PIEDMONT NATURAL GAS CO INC (Form: S-3, Received: 06/19/2003 14:00:37)

Delivery Date

Amount

As filed with the Securities and Exchange Commission on June 19, 2003

Registration No. 333-

Post-Effective Amendment No. 1 to Registration No. 333-62222

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM S-3

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

PIEDMONT NATURAL GAS COMPANY, INC.

(Exact name of Registrant as specified in its charter)


North Carolina (State or other jurisdiction of incorporation or organization)		56-0556998 (I.R.S. Employer Identification No.)

1915 Rexford Road

Post Office Box 33068

Charlotte, NC 28233

(704) 364-3120

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

David J. Dzuricky

Senior Vice President and Chief Financial Officer

Piedmont Natural Gas Company, Inc.

1915 Rexford Road, Charlotte, NC 28211

(704) 731-4547

(Name, address, including zip code, and telephone numbers, including area code, of agent for service)

with copies to:


Jerry W. Amos, Esq. Nelson, Mullins, Riley & Scarborough, LLP Suite 2400, Bank Of America Corporate Center 100 North Tryon Street Charlotte, NC 28202-4021 (704) 417-3000		Christopher J. Moore, Esq. Orrick, Herrington & Sutcliffe LLP 666 Fifth Avenue New York, New York 10103-0001 (212) 506-5000

Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement as determined by market conditions and other factors.

If the only securities being registered on this Form S-3 are being offered pursuant to dividend or interest reinvestment plans, please check the following box. o

If any of the securities being registered on this Form S-3 are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. x

CALCULATION OF REGISTRATION FEE





	Amount	Proposed maximum	Proposed maximum	Amount of
Title of each class of	to be	offering price	aggregate	registration
securities to be registered	registered	per unit(1)(2)	offering price(1)(2)	fee


Debt Securities(3), Common Stock (no par value Per share)(4), Purchase Contracts(5) and Units(6)	$500,000,000	100%	$500,000,000	$40,450

(1) Estimated solely for the purpose of calculating the registration fee.

(2) Excluding accrued interest and accrued amortization of discount, if any, to the date of delivery.

(3) Plus such additional principal amount of Debt Securities as may be necessary such that, if Debt Securities are issued with an original issue discount, the aggregate initial offering price of all Debt Securities and Common Stock will equal $500,000,000.

(4) Includes (a) such indeterminate number of shares of Common Stock of the Registrant (and accompanying Rights), if any as (i) shall be issuable or deliverable upon conversion of any Debt Securities registered hereby which are convertible into such Common Stock, (ii) as may be issuable or deliverable in connection with the settlement of any Purchase Contracts and (iii) as may be required for delivery upon conversion, exercise or settlement of any such convertible securities or Purchase Contracts as a result of the anti-dilution provisions thereof. The Rights are subject to the registrant’s Rights Agreement, dated as of February 27, 1998, as amended, between the registrant and Wachovia Bank, N.A., as Rights Agent, and until a triggering event thereunder, the Rights trade with, and cannot be separated from, the Common Stock.

(5) There are being registered hereby such indeterminate number of Purchase Contracts as may be issued at indeterminate prices. Such Purchase Contracts may be issued together with any of the other securities being registered hereby. Purchase Contracts may require the holder thereof to purchase or sell any of the other securities registered hereby or to purchase or sell (i) securities of an entity unaffiliated with the Registrant, a basket of such securities, an index or indices of such securities or any combination of the above, (ii) currencies or (iii) commodities.

(6) There are being registered hereby such indeterminate number of Units as may be issued at indeterminate prices. Units may consist of any combination of the securities being registered hereby.

Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus included in this Registration Statement also relates to an aggregate of $190,000,000 of unsold securities registered under Registration Statement No. 333-62222, filed on June 4, 2001, for which a registration fee of $47,500 was paid. This Registration Statement, which is a new registration statement, also constitutes Post-Effective Amendment No. 1 to Registration Statement No. 333-62222 and such Post-Effective Amendment No. 1 shall hereafter become effective concurrent with the effectiveness of this Registration Statement.

The Registrant hereby amends this Registration Statement and Post-Effective Amendment No. 1 on such date or dates as may be necessary to delay their effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement and Post-Effective Amendment No. 1 shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement and Post-Effective Amendment No. 1 shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION DATED [ ], 2003

PROSPECTUS

PIEDMONT NATURAL GAS COMPANY, INC.

By this prospectus, we offer up to

$690,000,000

of debt securities, common stock,

purchase contracts, and Units

WE WILL PROVIDE SPECIFIC TERMS OF THESE SECURITIES IN SUPPLEMENTS TO THIS PROSPECTUS. THIS PROSPECTUS MAY NOT BE USED TO SELL SECURITIES UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT. YOU SHOULD READ THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENTS CAREFULLY BEFORE YOU INVEST.

We may offer our securities directly or through underwriters, agents or dealers. The supplements to this prospectus will describe the terms of any particular plan of distribution, including any underwriting arrangements. The “Plan of Distribution” section of this prospectus also provides more information on this topic.

Our principal executive offices are maintained at 1915 Rexford Road, Post Office Box 33068, Charlotte, North Carolina 28233, and our telephone number is (704) 364-3120.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus is , 2003.

TABLE OF CONTENTS


About this Prospectus			2
Where You Can Find More Information			2
Forward-Looking Statements			3
The Company			5
Use of Proceeds			6
Ratio of Earnings to Fixed Charges			6
Selected Historical Consolidated Financial Information			7
Selected Unaudited Pro Forma Combined Condensed Consolidated Financial Data			9
Unaudited Pro Forma Combined Condensed Consolidated Financial Statements			10
Securities We May Issue			17
Prospectus Supplements			17
Description of Debt Securities			17
Description of Common Stock			29
Description of Stock Purchase Contracts and Stock Purchase Units			31
Plan of Distribution			31
Legal Opinions			32
Experts			33
Audited Financial Statements of North Carolina Natural Gas Corporation			A-1

ABOUT THIS PROSPECTUS

This prospectus is part of two registration statements that we have previously filed with the Securities and Exchange Commission, or SEC, using a “shelf” registration process. Under this shelf process, we may, over a period not expected to exceed two years, sell the securities described in this prospectus in one or more offerings up to a total dollar amount of $690,000,000. This prospectus provides you with a general description of the securities we may offer. Each time we sell securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering. The prospectus supplement may also add, update or change information contained in this prospectus. You should read both this prospectus and any prospectus supplement together with additional information described under the heading “Where You Can Find More Information.”

In this prospectus, unless the context otherwise requires, “we,” “us,” “our” and “the Company” refer to Piedmont Natural Gas Company, Inc., and its consolidated subsidiaries.

We may use this prospectus to offer from time to time up to $690,000,000 of:

• our debt securities,

• our common stock,

• our purchase contracts, or

• units.

For more detailed information about the securities, you can read the exhibits to the registration statements. Those exhibits have been either filed with the registration statements or incorporated by reference to earlier SEC filings listed in the registration statements.

WHERE YOU CAN FIND MORE INFORMATION

Available Information

We file annual, quarterly and special reports, proxy statements and other information with the SEC under the Securities Exchange Act. You may read and copy this information at, and you may also obtain copies of this information by mail from, the Public Reference Room of the SEC, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. You may obtain information on the operation of the Public Reference Room by calling the SEC at (800) SEC-0330.

The SEC also maintains an Internet world wide web site that contains reports, proxy statements and other information about issuers, like us, who file electronically with the SEC. The address of that site is http://www.sec.gov. You can also obtain additional information about us at our web site: http://www.piedmontng.com. Information on our website is not part of this prospectus.

Our common stock is listed on the New York Stock Exchange, and you can inspect reports, proxy statements and other information about us at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.

We have filed with the SEC two registration statements on Form S-3 that register the securities we are offering. The registration statements, including the attached exhibits and schedules, contain additional relevant information about us and the securities offered. The rules and regulations of the SEC allow us to omit certain information included in the registration statements from this prospectus.

Incorporation of Certain Documents by Reference

The SEC allows us to “incorporate by reference” information into this prospectus that we have filed with it. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this prospectus, except for any information that is superseded by information

that is included directly in this document or is included in a subsequently filed document which is also incorporated by reference.

This prospectus includes by reference the following documents that we have previously filed with the SEC and that we have not included or delivered with this document:

• our Annual Report on Form 10-K for the year ended October 31, 2002,

• our Quarterly Reports on Form 10-Q for the quarters ended January 31, 2003 and April 30, 2003, and

• our Current Reports on Form 8-K filed with the SEC on November 6, 2002, December 23, 2002, January 8, 2003, February 28, 2003, May 30, 2003 and June 13, 2003.

These documents contain important information about us, our common stock and our financial condition.

We incorporate by reference additional documents that we may file with the SEC between the date of this prospectus and the date of the closing of each offering. These documents include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy statements.

You can obtain any of the documents incorporated by reference in this document from us without charge, excluding any exhibits to those documents unless the exhibit is specifically incorporated by reference as an exhibit to this prospectus. You can obtain documents incorporated by reference in this prospectus by requesting them in writing or by telephone from us at the following address or telephone number:

Office of The Secretary

Piedmont Natural Gas Company, Inc.

1915 Rexford Road

Post Office Box 33068

Charlotte, North Carolina 28233

Telephone Number (704) 364-3120

By incorporating the foregoing documents, we do not intend to incorporate any exhibit or other information that, in accordance with applicable law or SEC rule or regulation, was “furnished” but not filed.

FORWARD-LOOKING STATEMENTS

We have made statements in this prospectus and the documents that we incorporate by reference that constitute forward-looking statements concerning, among others, plans, objectives, proposed capital expenditures and future events or performance. Our statements reflect our current expectations and involve a number of risks and uncertainties. Although we believe that our expectations are based on reasonable assumptions, actual results may differ materially from those suggested by the forward-looking statements. Important factors that could cause actual results to differ include:

• Regulatory issues, including those that affect allowed rates of return, terms and conditions of service, rate structures and financings. In addition to the impact of our three state regulatory commissions, we purchase natural gas transportation and storage services from interstate and intrastate pipeline companies whose rates and services are regulated by the Federal Energy Regulatory Commission (FERC) and the North Carolina Utilities Commission (NCUC), respectively.

• Residential, commercial and industrial growth in our service areas. The ability to grow our customer base and the pace of that growth are impacted by general business and economic conditions such as interest rates, inflation, fluctuations in the capital markets and the overall strength of the economy in our service areas and the country.

• Deregulation, unanticipated impacts of restructuring and competition in the energy industry. We face competition from electric companies and energy marketing and trading companies. As a result of deregulation, we expect this highly competitive environment to continue.

• The potential loss of large-volume industrial customers due to alternate fuels or to bypass or the shift by such customers to special competitive contracts at lower per-unit margins.

• Regulatory issues, customer growth, deregulation, economic and capital market conditions, the costs and availability of natural gas and weather conditions can impact our ability to meet internal performance goals.

• The capital-intensive nature of our business, including governmental approvals, development project delays or changes in project costs. Weather, general economic conditions and the cost of funds to finance our capital projects can materially alter the cost of a project.

