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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-Q  þ
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2005 OR  o
    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 001-01098 Columbia Energy Group   Delaware
    
    13-1594808(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)801 East 86th AvenueMerrillville, Indiana
    
    46410(Address of principal executive offices)
    
    (Zip Code)
 (877) 647-5990 
  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 þ No o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ As of November 1, 2000, all shares of the registrants Common Shares, $.01 par value, were issued
and outstanding, all held beneficially and of record by NiSource Inc. 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.




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COLUMBIA ENERGY GROUP
FORM 10-Q QUARTERLY REPORT
FOR THE QUARTER ENDED MARCH 31, 2005 Table of Contents PageDefined Terms
    
    
    3PART I FINANCIAL INFORMATIONItem 1.Financial StatementsStatements of Consolidated Income
    
    
    4Consolidated Balance Sheets
    
    
    5Statements of Consolidated Cash Flows
    
    
    7Statements of Consolidated Comprehensive Income
    
    
    8Notes to Consolidated Financial Statements
    
    
    9Item 2.Managements Narrative Analysis of Results of Operations
    
    
    16Item 3.Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4.Controls and Procedures
    
    
    22PART II OTHER INFORMATIONItem 1.Legal Proceedings
    
    
    23Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3.Defaults Upon Senior Securities
    
    
    23Item 4.Submission of Matters to a Vote of Security Holders
    
    
    23Item 5.Other Information
    
    
    23Item 6.Exhibits
    
    
    23Signature
    
    
    25Statements of Ratio of Earnings to Fixed ChargesSection 302 Certification of CEOSection 302 Certification of CFOSection 906 Certification of CEOSection 906 Certification of CFO
  2




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DEFINED TERMS The following is a list of frequently used abbreviations or acronyms that are found in this report: NiSource Subsidiaries and AffiliatesCER
    
    Columbia Energy Resources, Inc.Columbia Energy Services
    
    Columbia Energy Services CorporationColumbia Gulf
    
    Columbia Gulf Transmission CompanyColumbia of Kentucky
    
    Columbia Gas of Kentucky, Inc.Columbia of Ohio
    
    Columbia Gas of Ohio, Inc.Columbia of Pennsylvania
    
    Columbia Gas of Pennsylvania, Inc.Columbia of Virginia
    
    Columbia Gas of Virginia, Inc.Columbia Transmission
    
    Columbia Gas Transmission CorporationColumbia
    
    Columbia Energy GroupCORC
    
    Columbia of Ohio Receivables CorporationHardy Storage
    
    Hardy Storage Company, L.L.C.Millennium
    
    Millennium Pipeline Company, L.P.NiSource Finance
    
    NiSource Finance Corp.NiSource
    
    NiSource Inc.Transcom
    
    Columbia Transmission Communications CorporationAbbreviationsBcf
    
    Billion cubic feetEmpire
    
    Empire State PipelineEPCA
    
    Electric Power Cost AdjustmentFASB
    
    Financial Accounting Standards BoardFERC
    
    Federal Energy Regulatory CommissionFIN 47
    
    FASB Interpretation No. 47, Accounting for Conditional Asset Retirement ObligationsLDCs
    
    Local distribution companiesMahonia
    
    Mahonia II LimitedMMDth
    
    Million dekathermsMSCP
    
    Morgan Stanley Dean Witter Capital Partners IV, L.P.NYDOS
    
    New Yorks Department of StateNYMEX
    
    New York Mercantile ExchangeOPSB
    
    Ohio Power Siting BoardPiedmont
    
    Piedmont Natural Gas Company, Inc.PSC
    
    Kentucky Public Service CommissionPUCO
    
    Public Utilities Commission of OhioRAM
    
    Retainage Adjustment MechanismSEC
    
    Securities and Exchange CommissionSFAS
    
    Statement of Financial Accounting StandardsSFAS No. 71
    
    Statement of Financial Accounting Standards No. 71, Accounting for the Effects of Certain Types of RegulationSFAS No. 123R
    
    Statement of Financial Accounting Standards No. 123R, Share-Based PaymentSFAS No. 133
    
    Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amendedSFAS No. 143
    
    Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement ObligationsSFAS No. 144
    
    Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived AssetsSIP
    
    State Implementation PlanTriana
    
    Triana Energy HoldingsTcf
    
    Trillion cubic feet
 3




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PART I 
 ITEM 1. FINANCIAL STATEMENTS Columbia energy group 
 Statements of Consolidated Income (unaudited)
 Three Months Ended March 31, (in millions)
    
    2005
    
    
    2004Net RevenuesGas Distribution
    
    $
    1,066.7
    
    
    $
    944.0Gas Transportation and Storage
    
    
    293.7
    
    
    
    311.7Other
    
    
    27.8
    
    
    
    25.2Affiliated revenues
    
    
    3.0
    
    
    
    3.1Gross Revenues
    
    
    1,391.2
    
    
    
    1,284.0Cost of Sales
    
    
    787.5
    
    
    
    689.9Cost of Sales  Affiliated
    
    
    0.3
    
    
    
    Total Net Revenues
    
    
    603.4
    
    
    
    594.1Operating ExpensesOperation and maintenance
    
    
    199.3
    
    
    
    189.8Depreciation and amortization
    
    
    48.5
    
    
    
    41.0Other taxes
    
    
    69.0
    
    
    
    64.7Total Operating Expenses
    
    
    316.8
    
    
    
    295.5Operating Income
    
    
    286.6
    
    
    
    298.6Other Income (Deductions)Interest expense
    
    
    (26.5
    )
    
    
    (19.4
    )Interest expense  affiliated
    
    
    (0.6
    )
    
    
    (1.0
    )Interest income
    
    
    2.0
    
    
    
    1.6Interest income  affiliated
    
    
    4.4
    
    
    
    2.8Other, net
    
    
    (1.3
    )
    
    
    1.1Total Other Income (Deductions)
    
    
    (22.0
    )
    
    
    (14.9
    )Income from Continuing Operations
before Income Taxes
    
    
    264.6
    
    
    
    283.7Income Taxes
    
    
    99.7
    
    
    
    106.2Income from Continuing Operations
    
    
    164.9
    
    
    
