-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, JYRnJr6Qswu25d3njb4Vn+ybQStunf79Q3yXztJsIgViOoabb+yrm5OzpaZT9NYo iGD9sywcjyo08NKxyNc5xg== 0000892917-94-000034.txt : 19940331 0000892917-94-000034.hdr.sgml : 19940331 ACCESSION NUMBER: 0000892917-94-000034 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CASCADE NATURAL GAS CORP CENTRAL INDEX KEY: 0000018072 STANDARD INDUSTRIAL CLASSIFICATION: 4924 IRS NUMBER: 910599090 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-07196 FILM NUMBER: 94518388 BUSINESS ADDRESS: STREET 1: 222 FAIRVIEW AVE N CITY: SEATTLE STATE: WA ZIP: 98109 BUSINESS PHONE: 2066243900 10-K 1 ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1993 Commission File Number 1-7196 CASCADE NATURAL GAS CORPORATION (Exact name of registrant as specified in its charter) Washington 91-0599090 (State of incorporation or organization) (IRS Employer Identification Number) 222 Fairview Avenue North Seattle, Washington 98109 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code (206) 624-3900 Securities registered pursuant to Section 12 (b) of the Act: Name of Each Exchange Title of Each Class on Which Registered Common stock, par value $1 per share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: Title of Class 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 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 the Form 10-K. X The aggregate market value of the voting stock held by nonaffiliates of the Registrant as of the close of business on February 28, 1994, was $143,092,888. As of the close of business on February 28, 1994, Registrant had outstanding 8,602,716 shares of common stock. Portions of the Registrant's definitive proxy statement for its 1994 Annual Meeting of Shareholders are incorporated by reference into Part III hereof. CASCADE NATURAL GAS CORPORATION Annual Report to the Securities and Exchange Commission on Form 10-K For the Year Ended December 31, 1993 Table of Contents Part I Page Items Item 1 - Business 1 Item 2 - Properties 9 Item 3 - Legal Proceedings 9 Item 4 - Submission of Matters To a Vote of Security Holders 9 - Executive Officers of the Registrant 10 Part II Item 5 - Market for Registrant's Common Equity and Related Shareholder Matters 11 Item 6 - Selected Financial Data 12 Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operation 14 Item 8 - Financial Statements and Supplementary Data 17 Item 9 - Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 46 Part III Item 10 - Directors and Executive Officers 46 Item 11 - Executive Compensation 46 Item 12 - Security Ownership of Certain Beneficial Owners and Management 46 Item 13 - Certain Relationships and Related Transactions 46 Part IV Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K 46 Signatures 47 Index to Exhibits 48 PART I Item 1 - Business General Cascade Natural Gas Corporation (Cascade or the Corporation) was incorporated under the laws of the state of Washington on January 2, 1953. Its principal business is the distribution of natural gas to customers in the states of Washington and Oregon. Approximately 19% of its gas distribution revenues are from the state of Oregon. At December 31, 1993, there were 110,441 residential customers, 21,781 commercial customers, 329 firm industrial customers and 30 traditional interruptible customers, all of which are classified as core customers. In addition, there were 87 non-core customers. In 1993, the core customers provided 73% of the operating margin (up from 71% in 1992) while consuming 31.0% of the total gas deliveries, down from 31.3% in 1992. The non-core customers (including transportation service) provided the remaining operating margin of 27% (down from 29% in 1992) while consuming 69.0% of the total throughput, up from 68.7% in 1992. The Corporation is subject to regulation with respect to, among other matters, rates, systems of accounts and issuance of securities by the Washington Utilities and Transportation Commission (WUTC) and the Oregon Public Utility Commission (OPUC). The Corporation is not subject to direct regulation by the Federal Energy Regulatory Commission (FERC), but is significantly affected by the FERC's orders which regulate interstate pipelines serving the Corporation. Cascade's gas supply contracts provide for annual review of gas prices for possible adjustment. To the extent that prices are changed, Cascade is able to pass the effect of such changes to its customers by means of a periodic purchased gas cost adjustment (PGA) in each state. Gas price changes occurring between times when PGA rate changes become effective are deferred for pass through in the next PGA. The Corporation is also subject to state regulation with respect to integrated resource planning and has filed its second Integrated Resource Plan (IRP) in draft form with both the WUTC and the OPUC. The IRP (previously least cost plan) shows the Corporation's plan for the best set of gas supply and demand side resources that minimizes costs and has acceptable levels of deliverability risk over the twenty-year planning horizon. The IRP also sets forth the Corporation's forecast of growth in customers and volume throughput for a twenty-year period. In addition, the IRP sets forth the Corporation's demand side management goals of achieving certain conservation levels in customer usage. Corporation investments in cost-effective demand side resources are recoverable in rates in both Washington and Oregon. The IRP also sets forth the Corporation's supply side management plans regarding transportation capacity and gas supply acquisition over a twenty- year period. The Corporation developed the IRP over a two-year period and took into account input solicited from the public and the WUTC and OPUC staffs. While the filing of the IRP with both commissions gives the Corporation no advance assurance that its acquisitions of pipeline transportation capacity and gas supplies will be recognized in rates, management believes that the integrated resource planning process benefits the Corporation by giving it the opportunity to obtain input from regulators and the public concurrently with making these important strategic decisions. Until the Corporation receives final regulatory approval of these decisions in the context of a rate case, the Corporation cannot predict with - 1 - certainty the extent to which the integrated resource planning process will affect its rates. The principal industrial activities in Cascade's service area include the production of pulp, paper and converted paper products, plywood, chemical fertilizers, industrial chemicals, cement, clay and ceramic products, textiles, refining of crude oil, smelting and forming of aluminum, the processing and canning of many types of vegetable, fruit and fish products, processing of milk products, meat processing and the drying and curing of wood and agricultural products. OPERATING STATISTICS (dollars in thousands except per therm and per customer data)
1993 1992 1991 1990 1989 Gas Distribution Revenue: Firm: Residential. . . . . . . $ 46,456$ 37,424 $ 37,260$ 33,737$ 34,868 Commercial . . . . . . . 46,870 38,797 40,092 38,802 42,551 Industrial . . . . . . . 10,931 8,715 8,343 8,403 22,048 Interruptible: Commercial . . . . . . . 2,954 2,927 3,068 3,158 6,617 Industrial . . . . . . . 1,845 1,877 2,212 2,888 57,891 Non-core. . . . . . . . . 70,923 56,149 58,535 67,974 5,504 Total gas sales revenue . . . . . 179,979 145,889 149,510 154,962 169,479 Transportation revenue . 7,087 6,423 4,658 5,381 3,841 Total gas distribution revenue . . . . . . . . $187,066$152,312 $154,168$160,343$173,320 Gas Deliveries (thousands of therms): Firm: Residential. . . . . . . 87,812 71,211 71,661 64,673 60,149 Commercial . . . . . . . 102,256 85,303 89,873 86,497 85,633 Industrial . . . . . . . 28,208 22,585 21,984 21,941 69,402 Interruptible: Commercial . . . . . . . 4,730 4,608 5,319 5,396 16,204 Industrial . . . . . . . 5,925 5,944 7,350 10,507 254,787 Non-core. . . . . . . . . 269,483 255,707 277,716 301,983 24,684 Total sales. . . . . . . 498,414 445,358 473,903 490,997 510,859 Transportation deliveries 240,448 159,779 84,918 112,588 81,109 Total deliveries. . . . . 738,862 605,137 558,821 603,585 591,968 Customers (monthly averages): Firm: Residential. . . . . . . 104,334 96,621 89,306 82,640 77,340 Commercial . . . . . . . 21,166 20,266 19,316 18,475 17,582 Industrial . . . . . . . 318 308 308 300 300 Interruptible: Commercial . . . . . . . 17 17 18 19 30 Industrial . . . . . . . 13 16 18 19 68 Non-core. . . . . . . . . 86 80 77 76 5 Total. . . . . . . . . . 125,934 117,308 109,043 101,529 95,325 Year-end totals. . . . . 132,668 123,356 114,734 106,933 99,956
(Operating Statistics continued on next page) - 2 - OPERATING STATISTICS (dollars in thousands except per therm and per customer data)
1993 1992 1991 1990 1989 Average Annual Consumption Per Customer (therms): Residential. . . . . . . 842 737 802 783 778 Commercial-firm. . . . . 4,831 4,209 4,653 4,682 4,870 Average Annual Revenue Per Customer: Residential. . . . . . . $ 445 $ 387 $ 417 $ 408 $ 451 Commercial-firm. . . . . $ 2,214 $ 1,914 $ 2,076 $ 2,100 $ 2,420 Average Rate per Therm: Firm: Residential. . . . . . . $0.5290 $0.5255 $0.5199 $0.5217 $0.5797 Commercial . . . . . . . $0.4584 $0.4548 $0.4461 $0.4486 $0.4969 Industrial . . . . . . . $0.3875 $0.3859 $0.3795 $0.3830 $0.3177 Interruptible: Commercial (excluding facilities charges) . . $0.3169 $0.3194 $0.3166 $0.3156 $0.3186 Industrial . . . . . . . $0.3114 $0.3158 $0.3010 $0.2749 $0.2272 Non-core. . . . . . . . . $0.2632 $0.2196 $0.2108 $0.2251 $0.2230 Transportation. . . . . . $0.0295 $0.0402 $0.0549 $0.0478 $0.0474 Average Cost per Therm For Gas Purchased . . . . $0.2434 $0.2055 $0.1958 $0.1963 $0.2153 Heating Degree Days System Average (30-year average 5,675). . . . . 6,099 5,075 5,454 5,396 5,507 Maximum Day Send Out (1,000 therms) Including Transportation . . . . . 3,485 2,687 2,567 2,854 3,238 Average Daily Send Out (1,000 therms) Including Transportation . . . . . 2,019 1,653 1,531 1,654 1,622 Employees-End of Year. . . 467 466 460 450 443
- 3 - Natural Gas Supply The majority of Cascade's supply of natural gas is transported via Northwest Pipeline Corporation (Northwest). Northwest owns and operates a transmission system extending from points of interconnection with El Paso Natural Gas Company and Transwestern Pipeline Company near Blanco, New Mexico through the states of New Mexico, Colorado, Utah, Wyoming, Idaho, Oregon and Washington to the Canadian border near Sumas, Washington. The Corporation is also a shipper on the Pacific Gas Transmission Company (PGT) system. PGT owns and operates a gas transmission line that extends from the gas fields in Alberta, Canada through Washington and central Oregon into California. On November 1, 1993, Northwest completed the process, begun in 1988, of converting its sales function to firm transportation service. Along with the sales conversion of its remaining sales service from Northwest, the Corporation accepted assignment of a pro-rata share of Northwest's remaining Canadian gas supply arrangements, an equivalent share of PGT firm pipeline transportation and a portion of Northwest's natural gas inventory at the Clay Basin Storage Facility. Presently, baseload requirements for Cascade's core market group are provided by two major domestic and six major Canadian gas supply contracts with various expiration dates for 1995 through 2008 and totalling 503,840 therms per day. These contracts are supplemented by storage gas inventories including the assignment of Clay Basin inventory providing for 200,000 therms per day and a maximum 1994-95 inventory of 8,361,200 therms. Two additional agreements for storage gas cover periods of peak demand. One, with Northwest, extends to October 31, 2014 and provides for 165,950 therms per day and a maximum, renewable inventory of 5,973,780 therms. The second, with The Washington Water Power Company, extends to April 30, 1995 and entitles Cascade to receive up to 150,000 therms per day and a maximum, renewal inventory of 4,800,000 therms. Cascade has entered into a contract with one of its major industrial customers whereby it may reduce firm deliveries to that customer by 150,000 therms per day up to a seasonal total of 3,000,000 therms. This contract expires on September 30, 2015. Cascade also owns a propane air peak shaving plant with a daily capacity of 60,000 therms and has liquified natural gas storage available under an agreement with Northwest which extends to October 31, 2014. Under this agreement, Cascade is entitled to receive up to 600,000 therms per day and to a maximum, renewable inventory of 5,622,000 therms. Cascade maintains a diversified portfolio of natural gas supplies. During 1993, Cascade purchased approximately 6.2% from Northwest, 41.9% from other firm gas supply contracts, 48.3% from 30-day spot market contracts and 3.5% from customer assigned gas purchase contracts. In addition, 240,448,000 therms of customer purchased supplies were transported across Cascade facilities. Current Federal Energy Regulatory Commission (FERC) Matters: On November 1, 1993, and pursuant to FERC Order No. 636, as supplemented by FERC Order No. 636A, 636B and 636C (Order 636), Northwest completed the conversion of its remaining sale service to firm transportation service and ceased nearly all activities as a merchant of natural gas. Also on November 1, 1993, PGT undertook the same conversion and is now primarily a transportation pipeline. With the completion of the Northwest conversion, Cascade holds 2,090,490 therms per day of firm transportation capacity. As part of the Northwest conversion, the Corporation took direct assignment of 313,350 therms per day of firm PGT transportation capacity and contracted for an additional 74,460 therms of wintertime only firm capacity on the PGT system. - 4 - Interstate pipelines that cease being gas sellers face the cost of buying down take-or-pay commitments contained in contracts with their own gas suppliers. Such costs were relatively small on Northwest's system, and to the extent they were passed on, state regulators allowed Cascade to include them in rates to its customers. The FERC since has determined that $37,000,000 of these past charges were allocated among Northwest's customers in an impermissible manner. Proceedings to reallocate these costs are now in progress. To the extent Cascade's final allocation differs from the original, it will seek to pass on the difference to its customers in rates. Even though PGT is still restructuring supply contracts which were entered into between PGT and a sister company for the sole purpose of providing sales service to their parent, Pacific Gas and Electric Company in California, Cascade and other northwest shippers negotiated a settlement that capped their PGT Gas Supply Restructuring (GSR) costs at approximately 1.3% of the anticipated final approved GSR costs. Cascade's allocation was $350,000 and the Corporation opted to make a one time payment earlier this year, thereby discharging all obligations to the PGT GSR costs associated with Cascade's original PGT capacity regardless of the eventual PGT settlement total. The Corporation may have some additional exposure to a small amount of GSR costs that may be collected from all shippers through a volumetric surcharge assessed on its 1993 and 1995 PGT expansion capacity. Cascade is seeking full recovery of this payment in its rates, as was done with respect to Northwest transition costs. Because Northwest has been working toward the transformation from sales to open access transportation of natural gas since 1988, Cascade has experienced very little operational impact or transition costs from the implementation of Order 636. The April 1, 1993 shift to straight fixed variable rates mandated by Order 636 did not, by itself, increase total pipeline transportation costs to Cascade, but did result in a greater share of such costs being attributable to low load factor customers of Cascade. Additional pipeline costs were experienced with the November 1, 1993 completion of the first of Northwest's and PGT's expansion projects. The rates presently being collected, subject to refund, reflect a rolled-in methodology currently being challenged through FERC rate case proceedings, by Cascade and several other shippers advocating an incremental rate design. Cost of Purchased Gas Following the implementation of Order 636, Cascade's cost of gas depends primarily on the prices negotiated with producers and brokers, coupled with the cost of interstate pipeline transportation service. Curtailment Procedures In previous heating seasons, cold weather has required Cascade to significantly curtail its interruptible customers. Cascade has not curtailed any firm customers, except under force majeure provisions. Cascade's tariffs effective in Washington and Oregon, allow for curtailment of interruptible services, which are provided at rates lower than for firm services. In the event of curtailment by Cascade of firm service due to force majeure, Cascade's tariffs provide that it shall not be liable for damages or otherwise to any customer for failure to deliver gas curtailed in accordance with the provisions of the tariffs. The tariffs provide for appropriate adjustment of the monthly bill of firm customers curtailed by reason of an insufficient supply of gas. - 5 - Territory Served and Franchises The population of communities served by Cascade totaled approximately 700,000 at the end of 1993 compared to 665,000 at the end of 1992, a 5.3% increase. Cascade has all the franchises necessary for the distribution of natural gas in the communities it serves in Washington and Oregon with the exception of one city franchise in Washington the renewal of which is being negotiated. Under the laws of those states, incorporated municipalities and counties may grant non-exclusive franchises for a fixed term of years conferring upon the grantee certain rights with respect to public streets and highways in the location, construction, operation, maintenance and removal of gas distribution facilities. In the opinion of Cascade's management, none of its franchises contain any restrictions or requirements which are of a materially burdensome nature, and such franchises are adequate for the conduct of Cascade's present business. Franchises expire on various dates from 1994 to 2065. Management has not incurred difficulties in renewing franchises when they expire and does not expect any problems in the future. Customers Residential and commercial customers principally use natural gas for space heating and water heating. This market is very weather-sensitive. See "Seasonality," below. Of its non-core customers, 15 accounted for approximately 31% of Cascade's total 1993 gas and transportation revenues. Agreements with its principal industrial customers are for fixed terms of not less than one year and provide for automatic extension from year to year unless terminated by either party on 30-days' notice. No one customer accounted for as much as 10% of gas revenues. Seasonality Weather is an important factor affecting gas revenues because of the large number of customers using gas for space heating. In 1993, 64.5% of operating revenues and 96.8% of earnings from operations were derived from the first and last quarters. Because of the seasonality of space heating revenues, Cascade believes financial results for interim periods are not necessarily indicative of results to be expected for the year. Competitive Conditions Cascade sells in a competitive market for natural gas. Cascade competes with residual fuel oil and other alternative energy sources for industrial boiler uses and oil and electricity for residential and commercial space and water heating uses. Competition is primarily based on price. For residential and commercial space heating use, Cascade continues to maintain a price advantage over oil in its entire service territory and has a significant advantage over electricity in over 90% (by population) of its territory. In the remaining areas of its service territory served by public electric utilities with their own substantial hydro power supply, Cascade is at parity with respect to electricity furnished by those utilities for space heating and water heating uses. Cascade has increased its efforts in attaining a positive customer growth in the residential and commercial market over the last several years by aggressively meeting consumers' needs. Through its wholly-owned subsidiary, Cascade Land Leasing Co., the Corporation provides loans to customers to finance the purchase and installation of energy efficient gas appliances. - 6 - Historically, the large volume industrial market was very sensitive to price fluctuations between the comparable cost of natural gas and alternate fuels, principally residual fuel oil used in boiler applications. However, the advent of open access transportation and the restructuring of gas supply and contractual provisions with these customers has improved the Corporation's competitive position. From December 1991 through January 1992 and again from December 1992 through February 1994, except for a brief period in June 1993, residual fuel oil prices were lower than natural gas, but Cascade did not experience any significant loss of sales to alternate fuels during those periods. In addition to multiple alternate fuels, the Corporation competes with other sources of natural gas because of the potential for bypass of the Corporation's facilities. Bypass refers to actual or prospective customers which install their own facilities and connect directly to an upstream pipeline and thereby "bypass" the distribution company's service. The Corporation has experienced bypass but has also experienced success in offering competitive rates to reduce economic incentives to bypass. The Bonneville Power Administration ( BPA ) is a major supplier of hydro-electric power in the Pacific Northwest including Cascade's service area. BPA significantly influences the electric rates of all classes of customers including those applications in direct competition with natural gas marketed by Cascade. BPA increased rates by approximately 14% in October, 1993. Environmental The Corporation is subject to federal and state environmental regulation of its operations and properties through the United States Environmental Protection Agency, the Washington Department of Ecology and the Oregon Department of Environmental Quality. Such regulation may, at times, result in the imposition of liability or responsibility for the clean-up or treatment of existing environmental problems or for the prevention of future environmental problems. In the early 1950's, the Corporation purchased several of the gas distribution facilities that it operates today. Among the acquired facilities, the Corporation has identified to date 12 small manufactured gas plants which had used oil or coal as feedstock to produce manufactured gas. Some of the waste byproducts of the manufacturing process contain hazardous substances which, if found in sufficient concentrations, could pose environmental problems. Almost all of these plants were either dismantled or converted to propane air prior to 1956. In 1956, when natural gas became available, the remaining plants were dismantled. The plant sites were cleaned up when the plants were dismantled and the sites are currently being used for other purposes. Environmental agencies have monitored three of the sites and have found no hazardous substances at levels requiring remediation. Based on information received to date, management is not aware of hazardous substances present at any of the sites at levels that would require remediation. The Corporation is in the process of remediating a site that was contaminated by underground diesel and gasoline storage tanks. See Note 9 under Notes to Consolidated Financial Statements. Capital Expenditures Capital expenditures for 1994 are budgeted for $35,100,000. Including the 1994 capital budget, the Corporation will have spent slightly over $103,000,000 in new plant in the three years ended in 1994, compared to - 7 - $108,000,000 in the nine years from the end of 1982 through 1991. Included in the budget are distribution facilities to serve the fourth cogeneration plant on the Corporation's system. The contracts for service to the four cogeneration plants are expected to yield virtually level payments over the 15- to 25-year contract lives of the which should recover the capital investment in the facilities and provide a return to shareholders over their term. With level payments, projected rates of return are low in the early years and increase significantly over time as the Corporation's investment is depreciated. Therefore, the significant capital expenditures incurred in 1992, 1993 and budgeted for 1994, will likely produce a dampening effect on earnings in the short term with a longer term effect of strengthening the earnings flow. No budgets have been prepared beyond 1994, however, the Corporation expects that capital expenditures will total approximately $110,000,000 to $140,000,000 over the following five years. Non-Utility Subsidiaries Cascade has six non-utility subsidiaries. These subsidiaries are engaged in the following businesses, respectively; financing Cascade customers' purchases of energy-efficient appliances; marketing a gas measurement chart scanner; ownership and licensing of the technology related to a gas measurement chart scanner; exploring for natural gas; and ownership of certain real property in Oregon. The subsidiaries, which in the aggregate account for less than 5% of the consolidated assets of the Corporation, do not currently have a significant impact on Cascade's financial condition or the results of its operation. Personnel At December 31, 1993, Cascade had 467 employees. Of the total employees, 209 are represented by the International Chemical Workers Union. The present contract with the union extends to April 1, 1996, and thereafter until terminated by either party on 60-days' notice. - 8 - Item 2 - Properties At December 31, 1993, Cascade's utility plant investments included approximately 3,558 miles of distribution mains ranging in diameter from two inches to sixteen inches, 240 miles of transmission mains ranging in diameter from two inches to sixteen inches and 2,162 miles of service lines. The lateral lines and distribution mains are located under public property such as streets and highways or on private property with the permission or consent of the individual owner. Cascade owns 16 buildings used for operations, office space and warehousing in Washington and five such buildings in Oregon. It occupies an additional five commercial offices and maintains 35 pay stations in communities throughout its operating territory. Cascade considers its properties well maintained and in good operating condition, and adequate for Cascade's present and anticipated needs. All facilities are substantially utilized. The Corporation also owns a propane air plant in Yakima, Washington, with a capacity of 60,000 therms per day used for peak load shaving. Item 3 - Legal Proceedings See last paragraph under "Business - Environmental". Item 4 - Submission of Matters To a Vote of Security Holders None - 9 - Executive Officers of the Registrant The Executive Officers of the Corporation, as of March 1, 1994, are as follows:
