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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D. C. 20549
 FORM 10-K
 
 þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2006
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Transition Period from  to
 Commission File Number 1-7414
 NORTHWEST PIPELINE CORPORATION
  DELAWARE
(State or other jurisdiction of 
incorporation or organization)
    
    87-0269236
(I.R.S. Employer
Identification No.)295 Chipeta Way, Salt Lake City, Utah
(Address of principal executive offices)
    
    84108
(Zip Code)
    None
  None
 o þ
 o þ
 þ o
 þ
  o o þ
 o þ
    Class
    
    Outstanding at February 28, 2007Common stock, $1 par value
    
    1,000 shares




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TABLE OF CONTENTS
 PART
I
 Heading
    
    PageItem 1. BUSINESS
    
    
    1Item 1A. RISK FACTORS
    
    
    5Item 2. PROPERTIES
    
    
    12Item 3. LEGAL PROCEEDINGS
    
    
    12Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (Omitted)
    
    
    12PART IIItem 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCK-
HOLDER MATTERS
    
    
    13Item 6. SELECTED FINANCIAL DATA (Omitted)
    
    
    13Item 7. MANAGEMENTS NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS
    
    
    13Item 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    18Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    19Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
    
    
    46Item 9A. CONTROLS AND PROCEDURES
    
    
    46Item 9B. OTHER INFORMATION
    
    
    46PART IIIItem 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Omitted)
    
    
    47Item 11. EXECUTIVE COMPENSATION (Omitted)
    
    
    47Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT (Omitted)
    
    
    47Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Omitted)
    
    
    47Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    47PART IVItem 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    48Consent of Independent Registered Public Accounting FirmPower of Attorney with Certified ResolutionSection 302 Certification of Principal Executive OfficerSection 302 Certification of Principal Financial OfficerSection 906 Certification of Principal Executive Officer and Principal Financial Officer




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NORTHWEST PIPELINE CORPORATION
 FORM 10-K
 
 PART I
 
 Item 1. BUSINESS
  GENERAL
   PIPELINE SYSTEM AND CUSTOMERS
 Transportation and Storage
    
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Termination of the Grays Harbor Transportation Agreement
      CAPITAL PROJECTS
 Capacity Replacement Project
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Parachute Lateral Project
  Greasewood Lateral Project
  OPERATING STATISTICS
  Year Ended December 31,2006
    
    2005
    
    2004(In trillion British Thermal Units)Total Throughput
    
    
    676
    
    
    
    673
    
    
    
    650Average Daily Transportation Volumes
    
    
    1.9
    
    
    
    1.8
    
    
    
    1.8Average
Daily Reserved Capacity Under Long-Term Base Firm Contracts, excluding peak capacity
    
    
    2.5
    
    
    
    2.5
    
    
    
    2.5Average
Daily Reserved Capacity Under Short-Term Firm Contracts (1)
    
    
    .9
    
    
    
    .8
    
    
    
    .6
 
 (1)
    
    Includes additional capacity created from time to time through the installation of new
receipt or delivery points or the segmentation of existing mainline capacity. Such capacity
is generally marketed on a short-term firm basis. REGULATORY MATTERS
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General Rate Case (Docket No. RP06-416)
  TRANSACTIONS WITH AFFILIATES
  REGULATION
 Interstate Gas Pipeline Operations
  Environmental Matters
  OWNERSHIP OF PROPERTY
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Item 1A. RISK FACTORS
 FORWARD LOOKING STATEMENTS/RISK FACTORS AND CAUTIONARY STATEMENT FOR
PURPOSES OF THE SAFE HARBOR PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
   
    
    amounts and nature of future capital expenditures;
    
    expansion and growth of our business and operations;
    
    business strategy;
    
    cash flow from operations;
    
    rate case filings;
    
    power and gas prices and demand.
  
    
    availability of supplies (including the uncertainties inherent in assessing and
estimating future natural gas reserves), market demand, volatility of prices, and
increased costs of capital;
    
    inflation, interest rates, and general economic conditions;
    
    the strength and financial resources of our competitors;
    
    development of alternative energy sources;
    
    the impact of operational and development hazards;
    
    costs of, changes in, or the results of laws, government regulations, environmental
liabilities, litigation, and rate proceedings;
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
    
    increasing maintenance and construction costs;
    
    changes in the current geopolitical situation;
    
    risks related to strategy and financing, including restrictions stemming from our
debt agreements and our lack of investment grade credit ratings; and
    
    risk associated with future weather conditions and acts of terrorism.
    RISK FACTORS
  Risks Inherent to our Industry and Business
 Decreases in the volume of natural gas contracted or transported through our pipeline system for
any of the reasons described below will adversely affect our business.
 Expiration of firm transportation agreements.
 Decreases in natural gas production.
 Decreases in demand of natural gas.
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Competitive pressures.
 Our transporting activities involve numerous risks that might result in accidents and other
operating risks and hazards .
  
    
    blowouts, cratering and explosions;
    
    uncontrollable flows of natural gas;
    
    fires;
    
    pollution and other environmental risks;
    
    natural disasters;
    
    aging pipeline infrastructure; and
    
    terrorist attacks or threatened attacks on our facilities or those of other
energy companies.
  Costs of environmental liabilities and complying with existing and future environmental regulations
could exceed our current expectations.
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Risks Related to Strategy and Financing
 Our debt agreements impose restrictions on us that may adversely affect our ability to operate our
business.
   Our lack of investment grade credit ratings increases our costs of doing business in many ways and
increases our risks from market disruptions and further credit downgrades.
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
    
    further economic downturns;
    
    deteriorating capital market conditions generally;
    
    declining market prices for electricity and natural gas;
    
    the overall health of the energy industry, including the bankruptcy or insolvency of
other companies.
  Williams can exercise substantial control over our dividend policy and our business and operations
and may do so in a manner that is adverse to our interests.
  
