<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2004

                                       or

             [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the transition period from ______ to ______

                         Commission File Number: 1-1098

                              Columbia Energy Group
                              ---------------------
             (Exact name of registrant as specified in its charter)

               Delaware                                      13-1594808
    -------------------------------                    -------------------
    (State or other jurisdiction of                     (I.R.S. Employer
    incorporation or organization)                     Identification No.)

         801 East 86th Avenue
         Merrillville, Indiana                                 46410
    -------------------------------                    -------------------
(Address of principal executive offices)                     (Zip Code)

                                 (877) 647-5990
                                 --------------
              (Registrant's telephone number, including area code)

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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]

The registrant meets the conditions set forth in General Instructions H(1)(a)
and (b) of Form 10-Q and is therefore filing this form with the reduced
disclosure format.

<PAGE>

                     COLUMBIA ENERGY GROUP AND SUBSIDIARIES
                           FORM 10-Q QUARTERLY REPORT
                    FOR THE QUARTER ENDED SEPTEMBER 30, 2004

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                         Page
                                                                                         ----
<S>                                                                                      <C>
PART I - FINANCIAL INFORMATION

              Item 1.    Financial Statements

                         Statements of Consolidated Income..............................   3

                         Consolidated Balance Sheets....................................   4

                         Statements of Consolidated Cash Flows..........................   6

                         Statements of Consolidated Comprehensive Income................   7

                         Notes to Consolidated Financial Statements.....................   8

              Item 2.    Management's Narrative Analysis of Results of Operations.......  16

              Item 3.    Quantitative and Qualitative Disclosures About Market Risk.....  22

              Item 4.    Controls and Procedures........................................  23

PART II - OTHER INFORMATION

              Item 1.    Legal Proceedings..............................................  24

              Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds....  24

              Item 3.    Defaults Upon Senior Securities................................  24

              Item 4.    Submission of Matters to a Vote of Security Holders............  24

              Item 5.    Other Information..............................................  25

              Item 6.    Exhibits.......................................................  25

              Signature.................................................................  26
</TABLE>

                                       2

<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

COLUMBIA ENERGY GROUP AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)

<TABLE>
<CAPTION>
                                                                Three Months             Nine Months
                                                             Ended September 30,     Ended September 30,
                                                             -------------------   -----------------------
(in millions)                                                  2004       2003        2004         2003
--------------------------------                             --------   --------   ----------   ----------
<S>                                                          <C>        <C>        <C>          <C>
NET REVENUES
    Gas Distribution                                         $  186.1   $  150.5   $  1,512.3   $  1,467.9
    Transmission and Storage                                    171.3      176.8        671.7        688.1
    Other                                                        20.2       15.9         67.7         53.1
    Affiliated revenues                                           2.8        2.5          8.5          6.8
                                                             --------   --------   ----------   ----------
Gross Revenues                                                  380.4      345.7      2,260.2      2,215.9
    Cost of Sales                                                80.6       40.9      1,025.4        923.0
    Cost of Sales - affiliated                                      -          -            -          4.8
                                                             --------   --------   ----------   ----------
Total Net Revenues                                              299.8      304.8      1,234.8      1,288.1
                                                             --------   --------   ----------   ----------
OPERATING EXPENSES
    Operation and maintenance                                   161.6      146.7        502.3        481.3
    Depreciation and amortization                                41.8       40.1        125.4        122.3
    Loss (Gain) on sale of assets                                (0.1)     (16.2)         0.2        (16.0)
    Other taxes                                                  27.5       21.5        129.1        128.2
                                                             --------   --------   ----------   ----------
Total Operating Expenses                                        230.8      192.1        757.0        715.8
                                                             --------   --------   ----------   ----------
OPERATING INCOME                                                 69.0      112.7        477.8        572.3
                                                             --------   --------   ----------   ----------
OTHER INCOME (DEDUCTIONS)
    Interest expense                                            (25.6)     (17.4)       (68.7)       (59.8)
    Interest expense - affiliated                                (0.8)      (1.1)        (2.0)        (3.8)
    Interest income                                               1.8        1.5          4.6          5.0
    Interest income - affiliated                                  3.9        3.3         10.1         10.2
    Other, net                                                    1.5        1.0          2.4          1.2
                                                             --------   --------   ----------   ----------
Total Other Income (Deductions)                                 (19.2)     (12.7)       (53.6)       (47.2)
                                                             --------   --------   ----------   ----------
INCOME FROM CONTINUING OPERATIONS
    BEFORE INCOME TAXES                                          49.8      100.0        424.2        525.1
INCOME TAXES                                                     18.6       37.5        159.0        199.2
                                                             --------   --------   ----------   ----------
INCOME FROM CONTINUING OPERATIONS                                31.2       62.5        265.2        325.9
                                                             --------   --------   ----------   ----------
Income (Loss) from Discontinued Operations - net of taxes         6.0        1.2          2.3         (0.2)
Gain (Loss) on Disposition of Discontinued Operations -
    net of taxes                                                 (0.8)      30.9         (0.8)       (50.1)
Change in Accounting - net of taxes                                 -          -            -        (16.8)
                                                             --------   --------   ----------   ----------
NET INCOME                                                   $   36.4   $   94.6   $    266.7   $    258.8
                                                             ========   ========   ==========   ==========
</TABLE>


The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.


                                       3

<PAGE>

ITEM 1. FINANCIAL STATEMENTS (continued)

COLUMBIA ENERGY GROUP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                         SEPTEMBER 30,  December 31,
(in millions)                                                                 2004          2003
--------------------------------------------------------------           -------------  ------------
                                                                          (unaudited)
<S>                                                                      <C>            <C>
ASSETS
PROPERTY, PLANT AND EQUIPMENT
    Utility Plant                                                          $  8,302.8    $  8,248.9
    Accumulated depreciation and amortization                                (3,705.7)     (3,696.4)
                                                                           ----------    ----------
    Net utility plant                                                         4,597.1       4,552.5
                                                                           ----------    ----------
    Other property, at cost, less accumulated depreciation                        1.8           1.8
                                                                           ----------    ----------
Net Property, Plant and Equipment                                             4,598.9       4,554.3
                                                                           ----------    ----------

INVESTMENTS AND OTHER ASSETS
    Assets of discontinued operations and assets held for sale                   19.2          20.7
    Unconsolidated affiliates                                                    35.2          33.5
    Other investments                                                            42.0          40.9
                                                                           ----------    ----------
Total Investments                                                                96.4          95.1
                                                                           ----------    ----------

CURRENT ASSETS
    Cash and cash equivalents                                                    20.9          13.7
    Cash invested in the NiSource money pool                                    307.1          56.2
    Restricted cash                                                               0.6           3.6
    Accounts receivable (less reserves of $9.1 and $15.5, respectively)         145.4         301.6
    Accounts receivable - affiliated                                             31.2          33.1
    Unbilled revenue (less reserves of $5.0 and $2.1, respectively)              31.7         145.8
    Gas inventory                                                               389.9         246.3
    Underrecovered gas and fuel costs                                           141.6         163.7
    Materials and supplies, at average cost                                      20.9          22.2
    Price risk management assets                                                 53.6          35.2
    Exchange gas receivable                                                     123.9         145.1
    Regulatory assets                                                            96.7          92.0
    Prepayments and other                                                        40.2          75.8
                                                                           ----------    ----------
Total Current Assets                                                          1,403.7       1,334.3
                                                                           ----------    ----------

OTHER ASSETS
    Price risk management assets                                                122.9         110.5
    Regulatory assets                                                           348.5         338.7
    Intangible assets, less accumulated amortization                                -           0.9
    Deferred charges and other                                                  105.7          89.1
                                                                           ----------    ----------
Total Other Assets                                                              577.1         539.2
                                                                           ----------    ----------
TOTAL ASSETS                                                               $  6,676.1    $  6,522.9
                                                                           ==========    ==========
</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.

                                       4

<PAGE>

ITEM 1. FINANCIAL STATEMENTS (continued)

COLUMBIA ENERGY GROUP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)

<TABLE>
<CAPTION>
                                                                       SEPTEMBER 30,   December 31,
(in millions)                                                              2004            2003
------------------------------------------------------                 -------------   ------------
                                                                       (unaudited)
<S>                                                                    <C>             <C>
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common Stock Equity                                                     $  2,823.7      $  2,568.6
Long-term debt, excluding amounts due within one year                      1,356.6         1,368.1
                                                                        ----------      ----------
Total Capitalization                                                       4,180.3         3,936.7
                                                                        ----------      ----------

CURRENT LIABILITIES
    Current portion of long-term debt                                          0.3             0.3
    Accounts payable                                                         115.7           206.9
    Accounts payable - affiliated                                             18.9            25.8
    Customer deposits                                                         23.1            24.2
    Taxes accrued                                                            114.4           147.1
    Interest accrued                                                          36.5            13.6
    Overrecovered gas and fuel costs                                           7.9             2.3
    Price risk management liabilities                                          6.6             3.3
    Exchange gas payable                                                     248.0           288.4
    Deferred revenue                                                          23.6            19.6
    Regulatory liabilities                                                    29.8            71.3
    Accrued liability for postretirement and postemployment benefits          18.0            22.8
    Other accruals                                                           281.4           295.4
                                                                        ----------      ----------
Total Current Liabilities                                                    924.2         1,121.0
                                                                        ----------      ----------

OTHER LIABILITIES AND DEFERRED CREDITS
    Deferred income taxes                                                    807.0           747.3
    Deferred investment tax credits                                           25.8            26.9
    Deferred credits                                                          50.3            49.1
    Deferred revenue                                                          93.2           112.9
    Accrued liability for postretirement and postemployment benefits          92.4           103.1
    Regulatory liabilities and other cost of removal                         378.4           309.1
    Other noncurrent liabilities                                             124.5           116.8
                                                                        ----------      ----------
Total Other                                                                1,571.6         1,465.2
                                                                        ----------      ----------
COMMITMENTS AND CONTINGENCIES                                                    -               -
                                                                        ----------      ----------
TOTAL CAPITALIZATION AND LIABILITIES                                    $  6,676.1      $  6,522.9
                                                                        ==========      ==========
</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.

