Cascade Natural Gas Announces Fiscal Year 2005 Third Quarter and Year-to-Date Earnings

Financial and Operating Highlights

Third Quarter Operating Margin (revenue minus gas cost and revenuetaxes) increased $1.0 million, or 6.2%, compared to the quarter endedJune 30, 2004. This was driven by a $1.9 million increase inresidential and commercial margins, $1.4 million of which is due to a12% increase in per customer consumption. Consumption increases areattributed to cooler weather, principally in June, partially offset byconservation efforts and improved energy efficiency in buildings andappliances. Customer growth was 4.9% year-to-year and contributed$504,000 to these margins.

Industrial operating margin was lower by $885,000 in the fiscal2005 third quarter as compared to the same quarter last year. GasManagement Services accounted for $694,000 of the decline due to lostcustomers and lower margins. Changes in mark-to-market (M-to-M)derivative valuations further reduced our Industrial sector margins by$115,000.

Year-To-Date Operating Margin declined $2.0 million, or 2.6%. On ayear-to-date basis, reductions in per (residential and commercial)customer consumption were offset by a 4.6% increase in new customers.Our contribution from Gas Management Services was down by $1.9million, primarily due to lost customers and reduced margins. Over thelast few years, increased competition has resulted in significantreductions to our margins in this business. Lower Industrialconsumption further reduced our gas delivery margins by $851,000. Alsoreducing margins was $709,000 in M-to-M valuations for hedgingcontracts covering unregulated industrial gas sales.

Year-to-date operating margin increased by $525,000 from thereversal of our estimated fiscal 2004 Oregon earnings-sharing accrual,resulting in a $1.1 million improvement in reported marginyear-to-year.

Cost of Operations

Third Quarter Cost of Operations (operating expense, depreciationand amortization, and property and miscellaneous taxes) was up $1.7million compared to the third quarter of fiscal year 2004. Operatingexpenses increased $1.2 million, primarily from executive transitioncosts ($434,000), bad debt ($317,000) and costs related toSarbanes-Oxley Act compliance ($200,000). Improvements include thebenefits of the full operation of our consolidated call center inBellingham, representing savings of $216,000 during the quarter.Depreciation and amortization increased $299,000 due to growth inplant-in-service, in addition property tax increases added $168,000 tocosts.

Year-To-Date Cost of Operations was up $2.9 million with $929,000attributed to depreciation expense, $1.1 million to executivetransition charges, $313,000 to costs of transitioning to the callcenter, and $441,000 to increased bad debt expense. Benefits expensewas lower by $925,000 year-to-date.

Capital Spending

Net capital spending in the quarter was $6.0 million compared to$9.6 million in the third quarter of fiscal year 2004. The $3.6million decline reflects the September 2004 completion of theautomated meter-reading project, in addition to spending reductions inmost capital spending categories. For the nine months, capitalspending was $21.6 million compared to $29.4 million in 2004 and atotal fiscal year 2005 capital budget of $28.4 million.

Full Year Guidance and Other

Management is projecting earnings to be toward the lower end ofour prior full year earnings guidance range of $0.92 to $0.97 pershare. Projections do not include the effect of M-to-M valuations orexecutive transition costs.

The Company previously announced its declaration of a $0.24 pershare quarterly dividend on common stock, payable August 15, 2005 toshareholders of record at the close of business July 29, 2005.

Cascade Natural Gas Corporation is a local distribution companyproviding natural gas service to approximately 227,000 customers inthe states of Washington and Oregon.

Forward-Looking Statements

The Company's discussion in this report, or in any informationincorporated herein by reference, may contain forward-lookingstatements within the meaning of the Private Securities LitigationReform Act of 1995. All statements, other than statements ofhistorical facts, are forward-looking statements, including statementsconcerning plans, objectives, goals, strategies, and future events orperformance. When used in Company documents or oral presentations, thewords "anticipate," "believe," "estimate," "expect," "objective,""projection," "forecast," "goal", or similar words are intended toidentify forward-looking statements.

These forward-looking statements reflect the Company's currentexpectations, beliefs and projections about future events that webelieve may affect the Company's business, financial condition andresults of operations, and are expressed in good faith and arebelieved to have a reasonable basis. However, each suchforward-looking statement involves risks, uncertainties andassumptions, and is qualified in its entirety by reference to thefollowing important factors, among others, that could cause theCompany's actual results to differ materially from those projected insuch forward-looking statements: prevailing state and federalgovernmental policies and regulatory actions, including those of theWashington Utilities and Transportation Commission, the Oregon PublicUtility Commission, and the U.S. Department of Transportation's Officeof Pipeline Safety, with respect to allowed rates of return, industryand rate structure, purchased gas cost and investment recovery,acquisitions and dispositions of assets and facilities, operation andconstruction of plant facilities, the maintenance of pipelineintegrity, and present or prospective wholesale and retailcompetition; weather conditions and other natural phenomena;unanticipated population growth or decline, and changes in marketdemand caused by changes in demographic or customer consumptionpatterns; changes in and compliance with environmental and safetylaws, regulations and policies, including environmental cleanuprequirements; competition from alternative forms of energy and othersellers of energy; increasing competition brought on by deregulationinitiatives at the federal and state regulatory levels, as well asconsolidation in the energy industry; the potential loss of largevolume industrial customers due to "bypass" or the shift by suchcustomers to special competitive contracts at lower per-unit margins;risks, including creditworthiness, relating to performance issues withcustomers and suppliers; risks resulting from uninsured damage to theCompany's property, intentional or otherwise, or from acts ofterrorism; unanticipated changes that may affect the Company'sliquidity or access to capital markets; the Company's ability tocomplete its assessment and, if necessary, remediation of internalcontrols over financial reporting in compliance with Section 404 ofthe Sarbanes-Oxley Act of 2002; unanticipated changes in interestrates or in rates of inflation; economic factors that could cause asevere downturn in certain key industries, thus affecting demand fornatural gas; unanticipated changes in operating expenses and capitalexpenditures; unanticipated changes in capital market conditions,including their impact on future expenses and liabilities relating toemployee benefit plans; potential inability to obtain permits, rightsof way, easements, leases, or other interests or necessary authorityto construct pipelines, or complete other system expansions; changesin the availability and price of natural gas; and legal andadministrative proceedings and settlements.