    
    payment of dividends and repayment of advances;
    
    decisions on financings and our capital raising activities;
    
    mergers or other business combinations;
    
    acquisition or disposition of assets.
  The financial condition and liquidity of Williams affects our access to capital, our credit
standing and our financial condition.
   We are exposed to the credit risk of our customers in the ordinary course of our business.
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Risks Related to Regulations that Affect our Industry
 Our transmission and storage operations are subject to government regulations and rate proceedings
that could have an adverse impact on the profitability of these operations.
  
    
    transportation and sale for resale of natural gas in interstate commerce;
    
    rates and charges;
    
    construction;
    
    acquisition, extension or abandonment of services or facilities;
    
    accounts and records;
    
    depreciation and amortization policies; and
    
    operating terms and conditions of service.
   The outcome of pending rate cases to set the rates we can charge customers on our pipeline might
result in rates that lower our return on the capital that we have invested in our pipeline.
  Legal and regulatory proceedings and investigations relating to the energy industry and capital
markets have adversely affected our business and may continue to do so.
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Risks Related to Accounting Standards
 Potential changes in accounting standards might cause us to revise our financial results and
disclosures in the future, which might change the way analysts measure our business or financial
performance.
   Risks Related to Employees, Outsourcing of Non-Core Support Activities, and Technology.
 Institutional knowledge residing with current employees nearing retirement eligibility might not be
adequately preserved.
  Failure of the outsourcing relationships might negatively impact our ability to conduct our
business.
  Williams ability to receive services from outsourcing provider locations outside of the United
States might be impacted by cultural differences, political instability, or unanticipated
regulatory requirements in jurisdictions outside the United States.
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Our current information technology infrastructure is aging and may adversely affect our ability to
conduct our business.
  Risks Related to Weather, Other Natural Phenomena and Business Disruption
 Our assets and operations can be affected by weather and other natural phenomena.
  Our current pipeline infrastructure is aging and may adversely affect our ability to conduct our
business.
  Acts of terrorism could have a material adverse effect on our financial condition, results of
operations and cash flows.
  
 Item 2. PROPERTIES
  
 Item 3. LEGAL PROCEEDINGS
  
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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PART II
 
 Item 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
    
 Item 6. SELECTED FINANCIAL DATA
  
 Item 7. MANAGEMENTS NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS
 GENERAL
  CRITICAL ACCOUNTING POLICIES
 Use of Estimates
  Regulatory Accounting
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Revenue Subject to Refund
   Contingent Liabilities
  Impairment of Long-Lived Assets
   Asset Retirement Obligations
  Pension and Postretirement Obligations
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FERC Accounting Guidance
  CAPACITY REPLACEMENT PROJECT
  RESULTS OF OPERATIONS
 ANALYSIS OF FINANCIAL RESULTS
        - 15 -




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EFFECT OF INFLATION
  CAPITAL RESOURCES AND LIQUIDITY
 METHOD OF FINANCING
     - 16 -




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CREDIT RATINGS
   Moodys Investors Service
    
    Ba2 to Ba1Standard and Poors
    
    B+ to BB-Fitch Ratings
    
    BB+ to BBB-
  CAPITAL EXPENDITURES
  OTHER
 Contractual Obligations
  - 17 -




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2008 
    
    
    2010 
    
    
    There-2007
    
    
    2009
    
    
    2011
    
    
    after
    
    
    TotalLong-term debt, including
current portion:Principal
    
    $
    252.9
    
    
    $
    
    
    
    $
    175.0
    
    
    $
    260.0
    
    
    $
    687.9Interest
    
    
    49.3
    
    
    
    65.1
    
    
    
    43.7
    
    
    
    139.9
    
    
    
    298.0Operating leases
    
    
    6.4
    
    
    
    12.7
    
    
    
    
    
    
    
    
    
    
    
    19.1Purchase Obligations:Natural gas purchase,
storage, transportation
and construction
    
    
    62.8
    
    
    
    5.3
    
    
    
    4.3
    
    
    
    2.0
    
    
    
    74.4Other
    
    
    1.4
    
    
    
    .6
    
    
    
    .1
    
    
    
    .1
    
    
    
    2.2Total
    
    $
    372.8
    
    
    $
    83.7
    
    
    $
    223.1
    
    
    $
    402.0
    
    
    $
    1,081.6
 Regulatory Proceedings
  CONCLUSION
  
 Item 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
    Expected Maturity Date2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    Thereafter
    
    Total
    
    Fair Value(millions of dollars)Long-term debt,
including current
portion:Fixed rate
    
    $
    252.9
    
    
    $
    
    
    
    $
    
    
    
    $
    175.0
    
    
    $
    
    
    
    $
    260.0
    
    
    $
    687.9
    
    
    $
    703.8Interest rate
    
    
    7.2
    %
    
    
    7.5
    %
    
    
    7.5
    %
    
    
    7.2
    %
    
    
    7.0
    %
    
    
    7.0
    %
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 INDEX TO FINANCIAL STATEMENTS
 PageReport of independent registered public accounting firm
    
