##### 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 June 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 ______
 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
 R £
 £ R




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COLUMBIA
ENERGY GROUP
 FORM 10-Q QUARTERLY REPORT
FOR THE QUARTER ENDED JUNE 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
    
    
    19Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 4. Controls and Procedures
    
    
    26PART II            OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    27Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 3. Defaults Upon Senior Securities
    
    
    28Item 4. Submission of Matters to a Vote of Security Holders
    
    
    28Item 5. Other Information
    
    
    28Item 6. Exhibits
    
    
    28Signature
    
    
    29Second Amendment to Receivables Purchase AgreementStatements of Ratio of Earnings to Fixed ChargesDeloitte & Touche LLP Preferability Letter302 Certification of Chief Executive Officer302 Certification of Chief Financial Officer906 Certification of Chief Executive Officer906 Certification of Chief Financial Officer
  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 CorporationAbbreviationsAPB No. 28
    
    Accounting Principles Board Opinion No. 28, Interim Financial ReportingBcf
    
    Billion cubic feetDOT
    
    U.S. Department of TransportationEmpire
    
    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IBM
    
    International Business Machines Corp.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 ExchangeOCC
    
    Office of the Ohio Consumers CounselOPSB
    
    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 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 ofRegulation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 HedgingActivities, as amendedSFAS No. 143
    
    Statement of Financial Accounting Standards No. 143,Accounting for Asset Retirement ObligationsTcf
    
    Trillion cubic feetTriana
    
    Triana Energy Holdings
 4




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##### Table of Contents



PART I
 
 ITEM 1. FINANCIAL STATEMENTS
 Columbia energy group
 
 Statements of Consolidated Income (unaudited)
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,(in millions)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Net RevenuesGas Distribution
    
    $
    410.4
    
    
    $
    382.2
    
    
    $
    1,477.0
    
    
    $
    1,326.2Gas Transmission and Storage
    
    
    196.0
    
    
    
    188.7
    
    
    
    489.7
    
    
    
    500.4Other
    
    
    23.1
    
    
    
    22.3
    
    
    
    51.0
    
    
    
    47.5Affiliated revenues
    
    
    2.6
    
    
    
    2.6
    
    
    
    5.6
    
    
    
    5.7Gross Revenues
    
    
    632.1
    
    
    
    595.8
    
    
    
    2,023.3
    
    
    
    1,879.8Cost of sales
    
    
    267.8
    
    
    
    254.9
    
    
    
    1,055.3
    
    
    
    944.8Cost of sales  affiliated
    
    
    0.3
    
    
    
    
    
    
    
    0.6
    
    
    
    Total Net Revenues
    
    
    364.0
    
    
    
    340.9
    
    
    
    967.4
    
    
    
    935.0Operating ExpensesOperation and maintenance
    
    
    176.1
    
    
    
    150.9
    
    
    
    375.5
    
    
    
    340.7Depreciation and amortization
    
    
    49.6
    
    
    
    42.6
    
    
    
    98.0
    
    
    
    83.6Loss on sale of assets
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    0.3Other taxes
    
    
    37.9
    
    
    
    36.9
    
    
    
    107.0
    
    
    
    101.6Total Operating Expenses
    
    
    263.6
    
    
    
    230.7
    
    
    
    580.5
    
    
    
    526.2Operating Income
    
    
    100.4
    
    
    
    110.2
    
    
    
    386.9
    
    
    
    408.8Other Income (Deductions)Interest expense
    
    
    (25.4
    )
    
    
    (23.7
    )
    
    
    (51.9
    )
    
    
    (43.1
    )Interest expense  affiliated
    
    
    (0.6
    )
    
    
    (0.2
    )
    
    
    (1.2
    )
    
    
    (1.2
    )Interest income
    
    
    3.4
    
    
    
    1.2
    
    
    
    5.4
    
    
    
    2.8Interest income  affiliated
    
    
    4.2
    
    
    
    3.4
    
    
    
    8.6
    
    
    
    6.2Other, net
    
    
    (0.8
    )
    
    
    (0.2
    )
    
    
    (2.1
    )
    
    
    0.9Total Other Income (Deductions)
    
    
    (19.2
    )
    
    
    (19.5
    )
    
    
    (41.2
    )
    
    
    (34.4
    )Income from Continuing Operations before Income Taxes
    
    
    81.2
    
    
    
    90.7
    
    
    
    345.7
    
    
    
    374.4Income Taxes
    
    
    30.8
    
    
    