                                       5

<PAGE>

ITEM 1. FINANCIAL STATEMENTS (continued)

COLUMBIA ENERGY GROUP AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
Nine Months Ended September 30, (in millions)                          2004       2003
---------------------------------------------                        --------   --------
<S>                                                                  <C>        <C>
OPERATING ACTIVITIES
    Net Income                                                       $  266.7   $  258.8
    Adjustments to reconcile net income to net cash from
      continuing operations:
      Depreciation and amortization                                     125.4      122.3
      Net changes in price risk management assets and liabilities         6.7      (18.2)
      Deferred income taxes and investment tax credits                   40.3       53.7
      Deferred revenue                                                  (15.7)      (6.8)
      Amortization of unearned compensation                               0.6        0.4
      Loss (Gain) on sale of assets                                       0.2      (16.0)
      Change in accounting                                                  -       16.8
      Loss from sale of discontinued operations                           0.8       50.1
      Loss (Income) from discontinued operations                         (2.3)       0.2
      Other                                                              (1.2)      (1.2)
    Changes in assets and liabilities:
      Restricted cash                                                     3.0       21.6
      Accounts receivable, net                                          248.2      191.2
      Inventories                                                      (142.3)    (155.9)
      Accounts payable                                                 (104.8)    (108.2)
      Customer deposits                                                  (1.1)      (0.3)
      Taxes accrued                                                     (31.1)      (8.2)
      Interest accrued                                                   22.9       38.0
      (Under) Overrecovered gas and fuel costs                           27.7       21.7
      Exchange gas receivable/payable                                    23.1     (211.3)
      Other accruals                                                    (17.3)     (26.2)
      Prepayments and other current assets                               34.3       47.8
      Regulatory assets/liabilities                                      25.8       21.7
      Postretirement and postemployment benefits                        (14.7)     (30.4)
      Deferred credits                                                    1.2        4.2
      Deferred charges and other noncurrent assets                      (14.3)      (3.9)
      Other noncurrent liabilities                                        7.2      (38.0)
                                                                     --------   --------
Net Cash from Continuing Operations                                     489.3      223.9
                                                                     --------   --------
Net Cash used for Discontinued Operations                                   -      (89.4)
                                                                     --------   --------
Net Cash from Operating Activities                                      489.3      134.5
                                                                     --------   --------
INVESTMENT ACTIVITIES
    Capital expenditures                                               (177.8)    (163.6)
    Proceeds from disposition of assets                                   2.2      432.7
    Other investing activities                                           (5.6)     (22.0)
                                                                     --------   --------
Net Cash Flows (used for) or from Investment Activities                (181.2)     247.1
                                                                     --------   --------
FINANCING ACTIVITIES
    Changes in short-term debt                                              -       (0.8)
    Dividends paid - common shares                                      (50.0)         -
                                                                     --------   --------
Net Cash Flows used for Financing Activities                            (50.0)      (0.8)
                                                                     --------   --------
Increase in cash and cash equivalents                                   258.1      380.8
Cash and temporary cash investments at beginning of year                 69.9       14.5
                                                                     --------   --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                           $  328.0   $  395.3
                                                                     ========   ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
    Cash paid for interest                                               49.0       45.3
    Interest capitalized                                                  1.2        1.2
    Cash paid for income taxes                                           82.2       93.7
                                                                     --------   --------
</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.

                                       6

<PAGE>

ITEM 1. FINANCIAL STATEMENTS (continued)

COLUMBIA ENERGY GROUP AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED)

<TABLE>
<CAPTION>
                                                                   Three Months                  Nine Months
                                                                Ended September 30,          Ended September 30,
                                                               ---------------------       ----------------------
 (in millions)                                                   2004         2003           2004          2003
--------------------------------------------------------       -------      --------       --------      --------
<S>                                                            <C>          <C>            <C>           <C>
Net Income                                                     $  36.4      $   94.6       $  266.7      $  258.8
    Other comprehensive income, net of tax
      Foreign currency translation adjustment                        -          (0.6)             -           0.9
      Net unrealized gains (losses) on cash flow hedges           14.2         (11.5)          27.2          17.8
      Net gain on available for sale securities                    0.3           0.5              -           0.5
      Minimum pension liability adjustment                           -          19.8              -          19.8
                                                               -------      --------       --------      --------
    Total other comprehensive income, net of tax                  14.5           8.2           27.2          39.0
                                                               -------      --------       --------      --------
Total Comprehensive Income                                     $  50.9      $  102.8       $  293.9      $  297.8
                                                               -------      --------       --------      --------
</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.

                                       7

<PAGE>

ITEM 1. FINANCIAL STATEMENTS (continued)

COLUMBIA ENERGY GROUP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1.    BASIS OF ACCOUNTING PRESENTATION

Columbia Energy Group (Columbia) is a subsidiary of NiSource Inc. (NiSource).
NiSource is an energy holding company that provides natural gas, electricity and
other products and services to approximately 3.7 million customers located
within a corridor that runs from the Gulf Coast through the Midwest to New
England. NiSource is a Delaware corporation and a registered holding company
under the Public Utility Holding Company Act of 1935, as amended.

The accompanying unaudited consolidated financial statements for Columbia
reflect all normal recurring adjustments that are necessary, in the opinion of
management, to present fairly the results of operations in accordance with
accounting principles generally accepted in the United States of America.

The accompanying financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in Columbia's
Annual Report on Form 10-K for the fiscal year ended December 31, 2003. Income
for interim periods may not be indicative of results for the calendar year due
to weather variations and other factors. Certain reclassifications have been
made to the 2003 financial statements to conform to the 2004 presentation.

2.    REGULATORY MATTERS

Through October 2004, Columbia Gas of Ohio, Inc. (Columbia of Ohio) operated
under a regulatory stipulation approved by the Public Utilities Commission of
Ohio (PUCO). On October 9, 2003, Columbia of Ohio and other parties filed with
the PUCO an amended stipulation that would govern Columbia of Ohio's regulatory
framework from November 2004 through October 2010. The majority of Columbia of
Ohio's contracts with interstate pipelines expired in October 2004, and the
amended stipulation would have permitted Columbia of Ohio to renew those
contracts for firm capacity sufficient to meet up to 100% of the design peak day
requirements through October 31, 2005 and up to 95% of the design peak day
requirements through October 31, 2010. Among other things, the amended
stipulation would also have: (1) extended Columbia of Ohio's CHOICE(R) program
through October 2010; (2) provided Columbia of Ohio with an opportunity to
generate revenues sufficient to cover the stranded costs associated with the
CHOICE(R) program; and (3) allowed Columbia of Ohio to record post-in-service
carrying charges on plant placed into service after October 2004, and to defer
the property taxes and depreciation associated with such plant.

On March 11, 2004, the PUCO issued an order that adopted and modified the
stipulation from Columbia of Ohio and a collaborative of parties. The order
extended Columbia of Ohio's CHOICE(R) program only through December 31, 2007 and
declined to pre-approve the amount of interstate pipeline firm capacity for
which Columbia of Ohio could contract. In addition, the PUCO made other
modifications which would limit Columbia of Ohio's ability to generate
additional revenues sufficient to cover stranded costs, including declining to
mandate that natural gas marketers participating in the CHOICE(R) program obtain
75% of their interstate capacity directly from Columbia of Ohio and changing the
allocation of revenues generated through off-system sales. The order allowed
Columbia of Ohio to record post-in-service carrying charges on plant placed in
service after October 2004 and allowed the deferral of property taxes and
depreciation associated with such plant.

On April 9, 2004, Columbia of Ohio and other signatory parties to the
stipulation, consistent with standard regulatory process, petitioned the PUCO
for rehearing on the components which were modified in the order. That same day
the Office of the Ohio Consumers' Counsel (OCC) also filed an application for
rehearing, and argued that the PUCO should not have permitted Columbia of Ohio
to record post-in-service carrying charges on plant placed into service after
October 2004, and to defer the property taxes and depreciation associated with
such plant. On April 19, 2004, the OCC filed a motion to dismiss the application
for rehearing filed by Columbia of Ohio and other parties.

                                       8

<PAGE>

ITEM 1. FINANCIAL STATEMENTS (continued)

COLUMBIA ENERGY GROUP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited)

On May 5, 2004, the PUCO issued an order on rehearing, in which it denied the
OCC's motion to dismiss and its application for rehearing. The PUCO granted, in
part, the joint application filed by Columbia of Ohio and others. In granting
the joint application for rehearing, in part, the PUCO did the following: (1)
revised the term of the stipulation so that it runs through October 31, 2008;
(2) restored the mandate that required natural gas marketers participating in
the CHOICE(R) program obtain 75% of their interstate capacity directly from
Columbia of Ohio; and (3) revised the mechanism applicable to Columbia of Ohio's
sharing of off-system sales and capacity release revenue. Under the revised
off-system sales/capacity release revenue sharing mechanism, Columbia of Ohio
must now begin sharing such revenue with the customers when the annual revenue
exceeds $25 million, instead of $35 million as originally proposed by Columbia
of Ohio and other collaborative parties.