    20Statements of income for the years ended
December 31, 2006, 2005 and 2004
    
    21Balance sheets at December 31, 2006 and 2005
    
    22Statements of common stockholders equity for the years ended
December 31, 2006, 2005 and 2004
    
    24Statements of comprehensive income for the years ended
December 31, 2006, 2005 and 2004
    
    25Statements of cash flows for the years ended
December 31, 2006, 2005 and 2004
    
    26Notes to financial statements
    
    27
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NORTHWEST PIPELINE CORPORATION
 STATEMENTS OF INCOME
  Years Ended December 31,2006
    
    
    2005
    
    
    2004OPERATING REVENUES
    
    $
    324,250
    
    
    $
    321,457
    
    
    $
    338,532OPERATING EXPENSES:General and administrative
    
    
    56,463
    
    
    
    49,749
    
    
    
    51,062Operation and maintenance
    
    
    65,763
    
    
    
    53,330
    
    
    
    42,878Depreciation
    
    
    75,192
    
    
    
    66,333
    
    
    
    65,615Regulatory credits
    
    
    (4,469
    )
    
    
    (4,446
    )
    
    
    (7,180
    )Taxes, other than income taxes
    
    
    15,018
    
    
    
    15,115
    
    
    
    17,492Impairment charges (Note 12)
    
    
    
    
    
    
    
    
    
    
    8,872Total operating expenses
    
    
    207,967
    
    
    
    180,081
    
    
    
    178,739Operating income
    
    
    116,283
    
    
    
    141,376
    
    
    
    159,793OTHER INCOME  net:Interest income Affiliated companies
    
    
    3,920
    
    
    
    3,801
    
    
    
    4,517Other
    
    
    3,423
    
    
    
    2,820
    
    
    
    340Allowance for equity funds used during construction
    
    
    8,947
    
    
    
    2,872
    
    
    
    806Miscellaneous other income (deductions), net
    
    
    307
    
    
    
    1,104
    
    
    
    (385
    )Total other income   net
    
    
    16,597
    
    
    
    10,597
    
    
    
    5,278INTEREST CHARGES:Interest on long-term debt
    
    
    43,649
    
    
    
    38,164
    
    
    
    38,721Other interest
    
    
    3,824
    
    
    
    3,389
    
    
    
    3,368Allowance for borrowed funds used
during construction
    
    
    (4,557
    )
    
    
    (1,529
    )
    
    
    (452
    )Total interest charges
    
    
    42,916
    
    
    
    40,024
    
    
    
    41,637INCOME BEFORE INCOME TAXES
    
    
    89,964
    
    
    
    111,949
    
    
    
    123,434PROVISION FOR INCOME TAXES
    
    
    32,821
    
    
    
    40,194
    
    
    
    46,779NET INCOME
    
    $
    57,143
    
    
    $
    71,755
    
    
    $
    76,655CASH DIVIDENDS ON COMMON STOCK
    
    $
    
    
    
    $
    50,000
    
    
    $
    60,000
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NORTHWEST PIPELINE CORPORATION
 
 BALANCE SHEETS
  December 31,2006
    
    
    2005ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    1,489
    
    
    $
    59,709Advances to affiliates
    
    
    49,980
    
    
    
    50,000Accounts receivable Trade, less allowance of $53 for 2006 and $91 for 2005
    
    
    32,230
    
    
    
    28,677Affiliated companies
    
    
    591
    
    
    
    4,015Income taxes due from affiliate
    
    
    
    
    
    
    1,475Materials
and supplies, less reserves of $472 for 2006 and $263 for 2005
    
    
    10,013
    
    
    
    8,365Exchange gas due from others
    
    
    10,556
    
    
    
    11,257Exchange gas offset (Note 1)
    
    
    4,538
    
    
    
    9,386Deferred income taxes
    
    
    4,066
    
    
    
    3,913Prepayments and other
    
    
    7,945
    
    
    
    2,681Total current assets
    
    
    121,408
    
    
    
    179,478PROPERTY, PLANT AND EQUIPMENT, at cost
    
    
    2,669,056
    
    
    
    2,286,280Less  Accumulated depreciation
    
    
    893,033
    
    
    
    957,385Total property, plant and equipment
    
    
    1,776,023
    
    
    
    1,328,895OTHER ASSETS:Deferred charges
    
    
    32,093
    
    
    
    49,124Regulatory assets
    
    
    63,330
    
    
    
    58,607Total other assets
    
    
    95,423
    
    
    
    107,731Total assets
    
    $
    1,992,854
    
    
    $
    1,616,104
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NORTHWEST PIPELINE CORPORATION
 BALANCE SHEETS
  December 31,2006
    
    
    2005LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable Trade
    
    $
    55,403
    
    
    $
    25,835Affiliated companies
    
    
    13,701
    
    
    
    3,754Accrued liabilities Income taxes due to affiliate
    
    
    3,090
    
    
    
    Taxes, other than income taxes
    
    
    6,779
    
    
    
    8,511Interest
    
    
    7,038
    
    
    
    7,013Employee costs
    
    
    10,759
    
    
    
    8,731Exchange gas due to others
    
    
    15,094
    
    
    
    20,643Deferred contract termination income
    
    
    6,045
    
    
    
    6,045Other
    
    
    5,268
    
    
    
    4,318Current maturities of long-term debt (Note 4)
    
    
    252,867
    
    
    
    7,500Total current liabilities
    
    
    376,044
    
    
    
    92,350LONG-TERM DEBT, LESS CURRENT MATURITIES
    
    
    434,208
    
    
    
