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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

|For the fiscal year ended:
September 30, 2000 | Commission file number:
1-7196
|--------------------------------------------- | ------------------------------

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CASCADE NATURAL GAS CORPORATION(Exact name of Registrant as specified in its charter)

Washington

91-0599090(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)222 Fairview Avenue North
Seattle, WA 98109

(206) 624-3900(Address of principal executive offices)

(Registrant's telephone number
including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each Class

Name of Each Exchange on which RegisteredCommon Stock, Par Value $1 per Share

New York Stock ExchangePreferred Stock Purchase Rights

New York Stock Exchange


Securities
registered pursuant to Section 12(g) of the Act: None

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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes X No

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes X

The
aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of the close of business on
December 1, 2000, was $194,613,000.

Indicate
the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.

Title

OutstandingCommon Stock, Par Value $1 per Share

11,045,095 as of December 1, 2000


DOCUMENTS INCORPORATED BY REFERENCE

Portions
of the Registrant's definitive proxy statement for its 2001 Annual Meeting of Shareholders are incorporated by reference into Part III, Items 10, 11, 12, and 13.

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## 

CASCADE NATURAL GAS CORPORATION

Annual Report to the Securities and Exchange Commission on Form 10-K

For the Fiscal Year Ended September 30, 2000

Table of Contents

|Number            |  |                                                                                              |  | Page
|----------------- |  | -------------------------------------------------------------------------------------------- |  | ----
|                  |  |                                                                                              |  |     
|Part I            |  |                                                                                              |  |     
|                  |  | Item 1Business                                                                              |  | 3   
|                  |  | Item 2Properties                                                                            |  | 8   
|                  |  | Item 3Legal Proceedings                                                                     |  | 8   
|                  |  | Item 4Submission of Matters to a Vote of Security Holders                                   |  | 8   
|                  |  | Executive Officers of the Registrant                                                         |  | 8   
|Part II           |  |                                                                                              |  |     
|                  |  | Item 5Market for Registrant's Common Equity and Related Stockholder Matters                 |  | 9   
|                  |  | Item 6Selected Financial Data                                                               |  | 10  
|                  |  | Item 7Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 12  
|                  |  | Item 7aQuantitative and Qualitative Disclosures about Market Risk                           |  | 16  
|                  |  | Item 8Financial Statements and Supplementary Data                                           |  | 18  
|                  |  | Item 9Changes in and Disagreements With Accountants on Accounting and Financial Disclosure  |  | 38  
|Part III          |  |                                                                                              |  |     
|                  |  | Item 10Directors and Executive Officers of the Registrant                                   |  | 39  
|                  |  | Item 11Executive Compensation                                                               |  | 39  
|                  |  | Item 12Security Ownership of Certain Beneficial Owners and Management                       |  | 39  
|                  |  | Item 13Certain Relationships and Related Transactions                                       |  | 39  
|Part IV           |  |                                                                                              |  |     
|                  |  | Item 14Exhibits, Financial Statement Schedules and Reports on Form 8-K                      |  | 40  
|Signatures        |  | 41                                                                                          
|Index to Exhibits |  | 42                                                                                          

2

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Part I

Item 1. Business

General

Cascade Natural Gas Corporation (Cascade or the Company) was incorporated under the laws of the state of Washington on January 2, 1953. Its principal
business is the distribution of natural gas to customers in the states of Washington and Oregon. Approximately 82% of its gas distribution revenues are from customers in the state of Washington.

As
of September 30, 2000, the Company had approximately 157,400 residential customers, 27,200 commercial customers, 800 industrial and other customers. Residential, commercial,
and most small industrial customers are generally core customers, who take traditional "bundled" natural gas service, which includes supply, peaking service, and upstream interstate pipeline
transportation. Sales to core customers account for approximately 16% of gas deliveries and 68% of operating margin. The Company's sales to its core residential and commercial customers are influenced
by fluctuations in temperature, particularly during the winter season. A warm winter season will tend to reduce gas consumption. Over the longer term, these fluctuations tend to offset each other, as
rates charged to customers are developed based on the assumption of normal weather.

Non-core
customers are generally large industrial and institutional customers who have chosen "unbundled" service, meaning that they select from among several supply and
upstream pipeline transportation options, independent of the Company's distribution service. The Company's margin from non-core customers is generally derived only from this distribution
service.

State Regulation

The Company's rates and practices are regulated by the Washington Utilities and Transportation Commission (WUTC) and the Oregon Public Utility Commission
(OPUC).

Cascade's
gas supply contracts provide for annual review of gas prices for possible adjustment. To the extent that prices are changed for core customers, Cascade is able to pass the
effect of such changes, subject to regulatory review, to its customers by means of a periodic purchased gas cost adjustment (PGA) in each state. Gas price changes occurring between times when PGA rate
changes become effective are deferred for pass through in the next PGA.

With
respect to such gas supplies delivered to Oregon customers, 67% of the incremental change in the actual cost of gas supplies, as compared to the forecasted cost reflected in the
PGA, is deferred. The remaining 33% (increase or decrease) is absorbed by the Company. This mechanism is intended to encourage the Company to seek opportunities to lower its cost of supplies and to be
innovative in its management of the supply portfolio to avoid price spikes. Cascade's current gas supply portfolio for the Oregon core customers is comprised mostly of contains mostly gas supplies
that have a fixed commodity price, therefore management believes that there will be little risk or opportunity for the Company under the 67/33% sharing arrangement during the coming
year. For the fiscal year ended September 2000, under this arrangement, Cascade's 33% share of savings achieved totaled $164,000.

Cascade
has an earnings sharing mechanism with respect to its Oregon jurisdictional operations. See "Regulatory Matters" under Item 7 for a description of the mechanism.

The
Company is also subject to state regulation with respect to integrated resource planning, and its most recent update of its Integrated Resource Plan (IRP) was filed in 1999 with
both the WUTC and the OPUC. The IRP shows the Company's optimum set of supply and demand side resources that minimizes costs and risk over the twenty-year planning horizon. The IRP also
sets forth possible core customer growth scenarios for a twenty-year period. In addition, the IRP sets forth the Company's demand side management goals of achieving certain conservation
levels in customer usage.

3

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The IRP also sets forth the Company's supply side management plans regarding transportation capacity and gas supply acquisition over a twenty-year period. The Company
develops updates of the IRP every two years. These updated documents take into account input solicited from the public and the WUTC and OPUC staffs. While the filing of the IRP with both commissions
gives the Company no advance assurance that its acquisitions of pipeline transportation capacity and gas supplies will be recognized in rates, management believes that the integrated resource planning
process benefits the Company by giving it the opportunity to obtain input from regulators and the public concurrently with making these important strategic decisions. Until the Company receives final
regulatory approval of these decisions in the context of the rate making process, the Company cannot predict with certainty the extent to which the integrated resource planning process will affect its
rates.

Natural Gas Supply

The majority of Cascade's supply of natural gas is transported via Williams Gas PipelinesWest (Williams). Williams owns and operates a
transmission system extending from points of interconnection with El Paso Natural Gas Company and Transwestern Pipeline Company near Blanco, New Mexico through the states of New Mexico, Colorado,
Utah, Wyoming, Idaho, Oregon and Washington to the Canadian border near Sumas, Washington. Natural gas is transported north from the Colorado and New Mexico area, and south from British Columbia,
Canada. The Company is also a shipper on the Pacific Gas and Electric National Energy Group (PG&E) system. PG&E owns and operates a gas transmission line that connects with the facilities of the
TransCanada Pipeline (formerly Alberta Natural Gas Company, Ltd.) at the international border near Kingsgate, British Columbia and extends through Washington and central Oregon into California.
Cascade also receives natural gas directly from Westcoast Energy, Inc. at the Canadian border near Sumas, Washington.

Presently,
baseload requirements for Cascade's core market are provided by four major gas supply contracts with various expiration dates from 2001 through 2008 and totaling 564,830
therms per day of Canadian supply. These contracts are supplemented by various service agreements to cover periods of peak demand including three storage agreements. One such agreement, with Williams,
extends to October 31, 2014 and provides for 167,890 therms per day and a maximum, renewable inventory of 6,043,510 therms. The second storage agreement is with Avista, and has a primary term
ending April 30, 2002 and entitles Cascade to receive up to 150,000 therms per day and a maximum, renewable inventory of 4,800,000 therms. A third contract, also with Williams, for liquefied
natural gas (LNG) storage is effective through October 31, 2014. Under this LNG agreement, Cascade is entitled to receive up to 600,000 therms per day to a maximum inventory of 5,622,000
therms. In addition to withdrawal and inventory capacity, Cascade maintains a corresponding amount of firm transportation from the storage facility to the city gate for each of these agreements.

In
addition to underground and LNG storage, Cascade has entered into a contract with a major industrial customer whereby the customer agrees to switch to alternate fuel allowing
Cascade to reduce firm deliveries to that customer. Cascade then takes the customer's firm gas supply and pipeline capacity to serve its core markets. In return, Cascade reimburses the customer for
the cost of its diverted gas supply and pipeline capacity. Since the customer is also a distribution customer of Cascade, the supply is already being delivered to Cascade's system and is merely
diverted to core customers, allowing for an even greater accommodation of late day demand spikes. Because the customer's response is dictated by contract and firm gas supply and firm pipeline capacity
is involved, this type of resource is highly flexible and reliable. This peak shaving agreement, which expires in 2014, entitles Cascade to call on 150,000 therms per day up to a seasonal total of
3,000,000 therms.

During
2000, Cascade purchased approximately 84% of its gas supplies from firm gas supply contracts and 16% from 30-day spot market contracts. In addition,
1.1 billion therms of customer purchased supplies were transported through Cascade facilities.

4

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Cascade's cost of gas depends primarily on the prices negotiated with producers and brokers, coupled with the cost of interstate and Canadian pipeline transportation. Substantially
all gas supplies for Oregon core customers are currently purchased on fixed price contracts. Management believes that this, together with use of storage volumes at a value determined at the time of
injection, provides Cascade with the ability to mitigate the effects of spikes in the market price of natural gas.

Federal Energy Regulatory Commission (FERC) Matters

Cascade is not subject to regulation by the FERC, however FERC actions can affect the amounts Cascade pays to interstate pipeline companies for interstate
deliveries of natural gas supplies. Several issues are pending before FERC, or are on appeal before the U.S. Court of Appeals. The final outcome may affect prices Cascade pays. Since the policies of
the WUTC and OPUC provide for 100% pass through of costs subject to FERC regulation, the Company expects that the final resolution of pending issues will not affect net earnings.

Curtailment Procedures

In previous heating seasons, cold weather has required Cascade to significantly curtail deliveries to its interruptible customers. Cascade has not curtailed
any firm customers, except under force majeure conditions. Cascade's tariffs effective in Washington and Oregon allow for curtailment of interruptible services, which are provided at rates lower than
for firm services. In the event of curtailment by Cascade of firm service due to force majeure, Cascade's tariffs provide that it will not be liable for damages to any customer for failure to deliver
gas curtailed in accordance with the provisions of the tariffs. The tariffs provide for appropriate adjustment of the monthly charges to firm customers curtailed by reason of an insufficient supply of
gas.

Territory Served and Franchises

The population of communities served by Cascade totals approximately 826,000. At the end of September 2000, Cascade had the franchises necessary for the
distribution of natural gas in all but four of the communities it serves in Washington and Oregon. Those four franchises had expired during fiscal 2000. Since that time, franchises have been approved
in three of those communities and negotiations in the fourth are expected to be completed by the end of the calendar year. Under the laws of those states, incorporated municipalities and counties may
grant non-exclusive franchises for a fixed term of years conferring upon the grantee certain rights with respect to public streets and highways in the location, construction, operation,
maintenance and removal of gas distribution facilities.

In
the opinion of Cascade's management, none of its franchises contain any restrictions or requirements that are of a materially burdensome nature, and such franchises are adequate
for the conduct of Cascade's present business. Franchises expire on various dates from 2001 to 2065. Management has not incurred significant difficulties in renewing franchises when they expire and
does not expect any significant problems in the future.

Customers

Residential and commercial customers principally use natural gas for space heating and water heating. This market is very weather-sensitive. See "Seasonality"
below.

Agreements
with Cascade's principal industrial customers are for fixed terms of not less than one year and provide for automatic extension from year to year unless terminated by
either party on at least 30-days' notice.