In a letter docketed on May 12, 2004, Columbia of Ohio and the other signatory
parties to the stipulation accepted the PUCO's modifications. On May 14, 2004,
the OCC filed a Second Application for Rehearing. In the pleading, the OCC
argued that the joint applicants did not meet the statutory requirements for an
application for rehearing, and thus the PUCO's order on rehearing granting
rehearing was unlawful. The OCC also argued that the rehearing was the result of
exclusionary settlement negotiations. The OCC continued to disagree with the
PUCO's treatment of off-system sales and capacity release revenues, and
post-in-service carrying charges and related deferrals.

On June 3, 2004, Columbia of Ohio filed its proposed tariffs and accounting, as
required. On June 9, 2004, the PUCO denied the OCC's Second Application for
Rehearing. On July 29, 2004, the OCC filed an appeal with the Supreme Court of
Ohio, contesting the PUCO's May 5, 2004 order on rehearing, which granted in
part Columbia of Ohio's joint application for rehearing, and the PUCO's June 9,
2004 order, denying the OCC's Second Application for Rehearing. On August 4,
2004, Columbia of Ohio moved to intervene in the appellate proceeding.

On December 17, 2003, the PUCO approved an application by Columbia of Ohio and
other Ohio local distribution companies (LDCs) to establish a tracking mechanism
that will provide for recovery of current bad debt expense and for the recovery
over a five-year period of previously deferred uncollected accounts receivable.
As of September 30, 2004, Columbia of Ohio has $48 million of uncollected
accounts receivable pending future recovery. On October 1, 2004 Columbia of Ohio
filed an application for approval to increase its Uncollectible Expense Rider.
On October 20, 2004 the PUCO issued an Entry that approved this request.
The PUCO's approval of this request will result in Columbia's commencement
of recovery in November 2004 of the aforementioned deferred uncollectible
accounts receivables and future bad-debt recovery requirements.

On June 11, 2004, Columbia Gas of Pennsylvania, Inc. (Columbia of Pennsylvania)
signed a settlement agreement (Settlement Agreement) in its annual gas cost
recovery proceeding with The Office of Consumer Advocate, The Office of Small
Business Advocate, The Office of Trial Staff, and Commercial & Industrial
Intervenors. Under the Settlement Agreement, the signatory parties agreed to
financial incentive mechanisms for off-system sales and capacity release
transactions performed by Columbia of Pennsylvania. Under the incentive
mechanism, customers receive 100% of the total combined proceeds from off-system
sales and capacity release transactions up to a benchmark of $6 million. After
the benchmark is reached, Columbia of Pennsylvania will retain 50% of proceeds
from the transactions; however, Columbia of Pennsylvania may never retain more
than 40% of the actual net proceeds generated from off-system sales and capacity
release transactions. The incentive mechanism begins October 1, 2004 and ends on
September 30, 2006. On September 10, 2004, the Pennsylvania Public Utility
Commission approved the Settlement Agreement.

3.    RESTRUCTURING ACTIVITIES

Since 2000, Columbia has implemented restructuring initiatives to streamline its
operations and realize efficiencies from the acquisition of Columbia by
NiSource. The restructuring activities were primarily associated with reductions
in headcount and facility exit costs.

For all of the restructuring plans, a total of approximately 915 management,
professional, administrative and technical positions have been identified for
elimination. As of September 30, 2004, approximately 900 employees were
terminated, of whom no employees and 3 employees were terminated during the
quarter and nine months ended September 30, 2004, respectively. As of September
30, 2004 and December 31, 2003, the consolidated balance sheets reflected
liabilities of $14.4 million and $17.2 million related to the restructuring
plans, respectively. During the

                                       9

<PAGE>

ITEM 1. FINANCIAL STATEMENTS (continued)

COLUMBIA ENERGY GROUP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited)

quarter and nine months ended September 30, 2004, $0.9 million and $3.6 million
in payments were made, respectively, in association with the restructuring
plans. Adjustments of $0.1 million and $0.8 million were made for the quarter
and nine months ended September 30, 2004, respectively, increasing the
restructuring liability for facility exit costs. Of the remaining restructuring
liability, $12.3 million is related to facility exit costs.

4.    ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

In May 2004, Columbia Gas Transmission Corporation (Columbia Transmission)
identified certain facilities as being non-core to the operation of the pipeline
system. As a result, Columbia Transmission is in the process of selling these
facilities to third parties. Columbia has accounted for the assets of these
facilities, with a net book value of approximately $14.2 million, as assets held
for sale. During the third quarter of 2004, $1.1 million of these assets were
sold for a nominal amount.

On August 29, 2003, Columbia sold its exploration and production subsidiary,
Columbia Energy Resources, Inc. (CER), to a subsidiary of Triana Energy Holdings
(Triana). Under the CER sales agreement, Triana, an affiliate of Morgan Stanley
Dean Witter Capital Partners IV, L.P. (MSCP), purchased all of the stock of CER
for $330 million, plus the assumption of obligations to deliver approximately 94
billion cubic feet of natural gas pursuant to existing forward sales contracts.
The sale transferred 1.1 trillion cubic feet of natural gas reserves.
Approximately $220 million of after-tax cash proceeds from the sale were used to
reduce NiSource's debt. In addition, a $213 million liability related to the
forward sales contracts was removed from the balance sheet. On January 28, 2003,
Columbia's former subsidiary Columbia Natural Resources, Inc. sold its interest
in certain natural gas exploration and production assets in New York for
approximately $95 million. Columbia has accounted for CER as discontinued
operations and has adjusted all periods presented accordingly.

During 2002, Columbia decided to exit the telecommunications business. The
results of operations related to Columbia Transmission Communications
Corporation (Transcom) were displayed as discontinued operations on Columbia's
consolidated income statement and its assets and liabilities were separately
aggregated and reflected as assets and liabilities of discontinued operations on
the consolidated balance sheets. On September 15, 2003, Columbia sold 100% of
its shares in Transcom.

Results from discontinued operations of CER (including the New York State
properties) and Transcom are provided in the following table:

<TABLE>
<CAPTION>
                                                       Ended September 30,          Ended September 30,
                                                      ---------------------       ----------------------
(in millions)                                           2004         2003           2004          2003
----------------------------------------------        -------       -------       -------       --------
<S>                                                   <C>           <C>           <C>           <C>
REVENUES FROM DISCONTINUED OPERATIONS                 $     -       $  26.1       $     -       $  104.1
                                                      -------       -------       -------       --------

(Loss) Income from discontinued operations               (5.1)         (3.4)        (10.8)           1.8
Income tax                                              (11.1)         (4.6)        (13.1)           2.0
                                                      -------       -------       -------       --------
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS        $   6.0       $   1.2       $   2.3       $   (0.2)
                                                      -------       -------       -------       --------
</TABLE>

The assets held for sale and assets of discontinued operations were net
property, plant, and equipment of $19.2 million and $20.7 million at September
30, 2004 and December 31, 2003, respectively.

5.    RISK MANAGEMENT ACTIVITIES

Columbia uses commodity-based derivative financial instruments to manage certain
risks in its business. Columbia accounts for its derivatives under Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended, (SFAS No. 133.)

                                       10

<PAGE>

ITEM 1. FINANCIAL STATEMENTS (continued)

COLUMBIA ENERGY GROUP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited)

HEDGING ACTIVITIES. The activity for the third quarter and nine months ended
September 30, 2004 and September 30, 2003 affecting accumulated other
comprehensive income, with respect to cash flow hedges included the following:

<TABLE>
<CAPTION>
                                                                        Three Months                 Nine Months
                                                                     Ended September 30,          Ended September 30,
                                                                   ----------------------       ----------------------
(in millions, net of tax)                                            2004          2003           2004          2003
----------------------------------------------------------         --------       -------       --------       -------
<S>                                                                <C>            <C>           <C>            <C>
Net unrealized gains on derivatives qualifying as cash flow
    hedges at the beginning of the period                          $  100.6       $  94.3       $   87.6       $  65.0

Unrealized hedging gains (losses) arising during the period
     on derivatives qualifying as cash flow hedges                     20.8         (12.1)          47.1          22.6

Reclassification adjustment for net gain (loss) included
    in net income                                                      (6.6)          0.6          (19.9)         (4.8)
                                                                   --------       -------       --------       -------
Net unrealized gains on derivatives qualifying as cash flow
     hedges at the end of the period                               $  114.8       $  82.8       $  114.8       $  82.8
                                                                   --------       -------       --------       -------
</TABLE>

Unrealized gains and losses on Columbia's hedges were recorded as price risk
management assets and liabilities. The accompanying consolidated balance sheets
reflected price risk management assets related to unrealized gains on hedges of
$176.5 million and $145.7 million at September 30, 2004 and December 31, 2003,
respectively, of which $53.6 million and $35.2 million were included in "Current
Assets" and $122.9 million and $110.5 million were included in "Other Assets."

For regulatory incentive purposes, the Columbia LDCs, comprised of Columbia Gas
of Kentucky, Inc., Columbia Gas of Maryland, Inc., Columbia of Ohio, Columbia of
Pennsylvania, and Columbia Gas of Virginia, Inc. enter into contracts that allow
counterparties the option to sell gas to Columbia LDCs at first of the month
prices for a particular month of delivery. Columbia LDCs charge the
counterparties a fee for this option. The changes in the fair value of the
options are primarily due to the changing expectations of the future intra-month
volatility of gas prices. Columbia LDCs defer a portion of the change in the
fair value of the options as either a regulatory asset or liability in
accordance with SFAS No. 71, "Accounting for the Effects of Certain Types of
Regulation." The remaining change is recognized currently in earnings. The
consolidated balance sheets reflected $6.6 million and $3.3 million of price
risk management liabilities associated with the programs at September 30, 2004
and December 31, 2003, respectively.