    177.5Loss from Discontinued Operations  net of taxes
    
    
    
    
    
    
    (3.0
    )Loss on Disposition of Discontinued Operations  net of taxes
    
    
    (0.2
    )
    
    
    Net Income
    
    $
    164.7
    
    
    $
    174.5
 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 4




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ITEM 1. FINANCIAL STATEMENTS (continued) Columbia energy group 
 Consolidated Balance Sheets
 March 31,
    
    
    December 31,(in millions)
    
    2005
    
    
    2004(unaudited)ASSETSProperty, Plant and EquipmentUtility Plant
    
    $
    8,384.5
    
    
    $
    8,338.5Accumulated depreciation and amortization
    
    
    (3,760.6
    )
    
    
    (3,718.7
    )Net utility plant
    
    
    4,623.9
    
    
    
    4,619.8Other property, at cost, less accumulated depreciation
    
    
    2.3
    
    
    
    2.0Net Property, Plant and Equipment
    
    
    4,626.2
    
    
    
    4,621.8Investments and Other AssetsAssets of discontinued operations and assets held for sale
    
    
    23.1
    
    
    
    23.4Unconsolidated affiliates
    
    
    44.5
    
    
    
    41.7Other investments
    
    
    51.0
    
    
    
    41.7Total Investments
    
    
    118.6
    
    
    
    106.8Current AssetsCash and cash equivalents
    
    
    433.5
    
    
    
    13.5Cash invested in the NiSource money pool
    
    
    577.1
    
    
    
    440.7Restricted cash
    
    
    0.6
    
    
    
    5.4Accounts receivable (less reserves of $29.7 and $10.5, respectively)
    
    
    334.6
    
    
    
    263.1Accounts receivable  affiliated
    
    
    11.1
    
    
    
    11.7Unbilled revenue (less reserves of $4.9 and $8.9, respectively)
    
    
    96.3
    
    
    
    164.4Gas inventory
    
    
    37.9
    
    
    
    285.7Underrecovered gas and fuel costs
    
    
    155.8
    
    
    
    239.4Materials and supplies, at average cost
    
    
    18.4
    
    
    
    17.0Price risk management assets
    
    
    67.8
    
    
    
    45.7Exchange gas receivable
    
    
    165.9
    
    
    
    131.7Regulatory assets
    
    
    103.8
    
    
    
    87.9Prepayments and other
    
    
    69.4
    
    
    
    74.0Total Current Assets
    
    
    2,072.2
    
    
    
    1,780.2Other AssetsPrice risk management assets
    
    
    140.5
    
    
    
    113.9Regulatory assets
    
    
    358.8
    
    
    
    354.2Intangible assets, less accumulated amortization
    
    
    0.8
    
    

    
    1.4Deferred charges and other
    
    
    122.8
    
    
    
    121.0Other receivables  affiliated
    
    
    21.7
    
    
    
    21.7Total Other Assets
    
    
    644.6
    
    
    
    612.2Total Assets
    
    $
    7,461.6
    
    
    $
    7,121.0
 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 5




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ITEM 1. FINANCIAL STATEMENTS (continued) Columbia energy group
Consolidated Balance Sheets (continued) March 31,
    
    
    December 31,(in millions)
    
    2005
    
    
    2004(unaudited)CAPITALIZATION AND LIABILITIESCapitalizationCommon stock equityAdditional paid-in-capital
    
    
    1,419.5
    
    
    
    1,419.5Retained earnings
    
    
    1,604.1
    
    
    
    1,439.2Accumulated other comprehensive income
    
    
    133.7
    
    
    
    104.1Total common stock equity
    
    
    3,157.3
    
    
    
    2,962.8Long-term debt, excluding amounts due within one year
    
    
    1,075.8
    
    
    
    1,075.9Total Capitalization
    
    
    4,233.1
    
    
    
    4,038.7Current LiabilitiesCurrent portion of long-term debt
    
    
    281.9
    
    
    
    281.9Short-term borrowings
    
    
    
    
    
    
    0.1Accounts payable
    
    
    228.4
    
    
    
    310.7Accounts payable-affiliated
    
    
    18.4
    
    
    
    19.4Customer accounts receivable credit balances and deposits
    
    
    45.5
    
    
    
    122.2Taxes accrued
    
    
    257.4
    
    
    
    120.2Interest accrued
    
    
    36.1
    
    
    
    11.4Overrecovered gas and fuel costs
    
    
    17.0
    
    
    
    1.6Price risk management liabilities
    
    
    3.3
    
    
    
    4.9Exchange gas payable
    
    
    231.6
    
    
    
    323.7Current deferred revenue
    
    
    23.8
    
    
    
    23.2Regulatory liabilities
    
    
    28.8
    
    
    
    24.5Accrued liability for postretirement and postemployment benefits
    
    
    33.3
    
    
    
    33.5Deferred income taxes
    
    
    85.3
    
    
    
    104.7Other accruals
    
    
    382.4
    
    
    
    156.0Total Current Liabilities
    
    
    1,673.2
    
    
    
    1,538.0Other Liabilities and Deferred CreditsPrice risk management liabilities
    
    
    2.1
    
    
    
    Deferred income taxes
    
    
    840.4
    
    
    
    814.9Deferred investment tax credits
    
    
    25.1
    
    
    
    25.5Deferred credits
    
    
    39.4
    
    
    
    47.8Noncurrent deferred revenue
    
    
    80.2
    
    
    
    86.9Accrued liability for postretirement and postemployment benefits
    
    
    83.0
    
    
    
    84.5Regulatory liabilities
    
    
    369.6
    
    
    
    368.8Other noncurrent liabilities
    
    
    115.5
    
    
    
    115.9Total Other
    
    
    1,555.3
    
    
    
    1,544.3Commitments and Contingencies
    
    
    
    
    
    
    Total Capitalization and Liabilities
    
    $
    7,461.6
    
    
    $
    7,121.0
 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 6




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ITEM 1. FINANCIAL STATEMENTS (continued) Columbia energy group 
 Statements of Consolidated Cash Flows (unaudited)
 Three Months Ended March 31, (in millions)
    
