND DEDUCTIONS - MISCELLANEOUS
<TABLE>
<CAPTION>
For fiscal years ended September 30, 1997 1996 1995
(Thousands)
<S> <C> <C> <C>
Amortization of net gain on sale of Peoples Gas Building $ - $ - $ 576
Interest on amounts recoverable from customers 126 - 99
Gain on expiration of gas storage contracts (see Note 5) - 11,093 -
Amortization of gain (loss) on reacquired bonds (165) (65) 317
Loss on donation of property (650) - -
Earnings from subsidiary companies 304 275 188
Other 43 (1,283) (169)
Total other income and deductions - miscellaneous $ (342) $ 10,020 $ 1,011
</TABLE>
10. CAPITAL COMMITMENTS
Total contract and purchase order commitments of the Company at
September 30, 1997, amounted to approximately $2.9 million.
11. SHORT-TERM BORROWINGS AND CREDIT LINES
At September 30, 1997 1996
(Thousands)
Bank Loans
Peoples Gas
8.50% due March 27, 1998 $ 700 $ -
8.25% due February 11, 1997 - 700
Commercial Paper
North Shore Gas
due October 1, 1997 $ 2,110 $ -
due October 1, 1996 - 1,925
Letters of Credit
Peoples Gas $ 100 $ -
Available lines of credit
Unused bank lines $ 126,490 $ 126,775
Short-term cash needs of the Company and North Shore Gas are met
through intercompany loans from Peoples Energy, 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, 1997 and 1996, the Company and North Shore Gas
had combined lines of credit totaling $129.4 million. Of these
amounts, North Shore Gas could borrow up to $30 million. Agreements
covering $92 million of the total at September 30, 1997 will expire
on August 30, 1998; the agreement covering the remaining $37.4
million will expire on January 31, 1999. Such lines of credit cover
projected short-term credit needs of the Company and North Shore Gas
and support the long-term debt treatment of the Company's adjustable-
rate mortgage bonds. (See Note 12A.) Payment for the lines of
credit is by fee.
12. LONG-TERM DEBT
12A Interest-Rate Adjustments
The rate of interest on the City of Joliet 1984 Series C Bonds,
which are secured by the Company's Adjustable-Rate First and
Refunding 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. The
Company is obligated to purchase any such bonds tendered if they
cannot be remarketed. All Series C Bonds that were tendered prior to
October 1, 1997, have been remarketed. The interest rate on such
bonds is 3.875 per cent for the period October 1, 1997, through
September 30, 1998.
The rate of interest on the City of Chicago 1993 Series B Bonds,
which are secured by the Company's Adjustable-Rate First and
Refunding 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. The Company is obligated to purchase any such bonds tendered
if they cannot be remarketed. The interest rate on such bonds is
3.70 per cent for the period December 1, 1996, through
November 30, 1997.
The Company 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, the Company established a $37.4 million
three year line of credit with The Northern Trust Company which has
since been extended to January 31, 1999. (See Note 11.)
12B Bonds Redeemed
On December 29, 1995, the Company redeemed, from general corporate
funds, approximately $87 million aggregate principal amount of the
City of Joliet's 1984 Gas Supply Revenue Refunding Bonds, Series A
and B, which were secured by the Company's Series U and V First and
Refunding Mortgage Bonds.
12C Sinking Fund Requirements and Maturities
At September 30, 1997, long-term debt sinking fund requirements
and maturities for the next five years are:
Fiscal Amounts
Year
(Thousands)
1998 $ --
1999 --
2000 10,400
2001 --
2002 --
12D Fair Value of Financial Instruments
At September 30, 1997, the carrying amount of the Company's long-
term debt of $462.4 million had an estimated fair value of $497.0
million. At September 30, 1996, the carrying amount of the Company's
long-term debt of $462.4 million had an estimated fair value of
$494.5 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 the Company is subject to regulation, any gains or
losses related to the difference between the carrying amount and the
fair value of financial instruments may not be realized by the
Company's shareholder. The carrying amount of all other financial
instruments approximates fair value. The $15.5 million in temporary
cash investments approximates its fair market value.
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
The first quarter of fiscal 1997 included a full quarter's impact
of the Commission-approved rate orders. (See Note 2A of the Notes to
Consolidated Financial Statements.) All four quarters reflected the
decrease in gas deliveries due primarily to warmer weather and
conservation. However, this was offset in all four quarters by
reduced pension expense. The last three quarters of fiscal 1996
reflected the gain from the expiration of gas storage contracts.
(See Note 5 of the Notes to Consolidated Financial Statements.)
Net Income
Operating Operating Applicable to
Fiscal Quarters Revenues Income Common Stock
(Thousands)
1997
Fourth $ 96,349 $ (4,144) $ (11,734)
Third 177,308 18,146 10,394
Second 489,348 61,642 54,328
First 336,479 40,323 32,110
1996
Fourth $ 116,395 $ (971) $ (7,570)
Third 216,438 17,197 11,905
Second 429,115 58,918 52,912
First 274,627 40,675 31,505
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
IDENTIFICATION OF DIRECTORS
Company
Name, Principal Occupation, Age at Directorship
and Other Directorships 11-30-97 Since
Kenneth S. Balaskovits 55 1993
Vice President and Controller
of the Company, Peoples Energy,
and North Shore Gas; Director of North Shore Gas.
J. Bruce Hasch 59 1986
President and Chief Operating Officer of
the Company, Peoples Energy, and North Shore Gas;
Director of Peoples Energy and North Shore Gas.
James Hinchliff 57 1985
Senior Vice President and General Counsel
of the Company, Peoples Energy,
and North Shore Gas; Director of North Shore Gas.
Thomas M. Patrick 51 1996
Executive Vice President of the Company,
Peoples Energy, and North Shore Gas;
Director of North Shore Gas.
Richard E. Terry 60 1982
Chairman of the Board and Chief Executive
Officer of the Company, Peoples Energy, and
North Shore Gas; Director of Peoples Energy
and North Shore Gas. Mr. Terry is also a
Director of Harris Bankcorp, Inc., Harris Trust
and Savings Bank, Bankmont Financial Corp.,
and Amsted Industries.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY (Continued)
IDENTIFICATION OF EXECUTIVE OFFICERS
Position at Age at Position
Name November 30,1997 11-30-97 Held Since
Kenneth S. Balaskovits Vice President and Controller 55 1993
Emmet P. Cassidy Secretary and Treasurer 64 1989
Katherine A. Donofrio Vice President 40 1997
Willard S. Evans, Jr. Vice President 42 1997
Donald M. Field Vice President 48 1996
Joan T. Gagen Vice President 46 1994
J. Bruce Hasch President and Chief Operating 59 1990
Officer
James Hinchliff Senior Vice President and 57 1989
General Counsel
John C. Ibach Vice President 50 1992
James M. Luebbers Vice President 51 1997
William E. Morrow Vice President 41 1996
Thomas M. Patrick Executive Vice President 51 1996
Desiree Rogers Vice President 38 1997
Norman F. Sidler, Jr. Assistant Vice President 58 1997
Richard E. Terry Chairman of the Board and 60 1990
Chief Executive Officer
Directors and executive officers of the Company were elected to
serve for a term of one year or until their successors are duly
elected and qualified, except for Ms. Donofrio, Messrs. Evans,
Luebbers, Morrow, Ms. Rogers, and Mr. Sidler, who were appointed.
There are no family relationships among directors and executive
officers of the Company.
All of the directors and executive officers of the Company have
been continuously employed by the Company and/or its affiliates in
various capacities for at least five years with the exception of Ms.
Rogers.
ITEM 11. EXECUTIVE COMPENSATION
The following tables set forth information concerning annual and long-
term compensation and grants of stock options, stock appreciation rights
(SARs) and restricted stock awards under Peoples Energy's Long-Term
Incentive Compensation Plan. All compensation was paid by the Company and
its affiliates (Peoples Energy and North Shore Gas) for services in all
capacities during the three fiscal years set forth below, to (1) the Chief
Executive Officer and (2) the four most highly compensated executive
officers of the Company other than the Chief Executive Officer.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards
Restricted Stock All Other
Name and Awards(1)(2) Options/SARs Compensation
Principal Position Year Salary($) Bonus($) ($) (#) (3)($)
<S> <C> <C> <C> <C> <C> <C>
Richard E. Terry 1997 548,500 237,900 152,663 17,800 16,455
Chairman and Chief 1996 473,500 191,600 145,722 21,200 14,205
Executive Officer 1995 455,300 137,200 137,119 21,400 12,354
J. Bruce Hasch 1997 345,900 106,700 84,525 9,800 10,377
President and Chief 1996 332,600 86,000 80,803 11,800 9,978
Operating Officer 1995 319,800 61,500 76,606 11,800 9,594
James Hinchliff 1997 260,700 67,700 54,338 6,400 7,821
Senior Vice President 1996 250,700 54,500 51,797 7,600 7,521
And General Counsel 1995 241,100 39,000 48,925 7,600 7,233
Thomas M. Patrick 1997 231,600 67,700 54,338 6,400 6,948
Executive 1996 186,800 31,900 33,150 4,800 5,604
Vice President 1995 176,800 39,200 30,900 4,800 5,304
Kenneth S. Balaskovits 1997 210,400 53,100 43,988 5,200 6,312
Vice President and 1996 172,500 25,700 33,150 4,800 5,175
Controller 1995 162,700 24,200 30,900 4,800 4,881
</TABLE>
(1) Restricted stock awards are valued at the closing market price as of
the date of grant. The total number of restricted shares held by the
named executive officers and the aggregate market value of such shares
at September 30, 1997 were as follows: Mr. Terry, 14,020 shares,
valued at $528,378.75; Mr. Hasch, 7,990 shares, valued at $301,123.13;
Mr. Hinchliff, 5,130 shares, valued at $193,336.88; Mr. Patrick, 3,830
shares, valued at $144,343.13; and Mr. Balaskovits, 3,455 shares,
valued at $130,210.31. Dividends are paid on the restricted shares at
the same time and at the same rate as dividends paid to all
shareholders of common stock. Aggregate market value is based on a
per share price of $37.6875, the closing price of Peoples Energy's
stock on the New York Stock Exchange on September 30, 1997.
