April 9, 2004 6th Floor - 900 Howe Street Vancouver, B.C.€¦Via Courier April 9, 2004 B.C. Utilities Commission File No.: 4.2.28 6th Floor - 900 Howe Street

Via Courier April 9, 2004 B.C. Utilities Commission File No.: 4.2.28 6th Floor - 900 Howe Street Vancouver, B.C. V6Z 2N3 Attention: R.J. Pellatt Commission Secretary Dear Sir: Re: Revisions to Numerical Schedules Provided under PNG’s Application to the

Commission to Recapitalize PNG Under an Income Trust Ownership Structure Dated January 30, 2004 (the “Recapitalization. Application”) ___

The purpose of this letter is to update the numerical information provided under Tabs 5 to 10 of the original Recapitalization Application which contained information based on PNG’s 2004 revenue requirement applications to the Commission dated November 28, 2003 in respect of the PNG-West, Fort St. John/Dawson Creek and Tumbler Ridge Divisions. The 2004 revenue requirement applications for these three divisions were subsequently revised. Enclosed are 20 copies of the updated schedules to Tabs 5 to 10 to reflect:

1. The figures provided in the PNG-West division 2004 revenue requirement application revised as of April 8, 2004. This most recent version of the revenue requirement application reflects the impact of assuming the PNG/West Fraser Mills MOA dated February 17, 2004 is effective January 1, 2004 and other modifications that arose out of the cross examination of PNG’s witness panel in Terrace on March 31 and April 1, 2004.

2. The figures provided in the Fort St. John/Dawson Creek and Tumbler Ridge divisions’ 2004 revenue requirement applications revised as of February 23, 2004. The written submissions to the Commission on these revenue requirement applications were based on the February 23, 2004 revised applications.

It is also necessary to update some of the narrative contained in the Recapitalization Application to incorporate the impact of the revised 2004 revenue requirement applications. Enclosed are twenty copies of revised pages 20 to 24 of the Application narrative. Specifically, Paragraph 55 has been revised by adding the italicized words noted below:

55. In order to give parties a sense of the potential rate changes under an income trust ownership structure, Tabs 5, 6 and 7 contain the regulatory schedules from the 2004 revenue requirement applications dated November 28, 2003 (as revised on April 8, 2004 for the PNG-West Division and February 23, 2004 for the Fort St. John and Dawson Creek Divisions) showing the expected changes. A column has been added to each schedule called “Test Year 2004 Income Trust”. These figures are compared to the originally (i.e. as revised April 8 and February 23, 2004) applied for revenue requirement figures identified in the schedules under the heading “Test Year 2004 Status Quo”. For comparative purposes, the PNG Income Trust scenario is assumed to be effective for the entire 2004 test year even though the PNG Income Trust based rates would not be effective until after completion of the recapitalization of PNG under an income trust ownership structure.

The Tables on pages 21 to 24 reflect the updated figures under Tabs 5 to 10 as well. Please direct any questions regarding this letter to my attention. Yours truly, C.P. Donohue cc. Registered Intervenors

Revised April 9’04 Tab Application PNG Income Trust App. Page 20

each Division’s deferred income tax balances to their respective costs of service over time. The portion of the deferred income taxes to be credited to the annual revenue requirement will be determined each year based on the overall objective of stabilizing, and in some cases, reducing customers’ rates.

54. PNG will be seeking Commission approval to amend its rates in all operating Divisions on the basis set forth in the regulatory schedules provided in Tabs 5, 6 and 7 provided this Application is approved by the Commission on terms that enable PNG to successfully recapitalize under an income trust ownership structure. The intention would be to make the amended rates effective as of the first of the month following completion of all the steps required to recapitalize PNG and to complete the marketing of the units in the PNG Income Trust under the IPO.

55. In order to give parties a sense of the potential rate changes under an income trust

ownership structure, Tabs 5, 6 and 7 contain the regulatory schedules from the 2004 revenue requirement applications dated November 28, 2003 (as revised on April 8, 2004 for the PNG-West Division and February 23, 2004 for the Fort St. John and Dawson Creek Divisions) showing the expected changes. A column has been added to each schedule called “Test Year 2004 Income Trust”. These figures are compared to the originally (i.e. as revised April 8 and February 23, 2004) applied for revenue requirement figures identified in the schedules under the heading “Test Year 2004 Status Quo”. For comparative purposes, the PNG Income Trust scenario is assumed to be effective for the entire 2004 test year even though the PNG Income Trust based rates would not be effective until after completion of the recapitalization of PNG under an income trust ownership structure.

56. The following tables compare the Test Year 2004 Income Trust and Test Year

2004 Status Quo revenue requirement for each operating Division assuming the draw down of deferred income taxes at the level specified for each Division at the bottom of each table.


PNG-WEST DIVISION (000’s)

Cost of Service Item Test Year

2004 Income Trust

Test Year 2004

Status Quo

Change

O,M,A and G Expenses plus Other Cost of Service Items including property taxes, depreciation and Company use gas costs.

$22,903 $22,903 $0

Return Components

Income Taxes $3,451 $3,911 ($460)

Return on Common Equity $4,834 $4,833 $1

Short-Term Debt Interest $522 $452 $70

Long-Term Debt Interest $6,784 $6,395 $389

Preferred Shares $0 $350 ($350)

Total of Return Components $15,591 $15,941 ($350)

Total Gross Margin $38,494 $38,844 ($350)

Revenue Deficiency $3,001 $3,351 ($350)

The above figures reflect the impact on the test year 2004 revenue requirement of drawing down $180,000 of deferred income taxes. The $350,000 revenue requirement reduction under the Test Year 2004 Income Trust scenario is approximately 1.5 percent of total gross margin excluding Methanex Corporation gross margin and the projected cost of Company use gas.


FORT ST. JOHN/DAWSON CREEK DIVISION (000’s)


2004 Income Trust

Test Year 2004

Status Quo

Change

O,M,A and G Expenses plus Other Cost of Service Items including property taxes, depreciation and Company use gas costs.

$5,741 $5,741 $0

Return Components

Income Taxes $450 $573 ($123)

Return on Common Equity $1,062 $1,059 $3

Short Term Debt Interest $118 $139 ($21)

Long Term Debt Interest $1,412 $1,395 $17

Preferred Shares $0 $2 ($2)

Total of Return Components $3,042 $3,168 ($126)


Revenue Deficiency $592 $718 ($126)

The above figures reflect the impact on the test year 2004 revenue requirement of drawing down $80,000 of deferred income taxes. The $126,000 revenue requirement reduction under the Test Year 2004 Income Trust scenario is approximately 1.5 percent of the Test Year 2004 Status Quo total gross margin excluding the projected cost of Company use gas.


TUMBLER RIDGE DIVISION (000’s)


2004 Income Trust

Test Year 2004

Status Quo

Change

O,M,A and G Expenses plus Other Cost of Service Items including property taxes, depreciation and Company use gas costs..

$880 $880 $0

Return Components

Income Taxes $53 $65 ($12)

Return on Common Equity $39 $39 $0

Short Term Debt Interest $4 $1 $3

Long Term Debt Interest $54 $60 ($6)

Preferred Shares $0 $0 0

Total of Return Components $150 $165 ($15)


Revenue Deficiency $44 $59 ($15)

The above figures reflect the impact on the test year 2004 revenue requirement of drawing down $8,000 of deferred income taxes. The $15,000 revenue requirement reduction under the Test Year 2004 Income Trust scenario is approximately 1.5 percent of the Test Year 2004 Status Quo total gross margin excluding the projected cost of Company use gas.