During the third quarter 2004, no amounts were recognized in earnings due to the
change in value of certain derivative instruments, and there were no components
of the derivatives' fair values excluded in the assessment of hedge
effectiveness. Also, during the third quarter, Columbia reclassified no amounts
from other comprehensive income to earnings, due to the probability that certain
forecasted transactions would not occur. It is anticipated that during the next
twelve months the expiration and settlement of cash flow hedge contracts will
result in income recognition of amounts currently classified in other
comprehensive income of approximately $28.8 million, net of tax.

On May 12, 2004, Columbia terminated fixed-to-variable interest rate swap
agreements in a notional amount of $663.0 million with five counterparties.
Columbia received an aggregate settlement payment of $1.8 million, which is
being amortized as a reduction to interest expense over the remaining term of
the underlying debt.

                                       11

<PAGE>

ITEM 1. FINANCIAL STATEMENTS (continued)

COLUMBIA ENERGY GROUP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited)

6.    RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

FINANCIAL ACCOUNTING STANDARDS BOARD (FASB) INTERPRETATION NO. 46 (REVISED
DECEMBER 2003) -- CONSOLIDATION OF VARIABLE INTEREST ENTITIES. On January 17,
2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest
Entities" (FIN 46R). FIN 46R requires a variable interest entity to be
consolidated by a company if that company is subject to a majority of the risk
of loss from the variable interest entity's activities or is entitled to receive
a majority of the entity's residual returns. A company that consolidates a
variable interest entity is called the primary beneficiary of that entity. In
general, a variable interest entity is a corporation, partnership, trust, or any
other legal structure used for business purposes that either (a) does not have
equity investors with voting rights, or (b) has equity investors that do not
provide sufficient financial resources for the entity to support its activities.
FIN 46R also requires various disclosures about variable interest entities that
a company is not required to consolidate but in which it has a significant
variable interest. On December 18, 2003, the FASB deferred the implementation of
FIN 46R to the first quarter of 2004. The adoption of FIN 46R on January 1, 2004
did not have an effect on Columbia's financial position or results of
operations.

FASB STAFF POSITION (FSP) NO. FAS 106-2 -- ACCOUNTING AND DISCLOSURE
REQUIREMENTS RELATED TO THE MEDICARE PRESCRIPTION DRUG, IMPROVEMENT AND
MODERNIZATION ACT OF 2003 (FSP 106-2). (SUPERSEDES FSP 106-1-- ACCOUNTING AND
DISCLOSURE REQUIREMENTS RELATED TO THE MEDICARE PRESCRIPTION DRUG, IMPROVEMENT
AND MODERNIZATION ACT OF 2003.) On December 8, 2003, the President of the United
States signed the Medicare Prescription Drug, Improvement and Modernization Act
into law. The Act introduces a prescription drug benefit under Medicare
(Medicare Part D) as well as a federal subsidy to sponsors of retiree health
care benefit plans that provide a benefit that is at least actuarially
equivalent to Medicare Part D. FASB Statement No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," requires presently enacted
changes in relevant laws to be considered in current period measurements of
postretirement benefit costs and the Accumulated Projected Benefit Obligation.
FSP 106-2 is effective for the first interim or annual period beginning after
June 15, 2004. Columbia had previously elected to defer accounting for the
effects of this pronouncement, as allowed by FSP 106-1. On July 1, 2004,
Columbia adopted the provisions of FSP 106-2. The impact of accounting for the
federal subsidy was not material to Columbia's financial position or results of
operations.

7.    LEGAL PROCEEDINGS

In the normal course of its business, Columbia and its subsidiaries have been
named as defendants in various legal proceedings. In the opinion of management,
the ultimate disposition of these currently asserted claims will not have a
material adverse impact on Columbia's consolidated financial position. Please
see Item 1, Part II, "Legal Proceedings," contained herein for more specific
information regarding current legal matters.

8.    ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table displays the components of Accumulated Other Comprehensive
Income, which is included in "Common Stock Equity," on the consolidated balance
sheets.

<TABLE>
<CAPTION>
                                                      SEPTEMBER 30,  December 31,
(in millions)                                              2004         2003
-------------------------------------------------     -------------  ------------
<S>                                                   <C>            <C>
Net unrealized gains on cash flow hedges                 $  114.8      $  87.7
Net Gain on available for sale securities                     0.3          0.4
                                                         --------      -------
TOTAL ACCUMULATED OTHER COMPREHENSIVE INCOME, NET        $  115.1      $  88.1
                                                         --------      -------
</TABLE>

                                       12

<PAGE>

ITEM 1. FINANCIAL STATEMENTS (continued)

COLUMBIA ENERGY GROUP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited)

9.    GUARANTEES AND INDEMNITIES

As a part of normal business, Columbia and certain subsidiaries enter into
various agreements providing financial or performance assurance to third parties
on behalf of other subsidiaries. Such agreements include guarantees. These
agreements are entered into primarily to support or enhance the creditworthiness
otherwise attributed to a subsidiary on a stand-alone basis, thereby
facilitating the extension of sufficient credit to accomplish the subsidiaries'
intended commercial purposes. The total commercial commitments in existence at
September 30, 2004 and the years in which they expire are:

<TABLE>
<CAPTION>
(in millions)                            Total           2004         2005          2006          2007        2008          After
--------------------------------        --------        ------      --------      --------      -------     --------      --------
<S>                                     <C>             <C>         <C>           <C>           <C>         <C>           <C>
Guarantees supporting commodity
    transactions of subsidiaries        $  773.3        $    -      $   50.0      $  542.9      $  32.8     $   53.0      $   94.6
Other guarantees                           154.6                        50.4             -            -            -         104.2
                                        --------        ------      --------      --------      -------     --------      --------
Total commercial commitments            $  927.9        $    -      $  100.4      $  542.9      $  32.8     $   53.0      $  198.8
                                        --------        ------      --------      --------      -------     --------      --------
</TABLE>

Columbia has issued guarantees, which support up to approximately $773.3 million
in commodity-related payments of forward gas sales agreements of a current
subsidiary and a former subsidiary and other commodity based guarantees. These
guarantees were provided to counterparties in order to facilitate physical and
financial transactions involving natural gas. To the extent liabilities exist
under the commodity-related contracts subject to these guarantees, such
liabilities are included in the consolidated balance sheets.

Columbia also has purchase and sales agreement guarantees totaling $137.5
million, which guarantee performance of the seller's covenants, agreements,
obligations, liabilities, representations and warranties under the agreements.
No amounts related to the purchase and sales agreement guarantees are reflected
in the consolidated balance sheet.

Management believes that the likelihood Columbia would be required to perform or
otherwise incur any significant losses associated with any of the aforementioned
guarantees is remote.

Columbia has retained liabilities related to the CER forward gas sales
agreements with Mahonia II Limited (Mahonia) for guarantees of the forward sales
and for indemnity agreements with respect to surety bonds backing the forward
sales. The guarantees, surety bonds and associated indemnity agreements remain
in place subsequent to the closing of the CER sale and decline over time as
volumes are delivered in satisfaction of the contractual obligations, ending in
February 2006. Columbia will be indemnified by Triana, and MSCP will fund up to
a maximum of $221 million of additional equity to Triana to support Triana's
indemnity, for Triana's gas delivery and related obligations to Mahonia. The
MSCP commitment declines over time in concert with the surety bonds and the
guaranteed obligation to deliver gas to Mahonia.

Immediately after the closing of the sale, Triana owned approximately 1.1 Tcf of
proved reserves, and was capitalized with $330 million, approximately $200
million of which was provided as initial equity by MSCP and the remainder of
which is provided as part of a $500 million revolving credit facility. Columbia
believes that the combination of Triana's proved reserves, sufficient
capitalization, and access to the credit facility, combined with the Triana
indemnity and the $221 million of further commitments to Triana from MSCP,
adequately offset any risk of losses that may be incurred by Columbia due to
Triana's non-performance under the Mahonia agreements. Accordingly, Columbia has
not recognized a liability related to the retention of the Mahonia guarantees.