Year Became Name Office Age Officer Melvin C. Clapp Chairman of the Board and Chief Executive Officer 60 1972 W. Brian Matsuyama President 47 1987 Donald E. Bennett Executive Vice President, Chief Financial Officer and Secretary 61 1978 Jon T. Stoltz Senior Vice-President, Planning and Rates 47 1981 Ralph E. Boyd Vice-President and Chief Operating Officer 57 1988 O. LeRoy Beaudry Vice-President, Consumer and Public 55 1981 Affairs Calvin R. Steele Vice-President, Data-Processing 54 1991 King C. Oberg Vice-President, 53 1993 Gas Supply James E. Haug Treasurer and Chief Accounting Officer 45 1981
None of the above officers is related by blood, marriage or adoption to any other of the above named officers. Except as discussed below, each of the above named officers has been employed by the Corporation in a management capacity for at least the past five years. None of the above officers hold directorships in other public corporations. All officers serve at the pleasure of the Board of Directors. King C. Oberg has been employed by the Corporation since January 2, 1989. From 1963 through October 1988, he held various positions in gas measurement and accounting with ENRON Corp. of Houston Texas. - 10 - PART II Item 5 - Market for Registrant's Common Equity and Related Shareholder Matters The Common Stock is traded on the New York Stock Exchange under the symbol CGC. At February 28, 1994, there were approximately 6,745 record holders of the Common Stock. The following table shows for the periods indicated the high and low sales prices of, and the per share dividends paid on, the Common Stock in each case as adjusted for stock splits. Market and Dividend Information
Common stock sales price ranges Dividends 1993 1992 1993 1992 Quarter High Low High Low First 17 15 1/2 15 5/8 13 3/4 .23 1/3 .22 2/3 Second 17 3/4 16 5/8 15 1/8 13 7/8 .23 2/3 .23 1/3 Third 19 1/2 17 1/4 16 5/8 14 3/8 .23 2/3 .23 1/3 Fourth 19 3/8 17 15 7/8 14 3/4 .23 2/3 .23 1/3
The Corporation's practice has been to declare dividends on its common shares quarterly, payable on the 15th day of February, May, August, and November. The most recent quarterly dividend on the common shares was $.24 per share and was paid on February 15, 1994, to holders of record on January 15, 1994. Future dividend action will depend on the earnings and financial condition of the Corporation and other relevant factors. - 11 - Item 6 - Selected Financial Data Statements of Operations (dollars in thousands except per share data)
1993 1992 1991 1990 1989 Operating Revenues: Gas sales $179,979 $145,889 $149,510 $154,962 $169,479 Transportation revenue 7,087 6,423 4,658 5,381 3,841 Other operating income 388 154 144 172 166 187,454 152,466 154,312 160,515 173,486 Less: Gas purchases 113,500 90,320 90,903 97,392 110,407 Revenue taxes 11,095 8,997 9,362 9,192 10,039 Operating Margin 62,859 53,149 54,047 53,931 53,040 Cost of Operations: Operating expenses 28,536 26,262 24,630 22,428 21,144 Depreciation and amortization 9,151 8,388 7,704 7,282 6,829 Property and payroll taxes 3,757 3,516 3,361 3,373 3,005 Income taxes 5,224 2,817 4,206 4,547 5,178 46,668 40,983 39,901 37,630 36,156 Overrun Penalty Income 1,305 Earnings from operations 16,191 12,166 15,451 16,301 16,884 Nonoperating Expense (Income): Interest 7,038 7,478 7,793 8,374 8,063 Interest charged to construction (323) (218) (156) (98) (89) 6,715 7,260 7,637 8,276 7,974 Amortization of debt issuance expense 562 402 362 373 370 Other 20 (339) (199) (724) 58 7,297 7,323 7,800 7,925 8,402 Net Earnings Before Cumulative Effect of Change in Accounting Method 8,894 4,843 7,651 8,376 8,482 Cumulative Effect of Change in Accounting Method 209 Net Earnings 9,103 4,843 7,651 8,376 8,482 Preferred Dividends 580 595 148 154 178 Net Earnings Available to Common Shareholders $ 8,523 $ 4,248 $ 7,503 $ 8,222 $ 8,304 Common Stock Outstanding: End of Year 8,566,374 7,613,589 6,630,956 6,564,789 6,494,403 Average 7,914,858 6,681,263 6,586,671 6,518,520 6,452,913 Net Earnings per Common Share: Before cumulative effect of change in accounting method $ 1.05 $ 0.64 $ 1.14 $ 1.26 $ 1.29 Cumulative effect of change in accounting method 0.03 Net Earnings per Common Share $ 1.08 $ 0.64 $ 1.14 $ 1.26 $ 1.29
(Selected Financial Data continued on next page) - 12 -
1993 1992 1991 1990 1989 Retained Earnings: Beginning of the year $13,455 $15,655 $14,142 $11,674 $8,893 Net earnings after preferred dividends 8,523 4,248 7,503 8,222 8,304 Common dividends paid in cash (7,902) (6,448) (5,990) (5,754) (5,523) End of the year $14,076 $13,455 $15,655 $14,142 $11,674 Capital Structures: Common shareholders' equity $85,702 $69,199 $57,225 $54,931 $51,705 Redeemable preferred stocks $ 7,528 $ 7,951 $ 8,254 $ 2,444 $ 2,898 Debt: Long-term debt $87,000 $74,677 $57,060 $60,803 $60,080 Notes payable 13,502 13,000 8,500 1,500 0 Current maturities of long-term debt 0 0 3,500 2,500 3,925 $100,502 $87,677 $69,060 $64,803 $64,005 Total capital $193,732 $164,827 $134,539 $122,178 $118,608 Financial Ratios: Return on common shareholders' equity 11.00% 6.72% 13.38% 15.42% 16.62% Common stock dividend payout ratio 92.72% 151.82% 79.83% 69.98% 66.51% Dividends paid in cash per common share $ 0.94 $ 0.93 $ 0.90 $ 0.87 $ 0.85 Fixed charge coverage (before income tax deduction): Times interest earned 2.86 1.97 2.45 2.48 2.62 Times interest and preferred dividends earned 2.55 1.76 2.39 2.41 2.53 Book value per year-end share of common stock$ 10.00 $ 9.09 $ 8.63 $ 8.37 $ 7.96 Utility Plant: Utility plant - end of year $315,297 $283,871 $249,027 $230,769 $217,132 Accumulated depreciation 117,925 109,184 100,927 93,824 87,883 Net plant $197,372 $174,687 $148,100 $136,945 $129,249 Construction expenditures$ 32,990$ 35,335 $ 19,669 $ 16,415 $ 12,902 Total assets $252,690 $224,685 $191,471 $181,080 $175,319
- 13 - Item 7 - Management's Discussion of the Results of Operations and Financial Conditions Results of Operations 1993 vs 1992 The continuing strong customer growth coupled with reasonably normal weather (7.5% colder than normal) pushed total year earnings as well as fourth quarter earnings to new record levels. Net earnings to common shareholders for 1993 were $8,523,000 or $1.08 per share compared to $4,248,000 or $0.64 per share in 1992. Fourth quarter net earnings to common shareholders were $5,005,000 compared to $3,962,000 in the 1992 fourth quarter. Earnings per share were $0.59 in the 1993 quarter and $0.57 in the 1992 quarter. Margin and Volume Changes Between 1993 and 1992
Margin Contribution (thousands): Therms Deliveries (thousands): Increase(Decrease) Increase(Decrease) Amount Percent Amount Percent Core 8,058 21.4% 39,280 20.7% Non-Core 1,652 10.7% 94,445 22.7% Total 9,710 18.3% 133,725 22.1%
The successful sales of common stock in November, 1992 and June, 1993, increased the number of shares outstanding, affecting per share comparisons for both the year and the quarter. All per share numbers reflect the three for two stock split which was effective on December 20, 1993. Acquisition of new customers continued at the healthy rate of 7.5% in 1993. Residential customers increased 8.3% in 1993 over 1992. Therm deliveries to the core market increased 20.7% while therm deliveries to the non-core market were up 22.7%. The significant increase in deliveries to the non-core market, primarily in the latter half of 1993, reflects the beginning of commercial operation for the second cogeneration plant on the Corporation's system. Operating expenses were up 8.7% ($2,274,000) in 1993. Payroll and fringe benefit cost increases accounted for 85% of the increase. The Corporation adopted Statement of Financial Accounting Standard (SFAS) No. 106 Employers' Accounting for Postretirement Benefits other than Pensions, which accounted for a portion of the fringe benefit cost increase. Depreciation expense increased 9.1% ($763,000) as a result of the significant additions to utility plant in 1993 and prior years. Income taxes were up 85.4% ($2,407,000) over 1992. The increase is primarily due to the improvement in earnings. Interest expense was down 5.9% ($440,000) from the 1992 level as a result of the refinancing of higher cost debt that was accomplished in mid 1992 and early 1993. Interest charged to construction was up 48% ($105,000) as the result of the use of more short-term debt in 1993. Amortization of debt issuance expense was up 40% ($160,000) in 1993 reflecting the costs incurred to refinance the higher cost debt mentioned above. Other expense reflects termination of all interests and the writeoff of all remaining costs ($244,000) associated with the drilling activities in northwestern Washington as well as other valuation reserves. The results for 1993 include the effect of adopting, in the first quarter of 1993, SFAS No. 109, Accounting for Income Taxes, which resulted in a one time credit to earnings of $209,000 or $0.03 per share. Results of Operations 1992 vs 1991 A return to more normal weather in the fourth quarter of 1992 produced strong earnings for the quarter but, not sufficient to offset the impact of the record warm temperatures in the first quarter of 1992. Therm deliveries to the - 14 - core market were up 11.7% in the 1992 quarter compared to the prior year producing a 21.4% increase in margins from the core category over the similar period in 1991. While this significant improvement over the fourth quarter of 1991 was largely attributable to the return to more normal weather, the continuing strong customer growth of 7.5% also had an impact. Total margin for 1992 was down $898,000 (1.7%), however, margin from the core customers was down $1,764,000 (4.5%) reflecting the impact of the warmer than normal weather experienced through most of the year. The increase in margin from the non-core customers reflected the full year impact of the first cogeneration plant on the system as well as an increase in customers. Total volumes for 1992 were up 46,315,000 therms (8.3%) but deliveries to the core customers were down 6,536,000 therms (3.3%).
Margin and Volume Changes Between 1992 and 1991 Margin Contribution (thousands):Therms Deliveries (thousands): Increase(Decrease) Increase(Decrease) Amount Percent Amount Percent Core (1,764) (4.5%) (6,536) (3.3%) Non-Core 866 (5.9%) 52,851 14.6% Total (898) (1.7%) 46,315 8.3%
While earnings for all of 1992 were depressed as a result of the significant decline in degree days (6.9% fewer than 1991 and 10.6% warmer than normal), continuing customer growth contributes to improved profitability under normal weather. The Corporation continued to add new customers at a record pace and while the vast majority of the new customers in 1992 came from the residential class, the number of non-core customers increased by 7.8%. Operating expenses increased 6.6% in 1992 over 1991 and this compares favorably to the 9.8% increase experienced in 1991 over 1990. Employee costs, including fringe benefits, accounted for 80% ($1,299,000) of the increase. Staffing increases and increased medical costs were the primary driving force behind the increases. Depreciation expense increased 8.9% as a result of the significant growth in utility plant (up 11.6%) required to serve the additional customers. The decline in income tax expense is the result of lower earnings. Costs of $157,000 or $0.03 per share representing costs incurred in connection with natural gas exploration were charged to expenses in the fourth quarter. Liquidity and Capital Resources The Corporation invested $32,990,000 in new utility plant in 1993. Internal cash generation, after cash dividends, funded approximately 20%. The low level of internal cash generation for funding construction was the result of returning in excess of $8,778,000 to customers from a Northwest Pipeline Corporation refund received in 1989 as a result of the settlement of their rate case. These items coupled with the seasonal nature of the Corporation's business required the use of short and long-term debt in 1993. To provide the short-term debt requirements the Corporation has $25,000,000 of committed lines from two banks which are used to support a money market facility of a similar amount. The Corporation also has $30,000,000 of uncommitted lines from three banks. The long-term debt requirements were funded through the issuance of two $5,000,000 Medium-Term Notes which mature in 1998 and bear interest rates of 5.77% and 5.78%. The Corporation also sold $24,000,000 of 20 year Medium-Term Notes in February 1993 at interest rates ranging from 7.95% to 8.01% to refund the 9.875% Debentures Due 2013 in the amount of $21,677,000. On June 22, 1993, the Corporation sold 575,000 shares of common stock through a public offering at $26.125 per share. The net proceeds of $14,435,000 - 15 - were used to reduce short-term indebtedness. Effective December 20, 1993, the Corporation issued a three for two common stock split. In November 1993, an additional $50,000,000 of Medium-Term notes were registered with the Securities and Exchange Commission. In December, 1993, changes were implemented to the existing Dividend Reinvestment Plan to allow residential customers of the Corporation residing in Oregon and Washington to purchase stock through the Plan with an initial investment of $250. While there is no way of predicting the level of customer response, it is expected that this program will provide, at a lower cost, a new stream of equity capital to the Corporation to fund utility construction expenditures. The Corporation has a capital budget for 1994 of $35,100,000 which will be funded through internal cash generation and the short and long-term debt facilities mentioned above. Effects of Inflation Changing prices have had a minimal impact on the Corporation's operating margins. The effects of price changes in purchased gas costs and the cost of transporting gas to the Corporation's system are passed onto customers in accordance with regulatory policy. Inflationary increases in wages and other operating expenses are generally recognized by the regulatory agencies in their rate decisions in general rate filings. Since the Corporation's last general rate adjustment in 1989, growth in the customer base has mitigated the negative effect of inflation on income from operations. - 16 - Item 8 - Financial Statements and Supplementary Data The financial statements and supplementary data listed in the following index are filed as part of this report. Index to Financial Statements and Supplementary Data Page No. Independent Auditors' Report on the Consolidated Financial Statements 18 Consolidated Financial Statements: Statements of Net Earnings Available to Common Shareholders for the Years ended December 31, 1993, 1992 and 1991 19 Balance Sheets as of December 31, 1993 and 1992 20 Statements of Common Shareholders' Equity for the Years ended December 31, 1993, 1992 and 1991 22 Statements of Cash Flows for the Years ended December 31, 1993, 1992 and 1991 23 Notes to Consolidated Financial Statements for the three years ended December 31, 1993 24 Independent Auditors' Report on the Financial Statement Schedules 36 Financial Statement Schedules: Schedule V - Utility Plant 37 Schedule VI - Accumulated Depreciation of Utility Plant 38 Schedule VIII - Valuation and Qualifying Accounts 39 Schedule IX - Short-Term Borrowings 40 Schedule X - Supplementary Income Statement Information 41 - 17 - Independent Auditor's Report Board of Directors Cascade Natural Gas Corporation Seattle, Washington We have audited the accompanying consolidated balance sheets of Cascade Natural Gas Corporation and subsidiaries (the Corporation) as of December 31, 1993 and 1992, and the related consolidated statements of net earnings available to common shareholders, common shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements 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, such consolidated financial statements present fairly, in all material respects, the financial position of Cascade Natural Gas Corpora- tion and subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in Notes 6 and 7 to the financial statements, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, and SFAS No. 106, Employers' Accounting for Postretirement Benefits other than Pensions, for the year ended December 31, 1993. Deloitte & Touche Seattle, Washington February 1, 1994 - 18 - CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES Consolidated Statements of Net Earnings Available to Common Shareholders Years ended December 31, 1993, 1992, and 1991
1993 1992 1991 (dollars in thousands except per share data) Operating Revenues: Gas sales $179,979 $145,889 $149,510 Transportation revenue 7,087 6,423 4,658 Other operating income 388 154 144 187,454 152,466 154,312 Less: Gas purchases 113,500 90,320 90,903 Revenue taxes 11,095 8,997 9,362 Operating Margin 62,859 53,149 54,047 Cost of Operations: Operating expenses 28,536 26,262 24,630 Depreciation and amortization 9,151 8,388 7,704 Property and payroll taxes 3,757 3,516 3,361 Income taxes 5,224 2,817 4,206 46,668 40,983 39,901 Overrun Penalty Income --- --- 1,305 Earnings from operations 16,191 12,166 15,451 Nonoperating Expense (Income): Interest 7,038 7,478 7,793 Interest charged to construction (323) (218) (156) 6,715 7,260 7,637 Amortization of debt issuance expense 562 402 362 Other 20 (339) (199) 7,297 7,323 7,800 Net Earnings Before Cumulative Effect of Change in Accounting Method 8,894 4,843 7,651 Cumulative effect of change in accounting method (Note 6) 209 --- --- Net Earnings 9,103 4,843 7,651 Preferred Dividends 580 595 148 Net Earnings Available to Common Shareholders $ 8,523 $ 4,248 $ 7,503 Earnings Per Common Share: Before cumulative effect of change in accounting method $ 1.05 $ 0.64 $ 1.14 Cumulative effect of change in accounting method 0.03 --- --- Net Earnings Per Common Share $ 1.08 $ 0.64 $ 1.14 Average Shares Outstanding (Note 3) 7,914,858 6,681,263 6,586,671
See notes to consolidated financial statements - 19 - CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets ASSETS
December 31, 1993 1992 (dollars in thousands) Utility Plant $310,288 $272,464 Less accumulated depreciation 117,925 109,184 192,363 163,280 Construction work in progress 5,009 11,407 197,372 174,687 Other Assets: Investments, at cost 1,149 1,225 Notes receivable, less current maturities 3,508 4,379 4,657 5,604 Current Assets: Cash and cash equivalents 3,138 3,332 Temporary investments 757 --- Accounts receivable, less allowance of $490 and $399 for doubtful accounts 26,539 24,440 Current maturities of notes receivable 1,331 1,661 Materials, supplies, and inventories 6,416 5,410 Prepaid expenses and other assets 444 845 38,625 35,688 Deferred Charges 12,036 8,706 $252,690 $224,685
See notes to consolidated financial statements - 20 - COMMON SHAREHOLDERS' EQUITY, PREFERRED STOCKS, AND LIABILITIES
December 31, 1993 1992 (dollars in thousands) Common Shareholders' Equity: Common stock, par value $1 per share (Note 3) Authorized, 10,000,000 shares; issued and outstanding, 8,566,374 and 5,075,726 shares $ 8,566 $ 5,076 Additional paid-in capital 63,060 50,668 Retained earnings (Note 5) 14,076 13,455 85,702 69,199 Redeemable Preferred Stocks, aggregate redemption amount of $7,826 and $8,288 (Note 2) 7,528 7,951 Long-term Debt (Note 5) 87,000 74,677 Current Liabilities: Notes payable (Note 4) 13,502 13,000 Accounts payable 22,362 16,194 Property, payroll, and excise taxes 3,960 3,716 Dividends and interest payable 3,665 3,881 Other current liabilities 2,395 1,920 45,884 38,711 Deferred Credits: Gas cost changes 3,568 14,168 Income taxes (Note 6) 13,708 12,513 Investment tax credits 3,747 4,013 Other 5,553 3,453 26,576 34,147 Commitments and Contingencies (Notes 8 and 9) --- --- $252,690 $224,685
See notes to consolidated financial statements - 21 - CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES Consolidated Statements of Common Shareholders' Equity
Common Stock Additional Paid-in Retained Shares Par Value Capital Earnings (dollars in thousands) BALANCE, January 1, 1991 4,376,526 $4,377 $36,412 $14,142 Common stock issued: Sales to employee stock ownership plan 2,260 2 41 Dividend reinvestment program 35,370 35 688 Employee Savings Plan and Retirement Trust (401(k)) 6,481 7 139 Redemption of preferred stock (5) Issuance of preferred stock (126) Cash dividends: Common stock, $1.36 per share (5,990) Preferred stock, Senior, $.55 per share (141) 7.85% cumulative preferred stock, $.11 per share (7) Net earnings 7,651 Balance, December 31, 1991 4,420,637 4,421 37,149 15,655 Common stock issued: Public offering 600,000 600 12,352 Employee Savings Plan and Retirement Trust (401(k)) 17,802 18 384 Director stock award plan 1,200 1 25 Dividend reinvestment program 36,087 36 771 Redemption of preferred stock (13) Cash dividends: Common stock, $1.40 per share (6,448) Preferred stock, Senior, $.55 per share (124) 7.85% cumulative preferred stock, $7.85 per share (471) Net earnings 4,843 Balance, December 31, 1992 5,075,726 5,076 50,668 13,455 Common stock issued: Public offering 575,000 575 13,773 Employee Savings Plan and Retirement Trust (401(k)) 22,200 22 558 Director stock award 800 1 19 Dividend reinvestment program 37,992 38 939 Three for two stock split 2,854,656 2,854 (2,865) Redemption of preferred stock (32) Cash dividends: Common stock, $.95 per share (7,902) Preferred stock, Senior, $.55 per share (109) 7.85% cumulative preferred stock, $7.85 per share (471) Net earnings 9,103 Balance, December 31, 1993 8,566,374 $8,566 $63,060 $14,076 See notes to consolidated financial statements
- 22 - CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31, 1993, 1992, and 1991
1993 1992 1991 (dollars in thousands) Operating Activities: Net earnings . . . . . . . . . . . . $9,103 $4,843 $7,651 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation . . . . . . . . . . 10,268 9,342 8,598 Amortization of gas cost changes (10,119) (3,070) (3,695) Increase in deferred income taxes 758 1,976 920 Cumulative effect of change in accounting method . . . . . . . . . . . (209) -- -- Decrease in deferred investment tax credits(266)(274)(295) Cash provided (used) by changes in operating assets and liabilities: Accounts receivable. . . . . . (2,099) (3,515) 2,311 Income taxes . . . . . . . . . 98 268 (1,028) Inventories. . . . . . . . . . (601) (244) (675) Gas cost changes . . . . . . . (482) (366) 2,257 Deferred items . . . . . . . . 490 613 (145) Accounts payable and accrued expenses6,5633,918 (82) Other. . . . . . . . . . . . . 456 517 213 Net cash provided by operating activities13,96014,008 16,030 Investing Activities: Capital expenditures . . . . . . . . (32,990)(35,335)(19,669) New consumer loans . . . . . . . . . (2,352) (3,265) (4,033) Receipts on consumer loans . . . . . 3,533 3,994 3,120 Other. . . . . . . . . . . . . . . . (747) -- -- Net cash used by investing activities(32,556)(34,606)(20,582) Financing Activities: Issuance of preferred stock. . . . . -- -- 5,874 Issuance of common stock . . . . . . 14,937 13,380 189 Redemption of preferred stock. . . . (455) (315) (195) Proceeds from long-term debt . . . . 33,686 47,551 -- Repayment of long-term debt. . . . . (22,761)(37,414) (2,743) Proceeds from notes payable, net . . 501 4,500 7,000 Dividends paid . . . . . . . . . . . (7,506) (6,237) (5,415) Net cash provided by financing activities18,40221,465 4,710 Net Increase (Decrease) in Cash and Cash Equivalents . . . . . . . . . . (194) 867 158 Cash and Cash Equivalents: Beginning of year. . . . . . . . . . 3,332 2,465 2,307 End of year. . . . . . . . . . . . . $3,138 $3,332 $2,465 Supplemental Cash Flow Information: Cash paid during the year for: Interest (net of amounts capitalized)$6,744 $6,058 $6,486 Income taxes . . . . . . . . . . . $2,598 $1,050 $4,736
- 23 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three Years Ended December 31, 1993 Note 1 - Summary of Significant Accounting Policies Cascade Natural Gas Corporation and its subsidiaries (the Corporation) follow the Uniform System of Accounts prescribed by the Federal Energy Regulatory Commission and is subject to the jurisdiction of the Washington Utilities and Transportation Commission (WUTC) and the Oregon Public Utility Commission (OPUC). Substantially all of the Corporation's operations relate to the distribution of natural gas to retail customers. Principles of consolidation: The consolidated financial statements include the accounts of Cascade Natural Gas Corporation and its wholly owned subsidiaries, Cascade Land Leasing Co.; CGC Properties, Inc.; CGC Energy, Inc.; CGC Resources, Inc.; Fibre Graphics, Inc.; and Metrology One, Inc. All intercompany transactions have been eliminated in consolidation. Utility plant: Utility plant is stated at the historical cost of construction. These costs include payroll-related costs such as taxes and other employee benefits, general and administrative costs, and the estimated cost of funds used during construction. Maintenance and repairs of property, and replacements and renewals of items deemed to be less than units of property, are charged to operations. Units of utility plant retired or replaced are credited to property accounts at cost. Such amounts plus removal expense, less salvage, are charged to accumulated depreciation. In the case of a sale of land or major operating units, the resulting gain or loss on the sale is included in other income or expense. Depreciation of utility plant is computed using the straight-line method. The asset lives used for computing depreciation range from five to 40 years, with a composite rate of approximately 3.5%. Investments: Investments consist primarily of real estate, classified as nonutility property carried at original cost less accumulated depreciation. Notes receivable: Notes receivable include loans made to customers for the purchase of energy efficient appliances, which are generally the security for the loan. Loans are made for a term of five years at interest rates varying from 8.5% to 12%. Materials, supplies, and inventories: Materials, supplies, and inventories include patented chart - 24 - scanners held for resale which are recorded at the lower of cost (specific identification) or market. Inventories of gas and other materials and supplies are stated at the lower of average cost or market. Deferred charges: Deferred charges consist primarily of debt issuance costs, intangible assets related to minimum liability accruals on pension obligations (see Note 7), and deferrals of postretirement health care expenses (see Note 7). Debt issuance costs are amortized over the lives of the related issues. Redemption costs relating to refinanced debt are amortized over the life of the new debt issuance. Revenue recognition: The Corporation accrues estimated revenues for gas delivered but not billed to residential and commercial customers from the meter reading dates to month end. Overrun penalty income is recognized when the Corporation has determined that significant penalties are known and measurable and reasonably enforceable. Due to the unusual and infrequent nature of significant overrun penalty income, the Corporation has elected to report this income separately on the statement of net earnings. Gas cost changes: Gas cost changes consist primarily of the effect of decreases in purchased gas costs which have not yet been reflected in rates charged to customers. The effect of changes that are not tracked on a concurrent basis are deferred and amortized over a future period through a temporary rate change schedule. Amortization periods are subject to the approval of the regulatory agencies and are generally one to two years. Federal income taxes: The Corporation deducts depreciation computed on an accelerated basis for federal income tax purposes and, as a result, deductions exceed the amounts included in the financial statements. In 1981 the Corporation elected to record depreciation on 1981 and subsequent utility plant additions under the Accelerated Cost Recovery System. This election required the Corporation to provide deferred income taxes on the difference between depreciation computed for financial statement and tax reporting purposes beginning in 1981 (see Note 6). This procedure has been accepted by the WUTC and the OPUC. It is expected that any future increases in federal income taxes resulting from the reversal of accelerated depreciation on additions to utility plant in 1980 and prior will be allowed in future rate determinations. - 25 - Investment tax credits: Investment tax credits were deferred and are amortized over the life of the property giving rise to the credit. Statements of cash flows: For purposes of the statements of cash flows, the Corporation considers all investments with a purchased maturity of approximately three months or less to be cash equivalents. Reclassifications: Certain reclassifications have been made in the 1992 financial statements to conform to the classifications used in 1993. Note 2 - Redeemable Preferred Stocks