57. Following the change to an income trust ownership structure, PNG plans to

prepare revenue requirement applications for all three operating Divisions that will provide for rate stability over a three to four year period. Tabs 8, 9 and 10 provide pro forma regulatory schedules for the five-year period from 2004 to 2008 inclusive. The pro forma figures suggest that, in addition to the rate savings proposed for 2004, an overall revenue requirement reduction of approximately $6.4 million could be achieved over the 2005 to 2008 four year period under the income trust ownership structure. The following table summarizes the annual pro forma gross margin figures for the 2004 to 2008 period under the status quo and income trust scenarios as provided in Tabs 8, 9 and 10.

Gross Margin Comparison ($000s)

2004 2005 2006 2007 2008

Status Quo - PNG-West $38,848 $39,416 $39,493 $39,417 $39,423 - FSJ/DC 8,906 8,869 9,060 9,248 9,461 - Tumbler Ridge 1,045 1,052 1,064 1,079 1,092

Total $48,799 $49,337 $49,617 $49,744 $49,976 Income Trust

- PNG-West $38,497 $38,078 $38,033 $38,026 $38,016 - FSJ/DC 8,782 8,812 8,853 8,895 9,528 - Tumbler Ridge 1,030 1,016 1,014 1,012 1,011

Total $48,309 $47,906 $47,900 $47,933 $48,555

Reduction $490 $1,431 $1,717

$1,811 $1,421

Indicative gross margin savings over 2005 to 2008 of $6.4 million

Revised Apr. 9 '04Tab 5PNG

Income Trust App.Page 1

Test Year 2004 Test Year 2004EXPENSES Income Trust Status Quo Difference

OperatingLabour 3,489 3,489 0Other 3,505 3,505 0Sub-total 6,994 6,994 0

MaintenanceLabour 182 182 0Other 382 382 0Sub-total 564 564 0

Administrative and GeneralLabour 1,267 1,267 0Total Company Benefits 1,688 1,688 0Other 3,649 3,649 0Sub-total 6,604 6,604 0

Total (O, M, A & G) Excluding Co. Use 14,163 14,163 0

Transfers to Capital Operating (410) (410) 00

Transfers to Capital Admin. & Gen. (671) (671) 0

Property Taxes, BC Capital tax 3,149 3,149 0

Depreciation 6,448 6,448 0

Amortization 675 675 0

Other Income (329) (329) 0

Shared Service Recovery from PNG (N.E.) (1,308) (1,308) 0

Total Expenses Excluding Co, Use 21,716 21,716 0

Income Taxes 3,451 3,911 (460)

Return on Common Equity 4,834 4,833 1

Short Term Debt 522 452 70

Long Term Debt 6,785 6,396 389

Preferred Shares 0 351 (351)

Total Cost of Service Excluding Co. Use 37,307 37,657 (350)

Company Use Gas 1,187 1,187 0

Total Cost of Service Including Co. Use 38,494 38,844 (350)

($000)

Pacific Northern Gas Ltd.PNG-West Division

Test Year 2004 Income Trust vs. Test Year 2004 Status QuoCOST OF SERVICE COMPARISON



Line Test Year 2004 Test Year 2004No. Income Trust Status Quo Difference

1 Energy sales (TJ) 4 161 4 161 2 Average rate per GJ $10.69 $10.73 ($0.04)34 Transportation service (TJ) 29 573 29 573 5 Average rate per GJ $0.62 $0.63 ($0.01)67 Total deliveries (TJ) 33 735 33 735 89 Utility revenue

10 Energy sales $42,906 $42,906 $011 Interim rates - sales 1,564 1,747 (183)12 Transportation service 16,993 16,993 013 Interim rates - transportation 1,436 1,604 (168)1415 62,899 63,250 (351)16 Cost of sales 24,403 24,403 01718 Gross margin 38,497 38,848 (351)1920 Operating expenses 7,773 7,773 021 Maintenance expenses 564 564 022 Admin. & general expenses 5,934 5,934 023 Property taxes, BC capital tax 3,149 3,149 024 Depreciation 6,448 6,448 025 Amortization 675 675 026 Unusual deductions 0 0 029 Investment income, other revenue (1,637) (1,637) 030 2003 Settlement Allowance 0 0 031 22,905 22,905 03233 Earned return before income taxes 15,592 15,943 (351)34 Income taxes 3,451 3,911 (460)3536 Earned return $12,141 $12,032 $1093738 Utility rate base $135,671 $135,592 $803940 Return on rate base 8.95% 8.87% 0.08%

Pacific Northern Gas Ltd.PNG - West Division

UTILITY INCOME & RETURN

SCHEDULE 1(000's)




1 Plant in service beginning of year $242,023 $242,023 $02 Additions 7,042 7,042 03 Disposals (at cost) (309) (309) 045 Plant in service end of year 248,756 248,756 06 Accumulated depreciation 99,134 99,134 078 Net plant in service end of year 149,622 149,622 09

10 Net plant beginning of year 149,489 149,489 01112 Net plant in service midyear 149,555 149,555 013 Adjustment - expenditure timing 593 593 014 Contributions for construction (5,999) (5,999) 015 Construction advances 0 - 016 Deferred income taxes (14,372) (14,462) 9017 Work in progress, no AFUDC 100 100 018 Unamortized deferred charges 2,720 2,720 019 Conversion loans 0 - 020 Cash working capital 1,187 1,198 (10)21 Other working capital 1,887 1,887 02223 Utility rate base, midyear $135,671 $135,592 $80

UTILITY RATE BASE

SCHEDULE 2(000'S)

Pacific Northern Gas Ltd.PNG - West Division




1 Calculation of Taxable Income2 Earned return before income taxes $15,592 $15,943 ($351)3 Interest (7,307) (6,848)4 Permanent differences 161 161 05 Timing differences 1,483 1,483 067 Taxable income $9,929 $10,739 ($810)89 Calculation of Income Tax Expense

10 Income taxes payable 3,425 3,705 (280)11 Part I.3 tax 206 206 012 Deferred income tax (180) 0 (180)1314 Income tax expense $3,451 $3,911 ($460)1516 Particulars of Timing Differences17 A. Tax Effects Subject To Flowthrough18 Depreciation $6,448 $6,448 $019 Amortization $675 $675 $020 Capital cost allowance (4,798) (4,798) $021 Overheads capitalized (865) (865) $022 Other 24 24 $023 .24 $1,483 $1,483 $025 B. Tax Effects Subject To Deferral26 Deferred charges 0 0 02728 Timing differences $1,483 $1,483 $02930 Tax rate 34.50% 34.50% 0.00%

Pacific Northern Gas Ltd.