The
principal industrial activities in Cascade's service area include the production of pulp, paper and converted paper products, plywood, chemical fertilizers, industrial chemicals,
clay and ceramic products; refining of crude oil; producing and forming of aluminum; the processing, flash freezing and

5

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canning of many types of vegetable, fruit and fish products; processing of milk products; meat processing; drying and curing of wood and agricultural products; and electric power generation. Electric
generation customers represent a significant portion of industrial revenues. The demand for gas fired generation tends to decrease as the availability of hydroelectric generation increases.

Seasonality

Weather is an important factor affecting gas revenues because of the large number of customers using gas for space heating. For the fiscal year ended
September 30, 2000, 67% of operating revenues and 94% of earnings from operations were derived from the first two quarters (October 1999 through March 2000). Because of the
seasonality of space heating revenues, financial results for interim periods are not indicative of results to be expected for an entire year. To mitigate the seasonality of space heating revenues, the
Company pursues a marketing strategy of encouraging the installation of gas water heaters by customers, since they are not as influenced by weather conditions.

Competitive Conditions

Cascade operates in a competitive market for natural gas service. Cascade competes with residual fuel oil and other alternative energy sources for industrial
boiler uses, and oil, propane, and electricity for residential and commercial space heating, and electricity for water heating.

Competition
is primarily based on price. For residential and commercial space heating use, Cascade continues to maintain a price advantage over oil in its entire service territory and
has an advantage over electricity in the vast majority of its territory. In the remaining areas of its service territory served
by public electric utilities with their own hydro power supply, Cascade is almost equal in cost with respect to electricity furnished by those utilities for space heating and water heating uses. In
addition, natural gas enjoys the advantage of being the preferred energy choice by builders for new home construction.

Wholesale
natural gas prices for the 2000 - 2001 heating season have increased significantly. Passing these higher costs on to customers may negatively impact the economy of the
region and may result in a slowdown in new customer growth, the loss of customers, or partial plant curtailments by industrial customers.

Historically,
the large volume industrial market was very sensitive to price fluctuations between the comparable cost of natural gas and alternate fuels, principally residual fuel oil
used in boiler applications. However, the advent of open access transportation in the late 1980's and early 1990's and the subsequent restructuring of gas supply and contractual provisions with these
customers have improved the Company's competitive position. Cascade has not experienced any significant loss of sales to alternate fuels to these customers during the last ten years, even though there
have been periods when the residual fuel oil prices were lower than natural gas. However, with the escalation of wholesale natural gas prices occurring in November and December 2000, the
Company is experiencing some movement of its gas load to alternative fuels.

In
addition to multiple alternative fuels, the Company is subject to bypass. Bypass refers to actual or prospective customers who install their own facilities and connect directly to
an upstream pipeline and thereby "bypass" the distribution company's service. The Company has experienced bypass but has also experienced success in offering competitive rates to reduce economic
incentives to bypass. In addition, other sellers of natural gas compete to sell the natural gas commodity over the Company's pipelines to its distribution customers.

The
Bonneville Power Administration (BPA) is a major supplier of hydro-electric power in the Pacific Northwest including Cascade's service area. BPA significantly influences the
electric rates of all classes of customers including those applications in direct competition with natural gas marketed by Cascade.

6

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Environmental

The Company is subject to federal and state environmental regulation of its operations and properties through the United States Environmental Protection
Agency, the Washington Department of Ecology and the Oregon Department of Environmental Quality. Such regulation may, at times, result in the imposition of liability or responsibility for the clean up
or treatment of existing environmental problems or for the prevention of future environmental problems. For detailed descriptions of specific environmental issues, see "Environmental Matters" under
Item 7.

Capital Expenditures

Capital expenditures are primarily used to expand the Company's distribution system to serve its expanding customer base, as well as to increase deliverability
on its existing system to accommodate increased customer utilization. Capital expenditures for the five fiscal years ended September 30, 2000 totaled approximately $104.7 million, and
the budget for fiscal 2001 is $25.4 million.

The
Company is currently forecasting that capital expenditures will total approximately $125.4 million over the next five years, reflecting expectations that customer growth
will continue at a pace similar to recent experience. Management performs quantitative and qualitative analyses to assure that the Company's goals and strategies are met. The overall objective is to
invest limited capital to generate the highest possible returns within the shortest possible time, while assuming prudent risk, anticipating customer needs and complying with the requirements of
regulators.

Non-Utility Subsidiaries

Cascade has four non-utility subsidiaries, only two of which are actively engaged in business at present. Cascade Land Leasing is engaged in the
servicing of loans that were made to Cascade's gas customers to finance their purchases of energy-efficient appliances. The subsidiary ceased making new loans in September 1997. Beginning in
November 1998, CGC Resources began serving as an entity engaged in pipeline capacity management, with the objective of mitigating gas costs for Cascade. The subsidiaries, which in the aggregate
account for less than 1% of the consolidated assets of the Company, do not currently have a significant impact on Cascade's financial statements.

Personnel

At September 30, 2000, Cascade had 440 employees. Of the total employees, 202 are represented by the International Chemical Workers Union. The present
contract with the union extends to April 1, 2001, and thereafter until terminated by either party on sixty days' notice.

Over
the last three years, the number of employees has decreased by approximately 9%. These reductions have been accomplished through normal attrition, and an emphasis on achieving
improved operating efficiencies. During 2000, management of district operations was consolidated from twelve district managers to five regional directors, and a new vice president position was created
to oversee district operations and provide for more clear accountability.

Item 2. Properties

At September 30, 2000, Cascade's utility plant investments included approximately 4,489 miles of distribution mains ranging in diameter from two inches
to sixteen inches, 240 miles of transmission mains ranging in diameter from two inches to sixteen inches, and 2,940 miles of service lines.

The
distribution and transmission mains are located under public property such as streets and highways or on private property with the permission or consent of the individual owner.

Cascade
owns at present twenty buildings used for operations, office space and warehousing in Washington and seven such buildings in Oregon. It leases an additional seven commercial
offices and

7

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warehouse buildings. Cascade considers its properties well maintained and in good operating condition, and adequate for Cascade's present and anticipated needs. All facilities are substantially
utilized.

Item 3. Legal Proceedings

Incorporated herein by reference are the following:

The
information under "Environmental Matters" in Item 7.

The
information under "Litigation" in Note 12 to the financial statements in Item 8.

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

None.

Executive Officers of the Registrant

The executive officers of the Company, as of December 1, 2000, are as follows:

|Name               |  | Office                                                        |  | Age |  | Year Became Officer
|------------------ |  | ------------------------------------------------------------- |  | --- |  | -------------------
|W. Brian Matsuyama |  | Chairman of the Board, President and Chief Executive Officer  |  | 54  |  | 1987               
|Jon T. Stoltz      |  | Senior Vice PresidentPlanning, Regulatory & Consumer Affairs |  | 53  |  | 1981               
|J. D. Wessling     |  | Senior Vice PresidentFinance and Chief Financial Officer     |  | 57  |  | 1995               
|Larry E. Anderson  |  | Vice PresidentOperations                                     |  | 52  |  | 1995               
|King C. Oberg      |  | Vice PresidentGas Supply                                     |  | 59  |  | 1993               
|James E. Haug      |  | Controller and Chief Accounting Officer                       |  | 51  |  | 1981               
|Larry C. Rosok     |  | Vice PresidentHuman Resources and Corporate Secretary        |  | 44  |  | 1995               
|William H. Odell   |  | Vice PresidentDistricts                                      |  | 38  |  | 2000               
|Linda Cies         |  | Vice PresidentInformation Technology                         |  | 43  |  | 2000               

None
of the above officers is related by blood, marriage or adoption to any other of the above named officers. With the exception of Linda Cies, each of the above named officers has
been employed by the Company in a management capacity for at least the past five years. None of the above officers hold directorships in other public corporations. All officers serve at the pleasure
of the Board of Directors.

Linda
Cies was employed by the Company in February, 1997, as DirectorDevelopment Services, and subsequently was DirectorInformation Technology. Prior to
1997, she was ManagerInformation Services for an engineering consulting firm.

8

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Part II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

The Common Stock is traded on the New York Stock Exchange under the symbol CGC. The following table states the per share high and low sales prices of the
Common Stock.

Fiscal 2000

Fiscal 1999Quarter

High

Low

High

LowDecember 31

$
18
3/8
$
15
3/8
$
18
9/16
$
16
1/8March 31


16
7/16

13
3/8

18
1/8

14
15/16June 30


18
1/8

14
15/16

19


14
5/8September 30


17
15/16

15
1/2

18
11/16

16
9/16


At
September 30, 2000, there were 7,075 holders of the Common Stock. The following table shows for the periods indicated the dividends paid per share on the Common Stock.

Quarter

2000

1999December 31

$
0.24

$
0.24March 31

$
0.24

$
0.24June 30

$
0.24

$
0.24September 30

$
0.24

$
0.24


9

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Item 6. Selected Financial Data

|                                                  |                                       | Year Ended September 30, |         | (Note)
Nine Months Ended September 30, |  
|------------------------------------------------- | ------------------------------------- | ------------------------ | ------- | -------------------------------------- | -
|
|
|Statements of Operations:                         |                                       |                          |         |                                        |  
|Operating Revenues                                |                                       |                          | 241,936 |                                        |  
|Less: Gas Purchases                               |                                       |                          | 136,681 |                                        |  
|                                                  | Revenue Taxes                         |                          |         | 15,261                                 |  
|                                                  |                                       |                          |         |                                        |  
|Operating Margin                                  |                                       |                          | 89,994  |                                        |  
|                                                  |                                       |                          |         |                                        |  
|Cost of Operations:                               |                                       |                          |         |                                        |  
|                                                  | Operating expenses                    |                          |         | 36,970                                 |  
|                                                  | Depreciation and amortization         |                          |         | 13,293                                 |  
|                                                  | Property and payroll taxes            |                          |         | 4,734                                  |  
|                                                  |                                       |                          |         |                                        |  
|                                                  |                                       |                          | 54,997  |                                        |  
|                                                  |                                       |                          |         |                                        |  
|Earnings From Operations                          |                                       |                          | 34,997  |                                        |  
|                                                  |                                       |                          |         |                                        |  
|Nonoperating Expense (Income):                    |                                       |                          |         |                                        |  
|                                                  | Interest                              |                          |         | 10,936                                 |  
|                                                  | Interest charged to construction      |                          |         | (322                                   | )
|                                                  |                                       |                          |         |                                        |  
|                                                  |                                       |                          | 10,614  |                                        |  
|                                                  | Amortization of debt issuance expense |                          |         | 607                                    |  
|                                                  | Other                                 |                          |         | (649                                   | )
|                                                  |                                       |                          |         |                                        |  
|                                                  |                                       |                          | 10,572  |                                        |  
|                                                  |                                       |                          |         |                                        |  
|Earnings Before Income Taxes                      |                                       |                          | 24,425  |                                        |  
|Income Taxes                                      |                                       |                          | 9,051   |                                        |  
|                                                  |                                       |                          |         |                                        |  
|Net Earnings                                      |                                       |                          | 15,374  |                                        |  
|Preferred Dividends                               |                                       |                          | 4       |                                        |  
|                                                  |                                       |                          |         |                                        |  
|Net Earnings Available to Common Shareholders     |                                       | $                        | 15,370  |                                        | $
|                                                  |                                       |                          |         |                                        |  
|Net Earnings per Common Share (Basic and diluted) |                                       | $                        | 1.39    |                                        | $

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NoteIn
1996, the Company changed from a calendar year to a fiscal year, and the nine months ended September 30, 1996 was the transition period.