1993 1992 1991 (dollars in thousands) Shares Amount Shares Amount Shares Amount 7.85% cumulative $1.00 par value 60,000 $6,000 60,000 $6,000 60,000 $6,000 $.55 cumulative Senior, Series A, B, and C, without par value: Beginning of year 213,157 1,951 244,719 2,254 264,397 2,444 Shares retired 45,481 423 31,562 303 19,678 190 Authorized, issued, and outstanding at end of year 227,676 $7,528 273,157 $7,951 304,719 $8,254
The Corporation must retire annually 42,948 shares of Senior preferred stock through November 1, 1995, with further reductions as individual series are fully retired. The shares may be purchased on the open market or redeemed at $10 per share plus accrued dividends. The 7.85% cumulative preferred stock may not be redeemed until maturity on November 1, 1999. The aggregate preferred stock redemption requirements based upon the aforementioned redemption prices are: $284,000 in 1994, $425,000 in 1995, and $250,000 in 1996, 1997, and 1998. The Corporation may, at its option, purchase the required number of shares on the open market at less than the redemption price. Redemption in excess of the required number of shares of preferred stock can be made only if all cumulative dividends on preferred stock have been paid and all restrictive provisions of the long-term indebtedness agreements have been satisfied. - 26 - Note 3 - Common Stock At December 31, 1993, shares of common stock are reserved for issuance as follows:
Number Purchase, conversion, contribution, of shares or option price per share Employee Savings Plan and Market closing price of common stock Retirement Trust immediately prior to purchase by the (401(k) plan) 80,276 Trustee. Dividend reinvestment plan 823,962 Average of high and low sales prices on the closest business day immediately preceding the investment date, which is the 15th day of each month. Director stock award plan 12,000 Market closing price of common stock on the date of the Corporation's annual meeting. 916,238
Effective December 20, 1993, the Corporation issued 2,854,656 shares of common stock in a three for two stock split. For the calculations of earnings per share of common stock, the average number of shares outstanding has been recalculated to reflect the effect of this split. Note 4 - Notes Payable At December 31, 1993, the Corporation had two committed lines of credit available, one of $20,000,000 and one of $5,000,000. These agreements expire in 1996 and 1994, respectively, and provide for a commitment fee of .2% and .15%, respectively. The committed lines are used as backup support for an uncommitted facility of $25,000,000, of which $13,502,000 was outstanding at December 31, 1993. In addition, the Corporation has uncommitted lines of credit available of $10,000,000 each from three banks. The average daily amount outstanding under these arrangements during 1993 was approximately $11,696,000 with a maximum month end borrowing of $22,752,000. The effective weighted average interest rate (excluding commitment fees) based upon daily amounts outstanding was 3.66%. - 27 - Note 5 - Long-term Debt Long-term debt consists of the following:
1993 1992 (dollars in thousands) 9-7/8% debentures due 2013 $ -- $21,677 9.46% promissory note due 1995 5,000 5,000 Medium-term notes: 5.77% due 1998 5,000 -- 5.78% due 1998 5,000 -- 7.18% due 2004 4,000 4,000 7.32% due 2004 22,000 22,000 8.06% due 2012 14,000 14,000 8.10% due 2012 5,000 5,000 8.11% due 2012 3,000 3,000 7.95% due 2013 4,000 -- 8.01% due 2013 10,000 -- 7.95% due 2013 10,000 -- $87,000 $74,677
None of the long-term debt includes current maturities or sinking fund requirements. The 9-7/8% debentures were called for redemption on March 1, 1993. Various debt and credit agreements restrict the Corporation and its subsidiaries as to indebtedness, payment of cash dividends on common stock, and other matters. Under these restrictions, approximately $25,718,000 is available for payment of dividends as of December 31, 1993. During 1992, the Corporation entered into an interest rate swap agreement, which expires on December 1, 1995, that effectively converts its 9.46% $5,000,000 promissory note into a variable rate obligation. Under the terms of this agreement, the Corporation makes payments at a floating rate which is based on LIBOR and receives payments at a fixed rate. The net interest paid or received is included in interest expense. Note 6 - Income Taxes The Corporation adopted Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, effective January 1, 1993. This Statement supersedes Accounting Principles Board (APB) Opinion No. 11 and SFAS No. 96, the latter of which was never adopted by the Corporation. The cumulative effect of adopting SFAS No. 109 on the Corporation's financial statements was to increase net earnings by $209,000 ($.03 per share) in the first quarter of 1993. - 28 - Under the provisions of SFAS No. 109, the Corporation was required to record a deferred tax liability for the cumulative tax effect of basis differences on utility plant placed in service prior to 1981. Flow through accounting had previously been recorded with respect to these temporary differences. In addition, the Corporation was required to adjust previously recorded deferred tax liabilities related to plant placed in service after 1980, due to reductions in tax rates. Due to regulatory policies regarding recovery of deferred taxes charged to customers through rates, a regulatory liability was recorded which offsets the effect of these adjustments to the deferred tax balances. Therefore these adjustments had no effect on net earnings. - 29 - The provision for income tax expense consists of the following:
1993 1992 1991 (dollars in thousands) Current tax expense $3,443 $ 451 $3,581 Alternative minimum tax (credit carryforward) (665) 665 -- Deferred tax expense 2,668 1,975 920 Change in tax rates 44 -- -- Amortization of deferred investment tax credits (266) (274) (295) $5,224 $2,817 $4,206
During the third quarter of 1993, the Revenue Reconciliation Act of 1993 was enacted. This Act increased the maximum federal income tax rate applicable to corporations from 34% to 35%. The provision for deferred income taxes includes a charge of $44,000 ($.01 per share) as a result of recalculating certain deferred tax balances at the new tax rate. A reconciliation between income taxes calculated at the statutory federal tax rate and income taxes reflected in the financial statements is as follows:
1993 1992 1991 (dollars in thousands) Statutory federal income tax rate 35% 34% 34% Income tax calculated at statutory federal rate $4,941 $2,604 $4,031 Increase (decrease) resulting from: State income tax, net of federal tax benefit 106 15 104 Differences between book and tax depreciation 441 513 474 Amortization of investment tax credits (266) (274) (295) Other 2 (41) (108) $5,224 $2,817 $4,206
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income - 30 - tax purposes. The tax effects of significant items comprising the Corporation's net deferred tax liability are as follows: (dollars in thousands)
Deferred tax liabilities: Differences between book and tax basis of property $11,383 Debt refinancing costs 2,695 Retirement benefit obligations 410 Other 26 14,514 Deferred tax assets: Retirement benefit obligations 450 Provision for doubtful accounts 175 Other 181 806 Net deferred tax liability $13,708
- 31 - Note 7 - Retirement Plans The Corporation's noncontributory defined benefit pension plan covers substantially all employees over 21 years of age with one year of service. The benefits are based on a formula which includes credited years of service and the employee's annual compensation. The Corporation's policy is generally to fund the plan to the extent allowable under Internal Revenue Service rules. The Corporation provides executive officers with supplemental retirement, death, and disability benefits. Under the plan, vesting occurs on the first day of the year after the executive has reached age 55 and has completed five years of participation under the plan, or upon death. The plan supplements the benefit received through Social Security and the defined benefit pension plan so that the total retirement benefits equal 70% of the executive's highest salary during any of the five years preceding retirement. To fund the plan, the Corporation has insured the lives of the executives. The following table sets forth the funded status of the defined benefit pension and supplemental retirement plans and amounts recognized in the Corporation's financial statements:
Supplemental Pension plan retirement plan 1993 1992 1993 1992 (dollars in thousands) Actuarial present value of accumulated benefit obligations: Vested . . . . . . . . . . . . . . $ 21,579 $ 18,126 $ 2,285 $ 1,751 Nonvested . . . . . . . . . . . . . 239 79 138 118 $ 21,818 $ 18,205 $ 2,423 $ 1,869 Projected benefit obligation for services rendered to date . . . . . . . . . $(25,823) $(20,349) $(3,130) $(2,581) Plan assets at fair value, primarily common stocks, corporate bonds, and life insurance policies . . . . . . . . 21,076 19,079 2,079 1,788 Projected benefit obligation in excess of plan assets (4,747) (1,270) (1,051) (793) Unrecognized amounts: Prior service cost . . . . . . . . 2,561 1,331 --- --- Loss (gain) from past experience different from that assumed . . . . . . . . 2,446 194 523 110 Net transition obligation . . . . . 33 38 1,303 1,403 Adjustment to recognize minimum liability (1,035) --- (1,119) (801) Prepaid (accrued) pension cost . . . $ (742) $ 293 $ (344) $ (81)
- 32 - Net pension cost for both plans included the following components:
1993 1992 1991 (dollars in thousands) Service cost of benefits earned during the period . . . . . . . . . . . . . . $1,113 $920 $874 Interest cost on projected benefit obligation $1,900 $1,625 $1,219 Actual return on plan assets . . . . (1,485) (1,234) (2,352) Deferral of unrecognized loss (gain) and amortization, net . . . . . . . . . 82 (130) 1,210 $1,610 $1,181 $ 951
The actuarial present value of accumulated plan benefits for the pension plan at December 31, 1993, reflects an amendment effective April 1, 1993, which increases benefits applicable to compensation earned since January 1, 1990. The actuarial present value of accumulated plan benefits for both plans at December 31, 1993, reflect reductions in the discount rate and in the assumed rate of increase in future compensation levels. The combination of these changes increased the projected benefit obligation of the pension plan and supplemental retirement plan by $2,200,000 and $134,000, respectively, at December 31, 1993. - 33 - The following assumptions were used to determine the projected benefit obligation and expected return on assets at December 31:
1993 1992 1991 Pension plan: Discount rate: Nonretired lives . . . . . . . . . 7.5% 8.5% 8.5% Retired lives . . . . . . . . . . 6.0 6.0 6.0 Long-term rate of return on plan assets 8.5 8.5 8.5 Rate of increase in future compensation levels 5.0 6.0 6.0 Supplemental retirement plan: Discount rate . . . . . . . . . . . 7.5 8.5 8.5 Long-term rate of return on plan assets 8.5 8.5 8.5 Rate of increase in future compensation levels 5.0 6.0 6.0
The Corporation has an Employee Savings Plan and Retirement Trust (401(k) plan). All employees 21 years of age or older with one full year of service are eligible to enroll in the 401(k) plan. Under the terms of the 401(k) plan, the Corporation will match each employee's contribution to the 401(k) plan at a rate of 50% of the employee's contribution up to 6% of the employee's compensation as defined. The Corporation recognized costs for contributions to this plan of $370,000, $217,000, and $138,000 for 1993, 1992, and 1991, respectively. Effective January 1, 1993, the Corporation adopted SFAS No. 106, Employers' Accounting for Postretirement Benefits other than Pensions. SFAS No. 106 requires the Corporation to accrue the estimated cost of future retiree benefit payments during the years the employee provides services. The Corporation previously recorded the cost of these benefits, which are principally health care, as benefit payments were incurred. SFAS No. 106 allows recognition of the cumulative effect of the liability in the year of the adoption, or the accrual of the obligation over a period of up to 20 years. The Corporation has elected to recognize this obligation of approximately $13,100,000 over a period of 20 years. The accrual of postretirement benefits other than pensions (PBOP) for the year was $2,272,000. The accruals exceeded payments of these benefits during the period by $1,938,000. As allowed by the policy of the WUTC, $1,523,000 has been deferred, and included in deferred charges. Management expects that these and prospective deferral amounts will be recovered in the future through rates charged to customers. The remaining $415,000 is subject to the jurisdiction of the OPUC. In accordance with OPUC policy, $309,000 has been charged to operating expenses and $106,000 to construction. Implementation of this Standard has resulted in a charge to net earnings available to common shareholders of $202,000 ($.03 per share). - 34 - The Corporation's health care plan provides benefits for substantially all of its retired employees hired prior to June 1, 1992, and their eligible dependents. In 1992 and 1991, the Corporation recognized $239,000 and $209,000, respectively, as an expense for postretirement health care benefits. Net postretirement health care benefit cost for 1993 consisted of the following components:
(dollars in thousands) Service cost . . . . . . . . $ 510 Net interest cost . . . . . . 1,105 Actual return on plan assets Amortization of transition obligation 657 $2,272
The Corporation's policy is generally to fund the plan to the extent allowable under Internal Revenue Service rules. The following table sets forth the health care plan's funded status:
(dollars in thousands) Accumulated postretirement benefit obligation (APBO): Retirees . . . . . . . . . . $3,722 Fully eligible active plan participants 5,611 Other active plan participants 7,807 17,140 Plan assets (interest bearing deposits), at fair value 1,250 Funded status . . . . . . . . . . . . . (15,890) Unrecognized transition obligation . . . . . 12,483 Unrecognized (gain) loss . . . . . . . . . . 2,719 Accrued postretirement benefit cost . . . . . $ (688)
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation is 11.5% for 1994, trending down to 6% at 2010. The assumed discount rate used in determining the accumulated postretirement benefit obligation was 7.5%. A one percentage point increase in the assumed health care cost trend rate for each year would increase the accumulated postretirement benefit obligation by approximately 17% and the service and interest cost components of net postretirement health care cost by approximately 18%. - 35 - Note 8 - Gas Service Contracts The Corporation has entered into various transportation, supply, storage, and peaking service contracts to assure that adequate supplies of gas will be available to provide firm service to its core customers and to meet its obligations under long-term non-core customer agreements. These contracts, which have maturities ranging from one to 30 years, provide that the Corporation must pay a fixed demand charge each month. One gas supply contract requires the Corporation to take 10,037,500 therms annually or the seller can reduce its commitment to provide that minimum amount. Two other gas supply contracts, which expire in 1995, require that the Corporation take 100% of all tendered gas volumes during the remaining life of the agreements. These requirements are for 105,605,450 therms in 1994 and 87,956,320 therms in 1995. Another contract has a 42% take requirement, equaling an obligation of 41,475,315 therms per year through 2004. Lastly, a 15-year contract for winter-only (October through March) supply has a 70% minimum take requirement, which equates to a purchase requirement of 9,868,688 therms per year. The remaining gas supply contracts do not require the Corporation to take any gas, but the various suppliers are obligated to provide up to a maximum of 80,300,000 therms annually. The Corporation's minimum obligations under these contracts are set forth in the following table. The amounts are based on current contract prices, which are subject to change.
Firm gas Storage and Supply Transportation peaking service Total (dollars in thousands) 1994 $ 44,722 $ 21,018 $ 7,415 $ 73,155 1995 40,768 21,018 6,037 67,823 1996 20,633 21,018 4,320 45,971 1997 18,487 21,018 4,320 43,825 1998 18,099 21,018 4,320 43,437 Thereafter 90,335 178,712 47,338 316,385 $233,044 $283,802 $73,750 $590,596
Purchases under these contracts for 1991, 1992, and 1993, including commodity purchases, as well as demand charges have been as follows:
Firm gas Storage and Supply Transportation peaking service Total (dollars in thousands) 1991 $ 44,803 $ 10,722 $ 3,623 $ 59,148 1992 45,812 10,201 3,944 59,957 1993 50,036 18,691 4,179 72,906
- 36 - Note 9 - Contingencies The Corporation was notified by the Department of Ecology of the State of Washington that it is a "potentially liable person" as a result of contamination in the area of the Corporation's underground storage tanks at its Sunnyside, Washington office. The Corporation has provided $455,000 to date for the estimated costs of the cleanup. The Corporation believes that the remaining reserves of $181,000 are adequate to complete the remediation. Various lawsuits, claims, and contingent liabilities may arise from time to time from the conduct of the Corporation's business. None of those now pending, in the opinion of management, is expected to have a material effect on the Corporation's financial position or results of operations. - 37 - Note 10 - Fair Value of Financial Instruments The following estimated fair value amounts have been determined by the Corporation, using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value. Accordingly, these estimates are not necessarily indicative of the amounts that the Corporation could realize in a current market exchange. Thus, the use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The estimated fair value amounts of financial instruments at December 31, 1993, are as follows:
Carrying Estimated amount fair value (dollars in thousands) Assets: Cash and cash equivalents $ 3,138 $3,138 Notes receivable, including current maturities 4,839 4,984 Accounts receivable 26,539 26,539 Temporary investments 757 757 Redeemable preferred stock 7,528 7,482 Liabilities: Long-term debt 87,000 93,705 Notes payable 13,502 13,502
Cash and cash equivalents, accounts receivable, and notes payable: The carrying amounts of these items are a reasonable estimate of their fair value. Notes receivable, redeemable preferred stock, and long-term debt: Interest rates that are currently available to the Corporation for issuance of instruments with similar terms and remaining maturities are used to estimate fair value. Temporary investments: Fair values are based on quoted market prices. - 38 - Note 11 - Interim Results of Operations (unaudited) Earnings (loss) per share have been restated for the effect of the three for two stock split in December 1993.
Quarter ended March 31, June 30, September 30, December 31, 1993 1993 1993 1993 (dollars in thousands except per share data) Operating revenues . . . . . . . . . . . $61,729 $37,141 $29,435 $59,149 Gas costs and revenue taxes. . . . . . . 38,993 26,127 20,637 38,838 Operating margin . . . . . . . . . . . 22,736 11,014 8,798 20,311 Cost of operations . . . . . . . . . . . 13,968 10,168 9,124 13,408 Earnings from operations . . . . . . . . 8,768 846 (326) 6,903 Interest and other, net. . . . . . . . . 2,213 1,682 1,644 1,758 Net earnings (loss) before cumulative effect of change in accounting method . . . . . 6,555 (836) (1,970) 5,145 Cumulative effect of change in accounting method . . . . . . . . . . . 209 -- -- -- Net earnings (loss) $ 6,764 $ (836) $(1,970) $5,145 Earnings (loss) per share: Before cumulative effect of change in accounting method . . . . . . . . . . $0.84 $(0.13) $ (0.25) $ 0.59 Cumulative effect of change in accounting method 0.03 -- -- -- Earnings (loss) per share $0.87 $(0.13) $ (0.25) $ 0.59
Quarter ended March 31, June 30, September 30, December 31, 1992 1992 1992 1992 (dollars in thousands except per share data) Operating revenues . . . . . . . . . . . $47,155$27,676 $25,161 $52,474 Gas costs and revenue taxes. . . . . . . 30,209 18,025 16,986 34,097 Operating margin . . . . . . . . . . . 16,946 9,651 8,175 18,377 Cost of operations . . . . . . . . . . . 11,482 8,928 8,327 12,246 Earnings from operations . . . . . . . . 5,464 723 (152) 6,131 Interest and other, net. . . . . . . . . 1,728 1,751 1,822 2,022 Net earnings (loss). . . . . . . . . . . $3,736$(1,028) $(1,974) $4,109 Earnings (loss) per share. . . . . . . . $ 0.54$ (0.18) $ (0.32) $ 0.57
- 39 - INDEPENDENT AUDITOR'S REPORT Cascade Natural Gas Corporation and Subsidiaries We have audited the consolidated financial statements of Cascade Natural Gas Corporation and subsidiaries as of December 31, 1993 and 1992, and for each of the three years in the period ended December 31, 1993, and have issued our report thereon dated February 1, 1994; such consolidated financial statements and report are included in Part II of this Annual Report on Form 10-K. Our audits also included the financial statement schedules of Cascade Natural Gas Corporation, listed in Item 14(a)2. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information shown therein. DELOITTE & TOUCHE Seattle, Washington February 1, 1994 - 40 - SCHEDULE V CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
UTILITY PLANT (Thousands of Dollars) Column A Column B Column C Column D Column E Column F Balance at Additions Balance at Beginning at Other End of Description of Period Cost Retirements Changes Period ------------------------ ---------- ---------- ---------- ---------- ---------- YEAR ENDED DECEMBER 31, 1991: Intangible plant $364 $364 Production plant 1,073 1,073 Transmission plant 14,311 14,311 Distribution plant 186,596 15,367 775 201,188 General plant 26,267 1,671 735 27,203 ---------- ---------- ---------- ---------- Subtotal 228,611 17,038 1,510 0 244,139 Construction work in progress 2,158 2,730 4,888 ---------- ---------- ---------- ---------- ---------- Total $230,769 $19,768 $1,510 $0 $249,027 ========== ========== ========== ========== ========== YEAR ENDED DECEMBER 31, 1992: Intangible plant $364 $364 Production plant 1,073 1,073 Transmission plant 14,311 14,311 Distribution plant 201,188 26,279 549 226,918 General plant 27,203 3,628 1,033 29,798 ---------- ---------- ---------- ---------- Subtotal 244,139 29,907 1,582 0 272,464 Construction work in progress 4,888 6,519 11,407 ---------- ---------- ---------- ---------- ---------- Total $249,027 $36,426 $1,582 $0 $283,871 ========== ========== ========== ========== ========== YEAR ENDED DECEMBER 31, 1993: Intangible plant $364 $364 Production plant 1,073 33 1,106 Transmission plant 14,311 14,311 Distribution plant 226,918 37,893 557 264,254 General plant 29,798 1,376 921 30,253 ---------- ---------- ---------- ---------- Subtotal 272,464 39,302 1,478 0 310,288 Construction work in progress 11,407 (6,398) 5,009 ---------- ---------- ---------- ---------- ---------- Total $283,871 $32,904 $1,478 $0 $315,297 ========== ========== ========== ========== ========== Land is included in utility plant as follows: 1993 1992 1991 ---------- ---------- ---------- Production plant $54 $54 $54 Transmission plant 29 29 29 Distribution plant 310 310 311 General plant 2,408 2,408 2,295 ---------- ---------- ---------- Total $2,801 $2,801 $2,689 ========== ========== ==========
- 41 - SCHEDULE VI CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
ACCUMULATED DEPRECIATION OF UTILITY PLANT (Thousands of Dollars) Column A Column B Column C Column D Column E Column F Additions Balance at Charged to Other Balance at Beginning Costs and Charges End of Description of Period Expenses Retirements (Note) Period ------------------------ ---------- ---------- ---------- ---------- ---------- Year ended: December 31, 1991 $93,824 7,610 1,446 939 $100,927 ========== ========== ========== ========== ========== December 31, 1992 $100,927 8,294 1,280 1,243 $109,184 ========== ========== ========== ========== ========== December 31, 1993 $109,184 9,050 1,443 1,134 $117,925 ========== ========== ========== ========== ==========
NOTE: Additions charged to other accounts as follows:
Year ended December 31, ---------------------------------- 1993 1992 1991 Depreciation of equipment and warehouses charged to clearing accounts and allocated to operating and construction accounts on the basis of usage $1,031 $991 $907 Portion of depreciation of office building charged to construction accounts on the basis of the use of floor space in the building 139 127 117 Change as a result of increase (decrease) in Retirement Work-In-Progress (36) 125 (85) ---------- ---------- ---------- $1,134 $1,243 $939 ========== ========== ==========
- 42 - SCHEDULE VIII CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS (Thousands of Dollars) Column A Column B Column C Column D Column E Additions ---------------------- Balance at Charged to Charged to Balance at Beginning Costs and Other Deductions End of Description of Period Expenses Accounts (Note) Period ------------------------ ---------- ---------- ---------- ---------- ---------- Allowance for Doubtful Accounts: Year ended: December 31, 1991 $387 199 --- 202 $384 ==== ==== ==== ==== December 31, 1992 $384 249 --- 234 $399 ==== ==== ==== ==== December 31, 1993 $399 279 --- 188 $490 ==== ==== ==== ==== Note: Accounts receivable written off, net of recoveries
- 43 - SCHEDULE IX CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
SHORT-TERM BORROWINGS (Thousands of Dollars) Column A Column B Column C Column D Column E Maximum Average Weighted Amount Amount Balance at Average Outstanding Outstanding Category of Aggregate at End of Interest During the During the Short-term Borrowings Period Rate Period Period ------------------------ ---------- ---------- ---------- ---------- (Note) Notes Payable Year ended: December 31, 1991 $8,500 5.67% $14,750 $3,594 ========== ========== ========== ========== December 31, 1992 $13,000 3.83% $31,502 $13,480 ========== ========== ========== ========== December 31, 1993 $13,502 3.66% $22,752 $11,696 ========== ========== ========== ========== Note - The average amount outstanding during the period is computed by dividing the sum of daily outstanding balances by 360.