INCOME TAXES

SCHEDULE 3

PNG - West Division

(000'S)




1 Opening balance2 Share capital N/A $8,960 N/A3 Contributed surplus N/A 2,370 N/A4 Retained earnings N/A 60,184 N/A56 N/A 71,514 N/A78 Net income N/A 6,288 N/A9 Shares issued N/A N/A

10 Preferred dividends N/A (338) N/A11 Common dividends N/A (2,867) N/A1213 Closing balance N/A $74,596 N/A141516 Midyear common equity N/A $73,055 N/A17 Investment in Non Utility N/A $0 N/A18 less: acquisition premiums N/A ($1,683) N/A19 less: investment in subsidiary company N/A ($5,668) N/A202122 N/A $65,705 N/A2324 Deemed utility common equity $48,842 $48,813 $292526 Unused Equity N/A 16,892 N/A

PNG - West DivisionCOMMON EQUITY

SCHEDULE 4(000's)





1 Short Term Debt $9,497 $7,533 $1,9642 proportion 7.00% 5.56% 1.44%3 rate of return 5.50% 6.00% -0.50%4 return component 0.39% 0.33% 0.05%56 Long term debt $77,333 $74,246 $3,0877 proportion 57.00% 54.76% 2.24%8 rate of return 8.77% 8.61% 0.16%9 return component 5.00% 4.72% 0.28%

1011 Preferred shares $0 $5,000 ($5,000)12 proportion 0.00% 3.69% (3.69%)13 rate of return 7.01% 7.01% 0.00%14 return component 0.00% 0.26% (0.26%)1516 Common equity $48,842 $48,813 $2917 proportion 36.00% 36.00% 0.00%18 rate of return 9.90% 9.90% 0.00%19 return component 3.56% 3.56% (0.00%)2021 Total capitalization 135,671 $135,592 $802223 Return on rate base 8.95% 8.87% 0.08%2425 Utility rate base $135,671 $135,592 $80

(000's)

PNG - West DivisionRETURN ON CAPITAL

SCHEDULE 5




Test Year 2004Income Trust Test YearConversion 2004

1 Secured Debentures Series 20102 Liability beginning of year $0 $5,8503 Sinking fund payments 0 (825)4 Average Capitalization 0 5,4385 Annual Interest Expense 0 3695 Issue costs (Jan 1, 2004) 0 (91)6 Amortization 0 277 Average net capitalization67 Embedded cost rate8 Effective Cost Rate 7.30% 7.30%9

10 Secured Debentures Series 201111 Liability beginning of year $8,393 $10,10012 Sinking fund payments (582) (700)13 Average Capitalization 8,361 10,06114 Annual Interest Expense 914 1,08215 Issue costs beginning of year (62) (75)16 Amortization 14 1717 Average net capitalization1819 Embedded cost rate20 Effective Cost Rate 10.93% 10.93%2122 Secured Debentures Series 201223 Liability beginning of year $0 $9,39824 Sinking fund payments 0 (8,412)25 Average Capitalization 0 4,65526 Annual Interest Expense 0 34927 Issue costs beginning of year 0 (120)28 Amortization 0 1429 Average net capitalization3031 Embedded cost rate32 Effective Cost Rate 7.81% 7.81%3334 Secured Debentures Series 201835 Liability beginning of year $14,127 $14,38636 Sinking fund payments (499) (508)37 Average Capitalization 14,063 14,32138 Annual Interest Expense 1,251 1,25439 Issue costs beginning of year (111) (133)40 Amortization 16 1941 Average net capitalization4243 Embedded cost rate44 Effective Cost Rate 8.89% 8.89%


LONG TERM DEBT

FOR THE YEAR ENDED DECEMBER 31(000's)



Test Year 2004Income Trust Test YearConversion 2004


LONG TERM DEBT

FOR THE YEAR ENDED DECEMBER 31(000's)

4546 Secured Debentures Series 202547 Liability beginning of year $16,620 $20,00048 Sinking fund payments (416) (500)49 Average Capitalization 16,430 19,77150 Annual Interest Expense 1,549 1,84751 Issue costs beginning of year (162) (195)52 Amortization 20 2453 Average net capitalization5455 Embedded cost rate56 Effective Cost Rate 9.43% 9.43%5758 Secured Debentures Series 202759 Liability beginning of year $16,620 $20,00060 Sinking fund payments 0 061 Average Capitalization 16,620 20,00062 Annual Interest Expense 1,161 1,38363 Issue costs beginning of year (138) (166)64 Amortization 14 1665 Average net capitalization6667 Embedded cost rate68 Effective Cost Rate 6.99% 6.99%6970 Actual New Debt71 Additions During the Year $1,213 $072 Sinking fund payments 0 073 Average Capitalization 607 074 Annual Interest Expense 45 07576 Effective Cost Rate 7.46% NA7778 Total Actual Debt79 Total Average Capitalization 56,080 74,2468081 Effective Cost Rate 8.77% 8.61%




OperatingLabour 1,093 1,093 0 Other 1,625 1,625 0 Sub-total 2,718 2,718 0

MaintenanceLabour 92 92 0 Other 151 151 0 Sub-total 244 244 0

Administrative and GeneralLabour 0 0 0 Total Company Benefits 397 397 0 Other 722 722 0 Sub-total 1,118 1,118 0

Total (O, M, A & G) Excluding Co. Use 4,080 4,080 0



Property Taxes, BC Capital tax 761 761 0

Depreciation 1,237 1,237 0

Amortization 19 19 0


Total Expenses Excluding Co, Use 5,561 5,561 0

Income Taxes 450 573 (123)

Return on Common Equity 1,062 1,059 2

Short Term Debt 118 139 (21)

Long Term Debt 1,413 1,395 17

Preferred Shares 0 2 (2)

Total Cost of Service Excluding Co. Use 8,603 8,729 (126)

Company Use Gas 180 180 0

Total Cost of Service Including Co. Use 8,783 8,909 (126)

($000)

Pacific Northern Gas (N.E.) Ltd.

Fort St. John / Dawson Creek DivisionTest Year 2004 Status Quo vs. Decision 2003

COST OF SERVICE COMPARISON



SCHEDULE 1(000's)


1 Energy sales (TJ) 3 555 3 555 $02 Average rate per GJ $7.86 $7.90 ($0.03)34 Transportation service (TJ) 1 315 1 315 $05 Average rate per GJ $0.62 $0.62 $0.0067 Total deliveries (TJ) 4 870 4 870 $089 Utility revenue

10 Energy sales $27,360 $27,360 $011 Interim rates - sales $592 $716 ($124)12 Transportation service $811 $811 $013 Interim rates - transportation $0 $0 $01415 28,763 28,887 (124)16 Cost of sales 19,981 19,981 01718 Gross margin 8,782 8,906 (124)1920 Operating expenses 2,693 2,693 021 Maintenance expenses 244 244 022 Admin. & general expenses 939 939 023 Property taxes, BC capital tax 761 761 024 Depreciation 1,237 1,237 025 Amortization 19 19 026 Investment income, other revenue (153) (153) 02728 5,740 5,740 02930 Earned return before income taxes 3,042 3,166 (124)31 Income taxes 450 571 (121)3233 Earned return $2,592 $2,595 ($3)3435 Utility rate base $30,555 $30,528 $273637 Return on rate base 8.48% 8.50% -0.02%

Pacific Northern Gas Ltd.Fort St. John / Dawson Creek Division




UTILITY RATE BASE

SCHEDULE 2(000's)


1 Plant in service beginning of year $52,805 $52,805 $02 Additions 2,211 2,211 03 Disposals 0 0 045 Plant in service end of year 55,016 55,016 06 Accumulated depreciation 19,979 19,979 078 Net plant in service end of year 35,037 35,037 09

10 Net plant beginning of year 34,392 34,392 01112 Net plant in service midyear 34,714 34,714 014 Contributions for construction (7,227) (7,227) 015 Unamortized deferred charges 238 238 016 Deferred income taxes (513) (553) 4017 Reserve for damages (69) (69) 018 Cash working capital 3,261 3,274 (13)19 Other working capital 151 151 02021 Utility rate base, midyear $30,555 $30,528 $27




SCHEDULE 3(000's)


1 Calculation of Taxable Income2 Earned return before income taxes $3,042 $3,166 ($124)3 Interest (1,530) (1,534) 44 Permanent differences 12 12 05 Timing differences (206) (206) 067 Taxable income $1,318 $1,438 ($120)89 Calculation of Income Tax Expense

10 Income taxes payable $455 $496 ($41)11 Part I.3 tax 75 75 012 Deferred income tax (80) 0 (80)1314 Income tax expense $450 $571 ($121)1516 Particulars of Timing Differences17 A. Tax Effects Subject To Flowthrough18 Depreciation $1,237 $1,237 $019 Amortization $19 $19 $020 Capital cost allowance (1,155) (1,155) 021 Deferred charges 0 0 022 Overheads capitalized (349) (349) 023 Other 43 43 0242526 Timing differences ($206) ($206) $02728 Tax rate 34.50% 34.50% 0.00%29 Deferred tax rate 34.50% 34.50% 0.00%

Fort St. John / Dawson Creek DivisionPacific Northern Gas Ltd.