10.   PENSION AND OTHER POSTRETIREMENT BENEFITS

Columbia used a measurement date of September 30, 2003 for the calculation of
its obligations under the pension and other postretirement benefit plans. The
following table provides the components of the plans' net periodic benefits cost
(benefit) for the third quarter and nine months ended September 30, 2004 and
September 30, 2003:

                                       13

<PAGE>

ITEM 1. FINANCIAL STATEMENTS (continued)

COLUMBIA ENERGY GROUP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited)

<TABLE>
<CAPTION>
                                                    PENSION BENEFITS             OTHER BENEFITS
                                                  ---------------------       -------------------
Three months ended September 30, (in millions)      2004          2003         2004         2003
----------------------------------------------    -------       -------       ------       ------
<S>                                               <C>           <C>           <C>          <C>
NET PERIODIC COST
    Service cost                                  $   4.8       $   4.3       $  1.1       $  0.9
    Interest cost                                    12.5          12.9          5.2          4.9
    Expected return on assets                       (15.8)        (14.2)        (3.2)        (2.2)
    Amortization of prior service cost                0.2           0.1          0.1         (0.1)
    Recognized actuarial  loss                        0.3           0.8          0.5          0.2
                                                  -------       -------       ------       ------
NET PERIODIC BENEFITS COST                        $   2.0       $   3.9       $  3.7       $  3.7
                                                  -------       -------       ------       ------
</TABLE>

<TABLE>
<CAPTION>
                                                    PENSION BENEFITS             OTHER BENEFITS
                                                  ---------------------       -------------------
Nine months ended September 30, (in millions)      2004          2003          2004         2003
---------------------------------------------     -------       -------       ------       ------
<S>                                               <C>           <C>           <C>          <C>
NET PERIODIC COST
    Service cost                                  $  14.4       $  12.9       $  3.3       $  2.7
    Interest cost                                    37.5          38.7         15.6         14.7
    Expected return on assets                       (47.4)        (42.6)        (9.6)        (6.6)
    Amortization of prior service cost                0.6           0.3          0.3         (0.3)
    Recognized actuarial  loss                        0.9           2.4          1.5          0.6
                                                  -------       -------       ------       ------
NET PERIODIC BENEFITS COST                        $   6.0       $  11.7       $ 11.1       $ 11.1
                                                  -------       -------       ------       ------
</TABLE>

Columbia made a $14.9 million contribution to its pension plans and expects to
contribute $25.6 million to its postretirement medical and life plans in 2004.

11.   SALE OF TRADE RECEIVABLES

On May 14, 2004, Columbia of Ohio entered into an agreement to sell, without
recourse, substantially all of its trade receivables, as they originate, to
Columbia of Ohio Receivables Corporation (CORC), a wholly-owned subsidiary of
Columbia of Ohio. CORC, in turn, is party to an agreement, also dated May 14,
2004, in which it sells an undivided percentage ownership interest in the
accounts receivable to a commercial paper conduit sponsored by Dresdner
Kleinwort Wasserstein. The conduit can purchase up to $300 million of accounts
receivable under the agreement. The agreements, which replaced prior similar
agreements, expire in May 2005, but can be renewed if mutually agreed to by both
parties. As of September 30, 2004, $43.5 million of accounts receivable had been
sold by CORC.

12.   BUSINESS SEGMENT INFORMATION

Operating segments are components of an enterprise for which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.

During the second quarter 2003, Columbia re-aligned its reportable segments to
reflect the announced sale of its exploration and production operations. As of
the second quarter 2003, Columbia no longer reported an Exploration and
Production Operations segment. All periods have been adjusted to conform with
the realignment.

Columbia's operations are divided into three primary business segments. The Gas
Distribution Operations segment provides natural gas service and transportation
for residential, commercial and industrial customers in Ohio, Pennsylvania,
Virginia, Kentucky and Maryland. The Gas Transmission and Storage Operations
segment offers gas transportation and storage services for LDCs, marketers and
industrial and commercial customers located in northeastern, mid-Atlantic,
midwestern and southern states and the District of Columbia. The Other
Operations segment primarily includes ventures focused on energy-related
services.

                                       14

<PAGE>

ITEM 1. FINANCIAL STATEMENTS (continued)

COLUMBIA ENERGY GROUP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited)

The following tables provide information about Columbia's business segments.
Columbia uses operating income (loss) as its primary measurement for each of the
reporting segments. Segment revenues include intersegment sales to affiliated
subsidiaries, which are eliminated in consolidation. Affiliated sales are
recognized on the basis of prevailing market prices, regulated prices or at
levels provided for under contractual agreements. Operating income is derived
from revenues and expenses directly associated with each segment.

<TABLE>
<CAPTION>
                                            Three Months                     Nine Months
                                         Ended September 30,             Ended September 30,
                                       -----------------------       ---------------------------
(in millions)                            2004           2003            2004             2003
-------------------------------        --------       --------       ----------       ----------
<S>                                    <C>            <C>            <C>              <C>
REVENUES
GAS DISTRIBUTION
    Unaffiliated                       $  229.9       $  197.5       $  1,771.0       $  1,746.0
    Intersegment and affiliates               -              -                -                -
                                       --------       --------       ----------       ----------
Total                                     229.9          197.5          1,771.0          1,746.0
                                       --------       --------       ----------       ----------
TRANSMISSION AND STORAGE
    Unaffiliated                          131.9          135.8            429.5            438.6
    Intersegment and affiliates            52.4           48.8            170.8            166.4
                                       --------       --------       ----------       ----------
Total                                     184.3          184.6            600.3            605.0
                                       --------       --------       ----------       ----------
OTHER
    Unaffiliated                           15.7            9.8             50.5             23.9
    Intersegment and affiliates             0.1            0.1              0.2              0.2
                                       --------       --------       ----------       ----------
Total                                      15.8            9.9             50.7             24.1
                                       --------       --------       ----------       ----------
Adjustments and eliminations              (49.6)         (46.3)          (161.8)          (159.2)
                                       --------       --------       ----------       ----------
CONSOLIDATED REVENUES                  $  380.4       $  345.7       $  2,260.2       $  2,215.9
                                       --------       --------       ----------       ----------
OPERATING INCOME (LOSS)
    Gas Distribution                   $    1.8       $    8.9       $    217.3       $    262.8
    Transmission and Storage               68.2           91.1            251.6            289.4
    Other                                  (0.1)           0.7             (0.7)               -
    Corporate                              (0.9)          12.0              9.6             20.1
                                       --------       --------       ----------       ----------
OPERATING INCOME                       $   69.0       $  112.7       $    477.8       $    572.3
                                       --------       --------       ----------       ----------
</TABLE>

                                       15

<PAGE>

ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

COLUMBIA ENERGY GROUP AND SUBSIDIARIES

Columbia Energy Group (Columbia) meets the conditions specified in General
Instruction H(1)(a) and (b) to Form 10-Q and is permitted to use the reduced
disclosure format for wholly-owned subsidiaries of companies, such as NiSource
Inc. (NiSource), that are reporting companies under the Securities Exchange Act
of 1934. Accordingly, this Columbia Management's Narrative Analysis of Results
of Operations is included in this report, and Columbia has omitted from this
report the information called for by Part I. Item 2 (Management's Discussion and
Analysis of Financial Condition and Results of Operations).

NOTE REGARDING FORWARD-LOOKING STATEMENTS

The Management's Narrative Analysis of Results of Operations, including
statements regarding market risk sensitive instruments, contains
"forward-looking statements," within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Investors and prospective investors should understand
that many factors govern whether any forward-looking statement contained herein
will be or can be realized. Any one of those factors could cause actual results
to differ materially from those projected. These forward-looking statements
include, but are not limited to, statements concerning Columbia's plans,
objectives, expected performance, expenditures and recovery of expenditures
through rates, stated on either a consolidated or segment basis, and any and all
underlying assumptions and other statements that are other than statements of
historical fact. From time to time, Columbia may publish or otherwise make
available forward-looking statements of this nature. All such subsequent
forward-looking statements, whether written or oral and whether made by or on
behalf of Columbia, are also expressly qualified by these cautionary statements.
All forward-looking statements are based on assumptions that management believes
to be reasonable; however, there can be no assurance that actual results will
not differ materially.

Realization of Columbia's objectives and expected performance is subject to a
wide range of risks and can be adversely affected by, among other things,
weather, fluctuations in supply and demand for energy commodities, growth
opportunities for Columbia's businesses, increased competition in deregulated
energy markets, dealings with third parties over whom Columbia has no control,
actual operating experience of acquired assets, the regulatory process,
regulatory and legislative changes, changes in general economic, capital and
commodity market conditions, and counter-party credit risk, many of which risks
are beyond the control of Columbia. In addition, the relative contributions to
profitability by each segment, and the assumptions underlying the
forward-looking statements relating thereto, may change over time.

The following Management's Narrative Analysis should be read in conjunction with
Columbia's Annual Report on Form 10-K for the fiscal year ended December 31,
2003.

RESULTS OF OPERATIONS
THE QUARTER ENDED SEPTEMBER 30, 2004

Net Income

Columbia reported net income of $36.4 million for the three months ended
September 30, 2004, compared to net income of $94.6 million for the third
quarter 2003. Operating income was $69.0 million, a decrease of $43.7 million
from the same period in 2003.

Net Revenues

Total consolidated net revenues (gross revenues less cost of sales) for the
three months ended September 30, 2004, were $299.8 million, a $5.0 million
decrease from the same period last year. Gas Distribution net revenues decreased
by $4.3 million primarily due to lower non-traditional revenues of $8.7 million,
including a $2.9 million decrease due to the sale of Columbia Service Partners,
Inc. (Columbia Service Partners) in September 2003, offset by $2.6 million
primarily attributable to increased residential, industrial and commercial usage
and $1.5 million in non-weather related gas sales.

                                       16

<PAGE>

ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued)

COLUMBIA ENERGY GROUP AND SUBSIDIARIES

Expenses

Operating expenses for the third quarter 2004 were $230.8 million, an increase
of $38.7 million from the 2003 period. The increase in operating expenses was
primarily attributable to higher employee and administrative expenses of $9.2
million, including a $5.7 million increase million in pension expense, partly
offset by a decrease in uncollectible expense of $7.0 million largely
attributable to the bad debt cost tracker that was approved for Columbia Gas of
Ohio, Inc. (Columbia of Ohio) in 2003. The 2003 period was favorably impacted by
a $16.2 million gain on the sale of Columbia Service Partners, Inc., a reversal
of $11.0 million in accrued expenses for environmental remediation and insurance
recoveries.

Other Income (Deductions)

Interest expense, net was $26.4 million for the quarter, an increase of $7.9
million compared to the third quarter 2003. The increase was mainly due to a
reduction in interest rate swap savings due to the termination of certain
interest rate swap agreements in the second quarter of 2004.

