-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FrnXQ+vC0YT00qaViMZHir5ALonmj1DMkiwyFoRTJhNZE4Tq+3Neo6IloYiGTw6E QcxECcdGY/3oCsZKs1TL0w== 0000893220-02-000612.txt : 20020510 0000893220-02-000612.hdr.sgml : 20020510 ACCESSION NUMBER: 0000893220-02-000612 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHERN INDIANA PUBLIC SERVICE CO CENTRAL INDEX KEY: 0000072843 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 350552990 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04125 FILM NUMBER: 02641242 BUSINESS ADDRESS: STREET 1: 801 E. 86TH AVENUE CITY: MERRILLVILLE STATE: IN ZIP: 46410-6272 BUSINESS PHONE: 2198535200 MAIL ADDRESS: STREET 1: 801 E. 86TH AVENUE CITY: MERRILLVILLE STATE: IN ZIP: 46410-6272 10-Q 1 w60314e10-q.txt QUARTERLY REPORT FOR THE PERIOD ENDED 3/31/2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002 OR [ ] 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 1-4125 NORTHERN INDIANA PUBLIC SERVICE COMPANY (Exact name of registrant as specified in its charter) Indiana 35-0552990 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 801 East 86th Avenue Merrillville, Indiana 46410 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (877) 647-5990 Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange Title of each class on which registered ------------------- ------------------- Series A Cumulative Preferred - No Par Value New York 4-1/4% Cumulative Preferred - $100 Par Value American
Securities registered pursuant to Section 12(g) of the Act: Cumulative Preferred Stock - $100 Par Value (4-1/2%, 4.22%, 4.88%, 7.44% and 7.50% Series) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No __. As of May 1, 2002, 73,282,258 shares of the registrant's Common Shares, no par value, were issued and outstanding, all held beneficially and of record by NiSource Inc. Documents Incorporated by Reference None NORTHERN INDIANA PUBLIC SERVICE COMPANY FORM 10-Q QUARTERLY REPORT FOR THE QUARTER ENDED MARCH 31, 2002 TABLE OF CONTENTS
Page ---- PART I FINANCIAL INFORMATION Item 1. Financial Statements Statements of Consolidated Income ...................... 3 Consolidated Balance Sheets ............................ 4 Statements of Consolidated Cash Flows .................. 6 Notes to Consolidated Financial Statements ............... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .......... 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 19 PART II OTHER INFORMATION Item 1. Legal Proceedings ........................................ 20 Item 2. Changes in Securities and Use of Proceeds ................ 20 Item 3. Defaults Upon Senior Securities .......................... 20 Item 4. Submission of Matters to a Vote of Security Holders ...... 20 Item 5. Other Information ........................................ 20 Item 6. Exhibits and Reports on Form 8-K ......................... 20 Signature ................................................ 21
2 PART I ITEM 1. FINANCIAL STATEMENTS NORTHERN INDIANA PUBLIC SERVICE COMPANY STATEMENTS OF CONSOLIDATED INCOME
Three Months Ended March 31, (in millions) 2002 2001 - -------------------------------------------------------------------------------------------------------------------- (unaudited) (unaudited) OPERATING REVENUES Gas Distribution $ 288.8 $ 483.3 Electric 261.9 256.4 - -------------------------------------------------------------------------------------------------------------------- Gross Operating Revenues 550.7 739.7 - -------------------------------------------------------------------------------------------------------------------- COST OF ENERGY Gas costs 176.7 357.7 Fuel for electric generation 52.8 51.6 Power purchased 28.4 16.6 - -------------------------------------------------------------------------------------------------------------------- Cost of sales 257.9 425.9 - -------------------------------------------------------------------------------------------------------------------- Total Net Revenues 292.8 313.8 - -------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Operation 63.7 51.9 Maintenance 16.1 19.0 Depreciation and amortization 62.6 61.9 Other taxes 19.8 23.5 - -------------------------------------------------------------------------------------------------------------------- Total Operating Expenses 162.2 156.3 - -------------------------------------------------------------------------------------------------------------------- UTILITY OPERATING INCOME BEFORE UTILITY INCOME TAXES 130.6 157.5 - -------------------------------------------------------------------------------------------------------------------- UTILITY INCOME TAXES 41.8 50.1 - -------------------------------------------------------------------------------------------------------------------- UTILITY OPERATING INCOME 88.8 107.4 - -------------------------------------------------------------------------------------------------------------------- OTHER INCOME (DEDUCTIONS) (0.5) 1.8 - -------------------------------------------------------------------------------------------------------------------- INTEREST Interest on long-term debt 12.9 14.6 Other interest 2.0 5.8 Amortization of premium, reacquisition premium, discount and expense on debt, net 0.6 1.0 - -------------------------------------------------------------------------------------------------------------------- Total Interest 15.5 21.4 - -------------------------------------------------------------------------------------------------------------------- NET INCOME $ 72.8 $ 87.8 ==================================================================================================================== DIVIDEND REQUIREMENTS ON PREFERRED STOCKS 1.9 1.9 - -------------------------------------------------------------------------------------------------------------------- BALANCE AVAILABLE FOR COMMON SHARES $ 70.9 $ 85.9 - -------------------------------------------------------------------------------------------------------------------- COMMON DIVIDENDS DECLARED $ 31.0 $ 109.0 - --------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 3 ITEM 1. FINANCIAL STATEMENTS (continued) NORTHERN INDIANA PUBLIC SERVICE COMPANY CONSOLIDATED BALANCE SHEETS