- 44 - SCHEDULE X CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INCOME STATEMENT INFORMATION (Thousands of Dollars)
Column A Column B Charged to Costs and Expenses Item for the Years Ended December 31, ----------------------------- ---------------------------------- 1993 1992 1991 ---------- ---------- ---------- Taxes, other than income taxes: State excise $5,880 $4,811 $5,039 City franchise and occupation 4,843 3,896 4,038 Other revenue taxes 372 290 285 Real and personal property 2,478 2,325 2,247 Miscellaneous, principally payroll 1,635 1,532 1,415 ---------- ---------- ---------- $15,208 $12,854 $13,024 ========== ========== ========== Charged to - Revenue taxes $11,095 $8,997 $9,362 Property & payroll tax expense 3,757 3,516 3,361 Construction work in progress (payroll taxes) 356 341 301 ---------- ---------- ---------- $15,208 $12,854 $13,024 ========== ========== ========== Maintenance and repairs, charged to operating expenses $2,091 $1,824 $1,750 ========== ========== ========== Other items provided for in Rule 12-11 were less than 1% of revenues.
- 45 - Item 9 - Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None. PART III Item 10 - Directors and Executive Officers of the Registrant See the information regarding directors under the caption "Election of Directors" on pages 1 through 3 of the Proxy Statement issued to Shareholders for the 1994 Annual Meeting (the 1994 Proxy Statement), which information is incorporated herein by reference. Certain information concerning the executive officers of the Company is set forth in Part I under the caption "Executive Officers of the Registrant." Item 11 - Executive Compensation See the information regarding excutive compensation set forth in the 1994 Proxy Statement, under the caption "Report of Nominating and Compensation Committee to the Shareholders" on page 5, under "Executive Compensation "on pages 7 and 8 and under "Compensation Committee Interlocks and Insider Participation" on page 9, which information is incorporated herein by reference. Item 12 - Security Ownership of Certain Beneficial Owners and Management See the information on security ownership of certain beneficial owners and management under the caption "Security Ownership of Certain Beneficial Owners and Management" on page 4 of the 1994 Proxy Statement, which information is incorporated herein by reference. Item 13 - Certain Relationships and Related Transactions See the information on certain relationships and transactions under the caption "Compensation Committee Interlocks and Insider Participation" on page 9 of the Proxy Statement, which information is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) 1. and 2. For a list of the financial statements and financial statement schedules filed herewith, see the index to financial statements and supplementary data in Item 8 of this report. (a) 3. For a list of the exhibits filed herewith, see the index to exhibits following the signature pages of this report. Each management contract or compensatory plan or arrangement required to be filed as an exhibit to this report is identified in the list. (b) Reports on Form 8-K. No reports on Form 8-K were filed for the quarter ended December 31, 1993. - 46 - SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CASCADE NATURAL GAS CORPORATION March 25, 1994 By /s/ Donald E. Bennett Date Donald E. Bennett Executive Vice President, Chief Financial Officer, Secretary and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date Chairman of the Board, Chief Executive Officer /s/ Melvin C. Clapp and Director March 25, 1994 Melvin C. Clapp /s/ W. Brian Matsuyama President and Director March 25, 1994 W. Brian Matsuyama Executive Vice President, Chief Financial Officer, /s/ Donald E. Bennett Secretary and Director March 25, 1994 Donald E. Bennett Treasurer and Chief /s/ James E. Haug Accounting Officer March 25, 1994 James E. Haug /s/ Carl Burnham, Jr. Director March 25, 1994 Carl Burnham, Jr. /s/ David A. Ederer Director March 25, 1994 David A. Ederer /s/ Howard L. Hubbard Director March 25, 1994 Howard L. Hubbard /s/ Brooks G. Ragen Director March 25, 1994 Brooks G. Ragen /s/ Andrew V. Smith Director March 25, 1994 Andrew V. Smith /s/ Mary A. Williams Director March 25, 1994 Mary A. Williams - 47 - INDEX TO EXHIBITS Exhibit No. Description 3.1 Restated Articles of Incorporation of the Registrant as amended on January 5, 1993, and May 10, 1993. Incorporated by reference to Exhibit 4 to the Registrant's current report on Form 8-K dated June 2, 1993. 3.2 Restated Bylaws of the Registrant. Incorporated by reference to Exhibit 3-(2) to the Registrant's annual report on Form 10-K for the year ended December 31, 1990. 4.1 Indenture dated as of August 1, 1992, between the Registrant and The Bank of New York relating to Medium-Term Notes. Incorporated by reference to Exhibit 4(c) to the Registrant's current report on Form 8-K dated August 12, 1992. 4.2 First Supplemental Indenture dated as of October 25, 1993, between the Registrant and The Bank of New York relating to Medium-Term Notes. Incorporated by reference to Exhibit 4 to the Registrant's quarterly report on Form 10-Q for the quarter ended June 30, 1993. 4.3 Rights Agreement dated as of March 19, 1993, between the Registrant and Harris Trust and Savings Bank. Incorporated by reference to Exhibit 2 to the Registrant's registration statement on Form 8-A dated April 21, 1993. 4.4 Amendment to Rights Agreement dated June 15, 1993, between the Registrant and The Bank of New York. Incorporated by reference to Exhibit 4 to the Registrant's quarterly report on Form 10-Q for the quarter ended June 30, 1993. 10.1 Distribution Agreement dated December 6, 1993, among the Registrant and Smith Barney Shearson Inc. and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated. Incorporated by reference to Exhibit 1 to the Registrant's registration statement Form S-3, No. 33-71286. 10.2 Service Agreement (Storage Gas Service under Rate Schedule SGS-1) dated January 12, 1994, between Northwest Pipeline Corporation and the Registrant. 10.3 Service agreement (assigned Storage Gas Service under Rate Schedule SGS-1) dated January 12, 1994, between Northwest Pipeline Corporation and the Registrant. 10.4 Service Agreement (Liquefaction -- Storage Gas Service under Rate Schedule SGS-1) dated January 12, 1994, between Northwest Pipeline Corporation and the Registrant. 10.5 Gas Purchase Agreement dated November 1, 1990, between Mobil Oil Canada and the Registrant. Incorporated by reference to Exhibit 10-6 to the 1991 Form 10-K. - 48 - 10.6 Amendment to Gas Purchase Agreement dated August 30, 1991, between Mobil Oil Canada and the Registrant. Incorporated by reference to Exhibit 10(h)(2) to the 1992 Form S-2, No. 33-52672 (the 1992 Form S- 2). 10.7 Amendment to Natural Gas Purchase Agreement dated September 1, 1993, between Canadian Hydrocarbons Marketing Inc., and the Registrant. Incorporated by reference to Exhibit 10.1 to amendment no. 1 to the Registrant's quarterly report on Form 10-Q/A for the quarter ended September 30, 1993. 10.8 Natural Gas Sales Agreement dated November 1, 1990, as supplemented by letter dated August 27, 1992, between Canadian Hydrocarbons Marketing Inc. and the Registrant. Incorporated by reference to Exhibit 10(k) to the 1992 Form S-2. 10.9 Long Term Gas Sales Agreement dated August 26, 1993, between Canadian Hydrocarbons Marketing Inc., and the Registrant. Incorporated by reference to Exhibit 10.2 to amendment no. 1 to the Registrant's quarterly report on Form 10-Q/A for the quarter ended September 30, 1993. 10.10 Gas Sale Agreement dated November 1, 1993, between Mobil Natural Gas Inc. and the Registrant. 10.11 Agreement for Sale and Purchase of Gas dated November 1, 1993, as amended by Letter Amendment dated December 8, 1993, between Mobil Natural Gas, Inc., and the Registrant. 10.12 Replacement Firm Transportation Agreement dated July 31, 1991, between Northwest Pipeline Corporation and the Registrant. Incorporated by reference to Exhibit 10(1) to the 1992 Form S-2. 10.12.1 Amendments dated August 20, 1992, November 1, 1992, October 20, 1993, and December 17, 1993, to Replacement Firm Transportation Agreement dated July 31, 1991, between Northwest Pipeline Corporation and the Registrant. 10.13 Firm Transportation Service Agreement dated April 25, 1991, between Pacific Gas Transmission Company and the Registrant (1993 expansion). Incorporated by reference to Exhibit 10(m) to the 1992 Form S-2. 10.14 Firm Transportation Service Agreement dated October 27, 1993, between Pacific Gas Transmission Company and the Registrant. 10.15 Amendment to Transportation Agreement dated August 20, 1992, between Northwest Pipeline Corporation and the Registrant. Incorporated by reference to Exhibit 10(w) to the 1992 Form S-2. 10.16 Assignment and Amendment of Gas Purchase Contract dated September 30, 1991 (effective November 1, 1992) among Northwest Pipeline Corporation, West Coast Energy Inc., West Coast Energy Marketing Ltd., Canadian Hydrocarbons Marketing Inc., and the Registrant, amending Kingsgate Gas Sales Agreement ("Kingsgate Gas Sales Agreement") dated September 23, 1960, as amended by Letter Agreement dated August 15, 1989, between - 49 - Northwest Pipeline Corporation and West Coast Energy Inc. Incorporated by reference to Exhibit 10(s) to the 1992 Form S-2. 10.16.1 Interim Pricing Arrangement dated November 4, 1993 between Canadian Hydrocarbons Marketing, Inc. and the Registrant relating to the Kingsgate Gas Sales Agreement. 10.17 Clay Basin Inventory Sales Agreement dated July 31, 1991, between Northwest Pipeline Corporation and the Registrant. Incorporated by reference to Exhibit 10(t) to the 1992 Form S-2. 10.18 Storage Agreement dated July 23, 1991, between Washington Water Power Company and the Registrant. Incorporated by reference to Exhibit 10(v) to the 1992 Form S-2. 10.19 Service Agreement (Firm Redelivery Transportation Agreement under Rate Schedule TF-2 for Cascade's SGS-1) dated January 12, 1994, between Northwest Pipeline Company and the Registrant. 10.20 Service Agreement (Firm Redelivery Transportation Agreement under Rate Schedule TF-2 for Cascade's assignment of SGS-1 from WWP) dated January 12, 1994, between Northwest Pipeline Company and the Registrant. 10.21 Service Agreement (Firm Redelivery Transportation Agreement under rate Schedule TF-2 for Cascade's LS-1) dated January 12, 1994, between Northwest Pipeline Company and the Registrant. 10.22 1991 Director Stock Award Plan of the Registrant.* Incorporated by reference to Exhibit 10(n) to the 1992 Form S-2. 10.23 Executive Supplemental Income Retirement Plan of the Registrant and Supplemental Benefit Trust as amended and restated as of May 1, 1989, as amended by Amendment No. 1 dated July 1, 1991.* Incorporated by reference to Exhibit 10(o) to the 1992 Form S-2. 10.24 Employment agreement between the Registrant and W. Brian Matsuyama.* Incorporated by reference to Exhibit 10(p) to the 1992 Form S-2. 10.25 Employment agreement between the Registrant and Jon T. Stoltz.* Incorporated by reference to Exhibit 10(q) to the 1992 Form S-2. 10.26 Employment agreement between the Registrant and Ralph E. Boyd.* Incorporated by reference to Exhibit 10(r) to the 1992 Form S-2. 12. Computation of Ratio of Earnings to Fixed Charges. 21. A list of the Registrant's subsidiaries is omitted because the subsidiaries considered in the aggregate as a single subsidiary do not constitute a significant subsidiary. 23. Consent of Deloitte & Touche to the incorporation of their report in the Registrant's registration statements. * Management contract or compensatory plan or arrangement. - 50 - EX-10.2 2 SERVICE AGREEMENT - 51 - SERVICE AGREEMENT (Storage Gas Service under Rate Schedule SGS-1) THIS AGREEMENT, made and entered into this 12th day of January, 1994, by and between NORTHWEST PIPELINE CORPORATION, a Delaware corporation, hereinafter called "Transporter", and CASCADE NATURAL GAS CORPORATION, hereinafter called "Shipper". In consideration of the mutual covenants and agreements as herein set forth, the parties hereto agree as follows: ARTICLE I - GAS TO BE STORED AND DELIVERED Subject to the terms, conditions, and limitations hereof and of the applicable Rate Schedule SGS-1, Transporter agrees to inject, store, and withdraw for Shipper, and Shipper agrees to receive for Transportation from Transporter, up to the following quantities of natural gas: Up to a Storage Demand Volume of 16,595 MMBtus, Up to a Storage Capacity of 597,378 MMBtus, Up to a Best Efforts Volume of 3,969 MMBtus. ARTICLE II - DELIVERY OF GAS Delivery of natural gas by Transporter to Shipper shall be at or near the points where gas is withdrawn from the Jackson Prairie storage facility. Shipper shall arrange for redelivery transportation to mainline delivery points under Transporter's transportation rate schedules. ARTICLE III - APPLICABLE RATE SCHEDULE Shipper agrees to pay Transporter for all natural gas service rendered under the terms of this Agreement in accordance with Transporter's Rate Schedule SGS-1 as filed with the Federal Energy Regulatory Commission ("FERC"), and as such rate schedule may be amended or superseded from time to time. This Agreement shall be subject to the provisions of such rate schedule and the General Terms and Conditions applicable thereto on file with the FERC and effective from time to time, which by this reference is incorporated herein and made a part hereof. - 52 - ARTICLE IV - TERM OF AGREEMENT This Agreement shall become effective on the date so designated by the FERC and shall continue in effect for a period continuing through October 31, 2014 and year to year thereafter at Shipper's sole option. Shipper may terminate all or any portion of service under this Agreement either at the expiration of the primary term, or upon any anniversary thereafter by giving written notice to Transporter so stating at least twelve (12) months in advance. Shipper also shall have the sole option to enter into a new Agreement for all or any portion of the service under this Agreement. It is Transporter's and Shipper's intent that this term provision provide Shipper with a "contratual right to continue such service" and to provide Transporter with concurrent pregranted abandonment of any volume that Shipper terminates within the meaning of 18 CFR section 284.221(d)(2)(i) as promulgated by Order 636 on May 8, 1992. ARTICLE V - CANCELLATION OF PRIOR AGREEMENTS When this Agreement takes effect, it supersedes, cancels and terminates the following agreements: Service Agreement (Storage Gas Service) dated April 8, 1993, between NORTHWEST PIPELINE CORPORATION, "Transporter", and CASCADE NATURAL GAS CORPORATION, "Shipper". ARTICLE VI - SUCCESSORS AND ASSIGNS This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above set forth. "TRANSPORTER" NORTHWEST PIPELINE CORPORATION By: /s/ Joe H. Fields Joe H. Fields Attorney-In-Fact ATTEST: "SHIPPER" CASCADE NATURAL GAS CORPORATION By: By: /s/ King Oberg King Oberg Title: Vice President, Gas Supply - 53 - EX-10.3 3 SERVICE AGREEMENT - 54 - SERVICE AGREEMENT (Storage Gas Service under Rate Schedule SGS-1) THIS AGREEMENT, made and entered into this 12th day of January, 1994, by and between NORTHWEST PIPELINE CORPORATION, a Delaware corporation, hereinafter called "Transporter", and CASCADE NATURAL GAS CORPORATION, hereinafter called "Shipper". In consideration of the mutual covenants and agreements as herein set forth, the parties hereto agree as follows: ARTICLE I - GAS TO BE STORED AND DELIVERED Subject to the terms, conditions, and limitations hereof and of the applicable Rate Schedule SGS-1, Transporter agrees to inject, store, and withdraw for Shipper, and Shipper agrees to receive for Transportation from Transporter, up to the following quantities of natural gas: Up to a Storage Demand Volume of 15,000 MMBtus, Up to a Storage Capacity of 480,000 MMBtus, Up to a Best Efforts Volume of 5,533 MMBtus. Shipper owns an undivided interest in the Jackson Prairie Storage Project (or has acquired an assigned interest from another Owner), and for the purpose of this Agreement and of Rate Schedule SGS-1, Shipper's Owned or Assigned Storage Demand Volume shall be 15,000 MMBtus, and Shipper's Owned or Assigned Storage Capacity shall be 480,000 MMBtus. ARTICLE II - DELIVERY OF GAS Delivery of natural gas by Transporter to Shipper shall be at or near the points where gas is withdrawn from the Jackson Prairie storage facility. Shipper shall arrange for redelivery transportation to mainline delivery points under Transporter's transportation rate schedules. ARTICLE III - APPLICABLE RATE SCHEDULE Shipper agrees to pay Transporter for all natural gas service rendered under the terms of this Agreement in accordance with Transporter's Rate Schedule SGS-1 as filed with the Federal Energy Regulatory Commission ("FERC"), and as such rate schedule may be amended or superseded from time to time. This Agreement shall be subject to the provisions of such rate schedule and the General Terms and Conditions applicable thereto on file with the FERC and effective from time to time, which by this reference is incorporated herein and made a part hereof. ARTICLE IV - TERM OF AGREEMENT This Agreement shall become effective on the date so designated by the FERC and shall continue in effect for a period continuing through April 30, 1995. - 55 - ARTICLE V - CANCELLATION OF PRIOR AGREEMENTS When this Agreement takes effect, it supersedes, cancels and terminates the following agreements: Service Agreement (Storage gas Service) dated October 1, 1992, between NORTHWEST PIPELINE CORPORATION, "Transporter", and CASCADE NATURAL GAS CORPORATION, "Sipper". ARTICLE VI - SUCCESSORS AND ASSIGNS This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above set forth. "TRANSPORTER" NORTHWEST PIPELINE CORPORATION By: /s/ Joe H. Fields Joe H. Fields Attorney-In-Fact ATTEST: "SHIPPER" CASCADE NATURAL GAS CORPORATION By: By: /s/ King Oberg King Oberg Vice President, Gas Supply - 56 - EX-10.4 4 SERVICE AGREEMENT - 57 - SERVICE AGREEMENT (Liquefaction - Storage Gas Service under Rate Schedule LS-1) THIS AGREEMENT, made and entered into this 12th day of January, 1994, by and between NORTHWEST PIPELINE CORPORATION, a Delaware corporation, hereinafter called "Transporter and CASCADE NATURAL GAS CORPORATION, hereinafter called "Shipper". In consideration of the mutual covenants and agreement as herein set forth, the parties hereto agree as follows: ARTICLE I - GAS TO BE STORED AND DELIVERED Subject to the terms, conditions, and limitations hereof and of the applicable Rate Schedule LS-l, Transporter agrees to liquefy, store in liquid phase, vaporize and deliver to Shipper for transportation, and Shipper agrees to receive from Transporter up to the following quantities of natural gas. A Storage Demand Volume of 60,000 MMBtus, A Storage Capacity of 562,200 MMBtus. ARTICLE II - DELIVERY OF GAS Delivery of natural gas by Transporter to shipper for transportation shall be at or near the point of vaporization at Transporter's LNG facilities. Shipper shall arrange for redelivery transportation to mainline delivery points under Transporter's transportation rate schedules. ARTICLE III - APPLICABLE RATE SCHEDULE Shipper agrees to pay Transporter for all natural gas service rendered under the terms of this Agreement in accordance with Transporter's Rate Schedule LS-l as filed with the Federal Energy Regulatory Commission ("FERC"), and as such rate schedule may be amended or superseded from time to time. This Agreement shall be subject to the provisions of such rate schedule and the General Terms and Conditions applicable thereto on file with the FERC and effective from time to time, which by this reference are incorporated herein and made a part hereof. ARTICLE IV - TERM OF AGREEMENT This Agreement shall become effective on the date so designated by the FERC and shall continue in effect for a period continuing through October 31, 2014 and year to year thereafter at Shipper's sole option. Shipper may terminate all or any portion of service under this Agreement either at the Expiration of the primary term, or upon the anniversary thereafter by giving written notice to Transporter so stating at least twelve (12) months in advance. Shipper also shall have the sole option to enter into a new Agreement for all or any portion of the service under this Agreement. It is Transporter's and Shipper's intent that this term provision provide Shipper with a "contractual right to continue such service" and to provide Transporter with concurrent pregranted abandonment of any volume that Shipper terminates - 58 - within the meaning of 18 CFR section 284.221 (d)(2)(i) as promulgated by Order 636 on May 8, 1992. ARTICLE V - CANCELLATION OF PRIOR AGREEMENTS When this Agreement takes effect, it supersedes, cancels and terminates the following agreement: Service Agreement (Liquefaction - Storage Gas Service) dated October 1, 1992 between NORTHWEST PIPELINE CORPORATION, "Transporter", and CASCADE NATURAL GAS CORPORATION, "Shipper". ARTICLE VI - SUCCESSORS AND ASSIGNS This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above set forth. "TRANSPORTER" NORTHWEST PIPELINE CORPORATION By: /s/ Joe H. Fields Joe H. Fields Attorney-In-Fact ATTEST: "SHIPPER" CASCADE NATURAL GAS CORPORATION By: By: /s/ King Oberg King Oberg Title: Vice President, Gas Supply - 59 - EX-10.10 5 GAS SALE AGREEMENT - 60 - RE: GAS SALE AGREEMENT The following sets forth the Agreement between Cascade Natural Gas Corporation ("Buyer") and Mobil Natural Gas Inc. ("Seller") respecting the sale of gas by Seller to Buyer during the term hereof. 1. DEFINITIONS "Business Day" is defined in paragraph 8(b)(ii)(A); "Commodity Charge" is defined in Clause 6; "Contract Year" is defined in Clause 2; "Northwest" is defined as Northwest Pipeline Corporation or its successors; "Point of Delivery" is defined in Clause 5; "Term" is defined in Clause 2; 2. TERM The term of this Agreement shall be from November 1, 1993 at 0800 Pacific Time to November 1, 1995 at 0800 Pacific Time (such period of time being the "Term"). Within this Term, each Contract Year will extend from November 1st of each year through October 31st of the following year. 3. QUANTITY Subject to Clauses 7 and 14 hereof, Seller agrees to sell and deliver to Buyer during the Term of this contract a Maximum Daily Quantity ("MDQ") of up to 10,000 MMbtu's per day. Subject to Clauses 6(2)(B), 8 and 14 hereof, Buyer agrees to purchase and take from Seller a minimum of 85% of the MDQ on a monthly basis. 4. QUALITY AND MEASUREMENT (a) The gas to be delivered hereunder shall meet Westcoast Energy Inc. ("Westcoast") or Northwest minimum quality specifications, as applicable, as set forth in applicable agreements and tariff provisions. (b) The measurement of the gross heating value of the gas delivered shall be as determined by Westcoast or Northwest, as applicable, at the Point of Delivery (defined below). 5. POINT OF DELIVERY Title to and risk of loss of gas delivered hereunder shall pass from Seller to Buyer at either (a) Cascade Natural Gas Corporation/Westcoast interconnect; or (b) the Westcoast/Northwest Pipeline Corporation interconnect at the international border located at Huntingdon, British Columbia/Sumas, Washington. Buyer shall give notice of its choice of (a) or (b) prior to commencement of the Term, and shall give notice of any change prior to Pipeline Carrier's deadline for nominations. - 61 - 6. PRICE The Price for gas delivered pursuant to Clauses 3, 4, and 5 at the Point of Delivery shall be comprised of the following components: (i) A Demand Charge; (ii) A Commodity Charge; and (iii) A Reservation Fee. The three components are defined as follows: 1. Demand Charge The Demand Charge for gas delivered hereunder shall be the total of Westcoast's charges, which are approved by the National Energy Board from time to time, for the gathering, processing at 15.5% gas content, and transportation demand and commodity tolls, times the MDQ. 2. Commodity Charge The Commodity Charge shall be equal to the Commodity Price, in $U.S. per MMbtu, times the number of MMbtu nominated by Buyer and delivered by Seller to Buyer in each month. The Commodity Price is comprised of the following components: (A) The Commodity Price shall be equal to the Market Price, defined in (B) below, less the Demand Charge. (B) The Market Price shall be equal to: (i) In the first Contract Year, [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] US/MMBTU. Under this pricing arrangement, Buyer must purchase 10,000 MMBTU/D at 100% load factor; (ii) In the second Contract Year, Buyer and Seller will negotiate a new Market Price. Either of the following options are available: (a) A fixed price to be agreed upon by July 30, 1994, which will be based upon the average of the current prices in effect at the time of commitment for natural gas futures contracts for the twelve forward months corresponding to that second Contract Year, as reported by the New York Mercantile Exchange. Under this option, Buyer must purchase 10,000 MMbtu/d at 100% load factor. (b) The Inside F.E.R.C. Index, which shall be determined monthly as the spot price for gas delivered into the Northwest Pipeline Corporation - Canadian Border, as reported in the publication "Inside F.E.R.C.'s Gas Market Report" (McGraw Hill) under the heading of "Index", for the first Day of the Month of deliveries or the earliest Day in that Month for which such prices are reported; - 62 - 3. Reservation Fee The Reservation Fee shall be equal to [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] of the Market Price times the MDQ, [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] times the number of days in the month. 