    512,580DEFERRED INCOME TAXES
    
    
    255,469
    
    
    
    236,548DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES
    
    
    114,096
    
    
    
    65,869CONTINGENT LIABILITIES AND COMMITMENTSCOMMON STOCKHOLDERS EQUITY:Common stock, par value $1 per share; authorized
and outstanding, 1,000 shares
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    327,844
    
    
    
    262,844Retained earnings
    
    
    503,055
    
    
    
    445,912Accumulated other comprehensive loss
    
    
    (17,863
    )
    
    
    Total common stockholders equity
    
    
    813,037
    
    
    
    708,757Total liabilities and stockholders equity
    
    $
    1,992,854
    
    
    $
    1,616,104
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NORTHWEST PIPELINE CORPORATION
 
 STATEMENTS OF COMMON STOCKHOLDERS EQUITY
 Years Ended December 31,2006
    
    
    2005
    
    
    2004Common stock, par value $1 per share,
authorized and outstanding, 1,000 shares
    
    $
    1
    
    
    $
    1
    
    
    $
    1Additional paid-in capital -Balance at beginning of period
    
    
    262,844
    
    
    
    262,844
    
    
    
    262,844Capital contribution from parent
    
    
    65,000
    
    
    
    
    
    
    
    Balance at end of period
    
    
    327,844
    
    
    
    262,844
    
    
    
    262,844Retained earnings -Balance at beginning of period
    
    
    445,912
    
    
    
    424,157
    
    
    
    407,502Net income
    
    
    57,143
    
    
    
    71,755
    
    
    
    76,655Cash dividends
    
    
    
    
    
    
    (50,000
    )
    
    
    (60,000
    )Balance at end of period
    
    
    503,055
    
    
    
    445,912
    
    
    
    424,157Accumulated other comprehensive loss (net of tax) Balance at beginning of period
    
    
    
    
    
    
    
    
    
    
    (388
    )Gain on cash flow hedges, net of reclassification
adjustments
    
    
    365
    
    
    
    
    
    
    
    Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    388Adjustment to initially apply SFAS No. 158:Pension benefits:Prior service cost
    
    
    (308
    )
    
    
    
    
    
    
    Net actuarial loss
    
    
    (17,920
    )
    
    
    
    
    
    
    Balance at end of period
    
    
    (17,863
    )
    
    
    
    
    
    
    Total common stockholders equity
    
    $
    813,037
    
    
    $
    708,757
    
    
    $
    687,002
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NORTHWEST PIPELINE CORPORATION
 
 STATEMENTS OF COMPREHENSIVE INCOME
  Years Ended December 31,2006
    
    
    2005
    
    
    2004Net Income
    
    $
    57,143
    
    
    $
    71,755
    
    
    $
    76,655Gain on cash flow hedges, net of tax of
($220) for 2006
    
    
    365
    
    
    
    
    
    
    
    Minimum
pension liability adjustment, net of tax of ($240) for 2004
    
    
    
    
    
    
    
    
    
    
    388Total comprehensive income
    
    $
    57,508
    
    
    $
    71,755
    
    
    $
    77,043
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NORTHWEST PIPELINE CORPORATION
 
 STATEMENTS OF CASH FLOWS
 Years Ended December 31,2006
    
    
    2005
    
    
    2004OPERATING ACTIVITIES:Net Income
    
    $
    57,143
    
    
    $
    71,755
    
    
    $
    76,655Adjustments to reconcile to net cash provided by
operating activities -Depreciation
    
    
    75,192
    
    
    
    66,333
    
    
    
    65,615Regulatory credits
    
    
    (4,469
    )
    
    
    (4,446
    )
    
    
    (7,180
    )Provision (benefit) for deferred income taxes
    
    
    29,531
    
    
    
    (18,571
    )
    
    
    33,524Impairment charges
    
    
    
    
    
    
    
    
    
    
    8,872Amortization of deferred charges and credits
    
    
    2,484
    
    
    
    4,053
    
    
    
    4,189Allowance for equity funds used during construction
    
    
    (8,947
    )
    
    
    (2,872
    )
    
    
    (806
    )Reserve for doubtful accounts
    
    
    (38
    )
    
    
    44
    
    
    
    Changes in:Trade accounts receivable
    
    
    (3,515
    )
    
    
    1,639
    
    
    
    918Affiliated receivables, including income taxes
    
    
    4,899
    
    
    
    (5,489
    )
    
    
    577Exchange gas due from others
    
    
    5,549
    
    
    
    (4,632
    )
    
    
    (5,765
    )Materials and supplies
    
    
    (1,912
    )
    
    
    236
    
    
    
    899Other current assets
    
    
    (5,264
    )
    
    
    (800
    )
    
    
    685Deferred charges
    
    
    (1,610
    )
    
    
    (6,992
    )
    
    
    (5,854
    )Trade accounts payable
    
    
    27,440
    
    
    
    8,931
    
    
    
    (6,279
    )Affiliated payables, including income taxes
    
    
    13,037
    
    
    
    (15,785
    )
    
    
    5,019Exchange gas due to others
    
    
    (5,549
    )
    
    
    4,632
    
    
    
    5,765Other accrued liabilities
    
    
    1,192
    
    
    
    6,440
    
    
    
    2,422Other deferred credits
    
    
    4,095
    
    
    
    3,659
    
    
    
    2,592Net cash provided by operating activities
    
    
    189,258
    
    
    
    108,135
    
    
    
    181,848INVESTING ACTIVITIES:Property, plant and equipment -Capital expenditures
    
    
    (473,566
    )
    