MARCH 31, December 31, (in millions) 2002 2001 - ------------------------------------------------------------------------------------------------------------------------ (unaudited) ASSETS UTILITY PLANT, at original cost Electric $ 4,456.7 $ 4,440.2 Gas 1,429.2 1,423.7 Common 364.1 355.1 - ------------------------------------------------------------------------------------------------------------------------ Total Utility Plant 6,250.0 6,219.0 Less: Accumulated provision for depreciation and amortization 3,415.1 3,357.2 - ------------------------------------------------------------------------------------------------------------------------ Net utility plant 2,834.9 2,861.8 - ------------------------------------------------------------------------------------------------------------------------ OTHER PROPERTY AND INVESTMENTS 8.4 8.1 - ------------------------------------------------------------------------------------------------------------------------ CURRENT ASSETS Cash and cash equivalents 8.4 16.0 Accounts receivable (less reserve of $11.2 and $11.9, respectively) 144.3 116.4 Gas cost adjustment clause 29.8 28.2 Materials and supplies, at average cost 46.1 44.7 Electric production fuel, at average cost 33.4 29.2 Natural gas in storage, at last-in, first-out cost 5.9 104.7 Price risk management assets 0.3 -- Prepayments and other 44.7 40.3 - ------------------------------------------------------------------------------------------------------------------------ Total Current Assets 312.9 379.5 - ------------------------------------------------------------------------------------------------------------------------ OTHER ASSETS Regulatory assets 168.3 170.0 Prepayments and other 191.0 194.3 - ------------------------------------------------------------------------------------------------------------------------ Total Other Assets 359.3 364.3 - ------------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS $ 3,515.5 $ 3,613.7 ========================================================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 4 ITEM 1. FINANCIAL STATEMENTS (continued) NORTHERN INDIANA PUBLIC SERVICE COMPANY CONSOLIDATED BALANCE SHEETS
MARCH 31, December 31, (in millions) 2002 2001 - ------------------------------------------------------------------------------------------------------------------------- (unaudited) CAPITALIZATION AND LIABILITIES CAPITALIZATION Common shareholder's equity $ 1,079.0 $ 1,036.3 Preferred Stocks-- Series without mandatory redemption provisions 81.1 81.1 Series with mandatory redemption provisions 5.0 5.0 Long-term debt, excluding amounts due within one year 823.1 843.1 - ------------------------------------------------------------------------------------------------------------------------- Total Capitalization 1,988.2 1,965.5 - ------------------------------------------------------------------------------------------------------------------------- CURRENT LIABILITIES Current redeemable preferred stock subject to mandatory redemption 43.0 43.0 Current portion of long-term debt 79.0 59.0 Short term borrowings 139.5 335.4 Accounts payable 136.4 145.8 Dividends declared on common and preferred stocks 1.8 1.7 Customer deposits 33.4 31.8 Taxes accrued 264.6 195.4 Interest accrued 14.7 7.8 Fuel adjustment clause -- 3.7 Accrued employment costs 44.9 34.1 Price risk management liabilities 0.1 5.6 Other accruals 22.5 24.7 - ------------------------------------------------------------------------------------------------------------------------- Total Current Liabilities 779.9 888.0 - ------------------------------------------------------------------------------------------------------------------------- OTHER LIABILITIES AND DEFERRED CREDITS Deferred income taxes 458.0 464.7 Deferred investment tax credits 69.6 71.4 Deferred credits 45.2 48.9 Accrued liability for postretirement benefits 160.7 160.8 Regulatory liabilities 4.6 4.5 Other noncurrent liabilities 9.3 9.9 - ------------------------------------------------------------------------------------------------------------------------- Total Other 747.4 760.2 - ------------------------------------------------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES (see notes) -- -- - ------------------------------------------------------------------------------------------------------------------------- TOTAL CAPITALIZATION AND LIABILITIES $ 3,515.5 $ 3,613.7 =========================================================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 5 ITEM 1. FINANCIAL STATEMENTS (continued) NORTHERN INDIANA PUBLIC SERVICE COMPANY STATEMENTS OF CONSOLIDATED CASH FLOWS
Three Months Ended March 31, (in millions) 2002 2001 - ------------------------------------------------------------------------------------------------------------------ (unaudited) (unaudited) OPERATING ACTIVITIES Net Income $ 72.8 $ 87.8 Adjustments to reconcile net income to net cash: Depreciation and amortization 62.6 61.9 Net changes in price risk management activities (5.8) 5.1 Deferred income taxes (6.0) (8.0) Amortization of deferred investment tax credits (1.8) (1.8) Other, net 6.7 (4.8) - ------------------------------------------------------------------------------------------------------------------ 128.5 140.2 Changes in components of working capital: Accounts receivable, net (27.9) (70.6) Electric production fuel (4.2) (11.5) Materials and supplies (1.4) 2.0 Natural gas in storage 98.8 93.5 Accounts payable 0.7 (122.8) Taxes accrued 69.2 84.5 Fuel adjustment clause (3.7) 1.0 Gas cost adjustment clause (1.6) 64.5 Accrued employment costs 10.8 (18.9) Other accruals 4.8 22.7 Other, net (6.0) (3.0) - ------------------------------------------------------------------------------------------------------------------ Net Cash from Operating Activities 268.0 181.6 - ------------------------------------------------------------------------------------------------------------------ INVESTING ACTIVITIES Construction expenditures (34.2) (43.4) Other investing activities, net (12.7) (10.2) - ------------------------------------------------------------------------------------------------------------------ Net Investing Activities (46.9) (53.6) - ------------------------------------------------------------------------------------------------------------------ FINANCING ACTIVITIES Change in short-term debt (195.9) (78.4) Dividends paid - common shares (31.0) (50.0) Dividends paid - preferred shares (1.8) (1.8) - ------------------------------------------------------------------------------------------------------------------ Net Financing Activities (228.7) (130.2) - ------------------------------------------------------------------------------------------------------------------ Increase (decrease) in cash and cash equivalents (7.6) (2.2) Cash and cash equivalents at beginning of period 16.0 17.9 - ------------------------------------------------------------------------------------------------------------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8.4 $ 15.7 ================================================================================================================== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for interest, net of amounts capitalized 9.5 14.6 Cash paid for income taxes -- -- - ------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 6 ITEM 1. FINANCIAL STATEMENTS (continued) NORTHERN INDIANA PUBLIC SERVICE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF ACCOUNTING PRESENTATION The accompanying unaudited consolidated financial statements for Northern Indiana Public Service Company (Northern Indiana) reflect all normal recurring adjustments that are necessary, in the opinion of management, to present fairly the results of operations in accordance with accounting principles generally accepted in the United States. The accompanying financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Northern Indiana's Annual Report on Form 10-K for the fiscal year ended December 31, 2001. Income for interim periods may not be indicative of results for the calendar year due to weather variations and other factors. Certain reclassifications have been made to the 2001 financial statements to conform to the 2002 presentation. 