In light of these risks, uncertainties and assumptions, theforward-looking events and circumstances discussed in this report, orin any information incorporated herein by reference, may not occur andactual results could differ materially from those anticipated orimplied in the forward-looking statements. All subsequentforward-looking statements, whether written or oral and whether madeby or on behalf of the Company, also are expressly qualified by thesecautionary statements.

Any forward-looking statement by the Company is made only as ofthe date on which such statement is made. The Company undertakes noobligation to update any forward-looking statement to reflect eventsor circumstances after the date on which the statement is made or toreflect the occurrence of any unanticipated events. New factors emergefrom time-to-time, and the Company is not able to predict all suchfactors, nor can it assess the impact of each such factor or theextent to which such factors may cause results to differ materiallyfrom those contained in any forward-looking statement.
Cascade Natural Gas Corporation
Financial Highlights - (Thousands, except per share amounts)
Third Quarter Fiscal 2005

Fiscal Year 2005
-----------------------------------------------
Three Months Ended
------------------------------------ Year
to
Dec 31 Mar 31 Jun 30 Sep 30 Date
--------- --------- -------- ------- ----------

Revenues $104,613 $117,711 $56,315 $278,638
Operating Margin 28,922 30,842 17,674 77,437
Cost of Operations 15,584 16,245 16,412 48,240
--------- --------- -------- ------- ----------

Operating Income (Loss) 13,338 14,597 1,262 0 29,197
Interest and Other 2,894 2,976 2,891 8,761
Income Taxes 3,812 4,269 (502) 7,579
--------- --------- -------- ------- ----------

Net Income (Loss) $6,632 $7,352 $(1,127) $- $12,857

Common Shares
Outstanding:
End of Period 11,292 11,338 11,384 11,384
Average 11,279 11,312 11,367 11,319

Earnings (Loss) Per
Share
Basic $0.59 $0.65 $(0.10) $1.14
Diluted $0.59 $0.65 $(0.10) $1.14

Dividends Paid per
share $0.24 $0.24 $0.24 $0.72

Capital Expenditures
(net) $7,770 $7,759 $6,038 $21,567

Book Value Per Share $10.89 $11.32 $10.99 $10.99

Market Closing Price $21.20 $19.96 $20.50 $20.50

Active Customers (End
of Period) 225 228 225 225

Gas Deliveries (Therms):
Residential &
Commercial 82,643 92,637 39,632 214,912
Industrial & Other 227,779 228,890 176,178 632,847

Degree Days
5-Year Average 2,091 2,271 806 5,168
Actual 1,945 2,230 769 4,944

Colder (warmer) than
5-year avg. (7%) (2%) (5%) (4%)

Colder (warmer) than
prior year (8%) (1%) 16% (1%)


Fiscal Year 2004
---------------------------------------------------------
Three Months Ended
------------------------------------- Year Year
Ended to Date
Dec 31 Mar 31 Jun 30 Sep 30 Sep 30 Jun 30
--------- --------- -------- -------- --------- ---------

Revenues $104,884 $119,454 $52,077 $41,663 $318,078 $276,415
Operating
Margin 30,693 32,142 16,637 14,336 93,808 79,472
Cost of
Operations 15,129 15,460 14,696 15,276 60,561 45,285
--------- --------- -------- -------- --------- ---------

Operating
Income
(Loss) 15,564 16,682 1,941 (940) 33,247 34,187
Interest and
Other 3,116 3,121 3,099 3,050 12,386 9,336
Income Taxes 4,543 4,892 (492) (1,384) 7,559 8,943
--------- --------- -------- -------- --------- ---------

Net Income
(Loss) $7,905 $8,669 $(666) $(2,606) $13,302 $15,908

Common Shares
Outstanding:
End of
Period 11,181 11,210 11,241 11,268 11,268 11,241
Average 11,158 11,196 11,227 11,254 11,209 11,227

Earnings
(Loss) Per
Share
Basic $0.71 $0.77 $(0.06) $(0.23) $1.19 $1.42
Diluted $0.71 $0.77 $(0.06) $(0.23) $1.19 $1.42

Dividends
Paid per
share $0.24 $0.24 $0.24 $0.24 $0.96 $0.72

Capital
Expenditures
(net) $10,216 $9,672 $9,557 $9,575 $39,020 $29,445

Book Value
Per Share $10.61 $11.17 $10.89 $10.52 $10.52 $10.89

Market
Closing
Price $21.09 $21.79 $22.07 $21.23 $21.23 $22.07

Active
Customers
(End of
Period) 216 218 215 214 214 215

Gas
Deliveries
(Therms):
Residential
&
Commercial 86,070 96,038 33,746 21,900 237,754 215,854
Industrial
& Other 260,887 223,894 182,387 229,431 896,599 667,168

Degree Days
5-Year
Average 2,044 2,275 874 229 5,422 5,193
Actual 2,106 2,249 661 196 5,212 5,016

Colder
(warmer)
than 5-year
avg. 3% (1%) (24%) (14%) (4%) (3%)

Colder
(warmer)
than prior
year 4% 10% (20%) 40% 3% 2%