Chase Tower, Eighth Floor. P.O. Box July 7,2006

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1 STEPTOE & JOHNSON ATTORNEYS AT LAW Chase Tower, Eighth Floor Writer's Contact Information P.O. Box 1588 Charleston, WV (304) (304) Fax (304) July 7,2006 VIA HAND DELIVERY Mrs. Sandra Squire Executive Secretary Public Service Commission of West Virginia Post Office Box 812 Charleston, West Virginia ) /> r- r. I c') -;:, Re: CASE NO G-PC 'i rn EQUITABLE RESOURCES, INC. AND HOPE GAS, INC., dba DOMINION HOPE Joint Application of Equitable Resources, Inc. and Hope Gas, Inc. for all approvals required for the sale of all of the stock of Hope Gas, Inc., by its parent company, Consolidated Natural Gas Company, to Equitable Resources, Inc. with Equitable Resources, Inc. being the surviving parent company of Hope Gas, InC. Dear Mrs. Squire: On behalf of Hope Gas, Inc., dba Dominion Hope, enclosed please find an original and twelve (12) copies of its Prepared Direct Testimony of Jimmy Staton in the above proceeding. A copy of this filing has been served upon all parties to ths proceeding, as evidence by the attached certificate of service. Please stamp the enclosed copy of this filing as received and return it to me at your convenience. Thank you, and best wishes. Sincerely, P E. Dandridge McDonald EDM:tm Enclosures cc (w/enc): Meyishi Blair, Esquire

2 - David Sade, Esquire Richard Gottlieb, Esquire Daniel L. Frutchey, Esquire Scott H. Strauss, Esquire Kathryn Reed Bayless Susan G. George, Esquire Mark 0. Webb, Esquire Stephen H. Watts, II, Esquire

3 BEFORE THE PUBLIC SERVICE COMMISSION QF WEST VIRGINIA CASE NO G-PC EQUITABLE RESOURCES, INC. AND HOPE GAS, INC., d/b/a Dominion Hope Joint Application of Equitable Resources, Inc. and Hope Gas, Inc. for all approvals required for the sale of all of the stock of Hope Gas, Inc., by its parent company, Consolidated Natural Gas Company, to Equitable Resources, Inc. with Equitable Resources, Inc. being the surviving parent company of Hope Gas, Inc. PREPARED DIRECT TESTIMONY OF JIMMY D. STATON DATED: July 7,2006 CH

4 BEFORE THE PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CASE NO G-PC EQUITABLE RESOURCES, INC. AND HOPE GAS, INC., d/b/a Dominion Hope Joint Application of Equitable Resources, Inc, and Hope Gas, Inc. for all approvals required for the sale of all of the stock of Hope Gas, Inc., by its parent company, Consolidated Natural Gas Company, to Equitable Resources, Inc. with Equitable Resources, Inc. being the surviving parent company of Hope Gas, Inc. PREPARED DIRECT TESTIMONY OF JIMMY D. STATON Please state your name and business address. My name is Jimmy D. Staton. My business address is One James River Plaza, 701 E. Cary Street, Richmond, Virginia By whom are you employed, and in what capacity? I am employed by Dominion Resources Services Inc. ( Dominion ) as the Senior Vice President - Gas Delivery in the Dominion Delivery business group. I am also the Senior Vice President of Hope Gas, Inc. d/b/a Dominion Hope ( Dominion Hope ) and The Peoples Natural Gas Company d/b/a Dominion Peoples ( Dominion Peoples ). Please state your education and employment experience. I was graduated from Louisiana State University with a bachelor s degree in petroleum engineering. My first job after college was with the Federal Energy Regulatory Commission, where I was a petroleum engineerhate analyst. Subsequently, I served as