ITEM 11. EXECUTIVE COMPENSATION (Continued)
(2) Restricted stock awards granted to date vest in equal
annual increments over a five-year period. If a
recipient's employment with the Company terminates,
other than by reason of death, disability, or
retirement after attaining age 65, the recipient
forfeits all rights to the unvested portion of the
restricted stock award. In addition, the Compensation-
Nominating Committee (and with respect to the CEO, the
Compensation-Nominating Committee, subject to the
approval of the non-employee directors) may, in its
sole discretion, accelerate the vesting of any
restricted stock awards granted under the Long-Term
Incentive Compensation Plan. Total restricted stock
awarded to the named individuals for 1995 constitutes
12,600 shares, of which 2,520 shares vested in 1996;
2,520 shares vested in 1997; 2,520 shares will vest in
1998; 2,520 shares will vest in 1999; and the remaining
2,520 shares will vest in 2000. Total restricted stock
awarded to the named individuals for 1996 constitutes
12,475 shares, of which 2,495 shares vested in 1997;
2,495 shares will vest in 1998; 2,495 shares will vest
in 1999; 2,495 shares will vest in 2000; and the
remaining 2,495 shares will vest in 2001. Total
restricted stock awarded to the named individuals for
1997 constitutes 11,300 shares, of which 2,260 shares
will vest in 1998; 2,260 shares will vest in 1999;
2,260 shares will vest in 2000; 2,260 shares will vest
in 2001; and the remaining 2,260 shares will vest in
2002.
(3) Company contributions to the Capital Accumulation Plan
accounts of the named executive officers during the above
fiscal years. Employee contributions under the plan are
subject to a maximum limitation under the Internal Revenue
Code of 1986. The Company pays an employee who is subject
to this limitation an additional 50 cents for each dollar
that the employee is prevented from contributing solely by
reason of such limitation. The amounts shown in the table
above reflect, if applicable, this additional Company
payment.
<TABLE>
<CAPTION>
ITEM 11. EXECUTIVE COMPENSATION (Continued)
OPTIONS/SAR GRANTS IN FISCAL 1997
Individual Grants
% of Total Options/
Options/SARs SARs Granted to Exercise or Grant Date
Granted Employees in Fiscal Base Price Expiration Present Value
Name (#) (1) Year (2) ($/Sh) Date ($)(3)
<S> <C> <C> <C> <C> <C>
Richard E. Terry 17,800 10.1% $34.19 02-Oct-06 $51,620
Chairman and Chief
Executive Officer
J. Bruce Hasch 9,800 5.6 34.19 02-Oct-06 28,420
President and Chief
Operating Officer
James Hinchliff 6,400 3.6 34.19 02-Oct-06 18,560
Senior Vice President
And General Counsel
Thomas M. Patrick 6,400 3.6 34.19 02-Oct-06 18,560
Executive Vice
President
Kenneth S. Balaskovits 5,200 2.9 34.19 02-Oct-06 15,080
Vice President and
Controller
</TABLE>
(1)The grant of an Option enables the recipient to purchase Peoples
Energy common stock at a purchase price equal to the fair market
value of the shares on the date the Option is granted. The grant
of an SAR enables the recipient to receive, for each SAR granted,
cash in an amount equal to the excess of the fair market value of
one share of Peoples Energy common stock on the date the SAR is
exercised over the fair market value of such common stock on the
date the SAR was granted. Options or SARs that expire unexercised
become available for future grants. Before an Option or SAR may
be exercised, the recipient must complete 12 months of continuous
employment subsequent to the grant of the Option or SAR. Options
and SARs may be exercised within 10 years from the date of grant,
subject to earlier termination in case of death, retirement, or
termination of employment.
(2)Based on 88,200 Options and 88,200 SARs granted to all employees
under Peoples Energy's Long-Term Incentive Compensation Plan
during fiscal 1997.
(3)Present value is determined a variation of using a variation of the Black-
Scholes Option-Pricing Model. The model assumes: a) that Options and SARs
are exercised teo years after the date of grant-the average tie Options and
SARs were held by recipients under Peoples Energy Long-Term Incentive
Compensation Plan over the past ten years; b) use of an interest rate
equal to the interest rate on a U.S. Treasury security with a maturity
date corresponding to the assumed exercise date; c) a level of
volatility calculated using weekly stock prices for the two years
prior to the date of grant; d) an expected dividend yield; and e)
that no adjustments were made for non-transferability or risk of
forfeiture. This is a theoretical value for the Options and SARs.
The amount realized from an Option or SAR ultimately depends upon
the excess of the market value of Peoples Energy's stock over the
exercise price on the date the option or SAR is exercised.
ITEM 11. EXECUTIVE COMPENSATION (Continued)
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1997
AND FISCAL YEAR-END OPTION/SAR VALUES
Shares Number of Unexercised Value of Unexercised
Acquired on Options/SARs at Fiscal In-the-Money Options/SARs
(Option/ SAR) Value Year-End (#) at Fiscal Year-End($)
Name Exercise Realized($) Exercisable Unexercisable Exercisable Unexercisable
(#) (1)
<S> <C> <C> <C> <C> <C> <C>
Richard E. Terry 21,200 178,875 29,000 17,800 $204,790 $62,300
Chairman and Chief
Executive Officer
J. Bruce Hasch 21,400 172,977 9,400 9,800 64,014 34,300
President and Chief
Operating Officer
James Hinchliff 13,800 118,732 6,200 6,400 42,222 22,400
Senior Vice President
And General Counsel
Thomas M. Patrick 2,400 27,900 10,200 6,400 79,574 22,400
Executive Vice
President
Kenneth S. Balaskovits 11,000 97,119 0 5,200 0.00 18,200
Vice President and
Controller
</TABLE>
(1)Includes cash-only SARs exercised by the named executive officers
in the following amounts: Mr. Terry, 10,600; Mr. Hasch, 10,700;
Mr. Hinchliff, 6,900, Mr. Patrick, 1,200, and Mr. Balaskovits, 5,500.
ITEM 11. EXECUTIVE COMPENSATION (Continued)
PENSION PLAN TABLE
Years Of Service
Average Annual
Compensation 20 25 30 35 40
$150,000 $ 54,682 $ 68,352 $ 82,022 $ 91,397 $100,772
200,000 74,682 93,352 112,022 124,522 137,022
250,000 94,682 118,352 142,022 157,647 173,272
300,000 114,682 143,352 172,022 190,772 209,522
350,000 134,682 168,352 202,022 223,897 245,772
400,000 154,682 193,352 232,022 257,022 282,022
450,000 174,682 218,352 262,022 290,147 318,272
500,000 194,682 243,352 292,022 323,272 354,522
550,000 214,682 268,352 322,022 356,397 390,772
600,000 234,682 293,352 352,022 389,522 427,022
650,000 254,682 318,352 382,022 422,647 463,272
700,000 274,682 343,352 412,022 455,772 499,522
750,000 294,682 368,352 442,022 488,897 535,772
The above table illustrates various annual straight-life
benefits at normal retirement (age 65) for the indicated levels
of average annual compensation and various periods of service,
assuming no future changes in Peoples Energy's pension benefits.
The compensation used in the computation of annual retirement
benefits is substantially equivalent to the salary and bonus
reported in the Summary Compensation Table. The benefit amounts
shown reflect reduction for applicable Social Security benefits.
Average annual compensation is the average 12-month
compensation for the highest 60 consecutive months of the last
120 months of service prior to retirement. Compensation is total
salary paid to an employee by the Company and/or its affiliates,
including bonuses under Peoples Energy's Short-Term Incentive
Compensation Plan, pre-tax contributions under Peoples Energy's
Capital Accumulation Plan, pre-tax contributions under Peoples
Energy's Health and Dependent Care Spending Accounts Plan, and
pre-tax contributions for life and health care insurance, but
excluding moving allowances, exercise of stock options and SARs,
and other compensation that has been deferred.
At September 30, 1997, the credited years of retirement
benefit service for the individuals listed in the Summary
Compensation Table were as follows: Mr. Terry, 33 years; Mr.
