Non-Wholly-Owned Entity

9 Months Ended

Sep. 30, 2011

Notes To Financial Statements [Abstract]

Variable Interest Entity

Note 8 – Non-Wholly-Owned Entity

On a quarterly basis we evaluate all of our joint venture interests to determine if they represent a variable interest entity (VIE) as defined by the authoritative accounting guidance on consolidation. We have determined that SouthStar is our only VIE. Additionally, we have concluded that we are the primary beneficiary of the VIE, which requires us to consolidate the assets, liabilities and statements of income of the joint venture. Our methodology for determining that we are the primary beneficiary, and that our involvement allows us to direct SouthStar’s activities that most significantly influence its performance, has not changed during the nine months ended September 30, 2011. See Note 9 to our Consolidated Financial Statements and related notes included in Item 8 of our 2010 Form 10-K. Earnings in 2011 and 2010 were allocated entirely in accordance with the ownership interests.

SouthStar markets natural gas and related services under the trade name Georgia Natural Gas to retail customers primarily in Georgia, and under various other trade names to retail customers in Ohio, Florida and New York and to commercial and industrial customers principally in Alabama, Florida, North Carolina, South Carolina and Tennessee.

During the nine months ended September 30, 2011, there have been no significant changes to the primary risks associated with SouthStar as discussed in our risk factors included in Item 1A of our 2010 Form 10-K. See Note 10 for Summarized Statements of Income, Statements of Financial Position and capital expenditure information related to the retail energy operations segment, which is primarily comprised of SouthStar. The following table illustrates the effect that our 2009 purchase of an additional 15% ownership interest, which became effective in January 2010, had on our equity for the nine months ended September 30, 2010.

In millions	Premium on common stock	Accumulated other comprehensive loss	Total
Purchase of additional 15% ownership interest	$(51)	$(1)	$(52)

SouthStar’s financial results are seasonal in nature, with the business depending to a great extent on the winter heating seasons during the first and fourth quarters of each year for the majority of its earnings. SouthStar’s current assets consist primarily of natural gas inventory, derivative financial instruments and receivables from its customers. SouthStar also has receivables from us due to its participation in our commercial paper program. See Note 2 for additional discussions of SouthStar’s inventories. SouthStar’s restricted assets consist of customer deposits and are immaterial as of September 30, 2011 and 2010. SouthStar’s current liabilities consist primarily of accrued natural gas costs, other accrued expenses, customer deposits, derivative financial instruments and payables to us from its participation in our commercial paper program.

As of September 30, 2011, SouthStar’s current assets, which approximate fair value, exceeded its current liabilities, long-term assets and other deferred debits and long-term liabilities and other deferred credits by approximately $97 million. SouthStar’s other contractual commitments and obligations, including operating leases and agreements with third party providers, do not contain terms that would trigger material financial obligations in the event such contracts were terminated. As a result, our maximum exposure to a loss at SouthStar is considered to be immaterial. SouthStar’s creditors have no recourse to our general credit beyond the corporate guarantees we have provided to SouthStar’s counterparties and natural gas suppliers. We have provided no financial or other support that was not previously contractually required. Additionally, with the exception of our corporate guarantees, we have not entered into any arrangements that could require us to provide financial support to SouthStar.

Price and volume fluctuations of SouthStar’s natural gas inventories can cause significant variations in our working capital and cash flow from operations. Changes in our operating cash flows are also attributable to SouthStar’s working capital changes resulting from the impact of weather, the timing of customer collections, payments for natural gas purchases and cash collateral amounts that SouthStar maintains to facilitate its derivative financial instruments.

Cash flows used in our financing activities includes SouthStar’s distributions to the noncontrolling interest, which reflects the cash distribution to Piedmont for its ownership interest in SouthStar’s annual earnings from the prior year. Generally this distribution occurs in the first or second quarter. In the nine months ended September 30, 2011 SouthStar distributed $16 million to Piedmont and $27 million during the same period last year. This decrease of $11 million was primarily the result of our increased ownership percentage of SouthStar in 2010.

The following table provides additional information on SouthStar’s assets and liabilities as of the periods presented, which are consolidated within our Condensed Consolidated Statements of Financial Position.

		September 30, 2011					December 31, 2010				September 30, 2010
In millions	Consolidated		SouthStar (1)		% (2)	Consolidated		SouthStar (1)	% (2)	Consolidated		SouthStar (1)	% (2)
Current assets	$1,801		$164		9%	$2,166		$239	11%	$1,628		$167	10%
Long-term assets and other deferred debits	5,658		9		0	5,354		9	0	5,248		10	0
Total assets	$7,459		$173		2%	$7,520		$248	3%	$6,876		$177	3%
Current liabilities	$1,140		$57		5%	$2,432		$93	4%	$2,064		$63	3%
Long-term liabilities and other deferred credits	4,438		0		0	3,252		0	0	2,998		0	0
Total Liabilities	5,578		57		1	5,684		93	2	5,062		63	1
Equity	1,881		116		6	1,836		155	8	1,814		114	6
Total liabilities and equity	$7,459			$173	2%	$7,520		$248	3%	$6,876		$177	3%

(1) These amounts reflect information for SouthStar and do not include intercompany eliminations and the balances of our wholly-owned subsidiary with an 85% ownership interest in SouthStar. Accordingly, the amounts will not agree to the identifiable and total assets for our retail energy operations segment reported in Note 10.

(2) SouthStars percentage of the amount on our Condensed Consolidated Statements of Financial Position.