7. SELLER'S OBLIGATION (a) Over the Term of this Agreement, Seller shall (subject to Force Majeure as defined in Clause 14, and to Sub clause 7[b] below), use its reasonable efforts to deliver gas at the Point(s) of Delivery designated in Clause 5, at daily rates stipulated in Clause 3 and Sub clause 7 (b) hereof. (b) (i) In the event of a supply failure not attributable to Force Majeure, if Seller fails to tender at the Point(s) of Delivery a quantity of gas within ten percent (10%) of the MDQ (herein called the "Daily Operating Tolerance") {and such failure is not attributable to an event of Force Majeure, as defined in Clause 14 hereof}, Seller shall pay damages for such failure. Such damages shall comprise an amount calculated by multiplying the quantity of gas purchased by Buyer to replace the gas not supplied by Seller by the difference between (1) the costs Buyer paid for replacement gas delivered to the Point(s) of Delivery; and (2) the costs Buyer would have paid for gas hereunder delivered to the Point(s) of Delivery. Buyer agrees to act in good faith in the event of such a failure to deliver gas, by first seeking to purchase the least expensive substitute gas available when so doing will minimize Seller's obligation to Buyer under Clause 3 and this Sub clause 7 (b) hereof, while taking into consideration availability and reliability of alternate supplies available to be delivered at the Point(s) of Delivery. (ii) If however, any shortfall of delivery by Seller does not result in Buyer's receiving less gas than Buyer nominated for, but rather results in an imbalance under Buyer's transportation agreement(s), Seller shall have no obligation to pay damages for such shortfall; provided that Seller, upon written demand and after having failed to make up such imbalance within the maximum period prescribed in Buyer's transportation agreement(s), shall reimburse Buyer for any imbalance penalties caused by Seller's shortfall and paid by Buyer under its transportation agreement(s). (iii) Should either Buyer or Seller become aware that actual deliveries at the Point(s) of Delivery are greater or less than the amount nominated by Buyer (herein called "Purchase Quantity"), and should such variance be outside of the Daily Operating Tolerance, such party shall notify the other party's dispatcher by telephone immediately. Seller shall have no obligation to pay damages or reimburse imbalance penalties to the extent that the shortfall is attributable to any period in which the Seller was not aware that deliveries were not equal to the Purchase Quantity, provided that the - 63 - variance occurred through no fault of the Seller, and provided that the Seller acted prudently to determine whether deliveries were equal to the Purchase Quantity. Further, Seller shall have no obligation to pay damages to the extent that such shortfall is excused by Seller's Force Majeure (as defined in Clause 14 hereof), or an act or omission of Buyer or Buyer's transporter. (iv) In no event shall Seller's obligation to pay damages exceed [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] U.S. payable under this Agreement. (v) The remedy prescribed in this Subclause 7(b) shall be the sole and exclusive remedy for the Seller's failure to supply gas under this Agreement. Buyer's written demand for damages or for reimbursements for pipeline penalties must be received by Seller within sixty (60) days after the end of the month for which such are claimed, or Buyer shall be deemed to have waived any right to seek damages or reimbursements with respect to such month. (vi) If at any time during the Term of this Agreement, the damages due and payable under this Sub clause 7(b) equal the maximum amount of damages that may be claimed by Buyer, Buyer may at any time thereafter terminate this Agreement effective five (5) business days after Seller's receipt of Buyer's written notice of such election. (vii) It is expressly understood and agreed that Seller is not committing or dedicating any specific reserves or sources of gas to the performance of its obligations under this Agreement. 8. BUYER'S OBLIGATION (a) Except in the event of Force Majeure (as defined in Clause 14 hereof) Buyer shall receive and purchase all gas nominated by Buyer and tendered by Seller, not to exceed the MDQ, each day during the Term hereof. (b) (i) Buyer, by 8:00 a.m. Pacific time , four (4) Business Days (as hereinafter defined) prior to the end of the month, shall advise Seller or its designee of the daily quantities the Buyer desires Seller to deliver or cause to be delivered during the following month, commencing at 8:00 a.m. Pacific time on the first day of the following month. Buyer shall nominate from 85% to 100% of the MDQ, but must request the same quantity for delivery each day of the month. (ii) As used herein, the expression "Business Day" shall mean any day other than a Saturday, Sunday or a day that is recognized as a legal holiday by the jurisdiction in which the Point(s) of Delivery or the office of either the Buyer or the Seller is located. (c) Should Buyer fail to purchase during any month a quantity of gas equal to or greater than 85% of the MDQ multiplied by the number of days in such month ("Monthly Contract Quantity" or "MCQ"), Buyer - 64 - shall pay to Seller in the following month, and immediately after delivery of an invoice therefor, a penalty charge in an amount determined by multiplying $0.30 US per MMbtu by the difference between 85% of the MCQ and the total quantities actually purchased and taken by Buyer during that month. However, Buyer shall have no obligation to pay such penalty charge to the extent that such shortfall is excused by [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED], or an act or omission of Seller or Seller's Transporter. (d) The remedy prescribed under this Clause 8 shall be the sole and exclusive remedy of Seller for Buyer's failure to purchase gas under this Agreement. 9. WARRANTY OF TITLE Seller warrants, at the time of delivery, Seller's title to all gas delivered, and that such gas will be free from liens, claims or encumbrances. Seller indemnifies Buyer against any direct loss, damage or expense Buyer may sustain from a claim involving gas sold hereunder relating to the foregoing warranty or as to events or occurrences prior to its delivery at the Sales Point(s). Buyer agrees to indemnify Seller against any direct loss, damage, or expense Seller may sustain from a claim involving gas sold hereunder relating to events or occurrences at or after its delivery at the Sales Point(s). 10. TRANSPORTATION The gas to be delivered under this Agreement (up to the MDQ) to Buyer will be delivered under Seller's transportation arrangements on Westcoast, as well as under transportation agreements with other shippers on Westcoast's system. Such transportation agreements shall mean the necessary arrangements and agreements which have been made or may be made by Seller in order to make delivery on a firm basis of the gas from its source to the Point of Delivery for the full term under this Agreement. 11. IMBALANCES (a) Any penalties payable to Westcoast or Northwest for any reason including but not limited to failure to purchase gas nominated or a failure to supply gas so nominated, shall be borne (or reimbursed if it has been charged to the other party) by the party causing that penalty to be incurred. If both parties have caused the penalty to be incurred, the penalty shall be allocated based on each party's proportional share of causation. Nothing in this Clause 11 waives or compromises either party's right to contest or defend any proposed penalty assessed by Westcoast or Northwest. (b) A party shall notify the other party as soon as reasonably possible of any notice received from Westcoast or Northwest that indicates that an imbalance exists which may give rise to a penalty. The parties agree to cooperate to adjust their gas deliveries or nominations as necessary to avoid or minimize penalties. - 65 - 12. TERMS OF PAYMENT AND AUDIT (a) On or before the eighteenth day of each month during the Term of this Agreement, Seller shall render to Buyer a statement setting forth the quantity of gas delivered hereunder during the preceding month, the heating value thereof, the price therefor, and the total amount payable to Seller. Buyer agrees to pay Seller the total amount shown on each such invoice on or before the twenty-fifth (25th) day of the month following the month of delivery of the gas by wire transfer to the account stipulated in Clause 13(b). In the event that such twenty - fifth day is not a Business Day, Buyer agrees to make such payment on the first Business Day preceding such twenty-fifth day. (b) Payments not received by Seller or by Buyer, as the case may be, by the stipulated date shall bear interest, at the receiving party's discretion, at an annual rate of two percent (2%) above the prime lending rate charged to the best commercial customer as the "prime rate" of the New York office of Citibank, N.A., calculated daily both before and after judgement from the date such unpaid amount is due hereinafter until the date it is actually paid to the receiving party. (c) If failure to pay by Buyer continues for ten (10) days beyond the date upon which payment was due, Seller, in addition to all other remedies, may suspend deliveries and/or terminate the Agreement; provided however, in order to terminate the Agreement, Seller must give Buyer fifteen (15) days notice in writing prior to exercising such right. (d) If, as a result of any adjustment to an invoice, a payment is required, then the party against whom the adjustment was made shall forthwith pay to the other party the amount thereof, which shall be no later than the twenty-fifth (25th) day of the month following the invoice adjustment. (e) Upon prior written notice, either party hereto shall have the right at all times during normal business hours to audit those accounts, books, records and charts of the other party which are necessary to verify the accuracy of any statement, charge, computation or demand made under or pursuant to this Agreement. Any error or discrepancy in charts or statements furnished pursuant hereto shall be promptly reported to the other party and proper adjustment thereof shall be made in the next billing and payment after final determination of the correct volumes or amounts involved; provided however, that if no such errors or discrepancies are reported within two (2) years from the end of the gas supply period in which such errors or discrepancies occurred, the same shall be conclusively deemed to be correct. 13. NOTICES AND PAYMENTS (a) Every notice, request, nomination, change, statement, invoice or - 66 - other document required or permitted to be given hereunder shall be in writing and each of them and every payment provided for herein shall be personally delivered, sent by prepaid registered mail or sent by prepaid fax, or other telecommunication addressed as follows: BUYER: Cascade Natural Gas Corporation 222 Fairview Avenue North Seattle, Washington 98109 Attention: Vice President Gas Supply Phone: (206) 624-3900 (206) 624-7215 SELLER: Contract Matters Dispatching Matters Mobil Natural Gas Inc. Mobil Natural Gas Inc. 12450 Greenspoint Drive 12450 Greenspoint Drive Houston, Texas 77060-1991 Houston, Texas 77060-1991 U.S.A. U.S.A. Attention: Sales Attention: Gas Control Representative Coordinator Phone: (403)260-7538 Phone: (403) 260-4271 Fax: (403) 260-7559 Fax: (403) 260-7369 Any notice may be given by personal delivery or by mailing the same, postage prepaid, in an envelope properly addressed to the party to whom the notice is to be given and shall be deemed to have been received five (5) business days after the mailing thereof, Saturdays, Sundays and statutory holidays excepted. Any notice may also be given by prepaid fax, or other telecommunication addressed to the person to whom such notice is to be given at such persons's address for notice as set forth above, and any notice so given shall be deemed to have been received on the first business day following the day it was dispatched. Any notice may also be given by telephone followed immediately by letter, fax or other telecommunication and any notice shall be deemed to have been received as of the date and time of the telephone notice. In the event of disruption of regular mail, every payment shall be personally delivered or communicated by fax, and every notice, request, demand, statement, bill or other document shall be given by one of the alternative means set out herein. (b) Any payment by Buyer to Seller shall be made by wire transfer to the following account: Pittsburgh National Bank: ABA #043000096; Mobil Account No. 1-182862. 14. FORCE MAJEURE 1. Definition - 67 - Subject to the other provisions of this clause, if either party is unable by reason of Force Majeure, as hereinafter described, to perform in whole or in part any obligation or covenant set forth hereunder, the obligations of both parties under this Agreement will be suspended to the extent necessary for the period of such Force Majeure condition. (a) For the purposes of this Agreement, Force Majeure will include: (i) any acts of God, including without restricting the generality thereof, lightning, earthquakes, storms, epidemics, landslides, floods, fires, explosions or washouts; (ii) any strikes, lockouts or other industrial disturbance; (iii) any acts of the Government's enemies, sabotage,wars, blockades, insurrections, riots, civil disturbances, arrests or restraints; (iv) any freezing of wells or delivery facilities, hydrate obstruction of lines or pipes, well blowouts, craterings, inability to obtain pipe, materials or equipment, breakages of or accidents to machinery or lines of pipe; (v) any orders of any court or government authority having or purporting to have jurisdiction; (vi) any acts or omissions (including failure to take gas) of a transporter of gas to or for Seller, which are caused by any event or occurrence of the nature described in subclause (i) to (v); and (vii) any other causes, whether of the kind herein enumerated or otherwise, not within the control of the party claiming suspension and which, by the exercise of due diligence, such party could not have prevented or is unable to overcome. (viii) [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] (b) Force Majeure will not include: (i) failure caused by the party claiming suspension having failed to commence to remedy the condition, and to resume the performance of such covenants or obligations, with reasonable dispatch by taking - reasonable acts within its control; (ii) failure that was caused by lack of funds; (iii) failure that was caused by the negligence of the party claiming suspension; 2. Termination If Extended Force Majeure In the event that, due to Force Majeure, Seller fails to deliver or - 68 - Buyer fails to take all or a substantial par of the gas required hereunder, for a period of [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] the party not invoking Force Majeure may, at its option, and without waiving any right to receive payments under this Contract, terminate the Contract upon thirty (30) days written notice. 3. Claiming Relief (a) A party claiming relief under this article will not be entitled to the benefit of the above provisions unless, as soon as possible after determining that the occurrence was in the nature of Force Majeure and would affect the claiming party's ability to observe or perform any of its covenants or obligations hereunder, the party claiming suspension gives to the other party notice to the effect that such party is unable, by reason of Force Majeure, to perform the particular covenants or obligations. (b) The party claiming suspension will give notice as soon as possible after the Force Majeure condition is remedied, to the effect that the same has been remedied and that such party has resumed, or is then in a position to resume, the performance of such covenants or obligations. 4. Labour Disputes Notwithstanding anything to the contrary in this clause, expressed or implied, the settlement of strikes, lockouts and other industrial disturbances will be entirely within the discretion of the party involved therein and such party may make settlement thereof at such time and on such terms and conditions as it may deem advisable and no delay in making such settlement will deprive such party of the benefit of the foregoing provisions. 15. LAWS AND REGULATORY BODIES (a) This Agreement and the rights and obligations of the parties are subject to all present and future valid laws, rules, regulations and orders of any legislative body or duly constituted governmental or regulatory authority now or hereafter having jurisdiction or purporting to have jurisdiction over this Agreement and the sale and purchase of gas hereunder. (b) This Agreement shall be interpreted and construed in accordance with the laws of the State of Washington, without recourse to the rules of conflict of laws, and the parties agree to accept the jurisdiction of the courts of Washington and all courts of appeal therefrom for the purpose of the interpretation, construction and enforcement of this Agreement. The Parties expressly exclude the operation of the United Nations Convention on Contracts for the International Sale of Goods. 16. ASSIGNMENT This Agreement shall be binding upon and shall enure to the benefit of the - 69 - parties hereto and their respective successors and permitted assigns. The rights and obligations of either party may not be assigned except with the prior written consent of the other party, which consent shall not be withheld unreasonably. Either party may pledge such rights to a lender, provided that such lender agrees in writing to be bound by the obligations hereunder to the other party. 17. CONFIDENTIALITY Buyer and Seller agree that the terms of this Agreement and any resulting transaction shall be kept strictly confidential, except to the extent required by applicable law, and except to the extent either party is required to disclose pertinent information concerning this Agreement to lenders, underwriters or regulators within the normal course of business and except for the release of a mutually agreeable summary of contract terms. If either party makes such disclosure, it shall advise the lenders, underwriters or regulators that the information discussed is strictly confidential. 18. INFORMATIONAL REQUIREMENTS Seller and Buyer agree to provide the other party with any information that may be reasonably necessary to comply with any regulatory filing requirements. Such information shall be kept strictly confidential, subject to Clause 17, by the other party and used only to comply with said requirements. 19. REGULATORY AUTHORIZATIONS Seller shall acquire and maintain all permits, licenses and approvals required by Canadian Regulatory authorities relating to the sale and movement of gas sold hereunder. 20. CURRENCY All sums of money to be paid or calculated hereunder will be paid or calculated in United States currency. 21. NONWAIVER Except as otherwise provided herein, the failure of either party to exercise any right granted it hereunder shall neither impair nor be construed as a waiver of such party's rights hereunder which are exercisable at any subsequent time or times. 22. RENEWAL In the event that neither party has defaulted hereunder, the parties agree to enter into good faith negotiations from June 1, 1995 - August 31, 1995 to extend the term of this Agreement for a length of time and at a price mutually agreeable to both parties. In the event the parties are unable to reach an agreement, this Agreement shall automatically terminate on October 31, 1995. - 70 - 23. ENTIRE AGREEMENT This document constitutes the entire Agreement between the parties with respect to the subject matter of this Agreement. No promises, agreements or warranties additional to this Agreement will be deemed to be a part of this Agreement, nor will any alteration, amendment or modification be effective unless confirmed in writing and executed by both parties. 24. EQUAL OPPORTUNITY CLAUSE During the performance of this contract, the Seller agrees as follows: 1. The Seller will not discriminate against any employer or applicant for employment because of race, colour, religion, sex, or national origin. The Seller will take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, colour, religion, sex, or national origin. Such action shall include, but not be limited to the following: Employment, upgrading, demotion, or transfer, recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship. 2. The Seller will comply with all provisions of Executive Order 11246 of September 24, 1965, and the rules, regulations, and relevant orders of the Secretary of Labour. 3. The Seller will furnish all information and reports required by Executive Order 11246 of September 24, 1965, and by the rules, regulations, and orders of the Secretary of Labour, or pursuant thereto, and will permit access to his books, records, and accounts by the contracting agency and the Secretary of Labour for purposes of investigation to ascertain compliance with such rules, regulations, and orders. 4. In the event of the Seller's noncompliance with the nondiscrimination clauses of this contract or with any of such rules, regulations, or orders, this contract may be cancelled, terminated or suspended in whole or in part and the Seller may be declared ineligible for further Government contracts in accordance with procedures authorized in Executive Order 11246 of September 24, 1965, and such other sanctions may be imposed and remedies invoked as provided in Executive Order 11246 of September 24, 1965, or by rule, regulation, or order of the Secretary of Labour, or as otherwise provided by law. - 71 - If you are in agreement with the foregoing, please sign both copies where noted and return one copy to our office for further handling. Yours very truly, MOBIL NATURAL GAS INC. Per: /s/ Vice President by Power of Attorney AGREED TO THIS 2nd DAY OF December , 1993. CASCADE NATURAL GAS CORPORATION Per: /s/ King Oberg (Authorized Signatory) King Oberg Vice President, Gas Supply THIS IS THE SIGNATURE PAGE TO A GAS SALE AGREEMENT BETWEEN CASCADE NATURAL GAS CORPORATION AND MOBIL NATURAL GAS INC. DATED AS OF NOVEMBER 1, 1993. - 72 - EX-10.11 6 AGREEMENT FOR SALE AND PURCHASE OF GAS - 73 - RE: AGREEMENT FOR SALE AND PURCHASE OF GAS This letter shall confirm the agreement between Mobil Natural Gas Inc. ("Mobil") and Cascade Natural Gas Corporation ("Buyer") for the sale and purchase of gas, in accordance with the provisions hereof, during the period beginning November 1, 1993 and ending at the close of October 31, 1995. When executed by both parties, this Letter Agreement shall constitute a binding agreement between Mobil and Buyer. Mobil agrees to sell, and Buyer agrees to purchase, natural gas during the term hereof in accordance with the following provisions and the terms and provisions of Appendices A and B, attached to and made part of this Letter Agreement: 1. NATURE OF SALE: Warranty. Mobil warrants that it will deliver gas in accordance with Section 4 of Appendix B, or pay damages subject to the provisions of Section 5 thereof, for its failure to deliver such quantity. 2. TERM: The Term of the Agreement shall be the Effective Period set out in Appendix A, Part I, to this Agreement. 3. QUANTITY: The Maximum Daily Quantity (MDQ) for each day during the term of this Agreement shall be the quantity set out on Appendix A. 4. SALES POINT(S): Title to and possession of gas delivered shall pass from Mobil to Buyer at the Sales Point(s) listed on Appendix A. 5. COMMODITY CHARGE: Buyer agrees to pay Mobil the Commodity Charge indicated on Appendix A for each MMbtu of gas nominated and received by Buyer, except as set forth in Section 3 of Appendix B to this Agreement. 6. RESERVATION CHARGE: Regardless of the amount of gas actually taken by Buyer in any month, Buyer agrees to pay Mobil the Reservation Charge indicated on Appendix A in consideration for Mobil's agreement to make a quantity of gas, up to the MDQ, available each day. This Letter Agreement and Appendices A and B constitute the parties' entire agreement as to the matters covered hereby. - 74 - If the foregoing correctly reflects your understanding of our agreement, please execute both of the enclosed originals of this Letter Agreement and return one fully executed original to Mobil Natural Gas Inc. Very truly yours, MOBIL NATURAL GAS INC. By:/s/ S. C. Freeman S. C. Freeman Manager - Term Sales & Marketing -North America ACCEPTED AND AGREED to this 24th day of November , 1993. BUYER: Cascade Natural Gas Corporation BY; /s/ King Oberg NAME (Printed) King Oberg TITLE: Vice President, Gas Supply - 75 - APPENDIX A WARRANT LETTER AGREEMENT Attached to and forming part of the Letter Agreement dated November 1, 1993 between Mobil Natural Gas Inc. and Cascade Natural Gas Corporation. PART I MDQ SALES POINT(S) Effective Period (MMBtu/d) Location 11/01/1993 - 10/31/9115 10,000 Opal, Wyoming, or as mutually agreed to by the parties. Within this Term, each "Contract Year" will extend from Nov. 1 of each year through Oct. 31 of the following year. 5,000 Piceance, Colorado. PART II. PRICE The Price for gas delivered pursuant to this Letter Agreement at the Sales Point(s) shall be comprised of the following components: 1. a Commodity Charge, and 2. a Reservation Fee. These two components are defined as follows: 1. Commodity Charge The Commodity Charge shall be equal to the Commodity Price, in $U.S. per mmBtu, times the number of mmBtu nominated by Buyer and delivered by Mobil to Buyer in each month. The Commodity Charge shall be equal to: (a) In the first Contract Year [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] US/mmBtu. Under this pricing arrangement, Buyer must purchase 15,000 mmBtu/d at 100% load factor; (b) In the second Contract Year, Buyer and Mobil will negotiate a new Commodity Charge. Either of the following options are available: (i) A fixed price to be agreed upon by July 30, 1994 which will be based upon the average of the current prices in effect at the time of - 76 - commitment for natural gas futures contracts for the twelve forward months corresponding to that second Contract Year, as reported by the New York Mercantile Exchange. Under this option, Buyer must purchase 15,000 mmBtu/d at 100% load factor or (ii) The Inside F.E.R.C. Index, which shall be determined monthly as the spot price for gas delivered into the Northwest Pipeline Corporation - Rocky Mountains, as reported in the publication "Inside F.E.R.C.'s Gas Market Report" (McGraw Hill) under the heading of "Index", for the first Day of the Month or the earliest Day in that Month for which such prices are reported. (c) If the parties are unable to conclude a fixed price negotiation by July 30, 1994, the Commodity Price for the second Contract Year will equal the price described in Part II.1.b.ii above. 2. Reservation Fee The Reservation Fee shall be equal to [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] of the Commodity Price times the MDQ [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED], times the number of days in the month. - 77 - APPENDIX B TERMS & CONDITIONS WARRANTY LETTER AGREEMENT 1.Definitions: a. MMBtu: The unit of measurement shall be one million British Thermal Units (MMBtu), determined on the basis of gross heating value (determined at 60 degrees F when saturated with water vapour at an absolute pressure of 14.73 psia, adjusted for water content as delivered). b. Day: A period from 7:00 A.M. at the Sales Points until 7:00 A.M. on the following day. c. Month: A period from 7:00 A.M. on the first Day of the calendar month and ending at 7:00 A.M. on the first Day of the following month. 