TRANSACTIONS WITH MAJOR CUSTOMERS AND AFFILIATES

Concentration of Off-Balance-Sheet and Other Credit Risk

During the periods presented, more than 10 percent of our operating revenues were generated from each of the following customers:



	Years Ended December 31,
	2013		2012		2011
	(Thousands of Dollars)
Puget Sound Energy, Inc.	$	110,111	$	100,799	$	99,116
Northwest Natural Gas Company	51,085		47,297		47,322

Our major customers are located in the Pacific Northwest. As a general policy, collateral is not required for receivables, but customers’ financial condition and credit worthiness are regularly evaluated and historical collection losses have been minimal.

Related Party Transactions

We are a participant in WPZ’s cash management program. At December 31, 2013 and 2012, the advances due to us by WPZ totaled approximately $119.2 million and $29.3 million, respectively. These advances are represented by demand notes and are classified as Current Assets in the accompanying Balance Sheet. The interest rate on these intercompany demand notes is based upon the daily overnight investment rate paid on WPZ’s excess cash at the end of each month, which was approximately 0.01 percent at December 31, 2013. The interest income from these advances was minimal during the years ended December 31, 2013, 2012, and 2011. Such interest income is included in Other (Income) and Other Expenses: Miscellaneous other expenses, net on the accompanying Statement of Comprehensive Income.

We have no employees. Services necessary to operate our business are provided to us by Williams and certain affiliates of Williams. We reimburse Williams and its affiliates for all direct and indirect expenses incurred or payments made (including salary, bonus, incentive compensation, and benefits) in connection with these services. Employees of Williams also provide general administrative and management services to us, and we are charged for certain administrative expenses incurred by Williams. These charges are either directly identifiable or allocated to our assets. Direct charges are for goods and services provided by Williams at our request. Allocated charges are based on a three factor formula, which considers revenues; property, plant, and equipment; and payroll. In management’s estimation, the allocation methodologies used are reasonable and result in a reasonable allocation to us of our costs of doing business incurred by Williams. We were billed $112.1 million, $113.0 million, and $98.0 million in the years ended December 31, 2013, 2012, and 2011, respectively, for these services. Such expenses are primarily included in General and administrative and Operation and maintenance expenses on the accompanying Statement of Comprehensive Income.

During the periods presented, our revenues include transportation transactions and rental of communication facilities with subsidiaries of Williams. Combined revenues for these activities, for the years ended December 31, 2013 and 2012, were minimal. Combined revenues for these activities for the year ended December 31, 2011 were $24.7 million. The reduction in revenues from 2011 is a result of Williams’ spin-off of its former exploration and production business, which was completed on December 31, 2011. These revenues, associated with transportation transactions, are now reflected with the revenues from outside parties. In 2013, we incurred reimbursable costs of $89.8 million due from Williams Field Services related to the construction of a natural gas liquids pipeline, of which $38.6 million was outstanding at December 31, 2013.

During 2013, 2012, and 2011, we declared and paid equity distributions to our parent of $91.0 million, $137.5 million, and $127.0 million, respectively. During January 2014, we declared and paid equity distributions of $52.0 million to our parent.

During 2013, 2012, and 2011, we received contributions of $13.3 million, $8.6 million, and $5.1 million from our parent to fund a portion of our expenditures for additions to property, plant, and equipment.

We have entered into various other transactions with certain related parties, the amounts of which were not significant. These transactions and the above-described transactions are made on the basis of commercial relationships and prevailing market prices or general industry practices.