2. RESTRUCTURING ACTIVITIES During 2000, NiSource Inc. (NiSource) developed and began the implementation of a plan to restructure its operations. The restructuring plan included a severance program, a transition plan to implement operational efficiencies throughout NiSource's operations and a voluntary early retirement program. During 2001, the restructuring initiative was continued with the addition of a plan to restructure the operations within the NiSource's Gas Distribution and Electric Operations segments. Additionally, in December 2001 Northern Indiana announced its plan to indefinitely shut down the Dean H. Mitchell Generating Station located in Gary, Indiana. For all of the plans, a total of approximately 225 management, professional, administrative and technical positions will be eliminated. As of March 31, 2002, 66 employees had been terminated. At March 31, 2002 and December 31, 2001, the consolidated balance sheets reflected liabilities of $7.8 million and $9.7 million related to the restructuring plans. 3. ELECTRIC OPERATIONS REGULATORY REVIEW During the course of a regularly scheduled review, referred to as a Level 1 review, the staff of the Indiana Utility Regulatory Commission (IURC) made a preliminary determination, based on unadjusted historical financial information filed by Northern Indiana, that Northern Indiana was earning returns that were in excess of its last rate order and generally established standards. Despite efforts to explain to the IURC staff several adjustments that needed to be made to the filed information to make such an analysis meaningful, the staff recommended that a formal investigation be performed. During 2001, Northern Indiana and several other parties filed testimony, participated in hearings and submitted proposed forms of the order and comments on these proposed orders. Northern Indiana's testimony indicated that if rates are to be changed, they should be increased. 4. RISK MANAGEMENT ACTIVITIES Northern Indiana uses commodity-based derivative financial instruments to manage certain risks inherent in its business. Northern Indiana accounts for its derivatives under Statement of Financial Accounting Standards No. 133 (SFAS No. 133), "Accounting for Derivative Instruments and Hedging Activities" and accounts for its trading derivatives that do not qualify as derivatives accounted for under SFAS No. 133 pursuant to Emerging Issues Task Force Issue No. 98-10, "Accounting for Contracts Involved in Energy Trading and Risk Management Activities." 7 ITEM 1. FINANCIAL STATEMENTS (continued) NORTHERN INDIANA PUBLIC SERVICE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SFAS NO. 133. The activity for the first quarter of 2002 quarter with respect to cash flow hedges included the following:
Three Months Ended March 31, ( in millions) 2002 - ----------------------------------------------------------------------------------------- UNREALIZED GAINS (LOSSES) ON DERIVATIVES QUALIFYING AS CASH FLOW HEDGES: Unrealized hedging (losses) arising during the period due to cumulative effect of a change in accounting principle, recognized at January 1, 2002, net of tax $ (2.7) Unrealized hedging gains arising during the period on derivatives qualifying as cash flow hedges, net of tax 1.8 Reclassification adjustment for net gain included in net income, net of tax 0.9 - ----------------------------------------------------------------------------------------- Net unrealized gains (losses) on derivatives qualifying as cash flow hedges, net of tax $ -- - -----------------------------------------------------------------------------------------
Unrealized gains and losses on Northern Indiana's cash flow and fair value hedges were recorded as price risk management assets and liabilities along with unrealized gains and losses on Northern Indiana's trading portfolio. The accompanying Consolidated Balance Sheets reflected price risk management assets related to unrealized gains and losses on hedges of $0.3 million and effectively zero at March 31, 2002 and December 31,2001, respectively,and all of which was included in "Current Assets." Price risk management liabilities related to unrealized gains and losses on hedges were $0.1 million and $ 5.6 million at March 31, 2002 and December 31, 2001, respectively all of which was included in "Current Liabilities." During the first quarter of 2002, no components of the derivatives' fair values were excluded in the assessment of hedge effectiveness. Also during the first quarter, no amounts were reclassified from other comprehensive income to earnings due to the probability that the forecasted transactions would not occur. Accumulated other comprehensive income related to cash flow hedges is zero at March 31, 2002. 8 ITEM 1. FINANCIAL STATEMENTS (continued) NORTHERN INDIANA PUBLIC SERVICE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) TRADING ACTIVITIES. Northern Indiana's trading operations included the activities of its power trading business. Since power trading assets and liabilities were temporarily transferred to Energy USA-TPC Corp., a subsidiary of NiSource, effective November 1, 2001, there were no trading assets and liabilities at March 31, 2002 and December 31, 2001. 5. BUSINESS SEGMENT INFORMATION Northern Indiana's operations are divided into three primary business segments. The Gas Distribution segment provides natural gas service and transportation for residential, commercial and industrial customers in Indiana. The Electric Operations segment provides electric service in 21 counties in the northern part of Indiana. The Merchant Operations segment provides energy-related services including electric wheeling, bulk power and provided power trading through October 31, 2001. The following tables provide information about business segments. Adjustments have been made to the segment information to arrive at information included in the results of operations and financial position. Northern Indiana uses operating income as its primary measurement for each of the reported segments. Operating income is derived from revenues and expenses directly associated with each segment. The adjustments represent the revenues and net pre-tax operating income of Northern Indiana's electric trading business, which are reflected in the Merchant Operations Segment but are reported as a component of Other Income (Deductions) in the Statements of Consolidated Income.