Hasch, 37 years; Mr. Hinchliff, 25 years, Mr. Patrick, 21 years;
and Mr. Balaskovits, 30 years. The benefits shown in the
foregoing table are subject to maximum limitations under the
Employee Retirement Income Security Act of 1974, as amended, and
the Internal Revenue Code of 1986, as amended. Should these
benefits at the time of retirement exceed the then-permissible
limits of the applicable Act, the excess would be paid by the
Company as supplemental pensions pursuant to Peoples Energy's
Supplemental Retirement Benefit Plan. The benefits shown give
effect to these supplemental pension benefits.
SEVERANCE AGREEMENTS
Peoples Energy has entered into separate severance agreements
with certain key executives including each of the executives
named in the Summary Compensation Table. The intent of the
severance agreements is to assure the continuity of the
administration and operations of Peoples Energy and its
subsidiaries, including the Company in the event of a Change in
Control of the Company (as described below). The severance
agreements were developed in accordance with the advice of
outside consultants.
The term of each severance agreement is for the longer of 36
months after the date in which a Change in Control of Peoples
Energy occurs or 24 months after the completion of the
transaction approved by shareholders described in (iii) below of
the description of a Change in Control. A Change in Control is
defined as occurring when (i) Peoples Energy receives a report on
Schedule 13D filed with the Securities and Exchange Commission
pursuant to Section 13(d) of the Securities Exchange Act of 1934,
as amended, disclosing that any person, group, corporation, or
other entity is the beneficial owner, directly or indirectly, of
20% or more of the common stock of Peoples Energy; (ii) any
person, group, corporation, or other entity (except Peoples
Energy or a wholly-owned subsidiary), after purchasing common
stock of Peoples Energy in a tender offer or exchange offer,
becomes the beneficial owner, directly or indirectly, of 20% or
more of such common stock; (iii) the shareholders of Peoples
Energy approve (a) any consolidation or merger of Peoples Energy
in which Peoples Energy is not the continuing or surviving
corporation, other than a consolidation or merger in which
holders of Peoples Energy's common stock prior to the
consolidation or merger have substantially the same proportionate
ownership of common stock of the surviving corporation
immediately after the consolidation or merger as immediately
before; (b) any consolidation or merger in which Peoples Energy
is the continuing or surviving corporation, but in which the
common shareholders of Peoples Energy immediately prior to the
consolidation or merger do not hold at least 90% of the
outstanding common stock on Peoples Energy; (c) any sale, lease,
exchange or other transfer of all or substantially all of the
assets of Peoples Energy, except where Peoples Energy owns all of
the outstanding stock of the transferee entity or Peoples
Energy's common shareholders immediately prior to such
transaction own at least 90% of the transferee entity or group of
transferee entities immediately after such transaction; or (d)
any consolidation or merger of Peoples Energy where, after the
consolidation or merger, one entity or group of entities owns
100% of the shares of Peoples Energy, except where Peoples
Energy's common shareholders immediately prior to such merger or
consolation own at least 90% of the outstanding stock of such
entity or group of entities immediately after such consolidation
or merger; or (iv) a change in the majority of the members of
Peoples Energy's Board of Directors within a 24-month period,
unless approved by two-thirds of the directors then still in
office who were in office at the beginning of the 24-month
period.
Each severance agreement provides for payment of severance
benefits to the executive in the event that, during the term of
the severance agreement, (i) the executive's employment is
terminated by Peoples Energy or the Company, except for "cause"
as defined therein; or (ii) the executive's employment is
terminated due to a constructive discharge, which includes (a) a
material change in the executive's responsibilities, which change
would cause the executive's position with Peoples Energy or the
Company to become of less dignity, responsibility, prestige or
scope; (b) reduction, which is more than de minimis, in total
compensation; (c) assignment without the executive's consent to a
location more than 50 miles from the current place of employment;
or (d) liquidation, dissolution, consolidation, merger, or sale
of all or substantially all of the assets of Peoples Energy or
the Company, unless the successor corporation has a net worth at
least equal to that of Peoples Energy or the Company, as
applicable, and expressly assumes the obligations of Peoples
Energy under the executive's severance agreement.
The principal severance benefits payable under each severance
agreement consist of the following: (i) the executive's base
salary and accrued benefits through the date of termination,
including a pro rata portion of awards under Peoples Energy's
Short-Term Incentive Compensation (STIC) Plan; (ii) three times
the sum of the individual's base salary, the average of the STIC
Plan awards for the prior three years and the value of the Long-
Term Incentive Compensation (LTIC) Plan awards in the prior
calendar year; and (iii) the present value of the executive's
accrued benefits under the Peoples Energy's Supplemental
Retirement Benefits Plan (SRBP) that would be payable upon
retirement at normal retirement age, computed as if the executive
had completed three years of additional service. In addition,
the executive will be entitled to continuation of life insurance
and medical benefits for the longer of (a) a period of three
years after termination or (b) a period commencing after
termination and ending when the executive may receive pension
benefits without actuarial reduction, provided that Peoples
Energy's obligation for such benefits under the severance
agreement shall cease upon the executive's employment with
another employer that provides life insurance and medical
benefits. Each severance agreement also provides that the
executive's Options and SARs shall become exercisable upon a
Change in Control and that all Options and SARs shall remain
exercisable for the shorter of (a) three years after termination
or (b) the term of such Options and SARs. Any restricted stock
previously awarded to the executive under the LTIC Plan would
vest upon a Change in Control if such vesting does not occur due
to a Change in Control under the terms of the LTIC Plan. Peoples
Energy is also obligated under each severance agreement to pay an
additional amount to the executive sufficient on an after-tax
basis to satisfy any excise tax liability imposed by Section 4999
of the Internal Revenue Code of 1986, as amended. The benefits
received by the executive under each agreement are in lieu of
benefits under Peoples Energy's termination allowance plan and
the executive's benefits under the SRBP. Each executive would be
required to waive certain claims prior to receiving any severance
benefits.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
At November 30, 1997, voting securities of the Company were
beneficially owned as follows:
Title of Number of Per Cent of
Class Name and Address Shares Owned Class
Common Stock Peoples Energy Corporation
without 130 East Randolph Drive
par value Chicago, Illinois 60601-6207 24,817,566 100
SECURITY OWNERSHIP OF MANAGEMENT
No equity securities of the Company are beneficially owned
directly or indirectly by any director or officer of the Company.
Shares of common stock, without par value, of Peoples Energy
beneficially owned directly or indirectly by all directors and
certain executive officers of the Company and all directors and
executive officers of the Company as a group at November 30,
1997, are as follows:
Shares of Peoples Energy
Common Stock Beneficially
Name Owned at November 30, 1997 (1)
Kenneth S. Balaskovits* 12,238 (2)(3)
J. Bruce Hasch* 46,656 (2)(3)
James Hinchliff* 31,005 (2)(3)
Thomas M. Patrick* 19,554
Richard E. Terry* 76,717 (2)(3)
All directors and officers of the Company
as a group, including those named above
(23 in number) 326,454 (1)(2)(3)
* Director of the Company
(1) The total of 326,454 shares held by all directors and
executive officers as a group is less than one per cent of
Peoples Energy's outstanding common stock. Unless otherwise
indicated, each individual has sole voting and investment
power with respect to the shares of common stock attributed
to him or her in the table.
(2) Includes shares that the following have a right to acquire
within 60 days following November 30, 1997, through the
exercise of stock options granted under Peoples Energy's
Long-Term Incentive Compensation Plan: Messrs. Balaskovits,
2,600; Hasch, 9,600; Hinchliff, 6,300; Patrick, 8,300;
Terry, 23,400; and all executive officers of the Company, as
a group, 83,600.
(3)Includes shares of restricted stock awarded under Peoples
Energy's Long-Term Incentive Compensation Plan, the
restrictions on which had not lapsed at November 30, 1997, as
follows: Messrs. Balaskovits, 3,583; Hasch, 8,025;
Hinchliff, 4,925; Patrick, 4,125; Terry, 14,685; and all
executive officers as a group, 41,620. Owners of shares of
restricted stock have the right to vote such shares and to
receive dividends thereon, but have no investment power with
respect to such shares until the restrictions thereon lapse.
CHANGES IN CONTROL
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company provides general corporate and support services to
Peoples Energy pursuant to an Intercompany Service Agreement
(Agreement), the terms of which were approved by the Commission.
In fiscal 1997, the Company furnished general corporate services
in the amount of $3,360,094 and support services in the amount of
$120,128 to Peoples Energy under the Agreement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Financial
Statements: Page
See Part II, Item 8. 16
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 1997:
None.
<TABLE>
<CAPTION>
Schedule VIII
The Peoples Gas Light and Coke Company and Subsidiary Companies
VALUATION AND QUALIFYING ACCOUNTS
(Thousands)
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
<S> <C> <C> <C> <C>
Fiscal Year Ended September 30, 1997
RESERVES (deducted from assets in balance sheet):
Uncollectible items $ 25,279 $27,068 $23,388 $28,959
Fiscal Year Ended September 30, 1996
RESERVES (deducted from assets in balance sheet):
Uncollectible items $ 18,315 $27,345 $20,381 $25,279
Fiscal Year Ended September 30, 1995
RESERVES (deducted from assets in balance sheet):
Uncollectible items $ 23,400 $22,063 $27,148 $18,315
</TABLE>
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.