• Changes in the availability and cost of natural gas. To meet firm customer requirements, we must acquire sufficient gas supplies and pipeline capacity to ensure delivery to our distribution system while also ensuring that our supply and capacity contracts will allow us to remain competitive. Natural gas is an unregulated commodity subject to market supply and demand and price volatility. We have a diversified portfolio of local peaking facilities, transportation and storage contracts with interstate pipelines and supply contracts with major producers and marketers to satisfy the supply and delivery requirements of our customers. Because these producers, marketers and pipelines are subject to operating and financial risks associated with exploring, drilling, producing, gathering, marketing and transporting natural gas, their risks also increase our exposure to supply and price fluctuations. We engage in hedging activity to reduce price volatility for our customers.

• Changes in weather conditions. Weather conditions and other natural phenomena can have a large impact on our earnings. Severe weather conditions can impact our suppliers and the pipelines that deliver gas to our distribution system. Extended mild or severe weather, either during the winter period or the summer period, can have a significant impact on the demand for and the cost of natural gas.

• Changes in environmental regulations and cost of compliance.

• Earnings from our equity investments. We have investments in unregulated retail energy marketing services, interstate liquefied natural gas (LNG) storage operations, intrastate and interstate pipeline operations and unregulated retail propane operations. These companies have risks that are inherent to their industries and, as an equity investor, we assume such risks.

All of these factors are difficult to predict and many are beyond our control. Accordingly, while we believe the assumptions underlying these forward-looking statements to be reasonable, there can be no assurance that these statements will approximate actual experience or that the expectations derived from them will be realized. When used in our documents or oral presentations, the words “anticipate,” “believe,” “intend,” “plan,” “estimate,” “expect,” “objective,” “projection,” “budget,” “forecast,” “goal” or similar words or future or conditional verbs such as “will,” “would,” “should,” “could” or “may” are intended to identify forward-looking statements.

Forward looking statements reflect our current expectations only as of the date they are made. We assume no duty to update these statements should expectations change or actual results differ from current expectations except as required by applicable laws and regulations.

THE COMPANY

Piedmont Natural Gas Company, Inc., is an energy services company primarily engaged in the distribution of natural gas to 740,000 residential, commercial and industrial customers in North Carolina, South Carolina and Tennessee. We are the second-largest natural gas utility in the Southeast. We are also invested in a number of non-utility, energy-related businesses, including companies involved in unregulated retail natural gas and propane marketing and interstate and intrastate natural gas storage and transportation. We also sell residential and commercial gas appliances in Tennessee. In the Carolinas, our service area is comprised of numerous cities, towns and communities including Anderson, Greenville, Spartanburg and Gaffney in South Carolina and Charlotte, Salisbury, Greensboro, Winston-Salem, High Point, Burlington, Hickory, Spruce Pine and Reidsville in North Carolina. In Tennessee, our service area is the metropolitan area of Nashville. As discussed in more detail under the heading “The Company — Recent Developments,” we have agreed to purchase additional natural gas properties that will expand our service area into eastern North Carolina.

In 1994, our predecessor, which was incorporated in 1950, was merged into a newly formed North Carolina corporation for the purpose of changing our state of incorporation to North Carolina.

We have two reportable business segments, domestic natural gas distribution and retail energy marketing services. The domestic natural gas business is conducted by us and two wholly owned subsidiaries of our subsidiary, Piedmont Energy Partners — Piedmont Intrastate Pipeline Company and Piedmont Interstate Pipeline Company. Piedmont Intrastate is a member of Cardinal Pipeline Company, L.L.C., which owns and operates an intrastate natural gas pipeline in North Carolina. Piedmont Interstate is a member of Pine Needle LNG Company, L.L.C., which owns an interstate liquified natural gas (LNG) peak-demand facility in North Carolina. The retail energy marketing services business is conducted by SouthStar Energy Services LLC, a limited liability company in which our wholly owned subsidiary, Piedmont Energy Company, has a 30% equity interest. SouthStar sells natural gas to residential, commercial and industrial customers in the southeastern United States. SouthStar conducts most of its business in the state of Georgia.

Our wholly owned subsidiary Piedmont Propane Company owns 20.69% of the membership interest in US Propane, L.P., which owns all of the general partnership interest and approximately 26% of the limited partnership interest in Heritage Propane Partners, L.P. (NYSE:HPG). Heritage is the nation’s fourth-largest retail marketer of propane in the United States, serving more than 650,000 customers in 29 states.

Our utility operations are subject to regulation by the NCUC, the Public Service Commission of South Carolina and the Tennessee Regulatory Authority as to rates, service area, adequacy of service, safety standards, extensions and abandonment of facilities, accounting and depreciation. We are also subject to regulation by the NCUC as to the issuance of securities. We are also subject to or affected by various federal regulations.

Our principal executive offices are maintained at 1915 Rexford Road, Post Office Box 33068, Charlotte North Carolina 28233, and our telephone number is (704) 364-3120. Our web site is http:/www.piedmontng.com . Information on our web site is not part of this prospectus.

Recent Developments

On October 16, 2002, we entered into an agreement to purchase for $417.5 million in cash 100% of the common stock of North Carolina Natural Gas Corporation (NCNG). NCNG, a natural gas distribution subsidiary of Progress Energy, Inc. (Progress), serves approximately 176,000 customers in eastern North Carolina, including 56,000 customers served by four municipalities who are wholesale customers of NCNG. The purchase price for the NCNG common stock will be increased or

decreased by the amount of NCNG’s working capital on the closing date which is expected to be the end of July or August 2003. We expect to merge NCNG into Piedmont immediately following the closing. The purchase price of $417.5 million is approximately 1.07 times NCNG’s net plant as of March 31, 2003. We also agreed to purchase for $7.5 million in cash Progress’ equity interest in Eastern North Carolina Natural Gas Company (EasternNC). EasternNC is a regulated utility that was issued a certificate of public convenience and necessity to provide natural gas service to 14 counties in eastern North Carolina. Progress’ equity interest in EasternNC consists of 50% of EasternNC’s outstanding common stock and 100% of EasternNC’s outstanding preferred stock. The purchase agreement obligates us to purchase additional authorized but unissued shares of such preferred stock for $14.4 million. Each of the proposed transactions is subject to a number of conditions, including approval of the NCUC.

USE OF PROCEEDS

Unless otherwise specified in the applicable prospectus supplement, we will use the net proceeds from the sale of the securities to repay the short-term debt to be used to initially finance the purchase of NCNG and Progress’ equity interest in EasternNC, for general corporate purposes, including construction of additional facilities, the repayment of other short-term debt and working capital needs. Pending such use, we may temporarily invest the net proceeds in investment grade securities. We may, from time to time, engage in additional capital financing of a character and in amounts to be determined by us in light of our needs at such time or times and in light of prevailing market conditions. If we elect at the time of an issuance of the securities to make different or more specific use of proceeds other than as stated above, we will describe such use in the prospectus supplement.

RATIO OF EARNINGS TO FIXED CHARGES

The following are the consolidated ratios of earnings to fixed charges for the twelve-month period ended April 30, 2003, and each of our fiscal years in the five-year period ended October 31, 2002:

Twelve Months

Ended

Years Ended October 31

April 30,

2003

2002

2001

2000

1999

1998

Ratio of Earnings to Fixed Charges(1)

3.90

3.36

3.10

3.33

3.71

3.63

(1) For purposes of computing the consolidated ratios, “earnings” represent our net income from continuing operations plus applicable income taxes and fixed charges, and “fixed charges” represent interest expense, amortization of debt discount, premium and expense, and a portion of lease payments considered to represent an interest factor.

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION

Piedmont Natural Gas Company

Set forth below is our selected historical consolidated financial information as of the dates and for the periods indicated. We derived the consolidated income statement data for the fiscal years ended October 31, 2002, 2001 and 2000, and the consolidated balance sheet data at October 31, 2002 and 2001, from audited financial statements incorporated by reference in this prospectus and contained in our most recent Annual Report on Form 10-K. The remaining data is derived from financial statements incorporated by reference in this prospectus and contained in our Quarterly Report on Form 10-Q for the period ended April 30, 2003. These quarterly financial statements have not been audited, but, in the opinion of management, contain all adjustments, including normal recurring accruals, necessary to present fairly our financial position and results of operations and cash flows for the applicable periods. See “Where You Can Find More Information” in this prospectus.



		Six Months Ended
		April 30				Years Ended October 31

		2003		2002		2002		2001		2000


		(In thousands except per share amounts)
Income Statement Data
Margin (Utility Operating Revenues less Cost of Gas)		$	271,708	$	241,770	$	335,794	$	337,978	$	318,331
Utility Operating Revenues			901,265		582,622		832,028		1,107,856		830,377
Net Income			88,996		83,015		62,217		65,485		64,031
Cash Dividends Per Share of Common Stock		$	.815	$	.785	$	1.585	$	1.52	$	1.44
Earnings Per Share of Common Stock:
	Basic	$	2.68	$	2.54	$	1.90	$	2.03	$	2.03
	Diluted	$	2.67	$	2.53	$	1.89	$	2.02	$	2.01



			At October 31

	At April 30, 2003		2002		2001


	(In thousands)
Balance Sheet Data
Total Assets	$	1,541,624	$	1,445,088	$	1,393,658
Long-Term Debt		462,000		462,000		509,000
Stockholders’ Equity		664,507		589,596		560,379

North Carolina Natural Gas Corporation (NCNG)

Set forth below is the selected historical consolidated financial information of NCNG. We will be purchasing 100% of the common stock of NCNG and Progress’ equity interest in Eastern North Carolina Natural Gas Company (EasternNC). Progress’ equity interest in EasternNC consists of 50% of EasternNC’s outstanding common stock and 100% of EasternNC’s outstanding preferred stock. While closing has not yet occurred and the purchase agreement remains subject to certain conditions, we believe the completion of this transaction is probable. We derived the income statement data for the fiscal years ended December 31, 2002, 2001 and 2000, and the balance sheet data at December 31, 2002 and 2001, from the audited financial statements of NCNG which are set forth in

Appendix A to this prospectus. The remaining data is derived from financial statements of NCNG that have not been audited.



	Six Months Ended
	March 31				Years Ended December 31

	2003		2002		2002			2001		2000


	(In thousands)
Income Statement Data
Operating Revenues	$	257,269	$	146,365	$	316,481		$	318,808	$	345,598
Income (Loss) from Continuing Operations		11,607		11,562		(120,453	)(1)		2,868		9,915
Net Income (Loss)		11,607		11,562		(172,747	)(1)(2)		2,868		9,915



	At March 31				At December 31

	2003		2002		2002		2001


	(In thousands)
Balance Sheet Data
Total Assets	$	533,477	$	696,664	$	529,442	$	695,784
Long-Term Debt		—		—		—		—
Stockholder’s Equity		255,533		435,339		248,029		426,631

(1) Includes an impairment charge of $126.3 million to goodwill attributable to Progress’ original acquisition of NCNG in 1999. Without this impairment charge, NCNG’s income from continuing operations would have been $5.8 million for the year ended December 31, 2002.