    34.2
    
    
    
    130.4
    
    
    
    140.4Income from Continuing Operations
    
    
    50.4
    
    
    
    56.5
    
    
    
    215.3
    
    
    
    234.0Loss from Discontinued Operations  net of taxes
    
    
    (14.0
    )
    
    
    (0.7
    )
    
    
    (14.0
    )
    
    
    (3.7
    )Gain on Disposition of Discontinued Operations  net of taxes
    
    
    1.2
    
    
    
    
    
    
    
    1.0
    
    
    
    Net Income
    
    $
    37.6
    
    
    $
    55.8
    
    
    $
    202.3
    
    
    $
    230.3
  5




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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS (continued)
 Columbia energy group
 
 Consolidated Balance Sheets
 June 30,
    
    
    December 31,(in millions)
    
    2005
    
    
    2004(unaudited)ASSETSProperty, Plant and EquipmentUtility Plant
    
    $
    8,437.8
    
    
    $
    8,338.5Accumulated depreciation and amortization
    
    
    (3,789.3
    )
    
    
    (3,718.7
    )Net utility plant
    
    
    4,648.5
    
    
    
    4,619.8Other property, at cost, less accumulated depreciation
    
    
    10.8
    
    
    
    2.0Net Property, Plant and Equipment
    
    
    4,659.3
    
    
    
    4,621.8Investments and Other AssetsAssets of discontinued operations and assets held for sale
    
    
    17.0
    
    
    
    23.4Unconsolidated affiliates
    
    
    47.5
    
    
    
    41.7Other investments
    
    
    50.9
    
    
    
    41.7Total Investments and Other Assets
    
    
    115.4
    
    
    
    106.8Current AssetsCash and cash equivalents
    
    
    170.4
    
    
    
    13.5Restricted cash
    
    
    2.0
    
    
    
    5.4Accounts
receivable and unbilled revenue (less reserves of $29.7 and $19.4, respectively)
    
    
    195.2
    
    
    
    427.5Accounts receivable  affiliated
    
    
    379.6
    
    
    
    452.4Gas inventory
    
    
    115.9
    
    
    
    285.7Underrecovered gas and fuel costs
    
    
    59.5
    
    
    
    239.4Materials and supplies, at average cost
    
    
    18.4
    
    
    
    17.0Price risk management assets
    
    
    63.7
    
    
    
    45.7Exchange gas receivable
    
    
    167.8
    
    
    
    131.7Regulatory assets
    
    
    121.0
    
    
    
    87.9Prepayments and other
    
    
    48.0
    
    
    
    74.0Total Current Assets
    
    
    1,341.5
    
    
    
    1,780.2Other AssetsPrice risk management assets
    
    
    148.2
    
    
    
    113.9Regulatory assets
    
    
    348.0
    
    
    
    354.2Intangible assets, less accumulated amortization
    
    
    0.8
    
    
    
    1.4Deferred charges and other
    
    
    121.1
    
    
    
    121.0Other receivables  affiliated
    
    
    21.7
    
    
    
    21.7Total Other Assets
    
    
    639.8
    
    
    
    612.2Total Assets
    
    $
    6,756.0
    
    
    $
    7,121.0
  6




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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS (continued)
 Columbia energy group
 Consolidated
Balance Sheets (continued)
 June 30,
    
    
    December 31,(in millions)
    
    2005
    
    
    2004(unaudited)CAPITALIZATION AND LIABILITIESCapitalizationCommon stock equityAdditional paid-in-capital
    
    $
    1,418.5
    
    
    $
    1,419.5Retained earnings
    
    
    1,291.6
    
    
    
    1,439.2Accumulated other comprehensive income and other common stock
equity
    
    
    135.6
    
    
    
    104.1Total common stock equity
    
    
    2,845.7
    
    
    
    2,962.8Long-term debt, excluding amounts due within one year
    
    
    1,075.7
    
    
    
    1,075.9Total Capitalization
    
    
    3,921.4
    
    
    
    4,038.7Current LiabilitiesCurrent portion of long-term debt
    
    
    281.9
    
    
    
    281.9Short-term borrowings
    
    
    
    
    
    
    0.1Accounts payable
    
    
    156.9
    
    
    
    310.7Accounts payable-affiliated
    
    
    28.4
    
    
    
    19.4Customer accounts receivable credit balances and deposits
    
    
    44.9
    
    
    
    122.2Taxes accrued
    
    
    178.5
    
    
    
    120.2Interest accrued
    
    
    11.9
    
    
    