10

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|                   |                                                      | At September 30,                              |        
|------------------ | ---------------------------------------------------- | --------------------------------------------- | -------
|
|
|Retained Earnings: |                                                      |                                               |        
|                   | Beginning of the year                                |                                               | $      
|                   | Net earnings available to common shareholders        |                                               |        
|                   | Common dividends                                     |                                               |        
|                   |                                                      |                                               |        
|                   | End of the year                                      |                                               | $      
|                   |                                                      |                                               |        
|Capital Structure: |                                                      |                                               |        
|                   | Common shareholders' equity                          |                                               | $      
|                   | Redeemable preferred stocks                          |                                               |        
|                   |                                                      |                                               |        
|                   | Debt:                                                |                                               |        
|                   |                                                      | Long-term debt                                |        
|                   |                                                      | Notes Payable and Commercial Paper            |        
|                   |                                                      | Current maturities of long-term debt          |        
|                   |                                                      |                                               |        
|                   |                                                      |                                               | 126,500
|                   |                                                      |                                               |        
|                   | Total capital                                        |                                               | $      
|                   |                                                      |                                               |        
|Financial Ratios:  |                                                      |                                               |        
|                   | Return on common shareholders' equity                |                                               |        
|                   | Common stock dividend payout ratio                   |                                               |        
|                   | Cash dividends declared per common share             |                                               | $      
|                   | Fixed charge coverage (before income tax deduction): |                                               |        
|                   |                                                      | Times interest earned                         |        
|                   |                                                      | Times interest and preferred dividends earned |        
|                   | Book value per year-end share of common stock        |                                               | $      
|                   | Capitalization Ratios at End of Year                 |                                               |        
|                   |                                                      | Common shareholders' equity                   |        
|                   |                                                      | Preferred stock                               |        
|                   |                                                      | Long-term debt (incl. current)                |        
|                   |                                                      | Short-term debt                               |        
|                   |                                                      |                                               |        
|                   |                                                      |                                               | 100.0  
|                   |                                                      |                                               |        
|Utility Plant:     |                                                      |                                               |        
|                   | Utility plantend of year                            |                                               | $      
|                   | Accumulated depreciation                             |                                               |        
|                   |                                                      |                                               |        
|                   | Net plant                                            |                                               | $      
|                   |                                                      |                                               |        
|                   | Capital expenditures, net of contributions in aid    |                                               | $      
|                   |                                                      |                                               |        
|                   | Total assets                                         |                                               | $      
|                   |                                                      |                                               |        

11

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following is management's assessment of the Company's financial condition and a discussion of the principal factors that affect consolidated results of
operations and cash flows for the fiscal years ended September 30, 2000, 1999, and 1998.

EARNINGS PER SHARE

Net earnings available to common shareholders were $15,370,000, $1.39 per common share for fiscal 2000, representing a 13% improvement over the $13,570,000,
$1.23 per common share, reported for fiscal 1999. The improvement in earnings is primarily the result of operating margin increases that exceeded the increase in operating and other costs.

1999 versus 1998.Fiscal 1999 earnings represent a 50% improvement over the $9,047,000, $0.82 per common share reported for fiscal
1998. The improvement was primarily the result of higher operating margins. Lower operating expenses and depreciation charges also contributed to the improved earnings.

OPERATING MARGIN

Operating margin for the year improved $3.9 million, with $1.2 million attributed to growth in residential and commercial margin, and
$2.7 million from increased margins from industrial customers.

Residential and Commercial Marginfor the fiscal years ended September 30, 2000, 1999, and 1998 are set forth in the table
below:

12 months ended September 30,2000

1999

1998(Dollars in thousands)Degree Days


5,372


5,535


5,031Average Number of CustomersResidential


157,116


150,068


142,537Commercial


27,186


26,360


25,409Average Therm Usage Per CustomerResidential


776


799


747Commercial


3,926


4,058


3,931Operating MarginResidential

$
35,977

$
34,850

$
30,436Commercial

$
21,924

$
21,845

$
19,648


Fiscal
2000 operating margins from sales to residential and commercial customers were up $1,206,000, or 2.1%, compared to fiscal 1999. The primary factors contributing to this
improvement were increased deliveries to residential customers resulting from growth in the number of customers.

Increases
in the number of residential and commercial customers contributed approximately $1.8 million and $0.7 million respectively of new margin. These improvements
were partially offset by reductions in consumption per customer resulting from warmer than normal weather. Weather in fiscal 2000, as measured by heating degree-days, was approximately 5%
warmer than normal, and 3% warmer than fiscal 1999.

1999 versus 1998.  Fiscal 1999 operating margins from sales to residential and commercial customers were up $6,611,000,
or 13.2%, compared to fiscal 1998. The primary factors contributing to this improvement were increased per-customer gas usage, increased number of customers, and a $1 per month increase in
the monthly service charge paid by Washington customers.

Approximately
$2.8 million of the increase was attributable to increased consumption per customer, largely due to colder weather. Weather in fiscal 1999, as measured by heating
degree-days,

12

---

while approximately 2% warmer than normal, was 10% colder than fiscal 1998. Improvement of approximately $2.4 million was the result of the 5% increase in the number of customers.

A
$1 per month service charge increase added approximately $1.3 million in margin. The increase was offset by a corresponding decrease in the rates charged to industrial
customers. This shift in rate responsibility was approved by the Washington Utilities & Transportation Commission effective August 1, 1996. The approval provided for a phased in shift of
rate responsibility in three annual increments, on August 1, 1996, 1997, and 1998. The intended result was to produce no direct bottom line impact.

Industrial and Other Marginin fiscal 2000 increased $2.7 million, or 9.2% from fiscal 1999. Approximately $1.9 million
of this improvement resulted from increased gas deliveries to electric generation customers. Increased demand for electricity is the main reason for this higher gas usage. Historically, gas
consumption by, and margin from electric generation customers has been subject to significant volatility. Over the past four years, annual margins from these customers has varied from
$7.7 million to $10.7 million. Additionally, approximately $0.5 million in margins came from 35 smaller, new industrial customers and about $0.3 million resulted from
consumption increases by other industrial customers.

1999 versus 1998.  Margins from industrial and other customers in fiscal 1999 decreased $840,000, or 2.8% from fiscal
1998. Approximately $1.3 million represents the rate reduction offset for the increased
residential and commercial service charges. Also in 1999, margins from the sales of spot market gas declined $519,000. Partially offsetting these decreases is approximately $800,000 in margins from
70, mostly smaller, new industrial customers and $700,000 from consumption increases by existing industrial customers.

COST OF OPERATIONS

Cost of operations, which consists of operating expenses, depreciation and amortization, and property and payroll taxes, was $55.0 million,
$53.7 million, and $55.2 million for the fiscal years ended September 30, 2000, 1999, and 1998, respectively.

Operating Expensesfor fiscal 2000, which are primarily labor and benefits expenses, increased $657,000, or 1.8% from 1999. The net
increase reflected changes in various categories of expense. Significant changes included a $652,000 (2.7%) decrease in labor expense related to reductions in the number of employees. The average
number of employees in fiscal 2000 was 446, compared to 468 in fiscal 1999. These reductions were achieved through normal attrition. Employee benefits expense increased $337,000 (3.3%) mostly
attributable to higher accruals for medical benefits costs. The provision for uncollectible accounts increased $316,000 (52%) mostly due to establishing a reserve related to an account due from an
industrial customer. Office and administrative expenses, including hiring costs, supplies, postage, and collection costs, increased $213,000 (9.1%). Purchased services expenses increased $198,000
(13.2%), and included $155,000 in fees paid related to mitigation of property tax increases. Services provided for those fees resulted in the avoidance of approximately $350,000 in annual property tax
increases.

1999 versus 1998.  For fiscal 1999, expenses decreased $997,000, or 2.7% from 1998. Improved efficiencies resulted in
the reduction of 22 positions between September 30, 1998 and September 30, 1999. The average employee count in 1999 was 468 compared to 483 in 1998, and these reductions were achieved
through normal attrition and early retirements. As a result of these staffing reductions, savings in labor expense of $946,000 were realized in 1999 compared to 1998. In addition, overtime pay
decreased $137,000. These reductions were offset by $1.3 million of normal wage and salary rate increases, and incentive compensation accruals for all salaried employees. Additional reductions
were achieved in other expense categories, including administrative, advertising, and operations.

13

---

Depreciation and Amortizationfor fiscal 2000 increased $452,000, or 3.5% over 1999, representing incremental depreciation expense on
new assets placed in service.

1999 versus 1998.  For fiscal 1999, Depreciation and Amortization decreased $629,000, or 4.7% from 1998. Based on
results of a depreciation study, conducted during 1998, the Company implemented lower depreciation rates effective with the fourth quarter of fiscal 1998. The annual effect of the lower rates is an
approximate $2 million reduction in depreciation expense. The effect on the comparison of fiscal 1999 to 1998 is approximately $1.5 million. Incremental depreciation expense on new
assets placed in service was approximately $900,000.

Property and Payroll Taxesfor fiscal 2000 increased $159,000, or 3.5% over fiscal 1999, entirely attributable to property tax
increases related in large part to asset additions.

1999 versus 1998.  Property and payroll taxes for fiscal 1999 were higher by $154,000, or 3.5% compared to fiscal 1998.
Of the increase, $111,000 is related to the timing of recognition of property tax reductions in Oregon.

NONOPERATING EXPENSE (INCOME)

Interest expense in fiscal 2000, net of interest capitalized, increased $511,000 (5.1%) over fiscal 1999 because of higher average long-term debt
balances, and higher average balances of deferred gas cost accounts. Other non-operating income increased $154,000 primarily from higher interest income on deposits of cash and cash
equivalents.

1999 versus 1998.  Interest expense for 1999 increased by $354,000 or 3.5% from fiscal 1998. The increase was due
primarily to higher long-term debt, higher average short-term debt and deferred gas cost balances. Interest charged to construction decreased $167,000 because of lower
construction expenditures and lower balances in construction work in progress. Other income increased $107,000, mainly because of a gain of $174,000 on the sale of non-utility property,
partially offset by reductions in interest and other income of $67,000.

INCOME TAXES

The increase in the provision for federal and state income taxes is attributable to improvements in pre-tax earnings. The average effective income
tax rate for fiscal 2000 was 37.1% compared to 36.5% for 1999 and 37.4% for 1998.

LIQUIDITY AND CAPITAL RESOURCES

The seasonal nature of the Company's business creates short-term cash requirements to finance customer accounts receivable and construction
expenditures. To provide working capital for these requirements, the Company has a revolving credit commitment of $40 million from a bank. This agreement expires in 2004. The annual commitment
fee is 0.125% through November 2000, and 0.16% thereafter. The Company also has $20 million of uncommitted lines from two banks.

A
Medium-Term Note program provides longer term financing with $125 million outstanding at September 30, 2000. There is $15 million remaining
registered under the Securities Act of 1933 and available for issuance. Because of the availability of short-term credit and the ability to issue long-term debt and additional
equity, management believes it has adequate financial flexibility to meet its anticipated cash needs.

14

---

OPERATING ACTIVITIES

Cash provided by operating activities in fiscal 2000 was $32.2 million, compared to $28.2 million in fiscal 1999. The increase is primarily from
higher net earnings. Cash from operating activities, less cash dividends paid, provided 100% of capital expenditures in fiscal 2000, as was the case in 1999.

The
company increased its rates to its core customers effective August 1, 2000 in Washington and October 1, 2000 in Oregon. The purpose of the increase is to pass along
the effect of significantly higher wholesale costs of natural gas that will be in effect during the coming year. The rate adjustment approved by the WUTC also includes a provision to refund to
customers amounts that had been
deferred since prior to 1996. This refund will mitigate some of the increase to be experienced by customers. The Company expects to refund approximately $4 million during fiscal 2001, which
will negatively affect operating cash flow.

INVESTING ACTIVITIES

Cash used by investing activities in fiscal 2000 was $15.3 million, compared to $16.1 million in 1999. Capital expenditures, net of customer
contributions, in fiscal 2000 were $15.9 million, while the original budget was $23.5 million. Two projects related to facilities to serve large industrial customers, were either
postponed or cancelled. The lower expenditures were also partially due to the Company's success in achieving a lower average investment per new residential and commercial customer.

Budgeted
capital expenditures for fiscal 2001 are approximately $25.4 million. This budget includes $18 million for new customer connections and distribution system
replacement and reinforcement. The budget also includes $5.9 million in technology investments, most of which will be for an integrated financial and work management system. These expenditures
are expected to be financed approximately 75% from operating activities, and 25% from debt financing.

FINANCING ACTIVITIES

Cash used by financing activities was $15.2 million in fiscal 2000, and $14.0 million in 1999. Other than the payment of dividends, the
principal financing activity in 2000 was the retirement of $6.1 million in preferred stock that matured in the first fiscal quarter. The redemption was initially funded with
short-term debt, and at September 30, 2000, there was $1.5 million in short-term debt.

REGULATORY MATTERS

The Company's earnings from its operations in Oregon are subject to an earnings sharing mechanism pursuant to an arrangement with the OPUC, adopted in fiscal
1999. Under that mechanism, first effective for calendar year 1999, Cascade shares with its Oregon customers one third of earnings that exceed a return on equity (ROE) threshold. The ROE threshold is
periodically adjusted based upon the change in the average US Treasury 5, 7, and 10-year bond rates. Based upon current bond rates, the ROE ceiling before any sharing occurs is 13.20%. The
amount of sharing related to calendar 1999
operations was $107,000. The estimated effect of this sharing arrangement for the first nine months of calendar 2000 is $86,000.