INCOME TAXES



SCHEDULE 4(000's)


1 Opening balance2 Share capital N/A $7,845 N/A3 Contributed surplus N/A $0 N/A4 Retained earnings N/A $2,823 N/A56 N/A 10,668 N/A78 Net income N/A 1,025 N/A9 Shares issued N/A 0 N/A

10 Preferred dividends N/A (2) N/A11 Common dividends N/A (379) N/A1213 Closing balance N/A $11,312 N/A141516 Midyear common equity N/A $10,990 N/A171819202122 N/A $10,990 N/A2324 Deemed utility common equity $11,000 $10,990 $102526 Unused Equity (Deficiency) N/A 0 N/A


COMMON EQUITY



SCHEDULE 5(000's)


1 Short term borrowings $2,139 $2,311 ($172)2 proportion 7.00% 7.57% ($0)3 rate of return 5.50% 6.00% ($0)4 return component 0.39% 0.45% ($0)56 Long term debt $17,417 $17,204 $2137 proportion 57.00% 56.35% 0.65%8 rate of return 8.11% 8.11% 0.00%9 return component 4.62% 4.57% 0.05%

1011 Preferred shares $0 $24 ($24)12 proportion 0.00% 0.08% -0.08%13 rate of return 6.48% 6.48% 0.00%14 return component 0.00% 0.01% -0.01%1516 Common equity $11,000 $10,990 $1017 proportion 36.00% 36.00% 0.00%18 rate of return 9.65% 9.64% 0.01%19 return component 3.47% 3.47% 0.00%2021 Total capitalization 30,555 $30,528 $272223 Return on rate base 8.48% 8.50% -0.02%2425 Utility rate base $30,555 $30,528 $27

RETURN ON CAPITAL





OperatingLabour 228 228 0Other 251 251 0Sub-total 478 478 0

MaintenanceLabour 21 21 0Other 37 37 0Sub-total 58 58 0

Administrative and GeneralLabour 0 0 0Total Company Benefits 52 52 0Other 75 75 0Sub-total 127 127 0

Total (O, M, A & G) Excluding Co. Use 663 663 0



Property Taxes, BC Capital tax 31 31 0

Depreciation 145 145 0

Amortization 2 2 0


Total Expenses Excluding Co, Use 822 822 0

Income Taxes 53 65 (12)

Return on Common Equity 39 39 0

Short Term Debt 4 1 3

Long Term Debt 54 60 (6)

Preferred Shares 0 0 0

Total Cost of Service Excluding Co. Use 972 987 (14)

Company Use Gas 58 58 0

Total Cost of Service Including Co. Use 1030 1045 (15)

($000)

Pacific Northern Gas (N.E.) Ltd.

Tumbler Ridge

COST OF SERVICE COMPARISONTest Year Income Trust vs. Test Year 2004 Status Quo




1 Energy sales (TJ) 134 134 02 Average rate per GJ $10.38 $10.46 ($0.08)3 Per cent increase in rates34 Transportation service (TJ) 580 580 5 Average rate per GJ $0.48 $0.48 ($0.01)6 Per cent increase in rates 54.42%67 Total deliveries (TJ) 714 714 089 Utility revenue

10 Energy sales $1,362 $1,362 $011 Interim rates - sales 32 43 (10)12 Transportation service 264 264 013 Interim rates - transportation 12 16 (4)1415 1,670 1,684 (14)16 Cost of sales 639 639 01718 Gross margin 1,030 1,045 (14)1920 Operating expenses 533 533 021 Maintenance expenses 58 58 022 Admin. & general expenses 125 125 023 Property taxes, BC capital tax 31 31 024 Depreciation 145 145 025 Amortization 2 2 026 Investment income, other revenue (13) (13) 02728 880 880 02930 Earned return before income taxes 150 165 (14)31 Income taxes 53 65 (12)3233 Earned return $98 $100 ($2)3435 Utility rate base $1,090 $1,086 $43637 Return on rate base 8.95% 9.21% -0.25%

Pacific Northern Gas Ltd.Tumbler Ridge Division


SCHEDULE 1(000's)




1 Plant in service beginning of year $7,481 $7,481 $02 Additions 140 140 $03 Disposals 0 0 $045 Plant in service end of year 7,621 7,621 06 Accumulated depreciation 4,751 4,751 078 Net plant in service end of year 2,870 2,870 09

10 Net plant beginning of year 3,001 3,001 01112 Net plant in service midyear 2,936 2,936 013 Contributions for construction (1,399) (1,399) 014 Unamortized deferred charges 62 62 015 Deferred income taxes (411) (415) 416 Reserve for damages (155) (155) 017 Cash working capital 60 60 018 Other working capital (3) (3) 01920 Utility rate base, midyear $1,090 $1,086 $4

(000's)SCHEDULE 2

Pacific Northern Gas Ltd.Tumbler Ridge DivisionUTILITY RATE BASE




1 Calculation of Taxable Income2 Earned return before income taxes $150 $165 ($14)3 Interest (59) (61) 24 Permanent differences 0 0 05 Timing differences 73 73 067 Taxable income $165 $177 ($12)89 Calculation of Income Tax Expense

10 Income taxes payable $57 $61 ($4)11 Part I.3 tax 4 4 012 Deferred income tax (8) 0 (8)1314 Income tax expense $53 $65 ($12)1516 Particulars of Timing Differences17 A. Tax Effects Subject To Flowthrough18 Depreciation $145 $145 $019 Amortization 2 2 020 Capital cost allowance (76) (76) 021 Deferred charges 0 0 022 Overheads capitalized (7) (7) 023 Other 10 10 02425 Timing differences $73 $73 $02627 Tax rate 34.50% 34.50% 0.00%

Deferred tax rate 34.50% 34.50% 0.00%


INCOME TAXES

SCHEDULE 3(000's)




1 Opening balance2 Share capital N/A $680 N/A3 Contributed surplus N/A 0 N/A4 Retained earnings N/A (543) N/A56 13778 Net income N/A $39 N/A9 Shares Issued N/A 0 N/A

10 Preferred dividends N/A 0 N/A11 Common dividends N/A 379 N/A1213 Closing balance N/A $554 N/A141516 Midyear common equity N/A $345 N/A17 Investment in Non Utility N/A $0 N/A1819 $345 ($345)2021 Deemed utility common equity $392 $391 $12223 Unused (Deficient) Equity N/A N/A