Income Taxes

Income tax expense for the third quarter 2004 was $18.6 million, a decrease of
$18.9 million compared to the 2003 period, due to lower pre-tax income.

Discontinued Operations

The income from discontinued operations, net of tax, of $6.0 million for the
third quarter 2004 is due mostly to a reduction in estimated state taxes
associated with Columbia's exploration and production subsidiary, Columbia
Energy Resources, Inc. (CER). During the third quarter of 2003, Columbia
recorded a $30.9 million gain on the sale. The sale of CER's interest in natural
gas production properties in New York State was recorded in the first quarter
and estimated taxes and adjustments related to the sale were recorded in the
second quarter making the overall effect of the sales of CER an after-tax loss
of $47.6 million.

RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2004

Net Income

Columbia reported net income of $266.7 million for the nine months ended
September 30, 2004, compared to net income of $258.8 million for the first nine
months of 2003. Operating income was $477.8 million, a decrease of $94.5 million
from the same period in 2003. Columbia's 2004 net income reflects the impact of
the discontinued operations. Columbia's net income for the 2003 period was
negatively affected by a $50.3 million loss in 2003, which included the sale of
CER and a change in accounting of $16.8 million from the cumulative effect of
adopting the Financial Accounting Standards Board statement on asset retirement
obligations.

Net Revenues

Total consolidated net revenues (gross revenues less cost of sales) for the nine
months ended September 30, 2004, were $1,234.8 million, a $53.3 million decrease
from the same period last year. The decrease in net revenues was primarily a
result of lower non-traditional revenues amounting to $19.8 million, including a
$8.5 million decrease due to the sale of Columbia Service Partners in September
2003, reduced residential and commercial natural gas sales and deliveries due to
warmer weather of approximately $15.4 million and lower gross receipt taxes and
cost trackers of $7.7 million, largely offset in operating expenses. Both the
2004 period and the 2003 period reflect lower interruptible transmission service
revenues than those that have been historically realized. Management has
evaluated operational and market conditions, and anticipates that there will be
fewer opportunities for interruptible revenue on an ongoing basis. The
comparable 2003 period was favorably impacted by $7.1 million for a change in
the method of calculating unbilled revenues and adjustments for gas costs
associated with certain customers of $3.8 million.

                                       17

<PAGE>

ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued)

COLUMBIA ENERGY GROUP AND SUBSIDIARIES

Expenses

Operating expenses for the first nine months of 2004 were $757.0 million, an
increase of $41.2 million from the comparable 2003 period. Operation and
maintenance expenses for the first nine months of 2004 were $21.0 million higher
than they were in the 2003 period due to higher employee and administrative
expenses of $18.5 million, of which $5.7 million was attributable to pension
expense, and the impact of the reversal of legal, environmental and other
reserves and accrued expenses of $32.6 million in the 2003 period. These
increases in the current period were partly offset by reduced uncollectible
expense of $11.0 million and insurance recoveries. The 2003 operating expenses
were favorably impacted by a $16.2 million gain on the sale of Columbia Service
Partners.

Other Income (Deductions)

Interest expense, net was $70.7 million for the first nine months of 2004, an
increase of $7.1 million compared to same period in 2003. The increase was
primarily due to the termination of certain interest rate swap agreements.

Income Taxes

Income tax expense for the first nine months of 2004 was $159.0 million, a
decrease of $40.2 million compared to the 2003 period, due to lower pre-tax
income.

Discontinued Operations

Income from discontinued operations, net-of-tax, was $2.3 million for the nine
months ended September 30, 2004. The current period's income from discontinued
operations, net-of-tax, is mostly due to a reduction in estimated state taxes
associated with Columbia's exploration and production subsidiary, CER. For the
2003 period, an after-tax loss of $50.1 million was related to the sales of CER
and Columbia Transmission Communications Corporation (Transcom), slightly offset
by a first quarter 2003 gain on the sale of CER's interest in natural gas
production properties in New York State. Columbia accounted for CER and Transcom
as discontinued operations and has adjusted all periods presented accordingly.

Change in Accounting

The change in accounting in the first nine months of 2003 of $16.8 million,
net-of-tax, resulted from the cumulative effect of adopting the Financial
Accounting Standards Board statement on asset retirement obligations.

LIQUIDITY AND CAPITAL RESOURCES

Generally, cash flow from operations has provided sufficient liquidity to meet
operating requirements. A significant portion of Columbia's operations, most
notably in the gas distribution and gas transportation businesses, is subject to
seasonal fluctuations in cash flow. During the heating season, which is
primarily from November through March, cash receipts from gas sales and
transportation services typically exceed cash requirements. Conversely, during
the remainder of the year, cash on hand together with external short-term
financing, is used to purchase gas to place in storage for heating season
deliveries, perform necessary maintenance of facilities, make capital
improvements in plant and expand service into new areas.

Net cash from continuing operations for the nine months ended September 30, 2004
was $489.3 million. Net cash from continuing operations increased $265.4 million
from the comparable period a year-ago, mainly as a result of increased cash flow
from working capital. The increase in cash flow from working capital was $252.4
million, driven largely by a lower level of exchange gas activity, increased
factoring of accounts receivable through an expanded accounts receivable sales
agreement and reduction of higher priced inventory levels during 2004.

Columbia subsidiaries satisfy their liquidity requirements primarily through
internally generated funds and through intercompany borrowings from the NiSource
Money Pool. These subsidiaries may borrow, on an intercompany basis, a
cumulative maximum of $1.13 billion through the NiSource Money Pool as approved
by the Securities and Exchange Commission under the Public Utility Holding
Company Act of 1935. NiSource Finance Corp. provides funding to the NiSource
Money Pool from external borrowing sources and maintains an aggregate $1.25
billion revolving credit facility with a syndicate of banks. The credit facility
is guaranteed by NiSource. As of September 30, 2004, Columbia had $307.1 million
invested in the NiSource Money Pool.

                                       18

<PAGE>

ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued)

COLUMBIA ENERGY GROUP AND SUBSIDIARIES

Management believes that its sources of funding are sufficient to meet the
short-term and long-term liquidity needs of Columbia.

Sale of Trade Receivables

On May 14, 2004, Columbia of Ohio entered into an agreement to sell, without
recourse, substantially all of its trade receivables, as they originate, to
Columbia of Ohio Receivables Corporation (CORC), a wholly-owned subsidiary of
Columbia of Ohio. CORC, in turn, is party to an agreement, also dated May 14,
2004, in which it sells an undivided percentage ownership interest in the
accounts receivable to a commercial paper conduit sponsored by Dresdner
Kleinwort Wasserstein. The conduit can purchase up to $300 million of accounts
receivable under the agreement. The agreements, which replaced prior similar
agreements, expire in May 2005, but can be renewed if mutually agreed to by both
parties. As of September 30, 2004, $43.5 million of accounts receivable had been
sold by CORC.

Non-Trading Risks

Commodity price risk resulting from non-trading activities at Columbia's
rate-regulated subsidiaries is limited, since current regulations allow recovery
of prudently incurred gas costs through the rate-making process. As states
experiment with regulatory reform, these subsidiaries may begin providing
services without the benefit of the traditional rate-making process and may be
more exposed to commodity price risk.

On May 12, 2004, Columbia terminated fixed-to-variable interest rate swap
agreements in a notional amount of $663.0 million with five counterparties.
Columbia received an aggregate settlement payment of $1.8 million, which is
being amortized as a reduction to interest expense over the remaining term of
the underlying debt.

OFF BALANCE SHEET ARRANGEMENTS

Columbia has issued guarantees that support up to approximately $773.3 million
of commodity-related payments to satisfy requirements under forward gas sales
agreements of a current subsidiary and a former subsidiary. These guarantees
were provided to counterparties to facilitate physical and financial
transactions involving natural gas. To the extent liabilities exist under the
commodity-related contracts subject to these guarantees, such liabilities are
included in the consolidated balance sheets. In addition, Columbia has other
guarantees, purchase commitments and operating leases. Refer to Note 5, Risk
Management Activities, and Note 9, Guarantees and Indemnities, of the Notes to
Consolidated Financial Statements for further discussion of Columbia's off
balance sheet arrangements.

In addition, Columbia has sold certain accounts receivable. Columbia's accounts
receivable program qualifies for sale accounting because it meets the conditions
specified in the Statement of Financial Accounting Standards (SFAS) No. 140
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." In the agreements, all transferred assets have been isolated
from the transferor and put presumptively beyond the reach of the transferor and
its creditors, even in bankruptcy or other receivership. Columbia does not
retain any interest in the receivables under these programs.

OTHER INFORMATION

Pipeline Firm Service Contracts

The services of Columbia Gas Transmission Corporation (Columbia Transmission)
and Columbia Gulf Transmission (Columbia Gulf) consist of open access
transportation services, and open access storage services in the case of
Columbia Transmission. These services are provided primarily to LDCs. On October
31, 2004, firm contracts expired for both Columbia Transmission and Columbia
Gulf, representing approximately 60% of the Transmission Segment's net annual
revenues. Based upon commitments made to date, the Transmission Segment is
projecting a reduction of approximately $40 million in annual revenues under the
replacement contracts, which represents approximately 5% of total Segment
revenues. The terms of the replacement contracts entered into by Columbia
Transmission and Columbia Gulf range from one year to 15 years, with an average
term of approximately 7 years. Certain customers, who have storage and related
transportation contracts which were extended through the end of the 2004/2005
winter, have not made long-term commitments. These customers represent 16% of
the Transmission Segment's annual net revenues. It's anticipated that these
customers will make longer-term elections in early 2005.