    2005
    
    
    2004Operating ActivitiesNet Income
    
    $
    164.7
    
    
    $
    174.5Adjustments to reconcile net income to net cash from
continuing operations:Depreciation, depletion, and amortization
    
    
    48.5
    
    
    
    41.0Net changes in price risk management assets and liabilities
    
    
    (2.1
    )
    
    
    (7.5
    )Deferred income taxes and investment tax credits
    
    
    (10.2
    )
    
    
    20.5Deferred revenue
    
    
    (6.1
    )
    
    
    (3.7
    )Stock compensation expense
    
    
    0.1
    
    
    
    0.2Loss on sale of discontinued operations
    
    
    0.2
    
    
    
    Loss from discontinued operations
    
    
    
    
    
    
    3.0Other
    
    
    0.3
    
    
    
    (0.4
    )Changes in assets and liabilities:Restricted cash
    
    
    4.9
    
    
    
    2.2Accounts receivable and unbilled revenue
    
    
    0.8
    
    
    
    (179.1
    )Inventories
    
    
    459.2
    
    
    
    357.3Accounts payable
    
    
    (85.9
    )
    
    
    (6.6
    )Customer deposits
    
    
    1.5
    
    
    
    1.1Taxes accrued
    
    
    136.6
    
    
    
    104.2Interest accrued
    
    
    24.7
    
    
    
    29.9Overrecovered gas and fuel costs
    
    
    99.0
    
    
    
    43.3Exchange gas receivable/payable
    
    
    (104.2
    )
    
    
    (23.9
    )Other accruals
    
    
    (89.9
    )
    
    
    (82.1
    )Prepayments and other current assets
    
    
    4.6
    
    
    
    4.3Regulatory assets/liabilities
    
    
    (17.2
    )
    
    
    (7.5
    )Postretirement and postemployment benefits
    
    
    (1.9
    )
    
    
    (1.9
    )Deferred credits
    
    
    (8.3
    )
    
    
    (1.9
    )Deferred charges and other noncurrent assets
    
    
    (1.5
    )
    
    
    (2.7
    )Other noncurrent liabilities
    
    
    0.5
    
    
    
    (1.6
    )Net Cash from Continuing Operations
    
    
    618.3
    
    
    
    462.6Investment ActivitiesCapital expenditures
    
    
    (49.7
    )
    
    
    (40.8
    )Other investing activities
    
    
    (12.2
    )
    
    
    (2.5
    )Net Cash Flows used for Investing Activities
    
    
    (61.9
    )
    
    
    (43.3
    )Increase in cash and cash equivalents
    
    
    556.4
    
    
    
    419.3Cash and temporary cash investments at beginning of year
    
    
    454.2
    
    
    
    69.9Cash and Cash Equivalents at End of Period
    
    $
    1,010.6
    
    
    $
    489.2Supplemental Disclosures of Cash Flow InformationCash paid for interest
    
    $
    2.1
    
    
    $
    Interest capitalized
    
    
    (0.3
    )
    
    
    0.4Cash paid (refunded) for income taxes
    
    
    (13.3
    )
    
    
    1.2
 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 7




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ITEM 1. FINANCIAL STATEMENTS (continued) Columbia energy group 
 Statements of Consolidated Comprehensive Income (unaudited)
 Three Months Ended March 31, (in millions)
    
    2005
    
    
    2004Net Income
    
    $
    164.7
    
    
    $
    174.5Other comprehensive income, net of taxNet unrealized gains on cash flow hedges
    
    
    30.3
    
    
    
    11.0Net (loss) gain on available for sale securities
    
    
    (0.5
    )
    
    
    0.4Total other comprehensive income, net of tax
    
    
    29.8
    
    
    
    11.4Total Comprehensive Income
    
    $
    194.5
    
    
    $
    185.9
 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 8




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ITEM 1. FINANCIAL STATEMENTS (continued) Columbia energy group 
 Notes to Consolidated Financial Statements
 1. Basis of Accounting Presentation 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, 2004. 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 2004 financial statements to conform to the 2005 presentation. 2. Recent Accounting Pronouncements FASB Interpretation No. 47  Accounting for Conditional Asset Retirement Obligations.In March
2005, the FASB issued FIN 47 to clarify the accounting for conditional asset retirement obligations
and to provide additional guidance for when an entity would have sufficient information to
reasonably estimate the fair value of an asset retirement obligation, as used in SFAS No. 143.
This interpretation is effective for fiscal years ending after December 15, 2005, and early
adoption is encouraged. Columbia is currently reviewing the legal obligations surrounding future
retirement of tangible long-lived assets with regards to this interpretation. SFAS No. 123 (revised 2004)  Share-Based Payment.In December 2004, the FASB issued
SFAS No. 123R which requires that the cost resulting from all share-based payment transactions be
recognized in the financial statements and establishes fair value as the measurement objective in
accounting for these transactions. This statement is effective for public entities as of the
beginning of the first interim or annual reporting period beginning after December 15, 2005, as
directed by the SEC in their April 15, 2005 amendment to Rule 4-01(a) of Regulation S-X. Columbia
plans to adopt this standard on January 1, 2006, using a modified version of the prospective
application as described in the statement, for NiSource share-based awards issued to employees of
Columbia or a Columbia subsidiary. 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. In connection with these restructuring initiatives, a total of approximately 915 management,
professional, administrative and technical positions have been identified for elimination. As of
March 31, 2005, approximately 900 employees were terminated, of whom none were terminated during
the first quarter 2005. As of March 31, 2005 and December 31, 2004, the Consolidated Balance
Sheets reflected liabilities of $12.6 million and $14.1 million related to the restructuring
initiatives, respectively. For the first quarter of 2005, $1.1 million in payments were made in
association with the restructuring initiatives and a $0.5 million reduction to the restructuring
liability was recorded mainly to adjust for a reduction in estimated expenses related to previous
restructuring initiatives partly offset by an increase in facility exit costs. Of the remaining
restructuring liability, $11.8 million was related to facility exit costs. The reduction in the
estimated liability was reflected in Operation and Maintenance expense. 9