5 the Director - Rates for Arkla Energy Resources, which is now Reliant Gas Transmission, In 1993, I moved to West Virginia and joined CNG Transmission Corporation as Director - Rates. CNG Transmission Corporation, now called Dominion Transmission Corporation, is Dominion s interstate pipeline and storage subsidiary. In 1996, I became Vice President - Pricing, Planning and Financial Services. In that position, I was responsible for strategic and financial planning, pricing the company s products and services, competitive intelligence, the financial and treasury functions, and redesigning the company s processes to improve performance. On January 1, 1999, I became President - Asset Operations for the regulated businesses of Consolidated Natural Gas Company ( CNG ). In that position, I was responsible for directing all of the operating activities for CNG s pipeline company and its four local distribution subsidiaries. As stated previously, I now serve as Senior Vice President - Gas Operations in the Dominion Delivery business and am the Senior Vice President of Dominion Hope and Dominion Peoples. Please briefly describe your job responsibilities. I am responsible for the day-to-day operations of Dominion s services to 1.8 million gas customers in Ohio, Pennsylvania and West Virginia. My responsibilities include construction and maintenance of gas delivery infrastructure; compliance with state and federal safety, operations and environmental regulations; adherence to federal and state 2

6 code requirements; and responding to customer needs. I am responsible for developing regulatory strategies, marketing strategies and strategic planning for Dominion s Delivery s natural gas distribution businesses. With regard to Dominion Hope, my organization is responsible for providing services to our customers in West Virginia, adding new customers, maintaining the infrastructure, complying with federal, state and local codes, and responding to customer requirements, including meter reading, odor of gas calls and other service related inquiries. I directed the activities of the team that analyzed, negotiated and presented this transaction to the Dominion Board for approval. I am now responsible to ensure a smooth transition for Dominion Hope s and Dominion Peoples employees and customers. What is the purpose of your testimony in this proceeding? The purpose of my testimony is: (I) to provide the background regarding Dominion Hope and Dominion Peoples; (2) to sponsor portions of the Joint Application supplied by Dominion Hope; and (3) to describe other aspects of the transaction in respect to Dominion Hope. 3

7 Please explain the Dominion organizational structure. Dominion is headquartered in Richmond, Virginia, and has four major business groups: (1) Dominion Delivery, which includes Dominion Hope and which is responsible for gas distribution, electric distribution, customer service and retail; (2) Dominion Energy, which is responsible for gas transmission, electric transmission and the energy clearinghouse; (3) Dominion Generation, which is responsible for all of the Company s electric generating assets; and (4) Dominion Exploration and Production, which is responsible for the Company s onshore and offshore exploration and production activities. In addition, Dominion has a service company that provides financial, accounting, legal and other services to the major business groups. Please provide a brief description of Dominion Hope. Dominion Hope is a public utility corporation incorporated in West Virginia in 1898 that provides natural gas service to approximately 116,500 customers in 32 West Virginia counties. Dominion Peoples is a sister company of Dominion Hope and is a natural gas public utility operating in Pennsylvania subject to the jurisdiction of the Public Utilities Commission of Pennsylvania ( PaPUC ). Both Dominion Hope and Dominion Peoples are direct, wholly-owned subsidiaries of CNG, a holding company incorporated in Delaware. CNG is a direct, wholly-owned subsidiary of Dominion Resources, Inc., a holding company organized under the laws of the Commonwealth of Virginia. 4

8 Are the factual information and documents pertaining to Dominion Hope in the Joint Application at the above noted docket and appendices true and correct to the best of your knowledge, information and belief? Yes, they are. Please explain why Dominion Resources, Inc. decided to sell the stock of Dominion Hope. Dominion and CNG decided to sell the stock of Dominion Hope and Dominion Peoples after several inquiries were made as to the availability of the companies. At that time, Dominion decided to assess the market value of the companies to see if a sale made sense. Please describe generally the application transactions with respect to Dominion Hope. Equitable Resources, Inc. has agreed to acquire Dominion Hope and Dominion Peoples in a stock transaction under which Dominion Hope and Dominion Peoples would become direct, wholly-owned subsidiaries of Equitable. Equitable will acquire all of the authorized, issued and outstanding capital stock of Dominion Hope and Dominion Peoples. Dominion Hope will continue to exist as a West Virginia public utility corporation and remain a separate entity subject to regulation by the Public Service Commission of West Virginia ( Commission ). All of Dominion Hope s tariffs and 5

9 Commission approved filings and programs (with the possible exception of the proposed blending of the purchased gas cost rates discussed in Equitable s testimony) will not be changed until such time as regulatory approval.from the Commission is sought and obtained. Equitable is not affiliated with Dominion HopeDominion Peoples/CNG/Dominion and the negotiations which have produced the terms and conditions of Stock Purchase Agreement have been at arms length. The basic elements of the transaction are incorporated herein by reference from the Stock Purchase Agreement, which appears as Appendix A to the Joint Application. Please describe the impact of the transaction on the base rates charged to the customers of Dominion Hope. As indicated previously, all tariffs of Dominion Hope will remain the same, until such time as Commission approval is sought and obtained. Please describe the impact of the transaction on the quality of service provided to Dominion Hope s customers. The quality of Dominion Hope s service will remain the same except for the benefits described in Equitable s testimony. Were the negotiations leading to the execution of the Stock Purchase Agreement conducted at arm s length? 6