(2) Includes the cumulative effective of an accounting change to reduce the carrying value of goodwill by $52.3 million upon the adoption of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”

SELECTED UNAUDITED PRO FORMA COMBINED CONDENSED

CONSOLIDATED FINANCIAL DATA

Set forth below is selected unaudited pro forma combined condensed consolidated financial data after accounting for the proposed acquisitions of NCNG and Progress’ equity interest in EasternNC and the issuance of securities for the repayment of short-term debt used to initially finance the acquisitions. The pro forma adjustments are based upon available information and certain assumptions that we believe are identifiable and objectively measurable. The selected unaudited pro forma combined condensed consolidated financial data is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial condition of the combined company that would have occurred had the acquisitions occurred at the beginning of the period presented, nor is the selected unaudited pro forma combined condensed consolidated financial data necessarily indicative of future operating results or the financial position of the combined company. The selected unaudited pro forma combined condensed consolidated financial data was derived from and should be read in conjunction with the unaudited pro forma combined condensed consolidated financial statements and the related notes included in “Unaudited Pro Forma Combined Condensed Consolidated Financial Statements” in this prospectus and should be read in conjunction with our consolidated financial statements incorporated by reference in this prospectus and those of NCNG provided elsewhere in this prospectus.


	Six Months Ended		Years Ended
	April 30, 2003 and		October 31, 2002 and
	March 31, 2003		December 31, 2002


	(In thousands)
Income Statement Data
Margin	$	330,591	$	421,600
Operating Revenues		1,158,495		1,148,451
Income from Continuing Operations		98,226		63,262


	At April 30, 2003 and
	March 31, 2003

	(In thousands)
Balance Sheet Data
Total Assets	$	2,072,964
Long-Term Debt		712,000
Shareholders’ Equity		857,507

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Unaudited Pro Forma Information

The unaudited pro forma information reflects the historical combined condensed consolidated financial data of Piedmont and NCNG after accounting for the proposed acquisitions of NCNG and Progress’ equity interest in EasternNC and the issuance of securities for the repayment of short-term debt used to initially finance these acquisitions.

NCNG is a public service company primarily engaged in transporting and distributing natural gas to customers in portions of North Carolina. NCNG is a wholly owned subsidiary of Progress. The consolidated financial statements of NCNG include the activities of NCNG and its majority-owned subsidiaries, NCNG Pineneedle Investment Corporation, NCNG Cardinal Pipeline Investment Corporation and Cape Fear Energy Corporation.

The acquisitions of NCNG and Progress’ equity interest in EasternNC are reported as a purchase business combination, as more fully explained under “Accounting Treatment” below. The following information together with the historical consolidated financial statements of Piedmont, which are incorporated by reference into this prospectus, and the historical consolidated financial statements and related notes of NCNG included in this prospectus should be read together to obtain a more complete understanding of the two companies.

The Unaudited Pro Forma Combined Condensed Consolidated Statements of Income assume the acquisitions became effective on November 1, 2001. The Unaudited Pro Forma Combined Condensed Consolidated Balance Sheet assumes the acquisitions became effective on April 30, 2003.

The unaudited pro forma information is not necessarily indicative of the results of operations that might have occurred had the acquisitions actually closed on November 1, 2001, or the actual financial position that might have resulted had the acquisitions actually closed on April 30, 2003. This information is also not necessarily indicative of the future results of operations or financial position of Piedmont.

The Transaction

On October 16, 2002, we entered into an agreement to purchase for $417.5 million in cash 100% of the common stock of NCNG. NCNG, a natural gas distribution subsidiary of Progress, serves approximately 176,000 customers in eastern North Carolina, including 56,000 customers served by four municipalities who are wholesale customers of NCNG. The purchase price for the NCNG common stock will be increased or decreased by the amount of NCNG’s working capital on the closing date which is expected to be the end of July or August 2003. We expect to merge NCNG into Piedmont immediately following the closing. The purchase price of $417.5 million is approximately 1.07 times NCNG’s net plant as of March 31, 2003. We also agreed to purchase for $7.5 million in cash Progress’ equity interest in EasternNC. EasternNC is a regulated utility that was issued a certificate of public convenience and necessity to provide natural gas service to 14 counties in eastern North Carolina. Progress’ equity interest in EasternNC consists of 50% of EasternNC’s outstanding common stock and 100% of EasternNC’s outstanding preferred stock. The purchase agreement obligates us to purchase additional authorized but unissued shares for such preferred stock for $14.4 million. Each of the proposed transactions is subject to a number of conditions, including approval of the NCUC.

Accounting Treatment

The acquisitions will be accounted for by the purchase method of accounting. Under the purchase method, certain identifiable assets will be recorded at their book values in accordance with Statement of Financial Accounting Standards No. 71, “Accounting for the Effects of Certain Types of Regulation.” The remaining difference, if any, between the purchase price, including direct costs of the acquisitions, and the book values will be recorded as goodwill. Allocations included in the unaudited pro forma information are based on preliminary analysis of the purchase price allocation.

Unaudited Pro Forma Combined Condensed Consolidated

Statements of Income From Continuing Operations


			Piedmont		NCNG
			Year Ended		Year Ended
			October 31, 2002		December 31, 2002			Pro Forma			Pro Forma
			(Historical)		(Historical)			Adjustments			Combined


			(In thousands except per share amounts)
Operating Revenues			$	832,028	$	316,481		$	(58	)A	$	1,148,451
Cost of Gas				496,234		230,617			—			726,851

Margin				335,794		85,864			(58	)		421,600

Other Operating Expenses:
	Operations and maintenance expenses			133,427		45,247						178,674
	Goodwill impairment			—		126,277			(126,277	)J		—
	Depreciation			57,593		19,836						77,429
	General taxes			23,863		4,303						28,166
	Diversified business expenses			—		1			(1	)A		—
	Income taxes			30,784		—			1,783	A		29,430
									3,806	I
									(6,943	)K

		Total other operating expenses		245,667		195,664			(127,632	)		313,699

Operating Income (Loss)				90,127		(109,800	)		127,574			107,901
Other Income (Expense), net of tax				12,694		2,266			57	A		14,758
									(23	)A
									(236	)A
Utility Interest Charges				40,604		10,877			17,554	F		59,397
									(9,638	)I
Income Taxes				—		2,042			(23	)A		—
									(236	)A
									(1,783	)A

Income (Loss) from Continuing Operations			$	62,217	$	(120,453	)	$	121,498		$	63,262

Average shares of Common Stock:
	Basic			32,763					5,714			38,477
	Diluted			32,937					5,714			38,651
Earnings per Share of Common Stock:
	Basic		$	1.90							$	1.64
	Diluted		$	1.89							$	1.64

See Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial Statements.

Unaudited Pro Forma Combined Condensed Consolidated

Statements of Income From Continuing Operations — (Continued)


			Piedmont		NCNG
			Six Months Ended		Six Months Ended
			April 30, 2003		March 31, 2003		Pro Forma			Pro Forma
			(Historical)		(Historical)		Adjustments			Combined


			(In thousands except per share amounts)
Operating Revenues			$	901,265	$	257,269	$	(39	)A	$	1,158,495
Cost of Gas				629,557		198,347		—			827,904

Margin				271,708		58,922		(39	)		330,591

Other Operating Expenses:
	Operations and maintenance expenses			76,376		22,708					99,084
	Depreciation			30,559		10,335					40,894
	General taxes			12,747		2,165					14,912
	Diversified business expenses					1		(1	)A		—
	Income taxes			51,779		—		6,882	A		57,100
								1,910	I
								(3,471	)K

		Total other operating expenses		171,461		35,209		5,320			211,990

Operating Income				100,247		23,713		(5,359	)		118,601
Other Income (Expense), net of tax				9,046		697		38	A		9,690
								(15	)A
								(76	)A
Utility Interest Charges				20,297		5,830		8,776	F
								(4,838	)I		30,065
Income Taxes				—		6,973		(15	)A
								(76	)A		—
								(6,882	)A

Income (Loss) from Continuing Operations			$	88,996	$	11,607	$	(2,377	)	$	98,226

Average shares of Common Stock:
	Basic			33,258				5,714			38,972
	Diluted			33,372				5,714			39,086
Earnings per Share of Common Stock:
	Basic		$	2.68						$	2.52
	Diluted		$	2.67						$	2.51

See Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial Statements.

Unaudited Pro Forma Combined Condensed Consolidated Balance Sheet


				Piedmont			NCNG
				At April 30,			At March 31,
				2003			2003			Pro Forma			Pro Forma
				(Historical)			(Historical)			Adjustments			Combined


				(In thousands)
ASSETS
Utility Plant				$	1,764,910		$	574,938		$			$	2,339,848
	Less accumulated depreciation				601,005			184,237						785,242

	Utility plant, net				1,163,905			390,701						1,554,606
Other Physical Property, net					1,055			928						1,983
Current Assets					258,961			86,392			(12,418	)A		342,316
											16,375	B
											(6,994	)C
Investments, Deferred Charges and Other Assets					117,703			55,456			7,500	D		174,059
											(49,652	)E
											41,427	F
											1,625	F

	Total			$	1,541,624		$	533,477		$	(2,137	)	$	2,072,964


CAPITALIZATION AND LIABILITIES
Capitalization:
	Common stock equity:
		Common stock		$	364,039		$	417,653		$	200,000	F	$	564,039
		Capital in excess of par value									(417,653	)G
		Retained earnings (deficit)			301,925			(156,237	)		(7,000	)F		294,925
											156,237	G
		Accumulated other comprehensive income (loss)			(1,457	)		(5,883	)		5,883	G		(1,457	)

			Total common stock equity		664,507			255,533			(62,533	)		857,507
		Long-term debt			462,000			—			250,000	F		712,000

			Total capitalization		1,126,507			255,533			187,467			1,569,507
Current Liabilities					210,095			229,398			(12,418	)A		281,075
											4,000	F
											(150,000	)I
Deferred Credits and Other Liabilities					205,022			48,546			(31,186	)H		222,382

			Total	$	1,541,624		$	533,477		$	(2,137	)	$	2,072,964

See Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial Statements.

Notes To Unaudited Pro Forma Combined Condensed

Consolidated Financial Statements

The Unaudited Pro Forma Combined Condensed Consolidated Financial Data is based on the following assumptions (in thousands except per share amounts):

      A. Certain revenues, expenses, assets and liabilities of NCNG have been reclassified to conform with Piedmont’s presentation. The income tax effects of such reclassifications, if any, are computed at NCNG’s composite income tax rate of 39.485%.

      B. Increase in cash of $16,375 is the excess of the proceeds from securities issued to finance the acquisitions over the stated purchase price.

      C. The purchase of working capital is in addition to the stated purchase price. At the date of this pro forma balance sheet, the excess of current assets over current liabilities results in a cash payment by Piedmont to Progress of $6,994.

      D. The purchase price for the interest in EasternNC is $7,500.

      E. NCNG’s other assets of $49,652, primarily consisting of goodwill, unamortized debt costs, deferred environmental costs and investment in Cape Fear Energy Corporation, are excluded as they will not be acquired by Piedmont.

      F. The proceeds from the issuance of common stock and long-term debt will be used to repay the short-term debt used to initially finance the acquisitions. Based on our assumptions, the following is a summary of the calculation of the proceeds from the issuance of common stock and long-term debt and the allocation of the purchase price to the fair value of the net assets acquired.