THE PEOPLES GAS LIGHT AND COKE COMPANY
Date: December 22, 1997 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 22, 1997.
/s/ RICHARD E. TERRY Chairman of the Board and Chief Executive
Richard E. Terry Officer and Director
(Principal Executive Officer)
/s/ KENNETH S. BALASKOVITS Vice President and Controller and Director
Kenneth S. Balaskovits (Principal Financial and Accounting Officer)
/s/ J. BRUCE HASCH Director
J. Bruce Hasch
/s/ JAMES HINCHLIFF Director
James Hinchliff
/s/ THOMAS M. PATRICK Director
Thomas M. Patrick
The Peoples Gas Light and Coke Company 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 August 31, 1997.
3(b) By-Laws of the Registrant, as amended, dated August 31, 1997.
10(a) Firm Transportation Service Agreement under Rate Schedule
FTS between the Company and Natural Gas Pipeline
Company of America, dated November 13, 1996.
10(b) Firm Transportation Service Agreement under Rate Schedule FT-
A or FT-G between the Company and Midwestern Gas
Transmission Company, dated November 1, 1997.
10(c) Firm Transportation Service Agreement under Rate Schedule FT-
A between the Company and Tennessee Gas Pipeline
Company, dated November 1, 1997.
12 Statement re: Computation of Ratio of Earnings to Fixed Charges.
21 Subsidiaries of the Registrant
27 Financial Data Schedule
(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(c) Articles of Incorporation of the Registrant, as amended on April
24, 1995 (Registrant Form 10-K for fiscal year ended
September 30, 1995, Exhibit 3(b)).
4(a) First and Refunding Mortgage, dated January 2, 1926,
from Chicago By-Product Coke Company to Illinois Merchants
Trust Company, Trustee, assumed by the Company by Indenture
dated March 1, 1928 (May 17, 1935, Exhibit B-6a,
Exhibit B-6b A-2 File No. 2-2151, 1936); Supplemental
Indenture dated as of May 20, 1936, from the Company to
Continental Illinois National Bank and Trust Company of
Chicago, Trustee (Form 8-K for the year 1936, Exhibit B-
6f); Supplemental Indenture dated as of March 10, 1950
(Form 8-K for the month of March 1950, Exhibit B-6i);
Supplemental Indenture dated as of June 1, 1951 (File
No. 2-8989, Post-Effective, Exhibit 7-4(b));
Supplemental Indenture dated as of August 15, 1967
(File No. 2-26983, Post-Effective, Exhibit 2-4);
Supplemental Indenture dated as of September 15, 1970
(File No. 2-38168, Post-Effective Exhibit 2-2);
The Peoples Gas Light and Coke Company and Subsidiary Companies
EXHIBIT INDEX (Continued)
Exhibit
Number Description of Document
4(a) Supplemental Indenture dated October 1, 1984,
Cont'd Exhibit 4-3 (Form 10-K for fiscal year ended September
30, 1984); Supplemental Indentures dated March 1, 1985,
Exhibit 4-3 (Form 10-K for fiscal year ended September 30,
1985); Supplemental Indenture dated May 1, 1990 (Form 10-K for
the fiscal year ended September 30, 1990, Exhibit 4);
Supplemental Indenture dated as of April 1, 1993 (Form 8-K dated
as of May 5, 1933, Exhibit 1); Supplemental Indenture
dated as of December 1, 1993 (Form 10-Q for the
quarterly period ended December 31, 1993, Exhibit
4(a)); Supplemental Indentures dated as of
December 1, 1993 (Form 10-Q for the quarterly period
ended December 31, 1993, Exhibit 4(b)); Supplemental
Indenture dated June 1, 1995. (Form 10-K for fiscal
year ended September 30, 1995.)
10(d) Firm Transportation Service Agreement Under Rate Schedule FT
between the Company and Trunkline Gas Company, dated as
of December 1, 1993 (Registrant Form 10-K for the
fiscal year ended September 30, 1994, Exhibit 10). ETS
Service Agreement between the Company and ANR Pipeline
Company, dated September 21, 1994. (Registrant Form 10-
K for fiscal year ended September 30, 1995, Exhibit
10(a)); FSS Service Agreement between the Company and
ANR Pipeline Company, dated September 21, 1994.
(Registrant Form 10-K for fiscal year ended September
30, 1995, Exhibit 10(b)); Storage Rate Schedule NSS
Agreement between the Company and Natural Gas Pipeline
Company of America, dated October 19, 1995.
(Registrant Form 10-K for fiscal year ended September
30, 1995, Exhibit 10(c)); Transportation Rate Schedule
FTS Agreement between the Company 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)); Storage Rate Schedule DSS
Agreement between the Company and Natural Gas Pipeline
Company of America, dated December 1, 1995.
(Registrant Form 10-K for fiscal year ended September
30, 1995, Exhibit 10(e)); Transportation Rate Schedule
FTS Agreement between the Company 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)); Firm Transportation Service
Agreement Under Rate Schedule FT between the Company
and Trunkline Gas Company, dated as of April 1, 1995.
(Registrant Form 10-K for fiscal year ended September
30, 1995, Exhibit10(g)); Quick Notice Transportation
Service Agreement Under Rate Schedule QNT between the
Company and Trunkline Gas Company, dated as of December
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 the Company and Trunkline Gas Company,
dated as of December 1, 1995. (Registrant Form 10-K
for fiscal year ended September 30, 1995, Exhibit
10(i)); Firm Transportation Service Agreement under
Rate Schedule FTS-1 between the Company and ANR
Pipeline Company,
The Peoples Gas Light and Coke Company and Subsidiary Companies
EXHIBIT INDEX (Continued)
Exhibit
Number Description of Document
10(d) dated as of September 20, 1995. (Registrant Form
Cont'd 10-K for fiscal year ended cont'd September 30,
1996, Exhibit 10(j)); Firm Transportation Service
Agreement under Rate Schedule FTS between the Company
and Natural Gas Pipeline Company of America, dated as
of February 21, 1996. (Registrant form 10-K for fiscal
year ended September 30, 1996, Exhibit 10(k)); Firm
Transportation Service Agreement under Rate Schedule
FTS between the Company and Natural Gas Pipeline
Company of America, dated as of February 21, 1996.
(Registrant form 10-K for fiscal year ended September
30, 1996, Exhibit 10(l)).
10(e) Lease dated October 20, 1993, between Prudential Plaza
Associates, as Landlord, and the Company, as Tenant
(Registrant Form 10-Q for the quarterly period ended
December 31, 1993, Exhibit 10(a)).
Exhibit 3(a)
THE PEOPLES GAS LIGHT AND COKE COMPANY
RESOLVED, That, effective as of
the close of business on August 31, 1997,
the By-Laws of the Company be, and they
hereby are, amended by replacing Section
3.1 of Article III of the By-Laws in its
entirety with the following:
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, five (5) in number,
each of which shall be a shareholder. 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
his successor shall be elected and shall
qualify. The Board of Directors may fill
one or more vacancies arising between
meetings of shareholders by reason of an
increase in the number of directors or
otherwise.
RESOLVED FURTHER, That the
Secretary of the Company be, and he hereby
is, directed to initial a copy of the
amended By-Laws presented at this meeting
and place it with the important papers of
this meeting.
Exhibit 3(b)
BY-LAWS
OF
THE PEOPLES GAS LIGHT AND COKE COMPANY
AMENDED AUGUST 31, 1997
THE PEOPLES GAS LIGHT AND COKE COMPANY
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
THE PEOPLES GAS LIGHT AND COKE COMPANY
INDEX
PAGE
A
Amendment of By-Laws 16
Appointment of Officers 7
Assistant Controller, Duties of 10
Assistant General Counsel, Duties of 10
Assistant Secretary, Duties of 10
Assistant Treasurer, Duties of 10
Assistant Vice President, Duties of 9
B
Board of Directors 4
C
Certificates of Stock and Their Transfer 12
Chairman of the Board, Duties of 8
Committees 6
Controller, Duties of 10
Contracts, Execution of 14
D
Directors and Committees 4
E
Election of Directors 4
Election of Officers 7
F
Fees and Compensation of Directors 6
G
General Counsel, Duties of 10
THE PEOPLES GAS LIGHT AND COKE COMPANY
PAGE
I
Indemnification of Directors, Officers, Employees
and Agents 11
M
Meetings
Directors 4
Action Without Meeting 6
Shareholders 1
N
Notice of Meetings
Directors 4
Shareholders 2
O
Officers
Appointed 7
Elected 7
Offices, Two or More Held By One Person 7
P
President, Duties of 8
Presiding Officer
Board Meetings 5
Shareholder Meetings 4
Proxies 3
Q
Quorum
Board 5
Shareholders 2
THE PEOPLES GAS LIGHT AND COKE COMPANY
PAGE
S
Secretary, Duties of 9
Signatures to Checks, Drafts, etc. 15
Stock, Certificates of and their Transfer 12
T
Treasurer, Duties of 9
V
Vice President, Duties of 9
Voting
Shareholders 3
Stock Owned by Company 15
BY-LAWS
OF
THE PEOPLES GAS LIGHT AND COKE COMPANY
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 last Thursday of the month of
March in each year, if not a legal holiday, or, if a legal
holiday, then on the next preceding 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 called by the Chairman of the
Board, the President, a majority of the Board of Directors or
shareholders owning capital stock of the Company having not
less than 20% of the total voting power. 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 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 or more than 60 days before the
date of the meeting, except as otherwise provided by statute.