                                       19

<PAGE>

ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued)

COLUMBIA ENERGY GROUP AND SUBSIDIARIES

Regulatory Matters

Through October 2004, Columbia of Ohio operated under a regulatory stipulation
approved by the Public Utilities Commission of Ohio (PUCO). On October 9, 2003,
Columbia of Ohio and other parties filed with the PUCO an amended stipulation
that would govern Columbia of Ohio's regulatory framework from November 2004
through October 2010. The majority of Columbia of Ohio's contracts with
interstate pipelines expired in October 2004, and the amended stipulation would
have permitted Columbia of Ohio to renew those contracts for firm capacity
sufficient to meet up to 100% of the design peak day requirements through
October 31, 2005 and up to 95% of the design peak day requirements through
October 31, 2010. Among other things, the amended stipulation would also have:
(1) extended Columbia of Ohio's CHOICE(R) program through October 2010; (2)
provided Columbia of Ohio with an opportunity to generate revenues sufficient to
cover the stranded costs associated with the CHOICE(R) program; and (3) allowed
Columbia of Ohio to record post-in-service carrying charges on plant placed into
service after October 2004, and to defer the property taxes and depreciation
associated with such plant.

On March 11, 2004, the PUCO issued an order that adopted and modified the
stipulation from Columbia of Ohio and a collaborative of parties. The order
extended Columbia of Ohio's CHOICE(R) program only through December 31, 2007 and
declined to pre-approve the amount of interstate pipeline firm capacity for
which Columbia of Ohio could contract. In addition, the PUCO made other
modifications which would limit Columbia of Ohio's ability to generate
additional revenues sufficient to cover stranded costs, including declining to
mandate that natural gas marketers participating in the CHOICE(R) program obtain
75% of their interstate capacity directly from Columbia of Ohio and changing the
allocation of revenues generated through off-system sales. The order allowed
Columbia of Ohio to record post-in-service carrying charges on plant placed in
service after October 2004 and allowed the deferral of property taxes and
depreciation associated with such plant.

On April 9, 2004, Columbia of Ohio and other signatory parties to the
stipulation, consistent with standard regulatory process, petitioned the PUCO
for rehearing on the components which were modified in the order. That same day
the Office of the Ohio Consumers' Counsel (OCC) also filed an application for
rehearing, and argued that the PUCO should not have permitted Columbia of Ohio
to record post-in-service carrying charges on plant placed into service after
October 2004, and to defer the property taxes and depreciation associated with
such plant. On April 19, 2004, the OCC filed a motion to dismiss the application
for rehearing filed by Columbia of Ohio and other parties.

On May 5, 2004, the PUCO issued an order on rehearing, in which it denied the
OCC's motion to dismiss and its application for rehearing. The PUCO granted, in
part, the joint application filed by Columbia of Ohio and others. In granting
the joint application for rehearing, in part, the PUCO did the following: (1)
revised the term of the stipulation so that it runs through October 31, 2008;
(2) restored the mandate that required natural gas marketers participating in
the CHOICE(R) program obtain 75% of their interstate capacity directly from
Columbia of Ohio; and (3) revised the mechanism applicable to Columbia of Ohio's
sharing of off-system sales and capacity release revenue. Under the revised
off-system sales/capacity release revenue sharing mechanism, Columbia of Ohio
must now begin sharing such revenue with the customers when the annual revenue
exceeds $25 million, instead of $35 million as originally proposed by Columbia
of Ohio and other collaborative parties.

In a letter docketed on May 12, 2004, Columbia of Ohio and the other signatory
parties to the stipulation accepted the PUCO's modifications. On May 14, 2004,
the OCC filed a Second Application for Rehearing. In the pleading, the OCC
argued that the joint applicants did not meet the statutory requirements for an
application for rehearing, and thus the PUCO's order on rehearing granting
rehearing was unlawful. The OCC also argued that the rehearing was the result of
exclusionary settlement negotiations. The OCC continued to disagree with the
PUCO's treatment of off-system sales and capacity release revenues, and
post-in-service carrying charges and related deferrals.

On June 3, 2004, Columbia of Ohio filed its proposed tariffs and accounting, as
required. On June 9, 2004, the PUCO denied the OCC's Second Application for
Rehearing. On July 29, 2004, the OCC filed an appeal with the Supreme Court of
Ohio, contesting the PUCO's May 5, 2004 order on rehearing, which granted in
part Columbia of Ohio's joint application for rehearing, and the PUCO's June 9,
2004 order, denying the OCC's Second Application for Rehearing. On August 4,
2004, Columbia of Ohio moved to intervene in the appellate proceeding.

                                       20

<PAGE>

ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued)

COLUMBIA ENERGY GROUP AND SUBSIDIARIES

On December 17, 2003, the PUCO approved an application by Columbia of Ohio and
other Ohio local distribution companies (LDCs) to establish a tracking mechanism
that will provide for recovery of current bad debt expense and for the recovery
over a five-year period of previously deferred uncollected accounts receivable.
As of September 30, 2004, Columbia of Ohio has $48 million of uncollected
accounts receivable pending future recovery. On October 1, 2004 Columbia of Ohio
filed an application for approval to increase its Uncollectible Expense Rider.
On October 20, 2004 the PUCO issued an Entry that approved this request.
The PUCO's approval of this request will result in Columbia's commencement
of recovery in November 2004 of the aforementioned deferred uncollectible
accounts receivables and future bad-debt recovery requirements.

On June 11, 2004, Columbia Gas of Pennsylvania, Inc. (Columbia of Pennsylvania)
signed a settlement agreement (Settlement Agreement) in its annual gas cost
recovery proceeding with The Office of Consumer Advocate, The Office of Small
Business Advocate, The Office of Trial Staff, and Commercial & Industrial
Intervenors. Under the Settlement Agreement, the signatory parties agreed to
financial incentive mechanisms for off-system sales and capacity release
transactions performed by Columbia of Pennsylvania. Under the incentive
mechanism, customers receive 100% of the total combined proceeds from off-system
sales and capacity release transactions up to a benchmark of $6 million. After
the benchmark is reached, Columbia of Pennsylvania will retain 50% of proceeds
from the transactions; however, Columbia of Pennsylvania may never retain more
than 40% of the actual net proceeds generated from off-system sales and capacity
release transactions. The incentive mechanism begins October 1, 2004 and ends on
September 30, 2006. On September 10, 2004, the Pennsylvania Public Utility
Commission approved the Settlement Agreement.

All of the Columbia distribution companies hold long-term contracts for pipeline
and storage services with its affiliate pipelines, Columbia Transmission and
Columbia Gulf, and a majority of those contracts expired on October 31, 2004.
The Columbia distribution companies are comprised of Columbia Gas of Kentucky,
Inc., Columbia Gas of Maryland, Inc., Columbia of Ohio, Columbia of
Pennsylvania, and Columbia Gas of Virginia, Inc. (Columbia of Virginia). Several
distribution companies discussed their plan to renew pipeline and storage
contracts with industry stakeholders to ensure the continued ability to serve
the requirements of firm customers in a tightening capacity market. All contract
negotiations between the distribution companies and Columbia Transmission and
Columbia Gulf have been resolved prior to the contracts expiring. In addition,
certain contracts were subject to the approval of the respective state
regulatory agencies. On April 29, 2004, the Pennsylvania Public Utility
Commission approved a request by Columbia of Pennsylvania to renew its pipeline
and storage contracts with Columbia Transmission and Columbia Gulf. Pursuant to
this approval, Columbia of Pennsylvania's storage contracts and approximately
half of its pipeline contracts will be renewed for terms of fifteen years, while
the remaining pipeline contracts will be renewed on a tiered basis for terms
ranging from five or ten years. Columbia of Pennsylvania will also acquire
additional capacity to meet customer requirements on peak days. In addition, on
August 3, 2004, the Virginia State Corporation Commission approved a request by
Columbia of Virginia to renew its pipeline and storage contracts with Columbia
Transmission and Columbia Gulf. Pursuant to this approval, Columbia of
Virginia's storage and pipeline contracts with Columbia Transmission and
Columbia Gulf will be renewed for terms of fifteen years.

On February 28, 2003, Columbia Transmission filed with the Federal Energy
Regulatory Commission (FERC) certain scheduled annual rate adjustments,
designated as the Transportation Costs Rate Adjustment (TCRA), Retainage
Adjustment Mechanism (RAM), and Electric Power Cost Adjustment (EPCA). These
filings sought recovery, during the period April 1, 2003 through March 31, 2004,
of certain expenses relating to transportation costs incurred by Columbia
Transmission on interconnecting pipelines and electric costs incurred in the
operation of certain compressors (TCRA and EPCA, respectively), as well as
quantities of gas required by Columbia Transmission to operate its pipeline
system RAM. The recovery of each of these costs occurs through a "tracker" which
ensures full recovery of actual expenses. Each of the three filings was
conditionally accepted by the FERC subject to refund and the filing of
additional data by Columbia Transmission. On October 1, 2003, the FERC issued an
order accepting Columbia Transmission's TCRA filing, and accepting the full
recovery of upstream transportation costs. On February 11, 2004, the FERC issued
an order regarding the annual EPCA filing, which upheld Columbia Transmission's
ability to fully recover its electric costs, but required Columbia Transmission
to implement a separate EPCA rate to recover electric power costs incurred by a
newly expanded electric-powered compressor station from specific customers. The
order also limits Columbia Transmission's ability to prospectively discount its
EPCA rates. Management does not believe this order will have a material
financial impact. On April 14, 2004 the FERC issued an order accepting Columbia
Transmission's RAM filing and approving the full recovery of gas required in
system operations. The FERC will permit parties to pursue certain issues raised
in the 2003 filing

                                       21

<PAGE>

ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued)

COLUMBIA ENERGY GROUP AND SUBSIDIARIES

in connection with consideration of Columbia Transmission's 2004 RAM filing,
which became effective April 1, 2004, and is currently pending.