Common Stock:
	Number of shares		5,714
	Gross proceeds	$	200,000
	Expenses charged to Retained Earnings		7,000

	Net proceeds			$	193,000
Long-Term Debt
	Principal amount at 100% of issuance price	$	250,000
	Issuance costs		1,625

	Net proceeds				248,375

Total proceeds from issuance of common stock and long-term debt					441,375
Purchase of EasternNC					(7,500	)
Cash from securities in excess of purchase price					(16,375	)

Purchase price					417,500
NCNG’s net assets at March 31, 2003					255,533

Indicated goodwill					161,967
Working capital true-up					6,994
Notes payable not assumed					(150,000	)
Non-current assets not acquired					49,652
Non-current liabilities not assumed					(31,186	)
Estimated transaction costs					4,000

Estimated goodwill				$	41,427

Notes To Unaudited Pro Forma Combined Condensed

Consolidated Financial Statements — (Continued)


Other assumptions related to the issuance of long-term debt are:
	Maturity date			30 years
	Interest rate			7	%
	Interest charges:
		Annually	$	17,500
		Quarterly	$	4,375
	Amortization of issuance costs (straight-line):
		Annually	$	54
		Quarterly	$	13

Piedmont and NCNG expect to record direct costs of the acquisition (including fees of financial advisors, legal counsel, independent auditors and others). The estimated direct costs are $4,000 and are added to goodwill and reflected in accounts payable. The estimated charges and nature of costs included therein are subject to change as more accurate estimates become available. The pro forma statements of income do not reflect the costs and expenses associated with integrating the operations of the two companies, nor any of the anticipated recurring expense savings arising from the integration.

Goodwill of $41,427 is recognized, representing the excess of the purchase price plus transaction costs over the net assets acquired. The final allocation of the purchase price will be based on the values of identified assets and liabilities as of the date the business combination is completed.

      G. The application of the purchase method of accounting eliminates the preexisting balances of NCNG’s common stock, capital in excess of par value, retained earnings and accumulated other comprehensive loss.

      H. NCNG’s other liabilities of $31,186, consisting of accumulated deferred income taxes, unamortized investment tax credits and a regulatory liability for income taxes, are excluded as they will not be assumed by Piedmont.

      I. NCNG’s interest charges on notes payables are eliminated, net of income taxes at NCNG’s composite income tax rate of 39.485%, as the debt generating such charges will not be assumed by Piedmont.

      J. In its third quarter ended September 30, 2002, NCNG performed the annual impairment test of goodwill and recognized an impairment of $126.7 million based on the expected proceeds from the sale of NCNG to Piedmont. Because of the non-recurring nature of this charge, the goodwill impairment was eliminated from the pro forma statement of income. Because NCNG considered this charge to be a permanent book/tax difference, no income tax effect was recorded by NCNG.

      K. The income tax effect, if any, on the pro forma adjustments, except for the reclassifications discussed in Note A and the elimination of NCNG’s interest charges discussed in Note I, are computed at the statutory rates of 35% for federal and 7% for state, for a composite rate of 39.55%.

SECURITIES WE MAY ISSUE

We may use this prospectus to offer from time to time up to $690,000,000 of:

• our debt securities,

• our common stock,

• our purchase contracts, or

• units.

PROSPECTUS SUPPLEMENTS

This prospectus provides you with a general description of the securities we may offer. Each time we offer securities, we will provide a prospectus supplement that will contain specific information about the terms of the offering. The prospectus supplement may also add to or change information contained in this prospectus. If so, the prospectus supplement should be read as superseding this prospectus. You should read both this prospectus and any prospectus supplement together with additional information described under the heading “Where You Can Find More Information.”

For more details on the terms of the securities, you should read the exhibits filed with our registration statements.

DESCRIPTION OF DEBT SECURITIES

We may issue debt securities from time to time in one or more distinct series. This section summarizes the material terms of the debt securities that we anticipate will be common to all series. Most of the financial and other terms of any series of debt securities that we offer and any differences from the common terms will be described in the prospectus supplement to be attached to the front of this prospectus.

As required by U.S. federal law for all bonds and notes of companies that are publicly offered, a document called an “indenture” will govern any debt securities that we issue. An indenture is a contract between us and a financial institution acting as trustee on your behalf. We have entered into an indenture with Citibank, N.A., who will act as trustee. The indenture will be subject to the Trust Indenture Act of 1939. The trustee has the following two main roles:

• the trustee can enforce your rights against us if we default under the indenture. There are some limitations on the extent to which the trustee acts on your behalf, described later in this prospectus; and

• the trustee will perform certain administrative duties for us, which include sending you interest payments and notices.

Because this section is a summary of the material terms of the indenture, it does not describe every aspect of the debt securities. We urge you to read the indenture because it, and not this description, will define your rights as a holder of debt securities. For example, in this section, we use capitalized words to signify terms that are specifically defined in the indenture. Some of the definitions are repeated in this prospectus, but for the rest you will need to read the indenture. We have filed or will file the indenture and any supplements to it as exhibits to the registration statements that we have filed with the SEC. See “Where You Can Find More Information” for information on how to obtain copies of the indenture and any supplements. References to the “Indenture” in this prospectus mean the indenture we have filed as an exhibit to the registration statements relating to this offering that we have filed with the SEC. References to the “Trustee”

means Citibank, N.A., or any successor trustee under the Indenture. References to the “Debt Securities” means the debt securities issued under the Indenture.

General

The Debt Securities may be issued from time to time in one or more series. Although the amount of securities offered by this prospectus will be limited to $690,000,000, the indenture does not contain any limitations on the amount of Debt Securities that may be issued under it at any time or from time to time in one or more series.

The Debt Securities will be our unsecured obligations and will rank equally and ratably with all of our other unsecured indebtedness. As of April 30, 2003, we had issued and outstanding long-term debt with an aggregate principal amount of $509,000,000. The Debt Securities will be issued only in fully registered form.

You should read the prospectus supplement for the following terms of the series of Debt Securities offered by the prospectus supplement. Our Board of Directors will establish the following terms before issuance of the series:

• the specific title of the offered Debt Securities;

• any limit on the aggregate principal amount of the offered Debt Securities;

• the person to whom any interest on the offered Debt Securities will be payable, if other than the person in whose name that offered Debt Security is registered at the close of business on the record date for such interest;

• the date or dates on which the principal of the offered Debt Securities is payable;

• the rate or rates at which the offered Debt Securities will bear interest, if any, or the formula that will be used to determine which such rate or rates, and the date or dates from which any such interest will accrue, and the date or dates for any interest payable;

• the place or places where the principal, premium (if any) and interest on the offered Debt Securities will be payable, and the method of such payment;

• the period or periods within which the price or prices at which and the terms and conditions upon which the offered Debt Securities may be redeemed, in whole or in part, at our option;

• our obligations, if any, to purchase or redeem the offered Debt Securities under any sinking fund or analogous provision or at the option of holders of such securities and the period or periods within which, the price or prices at which and the terms and conditions upon which the offered Debt Securities will be redeemed or purchased, in whole or in part, pursuant to such obligation;

• the denominations in which the offered Debt Securities will be issuable, if other than denominations of $1,000 and any integral multiple thereof;

• if the amount of payments of principal, premium (if any) or interest on the offered Debt Securities may be determined with reference to an index, the manner in which such amounts shall be determined;

• whether the offered Debt Securities will be issuable in whole or in part in the form of one or more global securities (as defined under “Global Securities”) and, if so, the securities depository or depositories for such global security or securities and the circumstances under which any such global security or securities may be registered for transfer or exchange, or authenticated and delivered, in the name of a person other than such depository or its nominee, other than as set forth in the Indenture;

• if other than the principal amount thereof, the portion of the principal amount of the offered Debt Securities which shall be payable upon declaration of acceleration of the maturity thereof;

• any modification, amendment or addition to our covenants;

• whether the offered Debt Securities will be subject to defeasance or covenant defeasance, or such other means of satisfaction and discharge as may be specified in the prospectus supplement;

• any additional events of default; and

• any other terms or provisions of the offered Debt Securities not inconsistent with the provisions of the Indenture.

The Indenture does not limit the amount of Debt Securities that we are authorized to issue from time to time. We may issue Debt Securities with terms different from those of Debt Securities already issued. Without the consent of the holders of outstanding Debt Securities, we may reopen a previous issue of a series of Debt Securities and issue additional Debt Securities of that series unless the reopening was restricted when we created that series.

There is no requirement that we issue Debt Securities in the future under the Indenture, and we may use other indentures or documentation, containing different provisions, in connection with future issues of other Debt Securities.

We may issue the Debt Securities as “Original Issue Discount Securities,” which are Debt Securities, including any zero-coupon Debt Securities, that are issued and sold at a discount from their stated principal amount. Original Issue Discount Securities provide that, upon acceleration of their maturity, an amount less than their principal amount will become due and payable. We will describe the U.S. federal income tax consequences and other considerations applicable to original issue discount securities in any applicable prospectus supplement.

Global Securities

We will issue each Debt Security under the indenture in book-entry form only, unless we specify otherwise in the applicable prospectus supplement. A global security represents one or any other number of individual Debt Securities. Generally, all Debt Securities represented by the same global securities will have the same terms. We may, however, issue a global security that represents multiple Debt Securities that have different terms and are issued at different times. We call this kind of global security a master global security.

Each Debt Security issued in book-entry form will be represented by a global security that we deposit with and register in the name of a financial institution or its nominee that we select. The financial institution that we select for this purpose is called the depositary. Unless we specify otherwise in the applicable prospectus supplement, The Depository Trust Company, New York, New York, known as DTC, will be the depositary for all Debt Securities issued in book-entry form. We will describe the specific terms of the depository arrangements with respect to any Debt Securities represented by a global security in the applicable prospectus supplement.

A global security may not be transferred to or registered in the name of anyone other than the depositary or its nominee, unless special termination situations arise. We describe those situations below under “Special Situations When a Global Security Will Be Terminated.” As a result of these arrangements, the depositary, or its nominee, will be the sole registered owner and holder of all Debt Securities represented by a global security, and investors will be permitted to own only beneficial interests in a global security. Beneficial interests must be held by means of an account with a broker, bank or other financial institution that in turn has an account with the depositary or with another

institution that does. Thus, if your Debt Security is represented by a global security, you will not be a holder of the Debt Security, but only an indirect holder of a beneficial interest in the global security.

Special Considerations for Global Securities. As an indirect holder, your rights relating to a global security will be governed by the account rules of your financial institution and of the depositary, as well as general laws relating to securities transfers. We do not recognize an indirect holder as a holder of Debt Securities and instead deal only with the depositary that holds the global security.

If we issue Debt Securities only in the form of a global security, you should be aware of the following:

• you cannot cause the Debt Securities to be registered in your name, and cannot obtain non-global certificates for your interest in the Debt Securities, except in the special situations that we describe below;

• you will be an indirect holder and must look to your own bank or broker for payments on the Debt Securities and protection of your legal rights relating to the Debt Securities;

• you may not be able to sell interests in the Debt Securities to some insurance companies and to other institutions that are required by law to own their securities in non-book-entry form;

• you may not be able to pledge your interest in a global security in circumstances where certificates representing the Debt Securities must be delivered to the lender or other beneficiary of the pledge in order for the pledge to be effective;

• the depositary’s policies, which may change from time to time, will govern payments, transfers, exchanges and other matters relating to your interest in a global security. We and the Trustee have no responsibility for any aspect of the depositary’s actions or for its records of ownership interests in a global security. We and the Trustee also do not supervise the depositary in any way; and

• DTC requires that those who purchase and sell interests in a global security within its book-entry system use immediately available funds and your broker or bank may require you to do so as well, and financial institutions that participate in the depositary’s book-entry system, and through which you hold your interest in a global security, may also have their own policies affecting payments, notices and other matters relating to the debt security. Your chain of ownership may contain more than one financial intermediary. We do not monitor and are not responsible for the actions of any of those intermediaries.