Notice of any meeting of the shareholders may be waived by any
shareholder.
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 the 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 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 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, five (5) in number, each of which shall be a
shareholder. 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 his successor shall be elected and
shall qualify. The Board of Directors may fill one or more
vacancies arising between meetings of shareholders by reason of
an increase in the number of directors or otherwise.
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 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 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 or, in his absence, the President or, in his absence,
any other director elected chairman of the meeting by vote of a
majority of the directors present at the meeting.
SECTION 3.6. Committees. The Board may appoint
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 3.7. 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 3.8. 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.
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; and, if the Board may decide, a General Counsel; and
such number of Deputy 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 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,
one or more Assistant General Counsel, and such other agents,
employees and attorneys-in-fact of the Company as may be deemed
proper. Such officers, agents, employees and attorneys-in-fact
shall have such authority, (which may include the authority to
execute and deliver on behalf of the Company contracts and other
instruments in writing of any nature), perform such duties and
receive such compensation as the Board of Directors 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 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.
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 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, 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 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 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 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 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
interest in such share or shares on the part of 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, any Executive Vice President, any Vice President, the
Treasurer, or any other officer of the Company, agent, employee
or attorney-in-fact as may be designated by the Board, the
Chairman of the Board or the President pursuant to specific
authorizations and, the seal of the Company may 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
Executive Vice President, any Vice President, the Treasurer, or
by such officers, agents, employees or attorneys-in-fact 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 of stock 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.
EXHIBIT 10(a)
Contract No. 112196
NATURAL GAS PIPELINE COMPANY OF AMERICA (Natural)
TRANSPORTATION RATE SCHEDULE FTS AGREEMENT DATED November 13,1996
UNDER SUBPART G OF PART 284 OF THE FERC'S REGULATIONS
1. SHIPPER is: THE PEOPLES GAS LIGHT AND COKE COMPANY, a LOCAL
DISTRIBUTION COMPANY.
2. (a) MDQ totals: 30,000 MMBTU per day.
(b) Service option selected (check any or all):
[ ] LN [ ] SW [ ] NB
3. TERM: May 01, 1997 through April 30, 1999.
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) May 01, 1997, and
(b) the date service hereunder is available on
Natural's System.
[ ] Other: ______________________________________________
7. SHIPPER'S ADDRESSES NATURAL'S ADDRESSES
General Correspondence;
THE PEOPLES GAS LIGHT AND COKE NATURAL GAS PIPELINE COMPANY
COMPANY OF AMERICA
WILLIAM MORROW ATTENTION: GAS TRANSPORTATION
130 E. RANDOLPH DRIVE, 22nd FLOOR SERVICES
CHICAGO, IL 60601-6207 3200 SOUTHWEST FREEWAY 77027-7523
P.O. BOX 283 77001-0283
HOUSTON, TEXAS
Statements/Invoices/Accounting Related Materials:
THE PEOPLES GAS LIGHT AND COKE NATURAL GAS PIPELINE
COMPANY COMPANY OF AMERICA
PATRICIA GARCIA ATTENTION: ACCOUNT SERVICES
130 E. RANDOLPH DRIVE, 23RD FLOOR 701 EAST 22ND STREET
CHICAGO, IL 60601-6207 LOMBARD, ILLINOIS 60148
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 THE PEOPLES GAS LIGHT AND
OF AMERICA COKE COMPANY
"Natural" "Shipper"
By: /s/ Stephen G. Weiman By: /s/ T. M. Patrick
Name: Stephen G. Weiman Name: T. M. Patrick
Title:Vice President Title:Executive Vice President
EXHIBIT A
DATED: November 13, 1996
EFFECTIVE DATE: May 01, 1997
COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY
CONTRACT: 112196
RECEIPT POINT/S
County/Parish PIN MDQ
Name/Location Area State No. Zone (MMBtu/d)
PRIMARY RECEIPT POINT/S
1.LA GLORIA MOBIL/NGPL JIM WELLS TX 439 04 5,000
JIM WELLS 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.PENNZOIL/NGPL MASTER ZAPATA ZAPATA TX 446 04 10,000
INTERCONNECT WITH PENNZOIL
OIL COMPANY ON TRANSPORTER'S
ESCOBAS-LOS MAGATOS LATERAL
IN THE CERRITO BLANCO SURVEY,
A-73, ZAPATA COUNTY, TEXAS.
3.TRANSAM/NGPL NE THMPSNVLLE JIM HOGG TX 1041 04 15,000
JIM HOGG INTERCONNECT WITH
TRANSAMERICAN GAS TRANSMISSION
CORPORATION IN BLOCK 4, "LAS
ANIMAS" HEIRS OF FELIPE DE LA PENA
SURVEY, JIM HOGG COUNTY, TEXAS.
SECONDARY RECEIPT POINT/S
All secondary receipt point, 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.
EXHIBIT A (CONT'D)
DATED November 13, 1996
EFFECTIVE DATE: May 01, 1997
COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY
CONTRACT: 112196
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.
EXHIBIT B
DATED: November 13, 1996
EFFECTIVE DATE: May 01, 1997
COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY
CONTRACT: 112196
DELIVERY POINT/S
County/Parish PIN MDQ
Name/Location Area State No. Zone (MMBtu/d)
PRIMARY DELIVERY POINT/S
1.PGLC/NGPL ROGERS PARK COOK COOK IL 4174 06 30,000
INTERCONNECT WITH THE PEOPLES
GAS LIGHT AND COKE COMPANY ON
TRANSPORTER'S HOWARD STREET
LINE IN SEC. 36-T41N-R13E, COOK,
COUNTY, ILLINOIS.
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.
EXHIBIT C
DATED November 13, 1996
EFFECTIVE DATE: May 01, 1997
COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY
CONTRACT: 112196
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.
EXHIBIT C
DATED November 13, 1996
EFFECTIVE DATE: May 01, 1997
COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY
CONTRACT: 112196
Segment Upstream Forward/Backward Flow Through
Number Segment -Haul (Contractual) Capacity
18 0 F 0
20 18 F 25,000
22 20 F 30,000
26 22 F 30,000
27 26 F 30,000
28 27 F 30,000
30 28 F 30,000
EXHIBIT 10(b)
SERVICE PACKAGE NO. 19346
AMENDMENT NO. 0
FIRM GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedule FT-A or FT-G )
THIS AGREEMENT is made and entered into as of the 1st day of
November, 1997, by and between MIDWESTERN GAS TRANSMISSION
COMPANY, a Delaware Corporation, hereinafter referred to as
"Transporter" and PEOPLES GAS LIGHT & COKE CO., an ILLINOIS
Corporation, hereinafter referred to as "Shipper." Transporter
and Shipper shall be collectively referred to as "Parties."
WITNESSETH:
That, in consideration of the premises and of the mutual
agreements herein contained, Transporter and Shipper agree as
follows:
ARTICLE I - DEFINITIONS
The definitions found in Article 1 of Transporter's General Terms
and Conditions are incorporated herein by reference.
ARTICLE II - TRANSPORTATION
Transportation Service - Transporter agrees to accept and receive
daily, on a firm basis, at Eligible Receipt Point(s), from
Shipper or for Shipper's account such quantity of gas as Shipper
makes available up to the Transportation Quantity and deliver to
or for the account of Shipper to authorized Delivery Point(s) an
equivalent quantity of gas.
ARTICLE III- POINTS OF RECEIPT AND DELIVERY
AND ASSOCIATED PRESSURES
3.1 The Primary Point(s) of Receipt and Delivery shall be those
points specified on Exhibit A attached hereto. Shipper shall
have access to secondary receipt and delivery points as
specified in the applicable rate schedule (FT-A or FT-G)
pursuant to which Shipper's volumes are being transported.
Priority of transportation to such secondary points shall be
determined in accord with Article III Section 5 of the
General Terms and Conditions of Transporter's tariff.
3.2 Shipper may request a change to the Primary Points of
Receipt and/or Primary Points of Delivery provided in this
Agreement by submitting to Transporter a Service Request
Form in accord with Article XXV of the General Terms and
Conditions of Transporter's FERC Gas Tariff. Priority of
transportation service to such additional Points of Receipt
and/or Delivery shall be determined pursuant to Article III,
Section 5 of the General Terms and Conditions.
3.3 Shipper shall deliver, or cause to be delivered, to
Transporter the gas to be transported hereunder at pressures
sufficient to deliver such gas into Transporter's system at
the Receipt Point(s), provided such pressure shall not
exceed Transporter's maximum allowable operating pressure.