2. Decontrol: Buyer and Mobil agree, to the extent they are legally empowered to do so, that gas sold under this Agreement shall not be subject to control by any governmental agency. Instead, the parties intend to have their negotiated price govern. 3. Buyer's Obligations: Buyer will notify Mobil, in writing, five working days prior to the end of each Month, of the quantity of gas Buyer will purchase each Day during the next Month. Buyer may nominate any quantity from 85% to 100% of the MDQ but must request the same quantity for each Day of the Month. This quantity so nominated when multiplied by the number of Days in the Month shall equal the Purchase Quantity. Buyer shall pay the Commodity Charge for each mmBtu nominated by Buyer and tendered by Seller at the Sales Point(s) within the Monthly Operating Tolerance, as defined in Term 4 below, of the Purchase Quantity except as to any quantity Buyer is prevented from taking by Force Majeure as defined in Section 9 below. The Commodity Charge includes all taxes, transportation charges, and other addons, attributable to the gas prior to delivery, excluding only sales, use, and gross receipts taxes arising at the time of delivery and/or title passage. Buyer shall pay all sales, use and gross receipts taxes unless Buyer is exempt, by law, from such taxes. Buyer agrees to provide Seller copies of any applicable exemption certificates. Should Buyer purchase during any Month a quantity of gas less than 85% of the MDQ multiplied by the number of days in the Month ("Monthly Contract Quantity" or "MCQ"), Buyer shall pay to Mobil in the following Month, and immediately after delivery of an invoice therefore, a penalty charge in an amount determined by multiplying $0.30 US per mmBtu by the difference between 85% of the MCQ and the total quantities actually purchased and taken by Buyer during that Month. However, Buyer shall have no obligation to pay such penalty charge to the extent that such shortfall is excused by Force Majeure (as defined in Section 9 below), or an act or omission of Mobil. - 78 - 4. Seller's Obligation: Mobil agrees to deliver each Day at the Sales Point(s) a quantity of gas within the Daily Operating Tolerance (+10% of the Purchase Quantity), up to the MDQ. Mobil's obligation to deliver gas during any Month shall be met by deliveries within + 10% (Monthly Operating Tolerance) of the Monthly Purchase Quantity (the sum of the Purchase Quantities in effect each Day during such Month). It is expressly understood and agreed that Mobil is not committing or dedicating any specific reserves or resources of gas to the performance of its obligations under this Agreement. During the Month, Buyer may request a change in the quantity nominated for the remainder of the Month. Mobil may, at its sole option, agree to adjust the quantity nominated for the remainder of the Month, when such adjustments can be made without economic loss to Mobil. 5. Damages: Subject to the provisions of this Agreement, if Mobil tenders a quantity of gas that is less than the Purchase Quantity and outside the Daily Operating Tolerance, Mobil shall pay damages for such failure in an amount equal to the increased costs which Buyer demonstrates it paid for replacement Gas. Such increased costs, if any, shall be measured by comparing: (i) the costs Buyer paid for replacement gas delivered to its facilities, and (ii) the costs Buyer would have paid for gas purchased hereunder delivered to its facilities, provided that it is understood that Buyer shall purchase the least expensive replacement gas consistent with consideration of reliability of supply. If, however, any such shortfall does not result in Buyer receiving less gas at its facilities than required, but rather results in an imbalance under Buyer's transportation agreement(s), Mobil shall have no obligation to pay damages for such shortfall; provided that Mobil, upon written demand and after having failed to make-up such imbalance within the maximum period prescribed in Buyer's transportation agreement(s), shall reimburse Buyer for any imbalance penalties caused by Mobil's shortfall and paid by Buyer under its transportation agreement(s). Should either Buyer or Mobil become aware that actual deliveries at the Sales Point(s) are greater or lesser than the Purchase Quantity, and should such variance be outside the Daily Operating Tolerance, such party shall notify the other party's dispatcher by telephone immediately. The parties agree that Mobil shall have no obligation to pay damages or reimburse imbalance penalties to the extent that the shortfall is attributable to any period in which Mobil was not aware that deliveries were not equal to the Purchase Quantity, provided that the variance occurred through no fault of Mobil, and provided that Mobil acted prudently to determine whether deliveries were equal to the Purchase Quantity. Further, Mobil shall have no obligation to pay damages to the extent that such shortfall is excused by Mobil's force majeure or an act or omission of Buyer or Buyer's Transporter. In no event shall Mobil's obligation to pay damages exceed $3.00 per MMBtu of gas not so supplied under this Agreement, and provided further that the total damages payable under this Agreement shall not exceed [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] Buyer's written demand for damages or reimbursement for imbalance penalties must be received within sixty (60) Days after the end of the Month for which damages or imbalance penalties are claimed or Buyer shall be deemed to have waived any right to seek damages or reimbursement for imbalance penalties for such Month. The remedy in this Sec. 5 shall be the exclusive - 79 - remedy for Mobil's failure to provide gas under this Agreement. Neither party shall be liable to the other for indirect, consequential, or special damages. 6. Billing & Payment Mobil shall provide Buyer an invoice by the 10th Day of each Month showing the quantity of gas delivered at the Sales Points during the preceding Month and the amount due therefor. If actual measurement data is not available, Mobil will estimate the volume delivered using the best information available. Such invoice shall also set out the amount of the applicable sales tax if Mobil's information indicates that such tax is owed, and Buyer has not furnished to Mobil the necessary exemption certificate(s). Buyer shall pay the amount owed for gas, and the amount of any sales tax, by electronic transmission of funds, or other means agreeable to the parties, within ten (10) Days of the date of Mobil's posting its invoice in the U.S. mails or other delivery mechanism or service. A revised invoice will be prepared as soon as actual data is available, and any additional payment, or refund, will be made within 10 days after the posting of Mobil's invoice in the U.S. mails or other delivery mechanism or service. Buyer's obligation to pay for gas nominated and received, reservation charges owed, and pipeline imbalance penalties will not be subject to any suspension for force majeure, and will survive the termination hereof. If Buyer fails to pay any amount when due, interest thereon shall accrue at the lesser of the average prime commercial rate being charged during the period of delinquency by Citibank, N.A., New York, N.Y., or the effective maximum legal rate. Each party has the right, at its expense and during business hours, to examine the pertinent records and books of the other to verify the accuracy of any invoice, charge, or computation. 7. Measurement, Quality & Pressure: The parties will agree which, as between them, is responsible for measurement. Measurement requirements will be those in effect on the pipeline system through which gas is transported to the Sales Point(s). Gas tendered by Mobil will meet the quality and pressure specifications of the pipeline and/or facilities at the Sales Point(s) into which gas is delivered. 8. Warranty of Title: Mobil warrants, at the time of delivery, Mobil's title to all gas delivered, and that such gas will be free from liens, claims or encumbrances. Mobil indemnifies Buyer against any direct loss, damage or expense Buyer may sustain from a claim involving gas sold hereunder relating to the foregoing warranty or as to events or occurrences prior to its delivery at the Sales Point(s). Buyer agrees to indemnify Mobil against any direct loss, damage, or expense Mobil may sustain from a claim involving gas sold hereunder relating to events or occurrences at or after its delivery at the Sales Point(s). 9. Force Majeure: a. Definition Force Majeure as used herein shall mean any event beyond the reasonable control of the party in question which prevents, in whole or in part, that party's - 80 - performance of obligations hereunder, and shall include, without limitations: floods, hurricanes, breakage or accident to machinery, plants or pipelines, failure or inability of Mobil's or Buyer's transporter(s) to transport gas made available hereunder [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] and the operation of governmental authority (except at the request of the party claiming force majeure). Except as provided above, Force Majeure shall not include Buyer's loss of markets or Mobil's inability to secure gas at prices satisfactory to Mobil. b. Termination if Extended Force Majeure In the event that, due to Force Majeure, Seller fails to deliver or Buyer fails to take all or a substantial part of the Gas required hereunder [CONFIDENTIAL TREATMENT HAS BEEN REQUESTED] the party not invoking Force Majeure may, at its option, and without waiving any right to receive payments under this Contract, terminate the Contract upon thirty (30) days written notice. 10. Processing: Mobil reserves the right to process gas after delivery at the Sales Point(s), and agrees to indemnify Buyer for any Btu losses and transportation charges incurred by Buyer as a result of Mobil's processing. 11. Notice: All notices will be in writing and will be deemed delivered when mailed by U.S. Mail to the address or telecopied to the fax numbers provided below, of the other party. Notice by telecopier shall be effective when received provided a copy is mailed by the U.S. Mail within two (2) working days. Buyer: Cascade Natural Gas Corporation Attention: Vice President, Gas Supply Phone: (206) 624-3900 Fax: (206) 624-7215 Seller: Mobil Natural Gas Inc. Attention: Manager - Term Sales and Marketing Phone: (713) 775-2576/(403) 260-7538 Fax: (713) 775-4137/(403) 260-7559 12. Imbalance Penalties: Should either party, by its acts or omissions, cause an imbalance on pipeline(s) transporting gas hereunder on behalf of the other party, and should such imbalance cause the other party to incur a penalty from its transporter, then the party causing the imbalance shall reimburse the other for any such penalty incurred, provided that the party causing the imbalance receives timely notice and an opportunity to correct the imbalance equal to the time period provided in the transporter's tariff for making up such imbalances. Each party agrees to notify immediately the other party of any notice received from a transporting pipeline that indicates that an imbalance exists which may give rise to a penalty. The parties agree to cooperate immediately to adjust their gas nominations and/or deliveries as necessary to bring deliveries and receipts - 81 - into balance to the extent that penalties are avoided or minimized as much as possible. 13. Statement of ComPliance: Unless Seller is exempt or is not subject to the requirements of such laws, Seller certifies that it is in full and complete compliance with all applicable federal and state laws and regulations and amendments thereto, insofar as they relate to nondiscrimination in employment, including among others, Executive Order No. 11246 (Equal Employment Opportunity), effective September 24, 1965, and all regulations of the Secretary of Labour promulgated thereunder; Section 503, Rehabilitation Act of 1973 (29 USC section 793), Executive Order 11758 and regulations relating thereto (41 C.F.R. section 60-741.4); regulations relating to disabled veterans and veterans of the Vietnam era (41 C.F.R. section 60- 250.1 et seq.) and the order of the Secretary of Labour relating thereto; Small Business Act (15 USC section 637) relating to socially and economically disadvantaged small business concerns and the regulations promulgated thereunder, including 48 C.F.R. sections 19.701 et seq., Part 19 of the Federal Acquisition Regulations, 48 C.F.R. sections 219.702 et seq. of the Dept. of Defense regulations, and the regulations relating to labour surplus area subcontracting (48 C.F.R. sections 220.7000 et sec. of the Dept. of Defense regulations and 48 C.F.R. sections 20.000 et seq. of the Federal Acquisition Regulations); and Executive Order 12138 and 48 C.F.R. sections 19.901 et seq. of the Federal Acquisition Regulations regarding utilization of female-owned business enterprises. Seller also certifies that it does not and will not maintain any facilities provided for its employees in segregated manner, or permit its employees to perform their services at any location under its control where segregated facilities are maintained. 14. Assignment: This Agreement shall be binding upon and shall enure to the benefit of the parties hereto and their respective successors and permitted assigns. The rights and obligations of either party may not be assigned, except to an affiliate of the assigning party, without prior written consent of the other party, which consent shall not be withheld unreasonably. Either party may pledge such rights to a lender, provided that such lender agrees in writing to be bound by the obligations hereunder to the other party. 15. Legal and Regulatory: This Agreement and the rights and obligations of the parties are subject to all present and future valid laws, rules, regulations and orders of any legislative body or duly constituted governmental or regulatory authority now or hereafter having jurisdiction, or purporting to have jurisdiction over this Agreement and the sale and purchase of gas hereunder. (b) This Agreement shall be interpreted and construed in accordance with the laws of the State of Washington without recourse to the rules for conflicts of laws. 16. Confidentiality: Buyer and Seller agree that the terms of this Agreement and any resulting - 82 - transaction shall be kept strictly confidential, except to the extent required by applicable law and except to the extent either Party is required to disclose pertinent information concerning this Agreement to lenders, underwriters or regulators within the normal course of business and except for the release of a mutually agreeable summary of contract terms. If either Party makes such disclosure, it shall advise the leaders, underwriters or regulators that the information disclosed is strictly confidential. 17. Renewal: In the event that neither party has defaulted hereunder, the parties agree to enter into good faith negotiations from July 31, 1995 - August 31, 1995 to extend the term of this agreement for a length of time and at a price mutually agreeable to both parties. In the event the parties are unable to reach an agreement, this Agreement shall automatically terminate on October 31, 1995. - 83 - RE: LETTER AMENDMENT DATED DECEMBER 8, 1993 TO AGREEMENT FOR SALE AND PURCHASE OF GAS DATED NOVEMBER 1, 1993 The subject agreement is amended by adding the following to the end of Clause 5 Damages: 5. Damages: "If at any time during the Term of this Agreement, the damages due and payable under this Clause 5 equal the maximum amount of damages that may be claimed by Buyer, Buyer may at any time thereafter terminate this Agreement effective five (5) business days after Seller' receipt of Buyer's written notice of such election." If you are in agreement with the foregoing, please execute both of the enclosed originals of the Letter Amendment and return one fully executed original to Cynthia Babiy. Yours truly, MOBIL NATURAL GAS INC. By: /s/ S. C. Freeman S. C. Freeman Manager - Term Sales and Marketing - North America Accepted and Agreed to this 21st day of December, 1993. Buyer: Cascade Natural Gas Corporation By: /s/ King Oberg Name (Printed): King Oberg Title: Vice President, Gas Supply - 84 - EX-10.12.1 7 AMENDMENT TO REPLACEMENT FIRM TRANSPORTATION - 85 - AMENDMENT THIS AMENDMENT is entered into as of this 20th day of August, 1992, by and between NORTHWEST PIPELINE CORPORATION, hereinafter referred to as "Transporter" and CASCADE NATURAL GAS CORPORATION, hereinafter referred to as "Shipper". RECITALS: A. Transporter and Shipper are parties to that certain Replacement Firm Transportation Agreement dated July 31, 1991 ("Agreement"). B. Shipper and Transporter desire to amend Article IV of the Agreement to extend the term of the Agreement. AGREEMENT: NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties agree as follows: 1. Section 4.1 of the Agreement is hereby deleted in its entirety and the following substituted therefor: 4.1 This Agreement becomes effective upon the effective date of the termination of the firm sales Services Agreement dated May 25, 1989, and firm Transportation Agreement dated June 24, 1988, and shall remain in full force and effect until October 31, 2014, and year to year thereafter at Shipper's sole option. Shipper may terminate all or any portion of service under this Agreement either at the expiration of the primary term, or upon any anniversary thereafter, by giving written notice to Transporter so stating at least twelve (12) months in advance. Shipper also shall have the sole option to enter into a new Agreement containing the same provisions as this Agreement, for all or any portion of the service under this Agreement at or after the end of the primary term of this Agreement. It is Transporter's and Shipper's intent that this term provision provide Shipper with a "contractual right to continue such service" and to provide Transporter with concurrent pregranted abandonment of any volume that Shipper terminates within the meaning of 18 CFR section 284.221(d)(2)(i) as promulgated by Order No. 636 on May 8, 1992. - 86 - 2. Except as amended herein, the Agreement shall remain in full force and effect. 3. This Amendment shall be binding upon and inure to the benefit of the parties hereto and any successors or assigns of such parties. IN WITNESS WHEREOF, the parties hereto have executed two duplicate original copies of this Amendment as of the date and year first written above. NORTHWEST PIPELINE CORPORATION By /s/ Matt J. Gillis Matt J. Gillis Attorney-In-Fact ATTEST: CASCADE NATURAL GAS CORPORATION By: /s/ Yvonne Fourno By /s/ W. Brian Matsuyama Name W. Brian Matsuyama Title President - 87 - AMENDMENT THIS AMENDMENT is entered into this 1st day of November, 1992 by and between NORTHWEST PIPELINE CORPORATION, hereinafter referred to as "Transporter", and CASCADE NATURAL GAS CORPORATION, hereinafter referred to as "Shipper". RECITALS: A. Transporter and Shipper are parties to that certain Replacement Firm Transportation Agreement (#F-02) dated July 31, 1991, ("Agreement"). B. Transporter and Shipper desire to amend the Agreement to conform to those provisions of the approved Joint Offer of Settlement in Docket No. CP92-79 which are being implemented November 1, 1992. C. Transporter and Shipper desire to amend Exhibit "A" and "B" of the Agreement to reflect changes to receipt and delivery points. AGREEMENT: NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties agree as follows: 1. The maximum volume set forth in Section 1.1 of the Agreement shall be decreased from 206,123 to 179,068 MMBtu's per day. 2. Exhibit "A" of the Agreement shall be deleted in its entirety and the attached Exhibit "A" to this Amendment shall be added to and made a part of the Agreement effective November 1, 1992. 3. Exhibit "B" of the Agreement shall be deleted in its entirety and the attached Exhibit "B" of this Amendment shall be added to and made a part of the Agreement effective November 1, 1992. 4. Except as amended herein, the Agreement shall remain in full force and effect. 5. This Amendment shall be binding upon and inure to the benefit of the parties hereto and any successors or assigns of such parties. 6. This Amendment may be executed in any number of counterparts. - 88 - IN WITNESS WHEREOF, the parties hereto have executed two duplicate original copies of this Amendment as of the date and year first written above. ATTEST: NORTHWEST PIPELINE CORPORATION By: ____________________ By: /s/ Matt J. Gillis Title: _________________ Matt J. Gillis Vice President, Marketing ATTEST: CASCADE NATURAL GAS CORPORATION By: ____________________ By: O. LeRoy Beaudry Title: _________________ Name: O. LeRoy Beaudry Title: Vice President Supply and Marketing - 89 - EXHIBIT "A" to the REPLACEMENT FIRM TRANSPORTATION AGREEMENT Dated July 31, 1991 (As Amended Effective November 1, 1992) between NORTHWEST PIPELINE CORPORATION and CASCADE NATURAL GAS CORPORATION RECEIPT POINTS
Maximum Daily Quantity ("MDQ") Receipt Point For Each Receipt Point Sumas 89,391 Domestic: Painter 11,240 Clay Basin 16,205 Opal 10,500 South Canyon 10,400 Bar X 6,000 Grand Gas 1,000 Grand Valley 3,732 West Douglas 1,500 Foundation Creek 1,300 Great Divide 1,300 Shute Creek 25,000 North Douglas Creek 1,500 Total of Canadian and Domestic Sources 179,068
(Must equal Transportation Contract Demand in Section 1.1) - 90 - EXHIBIT "B" to the REPLACEMENT FIRM TRANSPORTATION AGREEMENT Dated July 31, 1991 (As Amended Effective November 1, 1992) between NORTHWEST PIPELINE CORPORATION and CASCADE NATURAL GAS CORPORATION DELIVERY POINTS All points of interconnection between the facilities of Transporter and Shipper which are currently set forth as delivery points on the ODL-1 Service Agreement dated November 1, 1992, except for any of such points which are located on or require transportation through the system of Pacific Gas Transmission Company. Jackson Prairie Plymouth LNG - 91 - AMENDMENT THIS AMENDMENT is entered into this 20th day of October, 1993, by and between NORTHWEST PIPELINE CORPORATION, hereinafter referred to as "Transporter", and CASCADE NATURAL GAS CORPORATION, hereinafter referred to as "Shipper". RECITALS: A. Transporter and Shipper are parties to that certain Replacement Firm Transportation Agreement (#F-02) dated July 31, 1991, ("Agreement"). B. Transporter and Shipper amended the Agreement on November 1, 1992 to conform to the provisions of the approved Joint Offer of Settlement in Docket No. CP92-79 which provided a partial sales conversion until the outstanding Pacific Gas Transmission ("PGT") issues were resolved. C. The outstanding PGT issues have been resolved and Shipper and Transporter desire to amend the Agreement to implement a full sales conversion effective November 1, 1993. D. Transporter and Shipper desire to amend Exhibit "A" and Exhibit "B" of the Agreement to reflect changes to receipt and delivery points occurring after the Agreement was executed. AGREEMENT: NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties agree as follows: 1. Section 1.1 of the Agreement is hereby amended to reflect an increase in the contract demand by 27,055 MMBtu's/day resulting in a new Transportation Contract Demand of up to 206,123 MMBtu's per day. 2. Exhibit "A" of the Agreement is hereby deleted in its entirety and the attached Exhibit "A" shall be added to and made a part of the Agreement. 3. Exhibit "B" of the Agreement is hereby deleted in its entirety and the attached Exhibit "B" shall be added to and made a part of the Agreement. 4. This Amendment is effective November 1, 1993. 5. Except as amended herein, the Agreement shall remain in full force and effect. - 92 - 6. This Amendment shall be binding upon and inure to the benefit of the parties hereto and any successors or assigns of such parties. IN WITNESS WHEREOF, the parties hereto have executed two duplicate original copies of this Amendment as of the date and year first written above. ATTEST: NORTHWEST PIPELINE CORPORATION By: ____________________ By: /s/ Joe M. Fields Title: _________________ Joe M. Fields Attorney-In-Fact ATTEST: CASCADE NATURAL GAS CORPORATION By: ____________________ By: King C. Oberg Title: _________________ Name: King C. Oberg Title: Vice President, Gas Supply - 93 - EXHIBIT "A" to the TRANSPORTATION AGREEMENT ("#F-02") Dated July 31, 1991 (As Amended November 1, 1993) between NORTHWEST PIPELINE CORPORATION and CASCADE NATURAL GAS CORPORATION RECEIPT POINTS
Maximum Daily Receipt Point Quantity (MDQ) Sumas 89,391 Bar X 1,000 Dove Creek 3,500 Dragon Trail 2,000 Foundation Creek 4,000 Grand Gas 500 Grand Valley Gathering 1,000 Green River Gathering 19,000 Ignacio Plant 11,500 Opal 27,277 Painter 4,900 Piceance 5,000 Prineville * 1,437 Red Wash-Chevron 3,000 Shute Creek 7,000 Starr Road 25,618 Total 206,123 * This receipt point is located at the interconnect of the Prineville lateral with PGT's system. Total Starr Road and Prineville volumes are equal to Kingsgate conversion volumes. The total of the MDQ'S must equal total transportation contract demand as set forth in Section 1.1.
- 94 - EXHIBIT "B" to the TRANSPORTATION AGREEMENT ("#F-02") DATED July 31, 1991 (As Amended November 1, 1993) between NORTHWEST PIPELINE CORPORATION and CASCADE NATURAL GAS CORPORATION DELIVERY POINTS
Maximum Daily Delivery Obligation ("MDDO") Primary for each Delivery Delivery Point Delivery Point Pressure (MMBtu) (psig) A&M Rendering Company 100 150 A&W Feed Lot Farm Tap 0 0 Aberdeen 4,400 375 Acme 90 150 Aluminum Company of American 2,860 150 Arlington 2,480 200 Athena 1,150 150 Baker 5,922 150 Bellingham II 37,500 500 Bellingham 17,500 300 Bremerton (Shelton) 7,102 375 Brulotte Hop Farm Tap 0 0 Burbank Heights 7,800 400 Castle Rock 220 150 Dave Rasmussen Farm Tap 0 0 DeHanns Dairy Farm Tap 0 0 Deming 210 150 Finley 430 300 Grandview 3,200 175 Green Circle Farms Farm Tap 0 0 Hermiston 7,845 200 Huntington 200 150 Kalama Farm Tap 200 150 Kalama No. 2 3,900 400 Kawecki Chemical Company 382 150 Kennewick 8,424 300 Lawrence 100 150
- 95 - EXHIBIT "B" to the TRANSPORTATION AGREEMENT ("#F-02") DATED July 31, 1991 (As Amended November 1, 1993) between NORTHWEST PIPELINE CORPORATION and CASCADE NATURAL GAS CORPORATION DELIVERY POINTS CONT.