Special Situations When a Global Security Will Be Terminated. In a few special situations described below, a global security will be terminated and interests in it will be exchanged for certificates in non-global form representing the Debt Securities it represented. After that exchange, the choice of whether to hold the Debt Securities directly or in street name will be up to you. You must consult your own bank or broker to find out how to have your interests in a global security transferred on termination to your own name, so that you will be a holder.

The special situations for termination of a global security are as follows:

• if the depositary notifies us that it is unwilling, unable or no longer qualified to continue as depositary for that global security and we do not appoint another institution to act as depositary within 60 days; and

• if we notify the Trustee that we wish to terminate that global security, or if an event of default has occurred with regard to Debt Securities represented by that global security and has not been cured or waived; we discuss defaults later under “Defaults and Rights of Acceleration.”

If a global security is terminated, only the depositary, and not we or the Trustee, is responsible for deciding the names of the institutions in whose names the Debt Securities represented by the global security will be registered and, therefore, who will be the holders of those Debt Securities.

Exchange Registration And Transfer

We will not be required to exchange or register a transfer of (i) any series of Debt Securities for a period of 15 days after the mailing of the notice of any redemption of such series, or (ii) any such series selected, called or being called for redemption except, in the case of any such series to be redeemed in part, that portion not being redeemed.

Debt Securities Issued in Non-Global Form

Debt Securities not issued in global form will be issued:

• only in fully registered form;

• without interest coupons; and

• unless we indicate otherwise in the prospectus supplement, in denominations of $1,000 and amounts that are multiples of $1,000.

Holders may exchange their Debt Securities that are not in global form for Debt Securities of smaller denominations or combined into fewer Debt Securities of larger denominations, as long as the total principal amount is not changed.

Holders may exchange or transfer their Debt Securities at the office of the Trustee. We will appoint the Trustee to act as our agent for registering Debt Securities in the names of holders transferring Debt Securities. We may appoint another entity to perform these functions or perform them ourselves.

Holders will not be required to pay a service charge to transfer or exchange their Debt Securities, but they may be required to pay for any tax or other governmental charge associated with the transfer or exchange. The transfer or exchange will be made only if our transfer agent is satisfied with the holder’s proof of legal ownership.

If we have designated additional transfer agents for your Debt Security, they will be named in your prospectus supplement. We may appoint additional transfer agents or cancel the appointment of any particular transfer agent. We may also approve a change in the office through which any transfer agent acts.

If a Debt Security is issued as a global security, only the depositary will be entitled to transfer and exchange the Debt Security as described in this subsection, since it will be the sole holder of the Debt Security.

Redemption

Any terms for the optional or mandatory redemption of the Debt Securities will be set forth in the applicable prospectus supplement. Except as shall otherwise be provided with respect to the Debt Securities redeemable at the option of the holder, such Debt Securities will be redeemable only upon notice, by mail, not less than 30 nor more than 60 days prior to the date fixed for redemption and, if less than all of a series of Debt Securities are to be redeemed, the Trustee shall select the particular Debt Securities to be redeemed in such manner as it deems fair and appropriate. If less than all of the Debt Securities represented by a global security are to be redeemed, the beneficial interest to be redeemed will be selected by the Depository as described in the applicable prospectus supplement.

Covenants

The Indenture contains the covenants summarized below, which are applicable so long as any of the Debt Securities are outstanding.

Property. To the extent necessary for our business to be properly conducted, we will cause (or, with respect to property owned in common with others, make reasonable effort to cause) all of our properties used or useful in the conduct of our business to be maintained and kept in good condition, repair and working order. We will also cause (or, with respect to property owned in common with others, make reasonable effort to cause) all necessary repairs, renewals, replacements, betterments and improvements to be made to such properties. This covenant does not prevent us from discontinuing, or causing the discontinuance of, the operation and maintenance of any of our properties if such discontinuance is, in our judgment, desirable in the conduct of our business.

Limitation on Liens. We will not create, assume or suffer to exist, and will not permit any subsidiary to create, assume or suffer to exist, except in our favor, any mortgage, pledge or other lien or encumbrance of or upon any of our properties or assets (including stock and other securities of subsidiaries) without making effective provisions to secure equally and ratably the Debt Securities then outstanding and other indebtedness entitled to be so secured, except that we or a subsidiary, without so securing the Debt Securities, may create, assume or suffer to exist

• certain purchase money and existing liens in connection with property acquisitions and the extension, renewal or refunding of the same,

• pledges of current assets, in the ordinary course of business to secure current liabilities,

• liens on property to secure obligations to pay all or a part of the purchase price of such property only out of or measured by oil or gas production or the proceeds thereof, or liens upon production from oil and gas property or the proceeds of such production, to secure obligations to pay all or part of the expenses of exploration, drilling or development of such property only out of such production or proceeds,

• mechanics’ or materialman’s liens, certain good faith deposits, deposits to secure public or statutory obligations, deposits to secure, or in lieu of, surety, stay or appeal bonds, and deposits as security for payment of taxes, assessments or similar charges and liens or security interests created in connection with bid or completion bonds,

• liens arising by reason of deposits with, or the giving of security to, a governmental agency as a condition to the transaction of business or the exercise of a privilege or license, or to enable us or a subsidiary to maintain self-insurance or participate in any funds established to cover any insurance risks in connection with workmen’s compensation, unemployment insurance, old age pension or other social security,

• pledges or assignments of accounts receivable, including customers’ installment paper, to banks or others (including to or by any subsidiary which is principally engaged in the business of financing our business and the business of our subsidiaries) made in the ordinary course of business,

• liens of taxes or assessments for the current year or not due or being contested in good faith and against which an adequate reserve has been established,

• judgments or liens the finality of which is being contested and execution on which is stayed,

• assessments or similar encumbrances the existence of which does not impair the use of the property subject thereto for the purposes for which it was acquired,

• certain landlords’ liens so long as the rent secured thereby is not in default,

• liens on the assets of any limited liability company organized under a limited liability company act of any state which limited liability company is treated as a partnership for federal income tax purposes, and

• with respect to Debt Securities issued after June 15, 2003, liens, in addition to liens set forth above, securing indebtedness not at any time exceeding in the aggregate 5% of the consolidated stockholders’ equity of the Company and its subsidiaries as of such time.

Subject to the provisions described under “Consolidation, Merger or Sale,” we will do or cause to be done all things necessary to preserve and keep in full force and effect our corporate existence, rights (charter and statutory), our franchises or franchises of our subsidiaries. We will not be required to preserve, or cause any subsidiary to preserve, any such right or franchise or to keep in full force and effect the corporate existence of any subsidiary if, in our judgment, preservation is no longer desirable in the conduct of our business and the loss thereof is not disadvantageous in any material respect to the holders of any series of Debt Securities.

Unless otherwise indicated in the applicable prospectus supplement, the covenants contained in the Indenture and the Debt Securities would not necessarily afford holders protection in the event of a highly leveraged or other transaction involving us that may adversely affect holders.

Consolidation, Merger or Sale

We will not consolidate with or merge into any other corporation or sell or convey all or substantially all of our assets to any person, firm or corporation unless:

• either we shall be the continuing corporation, or the successor corporation (if other than us) shall be a corporation organized and existing under the laws of the United States of America or a state thereof or the District of Columbia and such corporation shall expressly assume, by supplemental indenture, the due and punctual payment of the principal, premium (if any) and interest on all the Debt Securities and the performance of all of our covenants under the Indenture;

• we or such successor corporation, as the case may be, shall not, immediately after such merger or consolidation, or such sale or conveyance, be in default in the performance of any such covenant or condition; and

• we will have delivered to the Trustee an officers’ certificate and an opinion of counsel as provided in the Indenture.

Payment and Paying Agent

The principal, premium (if any) and interest (if any) on Debt Securities not represented by a global security will be payable in New York Clearing House Funds at the office or agency of the paying agent or paying agents as we may designate from time to time, provided that, at our option, interest may be paid by check mailed to the holders entitled thereto at their last addresses as they appear in the Debt Security Register. The Trustee is initially designated as our sole paying agent and the principal corporate trust office of Citibank, N.A., in the Borough of Manhattan, the City of New York, is initially designated as the office where the Debt Securities may be presented for payment, for the registration of transfer and for exchange and where notices and demands to or upon us in respect of the Debt Securities or of the Indenture may be served. Unless otherwise indicated in the applicable prospectus supplement, interest payments shall be made to the person in whose name any debt security is registered at the close of business on the record date with respect to an interest payment date. All moneys paid by us to a paying agent for the payment of principal, premium (if any) or interest on any Debt Security of any series which remain unclaimed at the end of two years

after such principal, premium or interest shall have become due and payable will be repaid to us, and the holder of such Debt Security will thereafter look only to us for payment thereof.

Defaults and Rights of Acceleration

The following are Events of Default under the Indenture with respect to a particular series of Debt Securities:

      (a) default in the payment of the principal or premium (if any) on any of the Debt Securities of such series when due and payable;

      (b) default in the payment of any installment of interest upon any of the Debt Securities of such series when due and payable, and continuance of such default for a period of 30 days;

      (c) default in the payment of any sinking or purchase fund payment or analogous obligation when due and payable;

      (d) failure to observe or perform any other of our covenants or agreements for a period of 90 days after written notice of such failure has been given as provided in the Indenture;

      (e) a default under any bond, debenture, note or other evidence of indebtedness for money borrowed by us (including a default with respect to Debt Securities of any series other than that series) or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by us (including the Indenture) whether such indebtedness now exists or shall hereafter be created, which default shall constitute a failure to pay in excess of $50,000,000 principal amount of such indebtedness when due and payable after the expiration of any applicable grace period with respect thereto or shall have resulted in an excess of $50,000,000 of principal amount of such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such indebtedness having been discharged, or such acceleration having been rescinded or annulled, within a period of 10 days after there shall have been given, by registered or certified mail, to us by the Trustee or to us and the Trustee by the holders of at least 25% in principal amount of the outstanding Debt Securities of that series a written notice specifying such default and requiring us to cause such indebtedness to be discharged or cause such acceleration to be rescinded or annulled and stating that such notice is a “Notice of Default” thereunder; or

      (f) certain events in bankruptcy, insolvency or other similar occurrences.

The Indenture provides that if an event of default described in clause (a), (b), (c), (d) or (e) shall have occurred and is continuing, and in each and every such case, unless the principal amount of all the Debt Securities of such series shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debt Securities of all series affected thereby then outstanding, by notice in writing to us (and to the Trustee if given by securityholders) may declare the principal amount of all the Debt Securities (or, with respect to discount Debt Securities, as defined below, such lesser amount as may be specified in the terms of such Debt Securities) affected thereby to be due and payable immediately, or, if an event of default described in clause (f) shall have occurred and is continuing, and unless the principal of all the Debt Securities of such series shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of all the Debt Securities then outstanding, by notice in writing to us (and to the Trustee if given by securityholders), may declare the principal of all the Debt Securities (or, with respect to discount Debt Securities, such lesser amount as may be specified in the terms of such Debt Securities) to be due and payable immediately. Upon certain conditions, such declarations may be annulled and certain past defaults may be waived by the holders

of a majority of the principal amount of outstanding Debt Securities of such series. For information as to waiver of defaults, see “Meetings; Modification of the Indenture; Waiver.”