(000's)SCHEDULE 4


COMMON EQUITY




1 Short term borrowings $76 $17 $592 proportion 7.00% 1.59% 5.41%3 rate of return 5.50% 6.00% -0.50%4 return component 0.39% 0.10% 0.29%56 Long term debt $621 $678 ($56)7 proportion 57.00% 62.41% -5.41%8 rate of return 8.77% 8.89% -0.12%9 return component 5.00% 5.55% -0.55%

1011 Preferred shares $0 $0 $012 proportion 0.00% 0.00% 0.00%13 rate of return 0.00% 0.00% 0.00%14 return component 0.00% 0.00% 0.00%1516 Common equity $392 $391 $117 proportion 36.00% 36.00% 0.00%18 rate of return 9.90% 9.90% 0.01%19 return component 3.57% 3.56% 0.00%2021 Total capitalization 1,090 $1,086 $42223 Return on rate base 8.95% 9.21% -0.25%2425 Utility rate base $1,090 $1,086 $4

SCHEDULE 5(000's)

Pacific Northern Gas Ltd.Tumbler Ridge DivisionRETURN ON CAPITAL



Line Test Year Test YearNo. 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008

1 Gross margin $38,497 $38,078 $38,033 $38,026 $38,016 $38,848 $39,416 $39,493 $39,147 $39,42323 O&M expenses 8,337 8,749 8,862 8,977 9,093 8,337 8,749 8,862 8,977 9,093 4 Admin. & general expenses 5,934 6,022 6,112 6,204 6,297 5,934 6,022 6,112 6,204 6,297 5 Property taxes, BC capital tax 3,149 3,196 3,244 3,293 3,342 3,149 3,196 3,244 3,293 3,342 6 Depreciation & amortization 7,122 7,394 7,462 7,220 7,354 7,122 7,394 7,462 7,220 7,354 7 Investment income, other revenue (1,637) (1,662) (1,686) (1,712) (1,737) (1,637) (1,662) (1,686) (1,712) (1,737) 8 22,905 23,700 23,994 23,982 24,349 22,905 23,700 23,994 23,982 24,3499

10 Earned return before income taxes 15,592 14,378 14,039 14,044 13,668 15,943 15,716 15,499 15,165 15,07411 Income taxes 3,451 2,377 2,158 2,253 1,950 3,911 3,926 3,887 3,713 3,7581213 Earned return $12,141 $12,001 $11,881 $11,791 $11,718 $12,032 $11,791 $11,612 $11,452 $11,3161415 Utility rate base $135,671 $134,621 $133,751 $133,150 $132,850 $135,592 $134,027 $132,211 $130,681 $129,4311617 Return on rate base 8.95% 8.91% 8.88% 8.86% 8.82% 8.87% 8.80% 8.78% 8.76% 8.74%

Pro Forma



SCHEDULE 1

PNG-West Division

(000's)

Pro FormaStatus QuoIncome Trust




1 Plant in service beginning of year $242,023 $248,755 $254,683 $260,701 $266,808 $242,023 $248,755 $254,683 $260,701 $266,8082 Additions 7,042 5,929 6,018 6,108 6,199 7,042 5,929 6,018 6,108 6,1993 Disposals (at cost) (309) 0 0 0 0 (309) 0 0 0 045 Plant in service end of year 248,756 254,683 260,701 266,808 273,008 248,756 254,683 260,701 266,808 273,0086 Accumulated depreciation 99,134 106,278 113,580 121,018 128,596 99,134 106,278 113,580 121,018 128,59678 Net plant in service end of year 149,622 148,405 147,121 145,790 144,412 149,622 148,405 147,121 145,790 144,4129

10 Net plant beginning of year 149,489 149,621 148,405 147,121 145,790 149,489 149,621 148,405 147,121 145,7901112 Net plant in service mid-year 149,555 149,013 147,763 146,456 145,101 149,555 149,013 147,763 146,456 145,10113 Contributions for construction (5,999) (5,750) (5,501) (5,251) (5,001) (5,999) (5,750) (5,501) (5,251) (5,001)14 Deferred income taxes (14,372) (13,832) (12,882) (11,962) (11,005) (14,462) (14,462) (14,462) (14,462) (14,462)15 Unamortized deferred charges 2,720 1,902 1,071 593 427 2,720 1,902 1,071 593 42716 Other (AFUDC, etc.) 693 100 100 100 100 693 100 100 100 10017 Cash working capital 1,187 1,289 1,289 1,289 1,290 1,198 1,326 1,328 1,320 1,32818 Other working capital 1,887 1,899 1,912 1,925 1,938 1,887 1,899 1,912 1,925 1,9381920 Utility rate base, mid-year $135,671 $134,621 $133,751 $133,150 $132,850 $135,592 $134,027 $132,211 $130,681 $129,431

Pro Forma Pro Forma

PNG-West DivisionPacific Northern Gas Ltd.

UTILITY RATE BASE

SCHEDULE 2(000's)

Income Trust Status Quo




1 Calculation of Taxable Income2 Earned return before income taxes $15,592 $14,378 $14,039 $14,044 $13,668 $15,943 $15,716 $15,499 $15,165 $15,0743 Interest (7,307) (7,203) (7,114) (7,046) (6,983) (6,848) (6,663) (6,550) (6,444) (6,353)4 Permanent differences 161 163 166 168 171 161 163 166 168 1715 Timing differences 1,483 1,637 1,682 1,425 1,547 1,483 1,637 1,682 1,425 1,54767 Taxable income $9,929 $8,975 $8,773 $8,592 $8,402 $10,739 $10,853 $10,798 $10,315 $10,43989 Calculation of Income Tax Expense

10 Income taxes payable $3,425 $3,097 $3,032 $3,031 $3,025 $3,705 $3,744 $3,760 $3,651 $3,75811 Part I.3 tax 206 181 127 63 0 206 181 127 63 012 Deferred income tax (180) (900) (1,000) (840) (1,075) 0 0 0 0 01314 Income tax expense $3,451 $2,377 $2,158 $2,253 $1,950 $3,911 $3,926 $3,887 $3,713 $3,7581516 Particulars of Timing Differences17 A. Tax Effects Subject to Flowthrough18 Depreciation & amortization $7,122 7,394 7,462 7,220 7,354 $7,122 7,394 7,462 7,220 7,354 19 Capital cost allowance (4,798) (4,880) (4,889) (4,891) (4,889) (4,798) (4,880) (4,889) (4,891) (4,889)20 Overheads capitalized (865) (878) (891) (904) (918) (865) (878) (891) (904) (918)21 Other 24 0 0 0 0 24 0 0 0 02223 1,483 1,637 1,682 1,425 1,547 1,483 1,637 1,682 1,425 1,54724 B. Tax Effects Subject to Deferral25 Deferred charges 0 0 0 0 0 0 0 0 0 02627 Timing differences $1,483 $1,637 $1,682 $1,425 $1,547 $1,483 $1,637 $1,682 $1,425 $1,5472829 Tax rate (including surtax) 34.50% 34.50% 34.55% 35.27% 36.00% 34.50% 34.50% 34.82% 35.39% 36.00%


INCOME TAXES

(000's)SCHEDULE 3

Pro Forma

PNG-West Division

Income Trust Status QuoPro Forma




1 Opening balance2 Share capital NA NA NA NA NA $8,960 $8,960 $8,960 $8,960 $8,9603 Contributed surplus NA NA NA NA NA 2,370 2,370 2,370 2,370 2,3704 Retained earnings NA NA NA NA NA 60,184 63,267 61,530 61,155 61,15156 NA NA NA NA NA 71,514 74,596 72,859 72,484 72,48078 Net income NA NA NA NA NA 6,288 6,544 6,499 6,454 6,4309 Shares issued NA NA NA NA NA 0 0 0 0 0