    
    (137,232
    )
    
    
    (102,213
    )Proceeds from sales
    
    
    
    
    
    
    
    
    
    
    5,033Asset removal cost
    
    
    (9,733
    )
    
    
    (1,568
    )
    
    
    Changes in accounts payable
    
    
    2,881
    
    
    
    6,564
    
    
    
    (784
    )Proceeds from contract termination payment
    
    
    3,348
    
    
    
    87,917
    
    
    
    Repayments from affiliates
    
    
    20
    
    
    
    
    
    
    
    36,356Net cash used in investing activities
    
    
    (477,050
    )
    
    
    (44,319
    )
    
    
    (61,608
    )FINANCING ACTIVITIES:Proceeds from issuance of long-term debt
    
    
    174,447
    
    
    
    
    
    
    
    Principal payments on long-term debt
    
    
    (7,500
    )
    
    
    (7,500
    )
    
    
    (7,500
    )Debt issuance costs
    
    
    (2,375
    )
    
    
    
    
    
    
    Capital contribution from parent
    
    
    65,000
    
    
    
    
    
    
    
    Dividends paid
    
    
    
    
    
    
    (50,000
    )
    
    
    (60,000
    )Net cash provided by (used in) financing activities
    
    
    229,572
    
    
    
    (57,500
    )
    
    
    (67,500
    )NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
    
    
    (58,220
    )
    
    
    6,316
    
    
    
    52,740CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR
    
    
    59,709
    
    
    
    53,393
    
    
    
    653CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    1,489
    
    
    $
    59,709
    
    
    $
    53,393
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##### Table of Contents



NORTHWEST PIPELINE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Corporate Structure and Control
   Nature of Operations
  Regulatory Accounting
  Basis of Presentation
  Use of Estimates
  - 27 -




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##### Table of Contents



NORTHWEST PIPELINE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
  Property, Plant and Equipment
        - 28 -




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NORTHWEST PIPELINE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
 Allowance for Borrowed and Equity Funds Used During Construction
   Advances to Affiliates
  Accounts Receivable and Allowance for Doubtful Receivables
  Materials and Supplies Inventory
   Impairment of Long-Lived Assets
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NORTHWEST PIPELINE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
 Income Taxes
   Deferred Charges
  Cash and Cash Equivalents
  Exchange Gas Imbalances
  Revenue Recognition
  Environmental Matters
  -30-




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##### Table of Contents



NORTHWEST PIPELINE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
 Interest Payments
  Recent Accounting Standards
   FERC Order, Accounting for Pipeline Assessment Cost
 Reclassifications and Adjustments
    2. RATE AND REGULATORY MATTERS
 General Rate Case (Docket No. RP06-416)
  -31-




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##### Table of Contents



NORTHWEST PIPELINE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
  3. CONTINGENT LIABILITIES AND COMMITMENTS
 Legal Proceedings
  Environmental Matters
   -32-




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NORTHWEST PIPELINE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
 Safety Matters
 Pipeline Integrity Regulations
 Other Matters
  Summary
  Other Commitments
  Termination of the Grays Harbor Transportation Agreement
     -33-




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NORTHWEST PIPELINE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
  4. DEBT, FINANCING ARRANGEMENTS AND LEASES
 Debt Covenants
  Long-Term Debt
   December 31,2006
    
    
    2005(Thousands of Dollars)6.625%, payable 2007
    
    $
    250,000
    
    
    $
    250,0007%, payable 2016
    
    
    174,477
    
    
    
    7.125%, payable 2025
    
    
    84,785
    
    
    
    84,7748.125%, payable 2010
    
    
    175,000
    
    
    
    175,0009%, payable 2004 through 2007
    
    
    2,813
    
    
    
    10,306Total long-term debt
    
    
    687,075
    
    
    
    520,080Less current maturities
    
    
    252,867
    
    
    
    7,500Total long-term debt, less current maturities
    
    $
    434,208
    
    
    $
    512,580
  (Thousands ofDollars)2007
    
    $
    252,8672008
    
    
    2009
    
    
    2010
    
    
    175,0002011
    
    
    Thereafter
    
    
    260,000Total
    
    $
    687,867
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##### Table of Contents



NORTHWEST PIPELINE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
  Line-of-Credit Arrangements
  Leases
    (Thousandsof Dollars)2007
    
    $
    6,3772008
    
    
    6,3762009
    
    
    6,312$
    19,065Less: noncancelable
subleases
    
    
    8,241Total
    
    $
    10,824
  -35-




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##### Table of Contents



NORTHWEST PIPELINE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
 5. EMPLOYEE BENEFIT PLANS
 SFAS No. 158 Adoption
     -36-




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##### Table of Contents



NORTHWEST PIPELINE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
 Prior to
    
    
    Effect of
    
    
    AfterSFAS No. 158
    
    
    SFAS No. 158
    
    
    SFAS No. 158Adoption (1)
    
    
    Adoption (1)
    
    
    Adoption (1)(Thousands of Dollars)Balances related to pension plans within:Assets:Noncurrent assets
    
    $
    19,021
    
    
    $
    (18,109
    )
    
    $
    912Regulatory assetsLiabilities:
    
    
    83
    
    
    
    (83
    )
    
    
    Current liabilities
    
    
    
    
    
    
    79
    
    
    
    79Noncurrent liabilities
    
    
    3,377
    
    
    
    10,941
    
    
    
    14,318Regulatory liabilities
    
    
    16,562
    
    
    
    
    
    
    