Maximum Daily Delivery Obligation ("MDDO") Primary for each Delivery Delivery Point Delivery Point Pressure (MMBtu) (psig) Longview-Kelso 38,400 400 Lynden 1,740 240 Milton-Freewater 1,040 150 LDS Church Farm Tap 0 0 Moses Lake 8,314 300 Menan Starch 43 150 Mission Farm Tap 0 0 Mount Vernon 5,000 300 Moxes 100 250 Nyssa-Ontario 8,125 400 Oak Harbor 3,470 400 Othello 4,825 300 Pasco 3,850 150 Paterson 1,000 150 Pendleton 8,620 300 Plymouth 2,500 400 Prineville 1,437 400 Prosser 3,116 300 Quincy 1,770 250 Richland 471 150 Sandvik Special Metals Corp. 540 500 Sedro-Woolley 24,386 500 Selah 2,000 200 Seventh Day Adventist Farm Tap 0 0 Stanfield 12,403 150 Sumas 280 150 Sunnyside 2,802 200 Toppenish (Zillah) 6,586 300 Umatilla 5,760 250 Utah-Idaho Sugar Company 19,006 150 Walla Walla 11,830 250 Wenatchee 8,740 225 - 96 - Woodland 920 150 Yakima 17,098 350 Yakima Chief Farms 50 150 Yakima Firing Center 302 150 TOTAL 318,539 Deliveries at Prineville are limited to volumes received at the Prineville receipt point. Total Stanfield volumes are equal to conversion of MDDO volumes from the PGT delivery points other than Prineville.
- 97 - AMENDMENT THIS AMENDMENT is entered into as of this 17th day of December, 1993, by and between NORTHWEST PIPELINE CORPORATION, hereinafter referred to as "Transporter", and CASCADE NATURAL GAS CORPORATION, hereinafter referred to as "Shipper". RECITALS: A. Shipper and Transporter are parties to that certain Replacement Firm Transportation Agreement (#F-02) dated July 31, 1991 ("Agreement"). B. Effective December 17, 1993, the Federal Energy Regulatory Commission ("FERC") approved the sale of the Prineville Lateral facilities to Shipper under Docket No. CP94-40-000. C. Shipper and Transporter desire to amend Exhibits "A" and "B" of the Agreement to reflect changes to receipt and delivery points occurring pursuant to the sale of the Prineville Lateral facilities to Shipper. AGREEMENT: NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties agree as follows: 1. Exhibit "A" of the Agreement is hereby deleted in its entirety and the attached Exhibit "A" shall be added to and made a part of the Agreement. 2. Exhibit "B" of the Agreement is hereby deleted in its entirety and the attached Exhibit "B" shall be added to and made a part of the Agreement. 3. This Amendment is effective December 17, 1993. 4. Except as amended herein, the Agreement shall remain in full force and effect. 5. This Amendment shall be binding upon and inure to the benefit of the parties hereto and any successors or assigns of such parties. - 98 - IN WITNESS WHEREOF, the parties hereto have executed two duplicate original copies of this Amendment as of the date and year first written above. ATTEST: NORTHWEST PIPELINE CORPORATION By: By: /s/ Joe H. Fields Title: Joe H. Fields Attorney-In-Fact ATTEST: CASCADE NATURAL GAS CORPORATION By: By: /s/ King Oberg Title: King Oberg Vice President, Gas Supply - 99 - EXHIBIT "A" to the TRANSPORTATION AGREEMENT ("#F-02") DATED July 31, 1991 (As Amended December 17, 1993) between NORTHWEST PIPELINE CORPORATION and CASCADE NATURAL GAS CORPORATION RECEIPT POINTS
Maximum Daily Receipt Point Quantity (MDQ) Sumas 89,391 Bar X 2,000 Dove Creek 2,500 Dragon Trail 4,000 Grand Valley Gathering 1,000 Green River Gathering 18,000 Ignacio Plant 15,740 Lisbon 1,260 Opal 30,277 Painter 4,900 Piceance 5,000 Shute Creek 5,000 Starr Road 27,055 Total 206,123 The total of the MDQ's must equal total transportation contract demand as set forth in Section 1.1.
- 100 - EXHIBIT "B" to the TRANSPORTATION AGREEMENT ("#F-02") DATED July 31, 1991 (As Amended December 17, 1993) between NORTHWEST PIPELINE CORPORATION and CASCADE NATURAL GAS CORPORATION DELIVERY POINTS
Maximum Daily Delivery Obligation ("MMDO") Primary for each Delivery Delivery Point Delivery Point Pressure (MMBtu) (psig) A&M Rendering Company 100 150 A&W Feed Lot Farm Tap 0 0 Aberdeen 4,400 375 Acme 90 150 Aluminum Company of America 2,860 150 Arlington 2,480 200 Athena 1,150 150 Baker 5,922 150 Bellingham II 37,500 500 Bellingham 17,500 300 Bremerton (Shelton) 7,102 375 Brulotte Hop Farm Tap 0 0 Burbank Heights 7,800 400 Castle Rock 220 150 Dave Rasmussen Farm Tap 0 0 DeHanns Dairy Farm Tap 0 0 Deming 210 150 Finley 430 300 Grandview 3,200 175 Green Circle Farms Farm Tap 0 0 Hermiston 7,845 200 Huntington 200 150 Kalama Farm Tap 200 150 Kalama No. 2 3,900 400 Kawecki Chemical Company 382 150 Kennewick 8,424 300 Lawrence 100 150
- 101 - EXHIBIT "B" to the TRANSPORTATION AGREEMENT ("#F-02") DATED July 31, 1991 (As Amended December 17, 1993) between NORTHWEST PIPELINE CORPORATION and CASCADE NATURAL GAS CORPORATION DELIVERY POINTS CONT.
Maximum Daily Delivery Obligation ("MMDO") Primary for each Delivery Delivery Point Delivery Point Pressure (MMBtu) (psig) Longview-Kelso 38,400 400 Lynden 1,740 240 Milton-Freewater 1,040 150 LDS Church Farm Tap 0 0 Moses Lake 8,314 300 Menan Starch 43 150 Mission Farm Tap 0 0 Mount Vernon 5,000 300 Moxee 100 250 Nyssa-Ontario 8,125 400 Oak Harbor 3,470 400 Othello 4,825 300 Pasco 3,850 150 Paterson 1,000 150 Pendleton 8,620 300 Plymouth 2,500 400 Prosser 3,116 300 Quincy 1,770 250 Richland 471 150 Sandvik Special Metals Corp. 540 150 Sedro-Woolley 24,386 500 Selah 2,000 200 Seventh Day Adventist Farm Tap 0 0 Stanfield 13,840 150 Sumas 280 150 Total Stanfield volumes are equal to conversion of MDDO volumes from the PGT delivery points.
- 102 - EXHIBIT "B" to the TRANSPORTATION AGREEMENT ("#F-02") DATED July 31, 1991 (As Amended December 17, 1993) between NORTHWEST PIPELINE CORPORATION and CASCADE NATURAL GAS CORPORATION DELIVERY POINTS CONT.
Maximum Daily Delivery Obligation ("MMDO") Primary for each Delivery Delivery Point Delivery Point Pressure (MMBtu) (psig) Sunnyside 2,802 200 Toppenish (Zillah) 6,586 300 Umatilla 5,760 250 Utah-Idaho Sugar Company 19,006 150 Walla Walla 11,830 250 Wenatchee 8,740 225 Woodland 920 150 Yakima 17,098 350 Yakima Chief Farms 50 150 Yakima Firing Center 302 150 TOTAL 318,539
- 103 - EX-10.14 8 FIRM TRANSPORTATION SERVICE AGREEMENT - 104 - FIRM TRANSPORTATION SERVICE AGREEMENT THIS AGREEMENT is made and entered into this 27th day of October, 1993, by and between PACIFIC GAS TRANSMISSION COMPANY, a California corporation (hereinafter referred to as "PGT"), and CASCADE NATURAL GAS CORPORATION, a corporation existing under the laws of the State of Washington (hereinafter referred to as "Shipper"). WHEREAS, PGT owns and operates a natural gas interstate pipeline transmission system which extends from a point of interconnection with the pipeline facilities of Alberta Natural Gas Company Ltd. (ANG) at the International Boundary near Kingsgate, British Columbia, through the states of Idaho, Washington and Oregon to a point of interconnection with Pacific Gas and Electric Company at the Oregon-California border near Malin, Oregon; and WHEREAS, Shipper desires PGT, on a firm basis, to transport certain quantities of natural gas from the International Boundary in the vicinity of Kingsgate, British Columbia and/or from Stanfield, Oregon (receipt points) to various delivery points as specified in Exhibit A of this Agreement; and WHEREAS, since July 15, 1981, PGT has provided firm transportation service to the Northwest Pipeline Corporation ("Northwest") under the terms and conditions of a firm transportation service agreement between PGT and Northwest and PGT's Rate Schedule T- l; and WHEREAS, the Federal Energy Regulatory Commission ("FERC") has authorized Northwest in Docket No. CP92-79 to, among other things, convert its gas sales service to Shipper on Northwest's interstate pipeline transmission system to firm transportation service; and WHEREAS, the FERC has authorized PGT in Docket No. G-17350-012 to assign to Shipper a portion of Northwest's firm transportation service on PGT formerly provided under Rate Schedule~T-l and to provide such service to Shipper under Part 284 of the FERC's regulations; and WHEREAS, Shipper desires to accept said assignment of Northwest firm transportation services on PGT; and WHEREAS, PGT is willing to transport certain quantities, of natural gas for Shipper, on a firm basis, utilizing its pipeline facilities, NOW, THEREFORE, the parties agree as follows: I. GOVERNMENTAL AUTHORITY 1.1This Firm Transportation Service Agreement ("Agreement") is made pursuant to the regulations of the Federal Energy Regulatory Commission (FERC) contained in 18 CFR Part 284, as amended from time to time. 1.2This Agreement is subject to all valid legislation with respect to the subject matters hereof, either state or federal, and to all valid present - 105 - and future decisions, orders, rules, regulations and ordinances of all duly constituted governmental authorities having jurisdiction. II. QUANTITY OF GAS 2.1 The Maximum Daily Quantity of gas, as defined in Paragraph 1 of the Transportation General Terms and Conditions of PGT's FERC Gas Tariff First Revised Volume No. l-A, which is the maximum quantity of gas that PGT is required to deliver for Shipper's account to Shipper's point(s) of delivery is set forth in Exhibit A, attached hereto and made a part hereof 2.2 The maximum quantity of gas which Shipper has a right to deliver to PGT at Shipper's point(s) of receipt, as identified in Exhibit A, equals the Maximum Daily Quantity plus an amount for fuel and line losses as set forth in PGT's Rate Schedule FTS-l of PGT's FERC Gas Tariff First Revised Volume No. l-A. 2.3 PGT's obligation to deliver Shipper's gas from the Shipper's point(s) of receipt to the Shipper's point(s) of delivery is limited to the actual quantity of gas received by PGT for Shipper's account at Shipper's point(s) of receipt less Shipper's requirement to provide fuel and line losses, as set forth in PGT's Rate Schedule FTS-1, up to Shipper's Maximum Daily Quantity. III. TERM OF AGREEMENT 3.1This Agreement shall become effective November 1, 1993 and shall remain in full force and effect for a period of thirty (30) years. Thereafter, this Agreement will continue year to year thereafter, provided however that PGT or Shipper may terminate all or any portion of service under this Agreement either at the expiration of the primary term, or upon any anniversary thereafter, by giving written notice at least twelve (12) months in advance. - 106 - IV. POINTS OF RECEIPT AND DELIVERY 4.1 The point(s) of receipt of gas deliveries to PGT is/are as designated in Exhibit A, attached hereto. 4.2 The point(s) of delivery of gas is/are as designated in Exhibit A, attached hereto. 4.3 The delivery pressure, actual average atmospheric pressure, and other pertinent factors applicable to the points of receipt and delivery are also set forth in Exhibit A. V. OPERATING PROCEDURES 5.1 Shipper shall conform to all of the operating procedures set forth in the Transportation General Terms and Conditions of PGT's FERC Gas Tariff First Revised Volume No. 1-A. 5.2 Shipper shall furnish gas for compressor fuel and line loss as set forth in PGT's Rate Schedule FTS-1. VI. RATE(S) 6.1Shipper shall pay PGT each month all rates applicable to services rendered pursuant to this Agreement in accordance with PGT's Rate Schedule FTS-1, or superseding rate schedule(s), and PGT's current Statement of Effective Rates and Charges in PGT's FERC Gas Tariff First Revised Volume No. 1-A, on file with and subject to the jurisdiction of the FERC. This Agreement in all respects shall be and remains subject to the applicable provisions of PGT's Rate Schedule FTS-1, or superseding rate schedule(s), and of the Transportation General Terms and Conditions of PGT's FERC Gas Tariff First Revised Volume No. l-A on file with the FERC, all of which are by this reference made a part hereof. 6.2 PGT shall have the right from time to time to propose, file and cause to be made effective with the FERC such changes in the rates and charges or service obligations applicable to transportation services pursuant to this Agreement, the rate schedule under which this service is hereunder provided, or any provisions of PGT's Transportation General Terms and Conditions applicable to such services. Shipper shall have the right to protest any such changes proposed by PGT and to exercise any other rights that Shipper may have with respect thereto. VII. MISCELLANEOUS 7.1 This Agreement shall be interpreted according to the laws of the state of California. - 107 - VII. MISCELLANEOUS (continued) 7.2 Unless herein provided to the contrary, any notice called for in this Agreement and/or PGT's Transportation General Terms and Conditions shall be in writing and shall be considered as having been given if delivered by facsimile or registered mail, with all postage or charges prepaid, to either PGT or Shipper at the place designated below. Routine communications, including monthly statements and payment, shall be considered as duly delivered when received by ordinary mail or facsimile. Shipper's daily nominations shall be considered as duly delivered when received by electronic data interchange. Unless changed, the addresses of the parties are as follows: "PGT" PACIFIC GAS TRANSMISSION COMPANY 160 Spear Street Room 1900 San Francisco, California 94105-1570 Attention: President & CEO "SHIPPER" CASCADE NATURAL GAS CORPORATION 222 Fairview Avenue North Seattle, Washington 98109 Attention: Mr. Jan T. Stoltz 7.3 Prior to initiation of service, Shipper shall provide PGT with any information required by the FERC, as well as all information identified in PGT's Transportation General Terms and Conditions applicable to service under PGT's Rate Schedule FTS-l and this Agreement. 7.4 A waiver by either party of any one or more defaults by the other hereunder shall not operate as a waiver of any future default or defaults, whether of a like or of a different character. 7.5 Nothing in this Agreement shall be deemed to create any rights or obligations between the parties hereto after the expiration of the Initial or Subsequent Term(s) set forth herein, except that expiration of this Agreement shall not relieve either party of the obligation to correct any quantity imbalances or Shipper of the obligation to pay any amounts due to PGT to the date of expiration. 7.6 Shipper warrants for itself, its successors and assigns, that it will have at the time of delivery of the gas to PGT hereunder good title to such gas and that all gas delivered to PGT for transportation hereunder is eligible for all requested transportation in interstate commerce under applicable rules, regulations or orders of the FERC, or other agency having jurisdiction. Shipper will indemnify PGT and save and hold it harmless from all suits, action, damages (including reasonable attorneys' fees) and costs connected with regulatory or legal proceedings, arising from the breach of this warranty. - 108 - VII. MISCELLANEOUS (Continued) 7.7This Agreement constitutes the full agreement between Shipper and PGT and any subsequent changes to this Agreement must be made in writing by an amendment to this Agreement. This Agreement may only be amended by an instrument in writing executed by both parties hereto. IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed as of the day and year first above written. PACIFIC GAS TRANSMISSION COMPANY By: /s/ Stephen P. Reynolds Stephen P. Reynolds President & CEO CASCADE NATURAL GAS CORPORATION /s/ King Oberg King Oberg Title: Vice President, Gas Supply - 109 - EXHIBIT A To the FIRM TRANSPORTATION SERVICE AGREEMENT Date November 1, 1993 between PACIFIC GAS TRANSMISSION COMPANY And CASCADE NATURAL GAS CORPORATION RECEIPT
Receipt Maximum Received Quantity Point(s) (MMBtu/d) Interconnection of PGT's system wit the system 31,335 of Alberta Natural Gas Company Ltd. at the International Boundary in the vicinity of Kingsgate, British Columbia DELIVERY De1ivery Maximum Daily Quantity Point(s) (MMBtu/d) Spokane NPC, WA 14,388 Kosmos Farms, OR 200 Stanfield City Tap, OR 192 Madras, OR 1,502 Prineville, OR 1,804 Redmond, OR 2,600 Bend, OR 8,200 Sterns, OR 1,910 LaPine, OR 285 Gilchrist, OR 204 Chemult, OR 50 TOTAL 31,335 The total quantity of gas received by PGT from Shipper at receipt point shall not exceed 31,335 MMBtu per day plus the quantities of gas to be furnished by Shipper for fuel nd line loss in accordance with PGT's Rate Schedule FTS-I and the Statement of Effective Rates and Chrages of PGT's FERC Gas Tariff First Revised Volume l-A, for service under Rate Schedule FTS-l If capacity to delivery points other than Spokane -NPC is not being utilized, then Cascade at its option, subject to operating conditions on PGT, may have gas volumes delivered at a secondary delivery point, Stanfield Exchange, Oregon Demand charges are based on primary delivery point and the - 110 - Kingsgate, British Columbia receipt point Cornmodity charges are applied per pipeline mile to gas transported by PGT Cascade has the right to designate up to 31,335 MMBtu per day of its Maximum Daily Quantity to delivery points south of Stanfield Exchange, Oregon. Pursuant to Paragraph 29 of PGT's Transportation General Terms and Conditions of its FERC Gas Tariff First Revised Volume No 1-A Shipper may designate other rcceipt points as "secondary receipt points" such as Stanfield, Orrgon, the interconnection of PGT's system with the system of Northwest Pipeline Corporation. Delivery pressure during normal operations on PGT shall be at 425 psig.
- 111 - EX-10.16.1 9 INTERIM PRICING ARRANGEMENT - 112 - Interim Pricing Arrangement Under the Kingsgate Gas Sales Agreement Dated September 23, 1960, As Amended (the "Kingsgate Gas Sales Agreement") This is in reference to our recent discussions with regard to the implementation of an amended and restated gas sales arrangement between Canadian Hydrocarbons Inc. ("CHMI") and your company. It also is in reference to your company's status as a contingent assignee of a proportionate share of the Kingsgate Gas Sales Agreement, under an assignment agreement dated September 30, 1991 between CHMI and your company, among others. INTERIM PRICING PROVISIONS We wish to confirm that CHMI and Northwest Pipeline Corporation have reached an agreement in principle to implement interim changes to the pricing formula under paragraph 11 of August 15, 1989 Kingsgate Gas Sales Agreement amendment (the "Interim Pricing Provisions"). Attached for your information is a copy of the letter agreement between those parties, documenting the implementation of the new "Commodity Price" under paragraph 11(b), and a new "Administration Fee" under paragraph 1 l(a)(ii), of the Kingsgate Gas Sales Agreement. The latter is to substitute for the "Kingsgate Demand Charge" as previously defined (the attached letter refers to the "Kingsgate Demand Charge" as the "Westcoast Energy Inc. fee"). The parties have put the Interim Pricing Provisions in place, to be in effect pending the finalization of all regulatory and contractual steps necessary to install your company as the direct buyer of Canadian gas under the provisions of the "Amended and Restated Natural Gas Sales Agreement, a copy of which you have been previously provided in draft form. CHMI is proposing that Interim Pricing Provisions be in effect commencing on the later of November 1, 1993, and the date the last of all related regulatory and other third party authorizations are in place. They would remain in place until CHMI and your company have finalized the more formal amended and restated agreement, and approvals related to that agreement are obtained. THIRD PARTY AUTHORIZATIONS CHMI will be making arrangements with Canadian federal and provincial agencies to ensure ah necessary authorizations are in place related to the commencement of deliveries under the cited interim pricing provisions. CHMI also will be obtaining any necessary confirmation by Pan Alberta Gas Ltd. for the sale of gas at Kingsgate to your company under the interim pricing arrangement. CHMI and your company will ensure that either one of those parties holds a United States federal import authorization order, which is sufficient as of November 1, 1993 to enable you to import gas under the Interim Pricing Provisions. - 113 - Kindly so signify your confirmation of and agreement to the Interim Pricing Provisions by signing both copies of this letter agreement, then retain one copy for your files and return the other copy to CHMI, to my attention. Yours Truly, CANADIAN HYDROCARBONS MARKETING INC. Title: Vice President, Marketing AGREED TO AND ACCEPTED, AS OF NOVEMBER 4, 1993 BY CASCADE NATURAL GAS CORPORATION Per: /s/ King Oberg King Oberg Title Vice President Gas Supply - 114 - EX-10.19 10 SERVICE AGREEMENT - 115 - SERVICE AGREEMENT (Firm Redelivery Transportation under Rate Schedule TF-2) THIS AGREEMENT is entered into this 12th day of January, 1994, by and between NORTHWEST PIPELINE CORPORATION, hereinafter referred to as "Transporter", and CASCADE NATURAL GAS CORPORATION, hereinafter referred to as "Shipper". RECITALS: A. Shipper is a local distribution company for natural gas. B. Shipper owns certain supplies of natural gas which it desires Transporter to transport for Shipper's account pursuant to Section 284.223 of the regulations of the Federal Energy Regulatory Commission ("FERC"). C. Shipper and Transporter are parties to that certain Storage Gas Service Agreement (SGS-1) dated January 12, 1994. D. Shipper and Transporter desire to enter into this Agreement to conform to the provisions of the approved Joint Offer of Settlement in Docket No. RP93-5-011 which unbundled the storage and redelivery transportation services. E. Shipper and Transporter desire to enter into this Agreement effective on the date so designated by the FERC. AGREEMENT: NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, the parties agree as follows: ARTICLE I - GAS DELIVERIES AND REDELIVERIES 1.1 Subject to the terms, conditions and limitations hereof, Transporter agrees to receive from Shipper at the Receipt Point specified in Exhibit "A" herein, transport and deliver to Shipper at the Delivery Point(s) specified in Exhibit "B" herein, the following quantities of natural gas, known as Transportation Contract Demand: Up to 16,595 MMBtu's/day provided that Transporter's receipt of gas at any receipt point for Shipper's account hereunder on any day shall not exceed the Maximum Daily Quantity ("MDQ") set forth for such receipt point on Exhibit "A" hereto, and provided that Transporter's daily obligation to deliver gas to Shipper at any delivery point under this Transportation Agreement shall not exceed the Maximum Daily Delivery Obligation ("MDDO") set forth in Exhibit "B" of this Agreement. 1.2 The following quantity is Shipper's Annual Contract Quantity: Up to 597,378 MMBtus - 116 - 1.3 The following quantity is Shipper's Monthly Billing Quantity: Up to 1,637 MMBtus 1.4 Fuel gas shall be provided in-kind as specified in Rate Schedule TF-2 and in the General Terms and Conditions of Transporter's FERC Gas Tariff. 1.5 Such transportation shall be on a firm basis. ARTICLE II - TRANSPORTATION RATES AND CHARGES 2.1 (a) Shipper agrees to pay Transporter for all natural gas transportation service rendered under the terms of this Agreement in accordance with Transporter's Rate Schedule TF-2 as filed with the FERC, and as such rate schedule may be amended or superseded from time to time. - 117 - (b) (Reserved for rate adjustments made pursuant to Section 3.4 of Rate Schedule TF-2.) ARTICLE III - GOVERNMENTAL REQUIREMENTS 3.1 Shipper shall reimburse Transporter for any and all filing fees to be incurred by Transporter in seeking governmental authorization for the initiation, extension or termination of service under this Agreement. 3.2 The transportation service contemplated herein shall be provided by Transporter pursuant to Section 284.223 of the FERC's regulations. 3.3 Upon termination, this Agreement shall cease to have any force or effect, save as to any unsatisfied obligations or liabilities of either party arising hereunder prior to the date of such termination, or arising thereafter as a result of such termination. Provided, however that this provision shall not supersede any abandonment authorization which may be required. 3.4 (Section 3.4 shall be applicable only for the transportation of imported natural gas.) Shipper hereby acknowledges and agrees that either it or its buyer or seller is the "importer of record" and it will comply with all requirements for reporting and submitting payment of duties, fees, and taxes to the United States or agencies thereof to be made on imported natural gas and for making the declaration of entry pursuant to 19 CFR Section 141.19. Shipper agrees to indemnify and hold Transporter harmless from any and all claims of damage or violation of any applicable laws, ordinances and statutes which pertain to the importation of the gas transported hereunder and which require reporting and/or filing of fees in connection with said import. ARTICLE IV - TERM 4.1 This Agreement becomes effective on the date so designated by the FERC and shall remain in full force and effect until October 31, 2014 and year to year thereafter at Shipper's sole option. Shipper may terminate all or any portion of service under this Agreement either at the expiration of the primary term, or upon any anniversary thereafter by giving written notice to Transporter so stating at least twelve (12) months in advance. Shipper also shall have the sole option to enter into a new Agreement for all or any portion of the service under this Agreement at or after the end of the primary term of this Agreement. It is Transporter's and Shipper's intent that this term provision provide Shipper with a "contractual right to continue such service" and to provide Transporter with concurrent pregranted abandonment of any volume that Shipper terminates within the meaning of 18 CFR section 284.221(d)(2)(i) as promulgated by Order 636 on May 8, 1992. ARTICLE V - WARRANTY OF ELIGIBILITY FOR TRANSPORTATION 5.1 Any shipper under this Rate Schedule warrants for itself, its successors and assigns, that all gas delivered to Transporter for transportation hereunder shall be eligible for transportation in interstate commerce under applicable rules, regulations or orders of the FERC. Shipper will indemnify Transporter and save it harmless from all suits, actions, - 118 - damages, costs, losses, expenses (including reasonable attorney fees) and regulatory proceedings, arising from breach of this warranty. ARTICLE VI - NOTICES 6.1 Unless herein provided to the contrary, any notice called for in this Agreement shall be in writing and shall be considered as having been given if delivered personally, or by mail or telegraph with all postage and charges prepaid to either Shipper or Transporter at the place designated. Routine communications shall be considered as duly delivered when mailed by ordinary mail. Normal operating instructions can be made by telephone. Unless changed, the addresses of the parties are as follows: NORTHWEST PIPELINE CORPORATION P. O. Box 58900 Salt Lake City, Utah 84158-0900 Statements: Attention: Transmission Accounting Payments: Attention: Treasury Services Contractual Notices: Attention: Transportation and Contract Administration Other Notices: Attention: Nominations Notices & Statements: CASCADE NATURAL GAS CORPORATION 222 Fairview Avenue North (98109) P. O. Box 24464 Seattle, Washington 98124 ARTICLE VII - OTHER OPERATING PROVISIONS 7.1 Pursuant to Section 5.3 of the General Transportation Terms and Conditions of Transporter's FERC Gas Tariff, Third Revised Volume No. 1, Shipper shall make payments to Transporter hereunder by wire transfer or check of immediately available funds by the due date set forth herein. If such funds are wire transferred, the funds shall be wire transferred to the First Interstate Bank of Utah located in Salt Lake City, Utah for Transporter's account No. 02-00986-8. ARTICLE VIII - ADJUSTMENTS TO GENERAL TERMS AND CONDITIONS 8.1 Certain of the General Transportation Terms and Conditions are to be adjusted for the purpose of this Agreement, as specified below: None. ARTICLE IX - CANCELLATION OF PRIOR AGREEMENT(S) 9.1 When this Agreement takes effect, it supersedes, cancels and terminates the following agreement(s): None. - 119 - ARTICLE X - SUCCESSORS AND ASSIGNS 10.1 This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. No assignment or transfer by either party hereunder shall be made without written approval of the other party. Such approval shall not be unreasonably withheld. As between the parties hereto, such assignment shall become effective on the first day of the month following written notice that such assignment has been effectuated. - 120 - IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above set forth. "SHIPPER" "TRANSPORTER" CASCADE NATURAL GAS CORPORATION NORTHWEST PIPELINE CORPORATION By: /s/ King Oberg By: /s/ Joe H. Fields Name: King Oberg Joe H. Fields Title: Vice President, Gas Supply Attorney-In-Fact - 121 - EXHIBIT "A" to the SERVICE AGREEMENT (Firm Redelivery Transportation under Rate Schedule TF-2) Dated January 12, 1994 between NORTHWEST PIPELINE CORPORATION and CASCADE NATURAL GAS CORPORATION RECEIPT POINTS
Primary Maximum Daily Receipt Points Quantity (MDQ) Jackson Prairie Storage Facility 16,595 - ------------------------ The total of the MDQ's must equal total transportation contract demand as set forth in Section 1.1.