We will be required to furnish to the Trustee annually a statement as to our performance of certain of our obligations under the Indenture and as to any default in such performance.

Under the Indenture, the Trustee must give to the holders of each series of Debt Securities notice of all uncured defaults with respect to such series within 90 days after the occurrence of such a default; provided that, except in the case of default in the payment of principal, premium (if any) or interest on any of the Debt Securities, the Trustee shall be protected in withholding such notice if it in good faith determines that the withholding of such notice is in the interests of the holders of the Debt Securities of such series.

Meetings; Modification of the Indenture; Waiver

The Indenture contains provisions permitting us and the Trustee, with the consent of the holders of not less than 66 2/3% in aggregate principal amount of all series of the Debt Securities to be affected at the time outstanding under the Indenture (voting as one class), to enter into indentures supplemental to or modifying the Indenture or the rights of the holders of such Debt Securities, except that no such modification shall (a) extend the fixed maturity, reduce the principal amount or redemption premium (if any) or reduce the rate or extend the time of payment of interest on any Debt Security without the consent of the holder of each Debt Security so affected; or (b) reduce the percentage in principal amount of the outstanding Debt Securities, the consent of whose holders is required for any such modification, without the consent of the holders of all Debt Securities then outstanding.

Without the consent of any holders of Debt Securities, we and the Trustee may enter into one or more supplemental indentures (which shall conform to the effective provisions of the Trust Indenture Act) for any of the following purposes:

• to evidence the succession of another corporation to us, or successive successions and the assumption by the successor corporation of our covenants, agreements and obligations pursuant to Article Eleven of the Indenture;

• to add to our covenants for the protection of the holders of the Debt Securities and to make the occurrence, or the occurrence or continuance, of a default in any of such additions, an event of default permitting the enforcement of all remedies provided in the Indenture, with such period of grace, if any, and subject to such conditions as such supplemental indenture may provide;

• to provide for the issuance under the Indenture of Debt Securities, whether or not then outstanding, in coupon form (including Debt Securities registrable as to principal only) and to provide for exchangeability of such Debt Securities with Debt Securities issued under the Indenture in fully registered form and to make all appropriate changes for such purpose;

• to modify, eliminate or add to the provisions of the Indenture to such extent as shall be necessary to effect the qualification of the Indenture under the Trust Indenture Act, or under any similar federal statute hereafter enacted, and to add to the Indenture such other provisions as may be expressly permitted by the Trust Indenture Act, excluding, however, the provisions referred to in Section 316(a)(2) of the Trust Indenture Act or any corresponding provision in any similar federal statute hereafter enacted;

• to convey, transfer, assign, mortgage or pledge any property to or with the Trustee;

• to evidence and provide for the acceptance and appointment hereunder of a successor trustee with respect to the Debt Securities of one or more series and to add or change any provisions

of the Indenture as shall be necessary to provide for or facilitate the administration of the trusts by more than one trustee;

• to change or eliminate any provision of the Indenture or to add any new provision to the Indenture; provided that if such change, elimination or addition will adversely affect the interests of the holders of the Debt Securities of any series in any material respect, such change, elimination or addition will become effective with respect to such series only when there is no debt security of such series remaining outstanding under the Indenture;

• to provide collateral security for the Debt Securities;

• to change any place where (1) the principal, premium (if any) and interest on Debt Securities of any series shall be payable; (2) any Debt Securities of any series may be surrendered for registration of transfer; (3) Debt Securities of any series may be surrendered for exchange; and (4) notices and demands to or upon us in respect of the Debt Securities of any series and the Indenture may be served; and

• to establish the form or terms of Debt Securities of any series as permitted by the Indenture.

The Trustee is authorized by the Indenture to join with us in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be contained in any such supplemental indenture and to accept the conveyance, transfer, assignment, mortgage or pledge of any property under such supplemental indenture. The Trustee shall not be obligated to enter into any such supplemental indenture which adversely affects the Trustee’s own rights, duties or immunities under the Indenture or otherwise. No supplemental indenture shall be effective as against the Trustee unless and until it has been duly executed and delivered by the Trustee.

The Indenture contains provisions for convening meetings of the holders of Debt Securities of a series. A meeting may be called at any time by the Trustee, and also by us or the holders of at least 25% in aggregate principal amount of the outstanding Debt Securities of any series if the Trustee fails to call the meeting upon our request or upon the request of such holders. Notice of every meeting of securityholders shall set forth the time and place in the Borough of Manhattan, the City of New York, of such meeting and in general terms the action proposed, and shall be mailed to all holders of Debt Securities of the applicable series as the names and addresses of such holders appear on the Debt Security Register.

Each holder of Debt Securities of a series with respect to which a meeting is being held (or such holder’s proxy) shall be entitled to one vote for each $1,000 outstanding principal amount of Debt Securities held (or represented) by the holder. The vote upon any resolution submitted to any meeting of securityholders shall be by written ballot. The holders of a majority in principal amount of the outstanding Debt Securities of all series affected thereby (voting as one class) may waive our compliance of covenants or conditions provided for in the Indenture. The holders of a majority in principal amount of the outstanding Debt Securities of each series may, on behalf of the holders of all the Debt Securities of such series, waive any past default under the Indenture, except a default (1) in the payment of principal, premium (if any) or interest on any debt security of such series, or (2) in respect of a covenant or provision of the Indenture which cannot be modified or amended without the consent of the holder of each outstanding debt security affected.

Collection of Indebtedness, Etc.

The Indenture also provides that if we fail to make payment of principal, premium, interest, or any mandatory sinking fund requirements on the Debt Securities (and in the case of payment of interest or any mandatory sinking fund payment, such failure to pay shall have continued for 30 days) we will, upon demand of the Trustee, pay to it, for the benefit of the holders of the Debt Securities,

the whole amount then due and payable on the Debt Securities for principal or premium (if any) and interest, with interest on the overdue principal and, to the extent payment of interest shall be legally enforceable, upon overdue installments of interest at the rate borne by the Debt Securities. The Indenture further provides that if we fail to pay such amount forthwith upon such demand, the Trustee may, among other things, institute a judicial proceeding for the collection thereof. However, the Indenture provides that notwithstanding any other provision of the Indenture, the holder of any Debt Security shall have the right to institute suit for the enforcement of any payment of principal and interest on such Debt Security on the respective stated maturities expressed in such Debt Security and that such right shall not be impaired without the consent of such holder. The holders of a majority in principal amount of the Debt Securities of each series then outstanding under the Indenture shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee; provided, that the holders shall have offered to the Trustee reasonable indemnity against expenses and liabilities.

Satisfaction and Discharge

We may satisfy and discharge our obligations under the Indenture if, at any time, (1) we shall have delivered to the Trustee for cancellation all Debt Securities of any series theretofore authenticated or (2) all such Debt Securities of such series not theretofore delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and we shall deposit or cause to be deposited with the Trustee as trust funds (a) an amount of money which will be sufficient, or (b) Government Obligations, the principal and interest on which when due, without any regard to reinvestment thereof, will provide monies which will be sufficient, or (c) a combination of (a) and (b) which will be sufficient, to pay at maturity or upon redemption all Debt Securities of such series not theretofore delivered to the Trustee for cancellation, including principal, premium (if any) and interest due or to become due to such date of maturity or date fixed for redemption, as the case may be.

If the conditions of either (1) or (2) above are satisfied, we must also pay or cause to be paid all other sums payable by us under the Indenture with respect to such series, and then the Indenture shall cease to be of further effect with respect to the Debt Securities of such series, and the Trustee, on demand of and at our cost and expense, shall execute proper instruments acknowledging satisfaction of and discharging the Indenture with respect to the Debt Securities of such series. We agree to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee in connection with the Indenture or the Debt Securities of such series.

In addition, under the Indenture we will be discharged from any and all obligations in respect of the Debt Securities of any series (except in each case for certain obligations to register the transfer or exchange of Debt Securities, replace stolen, lost or mutilated Debt Securities, maintain paying agencies and hold moneys for payment in trust) if we deposit with the Trustee, in trust, money, Government Obligations, or a combination thereof, in an amount sufficient to pay all the principal (including any mandatory sinking fund payments) of, and interest on, Debt Securities of such series on the dates such payments are due in accordance with the terms of such Debt Securities. Such defeasance and discharge will become effective after we have, among other things, delivered to the Trustee an opinion of counsel to the effect that the deposit and related defeasance would not cause the holders of the Debt Securities of such series to recognize income, gain or loss for federal income tax purposes, or a copy of a ruling or other formal statement or action to such effect received from or published by the United States Internal Revenue Service.

Notices

Any notice or demand required or permitted to be given or served by the Trustee or by the holders of Debt Securities to or on us may be given or served by postage prepaid first class mail addressed (until another address is filed by us with the Trustee) as follows: Piedmont Natural Gas Company, Inc., 1915 Rexford Road, Post Office Box 33068, Charlotte, North Carolina 28233, Attention: Robert O. Pritchard, Treasurer.

Any notice, direction, request or demand by any holder of the Debt Securities to or upon the Trustee shall be deemed to have been sufficiently given or made, if given or made in writing at the principal corporate trust office of the Trustee in the Borough of Manhattan, the City of New York.

Any notice to be given to the holders of the Debt Securities will be given by mail to the addresses of such holders as they appear in the Debt Security Register.

Title

We, the Trustee and any of our agents may deem the person in whose name such Debt Security shall be registered upon our books (which, in the case of Debt Securities represented by a global security, shall be the Depositary or its nominee) to be the absolute owner of such Debt Security (whether or not such Debt Security shall be overdue and notwithstanding any notation of ownership or other writing thereon), for the purpose of receiving payment and for all other purposes.

Replacement of Debt Securities

In case any Debt Security shall become mutilated or be destroyed, lost or stolen, we, in the case of a mutilated Debt Security shall, and in the case of a lost, stolen or destroyed Debt Security may, in our discretion, provide a new Debt Security of the same series. The applicant for a substituted Debt Security shall furnish to us and the Trustee such security or indemnity as may be required by them to save each of us harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish evidence of the destruction, loss or theft of such Debt Security and of the ownership thereof. We may require the payment of a sum sufficient to cover any tax, governmental charge or other charges that may be imposed in relation to the issuance of a substituted Debt Security and in addition a further sum not exceeding $2.00 for each Debt Security so issued in substitution.

Governing Law

The Indenture is and the Debt Securities will be governed by, and construed in accordance with, the laws of the State of New York.

Concerning the Trustee

Subject to the provisions of the Indenture relating to its duties, the Trustee will be under no obligation to expend or risk its own funds or to incur any personal financial liability in the performance of its duties under the Indenture, or to exercise any of its rights or powers under the Indenture, if there are reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Subject to such provisions, the holders of a majority in principal amount of the Debt Securities then outstanding will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee under the Indenture, or exercising any trust or power conferred on the Trustee. Citibank, N.A., Trustee under the Indenture, has commercial banking relationships with us.