ENVIRONMENTAL MATTERS

In 1995, the Company received a claim from a property owner in Eugene, Oregon requesting that the Company assume responsibility for investigation and possible
clean up of alleged contamination on property previously owned by a predecessor of Cascade. The predecessor company conducted a manufactured gas business on the property from approximately 1929 to
1948. Manufactured gas operations apparently were conducted on the site by several operators beginning about 1907. The site was used for other purposes beginning in 1949.

15

---

The present owner has retained an environmental consultant, which is investigating possible contamination on the property. To date the consultant has reported that it believes
contamination is present. The contamination is consistent with that which might originate from a manufactured gas operation. There have been no estimates as to possible clean up costs. The
consultant's initial report has been furnished to the Oregon Department of Environmental Quality (DEQ). The owner has reached an intergovernmental agreement with the DEQ with respect to further
investigation and possible remediation of contamination on the property under the voluntary cleanup program.

Another
northwest utility, which purchased the property from Cascade in 1958, has declined to participate in the site investigation, although it may, as a onetime owner of the
property, bear some share of the responsibility as well.

The
Company has notified its insurance carriers of the claim and is keeping them advised as to the investigation. On one occasion in the past when hazardous materials on property
formerly owned by a predecessor of the Company required clean up, the OPUC allowed the clean up costs to be passed on to customers. In the event the Company is responsible for clean up costs not
covered by insurance, management anticipates asking for reimbursement through rates for such costs.

In
1997, a property owner in Washington notified the Company that there is contamination on his property, and that he believes it comes from a former manufactured gas site, owned at
one time by a
predecessor company, which was merged with Cascade in 1953. The State of Washington Department of Ecology has categorized this site as a "listed site" ranked in its most hazardous category. As a
former owner of the site, the Company may be strictly liable to the State of Washington for investigation and remediation of the contamination of the site, but may share that cost or allocate all the
cost to others who actually caused or contributed to the contamination.

The
Company retained an environmental consultant who conducted a preliminary investigation of possible contamination at the site. There is evidence of contamination at the site, and
there is also evidence of an oil line across the site property owned and operated by others, which may be a contributor to the contamination. There have been no estimates as to possible clean up
costs. The Company has investigated title and other government records to identify other potentially liable parties. The Company has notified the other identified parties of the contamination claims,
and has requested cooperation and financial contribution.

In
the event the Company is responsible for clean up costs not covered by insurance, management anticipates asking the WUTC for reimbursement for such costs, through rates charged to
customers.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Cascade has evaluated its risk related to financial instruments whose values are subject to market sensitivity. The Company has fixed-rate debt
obligations, but does not have derivative financial instruments subject to interest rate risk. Cascade makes interest and principal payments on these obligations in the normal course of its business,
and does not plan to redeem these obligations prior to normal maturities.

The
Company's natural gas purchase commodity prices are subject to fluctuations resulting from weather, congestion on interstate pipelines, and other unpredictable factors. The
Company's PGA mechanisms assure the recovery of prudently incurred wholesale gas cost, therefore management believes the Company's commodity price risk is immaterial.

16

---

FORWARD-LOOKING STATEMENTS

Statements contained in this report that are not historical in nature are forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual future results to differ materially. Such risks and uncertainties with respect to the
Company include, among others, its ability to successfully implement internal performance goals, competition from alternative forms of energy, consolidation in the energy industry, performance issues
with key natural gas suppliers, the capital-intensive nature of the Company's business, regulatory issues, including the need for adequate and timely rate relief to recover increased capital and
operating costs resulting from customer growth and to sustain dividend levels, the weather, increasing competition brought on by deregulation initiatives at the federal and state regulatory levels,
the potential loss of large volume industrial customers due to "bypass" or the shift by such customers to special competitive contracts at lower per unit margins, exposure to environmental cleanup
requirements, and economic conditions, particularly in the Company's service area.

17

---

Item 8. Financial Statements and Supplementary Data

INDEPENDENT AUDITORS' REPORT

Board of Directors
Cascade Natural Gas Corporation
Seattle, Washington

We
have audited the consolidated balance sheets of Cascade Natural Gas Corporation and subsidiaries (the Corporation) as of September 30, 2000 and 1999, and the related
consolidated statements of net earnings available to common shareholders, common shareholders' equity, and cash flows for the years ended September 30, 2000, 1999 and 1998. These financial
statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Cascade Natural Gas Corporation and subsidiaries as of
September 30, 2000 and 1999, and the results of its operations and its cash flows for the years ended September 30, 2000, 1999 and 1998, in conformity with accounting principles
generally accepted in the United States of America.

DELOITTE &
TOUCHE LLP
Seattle, Washington

November 10,
2000.

18

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CASCADE NATURAL GAS CORPORATION

CONSOLIDATED STATEMENTS OF NET EARNINGS AVAILABLE TO COMMON SHAREHOLDERS

|                                                  |                                       | Year Ended September 30, |        
|------------------------------------------------- | ------------------------------------- | ------------------------ | -------
|
|
|Operating Revenues                                |                                       | $                        | 241,936
|                                                  | Less                                  |                          |        
|                                                  |                                       | Gas purchases            |        
|                                                  |                                       | Revenue taxes            |        
|                                                  |                                       |                          |        
|Operating Margin                                  |                                       |                          | 89,994 
|                                                  |                                       |                          |        
|Cost of Operations                                |                                       |                          |        
|                                                  | Operating expenses                    |                          |        
|                                                  | Depreciation and amortization         |                          |        
|                                                  | Property and payroll taxes            |                          |        
|                                                  |                                       |                          |        
|                                                  |                                       |                          | 54,997 
|                                                  |                                       |                          |        
|                                                  | Earnings from operations              |                          |        
|                                                  |                                       |                          |        
|Nonoperating Expense (Income)                     |                                       |                          |        
|                                                  | Interest                              |                          |        
|                                                  | Interest charged to construction      |                          |        
|                                                  |                                       |                          |        
|                                                  |                                       |                          | 10,614 
|                                                  | Amortization of debt issuance expense |                          |        
|                                                  | Other                                 |                          |        
|                                                  |                                       |                          |        
|                                                  |                                       |                          | 10,572 
|                                                  |                                       |                          |        
|Earnings Before Income Taxes                      |                                       |                          | 24,425 
|Income Taxes                                      |                                       |                          | 9,051  
|                                                  |                                       |                          |        
|Net Earnings                                      |                                       |                          | 15,374 
|Preferred Dividends                               |                                       |                          | 4      
|                                                  |                                       |                          |        
|Net Earnings Available to Common Shareholders     |                                       | $                        | 15,370 
|                                                  |                                       |                          |        
|Net Earnings Per Common Share (basic and diluted) |                                       | $                        | 1.39   
|                                                  |                                       |                          |        

The
accompanying notes are an integral part of these financial statements

19

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CASCADE NATURAL GAS CORPORATION

CONSOLIDATED BALANCE SHEETS

|                                                                           |                                                                                                                         | September 30,
|-------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------- | -------------
|
|
|ASSETS                                                                    
|Utility Plant                                                              |                                                                                                                         | $            
|                                                                           | Less accumulated depreciation                                                                                           |              
|                                                                           |                                                                                                                         |              
|                                                                           |                                                                                                                         |              
|                                                                           | Construction work in progress                                                                                           |              
|                                                                           |                                                                                                                         |              
|                                                                           |                                                                                                                         |              
|                                                                           |                                                                                                                         |              
|Other Assets                                                               |                                                                                                                         |              
|                                                                           | Investments in non utility property                                                                                     |              
|                                                                           | Notes receivable, less current maturities                                                                               |              
|                                                                           |                                                                                                                         |              
|                                                                           |                                                                                                                         |              
|                                                                           |                                                                                                                         |              
|Current Assets                                                             |                                                                                                                         |              
|                                                                           | Cash and cash equivalents                                                                                               |              
|                                                                           | Accounts receivable and current maturities of notes recievable, less allowance of $1,224 and $622 for doubtful accounts |              
|                                                                           | Materials, supplies, and inventories                                                                                    |              
|                                                                           | Prepaid expenses and other assets                                                                                       |              
|                                                                           |                                                                                                                         |              
|                                                                           |                                                                                                                         |              
|                                                                           |                                                                                                                         |              
|Deferred Charges                                                           |                                                                                                                         |              
|                                                                           |                                                                                                                         |              
|                                                                           |                                                                                                                         | $            
|                                                                           |                                                                                                                         |              
|COMMON SHAREHOLDERS' EQUITY, PREFERRED STOCKS, AND LIABILITIES            
|Common Shareholders' Equity                                                |                                                                                                                         |              
|                                                                           | Common stock, par value $1 per share Authorized, 15,000,000 shares; issued and outstanding, 11,045,095 shares           |              
|                                                                           | Additional paid-in capital                                                                                              |              
|                                                                           | Retained earnings                                                                                                       |              
|                                                                           |                                                                                                                         |              
|                                                                           |                                                                                                                         |              
|                                                                           |                                                                                                                         |              
|Redeemable Preferred Stocks, aggregate redemption amount of $73 and $6,338 |                                                                                                                         |              
|                                                                           |                                                                                                                         |              
|Long-Term Debt                                                             |                                                                                                                         |              
|                                                                           |                                                                                                                         |              
|Current Liabilities                                                        |                                                                                                                         |              
|                                                                           | Notes payable and commercial paper                                                                                      |              
|                                                                           | Accounts payable                                                                                                        |              
|                                                                           | Property, payroll, and excise taxes                                                                                     |              
|                                                                           | Dividends and interest payable                                                                                          |              
|                                                                           | Other current liabilities                                                                                               |              
|                                                                           |                                                                                                                         |              
|                                                                           |                                                                                                                         |              
|                                                                           |                                                                                                                         |              
|Deferred Credits and Other                                                 |                                                                                                                         |              
|                                                                           | Gas cost changes                                                                                                        |              
|                                                                           | Income taxes                                                                                                            |              
|                                                                           | Investment tax credits                                                                                                  |              
|                                                                           | Other                                                                                                                   |              
|                                                                           |                                                                                                                         |              
|                                                                           |                                                                                                                         |              
|                                                                           |                                                                                                                         |              
|Commitments and Contingencies (Note 12)                                    |                                                                                                                         |              
|                                                                           |                                                                                                                         |              
|                                                                           |                                                                                                                         | $            
|                                                                           |                                                                                                                         |              

The accompanying notes are an integral part of these financial statements.

20

---

CASCADE NATURAL GAS CORPORATION

CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY

|                            |                      | Common Stock                                        |  |        |        |  |   
|--------------------------- | -------------------- | --------------------------------------------------- |  | ------ | ------ |  | --
|
|
|
|Balance, September 30, 1997 |                      | 10,966,732                                          |  | $      | 10,967 |  | $ 
|                            | Common stock issued: |                                                     |  |        |        |  |   
|                            |                      | Employee savings plan and retirement trust (401(k)) |  | 25,446 |        |  | 25
|                            |                      | Dividend reinvestment plan                          |  | 52,917 |        |  | 53
|                            | Cash dividends:      |                                                     |  |        |        |  |   
|                            |                      | Common stock, $.96 per share                        |  |        |        |  |   
|                            |                      | Preferred stock, senior, $.55 per share             |  |        |        |  |   
|                            |                      | 7.85% cumulative preferred stock, $7.85 per share   |  |        |        |  |   
|                            | Net earnings         |                                                     |  |        |        |  |   
|                            |                      |                                                     |  |        |        |  |   
|Balance, September 30, 1998 |                      | 11,045,095                                          |  |        | 11,045 |  |   
|                            | Cash dividends:      |                                                     |  |        |        |  |   
|                            |                      | Common stock, $.96 per share                        |  |        |        |  |   
|                            |                      | Preferred stock, senior, $.55 per share             |  |        |        |  |   
|                            |                      | 7.85% cumulative preferred stock, $7.85 per share   |  |        |        |  |   
|Net earnings                |                      |                                                     |  |        |        |  |   
|                            |                      |                                                     |  |        |        |  |   
|Balance, September 30, 1999 |                      | 11,045,095                                          |  |        | 11,045 |  |   
|                            | Cash dividends:      |                                                     |  |        |        |  |   
|                            |                      | Common stock, $.96 per share                        |  |        |        |  |   
|                            |                      | Preferred stock, senior, $.55 per share             |  |        |        |  |   
|                            | Net earnings         |                                                     |  |        |        |  |   
|                            |                      |                                                     |  |        |        |  |   
|Balance, September 30, 2000 |                      | 11,045,095                                          |  | $      | 11,045 |  | $ 
|                            |                      |                                                     |  |        |        |  |   

The
accompanying notes are an integral part of these financial statements.

