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39
Competitive Natural Gas Sales and Services
The following table provides summary data of our Competitive Natural Gas Sales and Services business segment for 2010,
2011 and 2012 (in millions, except throughput and customer data):
Year Ended December 31,
2010 2011 2012
Revenues......................................................................................................... $ 2,651 $ 2,511 $ 1,784
Expenses:
Natural gas.................................................................................................... 2,591 2,458 1,730
Operation and maintenance .......................................................................... 38 41 45
Depreciation and amortization...................................................................... 4 5 6
Taxes other than income taxes...................................................................... 2 1 1
Goodwill impairment.................................................................................... — — 252
Total expenses.......................................................................................... 2,635 2,505 2,034
Operating Income (Loss) ................................................................................ $ 16 $ 6 $ (250)
Throughput (in Bcf) ........................................................................................ 548 558 562
Number of customers at end of period (1) ...................................................... 12,193 14,267 16,330
___________________
(1) These numbers do not include approximately 12,700 natural gas customers as of December 31, 2012 that are under
residential and small commercial choice programs invoiced by their host utility.
2012 Compared to 2011. Our Competitive Natural Gas Sales and Services business segment reported operating income,
excluding the goodwill impairment discussed below, of $2 million for 2012 compared to $6 million for 2011. The decrease in
operating income of $4 million was primarily due to a $24 million negative impact of mark-to-market accounting for derivatives
associated with certain forward natural gas purchases and sales used to lock in economic margins. 2012 included mark-to-market
charges of $16 million compared to a $8 million benefit for the same period of 2011. Substantially offsetting this decrease was a
$20 million improvement in operating margins primarily as a result of the termination of uneconomic transportation contracts and
an increase in retail sales customers and volumes.
2011 Compared to 2010. Our Competitive Natural Gas Sales and Services business segment reported operating income of
$6 million for 2011 compared to $16 million for 2010. The decrease in operating income of $10 million was primarily due to
reduced basis spreads on pipeline transport opportunities and decreased seasonal storage spreads of $9 million in 2011, which
included a $5 million charge related to an early capacity release on pipeline transportation, as compared to 2010. Additionally,
an $11 million write-down of natural gas inventory to the lower of cost or market occurred in 2011 as compared to a $6 million
write-down in 2010. Offsetting these decreases to operating income is an increase in operating income of $4 million related to
the favorable impact of the mark-to-market valuation for non-trading financial derivatives for 2011 of $8 million versus the
favorable impact of $4 million for 2010.
Goodwill Impairment
A non-cash goodwill impairment charge of $252 million for our Competitive Natural Gas Sales and Services business segment
was recorded in 2012. The adverse wholesale market conditions facing our energy services business, specifically the prospects
for continued low geographic and seasonal price differentials for natural gas, led to a reduction in our estimate of the fair value
of goodwill associated with this reporting unit. See Note 4 to our consolidated financial statements for further discussion of the
goodwill impairment charge.