Transporter shall deliver
SERVICE PACKAGE NO. 19346
AMENDMENT NO. 0
FIRM GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedule FT-A or FT-G )
the gas to be transported hereunder to or for the account of
Shipper at the pressures existing in Transporter's system at
the Delivery Point(s).
ARTICLE IV - FACILITIES
All facilities are in place to render the service provided for in
this Agreement.
or
(If facilities are contemplated to be constructed, a brief
description of the facilities will be included, as well as who is
to construct, own and/or operate such facilities.)
ARTICLE V - QUALITY SPECIFICATIONS AND STANDARDS FOR
MEASUREMENTS
For all gas received, transported, and delivered hereunder, the
Parties agree to the quality specifications and standards for
measurement as provided for in the General Terms and Conditions
of Transporter's FERC Gas Tariff. Transporter shall be
responsible for the operation of measurement facilities at the
Delivery Point(s) and at the Receipt Point(s). In the event that
measurement facilities are not operated by Transporter, then the
responsibility for operations shall be deemed to be that of the
Balancing Party at such point. If measurement facilities are
not operated by Transporter and there is no Balancing Party at
such point, then the responsibility for operations shall be
deemed to be Shipper's.
ARTICLE VI - RATES FOR SERVICE
6.1 Transportation Charge - Commencing on the date of the rates,
charges and surcharges to be paid by Shipper to Transporter,
including compensation for system fuel and losses, shall be
in accordance with Transporter's applicable effective Rate
Schedule (FT-A or FT-G) and the General Terms and Conditions
of Transporter's Tariff.
6.2 Incidental Charges - Upon execution of this Agreement,
Shipper agrees to pay Transporter for all known and
anticipated filing fees, reporting fees or similar charges
required for the rendition of the transportation service
provided for herein. Further, Shipper agrees to reimburse
Transporter for all such fees within thirty (30) days after
receiving proof of payment from Transporter.
6.3 Changes in Rates and Charges - Shipper agrees that
Transporter shall have the unilateral right to file with the
appropriate regulatory authority and make changes effective in
(a) the rates, charges, terms and conditions applicable to
service pursuant to the Rate Schedule under which this service is
rendered, (b) the Rate Schedule(s) pursuant to which service
hereunder is rendered, and (c)any provisions of the General Terms
and Conditions in Transporter's FERC Gas Tariff applicable to
those Rate Schedules, as such Tariff may be revised or replaced
from time to time. Transporter agrees that Shipper may
SERVICE PACKAGE NO. 19346
AMENDMENT NO. 0
FIRM GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedule FT-A or FT-G )
protest or contest the aforementioned filings, or may seek
authorization from duly constituted regulatory authorities
for such adjustment of Transporter's existing FERC Gas
Tariff as may be found necessary to assure Transporter just
and reasonable rates.
ARTICLE VII - RESPONSIBILITY DURING TRANSPORTATION
As between the Parties hereto, it is agreed that from the time
gas is delivered by Shipper to Transporter at the Receipt
Point(s) and prior to delivery of such gas to or for the account
of Shipper at the Delivery Point(s), Transporter shall have the
unqualified right to commingle such gas with other gas in its
system and shall have the unqualified right to handle and treat
such gas as its own.
ARTICLE VIII - BILLINGS AND PAYMENTS
Billings and payments under this Agreement shall be in accordance
with the terms and conditions of Transporter's FERC Gas Tariff as
such Tariff may be revised or replaced from time to time.
ARTICLE IX - RATE SCHEDULES AND GENERAL TERMS AND CONDITIONS
This Agreement and all terms and provisions contained or
incorporated herein are subject to the effective provisions of
Transporter's applicable Rate Schedule(s) as set forth on Exhibit
A and Transporter's General Terms and Conditions on file with the
FERC, or other duly constituted authorities having jurisdiction,
as the same may be changed or superseded from time to time in
accordance with the rules and regulations of the FERC, which Rate
Schedule(s) and General Terms and Conditions are incorporated by
reference. To the extent a term or condition set forth in this
Contract is inconsistent with the General Terms and Conditions,
the General Terms and Conditions shall govern. Furthermore, to
the extent a term or condition set forth in this Contract is
inconsistent with the applicable Rate Schedule, the Rate Schedule
shall govern unless the relevant provision is inconsistent with
General Terms and Conditions.
ARTICLE X - REGULATION
10.1 This Agreement shall be subject to all applicable and lawful
governmental statutes, orders, rules, and regulations and is
contingent upon the receipt and continuation of all
necessary regulatory approvals or authorizations upon terms
acceptable to Transporter. This Agreement shall be void and
of no force and effect if any necessary regulatory approval
or authorization is not so obtained or continued.
All Parties hereto shall cooperate to obtain or continue all
necessary approvals or authorizations, but no Party shall be
liable to any other Party for failure to obtain or continue
such approvals or authorizations.
SERVICE PACKAGE NO. 19346
AMENDMENT NO. 0
FIRM GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedule FT-A or FT-G )
10.2 The transportation service described herein shall be
provided subject to Part 284, Subpart G of the FERC
regulations.
10.3 In the event the Parties are unable to obtain all necessary
and satisfactory regulatory approvals for service on
facilities prior to the expiration of two (2) years from the
effective date hereof, then, prior to receipt of such
regulatory approvals, either Party may terminate this
Agreement by giving the other Party at least thirty (30)
days prior written notice, and the respective obligations
hereunder, except for the provisions of Section 6.2 herein,
shall be of no force and effect from and after the effective
date of such termination.
ARTICLE XI - WARRANTIES
Shipper agrees to indemnify and hold Transporter harmless from
all suits, actions, debts, accounts, damages, costs, losses, and
expenses (including reasonable attorneys fees) arising from or
out of breach of any warranty, express or implied, by the Shipper
herein. Transporter shall not be obligated to provide or continue
service hereunder in the event of any breach of warranty.
ARTICLE XII - TERM OF AGREEMENT
12.1 This Agreement shall become effective on the date of its
execution, and shall be implemented no later than the first
day of the month following the later of the date of
execution or the completion of any necessary facilities on
Transporter's system and shall remain in full force and
effect until the 31st day of March, 1998, ("Primary
Term")and will terminate on that date.
12.2 Any portions of this Agreement necessary to resolve or cash-
out imbalances under this Agreement upon its termination, as
required by the General Terms and Conditions of
Transporter's FERC Gas Tariff, shall survive the other parts
of this Agreement until such time as such balancing has been
accomplished.
12.3 In addition to any other remedy Transporter may have, this
Agreement will terminate automatically in the event Shipper
fails to pay all of the amount of any bill for service
rendered by Transporter hereunder when that amount is due,
provided Transporter shall give Shipper thirty days notice
prior to any termination of service. Service may continue
hereunder if within the thirty day notice period
satisfactory assurance of payment is made in accord with the
terms and conditions of Article VI of the General Terms and
Conditions of Transporter's FERC Gas Tariff.
SERVICE PACKAGE NO. 19346
AMENDMENT NO. 0
FIRM GAS TRANSPORTATION AGREEMENT
(For Use Rate Schedule FT-A or FT-G)
ARTICLE XIII - NOTICES
Except when notice is required through Transporter's Electronic
Bulletin Board, any notice, request, demand, statement, or bill
provided for in this Agreement or any notice that either Party
may desire to give to the post office address of the Party
intended to receive the same as follows::
TRANSPORTER: MIDWESTERN GAS TRANSMISSION COMPANY
P.O. Box 2511
Houston, Texas 77252-2511
Attention: Transportation Marketing
SHIPPER:
NOTICES: PEOPLES GAS LIGHT & COKE CO
130 East Randolph Drive
22ND Floor
Chicago, IL 60601-6207
Attention: Raulando C. deLara
BILLING: PEOPLES GAS LIGHT & COKE CO
130 East Randolph Drive
22ND Floor
Chicago, IL 60601-6207
Attention: Raulando C. deLara
or to such other address as either Party may designate by written
notice to the other.
ARTICLE XIV - ASSIGNMENTS
14.1 Either Party may assign or pledge this Agreement and all
rights and obligations hereunder under the provisions of any
mortgage, deed of trust, indenture, or other instrument
which it has executed or may execute hereafter as security
for indebtedness. Either Party, without relieving itself of
its obligation under this Agreement, may assign any of its
rights hereunder to a company with which it is affiliated.
Otherwise, Shipper shall not assign this Agreement or any of
its rights and obligations hereunder, except in accord with
Article XXI of the General Terms and Conditions of
Transporter's Tariff.
14.2 Any person or entity that succeeds by purchase, merger, or
consolidation to the properties, substantially or as an
entirety, of either Party hereto shall be entitled to the
rights and shall be subject to the obligations of its
predecessor in interest under this Agreement.
ARTICLE XV - MISCELLANEOUS
SERVICE PACKAGE NO. 19346
AMENDMENT NO. 0
FIRM GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedule FT-A or FT-G )
15.1 Except for changes specifically authorized pursuant to this
Agreement, no modification of or supplement to the terms and
conditions hereof shall be or become effective until Shipper
has submitted a request for change through Transporter's
Electronic Bulletin Board and Shipper has been notified
through Transporter's Electronic Bulletin Board of
Transporter's agreement to such change.