21

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CASCADE NATURAL GAS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                     |                                                                                     | Year Ended September 30,                  |      
|---------------------------------------------------- | ----------------------------------------------------------------------------------- | ----------------------------------------- | -----
|
|
|Operating Activities                                 |                                                                                     |                                           |      
|                                                     | Net earnings                                                                        |                                           | $    
|                                                     | Adjustments to reconcile net earnings to net cash provided by operating activities: |                                           |      
|                                                     |                                                                                     | Depreciation and amortization             |      
|                                                     |                                                                                     | Deferrals of gas cost changes             |      
|                                                     |                                                                                     | Amortization of gas cost changes          |      
|                                                     |                                                                                     | Other deferrals and amortizations         |      
|                                                     |                                                                                     | Deferred income taxes and tax creditsnet |      
|                                                     |                                                                                     | Other                                     |      
|                                                     |                                                                                     | Change in current assets and liabilities  |      
|                                                     |                                                                                     |                                           |      
|                                                     | Net cash provided by operating activities                                           |                                           |      
|                                                     |                                                                                     |                                           |      
|Investing Activities                                 |                                                                                     |                                           |      
|                                                     | Capital expenditures                                                                |                                           |      
|                                                     | Customer contributions in aid of construction                                       |                                           |      
|                                                     | Other                                                                               |                                           |      
|                                                     |                                                                                     |                                           |      
|                                                     | Net cash used by investing activities                                               |                                           |      
|                                                     |                                                                                     |                                           |      
|Financing Activities                                 |                                                                                     |                                           |      
|                                                     | Issuance of common stock                                                            |                                           |      
|                                                     | Redemption of preferred stock                                                       |                                           |      
|                                                     | Proceeds from long-term debt, net                                                   |                                           |      
|                                                     | Repayment of long-term debt                                                         |                                           |      
|                                                     | Changes in notes payable and commercial paper, net                                  |                                           |      
|                                                     | Dividends paid                                                                      |                                           |      
|                                                     |                                                                                     |                                           |      
|                                                     | Net cash used by financing activities                                               |                                           |      
|                                                     |                                                                                     |                                           |      
|Net Increase (Decrease) in Cash and Cash Equivalents |                                                                                     |                                           | 1,722
|Cash and Cash Equivalents                            |                                                                                     |                                           |      
|                                                     | Beginning of year                                                                   |                                           |      
|                                                     |                                                                                     |                                           |      
|                                                     | End of year                                                                         |                                           | $    
|                                                     |                                                                                     |                                           |      

The
accompanying notes are an integral part of these financial statements.

22

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Notes to Consolidated Financial Statements

Note 1Nature of Business

Cascade Natural Gas Corporation (the Company) is a local distribution company (LDC) engaged in the distribution of natural gas. The Company's service territory
consists of towns in Washington and Oregon, ranging from the Canadian border in northwestern Washington to the Idaho border in eastern Oregon.

As
of September 30, 2000, the Company had approximately 185,188 core customers and 188 non-core customers. Core customers are principally residential and small
commercial and industrial customers who take traditional "bundled" natural gas service, which includes supply, peaking service, and upstream interstate pipeline transportation. Sales to core customers
account for approximately 16% of gas deliveries and 68% of operating margin. The Company's sales to its core residential and commercial customers are influenced by fluctuations in temperature,
particularly during the winter season. A warm winter season will tend to reduce gas consumption. Over the longer term, these fluctuations tend to offset each other, as rates charged to customers are
developed based on the assumption of normal weather.

Non-core
customers are generally large industrial and institutional customers who have chosen "unbundled" service, meaning that they select from among several supply and
upstream pipeline transportation options, independent of the Company's distribution service. The Company's margin from non-core customers is derived primarily from this distribution
service. The principal industrial activities of its customers include the generation of electricity, processing of forest products, production of chemicals, refining of crude oil, production of
aluminum, and processing of food.

The
Company is subject to regulation of most aspects of its operations by the Washington Utilities and Transportation Commission (WUTC) and the Oregon Public Utility Commission
(OPUC). It is subject to regulatory risk primarily with respect to recovery of costs incurred. Various deferred charges and
deferred credits reflect assumptions regarding recovery of certain costs through amortization during future periods.

Note 2Summary of Significant Accounting Policies

The Company's accounting records and practices conform to the requirements and uniform system of accounts prescribed by the WUTC and the OPUC.

Principles of consolidation:The consolidated financial statements include the accounts of Cascade Natural Gas
Corporation and its wholly owned subsidiaries: Cascade Land Leasing Co.; CGC Properties, Inc.; CGC Energy, Inc.; and CGC Resources, Inc. All intercompany transactions have been
eliminated in consolidation.

Utility plant:Utility plant is stated at the historical cost of construction or purchase. These costs include
payroll-related costs such as taxes and other employee benefits, general and administrative costs, and the estimated cost of funds used during construction. Maintenance and repairs of property, and
replacements and renewals of items deemed to be less than units of property, are charged to operations. Units of utility plant retired or replaced are credited to property accounts at cost. Such
amounts plus removal cost, less salvage, are charged to accumulated depreciation. In the case of a sale of non-depreciable property or major operating units, the resulting gain or loss on
the sale is included in other income or expense.

Depreciation
of utility plant is computed using the straight-line method. The Company periodically conducts depreciation studies to establish and update asset depreciation
lives. The most recent study was conducted in 1998, and current rates were effective July 1, 1998. Asset lives used for computing

23

---

depreciation range from six to seventy years, and the weighted average annual depreciation rate is approximately 3.0%.

Investments in non-utility property:This consists primarily of real estate, carried at the lower of cost
or estimated net realizable value.

Notes receivable:Notes receivable includes loans made to customers for the purchase of energy efficient appliances,
which are generally the security for the loan. The loans have terms ranging from one to ten years at interest rates varying from 6.5% to 12%. Current maturities include a note receivable from one
industrial customer.

Cash and cash equivalents:For purposes of reporting cash flows, the Company accounts for all liquid investments, with
a purchased maturity of three months or less, as cash equivalents. The following provides additional information to the Consolidated Statements of Cash Flows:

2000

1999

1998(Dollars in thousands)Changes in current assets and current liabilities:Accounts receivable

$
(8,133
)
$
(3,196
)
$
2,596Income taxes


563


(165
)

2,261Inventories


12


(38
)

(326
)Prepaid expenses and other assets


(1,163
)

(259
)

(4
)Accounts payable and accrued expenses


7,016


(1,394
)

3,782Other


(424
)

(102
)

(168
)Net change in current assets and current liabilities

$
(2,129
)
$
(5,154
)
$
8,141Cash payments:Interest (net of amounts capitalized)

$
9,501

$
9,136

$
8,303Income taxes

$
7,664

$
5,863

$
1,876


Materials, supplies and inventories:Materials and supplies for construction, operations, and maintenance are recorded
at cost. Inventories of natural gas are stated at the lower of cost or market.

Regulatory accounts:The Company's financial statements are prepared in accordance with Statement of Financial
Accounting Standards (FAS) No. 71, "Accounting for the Effects of Certain Types of Regulation". This statement provides for the deferral of certain costs and benefits that would otherwise be
recognized in revenue or expense, if it is probable that future rates will result in recovery from customers or refund to customers of such amounts.

Regulatory
assets (liabilities) at September 30, 2000 and 1999 include the following:

2000

1999(Dollars in thousands)Unamortized loss on reacquired debt

$
3,968

$
4,497Gas cost changes


(15,047
)

(12,210
)Deferred income taxes


(3,826
)

(4,247
)Postretirement benefits other than pensions


1,687


2,436Other, net


(223
)

(316
)Net

$
(13,441
)
$
(9,840
)


Revenue recognition:The Company accrues estimated revenues for gas delivered but not billed to residential and
commercial customers from the meter reading dates to the end of the accounting period.

24

---

Leases:The Company leases mainframe computer equipment and a majority of its vehicle fleet. These leases are
classified as operating leases. The Company's primary obligation under these leases is for a twelve-month period, with options to extend the lease thereafter. Commitments beyond one year are not
material. The Company has no capital leases.

Federal income taxes:The Company normalizes temporary differences between book income and taxable income, with the
exception of depreciation differences on assets placed in service prior to 1981, consistent with the policies of the WUTC and OPUC. Deferred income taxes are determined using the asset and liability
method, under which deferred tax assets and liabilities are measured based upon the temporary differences between the financial statement and income tax bases of assets and liabilities, using current
tax rates. The Company files a consolidated federal income tax return.

Investment tax credits:Investment tax credits were deferred and are amortized over the remaining life of the property
giving rise to the credit.

Use of estimates:The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. The Company has used estimates in
measuring certain deferred charges and deferred credits related to items subject to approval of the WUTC and the OPUC. Estimates are also used in the development of discount rates and trend rates
related to the measurement of retirement benefit obligations and accrual amounts, and in the determination of depreciable lives of utility plant.

Stock-Based Compensation:Compensation cost for stock options is measured as the excess of the market price of the
Company's stock at the date of the grant over the price the employee must pay to acquire the stock. The Company accounts for its stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" rather than using the fair-value-based method prescribed under FAS No. 123, "Accounting
for Stock-Based Compensation." The Company has adopted the disclosure requirements of FAS No. 123. See Note 6 for more information about the Company's stock-based compensation plan.

Comprehensive Income:Comprehensive income for fiscal years ended September 30, 2000, 1999, and 1998 was equal
to the Company's net earnings.

Segment Reporting:Management views the Company as operating as a single segment, that of a local distribution company
in the Pacific Northwest. Therefore the financial statements do not include disclosure of segment information.

New Accounting Standards:

SOP 98-1.As of the first quarter of fiscal 2000, the Company adopted Statement of
Position (SOP) 98-1,"Accounting for the Costs of Computer Software Developed or Obtained for Internal Use", issued by the Accounting
Standards Executive Committee of the American Institute of Certified Public Accountants. The SOP establishes criteria for accounting for software costs as operating expense when incurred, or as a
capital expenditure. It provides that internal and external costs incurred to develop or obtain new software during the "application development stage" should be capitalized. Other costs, including
preliminary project costs, training, data conversion, and upgrades and enhancements, would be expensed under the provisions of SOP 98-1. The significance of this change is dependent upon
the magnitude of the costs and the nature and complexity of specific software development or acquisition projects incurred in any period. For the quarter and year ended September 30, 2000,
adoption of this standard had an immaterial effect on the financial position and results of operations.

25

---

FAS Nos. 133 and 138.In June 1998, the Financial Accounting Standards Board (FASB)
issued FAS No. 133, entitled"Accounting for Derivative Instruments and Hedging Activities."This standard was amended in June 2000 by FAS
No. 138,Accounting for Certain Derivative Instruments and Certain Hedging Activities.Both standards are effective for fiscal years beginning
after June 15, 2000, and have been adopted by the Company as of October 1, 2000. FAS No. 133 and 138 requires that the fair value of all derivative financial instruments be
recognized as either assets or liabilities on the Company's balance sheet. Changes during a period in the fair value of a derivative instrument would be included in earnings or other comprehensive
income for the period.

The
Company has concluded that the majority of its contracts for the purchase, sale, transportation and storage of natural gas constitute "normal purchases and sales" under FAS
No. 133 and 138, as such the majority of such contracts are not subject to the accounting requirements of the new standard. For the contracts that the Company believes are required to be
accounted for under the standard, the Company has calculated the value of these contracts as of October 1, 2000 and will record a derivative asset of $205,000 and a derivative liability of
$84,000. These contracts are short-term in nature and have minimal fixed price components. Management believes any gains or losses resulting from the eventual settlement of these contracts
are subject to deferral under the Company's tariffs with the WUTC and OPUC. Therefore, the derivative amounts to be recorded as a result of adoption of these standards will be offset with a
corresponding regulatory asset and liability pursuant to FAS No. 71. Thus, the adoption of FAS Nos. 133 and 138 will have no impact on recorded earnings.

SAB No. 101.In December 1999, the Securities and Exchange Commission released
Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements," to provide guidance on the recognition, presentation and disclosure of revenues in financial statements.
Management believes that the Company's revenue recognition policies are consistent with the bulletin, and thus the bulletin has had no effect on the financial statements.

Note 3Earnings per Share

The following table sets forth the calculation of earnings per share as prescribed in FAS No. 128.

2000

1999

1998(Dollars in thousands
except per share data)Net earnings

$
15,374

$
14,053

$
9,544Less: Preferred dividends


4


483


497Net earnings available to common shareholders

$
15,370

$
13,570

$
9,047Weighted average shares outstanding


11,045


11,045


11,000Plus: Issued on assumed exercise of stock options


5


1


Weighted average shares outstanding assuming dilution


11,050


11,046


11,000Basic and diluted earnings per common share

$
1.39

$
1.23

$
0.82


The
only dilutive securities are the stock options described in Note 6.