10 Preferred dividends NA NA NA NA NA (338) (337) (337) (337) (337)11 Common dividends NA NA NA NA NA (2,867) (7,944) (6,537) (6,121) (6,231)1213 Closing balance NA NA NA NA NA $74,596 $72,859 $72,484 $72,480 $72,342141516 Mid-year common equity NA NA NA NA NA $73,055 $73,728 $72,672 $72,482 $72,41117 Investment in Non Utility NA NA NA NA NA $0 $0 $0 $0 $018 less: acquisition premiums NA NA NA NA NA (1,683) (1,627) (1,572) (1,517) (1,462)19 less: investment in subsidiary company NA NA NA NA NA ($5,668) ($5,871) ($5,956) ($6,042) ($6,127)202122 NA NA NA NA NA $65,705 $66,230 $65,144 $64,923 $64,8222324 Deemed utility common equity $48,842 $48,464 $48,150 $47,934 $47,826 $48,813 $48,250 $47,596 $47,045 $46,5952526 Unused equity (deficiency) NA NA NA NA NA $16,892 $17,980 $17,548 $17,878 $18,227

Pro Forma

(000's)

Pro FormaIncome Trust Status Quo


COMMON EQUITY

SCHEDULE 4

PNG-West Division




1 Short Term Debt $9,497 $9,423 $9,363 $9,320 $9,300 $7,533 $11,793 $11,294 $11,315 $11,3472 proportion 7.00% 7.00% 7.00% 7.00% 7.00% 5.56% 8.80% 8.54% 8.66% 8.77%3 rate of return 5.50% 5.50% 5.50% 5.50% 5.50% 6.00% 6.00% 6.00% 6.00% 6.00%4 return component 0.39% 0.39% 0.39% 0.39% 0.39% 0.33% 0.53% 0.51% 0.52% 0.53%56 Long term debt $77,333 $76,734 $76,238 $75,895 $75,725 $74,246 $68,984 $68,321 $67,321 $66,4897 proportion 57.00% 57.00% 57.00% 57.00% 57.00% 54.76% 51.47% 51.68% 51.52% 51.37%8 rate of return 8.77% 8.71% 8.66% 8.61% 8.55% 8.61% 8.63% 8.59% 8.56% 8.53%9 return component 5.00% 4.97% 4.93% 4.91% 4.87% 4.72% 4.44% 4.44% 4.41% 4.38%

1011 Preferred shares $0 $0 $0 $0 $0 $5,000 $5,000 $5,000 $5,000 $5,00012 proportion 0.00% 0.00% 0.00% 0.00% 0.00% 3.69% 3.73% 3.78% 3.83% 3.86%13 rate of return 7.01% 7.01% 7.01% 7.01% 7.01% 7.01% 7.01% 7.01% 7.01% 7.01%14 return component 0.00% 0.00% 0.00% 0.00% 0.00% 0.26% 0.26% 0.27% 0.27% 0.27%1516 Common equity $48,842 $48,464 $48,150 $47,934 $47,826 $48,813 $48,250 $47,596 $47,045 $46,59517 proportion 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00%18 rate of return 9.90% 9.90% 9.90% 9.90% 9.90% 9.90% 9.90% 9.90% 9.90% 9.90%19 return component 3.56% 3.56% 3.56% 3.56% 3.56% 3.56% 3.56% 3.56% 3.56% 3.56%2021 Total capitalization $135,671 $134,621 $133,751 $133,150 $132,850 $135,592 $134,027 $132,211 $130,681 $129,4312223 Return on rate base 8.95% 8.91% 8.88% 8.86% 8.82% 8.87% 8.80% 8.78% 8.76% 8.74%2425 Utility rate base $135,671 $134,621 $133,751 $133,150 $132,850 $135,592 $134,027 $132,211 $130,681 $129,431

Income Trust Status QuoPro Forma


RETURN ON CAPITAL

SCHEDULE 5(000's)

Pro Forma

PNG-West Division

Revised Apr. 9 '04Tab 9

PNGIncome Trust App.

Page 1


1 Gross margin $8,782 $8,812 $8,853 $8,895 $9,528 $8,906 $8,869 $9,060 $9,248 $9,46123 O&M expenses 2,937 2,969 3,012 3,055 3,099 2,937 2,969 3,012 3,055 3,0994 Admin. & general expenses 939 953 967 982 997 939 953 967 982 9975 Property taxes, BC capital tax 761 776 792 808 824 761 776 792 808 8246 Depreciation & amortization 1,256 1,318 1,372 1,435 1,494 1,256 1,318 1,372 1,435 1,4947 Investment income, other revenue (153) (155) (158) (160) (162) (153) (155) (158) (160) (162)89 5,740 5,861 5,986 6,120 6,251 5,740 5,861 5,986 6,120 6,2511011 Earned return before income taxes 3,042 2,952 2,867 2,775 3,277 3,166 3,009 3,074 3,128 3,21012 Income taxes 450 459 305 134 477 571 520 517 510 5341314 Earned return $2,592 $2,493 $2,562 $2,641 $2,800 $2,595 $2,489 $2,558 $2,618 $2,6761516 Utility rate base $30,555 $29,379 $30,201 $31,126 $32,071 $30,528 $29,285 $30,039 $30,792 $31,5321718 Return on rate base 8.48% 8.48% 8.48% 8.48% 8.73% 8.50% 8.50% 8.52% 8.50% 8.49%

(000's)



SCHEDULE 1

Income Trust Status QuoPro FormaPro Forma



Page 2


1 Plant in service beginning of year $52,805 $55,015 $57,259 $59,537 $61,849 $52,805 $55,015 $57,259 $59,537 $61,8492 Additions 2,211 2,244 2,278 2,312 2,347 2,211 2,244 2,278 2,312 2,3473 Disposals 0 0 0 0 0 0 0 0 0 045 Plant in service end of year 55,016 57,259 59,537 61,849 64,195 55,016 57,259 59,537 61,849 64,1956 Accumulated depreciation 19,979 21,605 23,294 25,045 26,857 19,979 21,605 23,294 25,045 26,85778 Net plant in service end of year 35,037 35,654 36,243 36,804 37,338 35,037 35,654 36,243 36,804 37,338910 Net plant beginning of year 34,392 35,037 35,654 36,243 36,804 34,392 35,037 35,654 36,243 36,8041112 Net plant in service mid-year 34,714 35,345 35,948 36,523 37,071 34,714 35,345 35,948 36,523 37,07113 Contributions for construction (7,227) (7,045) (6,862) (6,678) (6,493) (7,227) (7,045) (6,862) (6,678) (6,493)14 Unamortized deferred charges 238 161 92 50 22 238 161 92 50 2215 Deferred income taxes (513) (453) (363) (168) (22) (553) (553) (553) (553) (553)16 Reserve for damages (69) (69) (69) (69) (69) (69) (69) (69) (69) (69)17 Cash working capital 3,261 1,287 1,299 1,310 1,402 3,274 1,292 1,327 1,360 1,39518 Other working capital 151 153 156 158 160 151 153 156 158 1601920 Utility rate base, mid-year $30,556 $29,379 $30,201 $31,126 $32,071 $30,529 $29,285 $30,039 $30,792 $31,532