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ITEM 1. FINANCIAL STATEMENTS (continued) Columbia energy groupNotes to Consolidated Financial Statements (continued)(unaudited) 4. Discontinued Operations and Assets Held for Sale Columbia Transmission is in the process of selling certain facilities that are non-core to the
operation of the pipeline system. Columbia has accounted for the assets of these facilities, with
a net book value of $17.0 million, as assets held for sale. Columbia is also actively pursuing a
buyer of certain assets formerly held by Transcom valued at $6.1 million. Results from discontinued operations associated with the sale of CER are provided in the following
table: Three Months Ended March 31, (in millions)
    
    2005
    
    
    2004Revenues from discontinued operations
    
    $
    
    
    
    $
    Loss from discontinued operations
    
    
    
    
    
    
    (5.0
    )Income tax benefit
    
    
    
    
    
    
    (2.0
    )Net Loss from discontinued operations
    
    $
    
    
    
    $
    (3.0
    )
 The balance of Discontinued Operations and Assets Held for Sale included net property, plant, and
equipment of $23.1 million and $23.4 million at March 31, 2005 and December 31, 2004, respectively. 5. Regulatory Matters Gas Distribution Operations Related Matters Gas Distribution Operations continues to offer CHOICE® opportunities, where customers
can choose to purchase gas from a third party supplier, through regulatory initiatives in all of
its jurisdictions. Through the month of March 2005, approximately 664 thousand of Gas Distribution
Operations residential and small commercial and industrial customers selected an alternate
supplier. On March 29, 2005, the PSC approved a renewed pilot program for Columbia of Kentucky authorizing
the continuation of the Customer ChoiceSM Program. The program provides residential and
small commercial customers the option to choose their natural gas supplier and avoids the stranded
costs associated with the previous pilot. In addition, Columbia received approval from the PSC to
implement programs that provide Columbia of Kentucky with the opportunity to stabilize wholesale
costs for gas during the winter heating season and share certain cost savings with customers. Since November 1, 2004, Columbia of Ohio has been operating under a new regulatory stipulation
approved by the PUCO that expires on October 31, 2008. This regulatory stipulation has been
contested by the OCC, and on June 9, 2004, the PUCO denied the OCCs Second Application for
Rehearing. The OCC then filed an appeal with the Supreme Court of Ohio on July 29, 2004,
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. Columbia of Ohio intervened in the appellate proceeding. On December
8, 2004, the PUCO and Columbia of Ohio filed motions to dismiss the appeal, based upon the OCCs
failure to comply with the Supreme Court of Ohios procedural rules. On December 17, 2004, the OCC
filed its Memoranda Contra. On March 23, 2005, the Supreme Court of Ohio issued a decision in
which it granted the motions to dismiss and dismissed the appeal based upon the OCCs failure to
comply with the Courts procedural rules. On April 1, 2005, the OCC filed a Motion for
Reconsideration with the Supreme Court of Ohio. Columbia of Ohio and the PUCO filed Memoranda
Contra on April 8, 2005. On December 17, 2003, the PUCO approved an application by Columbia of Ohio and other Ohio 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. On
October 1, 2004, Columbia of Ohio filed an application for approval to increase its Uncollectible
Expense Rider and on October 20, 2004, the PUCO approved the application. The PUCOs approval of
this application resulted in Columbia of Ohios commencing recovery of the deferred uncollectible
accounts receivables and establishment of future bad debt recovery requirements in November 2004.
As of March 31, 2005, Columbia of Ohio has $35.3 million of uncollected accounts receivable 10




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ITEM 1. FINANCIAL STATEMENTS (continued) Columbia energy groupNotes to Consolidated Financial Statements (continued)(unaudited) pending future recovery. On May 2, 2005, Columbia filed an application for approval to decrease
its Uncollectible Expense Rider rate, effective June 2005. This request for reduction in its
Uncollectible Expense Rider rate was based on projected annual recovery requirements of $26.3
million for the period ending March 31, 2006  a reduction of $11.4 million from Columbias
currently effective rate. On December 2, 2004, Columbia of Ohio filed two applications with the OPSB, requesting certificates
of environmental compatibility and public need for the construction of the Northern Columbus Loop
Natural Gas Pipeline project. The project is proposed in three phases (Phases IV, V and VI), and
contemplates an approximately 25-mile long pipeline, to be constructed in northern Columbus and
southern Delaware County. The project will help secure current and future natural gas supplies for
Columbia of Ohios customers in the region. On February 7, 2005, the Board notified Columbia that
the applications were certified as complete. Columbia of Ohio also filed requests for waivers from
certain of the Boards requirements. The waivers were approved on February 4, 2005. On April 14,
2005, the Board issued an Order (i) finding that the effective date of the applications is April
15, 2005, (ii) granting Columbias motion to consolidate the cases for hearing purposes, and (iii)
establishing a public hearing date of June 20, 2005, and an adjudicatory hearing date of June 21,
2005. Gas Transmission and Storage Operations Related Matters On March 31, 2005, the FERC issued an order regarding Columbia Transmissions annual EPCA filing.
The FERCs order accepted the filing, subject to refund, and established a hearing to address
issues related to the appropriate methodology for allocating costs associated with the new electric
Downingtown Compressor units. The order does not inhibit Columbias ability to fully recover its
electric costs; as such, management does not believe this order will have a material financial
impact. On March 29, 2005, the FERC issued an unconditional order accepting Columbia Transmissions March
1, 2005 RAM filing. Columbia Transmissions March 1, 2004 RAM is still pending before the FERC,
with no statutory time requirement for future action; however, with the approval of the 2005 RAM
filing, management does not anticipate a material adverse order. 6. Risk Management Activities Columbia uses commodity-based derivative financial instruments to manage certain risks in its
business. Columbia accounts for its derivatives under SFAS No. 133. Hedging Activities.The activity for the first quarter 2005 and 2004 affecting accumulated other
comprehensive income, with respect to cash flow hedges included the following: The three months ended March 31, (in millions, net of tax)
    
    2005
    
    
    2004Net unrealized gains on derivatives qualifying as cash flow hedges at
the
beginning of the period
    
    $
    103.7
    
    
    $
    87.7Unrealized hedging gains arising during the period on derivatives
qualifying
as cash flow hedges
    
    
    37.9
    
    
    
    18.2Reclassification adjustment for net gain included in net income
    
    
    (7.6
    )
    