($ in millions) GAS ELECTRIC MERCHANT ADJUSTMENTS TOTAL - --------------------------------------------------------------------------------------------------------------- FOR THE THREE MONTHS ENDED MARCH 31, 2002 Operating revenues 288.8 238.8 23.1 -- 550.7 Utility operating income before utility income taxes 58.8 65.6 6.2 -- 130.6 FOR THE THREE MONTHS ENDED MARCH 31, 2001 Operating revenues 483.3 247.3 123.3 (114.2) 739.7 Utility operating income before utility income taxes 73.8 76.8 11.9 (5.0) 157.5 - ---------------------------------------------------------------------------------------------------------------
Other Income (Deductions) in the Statement of Consolidated Income were comprised of the following items:
($ in millions) MERCHANT OTHER TOTAL - --------------------------------------------------------------------------------------------------------------- FOR THE THREE MONTHS ENDED MARCH 31, 2002 Power trading revenues -- -- -- Power trading cost of sales -- -- -- Power trading administrative expenses -- -- -- Power trading unrealized gains (losses) -- -- -- Other -- (0.5) (0.5) - --------------------------------------------------------------------------------------------------------------- Total Other Income (Deductions) -- (0.5) (0.5) - --------------------------------------------------------------------------------------------------------------- FOR THE THREE MONTHS ENDED MARCH 31, 2001 Power trading revenues 108.6 -- 108.6 Power trading cost of sales (108.8) -- (108.8) Power trading administrative expenses (0.4) -- (0.4) Power trading unrealized gains (losses) 5.6 -- 5.6 Other -- (3.2) (3.2) - --------------------------------------------------------------------------------------------------------------- Total Other Income (Deductions) 5.0 (3.2) 1.8 - ---------------------------------------------------------------------------------------------------------------
9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NORTHERN INDIANA PUBLIC SERVICE COMPANY CONSOLIDATED RESULTS The Management's Discussion and Analysis, including statements regarding market risk sensitive instruments, contains "forward-looking statements," within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Investors and prospective investors should understand that many factors govern whether any forward-looking statement contained herein will be or can be realized. Any one of those factors could cause actual results to differ materially from those projected. These forward-looking statements include, but are not limited to, statements concerning Northern Indiana's plans, objectives, expected performance, expenditures and recovery of expenditures through rates, stated on either a consolidated or segment basis, and any and all underlying assumptions and other statements that are other than statements of historical fact. From time to time, Northern Indiana may publish or otherwise make available forward-looking statements of this nature. All such subsequent forward-looking statements, whether written or oral and whether made by or on behalf of Northern Indiana, are also expressly qualified by these cautionary statements. All forward-looking statements are based on assumptions that management believes to be reasonable; however, there can be no assurance that actual results will not differ materially. Realization of Northern Indiana's objectives and expected performance is subject to a wide range of risks and can be adversely affected by, among other things, increased competition in deregulated energy markets, weather, fluctuations in supply and demand for energy commodities, growth opportunities for Northern Indiana's regulated businesses, dealings with third parties over whom Northern Indiana has no control, the regulatory process, regulatory and legislative changes, changes in general economic, capital and commodity market conditions, and counter-party credit risk, many of which are beyond the control of Northern Indiana. In addition, the relative contributions to profitability by each segment, and the assumptions underlying the forward-looking statements relating thereto, may change over time. The following Management's Discussion and Analysis should be read in conjunction with Northern Indiana's Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (Form 10-K). FIRST QUARTER RESULTS Net Income Northern Indiana reported net income of $72.8 million for the three months ended March 31, 2002, compared to $87.8 million in the 2001 period. Net Revenues Total consolidated net revenue (operating revenues less cost of sales) for the three months ended March 31, 2002, was $292.8 million, a $21.0 million decrease over the same period last year. The decrease is attributed to lower gas, electric and merchant margins and the unfavorable impact of warmer than normal weather. Decrease in gas cost recovery initiative revenues also contributed to the decrease. Expenses Operating expenses for the first quarter of 2002 were $162.2 million, an increase of $5.9 million over the same period last year. Operation and maintenance expenses increased $8.9 million due to increased administrative and general expenses and increased customer accounts expenses, partially offset by decreased electric production maintenance expenses. Depreciation and amortization increased $0.7 million due to plant additions. Other taxes decreased $3.7 million principally due to decreased Indiana Gross Income Tax. Utility Income Taxes Utility income tax expense for the first quarter of 2002 was $41.8 million, compared to $50.1 million in 2001, due to lower pre-tax income in the current period. Other Income (Deductions) Other income (Deductions) for the first quarter of 2002 decreased $2.3 million mainly as a result of decreased power trading operating income. Effective November 1, 2001, Northern Indiana's power trading operations were temporarily transferred to Energy USA-TPC Corp., a subsidiary of Nisource. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) NORTHERN INDIANA PUBLIC SERVICE COMPANY Interest Interest expense was $15.5 million for the first quarter of 2002, compared to $21.4 million in 2001, primarily due to lower average interest rates on short-term debt outstanding and decreased short-term and long-term debt. LIQUIDITY AND CAPITAL RESOURCES Generally, cash flow from operations has provided sufficient liquidity to meet current operating requirements. A significant portion of Northern Indiana's operations, most notably in the gas and electric distribution businesses, are subject to seasonal fluctuations in cash flow. During the heating season, which is primarily from November through March, cash receipts from gas sales and transportation services typically exceed cash requirements. In the summer months, cash receipts for electric sales normally exceed requirements. Also, during the summer months, cash on hand, together with external short-term and long-term financing, is used in operations to purchase gas to place in storage for heating season deliveries, perform necessary maintenance of