    16,562Deferred income tax liabilities
    
    
    
    
    
    
    (10,984
    )
    
    
    (10,984
    )Stockholders Equity:Accumulated other comprehensive loss
    
    
    
    
    
    
    (18,228
    )
    
    
    (18,228
    )Balances related to other postretirement
benefits plans within:Assets:Noncurrent assetsLiabilities:
    
    
    13,639
    
    
    
    25
    
    
    
    13,664Regulatory liabilities
    
    
    13,329
    
    
    
    25
    
    
    
    13,354
 
 (1)
    
    Amounts in brackets represent a reduction within the line item balance included on the
Balance Sheet.   Pension BenefitsGross
    
    
    Net of Tax(Thousands of Dollars)Amounts not yet recognized in net periodic
benefit expense:Unrecognized prior service cost
    
    $
    (494)
    
    
    $
    (308
    )Unrecognized net actuarial losses
    
    
    (28,717
    )
    
    
    (17,920
    )Amounts expected to be recognized in net
periodic benefit expense in 2007:Prior service cost
    
    
    77
    
    
    
    48Net actuarial losses
    
    
    1,969
    
    
    
    1,229
  -37-




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##### Table of Contents



NORTHWEST PIPELINE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
 Pension plans
   Postretirement benefits other than pensions
  Defined contribution plan
  Stock-Based Compensation
 Plan Information
   Accounting for Stock-Based Compensation
  -38-




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##### Table of Contents



NORTHWEST PIPELINE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
   6. INCOME TAXES
  December 31,2006
    
    
    2005(Thousands of Dollars)Property, plant and equipment
    
    $
    269,276
    
    
    $
    220,057Regulatory assets
    
    
    15,800
    
    
    
    12,303Loss on reacquired debt
    
    
    3,962
    
    
    
    4,521Other  net
    
    
    5,808
    
    
    
    8,024Deferred tax liabilities
    
    
    294,846
    
    
    
    244,905Accrued liabilities
    
    
    29,225
    
    
    
    2,569Accrued benefits
    
    
    14,218
    
    
    
    9,701Deferred tax assets
    
    
    43,443
    
    
    
    12,270Net deferred tax liabilities
    
    $
    251,403
    
    
    $
    232,635Reflected as:Deferred income taxes  current asset
    
    $
    4,066
    
    
    $
    3,913Deferred income taxes  noncurrent liability
    
    
    255,469
    
    
    
    236,548$
    251,403
    
    
    $
    232,635
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##### Table of Contents



NORTHWEST PIPELINE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
  Year Ended December 31,2006
    
    
    2005
    
    
    2004(Thousands of Dollars)Current:Federal
    
    $
    2,940
    
    
    $
    52,292
    
    
    $
    11,406State
    
    
    350
    
    
    
    6,473
    
    
    
    1,8493,290
    
    
    
    58,765
    
    
    
    13,255Deferred:Federal
    
    
    26,388
    
    
    
    (16,373
    )
    
    
    30,128State
    
    
    3,143
    
    
    
    (2,198
    )
    
    
    3,39629,531
    
    
    
    (18,571
    )
    
    
    33,524Total provision
    
    $
    32,821
    
    
    $
    40,194
    
    
    $
    46,779
  Year Ended December 31,2006
    
    
    2005
    
    
    2004(Thousands of Dollars)Provision at statutory Federal income tax
rate of 35 percent
    
    $
    31,487
    
    
    $
    39,182
    
    
    $
    43,202Increase (decrease) in tax provision resulting from -State income taxes net of Federal tax benefit
    
    
    2,270
    
    
    
    2,779
    
    
    
    3,409Book/tax basis reconciliation adjustment
    
    
    (723
    )
    
    
    (1,835
    )
    
    
    Other  net
    
    
    (213
    )
    
    
    68
    
    
    
    168Provision for income taxes
    
    $
    32,821
    
    
    $
    40,194
    
    
    $
    46,779Effective tax rate
    
    
    36.48
    %
    
    
    35.90
    %
    
    
    37.90
    %
   -40-




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##### Table of Contents



NORTHWEST PIPELINE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
 7. FINANCIAL INSTRUMENTS
 Disclosures About the Fair Value of Financial Instruments
  Cash, cash equivalents and advances to affiliate
 Long-term debt
 8. TRANSACTIONS WITH MAJOR CUSTOMERS AND AFFILIATES
 Concentration of Off-Balance-Sheet and Other Credit Risk
  Year Ended December 31,2006
    
    
    2005
    
    
    2004(Thousands of Dollars)Puget Sound Energy, Inc.
    
    $
    64,428
    
    
    $
    56,480
    
    
    $
    46,997Northwest Natural Gas Co.
    
    
    35,242
    
    
    
    35,420
    
    
    
    38,067
  Related Party Transactions
   -41-




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NORTHWEST PIPELINE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
   9. ASSET RETIREMENT OBLIGATIONS
     2006Beginning balance
    
    $
    15,372Accretion
    
    
    965New obligations
    
    
    1,451Changes in estimates of
existing obligations.
    
