##### Table of Contents



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 September 30, 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
 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
 þ o
 o þ
 o þ




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COLUMBIA ENERGY GROUP
FORM 10-Q QUARTERLY REPORT
FOR THE QUARTER ENDED SEPTEMBER 30, 2005
 Table of Contents
  
 PageDefined Terms
    
    
    3PART I
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsStatements of Consolidated Income
    
    
    5Consolidated Balance Sheets
    
    
    6Statements of Consolidated Cash Flows
    
    
    8Statements of Consolidated Comprehensive Income
    
    
    9Notes to Consolidated Financial Statements
    
    
    10Item 2.
    
    Managements Narrative Analysis of Results of Operations
    
    
    20Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4.
    
    Controls and Procedures
    
    
    28PART II
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    29Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 3.
    
    Defaults Upon Senior Securities
    
    
    30Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    30Item 5.
    
    Other Information
    
    
    30Item 6.
    
    Exhibits
    
    
    30Signature
    
    
    31Statements of Ratio of Earnings to Fixed ChargesCertification of Michael W. O'Donnell, President and CEO, Pursuant to Section 302Certification of David J. Vajda, Principal Financial Officer, Pursuant to Section 302Certification of Michael W. O'Donnell, President and CEO, Pursuant to Section 906Certification of David J. Vajda, Principal Financial Officer, Pursuant to Section 906
  2




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##### Table of Contents



DEFINED TERMS
  NiSource Subsidiaries and AffiliatesCER
    
    Columbia Energy Resources, Inc.Columbia
    
    Columbia Energy GroupColumbia Energy Services
    
    Columbia Energy Services CorporationColumbia Gulf
    
    Columbia Gulf Transmission CompanyColumbia of Kentucky
    
    Columbia Gas of Kentucky, Inc.Columbia of Maryland
    
    Columbia Gas of Maryland, 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 CorporationCORC
    
    Columbia of Ohio Receivables CorporationHardy Storage
    
    Hardy Storage Company, L.L.C.Millennium
    
    Millennium Pipeline Company, L.P.NiSource
    
    NiSource Inc.NiSource Corporate Services
    
    NiSource Corporate Services CompanyNiSource Finance
    
    NiSource Finance Corp.Transcom
    
    Columbia Transmission Communications Corporation
 AbbreviationsAPB No. 28
    
    Accounting Principles Board Opinion No. 28, Interim Financial ReportingBcf
    
    Billion cubic feetDOT
    
    United States Department of TransportationEmpire
    
    Empire State PipelineEPA
    
    United States Environmental Protection AgencyEPCA
    
    Electric Power Cost AdjustmentFASB
    
    Financial Accounting Standards BoardFERC
    
    Federal Energy Regulatory CommissionFIN 47
    
    FASB Interpretation No. 47, Accounting for Conditional Asset Retirement ObligationsIBM
    
    International Business Machines Corp.LDCs
    
    Local distribution companiesMahonia
    
    Mahonia II LimitedMMDth
    
    Million dekathermsMSCP
    
    Morgan Stanley Dean Witter Capital Partners IV, L.P.NAAQS
    
    National Ambient Air Quality
StandardsNOx
    
    Nitrogen oxideNYDOS
    
    New Yorks Department of StateNYMEX
    
    New York Mercantile ExchangeOPSB
    
    Ohio Power Siting BoardPiedmont
    
    Piedmont Natural Gas Company, Inc.PSC
    
    Kentucky Public Service CommissionPUC
    
    Public Utilities CommissionPUCO
    
    Public Utilities Commission of OhioRAM
    
    Retainage Adjustment MechanismSEC
    
    Securities and Exchange Commission
 3




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##### Table of Contents



DEFINED TERMS (continued)
 SFAS
    
    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. 87
    
    Statement of Financial Accounting Standards No. 87,
Employers Accounting for PensionsSFAS No. 109
    