Pro Forma

UTILITY RATE BASEFort St. John / Dawson Creek Division


SCHEDULE 2(000's)



Page 3


1 Calculation of Taxable Income2 Earned return before income taxes $3,042 $2,952 $2,867 $2,775 $3,277 $3,166 $3,009 $3,074 $3,128 $3,2103 Interest (1,530) (1,472) (1,513) (1,559) (1,686) (1,534) (1,470) (1,513) (1,547) (1,580)4 Permanent differences 12 12 12 13 13 12 12 12 13 135 Timing differences (206) (231) (213) (185) (159) (206) (231) (213) (185) (159)67 Taxable income $1,318 $1,261 $1,153 $1,043 $1,444 $1,438 $1,319 $1,360 $1,408 $1,48389 Calculation of Income Tax Expense

10 Income taxes payable $455 $435 $398 $360 $520 $496 $455 $469 $486 $53411 Part I.3 tax 75 64 47 24 0 75 64 47 24 012 Deferred income tax (80) (40) (140) (250) (43) 0 0 0 0 01314 Income tax expense $450 $459 $305 $134 $477 $571 $520 $517 $510 $5341516 Particulars of Timing Differences17 A. Tax Effects Subject to Flowthrough18 Depreciation & amortization $1,256 $1,318 $1,372 $1,435 $1,494 $1,256 $1,318 $1,372 $1,435 $1,49419 Capital cost allowance (1,155) (1,195) (1,226) (1,255) (1,283) (1,155) (1,195) (1,226) (1,255) (1,283)20 Deferred charges 0 0 0 0 0 0 0 0 0 021 Overheads capitalized (349) (354) (360) (365) (370) (349) (354) (360) (365) (370)22 Other 43 0 0 0 0 43 0 0 0 0232425 Timing differences ($206) ($231) ($213) ($185) ($159) ($206) ($231) ($213) ($185) ($159)2627 Tax rate 34.53% 34.50% 34.50% 34.50% 36.00% 34.50% 34.50% 34.50% 34.50% 36.00%28 Deferred tax rate 34.53% 34.50% 34.50% 34.50% 36.00% 34.50% 34.50% 34.50% 34.50% 36.00%

Pro Forma

(000's)

Pro Forma


INCOME TAXES

SCHEDULE 3

Fort St. John / Dawson Creek Division




Page 4


1 Opening balance2 Share capital NA NA NA NA NA $7,845 $7,845 $7,845 $7,845 $7,8453 Contributed surplus NA NA NA NA NA 0 0 0 0 04 Retained earnings NA NA NA NA NA 2,823 3,467 3,281 3,824 3,64656 NA NA NA NA NA 10,668 11,018 10,832 11,374 11,19678 Net income NA NA NA NA NA 1,025 1,019 1,045 1,070 1,0969 Shares issued NA NA NA NA NA 0 0 0 0 0

10 Preferred dividends NA NA NA NA NA (2) (1) (1) (1) (1)11 Common dividends NA NA NA NA NA (379) (1,203) (501) (1,248) (553)1213 Closing balance NA NA NA NA NA $11,312 $10,832 $11,374 $11,196 $11,739141516 Mid-year common equity NA NA NA NA NA $10,990 $10,925 $11,103 $11,285 $11,467171819 NA NA NA NA NA $10,990 $10,925 $11,103 $11,285 $11,4672021 Deemed utility common equity $11,000 $10,577 $10,872 $11,205 $11,545 $10,990 $10,542 $10,814 $11,085 $11,3522223 Unused equity (deficiency) NA NA NA NA NA $0 $382 $289 $200 $116

COMMON EQUITY

SCHEDULE 4(000's)

Pro FormaPro FormaIncome Trust Status Quo

Fort St. John / Dawson Creek DivisionPacific Northern Gas Ltd.



Page 5


1 Short term borrowings $2,139 $2,057 $2,114 $2,179 $2,245 $2,311 $1,610 $1,180 $1,255 $1,3272 proportion 7.00% 7.00% 7.00% 7.00% 7.00% 7.57% 5.50% 3.93% 4.08% 4.21%3 rate of return 5.50% 5.50% 5.50% 5.50% 5.50% 6.00% 6.00% 6.00% 6.00% 6.00%4 return component 0.39% 0.39% 0.39% 0.39% 0.39% 0.45% 0.33% 0.24% 0.24% 0.25%56 Long term debt $17,417 $16,746 $17,215 $17,742 $18,280 $17,204 $17,113 $18,029 $18,439 $18,8467 proportion 57.00% 57.00% 57.00% 57.00% 57.00% 56.35% 58.44% 60.02% 59.88% 59.77%8 rate of return 8.11% 8.11% 8.11% 8.11% 8.55% 8.11% 8.03% 8.00% 7.98% 7.96%9 return component 4.62% 4.62% 4.62% 4.62% 4.87% 4.57% 4.69% 4.80% 4.78% 4.76%1011 Preferred shares $0 $0 $0 $0 $0 $24 $20 $16 $12 $812 proportion 0.00% 0.00% 0.00% 0.00% 0.00% 0.08% 0.07% 0.05% 0.04% 0.03%13 rate of return 6.48% 6.48% 6.48% 6.48% 6.48% 6.48% 6.48% 6.48% 6.48% 6.48%14 return component 0.00% 0.00% 0.00% 0.00% 0.00% 0.01% 0.00% 0.00% 0.00% 0.00%1516 Common equity $11,000 $10,577 $10,872 $11,205 $11,545 $10,990 $10,542 $10,814 $11,085 $11,35217 proportion 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00%18 rate of return 9.65% 9.65% 9.65% 9.65% 9.65% 9.64% 9.65% 9.65% 9.65% 9.65%19 return component 3.47% 3.47% 3.47% 3.47% 3.47% 3.47% 3.47% 3.47% 3.47% 3.47%2021 Total capitalization $30,555 $29,379 $30,201 $31,126 $32,071 $30,528 $29,285 $30,039 $30,792 $31,5322223 Return on rate base 8.48% 8.48% 8.48% 8.48% 8.73% 8.50% 8.50% 8.52% 8.50% 8.49%2425 Utility rate base $30,556 $29,379 $30,201 $31,126 $32,071 $30,529 $29,285 $30,039 $30,792 $31,532

Pro Forma


RETURN ON CAPITAL

SCHEDULE 5(000's)


Fort St. John / Dawson Creek Division



Page 1


1 Gross margin $1,030 $1,016 $1,014 $1,012 $1,011 $1,045 $1,052 $1,064 $1,079 $1,09223 O&M expenses 591 588 595 603 611 591 588 595 603 6114 Admin. & general expenses 125 127 129 131 133 125 127 129 131 1335 Property taxes, BC capital tax 31 31 32 32 33 31 31 32 32 336 Depreciation & amortization 147 159 163 170 174 147 159 163 170 1747 Investment income, other revenue (13) (13) (13) (14) (14) (13) (13) (13) (14) (14)89 880 892 906 922 937 880 892 906 922 937

1011 Earned return before income taxes 150 124 108 89 74 165 160 158 156 15412 Income taxes 53 27 12 (7) (24) 65 63 63 65 661314 Earned return $98 $96 $96 $96 $98 $100 $97 $95 $92 $891516 Utility rate base $1,090 $1,081 $1,076 $1,084 $1,108 $1,086 $1,061 $1,029 $998 $9661718 Return on rate base 8.95% 8.91% 8.88% 8.86% 8.82% 9.21% 9.19% 9.19% 9.18% 9.17%