26

---

Note 4Utility Plant

Utility plant at September 30, 2000 and 1999 consists of the following components:

2000

1999(Dollars in thousands)Distribution plant

$
417,675

$
401,826Transmission plant


14,633


14,086Production plant





1,053General plant


32,262


32,104Intangible plant


212


212Nondepreciable plant


4,007


3,997$
468,789

$
453,278


Note 5Common Stock

At September 30, 2000, shares of common stock are reserved for issuance as follows:

Number
of sharesEmployee Savings Plan and Retirement Trust (401(k) plan)

119,765Dividend Reinvestment Plan

51,338Director Stock Award Plan

4,112Stock Incentive Plan (Note 6)

150,000325,215


The
price of shares issued to the above plans is determined by the market price of shares on the day of, or immediately preceding the issuance date. The Company's practice is to
purchase shares on the open market for these plans rather than issue new shares.

Holders
of Common Stock have rights ("Rights") to purchase shares of Series Z Preferred Stock on the basis of one Right for each share of Common Stock. The Rights may not be
exercised and will be attached to and trade with shares of Common Stock until the Distribution Date, which will occur on the earlier of (i) the tenth day following a public announcement that
there has been a "Share Acquisition", i.e., that a person or group (other than the Company and certain other persons) has acquired or obtained the right to acquire 20% or more of the outstanding
Common Stock and (ii) the tenth business day following the commencement or announcement of certain offers to acquire beneficial ownership of 30% or more of the outstanding Common Stock. Subject
to restrictions on exercisability while the Rights are redeemable, each Right entitles the holder to buy from the Company one one-hundredth of a share of Series Z Preferred Stock at
a price of $85, subject to adjustment. Upon the occurrence of a Share Acquisition, and provided that all necessary regulatory approvals have been obtained, each Right will thereafter entitle the
holder (other than the acquiring person or group and transferees) to buy from the Company for $85, shares of Common Stock having a market value of $170, subject to adjustment.

27

---

Note 6Stock Compensation Plan

At its annual meeting January 27, 1999, the Company adopted, and shareholders approved an incentive compensation plan, the1998
Stock Incentive Plan(the Plan), under which officers and other key management employees may be granted options to purchase stock. The grants vest 1/3 per year
over three years, and expire five years after the grant date. The weighted average remaining life of options outstanding at September 30, 2000 is 4.0 years.

The
following table summarizes the grants under option at September 30:

2000

1999Wtd. Avg.
Exercise
Price

No. of Shares
Under Option

Wtd. Avg.
Exercise
Price

No. of Shares
Under OptionBalance at October 1

$
16.50

38,000




Options granted

$
14.94

53,100

$
16.50

38,000Balance at September 30

$
15.90

91,100

$
16.50

38,000Exercisable at September 30

$
16.50

12,667


None

None


As
of September 30, 2000, no options under the plan have been exercised, expired or cancelled. The weighted average fair value of options granted during the fiscal years of
2000 and 1999 are estimated at $2.56 and $2.44, respectively. The fair value was estimated at the date of the grants using a Black-Scholes option pricing model using the following assumptions:

Options granted during2000

1999Dividend yield

5.49
%
4.52
%Expected volatility

23
%
21
%Expected life

5 years

4 yearsRisk-Free interest rate

5.73
%
4.60
%


The
Company accounts for stock-based compensation using APB Opinion No. 25, "Accounting for Stock Issued to Employees". Under this method, compensation cost is recognized on
the excess, if any, of the market price of the stock at grant date over the exercise price of the option. The exercise price of each grant was equal to the market price at the respective grant date,
therefore no compensation expense has been recorded in connection with the Plan. Under FAS No. 123, "Accounting for Stock-Based Compensation," compensation expense is determined based on the
fair value of the award and is recognized over the vesting period. Had compensation expense been determined in accordance with FAS 123, the Company's net earnings would have been as follows:

2000

1999Proforma net earnings

$
15,325

$
14,033Proforma earnings per share, basic and diluted

$
1.39

$
1.23


There
would have been no effect on fiscal 1998 earnings because no stock options were granted prior to 1999.

28

---

Note 7Redeemable Preferred Stocks

|                                                     |  | 2000  |  | 1999
|---------------------------------------------------- |  | ----- |  | ----
|
|
|7.85% cumulative, $1.00 par value                    |  |      |  | $   
|$0.55 cumulative senior, series C, without par value |  | 7,250 |  |     
|                                                     |  |       |  |     
|                                                     |  | 7,250 |  | $   
|                                                     |  |       |  |     

Preferred
shareholders have preference over common shareholders in dividends and liquidation rights. The 7.85% cumulative preferred stock was redeemed in November 1999. The
$0.55 cumulative senior preferred stock, Series C was fully redeemed in November 2000 for $73,000.

Note 8Notes Payable and Commercial Paper

The Company's short-term borrowing needs are met with a $40,000,000 revolving credit agreement with one of its banks. This agreement expires in
November 2004. The annual commitment fee is 0.1250%
through November 2000, and 0.1600% thereafter. The Company also has $20,000,000 of uncommitted lines from two banks.

2000

1999

1998(Dollars in thousands)Amount outstanding

$
1,500

$


$
6,929Average daily balance outstanding


2,670


8,122


6,201Average interest rate, excluding commitment fee


6.08
%

5.44
%

5.83
%Maximum month end amount outstanding

$
10,213

$
23,713

$
13,260


Various
debt and credit agreements restrict the Company and its subsidiaries as to indebtedness, payment of cash dividends on common stock, and other matters. Under these
restrictions, approximately $11,314,000 is available for payment of dividends as of September 30, 2000.

Note 9Long-Term Debt

Long-term debt at September 30, 2000 and 1999 consists of the following:

2000

1999(Dollars in thousands)Medium-term notes:7.32% due August 2004


22,000


22,0007.18% due October 2004


4,000


4,0008.38% due January 2005


5,000


5,0008.35% due July 2005


5,000


5,0008.50% due October 2006


8,000


8,0008.06% due September 2012


14,000


14,0008.10% due October 2012


5,000


5,0008.11% due October 2012


3,000


3,0007.95% due February 2013


4,000


4,0008.01% due February 2013


10,000


10,0007.95% due February 2013


10,000


10,0007.48% due September 2027


20,000


20,0007.098% due March 2029


15,000


15,000Total long-term debt

$
125,000

$
125,000


29

---

None of the long-term debt includes sinking fund requirements. Annual obligations for redemption of long-term debt are as follows: None in fiscal years 2000
through 2003 and $22,000,000 in fiscal year 2004, and $103,000,000 thereafter.

Note 10Income Taxes

Pursuant to the provisions of FAS No. 109, the Company has recorded a deferred tax liability for the cumulative tax effect of basis differences on
utility plant placed in service prior to 1981. Flow through accounting had previously been recorded with respect to these temporary differences. In addition, the Company has adjusted previously
recorded deferred tax liabilities related to plant placed in service after 1980, due to reductions in tax rates. Due to regulatory policies regarding recovery of deferred taxes charged to customers
through rates, a regulatory liability was recorded which offsets the effect of these adjustments to the deferred tax balances. Therefore these adjustments have had no effect on net earnings. The
provision for income tax expense consists of the following:

2000

1999

1998(Dollars in thousands)Current tax expense

$
8,269

$
5,702

$
4,126Deferred tax expense


984


2,594


1,809Amortization of deferred investment tax credits


(202
)

(221
)

(241
)$
9,051

$
8,075

$
5,694


A
reconciliation between income taxes calculated at the statutory federal tax rate and income taxes reflected in the financial statements is as follows:

2000

1999

1998(Dollars in thousands)Statutory federal income tax rate


35
%

35
%

35
%Income tax calculated at statutory federal rate

$
8,549

$
7,745

$
5,333Increase (decrease) resulting from:State income tax, net of federal tax benefit


191


177


117Non-normalized depreciation differences


407


374


345Amortization of investment tax credits


(202
)

(221
)

(241
)Other


106


0


140$
9,051

$
8,075

$
5,694Effective tax rate


37.1
%

36.5
%

37.4
%


Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for income tax

30

---

purposes. The tax effects of significant items comprising the Company's net deferred tax liability at September 30, 2000 and 1999 are as follows:

2000

1999(Dollars in thousands)Deferred tax liabilities:Basis differences on net fixed assets

$
19,714

$
17,484Debt refinancing costs


1,420


1,610Retirement benefit obligations


547


1,09221,681


20,186Deferred tax assets:Retirement benefit obligations


319


439Provision for doubtful accounts


482


266Other


113


76914


781Net deferred tax liability

$
20,767

$
19,405


Note 11Retirement Plans

The Company's noncontributory defined benefit pension plan covers substantially all employees over 21 years of age with one year of service. The
benefits are based on a formula which includes credited years of service and the employee's annual compensation. The Company's policy is to fund the plan by
contributing an amount equal to the actuarially determined normal cost plus ten-year amortization payments towards the unfunded actuarial liability, subject to the limits on deductible
contributions. The Company also provides executive officers with supplemental retirement, death, and disability benefits. Under the plan, vesting occurs on a stepped basis, with full vesting upon the
executive reaching age 55 and completing either five years of participation under the plan or seventeen years of employment with the Company, upon death, or upon a change in control. The plan
supplements the benefit received through Social Security and the defined benefit pension plan so that the total retirement benefits are equal to 70% of the executive's highest salary during any of the
five years preceding retirement. The plan also provides a death benefit equivalent to ten years of vested benefits. The Company funds the plan by making contributions to the Trust sufficient to assure
assets held by the Trust always exceed the accumulated benefit obligation for benefits payable by the plan.

The
Company's health care plan provides Postretirement Benefits Other than Pensions (PBOP), consisting of medical and prescription drug benefits, to its retired employees hired prior
to June 1, 1992, and their eligible dependents. The Company's policy is generally to fund the plan to the extent

31

---

allowable under Internal Revenue Service rules. The following tables set forth the pension and health care plan disclosures:

Components of net periodic benefit cost

|                                       |  | Pension Benefits |        | Other Benefits |  
|-------------------------------------- |  | ---------------- | ------ | -------------- | -
|
|
|Service cost                           |  | $                | 1,765  |                | $
|Interest cost                          |  |                  | 3,187  |                |  
|Expected return on plan assets         |  |                  | (3,841 | )              |  
|Amortization of transition obligation  |  |                  | 102    |                |  
|Amortization of prior service cost     |  |                  | 481    |                |  
|Recognized net actuarial loss / (gain) |  |                  | 1      |                |  
|Special termination benefit            |  |                  |       |                |  
|                                       |  |                  |        |                |  
|Net periodic benefit cost              |  | $                | 1,695  |                | $
|                                       |  |                  |        |                |  

|                                                  |  | Pension Benefits |        | Other Benefits |  
|------------------------------------------------- |  | ---------------- | ------ | -------------- | -
|
|
|Change in benefit obligations                     |  |                  |        |                |  
|Projected benefit obligation at beginning of year |  | $                | 40,887 |                | $
|Service Cost                                      |  |                  | 1,765  |                |  
|Interest Cost                                     |  |                  | 3,188  |                |  
|Plan participants' contributions                  |  |                  |       |                |  
|Amendments                                        |  |                  | 1,015  |                |  
|Termination Benefits                              |  |                  |       |                |  
|Benefits paid                                     |  |                  | (1,928 | )              |  
|Changes in assumptions                            |  |                  | 65     |                |  
|Actuarial (gain)/loss                             |  |                  | (585   | )              |  
|                                                  |  |                  |        |                |  
|Projected benefit obligation at end of year       |  | $                | 44,407 |                | $
|                                                  |  |                  |        |                |  
|Change in Plan Assets                             |  |                  |        |                |  
|Fair value of plan assets at beginning of year    |  | $                | 41,854 |                | $
|Actual return on plan assets                      |  |                  | 6,104  |                |  
|Employer contributions                            |  |                  | 2,269  |                |  
|Plan participants' contributions                  |  |                  |       |                |  
|Benefits Paid                                     |  |                  | (1,928 | )              |  
|                                                  |  |                  |        |                |  
|Fair value of plan assets at end of year          |  | $                | 48,299 |                | $
|                                                  |  |                  |        |                |  
|Funded Status                                     |  | $                | 3,891  |                | $
|Unrecognized prior service cost                   |  |                  | 3,499  |                |  
|Unrecognized net (gain)/loss                      |  |                  | (2,599 | )              |  
|Unrecognized transition obligation/(asset)        |  |                  | 627    |                |  
|                                                  |  |                  |        |                |  
|Net amount recognized in Consolidated Statements  |  | $                | 5,418  |                | $
|                                                  |  |                  |        |                |  

32

---

2000

1999Weighted Average AssumptionsDiscount rate

7.75
%
7.75
%Average compensation increase

5.00
%
5.00
%Expected rate of return on plan assetsPension plan

9.00
%
9.00
%Supplemental executive retirement plan

8.50
%
8.50
%Postretirement medical benefit plan

8.75
%
8.75
%


Health care cost trend

The assumed health care cost trend rate used in measuring the APBO is 8.0% for fiscal 2001, trending down to 5.5% in 2006. A one percent change in the assumed
health care cost trend rate would have the following effects as of September 30, 2000:

One Percentage PointIncrease

Decrease(thousands)Effect on service and interest cost

$
392

$
(318
)Effect on postretirement benefit obligation

$
3,514

$
(2,890
)


The
pension plan was amended, effective January 1, 2000, so that for salaried employees, the past service benefit calculation was changed to the five-year period
ended December 31, 1998 from the five-year period ended December 31, 1994. An amendment to the pension plan, effective April 1, 1999, increased the projected benefit
obligation for union employees represented by the collective bargaining agreement of the International Chemical Workers Union.