    Statement of Financial Accounting Standards No. 109,
Accounting for Uncertain Tax Positions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SIP
    
    State Implementation PlanTcf
    
    Trillion cubic feetTriana
    
    Triana Energy Holdings
 4




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##### Table of Contents



PART I
 
 ITEM 1. FINANCIAL STATEMENTS
 C olumbia energy group  Statements of Consolidated Income (unaudited)
 Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,(in millions)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Net RevenuesGas Distribution
    
    $
    192.1
    
    
    $
    186.1
    
    
    $
    1,669.1
    
    
    $
    1,512.3Gas Transmission and Storage
    
    
    169.6
    
    
    
    171.3
    
    
    
    659.3
    
    
    
    671.7Other
    
    
    26.8
    
    
    
    20.2
    
    
    
    77.8
    
    
    
    67.7Affiliated revenues
    
    
    2.2
    
    
    
    2.8
    
    
    
    7.8
    
    
    
    8.5Gross Revenues
    
    
    390.7
    
    
    
    380.4
    
    
    
    2,414.0
    
    
    
    2,260.2Cost of sales
    
    
    97.3
    
    
    
    80.6
    
    
    
    1,152.7
    
    
    
    1,025.4Cost of sales  affiliated
    
    
    0.3
    
    
    
    
    
    
    
    0.8
    
    
    
    Total Net Revenues
    
    
    293.1
    
    
    
    299.8
    
    
    
    1,260.5
    
    
    
    1,234.8Operating ExpensesOperation and maintenance
    
    
    184.0
    
    
    
    161.6
    
    
    
    559.5
    
    
    
    502.3Depreciation and amortization
    
    
    48.8
    
    
    
    41.8
    
    
    
    146.8
    
    
    
    125.4Loss (gain) on sale of assets
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    0.2Other taxes
    
    
    29.5
    
    
    
    27.5
    
    
    
    136.4
    
    
    
    129.1Total Operating Expenses
    
    
    262.3
    
    
    
    230.8
    
    
    
    842.7
    
    
    
    757.0Operating Income
    
    
    30.8
    
    
    
    69.0
    
    
    
    417.8
    
    
    
    477.8Other Income (Deductions)Interest expense
    
    
    (25.2
    )
    
    
    (25.6
    )
    
    
    (77.1
    )
    
    
    (68.7
    )Interest expense  affiliated
    
    
    (1.0
    )
    
    
    (0.8
    )
    
    
    (2.2
    )
    
    
    (2.0
    )Interest income
    
    
    1.5
    
    
    
    1.8
    
    
    
    6.8
    
    
    
    4.6Interest income  affiliated
    
    
    3.6
    
    
    
    3.9
    
    
    
    12.2
    
    
    
    10.1Other, net
    
    
    0.3
    
    
    
    1.5
    
    
    
    (1.8
    )
    
    
    2.4Total Other Income (Deductions)
    
    
    (20.8
    )
    
    
    (19.2
    )
    
    
    (62.1
    )
    
    
    (53.6
    )Income from Continuing Operations before Income Taxes
    
    
    10.0
    
    
    
    49.8
    
    
    
    355.7
    
    
    
    424.2Income Taxes
    
    
    3.4
    
    
    
    18.6
    
    
    
    133.8
    
    
    
    159.0Income from Continuing Operations
    
    
    6.6
    
    
    
    31.2
    
    
    
    221.9
    
    
    
    265.2Income (Loss) from Discontinued Operations  net of taxes
    
    
    (6.5
    )
    
    
    6.0
    
    
    
    (20.5
    )
    
    
    2.3Gain (Loss) on Disposition of Discontinued Operations  net of
taxes
    
    
    (0.6
    )
    
    
    (0.8
    )
    
    
    0.4
    
    
    
    (0.8
    )Net Income (Loss)
    
    $
    (0.5
    )
    