facilities, make capital improvements in plant and expand service into new areas. Northern Indiana satisfies its liquidity requirements primarily through internally generated funds and through intercompany borrowings from NiSource Finance Corp. (NFC). NFC borrows funds in the commercial paper market and maintains a $1.75 billion revolving credit facility with a syndicate of banks for back-up liquidity purposes. The credit facility is guaranteed by NiSource. Northern Indiana may borrow on an intercompany basis a maximum of one billion dollars through the NiSource Money Pool as approved by the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935. As of March 31, 2002, Northern Indiana had $139.5 million of intercompany short-term borrowings outstanding with NFC at a weighted average interest rate of 2.68%. Northern Indiana may sell up to $100 million of certain of its accounts receivable to Citibank under a sales agreement, without recourse, which expires May 2003. Northern Indiana has sold $100 million under this agreement. Under this agreement, Northern Indiana may not sell any new receivables to Citibank if Northern Indiana's debt rating falls below BBB- or Baa3 at Standard and Poor's and Moody's Investor Service, respectively. Credit Ratings On December 6, 2001 Fitch Ratings downgraded the long-term debt ratings of NiSource and its subsidiaries. Fitch cited weak consolidated credit coverage ratios and higher than projected debt levels at NiSource, resulting in a credit profile which was more consistent with a "BBB" rating category, rather than the previous "BBB+" rating. At the same time, Fitch also assigned a "Stable" ratings outlook for NiSource and its subsidiaries. On February 5, 2002, Fitch reaffirmed the credit ratings of NiSource and its subsidiaries, but revised NiSource's ratings outlook from "Stable" to "Negative". In January 2002, Standard and Poor's affirmed NiSource's BBB credit rating and its A2 commercial paper rating with a negative outlook. On December 7, 2001, Moody's Investors Service put under review for possible downgrade the short-term and long-term debt ratings of NiSource and its subsidiaries. Moody's stated rationale for their negative ratings watch action was NiSource's higher than expected overall leverage level and concerns about the effect that the weakening local economy might have on NiSource's operating results. Immediately following the Moody's ratings watch action, NiSource's ability to rollover maturities within the A2/P2 commercial paper market was significantly constrained. As a result, NiSource utilized its revolving credit facility to fund a number of commercial paper maturities occurring subsequent to the Moody's ratings watch action. At March 31, 2002, $1.0 billion of commercial paper maturities had been refinanced through NiSource's revolving credit facility. On February 1, 2002, Moody's downgraded the senior unsecured long-term debt ratings of NiSource and NFC to Baa3 and the commercial paper rating of NFC to P3 with a negative outlook. In addition, Moody's downgraded the long-term debt ratings of all other rated subsidiaries to Baa2 to align the ratings of the subsidiaries and bring them closer to the parent's ratings going forward. As a split-rated A2/P3 commercial paper issuer, NiSource has had its access to the commercial paper market constrained and has met its liquidity needs going forward by using its revolving credit facility and is expected to refinance a portion of its short-term borrowing requirements in the fixed-income capital markets. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) NORTHERN INDIANA PUBLIC SERVICE COMPANY MARKET RISK SENSITIVE INSTRUMENTS AND POSITIONS Through its various business activities, Northern Indiana is exposed to risk including non-trading and trading risks. The non-trading risks to which Northern Indiana is exposed include interest rate risk and commodity price risk. The risk resulting from trading activities consists primarily of commodity price and credit risk. Northern Indiana's risk management policy permits the use of certain financial instruments to manage its market risk, including futures, forwards, options and swaps. Risk management at Northern Indiana is defined as the process by which the organization ensures that the risks to which it is exposed are the risks to which it desires to be exposed to achieve its primary business objectives. Northern Indiana employs various analytic techniques to measure and monitor its market risks, including value-at-risk (VaR) and instrument sensitivity to market factors. VaR represents the potential loss for an instrument or portfolio from adverse changes in market factors, for a specified time period and at a specified confidence level. Non-Trading Risks Commodity price risk resulting from non-trading activities at Northern Indiana is limited, since current regulations allow recovery of prudently incurred purchased power, fuel and gas costs through the rate-making process. As the utility industry undergoes deregulation, however, these operations may be providing services without the benefit of the traditional rate-making process and will be more exposed to commodity price risk. Northern Indiana enters into certain sales contracts with customers based upon a fixed sales price and varying volumes, which are ultimately dependent upon the customer's supply requirements. Northern Indiana utilizes derivative financial instruments to reduce the commodity price risk based on modeling techniques to anticipate these future supply requirements. Northern Indiana is exposed to interest rate risk as a result of changes in interest rates on intercompany borrowings with NFC. These instruments have interest rates that are indexed to short-term market interest rates. At March 31, 2002, the combined borrowings outstanding under these facilities totaled $139.5 million. Based upon average borrowings under these agreements during 2002, an increase in short-term interest rates of 100 basis points (1%) would have increased interest expense by $0.6 million for the three months ending March 31, 2002. Due to the nature of the industry, credit risk is a factor in many of Northern Indiana's business activities. In sales and trading activities, credit risk arises because of the possibility that a counterparty will not be able or willing to fulfill its obligations on a transaction on or before settlement date. In derivative activities, credit risk arises when counterparties to derivative contracts, such as interest rate swaps, are obligated to pay Northern Indiana the positive fair value or receivable resulting from the execution of contract terms. Exposure to credit risk is measured in terms of both current and potential exposure. Current credit exposure is generally measured by the notional or principal value of financial instruments and direct credit substitutes, such as commitments and standby letters of credit and guarantees. Current credit exposure includes the positive fair value of derivative instruments. Because many of Northern Indiana's exposures vary with changes in market prices, Northern Indiana also estimates the potential credit exposure over the remaining term of transactions through statistical analyses of market prices. In determining exposure, Northern Indiana considers collateral and master netting agreements, which are used to reduce individual counterparty risk. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) NORTHERN INDIANA PUBLIC SERVICE COMPANY Trading Risks Effective November 1, 2001, Northern Indiana power trading activities were temporarily transferred to Energy USA-TPC Corp., a subsidiary of NiSource. The transactions associated with Northern Indiana's power trading operations have given rise to various risks, including market risks resulting from the potential loss from adverse changes in the market prices of electricity. The power trading operations marketed and traded over-the-counter contracts for the purchase and sale of electricity. The power trading activities generally have not resulted in the physical delivery of electricity. Some contracts within the trading portfolio required settlement by physical delivery, but were net settled in accordance with industry standards. Refer to and "Risk Management Activities" in Note 4 of Notes to the Consolidated Financial Statements for further discussion of Northern Indiana's risk management. OTHER INFORMATION Competition The regulatory environment applicable to Northern Indiana continues to undergo fundamental changes. These changes have previously had, and will continue to have, an impact on Northern Indiana's operations, structure and profitability. At the same time, competition within the energy industry will create opportunities to compete for new customers and revenues. Management has taken steps to become more competitive and profitable in this changing environment. These initiatives include providing its customers with increased choice for new products and services. Insurance Renewal Since the September 11, 2001 terrorist attacks that occurred on the World Trade Center in New York City and the Pentagon in Washington D.C, Northern Indiana has noted evidence of substantial rate increases and additional coverage restrictions in the energy insurance market. Northern Indiana expects the cost of its insurance and related deductibles to be higher than they were previously, when much of its insurance is renewed in July 2002. Presentation of Segment Information During 2001, Northern Indiana realigned a portion of its operations and reclassified previously reported operating segment information to conform to the realigned operating structure. The electric wheeling, bulk power, and power trading operations were moved from the Electric Operations segment to Merchant Operations. All periods presented reflect these changes. Northern Indiana's operations are divided into three primary business segments. The Gas Distribution segment provides natural gas service and transportation for residential, commercial and industrial customers in Indiana. The Electric Operations segment provides electric service in 21 counties in the northern part of Indiana. The Merchant Operations segment provides energy-related services including electric wheeling, bulk power and power trading through October 31, 2001. 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) NORTHERN INDIANA PUBLIC SERVICE COMPANY GAS DISTRIBUTION OPERATIONS
Three Months Ended March 31, (in millions) 2002 2001 - ------------------------------------------------------------------------------------------------------------ NET REVENUES Sales revenues $ 276.5 $ 468.8 Less: Cost of gas sold 176.7 357.7 - ------------------------------------------------------------------------------------------------------------ Net Sales Revenues 99.8 111.1 Transportation Revenues 12.3 14.5 - ------------------------------------------------------------------------------------------------------------ Net Revenues 112.1 125.6 - ------------------------------------------------------------------------------------------------------------ OPERATING EXPENSES Operation and maintenance 26.4 21.7 Depreciation and amortization 20.4 20.4 Other taxes 6.5 9.7 - ------------------------------------------------------------------------------------------------------------ Total Operating Expenses 53.3 51.8 - ------------------------------------------------------------------------------------------------------------ Operating Income (Loss) $ 58.8 $ 73.8 ============================================================================================================ REVENUES ($ IN MILLIONS) Residential 182.3 334.9 Commercial 56.0 111.0 Industrial 22.9 54.5 Transportation 12.3 14.5 Deferred Gas Costs 0.8 (64.4) Other 14.5 32.8 - ------------------------------------------------------------------------------------------------------------ Total 288.8 483.3 - ------------------------------------------------------------------------------------------------------------ SALES AND TRANSPORTATION (MDth) Residential Sales 28.9 30.0 Commercial Sales 9.5 10.2 Industrial Sales 3.9 4.3 Transportation 40.0 39.4 Other 3.8 3.1 - ------------------------------------------------------------------------------------------------------------ Total 86.1 87.0 - ------------------------------------------------------------------------------------------------------------ HEATING DEGREE DAYS 2,375 2,725 NORMAL HEATING DEGREE DAYS 2,809 2,809 % COLDER (WARMER) THAN NORMAL (15%) (3%) CUSTOMERS Residential 626,621 621,969 Commercial 48,095 48,183 Industrial 3,318 3,459 Transportation 14,810 15,352 Other 15 21 - ------------------------------------------------------------------------------------------------------------ TOTAL 692,859 688,984 - ------------------------------------------------------------------------------------------------------------
14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) NORTHERN INDIANA PUBLIC SERVICE COMPANY GAS DISTRIBUTION OPERATIONS (CONTINUED) Northern Indiana's natural gas distribution operations (Gas Distribution) serve approximately 693,000 customers in the northern part of Indiana. Market Conditions Northern Indiana has state-approved recovery mechanisms that provide a means for full recovery of prudently incurred gas costs. Gas costs are treated as pass-through costs and have no impact on the net revenues recorded in the period. The gas costs included in revenues are matched with the gas cost expense recorded in the period and the difference is recorded on the balance sheet to be included in a future billing mechanism to true up customer billings. Northern Indiana has pursued non-traditional revenue sources within the evolving natural gas marketplace. These efforts include both the sale of products and services upstream of its service territory, the sale of products and services in its service territories and gas supply cost incentive mechanisms for service to its core markets. The upstream products are made up of transactions that occur between Northern Indiana and