    
    30,232Ending Balance
    
    $
    48,020
  10. REGULATORY ASSETS AND LIABILITIES
  -42-




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NORTHWEST PIPELINE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
  2006
    
    
    2005(Thousands of Dollars)Current regulatory assets  environmental
costs
    
    $
    1,500
    
    
    $
    1,400Non-current regulatory assetsAsset retirement obligations
    
    
    15,501
    
    
    
    14,456Environmental costs
    
    
    3,200
    
    
    
    2,697Grossed-up deferred taxes on
equity funds used during
construction
    
    
    21,252
    
    
    
    21,470Levelized incremental projects
    
    
    22,118
    
    
    
    18,587Other postemployment benefits
    
    
    1,259
    
    
    
    1,397Total non-current regulatory assets
    
    
    63,330
    
    
    
    58,607Total regulatory assets
    
    $
    64,830
    
    
    $
    60,007Non-current regulatory liabilitiesNegative salvage
    
    $
    18,178
    
    
    $
    15,883Pension plans
    
    
    16,562
    
    
    
    17,478Postretirement benefits
    
    
    13,354
    
    
    
    10,803Total regulatory liabilities
    
    $
    48,094
    
    
    $
    44,164
 11.COMPREHENSIVE INCOME
  -43-




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##### Table of Contents



NORTHWEST PIPELINE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
 2006
    
    
    2005
    
    
    2004(Thousands of Dollars)Net income
    
    $
    57,143
    
    
    $
    71,755
    
    
    $
    76,655Other comprehensive income:Cash flow hedges:Balance at beginning of period
    
    
    
    
    
    
    
    
    
    
    Gain on cash flow hedges
    
    
    619
    
    
    
    
    
    
    
    Reclassification cash flow hedge gain into
earnings
    
    
    (34
    )
    
    
    
    
    
    
    Balance at end of period
    
    
    585Minimum pension liability:Balance at beginning of period
    
    
    
    
    
    
    
    
    
    
    388Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    (388
    )Balance at end of period
    
    
    
    
    
    
    
    
    
    
    Other comprehensive income before taxes
    
    
    585
    
    
    
    
    
    
    
    Income tax provision on other comprehensive
income
    
    
    (220
    )
    
    
    
    
    
    
    Other comprehensive income
    
    
    365
    
    
    
    
    
    
    
    Comprehensive income
    
    $
    57,508
    
    
    $
    71,755
    
    
    $
    76,655
  12. IMPAIRMENTS
  13. QUARTERLY INFORMATION (UNAUDITED)
  Quarter of 2006First
    
    Second
    
    Third
    
    Fourth(Thousands of Dollars)Operating revenues
    
    $
    79,638
    
    
    $
    79,915
    
    
    $
    81,088
    
    
    $
    83,609Operating income
    
    
    30,946
    
    
    
    29,955
    
    
    
    27,764
    
    
    
    27,618Net income
    
    
    15,902
    
    
    
    17,474
    
    
    
    11,273
    
    
    
    12,494
  -44-




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##### Table of Contents



NORTHWEST PIPELINE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
 Quarter of 2005First
    
    Second
    
    Third
    
    Fourth(Thousands of Dollars)Operating revenues
    
    $
    80,283
    
    
    $
    78,907
    
    
    $
    79,639
    
    
    $
    82,628Operating income
    
    
    37,664
    
    
    
    34,498
    
    
    
    36,074
    
    
    
    33,140Net income
    
    
    18,317
    
    
    
    17,189
    
    
    
    18,252
    
    
    
    17,997
  -45-




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##### Table of Contents



Item 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 Item 9A.
    
    CONTROLS AND PROCEDURES
    
 Item 9B.
  -46-




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##### Table of Contents



PART III
  
 Item 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
  2006
    
    
    2005(Thousands of Dollars)Audit Fees
    
    $
    851
    
    
    $
    791Audit-Related Fees
    
    
    
    
    
    
    Tax Fees
    
    
    
    
    
    
    All Other Fees
    
    
    
    
    
    
    $
    851
    
    
    $
    791
   -47-




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##### Table of Contents



PART IV
 
 Item 15.
    
    EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 (a) 1. Financial Statements
 Index
 PageReferenceto 2006Form 10-KReport of Independent Registered Public Accounting Firm
    
    
    20Statements of Income for the Years Ended December 31, 2006, 2005 and 2004
    
    
    21Balance Sheets at December 31, 2006 and 2005
    
    
    22Statements of Common Stockholders Equity for the Years Ended December 31, 2006,
2005 and 2004
    
    
    24Statements of Comprehensive Income for the Years Ended December 31, 2006, 2005
and 2004
    
    
    25Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004
    
    
    26Notes to Financial Statements
    
    
    27
 (a) 2. Financial Statement Schedules
 
 Charged toBeginning
    
    Costs and
    
    
    
    
    
    EndingDescription
    
    Balance
    
    Expenses
    
    Deductions
    
    BalancesYear ended December 31, 2006:Reserve for doubtful receivables
    
    $
    91
    
    
    $
    (38
    )
    
    $
    0
    
    
    $
    53Reserve for obsolescence of
materials and supplies
    
    
    263
    
    
    
    306
    
    
    
    (97
    )
    
    
    472Year ended December 31, 2005:Reserve for doubtful receivables
    
    
    320
    
    
    
    44
    
    
    
    (273
    )
    
    
    91Reserve for obsolescence of
materials and supplies
    
    
    439
    
    
    
    0
    
    
    
    (176
    )
    
    
    263Year ended December 31, 2004:Reserve for doubtful receivables
    
    
    320
    
    
    
    0
    
    
    
    0
    
    
    
    320Reserve for obsolescence of
materials and supplies
    
    
    284
    
    
    
    825
    
    
    
    (670
    )
    
    
    439
  -48-




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##### Table of Contents



a) 3 and b. Exhibits:
  *(a)
    