    $
    36.4
    
    
    $
    201.8
    
    
    $
    266.7
  5




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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS (continued)
 C olumbia energy group
 
 Consolidated Balance Sheets
 September 30,
    
    
    December 31,(in millions)
    
    2005
    
    
    2004(unaudited)ASSETSProperty, Plant and EquipmentUtility Plant
    
    $
    8,512.5
    
    
    $
    8,338.5Accumulated depreciation and amortization
    
    
    (3,815.7
    )
    
    
    (3,718.7
    )Net utility plant
    
    
    4,696.8
    
    
    
    4,619.8Other property, at cost, less accumulated depreciation
    
    
    10.7
    
    
    
    2.0Net Property, Plant and Equipment
    
    
    4,707.5
    
    
    
    4,621.8Investments and Other AssetsAssets of discontinued operations and assets held for sale
    
    
    17.0
    
    
    
    23.4Unconsolidated affiliates
    
    
    54.5
    
    
    
    41.7Other investments
    
    
    49.6
    
    
    
    41.7Total Investments and Other Assets
    
    
    121.1
    
    
    
    106.8Current AssetsCash and cash equivalents
    
    
    295.8
    
    
    
    13.5Restricted cash
    
    
    1.6
    
    
    
    5.4Accounts receivable and unbilled revenue (less reserves of $14.5 and $19.4, respectively)
    
    
    172.9
    
    
    
    427.5Accounts receivable  affiliated
    
    
    8.9
    
    
    
    452.4Gas inventory
    
    
    469.1
    
    
    
    285.7Underrecovered gas and fuel costs
    
    
    173.5
    
    
    
    239.4Materials and supplies, at average cost
    
    
    16.9
    
    
    
    17.0Price risk management assets
    
    
    143.4
    
    
    
    45.7Exchange gas receivable
    
    
    162.6
    
    
    
    131.7Regulatory assets
    
    
    129.9
    
    
    
    87.9Prepayments and other
    
    
    39.7
    
    
    
    74.0Total Current Assets
    
    
    1,614.3
    
    
    
    1,780.2Other AssetsPrice risk management assets
    
    
    191.7
    
    
    
    113.9Regulatory assets
    
    
    336.3
    
    
    
    354.2Intangible assets, less accumulated amortization
    
    
    1.1
    
    
    
    1.4Deferred charges and other
    
    
    122.3
    
    
    
    121.0Other receivables  affiliated
    
    
    21.7
    
    
    
    21.7Total Other Assets
    
    
    673.1
    
    
    
    612.2Total Assets
    
    $
    7,116.0
    
    
    $
    7,121.0
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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS (continued)
 C olumbia energy group
 
 Consolidated Balance Sheets (continued)
 September 30,
    
    
    December 31,(in millions)
    
    2005
    
    
    2004(unaudited)CAPITALIZATION AND LIABILITIESCapitalizationCommon stock equityAdditional paid-in-capital
    
    $
    1,420.3
    
    
    $
    1,419.5Retained earnings
    
    
    1,291.1
    
    
    
    1,439.2Accumulated other comprehensive income and other common stock
equity
    
    
    198.6
    
    
    
    104.1Total common stock equity
    
    
    2,910.0
    
    
    
    2,962.8Long-term debt, excluding amounts due within one year
    
    
    2.0
    
    
    
    1,075.9Total Capitalization
    
    
    2,912.0
    
    
    
    4,038.7Current LiabilitiesCurrent portion of long-term debt
    
    
    1,355.6
    
    
    
    281.9Short-term borrowings
    
    
    
    
    
    
    0.1Accounts payable
    
    
    266.2
    
    
    
    310.7Accounts payable-affiliated
    
    
    51.8
    
    
    
    19.4Customer accounts receivable credit balances and deposits
    
    
    121.2
    
    
    
    122.2Taxes accrued
    
    
    94.2
    
    
    
    120.2Interest accrued
    
    
    35.9
    
    
    