- 122 - EXHIBIT "B" to the SERVICE AGREEMENT (Firm Redelivery Transportation under Rate Schedule TF-2) Dated January 12, 1994 between NORTHWEST PIPELINE CORPORATION and CASCADE NATURAL GAS CORPORATION DELIVERY POINTS Maximum Daily Delivery Obligation ("MDDO")
for each Delivery Primary Delivery Point Pressure Delivery Points (MMBtu) (psig) A & M Rendering Company 11 150 Aberdeen 1,000 375 Acme 29 150 Arlington 41 200 Bellingham 1,803 300 Bellingham II 3,580 500 Bremerton 4,198 375 Burbank Heights 2,202 400 Castle Rock 80 150 Deming 20 150 Hermiston 838 200 Huntington 35 150 Kennewick 3,668 300 Lawrence 6 150 Longview-Kelso 2,000 400 Lynden 553 240 Moses Lake 6 150 Mount Vernon 885 300 Nyssa-Ontario 906 400 Oak Harbor 960 400 Pasco 500 150 Pendleton 1,231 300 Richland 80 150 Sedro-Woolley 2,614 500 Stanfield 3,107 Sunnyside 1,000 200 Walla Walla 2,109 250 Wenatchee 3,474 225 Woodland 69 150 Yakima 2,500 350 - 123 - Deliveries made by displacement. In the event displacement capabilities are not available at Stanfield, Transporter has the option to deliver at Starr Road.
- 124 - EX-10.20 11 SERVICE AGREEMENT - 125 - SERVICE AGREEMENT (Firm Redelivery Transportation under Rate Schedule TF-2) THIS AGREEMENT is entered into this 12th day of January, 1994, by and between NORTHWEST PIPELINE CORPORATION, hereinafter referred to as "Transporter", and CASCADE NATURAL GAS CORPORATION, hereinafter referred to as "Shipper". RECITALS: A. Shipper is a local distribution company for natural gas. B. Shipper owns certain supplies of natural gas which it desires Transporter to transport for Shipper's account pursuant to Section 284.223 of the regulations of the Federal Energy Regulatory Commission ("FERC"). C. Shipper and Transporter are parties to that certain Storage Gas Service Agreement (SGS-1) dated January 12, 1994. D. Shipper and Transporter desire to enter into this Agreement to conform to the provisions of the approved Joint Offer of Settlement in Docket No. RP93-5-011 which unbundled the storage and redelivery transportation services. E. Shipper and Transporter desire to enter into this Agreement effective on the date so designated by the FERC. AGREEMENT: NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, the parties agree as follows: ARTICLE I - GAS DELIVERIES AND REDELIVERIES 1.1 Subject to the terms, conditions and limitations hereof, Transporter agrees to receive from Shipper at the Receipt Point specified in Exhibit "A" herein, transport and deliver to Shipper at the Delivery Point(s) specified in Exhibit "B" herein, the following quantities of natural gas, known as Transportation Contract Demand: Up to 15,000 MMBtu's/day provided that Transporter's receipt of gas at any receipt point for Shipper's account hereunder on any day shall not exceed the Maximum Daily Quantity ("MDQ") set forth for such receipt point on Exhibit "A" hereto, and provided that Transporter's daily obligation to deliver gas to Shipper at any delivery point under this Transportation Agreement shall not exceed the Maximum Daily Delivery Obligation ("MDDO") set forth in Exhibit "B" of this Agreement. 1.2 The following quantity is Shipper's Annual Contract Quantity: Up to 480,000 MMBtus 1.3 The following quantity is Shipper's Monthly Billing Quantity: Up to 1,315 MMBtus - 126 - 1.4 Fuel gas shall be provided in-kind as specified in Rate Schedule TF-2 and in the General Terms and Conditions of Transporter's FERC Gas Tariff. 1.5 Such transportation shall be on a firm basis. ARTICLE II - TRANSPORTATION RATES AND CHARGES 2.1 (a) Shipper agrees to pay Transporter for all natural gas transportation service rendered under the terms of this Agreement in accordance with Transporter's Rate Schedule TF-2 as filed with the FERC, and as such rate schedule may be amended or superseded from time to time. (b) (Reserved for rate adjustments made pursuant to Section 3.4 of Rate Schedule TF-2.) ARTICLE III - GOVERNMENTAL REQUIREMENTS 3.1 Shipper shall reimburse Transporter for any and all filing fees to be incurred by Transporter in seeking governmental authorization for the initiation, extension or termination of service under this Agreement. 3.2 The transportation service contemplated herein shall be provided by Transporter pursuant to Section 284.223 of the FERC's regulations. 3.3 Upon termination, this Agreement shall cease to have any force or effect, save as to any unsatisfied obligations or liabilities of either party arising hereunder prior to the date of such termination, or arising thereafter as a result of such termination. Provided, however that this provision shall not supersede any abandonment authorization which may be required. 3.4 (Section 3.4 shall be applicable only for the transportation of imported natural gas.) Shipper hereby acknowledges and agrees that either it or its buyer or seller is the "importer of record" and it will comply with all requirements for reporting and submitting payment of duties, fees, and taxes to the United States or agencies thereof to be made on imported natural gas and for making the declaration of entry pursuant to 19 CFR Section 141.19. Shipper agrees to indemnify and hold Transporter harmless from any and all claims of damage or violation of any applicable laws, ordinances and statutes which pertain to the importation of the gas transported hereunder and which require reporting and/or filing of fees in connection with said import. ARTICLE IV - TERM 4.1 This Agreement becomes effective on the date so designated by the FERC and shall remain in full force and effect until April 30, 1995. ARTICLE V - WARRANTY OF ELIGIBILITY FOR TRANSPORTATION 5.1 Any shipper under this Rate Schedule warrants for itself, its successors and assigns, that all gas delivered to Transporter for transportation hereunder shall be eligible for transportation in interstate - 127 - commerce under applicable rules, regulations or orders of the FERC. Shipper will indemnify Transporter and save it harmless from all suits, actions, damages, costs, losses, expenses (including reasonable attorney fees) and regulatory proceedings, arising from breach of this warranty. ARTICLE VI - NOTICES 6.1 Unless herein provided to the contrary, any notice called for in this Agreement shall be in writing and shall be considered as having been given if delivered personally, or by mail or telegraph with all postage and charges prepaid to either Shipper or Transporter at the place designated. Routine communications shall be considered as duly delivered when mailed by ordinary mail. Normal operating instructions can be made by telephone. Unless changed, the addresses of the parties are as follows: NORTHWEST PIPELINE CORPORATION P. O. Box 58900 Salt Lake City, Utah 84158-0900 Statements: Attention: Transmission Accounting Payments: Attention: Treasury Services Contractual Notices: Attention: Transportation and Contract Administration Other Notices: Attention: Nominations Notices & Statements: CASCADE NATURAL GAS CORPORATION 222 Fairview Avenue North (98109) P. O. Box 24464 Seattle, Washington 98124 ARTICLE VII - OTHER OPERATING PROVISIONS 7.1 Pursuant to Section 5.3 of the General Transportation Terms and Conditions of Transporter's FERC Gas Tariff, Third Revised Volume No. 1, Shipper shall make payments to Transporter hereunder by wire transfer or check of immediately available funds by the due date set forth herein. If such funds are wire transferred, the funds shall be wire transferred to the First Interstate Bank of Utah located in Salt Lake City, Utah for Transporter's account No. 02-00986-8. ARTICLE VIII - ADJUSTMENTS TO GENERAL TERMS AND CONDITIONS 8.1 Certain of the General Transportation Terms and Conditions are to be adjusted for the purpose of this Agreement, as specified below: None. ARTICLE IX - CANCELLATION OF PRIOR AGREEMENT(S) 9.1 When this Agreement takes effect, it supersedes, cancels and terminates the following agreement(s): None. ARTICLE X - SUCCESSORS AND ASSIGNS 10.1 This Agreement shall be binding upon and inure to the benefit of - 128 - the parties hereto and their respective successors and assigns. No assignment or transfer by either party hereunder shall be made without written approval of the other party. Such approval shall not be unreasonably withheld. As between the parties hereto, such assignment shall become effective on the first day of the month following written notice that such assignment has been effectuated. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above set forth. "SHIPPER" "TRANSPORTER" CASCADE NATURAL GAS CORPORATION NORTHWEST PIPELINE CORPORATION By: /s/ King Oberg By: /s/ Joe H. Fields Name: King Oberg Joe H. Fields Title: Vice President, Gas Supply Attorney-In-Fact - 129 - EXHIBIT "A" to the SERVICE AGREEMENT (Firm Redelivery Transportation under Rate Schedule TF-2) Dated January 12, 1994 between NORTHWEST PIPELINE CORPORATION and CASCADE NATURAL GAS CORPORATION RECEIPT POINTS
Primary Maximum Daily Receipt Points Quantity (MDQ) Jackson Prairie Storage Facility 15,000 - ------------------------ The total of the MDQ's must equal total transportation contract demand as set forth in Section 1.1.
- 130 - EXHIBIT "B" to the SERVICE AGREEMENT (Firm Redelivery Transportation under Rate Schedule TF-2) Dated January 12, 1994 between NORTHWEST PIPELINE CORPORATION and CASCADE NATURAL GAS CORPORATION
DELIVERY POINTS Maximum Daily Delivery Obligation ("MDDO") for each Delivery Primary Delivery Point Pressure Delivery Points (MMBtu) (psig) Aberdeen, et.al 4,000 375 Arlington 41 200 Bellingham, et.al 842 375 Mount Vernon 2,000 300 Oak Harbor 4,000 400 Sedro-Woolley, et.al 4,117 500
- 131 - EX-10.21 12 SERVICE AGREEMENT - 132 - SERVICE AGREEMENT (Firm Redelivery Transportation under Rate Schedule TF-2) THIS AGREEMENT is entered into this 12th day of January, 1994, by and between NORTHWEST PIPELINE CORPORATION, hereinafter referred to as "Transporter", and CASCADE NATURAL GAS CORPORATION, hereinafter referred to as "Shipper". RECITALS: A. Shipper is a local distribution company for natural gas. B. Shipper owns certain supplies of natural gas which it desires Transporter to transport for Shipper's account pursuant to Section 284.223 of the regulations of the Federal Energy Regulatory Commission ("FERC"). C. Shipper and Transporter are parties to that certain Liquefaction Storage Gas Service Agreement (LS-1) dated January 12, 1994. D. Shipper and Transporter desire to enter into this Agreement to conform to the provisions of the approved Joint Offer of Settlement in Docket No. RP93-5-011 which unbundled the storage and redelivery transportation services. E. Shipper and Transporter desire to enter into this Agreement effective on the date so designated by the FERC. AGREEMENT: NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, the parties agree as follows: ARTICLE I - GAS DELIVERIES AND REDELIVERIES 1.1 Subject to the terms, conditions and limitations hereof, Transporter agrees to receive from Shipper at the Receipt Point specified in Exhibit "A" herein, transport and deliver to Shipper at the Delivery Point(s) specified in Exhibit "B" herein, the following quantities of natural gas, known as Transportation Contract Demand: Up to 60,000 MMBtu's/day provided that Transporter's receipt of gas at any receipt point for Shipper's account hereunder on any day shall not exceed the Maximum Daily Quantity ("MDQ") set forth for such receipt point on Exhibit "A" hereto, and provided that Transporter's daily obligation to deliver gas to Shipper at any delivery point under this Transportation Agreement shall not exceed the Maximum Daily Delivery Obligation ("MDDO") set forth in Exhibit "B" of this Agreement. 1.2 The following quantity is Shipper's Annual Contract Quantity: Up to 562,200 MMBtus 1.3 The following quantity is Shipper's Monthly Billing Quantity: Up to 1,540 MMBtus - 133 - 1.4 Fuel gas shall be provided in-kind as specified in Rate Schedule TF-2 and in the General Terms and Conditions of Transporter's FERC Gas Tariff. 1.5 Such transportation shall be on a firm basis. 1.6 Transporter shall not be obligated on any day to deliver under Rate Schedule TF-2, a volume of gas to Shipper at any delivery point(s) described on Exhibit "B" which in conjunction with other firm deliveries by Transporter to Shipper shall be in excess of the capacity of Transporter's facilities delivering gas to such point(s) on any such day. The aggregate of all deliveries made on any such day under Rate Schedule TF-2 at all such delivery point(s) shall not exceed the Transportation Contract Demand, except as provided by the delivery provisions in Rate Schedule TF-2. - 134 - ARTICLE II - TRANSPORTATION RATES AND CHARGES 2.1 (a) Shipper agrees to pay Transporter for all natural gas transportation service rendered under the terms of this Agreement in accordance with Transporter's Rate Schedule TF-2 as filed with the FERC, and as such rate schedule may be amended or superseded from time to time. (b) (Reserved for rate adjustments made pursuant to Section 3.4 of Rate Schedule TF-2.) ARTICLE III - GOVERNMENTAL REQUIREMENTS 3.1 Shipper shall reimburse Transporter for any and all filing fees to be incurred by Transporter in seeking governmental authorization for the initiation, extension or termination of service under this Agreement. 3.2 The transportation service contemplated herein shall be provided by Transporter pursuant to Section 284.223 of the FERC's regulations. 3.3 Upon termination, this Agreement shall cease to have any force or effect, save as to any unsatisfied obligations or liabilities of either party arising hereunder prior to the date of such termination, or arising thereafter as a result of such termination. Provided, however that this provision shall not supersede any abandonment authorization which may be required. 3.4 (Section 3.4 shall be applicable only for the transportation of imported natural gas.) Shipper hereby acknowledges and agrees that either it or its buyer or seller is the "importer of record" and it will comply with all requirements for reporting and submitting payment of duties, fees, and taxes to the United States or agencies thereof to be made on imported natural gas and for making the declaration of entry pursuant to 19 CFR Section 141.19. Shipper agrees to indemnify and hold Transporter harmless from any and all claims of damage or violation of any applicable laws, ordinances and statutes which pertain to the importation of the gas transported hereunder and which require reporting and/or filing of fees in connection with said import. ARTICLE IV - TERM 4.1 This Agreement becomes effective on the date so designated by the FERC and shall remain in full force and effect until October 31, 2014 and year to year thereafter at Shipper's sole option. Shipper may terminate all or any portion of service under this Agreement either at the expiration of the primary term, or upon any anniversary thereafter by giving written notice to Transporter so stating at least twelve (12) months in advance. Shipper also shall have the sole option to enter into a new Agreement for all or any portion of the service under this Agreement at or after the end of the primary term of this Agreement. It is Transporter's and Shipper's intent that this term provision provide Shipper with a "contractual right to continue such service" and to provide Transporter with concurrent pregranted abandonment of any volume that Shipper terminates within the meaning of 18 CFR section 284.221(d)(2)(i) as promulgated by Order 636 on May 8, 1992. - 135 - ARTICLE V - WARRANTY OF ELIGIBILITY FOR TRANSPORTATION 5.1 Any shipper under this Rate Schedule warrants for itself, its successors and assigns, that all gas delivered to Transporter for transportation hereunder shall be eligible for transportation in interstate commerce under applicable rules, regulations or orders of the FERC. Shipper will indemnify Transporter and save it harmless from all suits, actions, damages, costs, losses, expenses (including reasonable attorney fees) and regulatory proceedings, arising from breach of this warranty. ARTICLE VI - NOTICES 6.1 Unless herein provided to the contrary, any notice called for in this Agreement shall be in writing and shall be considered as having been given if delivered personally, or by mail or telegraph with all postage and charges prepaid to either Shipper or Transporter at the place designated. Routine communications shall be considered as duly delivered when mailed by ordinary mail. Normal operating instructions can be made by telephone. Unless changed, the addresses of the parties are as follows: NORTHWEST PIPELINE CORPORATION P. O. Box 58900 Salt Lake City, Utah 84158-0900 Statements: Attention: Transmission Accounting Payments: Attention: Treasury Services Contractual Notices: Attention: Transportation and Contract Administration Other Notices: Attention: Nominations Notices & Statements: CASCADE NATURAL GAS CORPORATION 222 Fairview Avenue North (98109) P. O. Box 24464 Seattle, Washington 98124 ARTICLE VII - OTHER OPERATING PROVISIONS 7.1 Pursuant to Section 5.3 of the General Transportation Terms and Conditions of Transporter's FERC Gas Tariff, Third Revised Volume No. 1, Shipper shall make payments to Transporter hereunder by wire transfer or check of immediately available funds by the due date set forth herein. If such funds are wire transferred, the funds shall be wire transferred to the First Interstate Bank of Utah located in Salt Lake City, Utah for Transporter's account No. 02-00986-8. ARTICLE VIII - ADJUSTMENTS TO GENERAL TERMS AND CONDITIONS 8.1 Certain of the General Transportation Terms and Conditions are to be adjusted for the purpose of this Agreement, as specified below: None. - 136 - ARTICLE IX - CANCELLATION OF PRIOR AGREEMENT(S) 9.1 When this Agreement takes effect, it supersedes, cancels and terminates the following agreement(s): None. ARTICLE X - SUCCESSORS AND ASSIGNS 10.1 This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. No assignment or transfer by either party hereunder shall be made without written approval of the other party. Such approval shall not be unreasonably withheld. As between the parties hereto, such assignment shall become effective on the first day of the month following written notice that such assignment has been effectuated. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above set forth. "SHIPPER" "TRANSPORTER" CASCADE NATURAL GAS CORPORATION NORTHWEST PIPELINE CORPORATION By: /s/ King Oberg By: /s/ Joe H. Fields Name: King Oberg Joe H. Fields Title: Vice President, Gas Supply Attorney-In-Fact - 137 - EXHIBIT "A" to the SERVICE AGREEMENT (Firm Redelivery Transportation under Rate Schedule TF-2) Dated January 12, 1994 between NORTHWEST PIPELINE CORPORATION and CASCADE NATURAL GAS CORPORATION RECEIPT POINTS
Primary Maximum Daily Receipt Points Quantity (MDQ) Plymouth LNG Storage Facility 60,000 - ------------------------ The total of the MDQ's must equal total transportation contract demand as set forth in Section 1.1.
- 138 - EXHIBIT "B" to the SERVICE AGREEMENT (Firm Redelivery Transportation under Rate Schedule TF-2) Dated January 12, 1994 between NORTHWEST PIPELINE CORPORATION and CASCADE NATURAL GAS CORPORATION DELIVERY POINTS Maximum Daily Delivery Obligation ("MDDO") for each Delivery Primary Delivery Point Pressure Delivery Points (MMBtu) (psig) Delivery of natural gas by Transporter to Shipper shall be at or near the points whose locations are described in Shipper's currently effective Service Agreement (F-02) dated July 31, 1991 under Rate Schedule TF-1. - 139 - EX-12 13 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES - 140 - EXHIBIT 12 Cascade Natural Gas Corporation and Subsidiaries Computation of Ratio of Earnings to Fixed Charges and Preferred Dividend Requirements
(Dollars in Thousands) Years Ended December 31 ---------------------------------------- 1993 1992 1991 -------- -------- -------- Fixed charges, as defined: Interest expense 7,038 7,478 7,793 Amortization of debt issuance expense 562 402 362 -------- -------- -------- Total fixed charges 7,600 7,880 8,155 -------- -------- -------- Earnings, as defined: Net earnings 9,103 4,843 7,651 Add (deduct): Income taxes 5,224 2,817 4,206 Cumulative effect of change in accounting method (209) Fixed charges 7,600 7,880 8,155 -------- -------- -------- Total earnings 21,718 15,540 20,012 -------- -------- -------- Ratio of earnings to fixed charges 2.86 1.97 2.45 ======== ======== ======== Fixed charges and preferred dividend requirements: Fixed charges 7,600 7,880 8,155 Preferred dividend requirements 913 941 229 -------- -------- -------- Total 8,513 8,821 8,384 -------- -------- -------- Ratio of earnings to fixed charges and preferred dividend requirements 2.55 1.76 2.39 ======== ======== ========
- 141 - EX-23 14 INDEPENDENT AUDITOR'S CONSENT - 142 - INDEPENDENT AUDITOR'S CONSENT We consent to the incorporation by reference in Registration Statement No. 33- 71286, No. 33-51377, No. 33-50004 and No. 33-29801 on Forms S-3 and No. 33- 39873 on Form S-8 of Cascade Natural Gas Corporation, of our reports dated February 1, 1994, appearing in this Annual Report on Form 10-K of Cascade Natural Gas Corporation for the year ended December 31, 1993. DELOITTE & TOUCHE Seattle, Washington March 22, 1994 - 143 - -----END PRIVACY-ENHANCED MESSAGE-----