    
    (7.2
    )Net unrealized gains on derivatives qualifying as cash flow hedges at
the end of the period
    
    $
    134.0
    
    
    $
    98.7
 Unrealized gains and losses on Columbias hedges were recorded as price risk management assets and
liabilities. The accompanying Consolidated Balance Sheets include price risk management assets
related to unrealized gains and losses on hedges of $208.3 million and $159.6 million at March 31,
2005 and December 31, 2004, respectively, of which $67.8 million and $45.7 million were included in
Current Assets and $140.5 million and $113.9 million were included in Other Assets. 11




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ITEM 1. FINANCIAL STATEMENTS (continued) Columbia energy groupNotes to Consolidated Financial Statements (continued)(unaudited) During the first quarter of 2005 and 2004, no amounts were recognized in earnings due to the change
in value of certain derivative instruments primarily representing time value. Additionally, all
derivatives classified as a hedge are assessed for hedge effectiveness, with any components
determined to be ineffective charged to earnings or classified as a regulatory asset or liability
per SFAS No. 71 as appropriate. During the first quarter of 2005 and 2004, Columbia reclassified no
amounts related to its cash flow hedges 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
$44.1 million, net of tax. Commodity Price Risk Programs.Columbia of Pennsylvania uses NYMEX derivative contracts to
minimize risk associated with gas price volatility. These derivative hedging programs must be
marked to fair value, but because these derivatives are used within the framework of their gas cost
recovery mechanism, regulatory assets or liabilities are recorded to offset the change in the fair
value of these derivatives. The Consolidated Balance Sheets reflected $2.1 million and zero of
price risk management assets associated with these programs at March 31, 2005 and December 31,
2004, respectively. In April 2005, Columbia of Virginia started a program which would allow non-jurisdictional
customers the opportunity to lock in their gas cost as an alternative to the standard gas cost
recovery mechanism. This service provides Columbia of Virginia customers with the opportunity to
either lock in their gas cost or place a cap on the total cost that could be charged for any future
month specified. In order to hedge the anticipated physical future purchases associated with these
obligations, Columbia of Virginia purchases NYMEX futures and options contracts that correspond to
a fixed or capped price in the associated delivery month. The NYMEX futures and options contracts
are designated as cash flow hedges. For regulatory incentive purposes, Columbia of Kentucky, Columbia of Ohio, and Columbia of
Pennsylvania, (collectively, the Columbia LDCs) 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. The remaining
change is recognized currently in earnings. The Consolidated Balance Sheets reflected $3.3 million
and $4.9 million of price risk management liabilities associated with the programs at March 31,
2005 and December 31, 2004, respectively. Columbia Energy Services has fixed price gas delivery commitments to three municipalities in the
United States. Columbia Energy Services entered into a forward purchase agreement with a gas
supplier, wherein the supplier will fulfill the delivery obligation requirements at a slight
premium to index. In order to hedge this anticipated future purchase of gas from the supplier,
Columbia Energy Services entered into commodity swaps priced at the locations designated for
physical delivery. These swaps are designated as cash flow hedges of the anticipated purchases. 7. Pension and Other Postretirement Benefits Columbia uses September 30 as its measurement date for its pension and postretirement benefit
plans. Columbia expects to make contributions of $0.6 million to its pension plans and $28.7
million to its postretirement medical and life plans in 2005. 12




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ITEM 1. FINANCIAL STATEMENTS (continued) Columbia energy groupNotes to Consolidated Financial Statements (continued)(unaudited) The following table provides the components of the plans net periodic benefits cost for first
quarter of 2005 as compared to the first quarter of 2004: Pension Benefits
    
    
    Other BenefitsThree months ended March 31, (in millions)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Net periodic costService cost
    
    $
    5.2
    
    
    $
    4.8
    
    
    $
    1.2
    
    
    $
    1.1Interest cost
    
    
    12.4
    
    
    
    12.5
    
    
    
    5.4
    
    
    
    5.2Expected return on assets
    
    
    (16.6
    )
    
    
    (15.8
    )
    
    
    (3.6
    )
    
    
    (3.2
    )Amortization of prior service cost
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.1
    
    
    
    0.1Recognized actuarial loss
    
    
    0.3
    
    
    
    0.3
    
    
    
    0.7
    
    
    
    0.5Net Periodic Benefits Cost
    
    $
    1.5
    
    
    $
    2.0
    
    
    $
    3.8
    
    
    $
    3.7
 8. Other Commitments and Contingencies A. 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 certain subsidiaries. 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 March 31, 2005 and the years in which
they expire were: (in millions)
    
    Total
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    AfterGuarantees supporting commodity
transactions of subsidiaries
    
    $
    651.2
    
    
    $
    50.0
    
    
    $
    434.0
    
    
    $
    28.2
    
    
    $
    48.3
    
    
    $
    51.5
    
    
    $
    39.2Other guarantees
    
    
    154.2
    
    
    
    50.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.2
    
    
    
    102.0Total commercial commitments
    
    $
    805.4
    
    
    $
    100.0
    
    
    $
    434.0
    
    
    $
    28.2
    
    
    $
    48.3
    
    
    $
    53.7
    
    
    $
    141.2
 Guarantees Supporting Commodity Transactions of Subsidiaries.Columbia has issued guarantees,
which support up to approximately $651.2 million in commodity-related payments for its current and
former subsidiaries involved in forward gas sales activities. 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. Other Guarantees. Columbia retains certain operational and financial guarantees with respect to
its former exploration and production subsidiary, CER. Off Balance Sheet Items.Columbia 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 Sheets.
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 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. As of March 31, 2005,
approximately 27.6 Bcf remained to be delivered under the forward sales agreements. Columbia is
indemnified by Triana, and MSCP will fund up to a maximum of $49.3 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. 13