DESCRIPTION OF COMMON STOCK

Our Articles of Incorporation authorize 100,000,000 shares of common stock without par value and 175,000 shares of preferred stock without par value. Our Board of Directors has the authority to establish one or more series of preferred stock with such terms and rights as it may determine. No shares of preferred stock are presently outstanding.

Holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of shareholders. Under North Carolina law, the election of directors requires a plurality of the votes cast in the election. Shareholders do not have cumulative voting rights.

Our Articles of Incorporation and By-Laws contain certain provisions that could have the effect of delaying, deferring or preventing a change in control. These provisions include:

• Classified Board of Directors. Our Board of Directors is divided into three classes with staggered terms, which means that, as a general matter, only one-third of the Board must stand for re-election at any annual meeting of shareholders. The classification of directors could have the effect of making it more difficult for shareholders, including those holding a majority of the outstanding shares, to force an immediate change in the composition of our Board. Two shareholder meetings, instead of one, generally will be required to effect a change in the control of our Board. The provision for the classification of directors may be amended, altered, changed or repealed only upon the affirmative vote of 80% of the outstanding shares entitled to vote in the election of directors.

• Fixing and Changing Number of Directors. Our By-laws and Articles of Incorporation authorize the Board of Directors to fix the number of directors and provide that the number may be changed only by (a) the affirmative vote of 80% of the outstanding shares entitled to vote in the election of Directors or (b) a majority of the entire Board of Directors.

• Nominations to the Board. With certain exceptions, nominations to the Board must be made at least 60 days prior to the date of a meeting of shareholders.

• Removal of Directors. Directors may be removed for cause only by the affirmative vote of 80% of the outstanding shares entitled to vote in the election of directors.

• Fair Price Provisions. Our Articles of Incorporation require the affirmative vote of a super majority of the outstanding shares of voting stock to approve certain transactions such as actions in connection with any “Business Combination.” A Business Combination is defined to include any merger, consolidation, lease, sale or disposition of assets or certain other business transactions by us or our subsidiaries involving an “interested shareholder.” An interested shareholder is defined as any person who is or has announced an intention to become the beneficial owner of 10% or more of our voting stock (and certain defined affiliates) or an affiliate or associate of an interested shareholder and that, together with all such other arrangements, has an aggregate fair market value and/or involves aggregate commitments of $10,000,000 or more or more than 5% of our total assets or shareholders’ equity as reflected on our most recent fiscal year-end consolidated balance sheet. Our Articles of Incorporation require the affirmative vote of not less than 66 2/3% of our voting stock, voting together as a single class, excluding any voting stock held by an interested shareholder, with respect to all Business Combinations involving the interested shareholder unless (1) the transaction is approved by our Board of Directors prior to the date on which directors not affiliated with the interested shareholder and who were directors prior to the time the interested shareholder acquired such status (“Continuing Directors”) comprise less than a majority of our Board of Directors, and (2) if the Business Combination involves payment of consideration to

shareholders, certain minimum price and disclosure requirements are satisfied as to all shareholders, and there has been no major change in our business or equity capital structure or any change or reduction in the payment of dividends since the date the interested shareholder acquired such status. To meet the minimum price criteria, the shareholders must receive consideration or retain value per share after the transaction that is not less than the highest price per share paid by the interested shareholder in the transaction or within two years preceding the announcement date of the transaction, or the fair market value per share of our common stock on the date the transaction is announced or the date on which the interested shareholder acquired such status, whichever is higher. The minimum price provisions must be met with respect to every class or series of our outstanding capital stock, whether or not the interested shareholder has previously acquired shares of any particular class or series. Our Articles of Incorporation require the same 66 2/3% shareholder approval to amend or repeal the foregoing provisions or to adopt any provision inconsistent with such provisions unless the change is proposed by the Board of Directors prior to the date on which Continuing Directors comprise less than a majority of the Board.

• Shareholder Rights Plan. Our shareholder rights plan generally provides the Board of Directors and shareholders the right to act to substantially dilute the share ownership position of any person who acquires 15% or more of our common stock. These provisions could discourage bids for the common stock at a premium and might adversely affect the market price of our common stock.

• Amendment to our By-Laws. Our By-Laws may be amended only by (a) the affirmative vote of 80% of the outstanding shares entitled to vote in the election of directors or by the Board of Directors or (b) a majority of the entire Board of Directors at a meeting at which a quorum is present.

• Opt out of North Carolina Anti-Takeover Statutes. Our Articles of Incorporation contain language to “opt out” of the provisions of two North Carolina anti-takeover statutes which, under the North Carolina Business Corporation Act, would otherwise apply to us. The first of these statutes, called the “North Carolina Shareholder Protection Act,” requires that any business combination (as defined therein) between a corporation and any 20% shareholder be approved by 95% of the corporation’s voting shares. Under the second statute, called the “North Carolina Control Share Acquisition Act,” control shares of a corporation that are acquired in a “control share acquisition” (as defined in the statute) have no voting rights unless such rights are granted by resolution adopted by a majority of the corporation’s shareholders, and in the event such voting rights were to be granted, all other shareholders would have the right to have their shares in the corporation redeemed at their fair value, subject to certain restrictions. Because application of these statutes to us would create material conflicts with existing provisions of our Articles of Incorporation regarding Business Combinations, our Articles of Incorporation include provisions stating that neither of these statutes will apply to us.

Holders of our common stock are entitled to receive dividends that may be declared from time to time by the Board of Directors subject to any preferences that may be applicable to any shares of our preferred stock then outstanding. Some of the agreements under which our long-term debt was issued contain provisions that restrict the amount of cash dividends that may be paid on our common stock. Under the most restrictive of these provisions, all of our retained earnings were free of such restrictions as of April 30, 2003.

In the event of liquidation, holders of common stock are entitled to all assets that remain after satisfaction of creditors and the liquidation preferences of any outstanding Preferred Stock, if any. Holders of common stock do not have preemptive rights to purchase additional shares of common

stock or securities convertible into such shares. There are no redemption provisions on any shares of common stock. The outstanding shares of common stock are, and the additional shares offered hereby will be, fully paid and non-assessable.

The outstanding shares of common stock are, and the additional shares offered hereby will be, listed on the New York Stock Exchange under the trading symbol “PNY.”

The Transfer Agent and Registrar for the common stock is American Stock Transfer & Trust Company, 59 Maiden Lane, New York, New York 10038.

DESCRIPTION OF STOCK PURCHASE

CONTRACTS AND STOCK PURCHASE UNITS

We may issue stock purchase contracts, including contracts that obligate holders to purchase from us, and us to sell to these holders, a specified number of shares of common stock at a future date or dates. The consideration per share of common stock may be fixed at the time the stock purchase contracts are issued or may be determined by reference to a specific formula set forth in the stock purchase contracts. The stock purchase contracts may be issued separately or as a part of stock purchase units consisting of a stock purchase contract and either debt securities or debt obligations of third parties, including United States Treasury securities, that are pledged to secure the holders’ obligations to purchase the common stock under the stock purchase contracts. The stock purchase contracts may require us to make periodic payments to the holders of the stock purchase units or vice versa, and such payments may be unsecured or prefunded on some basis. The stock purchase contracts may require holders to secure their obligations under these stock purchase contracts in a specified manner.

A prospectus supplement will summarize material terms of any stock purchase contracts or stock purchase units being offered. The description in the prospectus supplement will refer to the forms of stock purchase contracts. Material United States federal income tax considerations applicable to the stock purchase units and stock purchase contracts will also be discussed in the applicable prospectus supplement.

PLAN OF DISTRIBUTION

We may sell the securities offered by this prospectus and the applicable prospectus supplement as follows:

• to or through underwriting syndicates represented by managing underwriters, or by underwriters without a syndicate, such underwriters to be designated at the time of sale;

• through agents designated from time to time; or

• directly by us to other purchasers.

The applicable prospectus supplement will set forth the terms of the offering of the securities, including the name or names of any underwriters or agents, the purchase price of such securities and the proceeds to us from such sales, any underwriting discounts, agency commissions and other items constituting underwriters’ or agents’ compensation, any initial public offering price, any discounts or concessions to be allowed or reallowed or paid to dealers and the securities exchanges, if any, on which such securities may be listed.

If underwriters are used in the sale, the securities will be acquired by the underwriters for their own accounts and may be resold from time to time in one or more transactions, including negotiated transactions. These transactions may be at a fixed public offering price or at varying prices

determined at the time of sale. Such securities may be offered to the public either through underwriting syndicates represented by managing underwriters or by underwriters without a syndicate, all of which underwriters in either case will be designated in the prospectus supplement corresponding to such offering. Unless otherwise set forth in the applicable prospectus supplement, under the terms of the underwriting agreement, the obligations of the underwriters to purchase such securities will be subject to certain conditions precedent, and the underwriters will be obligated to purchase all of such securities if any are purchased. Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time.

The securities may be sold directly by us or through agents designated by us from time to time. Any agent involved in the offer or sale of the securities with respect to which this prospectus is delivered will be named, and any commission payable by us to such agent will be set forth, in the corresponding prospectus supplement. Unless otherwise indicated in the corresponding prospectus supplement, any such agent will be acting on a reasonable best-efforts basis for the period of its appointment.

If so indicated in the applicable prospectus supplement, we may authorize underwriters or agents to solicit offers by certain institutions to purchase securities from us at the public offering price set forth in such prospectus supplement pursuant to delayed delivery contracts (“Delayed Delivery Contracts”) providing for payment and delivery on the future date or dates stated in the prospectus supplement. The amount of securities to be sold under each Delayed Delivery Contract and the aggregate amount of securities to be sold under all Delayed Delivery Contracts will be set forth in the prospectus supplement. Institutions with which Delayed Delivery Contracts, when authorized, may be made include commercial and savings banks, insurance companies, pension funds, investment companies and educational and charitable institutions, but shall in all cases be subject to our approval in our sole discretion. The obligations of the purchaser under any Delayed Delivery Contract to pay for and take delivery of securities will not be subject to any conditions except that (i) the purchase of securities by such institution shall not at the time of delivery be prohibited under the laws of any jurisdiction to which such institution is subject; and (ii) any related sale of securities to underwriters shall have occurred. A commission set forth in the applicable prospectus supplement will be paid to underwriters or agents soliciting purchases of securities pursuant to Delayed Delivery Contracts accepted by us. The underwriters or agents will not have any responsibility in respect of the validity or performance of Delayed Delivery Contracts.

All Debt Securities will be new issues of securities with no established trading market. Any underwriters to whom Debt Securities are sold by us for public offering and sale may make a market in such securities, but such underwriters will not be obligated to do so and may discontinue any market making at any time without notice. No assurance can be given as to the liquidity of the trading market for any Debt Securities.

Underwriters and agents may be entitled under agreements entered into with us to indemnification by us against certain civil liabilities, including liabilities under the Securities Act of 1933, or to contribution with respect to payments which the underwriters or agents may be required to make in respect thereof and to reimbursement by us for certain expenses. Underwriters and agents also may be customers of, engage in transactions with, or perform other services for us in the ordinary course of business.