10 Yes, Equitable and CNG - Dominion are not affiliated in any way, so the negotiations were conducted between parties of equal bargaining strength at arm s length. Does Equitable have the knowledge, experience and resources sufficient to conduct Dominion Mope s utility operation in a manner designed to provide adequate and reliable service at reasonable rates? Yes. Equitable has been engaged in the utility business for over 100 years, so it has knowledge and experience in providing safe and reliable service at regulated rates. It has participated in all PSC proceedings involving rulemakings and its personnel, business practices and customer service are well known to the Commission and its Staff. Are the terms and conditions of the Stock Purchase Agreement reasonable and will the public in West Virginia be adversely affected by the proposed transaction? Yes, the terms and conditions of the Agreement are reasonable, and the sale will not adversely affect Equitable s or Dominion Hope s customers or the general public in West Virginia. Equitable will honor the base rate moratorium in effect for Dominion Hope until January 1, As Equitable witness Crawford has testified, at some time after the end of the moratorium and after approval of the acquisition, Equitable will file a base rate 7

11 case to consolidate its Equitable Gas and Dominion Hope operations into one operational entity with one consolidated tariff. Equitable will continue the employment of all Dominion Hope's non-union employees for at least a year after the sale closes with total compensation and benefits comparable to total compensation and benefits of each such employee in effect as of the closing date. If for some unforeseen reason, any of these employees are terminated, other than for cause, prior to the end of that one-year period, they will receive severance benefits of at least equal value to those of the current Dominion Hope severance plan. For employees covered by collective bargaining agreements, those agreements will remain in place. For all affected employees, the sale will not affect pension benefits accrued for service with Dominion and CNG subsidiaries prior to closing. Those benefits will be paid by Dominion at the appropriate time in accordance with the pension plans. Does this conclude your prepared direct testimony? Yes, it does. 8

12 CERTIFICATE OF SERVICE I, E. Dandridge McDonald, one of counsel for Hope Gas, Inc. dba Dominion Hope, do hereby certify that a copy of the foregoing Prepared Direct Testimony of Jimmy Staton has been served upon all parties of record to this proceeding this July 7, 2006, addressed as follows: Meyishi Blair, Esquire Legal Division Public Service Commission of West Virginia Post Office Box Brooks Street Charleston, West Virginia David Sade, Esquire Deputy Consumer Advocate Consumer Advocate Division Public Service Commission of West Virginia 7th Floor, Union Building 723 Kanawha Boulevard, East Charleston, West Virginia Richard L. Gottlieb, Esquire Webster J. Arceneaux, 111, Esquire Lewis Glasser Casey & Rollins Post Office Box 1746 Charleston, West Virginia Daniel L. Frutchep, Esquire Senior Vice President and General Counsel Equitable Gas Company, a Division of Equitable Resources, Inc. 225 North Shore Drive Pittsburgh, PA Scott H. Strauss, Esquire David B. Lieb, Esquire Elaine C. Lippmann, Esquire Spiegel & McDiarmid 1333 New Hampshire Avenue, NW Washington, DC Kathryn Reed Bayless, Esquire Bayless Law Firm, PLLC 1607 West Main Street Princeton, WV George Patterson, 111, Esquire Joel E. Symonds, Esquire Bowles Rice McDavid Graff & Love LLP 600 Quarrier Street Post Office Box Charleston, West Virginia Susan G. George, Esquire Deputy General Counsel Hope Gas, Inc. dba Dominion Hope Post Office Box 2868 Clarksburg, West Virginia Mark 0. Webb, Esquire Deputy General Counsel, Corporate Finance, Securities & Special Projects Dominion Resources Services, Inc. 120 Tredegar Street, Pumphouse, 2nd fl. Richmond, VA Stephen H. Watts, 11, Esquire McGuireWoods LLP 901 E. Cary Street, One James Center Richmond, VA