    11.4Overrecovered gas and fuel costs
    
    
    26.0
    
    
    
    1.6Price risk management liabilities
    
    
    2.3
    
    
    
    4.9Exchange gas payable
    
    
    253.0
    
    
    
    323.7Current deferred revenue
    
    
    24.4
    
    
    
    23.2Regulatory liabilities
    
    
    24.1
    
    
    
    24.5Accrued liability for postretirement and postemployment benefits
    
    
    33.6
    
    
    
    33.5Deferred income taxes
    
    
    42.0
    
    
    
    104.7Other accruals
    
    
    164.2
    
    
    
    156.0Total Current Liabilities
    
    
    1,272.1
    
    
    
    1,538.0Other Liabilities and Deferred CreditsDeferred income taxes
    
    
    854.6
    
    
    
    814.9Deferred investment tax credits
    
    
    24.8
    
    
    
    25.5Deferred credits
    
    
    41.8
    
    
    
    47.8Noncurrent deferred revenue
    
    
    74.1
    
    
    
    86.9Accrued liability for postretirement and postemployment benefits
    
    
    79.1
    
    
    
    84.5Regulatory liabilities
    
    
    371.9
    
    
    
    368.8Other noncurrent liabilities
    
    
    116.2
    
    
    
    115.9Total Other Liabilities and Deferred Credits
    
    
    1,562.5
    
    
    
    1,544.3Commitments and Contingencies
    
    
    
    
    
    
    Total Capitalization and Liabilities
    
    $
    6,756.0
    
    
    $
    7,121.0
  7




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##### Table of Contents



ITEM
1. FINANCIAL STATEMENTS (continued)
 Columbia energy group
 
 Statements of Consolidated Cash Flow (unaudited)
 Six Months Ended June 30, (in millions)
    
    2005
    
    
    2004Operating ActivitiesNet Income
    
    $
    202.3
    
    
    $
    230.3Adjustments to reconcile net income to net cash from continuing operations:Depreciation, depletion, and amortization
    
    
    98.0
    
    
    
    83.6Net changes in price risk management activities
    
    
    (6.3
    )
    
    
    0.9Deferred income taxes and investment tax credits
    
    
    (40.6
    )
    
    
    34.6Deferred revenue
    
    
    (11.6
    )
    
    
    (17.2
    )Amortization of unearned compensation
    
    
    0.3
    
    
    
    0.4Loss on sale of assets
    
    
    
    
    
    
    0.3Gain on sale of discontinued operations
    
    
    (1.0
    )
    
    
    Loss from discontinued operations
    
    
    14.0
    
    
    
    3.7Other
    
    
    (0.2
    )
    
    
    0.7Changes in assets and liabilities:Accounts
receivable and unbilled revenue
    
    
    224.5
    
    
    
    282.1Inventories
    
    
    168.5
    
    
    
    109.1Accounts payable
    
    
    (145.8
    )
    
    
    (27.1
    )Customer deposits
    
    
    (1.1
    )
    
    
    (0.2
    )Taxes accrued
    
    
    45.4
    
    
    
    6.4Interest accrued
    
    
    0.5
    
    
    
    (2.7
    )(Under) Overrecovered gas and fuel costs
    
    
    204.3
    
    
    
    49.8Exchange gas receivable/payable
    
    
    (69.1
    )
    
    
    27.5Other accruals
    
    
    (80.8
    )
    
    
    (78.4
    )Prepayments and other current assets
    
    
    26.0
    
    
    
    23.8Regulatory assets/liabilities
    
    
    (32.4
    )
    
    
    2.3Postretirement and postemployment benefits
    
    
    (5.3
    )
    
    
    (2.9
    )Deferred credits
    
    
    (5.4
    )
    
    
    (1.6
    )Deferred charges and other noncurrent assets
    
    
    (0.6
    )
    
    
    (4.8
    )Other noncurrent liabilities
    
    
    4.1
    
    
    
    1.7Net Cash Flows from Continuing Operations
    
    
    587.7
    
    
    
    722.3Net Cash Flows used for Discontinued Operations
    
    
    (9.8
    )
    
    
    Net Cash Flows from Operating Activities
    
    
    577.9
    
    
    
    722.3Investment ActivitiesCapital expenditures
    
    
    (130.5
    )
    
    
    (95.5
    )Change in Affiliated Money Pool
    
    
    71.0
    
    
    
    (631.9
    )Proceeds from disposition of assets
    
    
    0.3
    
    
    