a buyer for the sales of unbundled or rebundled gas supply and capacity products. The on-system services are offered by Northern Indiana to customers and include products such as the transportation of gas on Northern Indiana's system. The incentive mechanisms gives Northern Indiana an opportunity to share in the savings created from such things as gas purchase prices paid below an agreed benchmark and its ability to reduce pipeline capacity charges. The treatment of the revenues generated from these types of transactions varies. Northern Indiana generated $3.6 million in net revenues from various non-traditional sales and incentive programs in the first quarter of 2002, a $5.5 million decrease over the prior period. Weather Weather in Northern Indiana's market area for the first three months of 2002 was 15% warmer than normal and 13% warmer than the first quarter of 2001. Throughput Total volumes sold and transported of 86.1 million dekatherms (MDth) for the first quarter of 2002 decreased 0.9 MDth from the same period last year. Net Revenues Net revenues for the three months ended March 31, 2002 were $112.1 million, a decrease of $13.5 million from the same period in 2001, primarily due to a decline of approximately $9.6 million as a result of warmer weather, decreased gas cost recovery initiatives and decreased industrial sales. Operating Income Operating income for the first quarter of 2002 of $58.8 million decreased $15.0 million from the same period in 2001. Operation and maintenance expenses increased $4.7 million, primarily resulting from increased administrative and general expenses and increased customer accounts expenses. Other taxes decreased $3.2 million principally due to decreased Indiana Gross Income Tax. 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) NORTHERN INDIANA PUBLIC SERVICE COMPANY ELECTRIC OPERATIONS
Three Months Ended March 31, (in millions) 2002 2001 - ----------------------------------------------------------------------------------------------------- NET REVENUES Sales Revenues $ 238.8 $ 247.3 Less: Cost of sales 64.6 66.4 - ----------------------------------------------------------------------------------------------------- Net Revenues 174.2 180.9 - ----------------------------------------------------------------------------------------------------- OPERATING EXPENSES Operation and maintenance 53.1 48.8 Depreciation and amortization 42.2 41.5 Other taxes 13.3 13.8 - ----------------------------------------------------------------------------------------------------- Total Operating Expenses 108.6 104.1 - ----------------------------------------------------------------------------------------------------- Operating Income $ 65.6 $ 76.8 ===================================================================================================== REVENUES ($ IN MILLIONS) Residential 68.9 68.8 Commercial 69.0 68.0 Industrial 91.0 105.0 Other electric service 9.9 5.5 - ----------------------------------------------------------------------------------------------------- Total 238.8 247.3 - ----------------------------------------------------------------------------------------------------- SALES (GIGAWATT HOURS) Residential 702.4 697.7 Commercial 831.7 815.4 Industrial 2,025.8 2,323.0 Other electric service 36.8 39.4 - ----------------------------------------------------------------------------------------------------- Total 3,596.7 3,875.5 - ----------------------------------------------------------------------------------------------------- CUSTOMERS Residential 381,737 379,898 Commercial 47,486 46,670 Industrial 2,622 2,660 Other electric service 802 805 - ----------------------------------------------------------------------------------------------------- Total 432,647 430,033 - -----------------------------------------------------------------------------------------------------
Northern Indiana generates and distributes electricity approximately 433,000 customers in 21 counties in the northern part of Indiana. Northern Indiana owns and operates four coal-fired electric generating stations with a net capability of 3,179 megawatts (mw), four gas-fired combustion turbine-generating units with a net capability of 203 mw and two hydroelectric generating plants with a net capability of 10 mw. These facilities provide for a total system net capability of 3,392 mw. The shutdown of the Dean Mitchell Generating Station (Mitchell Station) announced in December 2001 was completed in the first quarter of 2002. The net capability of the Mitchell Station was 502 mw. As of March 31, 2002, excluding the Mitchell Station, these facilities provide for a total system net capability of 2,890 mw. Northern Indiana is interconnected with five neighboring electric utilities. Market Conditions The regulatory frameworks applicable to Electric Operations continue to work through fundamental changes as noted below. These changes will continue to have, an impact on Northern Indiana's Electric Operations, structure and profitability. At the same time, competition within the industry will create opportunities to compete for new customers and revenues. Management has taken steps to become more competitive and profitable in this changing environment, including indefinitely shutting down an inefficient generating plant, converting some of its generating units to allow use of lower cost, low sulfur coal and improving the transmission interconnections with neighboring electric utilities. 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) NORTHERN INDIANA PUBLIC SERVICE COMPANY ELECTRIC OPERATIONS (CONTINUED) The overall weakening of the U.S. economy is reflected in the 297.2 gigawatt-hour (gwh) decline in sales to the industrial customer class for the first quarter of 2002 compared to the same period last year. In particular, the steel and steel related industries have been adversely impacted by recent events and market conditions, with three major customers (LTV Corp., Bethlehem Steel Corp. and National Steel Corp.) declaring bankruptcy. Overall deliveries to the steel industry were down 229.8 gwh in the first quarter of 2002 compared to the same period last year. Regulatory Matters In 1999, The Federal Energy Regulatory Commission (FERC) issued Order 2000 addressing the formation and operation of Regional Transmission Organization (RTO). On February 28, 2001, Northern Indiana joined the Alliance RTO. On December 18, 2001, the IURC issued an order denying Northern Indiana's request to transfer functional control of its transmission facilities to the Alliance RTO. On December 20, 2001, the FERC reversed prior orders that had preliminarily approved the Alliance RTO and concluded that the Alliance RTO failed to meet Order 2000's scope and configuration requirements. FERC ordered the Alliance RTO companies, including Northern Indiana, to pursue membership in the Midwest Independent System Operator (MISO). The Alliance RTO is actively negotiating to become a part of the MISO. On April 24, 2002, FERC issued an Order giving guidance regarding the