15.2 No waiver by any Party of any one or more defaults by the
other in the performance of any provision of this Agreement
shall operate or be construed as a waiver of any future
default or defaults, whether of a like or of a different
character.
15.3 The interpretation and performance of this agreement shall
be in accordance with and controlled by the laws of the
State of Texas, without regard to Choice of Law doctrine
that refers to the laws of another jurisdiction.
15.4 Exhibit A attached hereto is incorporated herein by
reference add made a part of this agreement purposes.
15.5 If any provision of this Agreement is declared null and
void, or voidable, by a court of competent jurisdiction,
then that provision will be considered severable at
Transporter's option and if the severability option is
exercised, the remaining provisions of the Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
to be duly executed as of the date first hereinabove
written.
MIDWESTERN GAS TRANSMISSION COMPANY
BY: /s/ J. P. Dickerson
J. P. Dickerson
Agent and Attorney-in-Fact
Date: 9/23/97
PEOPLES GAS LIGHT & COKE CO.
BY: s/ W. E. Morrow
Title: Vice President
Date: August 25, 1997
<TABLE>
<CAPTION>
GAS TRANSPORTATION AGREEMENT
(For Use Under FT-A Rate Schedule)
EXHIBIT "A"
AMENDMENT #0 TO GAS TRANSPORTATION AGREEMENT
DATED November 1, 1997
BETWEEN
MIDWESTERN GAS TRANSMISSION COMPANY
AND
PEOPLES GAS LIGHT & COKE CO
PEOPLES GAS LIGHT & COKE CO
EFFECTIVE DATE OF AMENDMENT: November 1, 1997
RATE SCHEDULE: FT-A
SERVICE PACKAGE: 19346
SERVICE PACKAGE TQ: 53,410 Dth
METER METER NAME INTERCONNECT PARTY NAME COUNTY ST ZONE R/D LEG METER-TQ BILLABLE-TQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
017024 MGT PURCHASE (Bi 2- MIDWESTERN GAS SUMMER TN 01 R 53,410 53,410
7086 Dual TRANSMISSION CO
Total 53,410 53,410
Receipt
TQ:
027062 PEOPLES-UNION HILL PEPLES GAS LIGHT & COKE WILL IL 01 D 53,410 53,410
SALES CO
NUMBER OF RECEIPT POINTS AFFECTED: 1
NUMBER OF DELIVERY POINTS AFFECTED: 1
Note: Exhibit "A" is a reflection of the contract and all amendments as of the
amendment effective date.
</TABLE>
EXHIBIT 10(c)
SERVICE PACKAGE NO.19399
AGREEMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under FT-A Rate Schedule)
THIS AGREEMENT is made and entered into as of the 1st day of
November, 1997, by and between TENNESSEE GAS PIPELINE COMPANY, a
Delaware Corporation, hereinafter referred to as "Transporter"
PEOPLES GAS LIGHT & COKE CO, a ILLINOIS Corporation, hereinafter
referred to as "Shipper." Transporter and Shipper shall
collectively be referred to herein as the "Parties."
ARTICLE I
DEFINITIONS
1.1 TRANSPORTATION QUANTITY (TQ) - shall mean the maximum daily
quantity of gas which Transporter agrees to receive and
transport on a firm basis, subject to Article II herein, for
the account of Shipper hereunder on each day during each
year during the term hereof, which shall be 53,950
dekatherms. Any limitations of the quantities to be
received from each Point of Receipt and/or delivered to each
Point of Delivery shall be as specified on Exhibit "A"
attached hereto.
1.2 EQUIVALENT QUANTITY - shall be as defined in Article I of
the General Terms and Conditions of Transporter's FERC Gas
Tariff.
ARTICLE II
TRANSPORTATION
Transportation Service - Transporter agrees to accept and receive
daily on a firm basis, at the Point(s) of Receipt from Shipper or
for Shipper's account such quantity of gas as Shipper makes
available up to the Transportation Quantity, and to deliver to or
for the account of Shipper to the Point(s) of Delivery an
Equivalent Quantity of gas.
ARTICLE III
POINT(S) OF RECEIPT AND DELIVERY
The Primary Point(s) of Receipt and Delivery shall be those
points specified on Exhibit "A" attached hereto.
ARTICLE IV
All facilities are in place to render the service provided for in
this Agreement.
SERVICE PACKAGE NO.19399
AGREEMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under FT-A Rate Schedule)
ARTICLE V
QUALITY SPECIFICATIONS AND STANDARDS FOR MEASUREMENT
For all gas received, transported and delivered hereunder the
Parties agree to the Quality Specifications and Standards for
Measurement as specified in the General Terms and Conditions of
Transporter's FERC Gas Tariff Volume No. 1. To the extent that no
new measurement facilities are installed to provide service
hereunder, measurement operations will continue in the manner in
which they have previously been handled. In the event that such
facilities are not operated by Transporter or a downstream
pipeline, then responsibility for operations shall be deemed to
be Shipper's.
ARTICLE VI
RATES AND CHARGES FOR GAS TRANSPORTATION
6.1 TRANSPORTATION RATES - Commencing upon the effective date
hereof, the rates, charges, and surcharges to be paid by
Shipper to Transporter for the transportation service
provided herein shall be in accordance with Transporter's
Rate Schedule FT-A and the General Terms and Conditions of
Transporter's FERC Gas Tariff.
6.2 INCIDENTAL CHARGES - Shipper agrees to reimburse Transporter
for any filing or similar fees, which have not been
previously paid for by Shipper, which Transporter incurs in
rendering service hereunder.
6.3 CHANGES IN RATES AND CHARGES - Shipper agrees that
Transporter shall have the unilateral right to file with the
appropriate regulatory authority and make effective changes
in (a) the rates and charges applicable to service pursuant
to Transporter's Rate Schedule FT-A, (b) the rate
schedule(s) pursuant to which service hereunder is rendered,
or (c) any provision of the General Terms and Conditions
applicable to those rate schedules. Transporter agrees that
Shipper may protest or contest the aforementioned filings,
or may seek authorization from duly constituted regulatory
authorities for such adjustment of Transporter's existing
FERC Gas Tariff as may be found necessary to assure
Transporter just and reasonable rates.
ARTICLE VII
BILLINGS AND PAYMENTS
Transporter shall bill and Shipper shall pay all rates and
charges in accordance with Articles V and VI, respectively, of
the General Terms and Conditions of Transporter's FERC Gas
Tariff.
SERVICE PACKAGE NO.19399
AGREEMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under FT-A Rate Schedule)
ARTICLE VIII
GENERAL TERMS AND CONDITIONS
This Agreement shall be subject to the effective provisions of
Transporter's Rate Schedule FT-A and to the General Terms and
Conditions incorporated therein, as the same may be changed or
superseded from time to time in accordance with the rules and
regulations of the FERC.
ARTICLE IX
REGULATION
9.1 This Agreement shall be subject to all applicable and lawful
governmental statutes, orders, rules and regulations and is
contingent upon the receipt and continuation of all
necessary regulatory approvals or authorizations upon terms
acceptable to Transporter. This Agreement shall be void and
of no force and effect if any necessary regulatory approval
is not so obtained or continued. All Parties hereto shall
cooperate to obtain or continue all necessary approvals or
authorizations, but no Party shall be liable to any other
Party for failure to obtain or continue such approvals or
authorizations.
9.2 The transportation service described herein shall be
provided subject to Subpart G, Part 284, of the FERC
Regulations.
ARTICLE X
RESPONSIBILITY DURING TRANSPORTATION
Except as herein specified, the responsibility for gas during
transportation shall be as stated in the General Terms and
Conditions of Transporter's FERC Gas Tariff Volume No. 1.
ARTICLE XI
WARRANTIES
11.1 In addition to the warranties set forth in Article IX of the
General Terms and Conditions of Transporter's FERC Gas
Tariff, Shipper warrants the following:
(a) Shipper warrants that all upstream and downstream
transportation arrangements are in place, or will be in place as
of the requested effective date of service, and that it has
advised the upstream and downstream transporters of the receipt
and delivery points under this Agreement and any quantity
limitations for each point as specified on Exhibit "A" attached
hereto. Shipper agrees to indemnify and hold Transporter harmless
for refusal to transport gas
SERVICE PACKAGE NO. 19399
AGREEMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under FT-A Rate Schedule)
hereunder in the event any upstream or downstream
transporter fails to receive or deliver gas as
contemplated by this Agreement.
(b) Shipper agrees to indemnify and hold Transporter
harmless from all suits, actions, debts, accounts,
damages, costs, losses and expenses (including reasonable
attorneys fees) arising from or out of breach of any
warranty by Shipper herein.
11.2 Transporter shall not be obligated to provide or continue
service hereunder in the event of any breach of warranty.
ARTICLE XII
TERM
12.1 This Agreement shall be effective as of the 1st day of
November, 1997, and shall remain in force and effect until
the 31st day of March, 1998,("Primary Term") and will
terminate on that date.