    Other investing activities
    
    
    (11.7
    )
    
    
    (3.8
    )Net Cash Flows used for Investing Activities
    
    
    (70.9
    )
    
    
    (731.2
    )Financing ActivitiesChange in short-term debt
    
    
    (0.1
    )
    
    
    Dividends paid   common shares
    
    
    (350.0
    )
    
    
    Net Cash Flows used for Financing Activities
    
    
    (350.1
    )
    
    
    Increase (Decrease) in cash and cash equivalents
    
    
    156.9
    
    
    
    (8.9
    )Cash and cash equivalents at beginning of year
    
    
    13.5
    
    
    
    13.7Cash and cash equivalents at end of period
    
    $
    170.4
    
    
    $
    4.8Supplemental Disclosures of Cash Flow InformationCash paid for interest
    
    
    52.8
    
    
    
    47.6Interest capitalized
    
    
    0.2
    
    
    
    0.7Cash paid for income taxes
    
    
    80.3
    
    
    
    73.4
  8




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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS (continued)
 Columbia energy group
 
 Statements
of Consolidated Comprehensive Income (unaudited)
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,(in millions)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Net Income
    
    $
    37.6
    
    
    $
    55.8
    
    
    $
    202.3
    
    
    $
    230.3Other comprehensive income, net of taxesNet unrealized gains on cash flow hedges
    
    
    1.4
    
    
    
    1.9
    
    
    
    31.7
    
    
    
    13.0Net gain (loss) on available for sale securities
    
    
    0.4
    
    
    
    (0.8
    )
    
    
    (0.1
    )
    
    
    (0.5
    )Total other
comprehensive
income, net of
taxes
    
    
    1.8
    
    
    
    1.1
    
    
    
    31.6
    
    
    
    12.5Total Comprehensive Income
    
    $
    39.4
    
    
    $
    56.9
    
    
    $
    233.9
    
    
    $
    242.8
  9




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##### Table of Contents



ITEM
1 FINANCIAL STATEMENTS (continued)
 Columbia energy group
 
 Notes to Consolidated Financial Statements
 1. Basis of Accounting Presentation
       (in millions)
    
    Six Months Ended June 30, 2004Cash used for investing activities as previously presented
    
    $
    (102.1
    )Change in cash deposits with NiSource Money Pool
    
    
    (631.9
    )Reclassification of restricted cash
    
    
    2.8Cash used for investing activities, as currently reported
    
    $
    (731.2
    )
 (in millions)
    
    Six Months Ended June 30, 2004Net increase in cash and cash equivalents as previously presented
    
    $
    623.0Change in cash deposits with NiSource money pool
    
    
    (631.9
    )Net decrease in cash and cash equivalents, as currently reported
    
    $
    (8.9
    )
 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)
 Columbia energy group
 Notes to Consolidated Financial Statements (continued)
 SFAS
No. 123 (revised 2004)  Share-Based Payment.
 Accounting for Uncertain Tax Positions.
 3. Restructuring Activities
    Balance at
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at(in millions)
    
    Dec. 31, 2004
    
    
    Additions
    
    
    Benefits Paid
    
    
    Adjustments
    
    
    Jun. 30, 2005Outsourcing initiative
    
    $
    
    
    
    $
    3.4
    
    
    $
    
    
    
    $
    
    
    
    $
    3.4Columbia merger and related initiatives
    
    
    14.1
    
    
    
    
    
    
    
    (2.0
    )
    
    
    (0.7
    )
    
    $
    11.4Total
    
    $
    14.1
    
    
    $
    3.4
    
    
    $
    (2.0
    )
    
    $
    (0.7
    )
    
    $
    14.8
  11




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##### Table of Contents



ITEM
1 FINANCIAL STATEMENTS (continued)
 Columbia energy group
 Notes to Consolidated Financial Statements (continued)
  4. Discontinued Operations and Assets Held for Sale
   Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,(in millions)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues from discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Loss from discontinued operations
    
    
    (21.5
    )
    
    
    (0.7
    )
    
    
    (21.5
    )
    
    
    (5.7
    )Income tax benefit
    
    
    (7.5
    )
    
    
    
    
    
    
    (7.5
    )
    
    
    (2.0
    )Net Loss from discontinued operations
    
    $
    (14.0
    )
    
    $
    (0.7
    )
    
    $
    (14.0
    )
    
    $
    (3.7
    )
   5. Regulatory Matters
 Gas
Distribution Operations Related Matters  ®
 SM
  12