The
special termination benefit for the supplemental retirement plan represents the recognition of the increase in the projected benefit obligation for three executives who elected to
accept early retirement benefits effective September 30, 1998. The special termination benefit for the retirement plan represents the recognition of the increase in the projected benefit
obligation for five employees that retired in December 1998 and January 1999.

The
Company has an Employee Savings Plan and Retirement Trust (401(k) plan). All employees 21 years of age or older with one full year of service are eligible to enroll in the
plan. Under the terms of the plan, the Company will match each employee's contribution at a rate of 75% of the employee's contribution up to 6% of the employee's compensation, as defined. The Company
recognized costs for contributions to this plan of $889,000, $810,000, and $769,000, for 2000, 1999 and 1998, respectively.

Note 12Commitments and Contingencies

Gas Service Contracts

The Company has entered into various long-term contracts for natural gas supply, transportation, storage, and peaking services. These contracts
assure that adequate supplies of gas will be available to provide firm service to core customers and to meet obligations under long-term non-core customer agreements, and to
assure that adequate capacity is available on interstate pipelines for the delivery of these supplies. These contracts have maturities ranging up to 25 years, and generally provide for monthly
and annual fixed demand charges and minimum purchase obligations.

33

---

The Company's minimum obligations under these contracts are set forth in the following table. The amounts are based on current contract price terms and estimated commodity prices,
which are subject to change:

|Fiscal Year Ending
September 30 |  | Firm Gas
Supply |         | Interstate
Pipeline
Transportation |   | Storage
and Peaking
Service |  | Total
|------------------------------- |  | --------------- | ------- | ---------------------------------- | - | --------------------------- |  | -----
|
|2001                            |  | $               | 42,377  |                                    | $ | 25,695                      |  | $    
|2002                            |  |                 | 42,943  |                                    |   | 25,559                      |  |      
|2003                            |  |                 | 35,174  |                                    |   | 25,559                      |  |      
|2004                            |  |                 | 35,174  |                                    |   | 25,559                      |  |      
|2005                            |  |                 | 9,373   |                                    |   | 25,559                      |  |      
|Thereafter                      |  |                 | 21,668  |                                    |   | 237,533                     |  |      
|                                |  |                 |         |                                    |   |                             |  |      
|                                |  | $               | 186,709 |                                    | $ | 365,464                     |  | $    
|                                |  |                 |         |                                    |   |                             |  |      

Purchases
under these contracts for fiscal 2000, 1999, and 1998, including commodity purchases, as well as demand charges have been as follows:

|     |  | Firm Gas
Supply |        | Interstate
Pipeline
Transportation |   | Storage
and Peaking
Service |  | Total
|---- |  | --------------- | ------ | ---------------------------------- | - | --------------------------- |  | -----
|
|2000 |  | $               | 69,168 |                                    | $ | 31,852                      |  | $    
|1999 |  | $               | 60,231 |                                    | $ | 30,224                      |  | $    
|1998 |  | $               | 47,102 |                                    | $ | 28,901                      |  | $    

Environmental Matters

There are two claims against the Company for as yet unknown costs for clean up of alleged environmental contamination related to manufactured gas plant sites
that were previously operated by companies, which were subsequently merged into Cascade.

The
first claim was received in 1995, and relates to a site in Oregon. An investigation has shown that contamination does exist, but there is currently not enough information
available to estimate the
potential liability associated with this claim. It is expected that other parties will participate in the clean up costs, and negotiations are ongoing as to the sharing arrangement. Through the end of
the fiscal year the amounts spent, primarily on investigation and containment, has been immaterial.

The
second claim was received in 1997, and relates to a site in Washington. An investigation has determined there is evidence of contamination at the site, but there is also evidence
of an oil line, operated by an unrelated party, crossing the property, which may have also contributed to the contamination. There is currently not enough information available to estimate the
potential liability associated with this claim. The party who originally made this claim has not been actively pursuing it.

Management
intends to pursue reimbursement from its insurance carriers, and recovery from its customers through increased rates, for any remediation costs for which the Company is
determined to be liable. There is precedent for such recovery through increased rates, as both the WUTC and OPUC have previously allowed regulated utilities to increase customer rates to recover
similar costs.

Litigation

Various lawsuits, claims, and contingent liabilities may arise from time to time from the conduct of the Company's business. In 1998, the Company was served
with a lawsuit by six plaintiffs, claiming unspecified damages for personal injuries in connection with carbon monoxide exposure. The plaintiffs were residents of a house served by the Company at the
time of the incident. The Company denies any

34

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responsibility for these injuries, and the parties are engaged in discovery. This case is scheduled for trial in May 2001. There is currently not enough information available to estimate the
Company's potential liability associated with this claim, but its self-insured exposure with respect to such claims is $1 million. No other claim now pending, in the opinion of
management, is expected to have a material effect on the Company's financial position, results of operations, or liquidity.

Note 13Fair Value of Financial Instruments

The following estimated fair value amounts have been determined by the Company, using available market information and appropriate valuation methodologies.
However, considerable judgment is
required in interpreting market data to develop the estimates of fair value. Accordingly, these estimates are not necessarily indicative of the amounts that the Company could realize in a current
market exchange. Thus, the use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts. The estimated fair values have been
determined by using interest rates that are currently available to the Company for issuance of instruments with similar terms and remaining maturities. The estimated fair value amounts, at
September 30, 2000 and 1999, of financial instruments whose values are sensitive to market conditions are set forth in the following table:

|                           |  | 2000 |         | 1999
|-------------------------- |  | ---- | ------- | ----
|
|
|Redeemable Preferred Stock |  | $    | 62      |     
|Long-term Debt             |  | $    | 125,000 |     

Note 14Interim Results of Operations (unaudited)

|                                                       |  | Quarter Ended
|------------------------------------------------------ |  | -------------
|
|
|                                                       |  |              
|Operating revenues                                     |  | $            
|Gas costs and revenue taxes                            |  |              
|                                                       |  |              
|Operating margin                                       |  |              
|Cost of operations                                     |  |              
|                                                       |  |              
|Earnings (loss) from operations                        |  |              
|Interest and other, net                                |  |              
|                                                       |  |              
|Earnings (loss) before income taxes                    |  |              
|Income taxes                                           |  |              
|                                                       |  |              
|Net earnings (loss)                                    |  |              
|Preferred dividends                                    |  |              
|                                                       |  |              
|Net earnings (loss) available to Common Shareholders   |  | $            
|                                                       |  |              
|Net earnings (loss) per common sharebasic and diluted |  | $            
|                                                       |  |              

35

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|                                                       |  | Quarter Ended
|------------------------------------------------------ |  | -------------
|
|
|                                                       |  |              
|Operating revenues                                     |  | $            
|Gas costs and revenue taxes                            |  |              
|                                                       |  |              
|Operating margin                                       |  |              
|Cost of operations                                     |  |              
|                                                       |  |              
|Earnings (loss) from operations                        |  |              
|Interest and other, net                                |  |              
|                                                       |  |              
|Earnings (loss) before income taxes                    |  |              
|Income taxes                                           |  |              
|                                                       |  |              
|Net earnings (loss)                                    |  |              
|Preferred dividends                                    |  |              
|                                                       |  |              
|Net earnings (loss) available to Common Shareholders   |  | $            
|                                                       |  |              
|Net earnings (loss) per common sharebasic and diluted |  | $            
|                                                       |  |              

36

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INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE

Cascade Natural Gas Corporation and Subsidiaries
Seattle, Washington

We
have audited the consolidated balance sheets of Cascade Natural Gas Corporation and subsidiaries (the Corporation) as of September 30, 2000 and 1999, and the related
consolidated statements of net earnings available to common shareholders, common shareholders' equity, and cash flows for the years ended September 30, 2000, 1999, and 1998, and have issued our
report thereon dated November 10, 2000; such consolidated financial statements and report are included in Part II of this Annual Report on Form 10-K. Our audits also
included the consolidated financial statement schedule of Cascade Natural Gas Corporation, listed in Item 14(a)2. This consolidated financial statement schedule is the responsibility of the
Corporation's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material respects, the information shown therein.

Deloitte &
Touche LLP

Seattle,
Washington
November 10, 2000

37

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SCHEDULE II

CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

|Column A                         |                    | Column B |   | Column C |  | Column D |  | Column E
|-------------------------------- | ------------------ | -------- | - | -------- |  | -------- |  | --------
|
|
|
|Allowance for Doubtful Accounts: |                    |          |   |          |  |          |  |         
|Year ended:                      |                    |          |   |          |  |          |  |         
|                                 | September 30, 1998 |          | $ | 529      |  | 585      |  |         
|                                 | September 30, 1999 |          | $ | 645      |  | 686      |  |         
|                                 | September 30, 2000 |          | $ | 622      |  | 561      |  |         
|ReserveNotes Receivable         |                    |          |   |          |  |          |  |         
|                                 | September 30, 1998 |          | $ | 1,786    |  | 151      |  |         
|                                 | September 30, 1999 |          | $ | 1,925    |  | 32       |  |         
|                                 | September 30, 2000 |          | $ | 119      |  | 520      |  |         

---

Note:
Accounts written off, net of recoveries

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

38

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Part III

Item 10. Directors and Executive Officers of the Registrant

Reference is made to the information regarding directors under the caption "Election of Directors" on pages 1 through 3 and the caption "Section 16(a)
Beneficial Ownership Reporting Compliance" on pages 4 and 5 of the Proxy Statement sent to shareholders for the 2001 Annual Meeting (the 2001 Proxy Statement), which information is incorporated herein
by reference.

Item 11. Executive Compensation

Reference is made to the information regarding executive compensation set forth in the 2001 Proxy Statement under "Executive Compensation" on pages 8 and 9,
"Retirement Plan" on page 10, "Executive Supplemental Retirement Income Plan" on page 11, "Employment Agreements" on pages 11 and 12, "Supplemental Benefit Trust" on page 12, "Director Compensation"
on page 12, and under "Compensation Committee Interlocks and Insider Participation" on page 13, which information is incorporated herein by reference. Certain information concerning the executive
officers of the Company is set forth in Part I, under the caption "Executive Officers of the Registrant."

Item 12. Security Ownership of Certain Beneficial Owners and Management

Reference is made to the information regarding security ownership of certain beneficial owners and management under the caption "Security Ownership of Certain
Beneficial Owners and Management" on page 4 of the 2001 Proxy Statement (excluding the information under the subheading "Section 16(a) Beneficial Ownership Reporting Compliance"), which
information is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

Reference is made to the information regarding certain relationships and transactions under the caption "Compensation Committee Interlocks and Insider
Participation" on page 13 of the 2001 Proxy Statement, which information is incorporated herein by reference.