rate design and delegation of functions applicable to the Alliance companies, including efforts to join a RTO as an Independent Transmission Company (ITC). In addition the Alliance companies must make a filing by May 27, 2002 detailing which RTO they plan to join and whether such participation will be collective or individual. Northern Indiana has expended approximately $7.2 million related to joining the Alliance RTO. Northern Indiana believes that the amounts spent will be recoverable. Northern Indiana has been recovering the costs of electric power purchased for sale to its customers through the Fuel Adjustment Clause. The recovery provides for cost to be collected if they are below a cap set based upon the costs of Northern Indiana's most expensive generating unit. If costs exceed this cap, Northern Indiana must demonstrate why it should be allowed recovery before recovery is approved. In January 2002, Northern Indiana filed for approval to implement a purchase power tracker (PPT). The PPT would allow recovery of all costs related to purchasing electricity for use by Northern Indiana's customers on a periodic basis. No actions have been taken by the IURC on this filing. During the course of a regularly scheduled review, referred to as a Level 1 review, the staff of the IURC made a preliminary determination, based on unadjusted historical financial information filed by Northern Indiana, that Northern Indiana was earning returns that were in excess of its last rate order and generally established standards. Despite efforts to explain to the IURC staff several adjustments that needed to be made to the filed information to make such an analysis meaningful, the staff recommended that a formal investigation be performed. During 2001, Northern Indiana and several other parties filed testimony, participated in hearings and submitted proposed forms of the order and comments on these proposed orders. Northern Indiana's testimony indicated that if rates are to be changed, they should be increased. Environmental Matters The U.S Environmental Protection Agency (EPA) issued final rules revising the National Ambient Air Quality Standards for ozone and particulate matter in July 1997. On May 14, 1999, the United States Court of Appeals for the D.C. Circuit remanded the new rules for both ozone and particulate matters to the EPA. The Court of Appeals decision was appealed to the Supreme Court, which heard oral arguments on November 7, 2000. The Supreme Court rendered a complex ruling on February 27, 2001 that required several issues to be resolved by the D.C. Circuit Court before final rulemaking could occur. On March 26, 2002, the D.C. Circuit Court largely upheld the ambient air standards as proposed. Consequently, final rules specifying a compliance level and controls necessary for compliance will now be developed by EPA which will likely change air emissions compliance requirements. Resulting rules could require additional reductions in sulfur dioxide, particulate matter and nitrogen oxides emissions from coal-fired boilers (including Northern Indiana's electric generating stations). Final implementation 17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) NORTHERN INDIANA PUBLIC SERVICE COMPANY ELECTRIC OPERATIONS (CONTINUED) methods will be set by the EPA as well as state regulatory authorities. Northern Indiana believes that the costs relating to compliance with any new limits may be substantial but are dependent upon the ultimate control program agreed to by the targeted states and the EPA and are currently not reasonably estimable. Northern Indiana will continue to closely monitor developments in this area, however, the exact nature of the impact of the new standards on its operations will not be known for some time. Sales Electric sales for the first quarter of 2002 were 3,596.7 million kilowatt-hours (kwh), a decrease of 278.8 million kwh, compared to the 2001 period, primarily due to reduced industrial sales reflecting the economic downturn. Net Revenues In the first quarter of 2002, electric net revenues of $174.2 million decreased by $6.7 million over the 2001 period, primarily attributable to a decrease in industrial net revenues due to the economic downturn. Operating Income Operating income for the first quarter of 2002 was $65.6 million, a decrease of $11.2 million from the same period in 2001. Operation and maintenance expenses increased $4.3 million, primarily resulting from increased administrative and general expenses and increased customer accounts expenses, partially offset by decreased electric production maintenance expenses. Depreciation and amortization increased $0.7 million primarily due to plant additions. 18 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) NORTHERN INDIANA PUBLIC SERVICE COMPANY MERCHANT OPERATIONS
Three Months Ended March 31, (in millions) 2002 2001 - -------------------------------------------------------------------------------------------------------- NET REVENUES Electric Revenues $ 23.1 $ 123.3 Less: Cost of sales 16.6 110.7 - -------------------------------------------------------------------------------------------------------- Net Revenues 6.5 12.6 TOTAL OPERATING EXPENSES 0.3 0.7 - -------------------------------------------------------------------------------------------------------- Operating Income $ 6.2 $ 11.9 ======================================================================================================== VOLUMES Electric sales (Gigawatt Hours) 756.9 2,569.7 - --------------------------------------------------------------------------------------------------------
Effective November 1, 2001, Northern Indiana's power trading operations were temporarily transferred to Energy USA-TPC Corp., a subsidiary of NiSource. Net Revenues Net revenues for the first quarter of 2002 were $6.5 million, a decrease of $6.1 million over the same period last year. The decrease is due primarily to decreased power trading margins since there were no power trading operations for the first quarter of 2002. Operating Income Merchant Operations had operating income of $6.2 million for the first quarter of 2002 compared to operating income of $11.9 million for the same period last year. The decrease is primarily due to the decreased net revenues discussed above. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For a discussion regarding quantitative and qualitative disclosures about market risk, see Management's Discussion and Analysis of Financial Condition and Results of Operations under "Market Risk Sensitive Instruments and Positions." 19 PART II NORTHERN INDIANA PUBLIC SERVICE COMPANY ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None 20 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Northern Indiana Public Service Company ---------------------------------------------- (Registrant) Date: May 9, 2002 By: /s/ Jeffrey W. Grossman ---------------------------------------------- Jeffrey W. Grossman Vice President (Duly Authorized Officer) 21 -----END PRIVACY-ENHANCED MESSAGE-----