    11.4Overrecovered gas and fuel costs
    
    
    2.9
    
    
    
    1.6Price risk management liabilities
    
    
    10.8
    
    
    
    4.9Exchange gas payable
    
    
    306.5
    
    
    
    323.7Current deferred revenue
    
    
    25.0
    
    
    
    23.2Regulatory liabilities
    
    
    30.8
    
    
    
    24.5Accrued liability for postretirement and postemployment benefits
    
    
    34.2
    
    
    
    33.5Deferred income taxes
    
    
    58.7
    
    
    
    104.7Other accruals
    
    
    202.6
    
    
    
    156.0Total Current Liabilities
    
    
    2,596.4
    
    
    
    1,538.0Other Liabilities and Deferred CreditsDeferred income taxes
    
    
    901.9
    
    
    
    814.9Deferred investment tax credits
    
    
    24.4
    
    
    
    25.5Deferred credits
    
    
    44.9
    
    
    
    47.8Noncurrent deferred revenue
    
    
    68.2
    
    
    
    86.9Accrued liability for postretirement and postemployment benefits
    
    
    77.9
    
    
    
    84.5Regulatory liabilities
    
    
    375.1
    
    
    
    368.8Other noncurrent liabilities
    
    
    115.2
    
    
    
    115.9Total Other Liabilities and Deferred Credits
    
    
    1,607.6
    
    
    
    1,544.3Commitments and Contingencies
    
    
    
    
    
    
    Total Capitalization and Liabilities
    
    $
    7,116.0
    
    
    $
    7,121.0
  7




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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS (continued)
 C olumbia energy group
 
 Statements of Consolidated Cash Flows (unaudited)
 Nine Months Ended September 30, (in millions)
    
    2005
    
    
    2004Operating ActivitiesNet Income
    
    $
    201.8
    
    
    $
    266.7Adjustments to reconcile net income to net cash from continuing operations:Depreciation, depletion, and amortization
    
    
    146.8
    
    
    
    125.4Net changes in price risk management activities
    
    
    (24.7
    )
    
    
    6.7Deferred income taxes and investment tax credits
    
    
    (11.3
    )
    
    
    40.3Deferred revenue
    
    
    (16.9
    )
    
    
    (15.7
    )Amortization of unearned compensation
    
    
    0.5
    
    
    
    0.6Loss on sale of assets
    
    
    
    
    
    
    0.2Income from unconsolidated affiliates
    
    
    (0.1
    )
    
    
    Loss (gain) on sale of discontinued operations
    
    
    (0.4
    )
    
    
    0.8Loss (income) from discontinued operations
    
    
    20.5
    
    
    
    (2.3
    )Other
    
    
    (1.0
    )
    
    
    (1.2
    )Changes in assets and liabilities:Accounts receivable and unbilled revenue
    
    
    229.0
    
    
    
    248.2Inventories
    
    
    (183.2
    )
    
    
    (142.3
    )Accounts payable
    
    
    (28.5
    )
    
    
    (104.8
    )Customer deposits
    
    
    (0.6
    )
    
    
    (1.1
    )Taxes accrued
    
    
    (14.1
    )
    
    
    (31.1
    )Interest accrued
    
    
    24.5
    
    
    
    22.9(Under) Overrecovered gas and fuel costs
    
    
    67.2
    
    
    
    27.7Exchange gas receivable/payable
    
    
    (15.5
    )
    
    
    23.1Other accruals
    
    
    (3.3
    )
    
    
    (17.3
    )Prepayments and other current assets
    
    
    34.3
    
    
    
    34.3Regulatory assets/liabilities
    
    
    (26.6
    )
    
    
    25.8Postretirement and postemployment benefits
    
    
    (5.9
    )
    
    
    (14.7)Deferred credits
    
    
    (2.4
    )
    
    
    1.2Deferred charges and other noncurrent assets
    
    
    (2.3
    )
    