39

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Part IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K









40

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## 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

|                      |  | CASCADE NATURAL GAS CORPORATION
|--------------------- |  | -------------------------------
|December 18, 2000Date |  | By:                            

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.

|Name                                    |  | Title                                                                                                   |  | Date             
|--------------------------------------- |  | ------------------------------------------------------------------------------------------------------- |  | -----------------
|                                        |  |                                                                                                         |  |                  
|/s/W. BRIAN MATSUYAMAW. Brian Matsuyama |  | Chairman of the Board, President and Chief Executive Officer and Director (Principal Executive Officer) |  | December 18, 2000
|/s/J. D. WESSLINGJ. D. Wessling         |  | Sr. Vice PresidentFinance, Chief Financial Officer (Principal Financial Officer)                       |  | December 18, 2000
|/s/JAMES E. HAUGJames E. Haug           |  | Controller and Chief Accounting Officer (Principal Accounting Officer)                                  |  | December 18, 2000
|/s/MELVIN C. CLAPPMelvin C. Clapp       |  | Director                                                                                                |  | December 18, 2000
|/s/DAVID A. EDERERDavid A. Ederer       |  | Director                                                                                                |  | December 18, 2000
|/s/LARRY L. PINNTLarry L. Pinnt         |  | Director                                                                                                |  | December 18, 2000
|/s/BROOKS G. RAGENBrooks G. Ragen       |  | Director                                                                                                |  | December 18, 2000
|/s/MARY A. WILLIAMSMary A. Williams     |  | Director                                                                                                |  | December 18, 2000
|                                        |  |                                                                                                         |  |                  

41

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## 

INDEX TO EXHIBITS

|Exhibit
No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                              
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                          
|3.1         |  | Restated Articles of Incorporation of the Registrant as amended through March 28, 1996. Incorporated by reference to Exhibit 3.1 to the Registrant's current report on Form 8-K filed July 19,
1996.                                                                                                                                                                                                     
|3.2         |  | Restated Bylaws of the Registrant. Incorporated by reference to Exhibit 3.2 to the Registrant's current report on Form 8-K filed July 19, 1996.                                                                                                                                                                                                                                                          
|4.1         |  | Indenture dated as of August 1, 1992, between the Registrant and The Bank of New York relating to Medium-Term Notes. Incorporated by reference to Exhibit 4 to the Registrant's current report on Form 8-K dated August 12,
1992.                                                                                                                                                                        
|4.2         |  | First Supplemental Indenture dated as of October 25, 1993, between the Registrant and The Bank of New York relating to Medium-Term Notes. Incorporated by reference to Exhibit 4 to the Registrant's quarterly report on Form 10-Q for the
quarter ended June 30, 1993.                                                                                                                                  
|4.3         |  | Rights Agreement dated as of March 19, 1993, between the Registrant and Harris Trust and Savings Bank. Incorporated by reference to Exhibit 2 to the Registrant's registration statement on Form 8-A dated April 21, 1993.                                                                                                                                                                               
|4.4         |  | First Amendment to Rights Agreement dated June 15, 1993, between the Registrant and The Bank of New York. Incorporated by reference to Exhibit 4 to the Registrant's quarterly report on Form 10-Q for the quarter ended June 30,
1993.                                                                                                                                                                  
|10.1        |  | 1998 Stock Incentive Plan of the Registrant.* Incorporated by reference to Exhibit 10.1 to the Registrant's Annual Report on Form 10-K for the year ended September 30, 1998.                                                                                                                                                                                                                            
|10.2        |  | Service Agreement (Storage Gas Service under Rate Schedule SGS-1) dated January 12, 1994, between Northwest Pipeline Corporation and the Registrant. Incorporated by reference to Exhibit 10.2 to the Registrant's Annual Report on Form
 10-K for the year ended December 31, 1993 (1993 Form 10-K).                                                                                                    
|10.3        |  | Service agreement (assigned Storage Gas Service under Rate Schedule SGS-1) dated January 12, 1994, between Northwest Pipeline Corporation and the Registrant. Incorporated by reference to Exhibit 10.3 to the Registrant's 1993 Form
 10-K.                                                                                                                                                             
|10.4        |  | Service Agreement (LiquefactionStorage Gas Service under Rate Schedule SGS-1) dated January 12, 1994, between Northwest Pipeline Corporation and the Registrant. Incorporated by reference to Exhibit 10.4 to the Registrant's 1993 Form
 10-K.                                                                                                                                                         
|10.5        |  | Gas Purchase Agreement dated November 1, 1990, between Mobil Oil Canada and the Registrant. Incorporated by reference to Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991.                                                                                                                                                                               
|10.6        |  | Consent to Assignments, Dated June 1, 1997, which assigns from Westcoast Gas Services Inc. (WGSI), to Engage Energy Canada, L.P. (Engage) all the rights and obligations as specified in the contracts contained herein as Exhibit Nos. 10.7,
and 10.22. Incorporated by reference to Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the year ended September 30, 1997 (1997 Form 10-K).
|10.7        |  | Natural Gas Sales Agreement dated November 1, 1998, between Engage Energy US L.P., and the Registrant. Incorporated by reference to Exhibit 10.7 to the Registrant's 1999 Form 10-K.                                                                                                                                                                                                                     
|10.8        |  | Intentionally omitted.                                                                                                                                                                                                                                                                                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                          

42

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|10.9    |  | Intentionally omitted.                                                                                                                                                                                                                                                                                                                       
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.11   |  | Gas transportation agreement between Pacific Gas Transmission Company and the Registrant dated as of April 30, 1997. Incorporated by reference to Exhibit 10.11 to the Registrant's 1997 10-K.                                                                                                                                               
|10.12   |  | Replacement Firm Transportation Agreement dated July 31, 1991, between Northwest Pipeline Corporation and the Registrant. Incorporated by reference to Exhibit 10(1) to the Registrant's registration statement on Form S-2, No.
 33-52672 (1992 Form S-2).                                                                                  
|10.12.1 |  | Amendments dated August 20, 1992, November 1, 1992, October 20, 1993, and December 17, 1993, to Replacement Firm Transportation Agreement dated July 31, 1991, between Northwest Pipeline Corporation and the Registrant.
Incorporated by reference to Exhibit 10.12.1 to the Registrant's 1993 Form 10-K.                                   
|10.13   |  | Firm Transportation Service Agreement dated April 25, 1991, between Pacific Gas Transmission Company and the Registrant (1993 expansion). Incorporated by reference to Exhibit 10(m) to the 1992 Form S-2.                                                                                                                                   
|10.14   |  | Firm Transportation Service Agreement dated October 27, 1993, between Pacific Gas Transmission Company and the Registrant. Incorporated by reference to Exhibit 10.14 to the Registrant's 1993 Form 10-K.                                                                                                                                    
|10.15   |  | Intentionally omitted.                                                                                                                                                                                                                                                                                                                       
|10.16   |  | Intentionally omitted.                                                                                                                                                                                                                                                                                                                       
|10.17   |  | Storage Agreement dated July 23, 1990, between Washington Water Power Company and the Registrant. Incorporated by reference to Exhibit 10(v) to the 1992 Form S-2.                                                                                                                                                                           
|10.17.1 |  | Second amendment to the agreement for the release of Jackson Prairie Storage Capacity dated as of July 30, 1997, amending the Storage Agreement dated July 23, 1990, between Washington Water Power Company and the Registrant. Incorporated by
reference to Exhibit 10.17.1 to the Registrant's 1997 Form 10-K.                             
|10.18   |  | Service Agreement (Firm Redelivery Transportation Agreement under Rate Schedule TF-2 for Cascade's SGS-1) dated January 12, 1994, between Northwest Pipeline Corporation and the Registrant. Incorporated by reference to Exhibit 10.18 to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 (1994 Form 10-K).
|10.19   |  | Service Agreement (Firm Redelivery Transportation Agreement under Rate Schedule TF-2 for Cascade's assignment of SGS-1 from  WWP) dated January 12, 1994, between Northwest Pipeline Corporation and the Registrant. Incorporated by reference to
Exhibit 10.19 to the Registrant's 1994 Form 10-K.                                          
|10.20   |  | Service Agreement (Firm Redelivery Transportation Agreement under Rate Schedule TF-2 for Cascade's LS-1) dated January 12, 1994, between Northwest Pipeline Corporation and the Registrant. Incorporated by reference to Exhibit 10.20 to the
Registrant's 1994 Form 10-K.                                                                   
|10.21   |  | Gas Purchase Contract dated October 1, 1994, between IGI Resources, Inc. and the Registrant. Incorporated by reference to Exhibit 10.21 to the Registrant's 1994 Form 10-K.                                                                                                                                                                  
|10.21.1 |  | Amended Exhibit A, effective October 1, 2000, to Gas Purchase Contract dated October 1, 1994, between IGI Resources, Inc. and the Registrant. A PORTION OF THIS AGREEMENT IS SUBJECT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                              

43

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|10.22   |  | Amended and restated Natural Gas Sales Agreement dated August 17, 1994, between Westcoast Gas Services, Inc. and the Registrant Incorporated by reference to Exhibit 10.22 to the Registrant's 1994 Form 10-K.                                                                                                 
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.22.1 |  | Amendment dated September 8, 2000, to Amended and restated Natural Gas Sales Agreement dated August 17, 1994, between Engage Energy Canada L.P. and Registrant. A PORTION OF THIS AGREEMENT IS SUBJECT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.                                                                
|10.23   |  | Firm Transportation Service Agreement dated November 4, 1994, between Pacific Gas Transmission and the Registrant, effective November 1, 1995. Incorporated by reference to Exhibit 10.23 to the Registrant's 1994 Form
 10-K.                                                                                 
|10.24   |  | Firm Transportation Agreement dated August 1, 1994, between Northwest Pipeline Corporation and the Registrant. Incorporated by reference to Exhibit 10.24 to the Registrant's 1994 Form 10-K.                                                                                                                  
|10.25   |  | Prearranged Permanent Capacity Release of Firm Natural Gas Transportation Agreements dated November 30, 1993 between Tenaska Gas Co., Tenaska Washington Partners, L.P. and the Registrant. Incorporated by reference to Exhibit 10.25 to the
Registrant's 1994 Form 10-K.                                     
|10.26   |  | Agreement for Peak Gas Supply Service dated August 1, 1992, between Tenaska Gas Co., Tenaska Washington Partners, L.P., and the Registrant. Incorporated by reference to Exhibit 10.26 to the Registrant's 1994 Form 10-K.                                                                                     
|10.27   |  | Agreement for Peaking Gas Supply Service dated November 22, 1991, between Longview Fibre Company and the Registrant. Incorporated by reference to Exhibit 10.27 to the Registrant's 1994 Form 10-K.                                                                                                            
|10.27.1 |  | Amendment No. 3 to Agreement for Peaking Gas Supply Service, dated as of October 2, 1997. Incorporated by reference to Exhibit 10.27.1 to the Registrant's 1997 Form 10-K.                                                                                                                                     
|10.28   |  | Intentionally omitted.                                                                                                                                                                                                                                                                                         
|10.29   |  | 1991 Director Stock Award Plan of the Registrant.* Incorporated by reference to Exhibit 10(n) to the 1992 Form S-2.                                                                                                                                                                                            
|10.30   |  | Executive Supplemental Retirement Income Plan of the Registrant and Supplemental Benefit Trust as amended and restated as of May 1, 1989, as amended by Amendment No. 1 dated July 1, 1991.* Incorporated by reference to Exhibit 10(o)
 to the 1992 Form S-2.                                                 
|10.31   |  | Form of employment agreement between the Registrant and W. Brian Matsuyama, and each other executive officer of the Registrant.*  Incorporated by reference to Exhibit 10(p) to the 1992 Form S-2.                                                                                                             
|10.32   |  | Gas Storage Management Agreement, dated November 17, 1999, between Amoco Energy Trading Corporation, Part of BP Amoco Group, and the Registrant. A PORTION OF THIS AGREEMENT IS SUBJECT TO A REQUEST FOR CONFIDENTIAL TREATMENT. Incorporated by
reference to Exhibit 10.32 to the Registrant's 1999 Form 10-K.
|10.33   |  | Agreement for Jackson Prairie Storage Service, dated October 7, 1999, between Engage Energy Canada, L.P. and the Registrant. A PORTION OF THIS AGREEMENT IS SUBJECT TO A REQUEST FOR CONFIDENTIAL TREATMENT. Incorporated by reference to Exhibit
 10.33 to the Registrant's 1999 Form 10-K.                   
|        |  |                                                                                                                                                                                                                                                                                                                

44

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|12. |  | Statement regarding computation of ratio of earnings to fixed charges and preferred dividend requirements.                                                                
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|21. |  | A list of the Registrant's subsidiaries is omitted because the subsidiaries considered in the aggregate as a single subsidiary do not constitute a significant subsidiary.
|23. |  | Consent of Deloitte & Touche LLP to the incorporation of their reports in the Registrant's registration statements.                                                       
|27. |  | Financial Data Schedule.                                                                                                                                                  
|    |  |                                                                                                                                                                           

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