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##### Table of Contents



ITEM
1 FINANCIAL STATEMENTS (continued)
 Columbia 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)
 Columbia energy group
 Notes to Consolidated Financial Statements (continued)
 6. Risk Management Activities
  Hedging Activities.
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 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
    
    $
    134.0
    
    
    $
    98.7
    
    
    $
    103.7
    
    
    $
    87.6Unrealized hedging gains arising during the period on
derivatives qualifying as cash flow hedges
    
    
    11.3
    
    
    
    8.0
    
    
    
    49.2
    
    
    
    26.3Reclassification adjustment for net gain included in net income
    
    
    (9.9
    )
    
    
    (6.1
    )
    
    
    (17.5
    )
    
    
    (13.3
    )Net unrealized gains on derivatives qualifying as cash flow
hedges at the end of the period
    
    $
    135.4
    
    
    $
    100.6
    
    
    $
    135.4
    
    
    $
    100.6
   Commodity Price Risk Programs.
  14




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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS (continued)
 Columbia energy group
Notes to Consolidated Financial Statements (continued)
   7. Pension and Other Postretirement Benefits
   Pension Benefits
    
    Other BenefitsThree months ended June 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
    
    
    
    0.5Net Periodic Benefits Cost
    
    $
    1.5
    
    
    $
    2.0
    
    
    $
    3.8
    
    
    $
    3.7
 Pension Benefits
    
    Other BenefitsSix months ended June 30, (in
millions)
    
    2005
    
    2004
    
    2005
    
    2004Net periodic costService cost
    
    $
    10.4
    
    
    $
    9.6
    
    
    $
    2.4
    
    
    $
    2.2Interest cost
    
    
    24.8
    
    
    
    25.0
    
    
    
    10.8
    
    
    
    10.4Expected return on assets
    
    
    (33.2
    )
    
    
    (31.6
    )
    
    
    (7.2
    )
    
    
    (6.4
    )Amortization of prior service cost
    
    
    0.5
    
    
    
    0.4
    
    
    
    0.2
    
    
    
    0.2Recognized actuarial loss
    
    
    0.5
    
    
    
    0.6
    
    
    
    1.4
    
    
    
    1.0Net Periodic Benefits Cost
    
    $
    3.0
    
    
    $
    4.0
    
    
    $
    7.6
    
    
    $
    7.4
 15




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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS (continued)
 Columbia energy group
Notes to Consolidated Financial Statements (continued)
 8. Other Commitments and Contingencies
 A. Guarantees and Indemnities
 (in millions)
    
    Total
    
    2005
    
    2006
    
    2007
    
    2008
    
    2009
    
    AfterGuarantees supporting commodity
transactions of subsidiaries
    
    $
    608.0
    
    
    $
    50.0
    
    
    $
    397.0
    
    
    $
    25.9
    
    
    $
    46.4
    
    
    $
    49.5
    
    
    $
    39.2Other guarantees
    
    
    101.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.2
    
    
    
    99.5Total commercial commitments
    
    $
    709.7
    
    
    $
    50.0
    
    
    $
    397.0
    
    
    $
    25.9
    
    
    $
    46.4
    
    
    $
    51.7
    
    
    $
    138.7
 Guarantees Supporting Commodity Transactions of Subsidiaries.
 Other Guarantees
 Off Balance Sheet Items.
   B. Other Legal Proceedings
 16




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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS (continued)
 Columbia energy group
Notes to Consolidated Financial Statements (continued)
 C. Environmental Matters.
   9. Accumulated Other Comprehensive Income
  June 30,
    
    December 31,(in millions)
    
    2005
    
    2004Other comprehensive income, before taxes:Unrealized gains on securities
    
    $
    0.2
    
    
    $
    0.3Unrealized gains on cash flow hedges
    
    
    208.3
    
    
    
    159.5Other comprehensive income, before taxes:
    
    $
    208.5
    
    
    $
    159.8Income tax expense related to items of other comprehensive income
    
    
    (72.9
    )
    
    
    (55.7
    )Total Accumulated Other Comprehensive Income, net of taxes
    
    $
    135.6
    
    
    $
    104.1
 10. Income Taxes
  11. Business Segment Information
   17




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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS (continued)
 Columbia energy group
Notes to Consolidated Financial Statements (continued)
  Three Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,(in millions)
    