12.2 Any portions of this Agreement necessary to resolve or cash-
out imbalances under this Agreement as required by the
General Terms and Conditions of Transporter's Tariff, shall
survive the other parts of this Agreement until such time as
such balancing has been accomplished; provided, however,
that Transporter notifies Shipper of such imbalance not
later than twelve months after the termination of this
Agreement.
12.3 This Agreement will terminate automatically upon written
notice from Transporter in the event Shipper fails to pay
all of the amount of any bill for service rendered by
Transporter hereunder in accord with the terms and
conditions of Article VI of the General Terms and Conditions
of Transporter's FERC Gas Tariff.
SERVICE PACKAGE NO.19399
AGREEMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under FT-A Rate Schedule)
ARTICLE XIII
NOTICE
Except as otherwise provided in the General Terms and Conditions
applicable to this Agreement, any notice under this Agreement
shall be in writing and mailed the post office address of the
Party intended to receive the same, as follows:
TRANSPORTER: TENNESSEE GAS PIPELINE COMPANY
P.O. Box 2511
Houston, Texas 77252-2511
Attention: Director, Transportation Control
SHIPPER:
NOTICES: PEOPLES GAS LIGHT & COKE CO.
130 East Randolph Drive
22nd Floor
Chicago, IL 60601-6207
Attention: Raulando C. deLara
BILLING: PEOPLES GAS LIGHT & COKE CO.
130 East Randolph Drive
22nd Floor
Chicago, IL 60601-6207
Attention: Raulando C deLara
or to such other address as either Party may designate by formal
written notice to the other.
ARTICLE XIV
ASSIGNMENTS
14.1 Either Party may assign or pledge this Agreement and all
rights and obligations hereunder under the provisions of any
mortgage, deed of trust, indenture, or other instrument
which it has executed or may execute hereafter as security
for indebtedness. Either Party, without relieving itself of
its obligations under this Agreement, assign any of its
rights hereunder to a company with which it is affiliated.
Otherwise, Shipper shall not assign this Agreement or any of
its rights hereunder, except in accord with Article III,
Section 11 of the General Terms and Conditions of
Transporter's FERC Gas Tariff.
14.2 Any person which shall succeed by purchase, merger, or
consolidation to the properties, substantially as an
entirety, of either Party hereto shall be entitled to the
rights and shall be subject to the obligations of its
predecessor in interest under this Agreement.
SERVICE PACKAGE NO. 19399
AGREEMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under FT-A Rate Schedule)
ARTICLE XV
MISCELLANEOUS
15.1 THE INTERPRETATION AND PERFORMANCE OF THIS CONTRACT SHALL BE
IN ACCORDANCE WITH AND CONTROLLED BY THE LAWS OF THE STATE
OF TEXAS, WITHOUT REGARD TO THE DOCTRINES GOVERNING CHOICE
OF LAW.
15.2 If any provisions of this Agreement is declared null and
void, or voidable, by a court of competent jurisdiction,
then that provision will be considered severable at either
Party's option; and if the severability option is exercised,
the remaining provisions of the Agreement shall remain in
full force and effect.
15.3 Unless otherwise expressly provided in this Agreement or
Transporter's Gas Tariff, no modification of or supplement
to the terms and provisions stated in this agreement shall
be or become effective until Shipper has submitted a request
for change through the Electronic Bulletin Board and Shipper
has been notified through the Electronic Bulletin Board of
Transporter's agreement to such change.
15.4 Exhibit "A" attached hereto is incorporated herein by
reference and made a part hereof for all purposes.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
to be duly executed as of the date first hereinabove written.
TENNESSEE GAS PIPELINE COMPANY
By: /s/ J. P. Dickerson
J.P. Dickerson
Agent and Attorney-in-Fact
Date: 9/27/97
PEOPLES GAS LIGHT & COKE CO
By: /s/ William E. Morrow
Title: Vice President
Date: August 25, 1997
<TABLE>
<CAPTION>
GAS TRANSPORTATION AGREEMENT
(For Use Under FT-A Rate Schedule)
EXHIBIT "A"
AMENDMENT #0 TO GAS TRANSPORTATION AGREEMENT
DATED November 1, 1997
BETWEEN
TENNESSEE GAS PIPELINE COMPANY
AND
PEOPLES GAS LIGHT & COKE CO
PEOPLES GAS LIGHT & COKE CO
EFFECTIVE DATE OF AMENDMENT: November 1, 1997
RATE SCHEDULE: FT-A
SERVICE PACKAGE: 19399
SERVICE PACKAGE TQ: 53,950 Dth
METER METER NAME INTERCONNECT PARTY NAME COUNTY ST ZONE R/D LEG METER-TQ BILLABLE-TQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
010932 PENNZOIL-SHIP SHOAL PENNZOIL EXPLORATION OFFSHORE- OL OL R 500 9,809 9,809
BLK 154 E AND PRODU FEDERA
011127 TEXACO-EUGENE ISLAND TEXACO EXPLORATION AND OFFSHORE- OL OL R 500 4,904 4,904
BLK 338 A PRODUCT FEDERA
011423 TEXACO-(NGP)-WEST TEXACO EXPLORATION AND OFFSHORE- OL OL R 500 4,905 4,905
DELTA BLK 10 PRODUCT FEDERA
011724 VASTOR-ATLANTIC-SOUTH VASTAR GAS MARKETING, OFFSHORE- OL OL R 500 3,218 3,218
PASS BLK INC. FEDERA
011971 CHEVRON-SOUTH MARSH CHEVRON USA INC OFFSHORE- OL OL R 500 11,495 11,495
ISLAND 7 FEDERA
012225 WALTER - SOUTH MARSH WALTER OIL & GAS CORP OFFSHORE- OL OL R 500 4,905 4,905
ISLAND 36 FEDERA
012416 ALLAR CO #1 AMERADA HESS CORP FORREST MS 01 R 500 14,714 14,714
Total 53,950 53,950
Receipt
TQ:
020852 MGT SMS (Bi 1-2447 SUMNER TN 01 D 999 53,950 53,950
Dual 1-70
NUMBER OF RECEIPT POINTS AFFECTED: 7
NUMBER OF DELIVERY POINTS AFFECTED: 1
Note: Exhibit "A" is a reflection of the contract and all amendments as of the
amendment effective date.
</TABLE>
Exhibit 12
The Peoples Gas Light and Coke Company and Subsidiary Companies
Statement Re: Computation of Ratio of Earnings to Fixed Charges
(Dollars in Thousands)
Fiscal years ended September 30,
1997 1996 1995 1994 1993
Net Income Before Preferred
Stock Dividends $ 85,098 $ 88,752 $ 53,666 $ 63,825 $ 64,355
Add - Income Taxes 48,269 53,533 28,164 30,429 32,951
Fixed Charges (see below) 33,289 37,052 46,586 41,352 37,931
Earnings $166,656 $179,337 $128,416 $135,606 $135,237
Fixed Charges:
Interest on Long-Term Debt $31,094 $ 32,889 $ 40,507 $ 38,718 $ 35,523
Other Interest 2,195 4,163 6,079 2,634 2,408
Total Fixed Charges $33,289 $ 37,052 $ 46,586 $ 41,352 $ 37,931
Ratio of Earnings to Fixed
Charges 5.01 4.84 2.76 3.28 3.57
Exhibit 21
The Peoples Gas Light and Coke Company
Subsidiaries of the Registrant
Date of State of
Company Incorporation Incorporation
Peoples Gas Light Exploration Company 04/25/73 Illinois
Peoples Gas Neighborhood Development Corporation 04/16/85 Illinois
Peoples Gas Ventures Corporation 01/13/87 Illinois
<TABLE> <S> <C>
<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-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,205,343
<OTHER-PROPERTY-AND-INVEST> 5,470
<TOTAL-CURRENT-ASSETS> 285,498
<TOTAL-DEFERRED-CHARGES> 15,704
<OTHER-ASSETS> 45,612
<TOTAL-ASSETS> 1,557,627
<COMMON> 165,307
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 409,662
<TOTAL-COMMON-STOCKHOLDERS-EQ> 574,969
0
0
<LONG-TERM-DEBT-NET> 462,400
<SHORT-TERM-NOTES> 700
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 519,558
<TOT-CAPITALIZATION-AND-LIAB> 1,557,627
<GROSS-OPERATING-REVENUE> 1,099,484
<INCOME-TAX-EXPENSE> 46,612
<OTHER-OPERATING-EXPENSES> 936,905
<TOTAL-OPERATING-EXPENSES> 983,517
<OPERATING-INCOME-LOSS> 115,967
<OTHER-INCOME-NET> 2,420
<INCOME-BEFORE-INTEREST-EXPEN> 118,387
<TOTAL-INTEREST-EXPENSE> 33,289
<NET-INCOME> 85,098
0
<EARNINGS-AVAILABLE-FOR-COMM> 85,098
<COMMON-STOCK-DIVIDENDS> 53,854
<TOTAL-INTEREST-ON-BONDS> 31,094
<CASH-FLOW-OPERATIONS> 146,337
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