    Merger Agreement, dated as of September 20, 1983, between Williams and Northwest
Energy Company (Energy) (Exhibit 18 to Energy schedule 14D-9 (Amendment No. 3) dated
September 22, 1983).*(b)
    
    The Plan of Merger, dated as of November 7, 1983, between Energy and a subsidiary
of Williams (Exhibit 2(b) to Northwest report on Form 10-K, No. 1-7414, filed March 22,
1984).
  *(a)
    
    Restated Certificate of Incorporation (Exhibit 3a to Amendment No. 1 to
Registration Statement on Form S-1, No. 2-55-273, filed January 13, 1976).*(b)
    
    By-laws, as amended (Exhibit 3c to Registration Statement on Form S-1, No.
2-55273, filed December 30, 1975).
  *(a)
    
    Senior Indenture, dated as of August 1, 1992, between Northwest and Continental
Bank, N.A., relating to Pipelines 9% Debentures, due 2022 (Exhibit 4.1 to Registration
Statement on Form S-3, No. 33-49150, filed July 2, 1992).*(b)
    
    Senior Indenture, dated as of November 30, 1995 between Northwest and Chemical
Bank, relating to Pipelines 7.125% Debentures, due 2025 (Exhibit 4.1 to Registration
Statement on Form S-3, No. 33-62639, filed September 14, 1995).*(c)
    
    Senior indenture, dated as of December 8, 1997 between Northwest and The Chase
Manhattan Bank, relating to Pipelines 6.625% Debentures, due 2007 (Exhibit 4.1 to
Registration Statement on Form S-3, No. 333-35101, filed September 8, 1997).*(d)
    
    Indenture dated March 4, 2003, between Northwest and JP Morgan Chase Bank, as
Trustee (filed as Exhibit 4.1 to The Williams Companies, Inc. Form 10-Q for the quarter
ended March 31, 2003, Commission File Number 1-4174).*(e)
    
    Indenture dated as of June 22, 2006, between Northwest Pipeline Corporation and
JPMorgan Chase Bank, N.A. (Exhibit 4.1 to Form 8-K filed June 23, 2006).
  (a)
    
    *(1)
    
    Form of Transfer Agreement, dated July 1, 1991, between Northwest and Gas
Processing (Exhibit 10(c)(8) to Pipeline Report on Form 10-K, No. 1-7414, filed March
26, 1992).*(2)
    
    Form of Operating Agreement, dated July 1, 1991, between Northwest and
Williams Field Services Company (Exhibit 10(c)(9) to Pipeline Report on Form 10-K,
No. 1-7414, filed March 26, 1992).*(1)
    
    Amended and Restated Credit Agreement dated as of May 20, 2005 among
The Williams Companies, Inc., Williams Partner L.P., Northwest
Pipeline Corporation, Transcontinental Gas Pipe Line Corporation, and
the Banks, Citibank, N.A. and Bank of America, N.A. (each, an
Issuing Bank), and Citicorp USA, INC. as administrative agent.
(filed as Exhibit 1.1 to Form 8-K filed May 26, 2005).*(2)
    
    Credit Agreement, dated as of May 1, 2006, among The Williams
Companies, Inc., Northwest Pipeline Corporation, Transcontinental Gas
Pipe Line Corporation, and Williams Partners L.P., as Borrowers, and
Citibank, N.A., as Administrative Agent (Exhibit 10.1 to The Williams
Companies, Inc. Form 8-K filed May 1, 2006 Commission File Number
1-4174).
 -49-




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##### Table of Contents



*(3)
    
    
    
    Registration Rights Agreement, dated as of June 22, 2006, among
Northwest Pipeline Corporation and J.P. Morgan Securities Inc. and
Calyon Securities (USA) Inc., acting on behalf of themselves and the
several initial purchasers listed on Schedule I thereto. (Exhibit
10.1 to Form 8-K filed June 23, 2006).
    (a)
    
    Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and
15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended and Item
601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of The Sarbanes-Oxley
Act of 2002.(b)
    
    Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and
15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item
601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of The Sarbanes-Oxley
Act of 2002.
  (a)
    
    Certification of Principal Executive Officer and Principal Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *Exhibits so marked have heretofore been filed with the Securities and Exchange Commission as
part of the filing indicated and are incorporated herein by reference. -50-




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##### Table of Contents



SIGNATURES
  NORTHWEST PIPELINE CORPORATION(Registrant)By
    
    /s/ R. Rand Clark

          R. Rand ClarkController
   Signature
    
    
    
    Title/s/ Steven J. Malcolm*

Steven J. Malcolm
    
    
    
    Chairman of the Board/s/ Phillip D. Wright*

Phillip D. Wright
    
    
    
    Senior Vice President and Director
(Principal Executive Officer)/s/ Richard D. Rodekohr*

Richard D. Rodekohr
    
    
    
    Vice President and Treasurer
(Principal Financial Officer)/s/ R. Rand Clark

R. Rand Clark
    
    
    
    Controller (Principal Accounting Officer)/s/ Allison G. Bridges*

Allison G. Bridges
    
    
    
    Director and Vice President
 * By /s/ R. Rand Clark

                R. Rand ClarkAttorney-in-fact
 
 -51-




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##### Table of Contents



Exhibit23
    
    Consent of Independent Registered Public Accounting Firm24
    
    Power of Attorney with Certified Resolution31(a)
    
    Section 302 Certification of Principal Executive Officer31(b)
    
    Section 302 Certification of Principal Financial Officer32
    
    Section 906 Certification of Principal Executive Officer and Principal Financial Officer