    
    (14.3
    )Other noncurrent liabilities
    
    
    15.9
    
    
    
    7.2Net Cash Flows from Continuing Operations
    
    
    403.7
    
    
    
    486.3Net Cash Flows used for Discontinued Operations
    
    
    (10.7
    )
    
    
    Net Cash Flows from Operating Activities
    
    
    393.0
    
    
    
    486.3Investing ActivitiesCapital expenditures
    
    
    (224.5
    )
    
    
    (177.8
    )Change in Affiliated Money Pool Lendings
    
    
    441.4
    
    
    
    (250.9
    )Proceeds from disposition of assets
    
    
    0.3
    
    
    
    2.2Other investing activities
    
    
    (3.3
    )
    
    
    (2.6
    )Net Cash Flows from (used for) Investing Activities
    
    
    213.9
    
    
    
    (429.1
    )Financing ActivitiesChange in short-term debt
    
    
    (0.1
    )
    
    
    Change in Affiliated Money Pool Borrowings
    
    
    25.5
    
    
    
    Dividends paid  common shares
    
    
    (350.0
    )
    
    
    (50.0
    )Net Cash Flows used for Financing Activities
    
    
    (324.6
    )
    
    
    (50.0
    )Increase in cash and cash equivalents
    
    
    282.3
    
    
    
    7.2Cash and cash equivalents at beginning of year
    
    
    13.5
    
    
    
    13.7Cash and cash equivalents at end of period
    
    $
    295.8
    
    
    $
    20.9Supplemental Disclosures of Cash Flow InformationCash paid for interest
    
    
    55.7
    
    
    
    49.0Interest capitalized
    
    
    1.0
    
    
    
    1.2Cash paid for income taxes
    
    
    99.2
    
    
    
    82.2
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ITEM 1. FINANCIAL STATEMENTS (continued)
 C olumbia energy group
 
 Statements of Consolidated Comprehensive Income (unaudited)
 Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,(in millions, net of taxes)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Net Income (Loss)
    
    $
    (0.5
    )
    
    $
    36.4
    
    
    $
    201.8
    
    
    $
    266.7Other comprehensive income, net of taxesNet unrealized gains on cash flow hedges
    
    
    63.4
    
    
    
    14.2
    
    
    
    95.1
    
    
    
    27.2Net gain on available for sale securities
    
    
    (0.4
    )
    
    
    0.3
    
    
    
    (0.5
    )
    
    
    Total other
comprehensive
income, net of
taxes
    
    
    63.0
    
    
    
    14.5
    
    
    
    94.6
    
    
    
    27.2Total Comprehensive Income
    
    $
    62.5
    
    
    $
    50.9
    
    
    $
    296.4
    
    
    $
    293.9
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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS (continued)
 C olumbia energy group
 
 Notes to Consolidated Financial Statements
 1.
    
    Basis of Accounting Presentation
       (in millions)
    
    Nine Months Ended September 30, 2004Cash used for investing activities as previously presented
    
    $
    (181.2
    )Change in cash deposits with NiSource Money Pool
    
    
    (250.9
    )Reclassification of restricted cash
    
    
    3.0Cash used for investing activities, as currently reported
    
    $
    (429.1
    )
 (in millions)
    
    Nine Months Ended September 30, 2004Net increase in cash and cash equivalents as previously
presented
    
    $
    258.1Change in cash deposits with NiSource money pool
    
    
    (250.9
    )Net increase in cash and cash equivalents, as currently
reported
    
    $
    7.2
 2.
    
    Recent Accounting Pronouncements
 FASB Interpretation No. 47  Accounting for Conditional Asset Retirement Obligations.
 10




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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS (continued)
 C olumbia energy group  Notes to Consolidated Financial Statements (continued)
 SFAS No. 123 (revised 2004)    Share-Based Payment.
 Accounting for Uncertain Tax Positions.
 3.
    