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ITEM 1. FINANCIAL STATEMENTS (continued) Columbia energy groupNotes to Consolidated Financial Statements (continued)(unaudited) Immediately after the close 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 $49.3
million of further commitments to Triana from MSCP, adequately offset any 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. B. Other 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. C. Environmental Matters. The operations of Columbia are subject to extensive and evolving federal, state and local
environmental laws and regulations intended to protect the public health and the environment. Such
environmental laws and regulations affect operations as they relate to impacts on air, water and
land. As of March 31, 2005, a reserve of approximately $48.1 million has been recorded to cover probable
corrective actions at sites where Columbia has environmental remediation liability. Regulatory
assets have been recorded to the extent environmental expenditures are expected to be recovered in
rates. The ultimate liability in connection with these sites will depend upon many factors,
including the volume of material contributed to the site, the number of the other potentially
responsible parties and their financial viability, the extent of corrective actions required and
rate recovery. Based upon investigations and managements understanding of current environmental
laws and regulations, Columbia believes that any corrective actions required will not have a
material effect on its financial position or results of operations. 9. 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. March 31,
    
    
    December 31,(in millions)
    
    2005
    
    
    2004Other comprehensive income, before tax:Unrealized gains (loss) on securities
    
    $
    (0.4
    )
    
    $
    0.3Unrealized gains on cash flow hedges
    
    
    206.1
    
    
    
    159.5Other comprehensive income, before tax:
    
    $
    205.7
    
    
    $
    159.8Income tax expense related to items of other comprehensive income
    
    
    (72.0
    )
    
    
    (55.7
    )Total Accumulated Other Comprehensive Income, net of tax
    
    $
    133.7
    
    
    $
    104.1
 10. 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. 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 is primarily comprised
of the remaining gas sales obligation of Columbia Energy Services, which was in 14




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ITEM 1. FINANCIAL STATEMENTS (continued) Columbia energy groupNotes to Consolidated Financial Statements (continued)(unaudited) the commercial and residential natural gas retail business, and the operations of the
remaining microwave relay business. The following tables provide information about business segments. Columbia uses operating income
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, regulated prices or at levels provided for
under contractual agreements. Operating income is derived from revenues and expenses directly
associated with each segment. Three Months Ended March 31, (in millions)
    
    2005
    
    
    2004REVENUESGas Distribution OperationsUnaffiliated
    
    $
    1,210.3
    
    
    $
    1,097.3Intersegment and affiliates
    
    
    
    
    
    
    Total
    
    
    1,210.3
    
    
    
    1,097.3Transmission and Storage OperationsUnaffiliated
    
    
    157.1
    
    
    
    165.6Intersegment and affiliates
    
    
    64.0
    
    
    
    64.5Total
    
    
    221.1
    
    
    
    230.1Other OperationsUnaffiliated
    
    
    20.6
    
    
    
    17.8Intersegment and affiliates
    
    
    0.1
    
    
    
    0.1Total
    
    
    20.7
    
    
    
    17.9Adjustments and eliminations
    
    
    (60.9
    )
    
    
    (61.3
    )Consolidated Revenues
    
    $
    1,391.2
    
    
    $
    1,284.0Operating Income (Loss)Gas Distribution Operations
    
    $
    178.0
    
    
    $
    183.5Transmission and Storage Operations
    
    
    108.0
    
    
    
    110.5Other Operations
    
    
    1.9
    
    
    
    (0.5
    )Corporate
    
    
    (1.3
    )
    
    
    5.1Operating Income
    
    $
    286.6
    
    
    $
    298.6
 15




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ITEM 2. MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS 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, 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, the success of regulatory and commercial initiatives, dealings with
third parties over whom Columbia has no control, the scope, timing and impact of any outsourcing
initiative, actual operating experience of Columbia 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 Discussion and Analysis should be read in conjunction with Columbias
Annual Report on Form 10-K for the fiscal year ended December 31, 2004. Results of OperationsThe Quarter Ended March 31, 2005 Net Income Columbia reported net income of $164.7 million for the three months ended March 31, 2005, compared
to net income of $174.5 million for the first quarter 2004. Operating income was $286.6 million, a
decrease of $12 million from the same period in 2004. Comparability of line item operating results was impacted by regulatory trackers that allow for the
recovery in rates of certain costs such as bad debt expenses. These trackers increase both
operating expenses and net revenues and had essentially no impact on total operating income
results. Approximately $15 million of the increase in operating expenses was offset by a
corresponding increase to net revenues reflecting recovery of these costs. Net Revenues Total consolidated net revenues (gross revenues less cost of sales) for the three months ended
March 31, 2005, were $603.4 million, a $9.3 million increase from the same period last year. The
increase resulted from approximately $15 million of trackers as discussed above and increased
revenues of approximately $13 million from the expiration of the 1999 stipulation for Columbia of
Ohio. These revenues were partially offset by a $11.2 million reduction related to the
restructuring of firm transportation and storage contracts that expired October 31, 2004, net of
remarketing activities, lower customer usage and warmer weather compared to the prior period. 16




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ITEM 2. MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued) Columbia energy group Expenses Operating expenses for the first quarter of 2005 were $316.8 million, an increase of $21.3 million
from the 2004 period. Excluding the impact of $15 million of trackers discussed above, operating
expenses were $6.3 million higher, reflecting higher depreciation primarily as a result of the
expiration of the 1999 stipulation for Columbia of Ohio. Other Income (Deductions) Interest expense, net was $27.1 million for the quarter, an increase of $6.7 million compared to
the first quarter 2004 mainly due to the termination of certain interest rate swap agreements.
Other, net was a loss of $1.3 million for the current quarter compared to $1.1 million of income
for the comparable 2004 period due to costs associated with the sale of more accounts receivables
compared to the previous period. Income Taxes Income tax expense for the first quarter of 2005 was $99.7 million, a decrease of $6.5 million
compared to the 2004 period, due to lower pre-tax income. 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. Operating Activities.Net cash from operating activities for the three months ended March 31, 2005
was $618.3 million, an increase of $155.7 million from the comparable 2004 period. The change was
due to increased cash from the change in working capital. Cash from working capital increased
$200.7 million due to the increased sale of accounts receivable, and lower inventory levels as a
result of increased gas storage withdrawals at a higher cost. Investing Activities.Capital expenditures of $49.7 million in the first quarter of 2005 were $8.9
million lower than the comparable 2004 period. The spending for the first quarter primarily
reflected on-going system improvements and upgrades to maintain service and reliability. Capital
spending is expected to increase in the remaining 2005 periods as compared to last year, mainly to
support increased pipeline integrity related work and growth initiatives within Gas Transmission
and Storage Operations. Financing Activities.Columbia subsidiaries satisfy their liquidity requirements primarily through
internally generated funds and through intercompany borrowings from the NiSource Money Pool. These
subsidiaries may borrow or invest, on an intercompany basis, a cumulative maximum of $1.13 billion
through the NiSource Money Pool as approved by the SEC under the Public Utility Holding Company Act
of 1935. NiSource Finance 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 March 31, 2005, Columbia had $577.1
million invested in the NiSource Money Pool. Sale of Trade Accounts 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 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 agreement, which replaced a prior similar
agreement, expires in May 2005, but can be renewed if mutually agreed to by both parties. As of
March 31, 2005, $300 million of accounts receivable had been sold by CORC. 17