SCHEDULE 1(000's)

Tumbler Ridge Division

Income Trust Status QuoPro Forma Pro Forma



Page 2

Line Test Year Test YearNo. 2004 2005 2006 2007 2008 04 LTM 2005 2006 2007 2008

1 Plant in service beginning of year $7,481 $7,620 $7,761 $7,904 $8,050 $7,481 $7,620 $7,761 $7,904 $8,0502 Additions 140 141 143 145 148 140 141 143 145 1483 Disposals 0 0 0 0 0 0 0 0 0 045 Plant in service end of year 7,621 7,761 7,904 8,050 8,197 7,621 7,761 7,904 8,050 8,1976 Accumulated depreciation 4,751 5,028 5,312 5,602 5,899 4,751 5,028 5,312 5,602 5,89978 Net plant in service end of year 2,870 2,733 2,592 2,447 2,298 2,870 2,733 2,592 2,447 2,2989

10 Net plant beginning of year 3,001 2,869 2,733 2,592 2,447 3,001 2,869 2,733 2,592 2,4471112 Net plant in service mid-year 2,936 2,801 2,663 2,520 2,373 2,936 2,801 2,663 2,520 2,37313 Contributions for construction (1,399) (1,281) (1,162) (1,043) (924) (1,399) (1,281) (1,162) (1,043) (924)14 Unamortized deferred charges 62 51 37 28 23 62 51 37 28 2315 Deferred income taxes (411) (395) (367) (327) (274) (415) (415) (415) (415) (415)16 Reserve for damages (155) (155) (155) (155) (155) (155) (155) (155) (155) (155)17 Cash working capital 60 63 64 64 69 60 62 64 66 6718 Other working capital (3) (3) (3) (3) (3) (3) (3) (3) (3) (3)1920 Utility rate base, mid-year $1,090 $1,081 $1,076 $1,084 $1,108 $1,086 $1,061 $1,029 $998 $966


Pro Forma Pro Forma

(000's)

UTILITY RATE BASE

SCHEDULE 2





Page 3


1 Calculation of Taxable Income2 Earned return before income taxes $150 $124 $108 $89 $74 $165 $160 $158 $156 $1543 Interest (59) (58) (57) (57) (58) (61) (60) (58) (56) (54)4 Permanent differences 0 0 0 0 0 0 0 0 0 05 Timing differences 73 73 75 80 82 73 73 75 80 8267 Taxable income $165 $139 $126 $111 $98 $177 $174 $175 $180 $18289 Calculation of Income Tax Expense

10 Income taxes payable $57 $48 $44 $39 $35 $61 $60 $61 $64 $6611 Part I.3 tax 4 2 2 1 0 4 2 2 1 012 Deferred income tax (8) (23) (33) (47) (59) 0 0 0 0 01314 Income tax expense $53 $27 $12 ($7) ($24) $65 $63 $63 $65 $661516 Particulars of Timing Differences17 A. Tax Effects Subject to Flowthrough18 Depreciation & amortization $147 $159 $163 $170 $174 $147 $159 $163 $170 $17419 Capital cost allowance (76) (79) (81) (83) (84) (76) (79) (81) (83) (84)20 Deferred charges 0 0 0 0 0 0 0 0 0 021 Overheads capitalized (7) (7) (7) (7) (7) (7) (7) (7) (7) (7)22 Other 10 0 0 0 0 10 0 0 0 02324 Timing differences $73 $73 $75 $80 $82 $73 $73 $75 $80 $82252627 Tax rate 34.63% 34.50% 34.67% 35.25% 36.00% 34.46% 34.66% 35.07% 35.56% 36.00%28 Deferred tax rate 34.63% 34.50% 34.67% 35.25% 36.00% 34.46% 34.66% 35.07% 35.56% 36.00%

Pro Forma Pro Forma


INCOME TAXES

SCHEDULE 3(000's)





Page 4


1 Opening balance2 Share capital NA NA NA NA NA $680 $680 $680 $680 $6803 Contributed surplus NA NA NA NA NA 0 0 0 0 04 Retained earnings NA NA NA NA NA (543) (126) (88) (51) (16)56 NA NA NA NA NA 137 554 592 629 66478 Net income NA NA NA NA NA 39 38 37 36 349 Shares Issued NA NA NA NA NA 0 0 0 0 0

10 Preferred dividends NA NA NA NA NA 0 0 0 0 011 Common dividends NA NA NA NA NA 379 0 0 0 01213 Closing balance NA NA NA NA NA $554 $836 $827 $817 $804141516 Mid-year common equity NA NA NA NA NA $345 $817 $809 $799 $78717 Investment in Non Utility NA NA NA NA NA 0 0 0 0 01819 NA NA NA NA NA $345 $817 $809 $799 $7872021 Deemed utility common equity $392 $389 $387 $390 $399 $391 $382 $370 $359 $3482223 Unused equity (deficiency) NA NA NA NA NA $0 ($192) ($147) ($101) ($54)


COMMON EQUITY

SCHEDULE 4(000's)


Income Trust Status QuoPro Forma Pro Forma



Page 5


1 Short term borrowings $76 $76 $75 $76 $78 $17 $21 $19 $20 $212 proportion 7.00% 7.00% 7.00% 7.00% 7.00% 1.59% 2.01% 1.89% 2.03% 2.19%3 rate of return 5.50% 5.50% 5.50% 5.50% 5.50% 6.00% 6.00% 6.00% 6.00% 6.00%4 return component 0.39% 0.39% 0.39% 0.39% 0.39% 0.10% 0.12% 0.11% 0.12% 0.13%56 Long term debt $621 $616 $613 $618 $632 $678 $658 $639 $618 $5977 proportion 57.00% 57.00% 57.00% 57.00% 57.00% 62.41% 61.99% 62.11% 61.97% 61.81%8 rate of return 8.77% 8.71% 8.66% 8.61% 8.55% 8.89% 8.88% 8.87% 8.87% 8.86%9 return component 5.00% 4.97% 4.93% 4.91% 4.87% 5.55% 5.51% 5.51% 5.49% 5.48%

1011 Preferred shares $0 $0 $0 $0 $0 $0 $0 $0 $0 $012 proportion 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%13 rate of return 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%14 return component 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%1516 Common equity $392 $389 $387 $390 $399 $391 $382 $370 $359 $34817 proportion 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00%18 rate of return 9.90% 9.90% 9.90% 9.90% 9.90% 9.90% 9.90% 9.90% 9.90% 9.90%19 return component 3.57% 3.56% 3.56% 3.56% 3.56% 3.56% 3.56% 3.56% 3.56% 3.56%2021 Total capitalization $1,090 $1,081 $1,076 $1,084 $1,108 $1,086 $1,061 $1,029 $998 $9662223 Return on rate base 8.95% 8.91% 8.88% 8.86% 8.82% 9.21% 9.19% 9.19% 9.18% 9.17%2425 Utility rate base $1,090 $1,081 $1,076 $1,084 $1,108 $1,086 $1,061 $1,029 $998 $966

Pro Forma Pro Forma

(000's)


SCHEDULE 5

Tumbler Ridge DivisionPacific Northern Gas Ltd.

RETURN ON CAPITAL

Documents

April 9, 2004 6th Floor - 900 Howe Street Vancouver, B.C.€¦Via Courier April 9, 2004 B.C. Utilities Commission File No.: 4.2.28 6th Floor - 900 Howe Street