    Restructuring Activities
   
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ITEM 1. FINANCIAL STATEMENTS (continued)
 C olumbia energy group  Notes to Consolidated Financial Statements (continued)
  Balance at
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at(in millions)
    
    Dec. 31, 2004
    
    
    Additions
    
    
    Benefits Paid
    
    
    Adjustments
    
    
    Sept. 30, 2005Outsourcing initiative
    
    $
    
    
    
    $
    3.4
    
    
    $
    (0.4
    )
    
    $
    
    
    
    $
    3.0Columbia merger and
related initiatives
    
    
    14.1
    
    
    
    
    
    
    
    (3.0
    )
    
    
    (0.7
    )
    
    $
    10.4Total
    
    $
    14.1
    
    
    $
    3.4
    
    
    $
    (3.4
    )
    
    $
    (0.7
    )
    
    $
    13.4
 4.
    
    Discontinued Operations and Assets Held for Sale
   Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,(in millions)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues from Discontinued Operations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Loss from discontinued operations
    
    
    (10.0
    )
    
    
    (5.1
    )
    
    
    (31.5
    )
    
    
    (10.8
    )Income tax benefit
    
    
    (3.5
    )
    
    
    (11.1
    )
    
    
    (11.0
    )
    
    
    (13.1
    )Net Income (Loss) from Discontinued Operations
    
    $
    (6.5
    )
    
    $
    6.0
    
    
    $
    (20.5
    )
    
    $
    2.3
   5.
    
    Regulatory Matters
 Gas Distribution Operations Related Matters  ®
 SM
  12




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ITEM 1. FINANCIAL STATEMENTS (continued)
 C olumbia energy group  Notes to Consolidated Financial Statements (continued)
    Gas Transmission and Storage Operations Related Matters
   13




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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS (continued)
 C olumbia energy group  Notes to Consolidated Financial Statements (continued)
 6.
    
    Risk Management Activities
  Hedging Activities.
 Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,(in millions, net of taxes)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Net unrealized gains on derivatives qualifying as cash flow
hedges at the beginning of the period
    
    $
    135.4
    
    
    $
    100.6
    
    
    $
    103.7
    
    
    $
    87.6Unrealized hedging gains arising during the period on
derivatives qualifying as cash flow hedges
    
    
    71.8
    
    
    
    20.8
    
    
    
    121.0
    
    
    
    47.1Reclassification adjustment for net gain included in net income
    
    
    (8.4
    )
    
    
    (6.6
    )
    
    
    (25.9
    )
    
    
    (19.9
    )Net unrealized gains on derivatives qualifying as cash flow
hedges at the end of the period
    
    $
    198.8
    
    
    $
    114.8
    
    
    $
    198.8
    
    
    $
    114.8
   Commodity Price Risk Programs.
  14




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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS (continued)
 C olumbia energy group  Notes to Consolidated Financial Statements (continued)
   7.
    
    Pension and Other Postretirement Benefits
  
 15




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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS (continued)
 C olumbia energy group  Notes to Consolidated Financial Statements (continued)
  Pension Benefits
    
    
    Other BenefitsThree months ended September 30, (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
    
    
    
    0.5Special termination benefits
    
    
    1.3
    
    
    
    
    
    
    
    
    
    
    
    Settlement/Curtailment loss
    
    
    3.3
    
    
    
    
    
    
    
    6.4
    
    
    
    Net Periodic Benefits Cost
    
    $
    6.1
    
    
    $
    2.0
    
    
    $
    10.2
    
    
    $
    3.7
 Pension Benefits
    
    
    Other BenefitsNine months ended September 30, (in millions)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Net periodic costService cost
    
    $
    15.5
    
    
    $
    14.4
    
    
    $
    3.6
    
    
    $
    3.3Interest cost
    
    
    37.2
    
    
    
    37.5
    
    
    