    2005
    
    2004
    
    2005
    
    2004REVENUESGas Distribution OperationsUnaffiliated
    
    $
    471.8
    
    
    $
    443.8
    
    
    $
    1,682.1
    
    
    $
    1,541.1Gas Transmission and Storage OperationsUnaffiliated
    
    
    137.0
    
    
    
    132.0
    
    
    
    294.1
    
    
    
    297.6Intersegment and affiliates
    
    
    50.2
    
    
    
    53.9
    
    
    
    114.3
    
    
    
    118.4Total
    
    
    187.2
    
    
    
    185.9
    
    
    
    408.4
    
    
    
    416.0Other OperationsUnaffiliated
    
    
    20.5
    
    
    
    17.0
    
    
    
    41.1
    
    
    
    34.8Intersegment and affiliates
    
    
    0.1
    
    
    
    
    
    
    
    0.1
    
    
    
    0.1Total
    
    
    20.6
    
    
    
    17.0
    
    
    
    41.2
    
    
    
    34.9Adjustments and eliminations
    
    
    (47.5
    )
    
    
    (50.9
    )
    
    
    (108.4
    )
    
    
    (112.2
    )Consolidated Revenues
    
    $
    632.1
    
    
    $
    595.8
    
    
    $
    2,023.3
    
    
    $
    1,879.8Operating Income (Loss)Gas Distribution Operations
    
    $
    25.0
    
    
    $
    32.0
    
    
    $
    203.0
    
    
    $
    215.5Gas Transmission and Storage Operations
    
    
    76.1
    
    
    
    72.9
    
    
    
    184.0
    
    
    
    183.4Other Operations
    
    
    
    
    
    
    (0.1
    )
    
    
    1.9
    
    
    
    (0.6
    )Corporate
    
    
    (0.7
    )
    
    
    5.4
    
    
    
    (2.0
    )
    
    
    10.5Consolidated Operating Income
    
    $
    100.4
    
    
    $
    110.2
    
    
    $
    386.9
    
    
    $
    408.8
 18




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##### Table of Contents



ITEM 2. MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
 Columbia energy group
  Note regarding forward-looking statements
    Results of Operations
The Quarter Ended June 30, 2005
 Net Income
  
 19




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##### Table of Contents



ITEM
2. MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF
OPERATIONS (continued)
 Columbia energy group
 Net
Revenues
 Expenses
 Other
Income (Deductions)
 Income
Taxes
 Results of Operations
Six Months Ended June 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)
 Columbia energy group
 Other
Income (Deductions)
 Income
Taxes
 Liquidity and Capital Resources
  Operating Activities.
 Investing Activities.
 Financing Activities.
 Long-term
Debt
 Sale of
Trade Accounts Receivables
 21




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##### Table of Contents



ITEM
2. MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued)
 Columbia energy group
  Market Risk Disclosures
    Off Balance Sheet Arrangements
      22




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##### Table of Contents



ITEM
2. MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued)
 Columbia energy group
  Other Information
 Regulatory
Matters  Gas Distribution Operations Related Matters. ®
 SM
    23




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##### Table of Contents



ITEM
2. MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued)
 Columbia energy group
  Gas Transmission and Storage Operations Related Matters.
   Environmental
Matters
 Proposed
Millennium Pipeline Project
    24




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##### Table of Contents



ITEM
2. MANAGEMENTS NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS (continued)
 Columbia energy group
  Hardy
Storage Project
    NiSource
Outsourcing Project
 25




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Columbia energy group
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation
of Disclosure Controls and Procedures
 Changes
in Internal Controls
 26




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##### Table of Contents



PART II
 
 ITEM 1. LEGAL PROCEEDINGS
 Columbia 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
  27




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##### Table of Contents



ITEM
1. LEGAL PROCEEDINGS (continued)
 Columbia 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
 (10.1)
    
    Second Amendment to Receivables Purchase Agreement by and among Columbia Ohio Receivables
Corporation, as Seller, Beethoven Funding Corporation, as Purchaser, Dresdner Bank AG, New
York Branch, as Agent for Purchaser, and Columbia Gas of Ohio, as Servicer, dated May 13,
2005.*(12)
    
    Statements of Ratio of Earnings to Fixed Charges.*(18)
    
    Deloitte & Touche LLP Preferability Letter. *(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.  28




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##### Table of Contents



SIGNATURE
 Columbia energy group
  Columbia Energy Group(Registrant)Date: August 5, 2005
    
    By:
    
    /s/ Jeffrey W. GrossmanJeffrey W. GrossmanVice President(Principal Accounting Officerand Duly Authorized Officer)
 29