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ITEM 2. MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued) Columbia energy group Under the agreement, Columbia of Ohio acts as administrative agent, by performing record keeping
and cash collection functions for the accounts receivable sold by CORC. Columbia of Ohio receives
a fee, which provides adequate compensation, for such services. Non-Trading Risks Commodity price risk resulting from non-trading activities at Columbias rate-regulated
subsidiaries is limited, since regulations allow recovery of gas costs through the rate-making
process. If states should explore additional 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. Off Balance Sheet Arrangements Columbia has issued guarantees that support up to approximately $651.2 million of commodity-related
payments to satisfy requirements under forward gas sales agreements of former and current
subsidiaries. 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 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 Sheets. 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 other guarantees, operating leases, and lines and letters of credit outstanding.
Refer to Note 6, Risk Management Activities, and Note 8-A, Guarantees and Indemnities, in the
Notes to Consolidated Financial Statements for additional information about Columbias off balance
sheet arrangements. Columbia has retained liabilities related to the CER forward gas sales agreements with 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. As of March 31, 2005,
approximately 27.6 Bcf remained to be delivered under the forward sales agreements. Columbia is
indemnified by Triana, and MSCP will fund up to a maximum of $49.3 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 close 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 $49.3
million of further commitments to Triana from MSCP, adequately offset any 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. Other Information Regulatory Matters Gas Distribution Operations Related Matters.Gas Distribution Operations continues to offer
CHOICE® opportunities, where customers can choose to purchase gas from a third party
supplier, through regulatory initiatives in all of its jurisdictions. Through the month of March
2005, approximately 664 thousand of Gas Distribution Operations residential and small commercial
and industrial customers selected an alternate supplier. 18




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ITEM 2. MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued) Columbia energy group On March 29, 2005, the PSC approved a renewed pilot program for Columbia of Kentucky authorizing
the continuation of the Customer ChoiceSM Program. The program provides residential and
small commercial customers the option to choose their natural gas supplier and avoids the stranded
costs associated with the previous pilot. In addition, Columbia received approval from the PSC to
implement programs that provide Columbia of Kentucky with the opportunity to stabilize wholesale
costs for gas during the winter heating season and share certain cost savings with customers. Since November 1, 2004, Columbia of Ohio has been operating under a new regulatory stipulation
approved by the PUCO that expires on October 31, 2008. This regulatory stipulation has been
contested by the OCC, and on June 9, 2004, the PUCO denied the OCCs Second Application for
Rehearing. The OCC then filed an appeal with the Supreme Court of Ohio on July 29, 2004,
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. Columbia of Ohio intervened in the appellate proceeding. On December
8, 2004, the PUCO and Columbia of Ohio filed motions to dismiss the appeal, based upon the OCCs
failure to comply with the Supreme Court of Ohios procedural rules. On December 17, 2004, the OCC
filed its Memoranda Contra. On March 23, 2005, the Supreme Court of Ohio issued a decision in
which it granted the motions to dismiss and dismissed the appeal based upon the OCCs failure to
comply with the Courts procedural rules. On April 1, 2005, the OCC filed a Motion for
Reconsideration with the Supreme Court of Ohio. Columbia of Ohio and the PUCO filed Memoranda
Contra on April 8, 2005. On December 17, 2003, the PUCO approved an application by Columbia of Ohio and other Ohio 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. On
October 1, 2004, Columbia of Ohio filed an application for approval to increase its Uncollectible
Expense Rider and on October 20, 2004, the PUCO approved the application. The PUCOs approval of
this application resulted in Columbia of Ohios commencing recovery of the deferred uncollectible
accounts receivables and establishment of future bad debt recovery requirements in November 2004.
As of March 31, 2005, Columbia of Ohio has $35.3 million of uncollected accounts receivable pending
future recovery. On May 2, 2005, Columbia filed an application for approval to decrease its
Uncollectible Expense Rider rate, effective June 2005. This request for reduction in its
Uncollectible Expense Rider rate was based on projected annual recovery requirements of $26.3
million for the period ending March 31, 2006  a reduction of $11.4 from Columbias currently
effective rate. On December 2, 2004, Columbia of Ohio filed two applications with the OPSB, requesting certificates
of environmental compatibility and public need for the construction of the Northern Columbus Loop
Natural Gas Pipeline project. The project is proposed in three phases (Phases IV, V and VI), and
contemplates an approximately 25-mile long pipeline, to be constructed in northern Columbus and
southern Delaware County. The project will help secure current and future natural gas supplies for
Columbia of Ohios customers in the region. On February 7, 2005, the Board notified Columbia that
the applications were certified as complete. Columbia of Ohio also filed requests for waivers from
certain of the Boards requirements. The waivers were approved on February 4, 2005. On April 14,
2005, the Board issued an Order (i) finding that the effective date of the applications is April
15, 2005, (ii) granting Columbias motion to consolidate the cases for hearing purposes, and (iii)
establishing a public hearing date of June 20, 2005, and an adjudicatory hearing date of June 21,
2005. Gas Transmission and Storage Operations Related Matters.On March 31, 2005, the FERC issued an
order regarding Columbia Transmissions annual EPCA filing. The FERCs order accepted the filing,
subject to refund, and established a hearing to address issues related to the appropriate
methodology for allocating costs associated with the new electric Downingtown Compressor units.
The order does not inhibit Columbias ability to fully recover its electric costs; as such,
management does not believe this order will have a material financial impact. On March 29, 2005, the FERC issued an unconditional order accepting Columbia Transmissions March
1, 2005 RAM filing. Columbia Transmissions March 1, 2004 RAM is still pending before the FERC,
with no statutory time requirement for future action; however, with the approval of the 2005 RAM
filing, management does not anticipate a material adverse order. 19