    16.2
    
    
    
    15.6Expected return on assets
    
    
    (49.7
    )
    
    
    (47.4
    )
    
    
    (10.7
    )
    
    
    (9.6
    )Amortization of prior service cost
    
    
    0.7
    
    
    
    0.6
    
    
    
    0.3
    
    
    
    0.3Recognized actuarial loss
    
    
    0.8
    
    
    
    0.9
    
    
    
    2.1
    
    
    
    1.5Special termination benefits
    
    
    1.3
    
    
    
    
    
    
    
    
    
    
    
    Settlement/Curtailment loss
    
    
    3.3
    
    
    
    
    
    
    
    6.4
    
    
    
    Net Periodic Benefits Cost
    
    $
    9.1
    
    
    $
    6.0
    
    
    $
    17.9
    
    
    $
    11.1
 8.
    
    Long-Term Debt
  9.
    
    Other Commitments and Contingencies
 A. Guarantees and Indemnities
 (in millions)
    
    Total
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    AfterGuarantees supporting commodity
transactions of subsidiaries
    
    $
    512.7
    
    
    $
    
    
    
    $
    357.7
    
    
    $
    23.5
    
    
    $
    44.8
    
    
    $
    47.5
    
    
    $
    39.2Other guarantees
    
    
    101.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.2
    
    
    
    99.5Total commercial commitments
    
    $
    614.4
    
    
    $
    
    
    
    $
    357.7
    
    
    $
    23.5
    
    
    $
    44.8
    
    
    $
    49.7
    
    
    $
    138.7
 16




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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS (continued)
 C olumbia energy group  Notes to Consolidated Financial Statements (continued)
 Guarantees Supporting Commodity Transactions of Subsidiaries.
 Off Balance Sheet Items.
     B. Other Legal Proceedings
 C. Environmental Matters.
 
 17




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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS (continued)
 C olumbia energy group  Notes to Consolidated Financial Statements (continued)
 Gas Distribution Operations and Gas Transmission and Storage Operations.
Air.
 10.
    
    Accumulated Other Comprehensive Income
  September 30,
    
    
    December 31,(in millions)
    
    2005
    
    
    2004Other comprehensive income, before taxes:Unrealized gains (losses) on securities
    
    $
    (0.4
    )
    
    $
    0.3Unrealized gains on cash flow hedges
    
    
    306.0
    
    
    
    159.5Other comprehensive income, before taxes:
    
    $
    305.6
    
    
    $
    159.8Income tax expense related to items of other comprehensive income
    
    
    (107.0
    )
    
    
    (55.7
    )Total Accumulated Other Comprehensive Income, net of taxes
    
    $
    198.6
    
    
    $
    104.1
 11.
    
    Income Taxes
  18




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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS (continued)
 C olumbia energy group  Notes to Consolidated Financial Statements (continued)
 12.
    
    Business Segment Information
    Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,(in millions)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004REVENUESGas Distribution OperationsUnaffiliated
    
    $
    234.0
    
    
    $
    229.9
    
    
    $
    1,916.1
    
    
    $
    1,771.0Gas Transmission and Storage OperationsUnaffiliated
    
    
    129.8
    
    
    
    131.9
    
    
    
    423.9
    
    
    
    429.5Intersegment and affiliates
    
    
    49.5
    
    
    
    52.4
    
    
    
    163.8
    
    
    
    170.8Total
    
    
    179.3
    
    
    
    184.3
    
    
    
    587.7
    
    
    
    600.3Other OperationsUnaffiliated
    
    
    24.6
    
    
    
    15.7
    
    
    
    65.7
    
    
    
    50.5Intersegment and affiliates
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.2
    
    
    
    0.2Total
    
    
    24.7
    
    
    
    15.8
    
    
    
    65.9
    
    
    
    50.7Adjustments and eliminations
    
    
    (47.3
    )
    
    
    (49.6
    )
    