Environmental Matters

On April 1, 2004, the U.S. Environmental Protection Agency (EPA) issued its
final Phase II nitrogen oxide (NOx) regulation establishing NOx budgets for
states. States will be developing State Implementation Plans (SIPs) which may
impact certain compressor station engines/turbines owned by Columbia
Transmission and Columbia Gulf. Columbia Transmission and Columbia Gulf will
continue to monitor the development of SIPs, but anticipates that the cost will
not be material.

The EPA has issued maximum achievable control technology (MACT) standards for
hazardous air pollutants for stationary combustion turbines and reciprocating
internal combustion engines. The final standards for turbines do not impose any
additional compliance costs. The MACT for reciprocating internal combustion
engines will only impact one Columbia Transmission facility and the estimated
cost of compliance is expected to be immaterial.

On April 15, 2004, the EPA finalized the 8-hour ozone non-attainment areas.
After designation, the Clean Air Act provides for a process for promulgation of
rules specifying a compliance level, compliance deadline, and necessary controls
to be implemented within designated areas. Resulting state rules could require
additional reductions in NOx. Columbia Transmission and Columbia Gulf will
monitor implementation of the rules. While the outcome of such rulemakings is
uncertain, the cost could be significant.

Proposed Millennium Pipeline Project

The proposed Millennium Pipeline Project (Millennium), in which Columbia
Transmission is participating and will serve as developer and operator, will
provide access to a number of supply and storage basins and the Dawn, Ontario
trading hub. The project is now being marketed in two phases. Phase 1 of the
project is to begin at a proposed interconnect with the Empire State Pipeline
(Empire), an existing pipeline that originates at the Canadian border and
extends easterly towards Syracuse. Empire would construct a lateral pipeline
southward to connect with Millennium near Corning, N.Y. Millennium would extend
eastward to an interconnect with Algonquin Gas Transmission at Ramapo, N.Y. As
currently planned, Phase 2 would cross the Hudson River, linking to the New York
City metropolitan market.

On September 19, 2002, the FERC issued its order granting final certificate
authority for the original Millennium project and specified that Millennium may
not begin construction until certain environmental and other conditions are met.
One such condition, impacting what is now being marketed as Phase 2 of the
project, is compliance with the Coastal Zone Management Act, which is
administered by the State of New York's Department of State (NYDOS). NYDOS has
determined that the Hudson River crossing plan is not consistent with the Act.
Millennium's appeal of that decision to the United States Department of Commerce
was denied. Millennium filed an appeal of the U.S. Department of Commerce ruling
relating to the project's Hudson River crossing plan in the U.S. Federal
District Court on February 13, 2004. The procedural schedule calls for all
briefings to be completed by the first quarter of 2005.

During the second quarter of 2004, a Columbia affiliate purchased an additional
interest in the project. Columbia intends to find another sponsor by the end of
2004 to purchase this interest. During the third quarter of 2004, KeySpan
Millennium, L.L.C. (subsidiary of KeySpan Corporation) purchased the interest of
West Coast Energy, Inc. (subsidiary of Duke Energy Corp.). The other sponsors
are Columbia Transmission and MCN Energy Group, Inc. (subsidiary of DTE Energy
Co.).

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Omitted pursuant to General Instruction H(2)(c).

                                       22

<PAGE>

ITEM 4.  CONTROLS AND PROCEDURES

COLUMBIA ENERGY GROUP AND SUBSIDIARIES

Evaluation of Disclosure Controls and Procedures

Columbia's president and chief executive officer and its principal financial
officer, after evaluating the effectiveness of Columbia's disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), have
concluded based on the evaluation required by paragraph (b) of Exchange Act
Rules 13a-15 and 15d-15 that, as of the end of the period covered by this
report, Columbia's disclosure controls and procedures were adequate and
effective to ensure that material information relating to Columbia and its
consolidated subsidiaries would be made known to them by others within those
entities.

Changes in Internal Controls

There was no change in Columbia's internal control over financial reporting
during the fiscal quarter covered by this report that has materially affected,
or is reasonably likely to materially affect, Columbia's internal control over
financial reporting.

                                       23

<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

COLUMBIA ENERGY GROUP AND SUBSIDIARIES

1.    VIRGINIA NATURAL GAS, INC. V. COLUMBIA GAS TRANSMISSION CORP., FEDERAL
ENERGY REGULATORY COMMISSION (FERC)

On January 13, 2004, Virginia Natural Gas, Inc. (VNG) filed with the FERC a
"Complaint Seeking Compliance with the Natural Gas Act and with Regulations and
Certificate Orders of the Federal Energy Regulatory Commission and Seeking
Remedies" in Docket No. RP04-139. VNG alleged various violations during the
winter of 2002-2003 by Columbia Gas Transmission Corp. (Columbia Transmission)
of its firm service obligations to VNG. VNG sought monetary damages and remedies
(exceeding $37 million), and also sought certain prospective remedies. On July
29, 2004, the FERC issued an order in which it refused to grant VNG any monetary
damages and said such claims are best determined by a court of law. The FERC
also agreed with Columbia Transmission, that Columbia Transmission had not
abandoned its obligation to provide service and that it had not inappropriately
continued interruptible service to the detriment of firm service. However, the
FERC did find that Columbia Transmission had failed to exercise sufficient due
diligence in its modifications to or its operation of vaporization equipment at
its Chesapeake LNG facility and that Columbia Transmission had failed to deliver
gas to VNG at 250 pounds per square inch gauge (psig) as called for by the
agreement between VNG and Columbia Transmission. The FERC declined VNG's request
to award damages in this case and, as noted above, stated that any claim for
damages could best be determined by a court of law. Both VNG and Columbia
Transmission sought rehearing of the FERC order, but the FERC denied the
requests for rehearing at its October 26, 2004 public meeting.

2.    STAND ENERGY CORPORATION, ET AL. V. COLUMBIA GAS TRANSMISSION CORPORATION,
ET AL KANAWHA COUNTY COURT, WEST VIRGINIA, ATLANTIGAS CORPORATION V. NISOURCE,
ET AL, U.S. DISTRICT COURT, NORTHERN DISTRICT OF MARYLAND AND TRIAD ENERGY
RESOURCES, ET AL. V. NISOURCE, ET AL

In June 2002, Atlantigas Corporation filed a complaint in the U.S. District
Court, District of Columbia. In March 2003, Triad Energy Resources filed a
similar complaint in the U.S. District Court, District of Columbia. On September
29, 2003, the Atlantigas complaint was dismissed for lack of personal
jurisdiction and Atlantigas filed a new complaint in the U.S. District Court of
Northern Maryland on October 27, 2003. Based on the Court's decision on personal
jurisdiction in Atlantigas, the plaintiffs in the Triad case dismissed that case
on October 31, 2003 from the District of Columbia and indicated that the case
would be refiled in another jurisdiction. On July 14, 2004, Stand Energy
Corporation filed a complaint in Kanawha County Court in West Virginia and on or
about July 22, Atlantigas filed a voluntary notice of dismissal without
prejudice in the case in the U.S. District Court of Northern Maryland, citing
its joinder as a plaintiff in the Stand Energy case. All of these complaints
contain allegations against various NiSource companies, including Columbia
Transmission and Columbia Gulf Transmission Company (Columbia Gulf), and assert
that those companies and certain "select shippers" engaged in an "illegal gas
scheme" that violated federal anti-trust and state law. The "illegal gas scheme"
complained of by the plaintiffs relates to the Columbia Transmission and
Columbia Gulf gas imbalance transactions that were the subject of the FERC
enforcement staff investigation and subsequent settlement approved in October
2000. Columbia Transmission and Columbia Gulf filed a Notice of Removal with the
Federal Court in West Virginia on August 13, 2004 and a Motion to Dismiss on
September 10, 2004. All briefing on the Motion to Dismiss is now complete.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Omitted pursuant to General Instruction H(2)(b)

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Omitted pursuant to General Instruction H(2)(b)

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Omitted pursuant to General Instruction H(2)(b)

                                       24

<PAGE>

ITEM 5. OTHER INFORMATION

COLUMBIA ENERGY GROUP AND SUBSIDIARIES

None

ITEM 6. EXHIBITS

      (12)   Statements of Ratio of Earnings to Fixed Charges.

      (31.1) Certification of Michael W. O'Donnell, Chief Executive Officer,
             pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

      (31.2) Certification of David J. Vajda Principal Financial Officer,
             pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

      (32.1) Certification of Michael W. O'Donnell, Chief Executive Officer,
             pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

      (32.2) Certification of David J. Vajda, Principal Financial Officer,
             pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

                                       25

<PAGE>

SIGNATURE

COLUMBIA ENERGY GROUP AND SUBSIDIARIES

Pursuant to the requirements 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.

                                                 Columbia Energy Group
                                                 ---------------------
                                                       (Registrant)

Date:  November 2, 2004              By:         /s/ Jeffrey W. Grossman
                                           -------------------------------------
                                                    Jeffrey W. Grossman
                                                       Vice President
                                               (Principal Accounting Officer
                                                and Duly Authorized Officer)

                                       26