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ITEM 2. MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued) Columbia energy group Environmental Matters Currently, various environmental matters impact Columbia. As of March 31, 2005, a reserve has been
recorded to cover probable environmental response actions. Refer to Note 8-C, Environmental

Matters, in the Notes to Consolidated Financial Statements for additional information regarding
environmental matters. Proposed Millennium Pipeline Project The proposed Millennium Project, 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 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 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 United States Department of Commerce ruling
relating to the projects Hudson River crossing plan in the United States Federal District Court on
February 13, 2004. The procedural schedule calls for all briefings to be completed by the end of
2005. During the second quarter of 2004, a NiSource affiliate purchased an additional interest in the
project. NiSource is finalizing plans to transfer this interest to other sponsors in the second
quarter of 2005. The other sponsors are Columbia Transmission, MCNIC Millennium Company
(subsidiary of DTE Energy Company), and KeySpan Millennium, L.L.C. (subsidiary of KeySpan
Corporation). Hardy Storage Project In November 2004, Columbia Transmission and a subsidiary of Piedmont reached an agreement to
jointly develop a major new underground natural gas storage field to help meet increased market
demand for natural gas in the eastern United States. Columbia Transmission and Piedmont have formed Hardy Storage, to develop a natural gas storage
field from a depleted natural gas production field in West Virginia. Columbia Transmission and
Piedmont each have a 50% equity interest in the project, and Columbia Transmission will serve as
operator of the facilities. An open season for Hardy Storage conducted in early 2004 resulted in full subscription of the
projects storage capacity under long-term firm contracts. The field, which will have the capacity
to store approximately 12 Bcf natural gas, is planned to begin service in November 2007, and will
ultimately deliver 176 MMDth per day of firm storage service to the four customers subscribing for
Hardy Storage capacity. These customers have also signed long-term firm agreements with Columbia
Transmission for transportation capacity to deliver gas from Hardy Storage to their markets.
Columbia Transmission will expand its natural gas transmission system to create this capacity. Both Hardy Storage and Columbia Transmission filed the necessary applications for the projects with
the FERC on April 25, 2005, with plans to begin construction later this year. Service from both
projects is expected to be available in 2007. 20




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ITEM 2. MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued) Columbia energy group Nisource Outsourcing Project NiSource has selected IBM as the business process service provider with whom NiSource will move
forward into a period of exclusive negotiation toward a contract to outsource up to $2 billion of
business support activities over ten years. Teams of employees from the areas under consideration
for transformation have been working for three months through a disciplined process with Accenture
Ltd. and IBM  the two service providers that responded to an extensive RFP from NiSource  to
identify potential solutions and savings. NiSource has not yet finalized which activities and
processes will be outsourced or to what extent, and it is uncertain at this time what the impact
will be for Columbia. A team from NiSource and IBM is working on the details of the future
relationship between the two companies. NiSource expects to make final decisions and conclude
contract negotiations in June 2005 . 21




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Columbia energy group Omitted pursuant to General Instruction H(2)(c). 
 ITEM 4. CONTROLS AND PRODEDURES 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. 22




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PART II 
 ITEM 1. LEGAL PROCEEDINGS Columbia energy group  1.
    United States of America ex rel. Jack J. Grynberg v. Columbia Gas Transmission Corporation,
et al., U.S. District Court, E.D. LouisianaThe plaintiff filed a complaint in 1997, under the False Claims Act, on behalf of the United
States of America, against approximately seventy pipelines, including Columbia Gulf and Columbia
Transmission. The plaintiff claimed that the defendants had submitted false royalty reports to
the government (or caused others to do so) by mis-measuring the volume and heating content of
natural gas produced on Federal land and Indian lands. The Plaintiffs original complaint was
dismissed without prejudice for misjoinder of parties and for failing to plead fraud with
specificity. The plaintiff then filed over sixty-five new False Claims Act complaints against
over 330 defendants in numerous Federal courts. One of those complaints was filed in the
Federal District Court for the Eastern District of Louisiana against Columbia Energy Group and
thirteen affiliated entities (collectively, the Columbia defendants).Plaintiffs second complaint, filed in 1997, repeats the mis-measurement claims previously made
and adds valuation claims alleging that the defendants have undervalued natural gas for royalty
purposes in various ways, including sales to affiliated entities at artificially low prices.
Most of the Grynberg cases were transferred to Federal court in Wyoming in 1999.The defendants, including the Columbia defendants, have filed motions to dismiss for lack of
subject matter jurisdiction in this case. Oral argument on the motions to dismiss was held on
March 17 and 18, 2005 before a Special Master. The Special Master is expected to submit a final
report and recommendation to the Federal District Court. 
 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) 
 ITEM 5. OTHER INFORMATION None 
 ITEM 6. EXHIBITS  (a)
    Exhibits  (12)
    Statements of Ratio of Earnings to Fixed Charges (filed herewith).(31.1)
    Certification of Michael W. ODonnell, Chief Executive Officer, pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 (filed herewith).(31.2)
    Certification of David J. Vajda Principal Financial Officer, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 (filed herewith). 23




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ITEM 6. EXHIBITS (continued) Columbia energy group  (32.1)
    Certification of Michael W. ODonnell, Chief Executive Officer, pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (filed herewith).(32.2)
    Certification of David J. Vajda, Principal Financial Officer, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (filed herewith). Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Columbia hereby agrees to furnish the SEC, upon
request, any instrument defining the rights of holders of long-term debt of Columbia not filed as
an exhibit herein. No such instrument authorizes long-term debt securities in excess of 10% of the
total assets of Columbia and its subsidiaries on a consolidated basis. 24




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SIGNATURE Columbia energy group 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: May 9, 2005
    
    By:
    
    /s/ Jeffrey W. GrossmanJeffrey W. GrossmanVice President(Principal Accounting Officerand Duly Authorized Officer)
 25