    
    (155.7
    )
    
    
    (161.8
    )Consolidated Revenues
    
    $
    390.7
    
    
    $
    380.4
    
    
    $
    2,414.0
    
    
    $
    2,260.2Operating Income (Loss)Gas Distribution Operations
    
    $
    (28.4
    )
    
    $
    1.8
    
    
    $
    174.6
    
    
    $
    217.3Gas Transmission and Storage Operations
    
    
    62.1
    
    
    
    68.2
    
    
    
    246.1
    
    
    
    251.6Other Operations
    
    
    (1.0
    )
    
    
    (0.1
    )
    
    
    1.0
    
    
    
    (0.7
    )Corporate
    
    
    (1.9
    )
    
    
    (0.9
    )
    
    
    (3.9
    )
    
    
    9.6Consolidated Operating Income
    
    $
    30.8
    
    
    $
    69.0
    
    
    $
    417.8
    
    
    $
    477.8
 19




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ITEM 2. MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
 C olumbia energy group
  Note regarding forward-looking statements
   Results of Operations  The Quarter Ended September 30, 2005
 Net Income
 Net Revenues
 Expenses
 20




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##### Table of Contents



ITEM 2. MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued)
 C olumbia energy group
  Other Income (Deductions)
 Income Taxes
 Results of Operations  Nine Months Ended September 30, 2005
 Net Income
  Net Revenues
 Expenses
 Other Income (Deductions)
 Income
Taxes
 21




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##### Table of Contents



ITEM 2. MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued)
 C olumbia energy group
 Liquidity and Capital Resources
  Operating Activities.
 Investing Activities.
 Financing Activities.
  Long-term Debt
 Sale of Trade Accounts Receivables
 22




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##### Table of Contents



ITEM 2. MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued)
 C olumbia energy group
  Market Risk Disclosures
    Off Balance Sheet Arrangements
      23




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##### Table of Contents



ITEM 2. MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued)
 C olumbia energy group
  Other Information
 Regulatory Matters  Gas Distribution Operations Related Matters. ®
 SM
    24




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##### Table of Contents



ITEM 2. MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued)
 C olumbia energy group
 Gas Transmission and Storage Operations Related Matters.
   Environmental Matters
 Operational Impacts Associated with Hurricanes Katrina and Rita
    Proposed Millennium Pipeline Project
 25




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##### Table of Contents



ITEM 2. MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued)
 C olumbia energy group
    Hardy Storage Project
    Other
Growth Projects
 26




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##### Table of Contents



ITEM 2. MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued)
 C olumbia energy group
 NiSource
Outsourcing Project
 27




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 C olumbia energy group
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
 Changes in Internal Controls
  28




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##### Table of Contents



PART II
 
 ITEM 1. LEGAL PROCEEDINGS
 C olumbia energy group
 1.
    
    Stand Energy Corporation, et al. v. Columbia Gas Transmission Corporation, et al.,
Kanawha County Court, West Virginia
  2.
    
    United States of America ex rel. Jack J. Grynberg v. Columbia Gas Transmission
Corporation, et al., U.S. District Court, E.D. Louisiana
    3.
    
    Tawney, et al. v. Columbia Natural Resources, Inc., Roane County, WV Circuit Court
  29




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##### Table of Contents



ITEM 1. LEGAL PROCEEDINGS (continued)
 C olumbia energy group
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3 DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 (12)
    
    Statements of Ratio of Earnings to Fixed Charges.*(31.1)
    
    Certification of Michael W. ODonnell, President and 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, President and 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.**
    
    Exhibit filed herewith.
  30




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SIGNATURE
 C olumbia energy group
  Columbia Energy Group(Registrant)Date: November 7, 2005
    
    By:
    
    /s/ Jeffrey W. GrossmanJeffrey W. GrossmanVice President(Principal Accounting Officerand Duly Authorized Officer)
 31