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Transactions With Affiliates
6 Months Ended
Jun. 30, 2011
Transactions With Affiliates [Abstract]  
TRANSACTIONS WITH AFFILIATES
6.  TRANSACTIONS WITH AFFILIATES.
     Prior to The Williams Companies, Inc. (Williams) restructuring in February 2010, we were a participant in Williams’ cash management program, whereby we made advances to and received advances from Williams. The interest rate on these intercompany demand notes was based upon the weighted average cost of Williams’ debt outstanding at the end of each quarter. We received interest income from advances to Williams of $2.2 million during the six months ended June 30, 2010.
     Subsequent to Williams’ restructuring in February 2010, we became a participant in WPZ’s cash management program, and we make advances to and receive advances from WPZ. At June 30, 2011 and December 31, 2010, the advances due us by WPZ totaled approximately $208.5 million and $108.8 million, respectively. The advances are represented by demand notes. 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. At June 30, 2011, the interest rate was 0.01 percent. The interest income from these advances to WPZ was minimal during the six months ended June 30, 2011 and June 30, 2010.
     Included in our operating revenues for the six months ending June 30, 2011 and 2010 are revenues received from affiliates of $9.9 million and $12.4 million, respectively. The rates charged to provide sales and services to affiliates are the same as those that are charged to similarly-situated nonaffiliated customers.
     Through an agency agreement with us, WPXEM manages our jurisdictional merchant gas sales. The agency fees billed by WPXEM for the six months ended June 30, 2011 and 2010 were not significant.
     Included in our cost of sales for the six months ended June 30, 2011 and 2010 is purchased gas cost from affiliates, excluding the agency fees discussed above, of $4.5 million and $2.8 million, respectively. All gas purchases are made at market or contract prices.
     We have long-term gas purchase contracts containing variable prices that are currently in the range of estimated market prices. Our estimated purchase commitments under such gas purchase contracts are not material to our total gas purchases. Furthermore, through the agency agreement with us, WPXEM has assumed management of our merchant sales service and, as our agent, is at risk for any above-spot market gas costs that it may incur.
     Williams has a policy of charging subsidiary companies for management services provided by the parent company and other affiliated companies. Included in our administrative and general expenses for the six months ended June 30, 2011 and 2010, are $27.0 million and $26.9 million, respectively, for such corporate expenses charged by Williams, WPZ, and other affiliated companies. Management considers the cost of these services to be reasonable.
     Pursuant to an operating agreement, we serve as contract operator on certain Williams Field Services Company (WFS) facilities. For the six months ended June 30, 2011 and 2010, we recorded reductions in operating expense of $2.1 million and $3.8 million, respectively, for services provided to and reimbursed by WFS under terms of the operating agreement.
     Distributions totaling $101.0 million were declared and paid during the six months ended June 30, 2011. An additional distribution of $51.0 million was declared and paid in July 2011. Two distributions totaling approximately $203.8 million were declared and paid to Williams Gas Pipeline Company, LLC (WGP) and a $0.2 million non cash distribution was made to WGP during the six months ended June 30, 2010. In the six months ended June 30, 2011, Williams Partners Operating, LLC (WPO) made contributions totaling $86.0 million to us to fund a portion of our expenditures for additions to property, plant and equipment. In July 2011, WPO made an additional $14.0 million contribution.
     We have no employees. Services are provided to us by an affiliate, Transco Pipeline Services LLC (TPS), a Delaware limited liability company. On February 17, 2010, we entered into an administrative services agreement pursuant to which TPS provides personnel, facilities, goods and equipment not otherwise provided by us that are necessary to operate our business. In return, we reimburse TPS for all direct and indirect expenses it incurs or payments it makes (including salary, bonus, incentive compensation and benefits) in connection with these services. We were billed $95.2 million and $74.4 million in the six months ended June 30, 2011 and 2010, respectively. Such expenses are primarily included in “Administrative and general” and “Operations and maintenance” expenses on the accompanying Condensed Consolidated Statement of Income.