LEGAL OPINIONS

The validity of the securities will be passed upon for us by Nelson, Mullins, Riley & Scarborough, LLP, Charlotte, North Carolina. Jerry W. Amos, a partner in that law firm and a director of the Company, beneficially owned 73,553 shares of our common stock as of May 31, 2003.

Certain legal matters in connection with the issuance of the securities will be passed upon for any underwriters or agents by Orrick, Herrington & Sutcliffe LLP, New York, New York.

EXPERTS

The consolidated financial statements of Piedmont Natural Gas Company, Inc., as of October 31, 2002 and 2001, and for each of the three years in the period ended October 31, 2002, and the related financial statement schedule incorporated in this prospectus by reference from Piedmont Natural Gas Company’s Annual Report on Form 10-K, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report which is incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm, given upon their authority as experts in accounting and auditing.

The consolidated financial statements of North Carolina Natural Gas Corporation as of December 31, 2002 and 2001, and for each of the three years in the period ended December 31, 2002, included in this prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein (which expresses an unqualified opinion and includes an explanatory paragraph referring to the change in 2002 in the method of accounting for goodwill), and have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

Appendix A

AUDITED FINANCIAL STATEMENTS

NORTH CAROLINA NATURAL GAS CORPORATION

North Carolina Natural Gas Corporation

Consolidated Balance Sheets

December 31, 2002 and 2001



				December 31

				2002			2001


				(In Thousands)
ASSETS
Utility Plant
	Gas utility plant in service			$	554,738		$	492,001
	Accumulated depreciation				(179,086	)		(159,897	)

		Utility plant in service, net			375,652			332,104
	Construction work in progress				18,127			60,895

		Total Utility Plant, Net			393,779			392,999

Current assets
	Cash and cash equivalents				762			711
	Accounts receivable, net				34,856			28,383
	Unbilled accounts receivable				16,565			—
	Accounts receivable from affiliated companies				3,644			3,701
	Inventory				17,198			21,248
	Deferred gas costs — unbilled volumes				—			9,814
	Other current assets				5,644			1,259

		Total Current Assets			78,669			65,116

Deferred Debits and Other Assets
	Goodwill				43,022			221,593
	Unamortized debt expense				2,803			3,282
	Diversified business property, net				928			923
	Miscellaneous other property and investments				5,690			5,741
	Other assets and deferred debits				4,551			6,130

		Total Deferred Debits and Other Assets			56,994			237,669

			Total Assets	$	529,442		$	695,784

CAPITALIZATION AND LIABILITIES
Capitalization
	Common stock, par value $0.10; 100 shares authorized; 100 shares issued and outstanding			$	—		$	—
	Capital in excess of par value				417,645			417,617
	Accumulated other comprehensive loss				(5,883	)		—
	Retained earnings (deficit)				(163,733	)		9,014

		Total Capitalization			248,029			426,631

Current Liabilities
	Accounts payable				36,109			26,437
	Accounts payable to affiliated companies				14,567			34,446
	Notes payable to affiliated companies				150,000			150,000
	Income taxes payable				2,790			941
	Interest accrued				426			388
	Deferred gas costs				13,860			4,506
	Other current liabilities				15,956			13,427

		Total Current Liabilities			233,708			230,145

Deferred Credits and Other Liabilities
	Accumulated deferred income taxes				27,172			26,887
	Accumulated deferred investment tax credits				1,685			1,817
	Regulatory liability for income taxes, net				1,382			1,640
	Other liabilities and deferred credits				17,466			8,664

		Total Deferred Credits and Other Liabilities			47,705			39,008

			Total Capitalization and Liabilities	$	529,442		$	695,784

See Notes to Consolidated Financial Statements.

A-1

North Carolina Natural Gas Corporation

Consolidated Statements of Income and Comprehensive Income

Years Ended December 31, 2002, 2001 and 2000



			Years Ended December 31

			2002			2001		2000


			(In Thousands)
Operating Revenues
	Natural gas revenues		$	316,423		$	318,755	$	339,569
	Diversified business revenues			58			53		6,029

		Total operating revenues		316,481			318,808		345,598


Operating Expenses
	Cost of gas			230,617			240,672		268,986
	Other operation and maintenance			45,247			40,990		31,081
	Goodwill impairment			126,277			—		—
	Depreciation and amortization			19,836			23,043		19,458
	General taxes			4,303			3,995		3,360
	Diversified business expenses			1			104		4,862

		Total Operating Expenses		426,281			308,804		327,747

Operating Income (Loss)				(109,800	)		10,004		17,851

Other Income				2,266			3,029		7,665
Interest Charges				10,877			6,420		7,323

Income (Loss) before Income Taxes and Cumulative Effect of Accounting Change				(118,411	)		6,613		18,193
Income Taxes				2,042			3,745		8,278

Income (Loss) before Cumulative Effect of Accounting Change				(120,453	)		2,868		9,915
Cumulative Effect of Accounting Change				(52,294	)		—		—

Net Income (Loss)				(172,747	)		2,868		9,915
Minimum Pension Liability Adjustment (net of tax of $3,838)				(5,883	)		—		—

Comprehensive Income (Loss)			$	(178,630	)	$	2,868	$	9,915

See Notes to Consolidated Financial Statements.

A-2

North Carolina Natural Gas Corporation

Consolidated Statements of Cash Flows

Years Ended December 31, 2002, 2001 and 2000



					Years Ended December 31

					2002			2001			2000


					(In Thousands)
Operating Activities
	Net Income				$	(172,747	)	$	2,868		$	9,915
	Adjustments to reconcile net income to net cash provided by operating activities:
		Goodwill impairment and cumulative effect of accounting change				178,571			—			—
		Depreciation and amortization				20,377			23,865			20,835
		Deferred income taxes				3,865			(447	)		(212	)
		Investment tax credit				(132	)		(133	)		(133	)
		Deferred fuel credit				9,354			13,589			(4,602	)
		Net changes in other assets and liabilities:
			Accounts receivable from affiliated companies			57			(301	)		(3,596	)
			Accounts receivable			(23,038	)		20,074			(33,038	)
			Inventories			4,050			(4,519	)		(1,147	)
			Deferred gas costs — unbilled volumes			9,814			5,408			(9,128	)
			Other assets			(5,169	)		6,928			(3,853	)
			Accounts payable to affiliated companies			(24,026	)		(41,573	)		70,687
			Accounts payable			9,669			(17,856	)		23,803
			Current and accrued liabilities			5,567			997			3,448
			Other			16			(283	)		(2,454	)

				Net Cash Provided by Operating Activities		16,228			8,617			70,525

Investing Activities
	Gross property additions					(20,648	)		(68,893	)		(92,959	)
	Proceeds from sale of assets					245			249			12,825
	Investments in non-utility activities					51			832			(665	)

				Net Cash Used in Investing Activities		(20,352	)		(67,812	)		(80,799	)

Financing Activities
	Proceeds from issuance of note payable to parent					—			150,000			—
	Payments of note payable to parent					—			(123,548	)		(11,435	)
	Net changes in advances from affiliate					4,147			32,215			21,732
		Issuance of common stock on deferred compensation plans for retired directors				28			29			30

				Net Cash Provided by Financing Activities		4,175			58,696			10,327

Net Increase (Decrease) in Cash and Cash Equivalents						51			(499	)		53
Cash and Cash Equivalents at Beginning of the Year						711			1,210			1,157

Cash and Cash Equivalents at End of the Period					$	762		$	711		$	1,210

Supplemental Disclosures of Cash Flow Information
Cash paid (received) during the period:
	Interest				$	10,906		$	5,255		$	7,573
	Income Taxes				$	(3,357	)	$	938		$	9,846
Noncash financing activities —
	Equity investment from parent company				$	—		$	50,000		$	3,829

See Notes to Consolidated Financial Statements.

A-3

North Carolina Natural Gas Corporation

Consolidated Statements of Changes in Capitalization

January 1, 2000 to December 31, 2002



		Common Stock						Accumulated
		Outstanding				Additional		Other			Retained
						Paid-In		Comprehensive			Earnings			Total
		Shares		Amount		Capital		Loss			(Deficit)			Capitalization


		(In Thousands)
Balance, January 1, 2000			100	$	—	$	363,729	$	—		$	(3,769	)	$	359,960
	Additional equity investment from parent company						3,829								3,829
	Equity compensation						30								30
	Net income											9,915			9,915

Balance, December 31, 2000			100	$	—	$	367,588	$	—		$	6,146		$	373,734
	Additional equity investment from parent company						50,000								50,000
	Equity compensation						29								29
	Net income											2,868			2,868

Balance, December 31, 2001			100	$	—		417,617	$	—		$	9,014		$	426,631
	Minimum pension liability adjustment (net of tax)								(5,883	)					(5,883	)
	Equity compensation						28								28
	Net loss											(172,747	)		(172,747	)

Balance, December 31, 2002			100	$	—	$	417,645	$	(5,883	)	$	(163,733	)	$	248,029

See Notes to Consolidated Financial Statements.

A-4

North Carolina Natural Gas Corporation

Notes to Consolidated Financial Statements

Years Ended December 31, 2002, 2001 and 2000

Note 1. Summary of Significant Accounting Policies

A. Organization

North Carolina Natural Gas Corporation (NCNG or the Company) is a public service company primarily engaged in transporting and distributing natural gas in portions of North Carolina. NCNG is a wholly owned subsidiary of Progress Energy, Inc. (Progress Energy or PGN), which was formed as a result of the reorganization of Carolina Power & Light (CP&L) into a holding company structure on June 19, 2000. All shares of common stock of CP&L were exchanged for an equal number of shares of PGN. On July 1, 2000, CP&L distributed its ownership interest in the stock of NCNG to PGN. PGN is a registered holding company under the Public Utility Holding Company Act (PUCHA) of 1935. Both PGN and its subsidiaries are subject to the regulatory provisions of the PUCHA.

B. Basis of Presentation

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and include the activities of the Company and its majority-owned subsidiaries, NCNG Pineneedle Investment Corporation, NCNG Cardinal Pipeline Investment Corporation, and Cape Fear Energy Corporation. Significant intercompany balances and transactions have been eliminated in consolidation except as permitted by Statement of Financial Accounting Standards (SFAS) No. 71, “Accounting for the Effects of Certain Types of Regulation,” which provides that profits on intercompany sales to regulated affiliates are not eliminated if the sales price is reasonable and the future recovery of the sales price through the rate making process is probable. The accounting records are maintained in accordance with uniform systems of accounts prescribed by the North Carolina Utilities Commission (NCUC).

C. Use of Estimates and Assumptions

In preparing financial statements that conform with accounting principals generally accepted in the United States of America, management must make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and amounts of revenues and expenses reflected during the reporting period. Actual results could differ from those estimates.

D. Cash

The Company considers cash and cash equivalents to include unrestricted cash on hand, cash in banks, and temporary investments with a maturity of three months or less.

E. Utility Plant and Depreciation

Utility plant in service is stated at historical cost less accumulated depreciation. The Company capitalizes all construction-related direct labor and material costs of units of property as well as indirect construction costs. The cost of renewals and betterments is also capitalized. Maintenance and repairs of property, and replacements and renewals of items determined to be less than units of property, are charged to maintenance expense as incurred. The cost of units of property replaced, renewed or retired, plus removal or disposal costs, less salvage, is charged to accumulated

A-5

North Carolina Natural Gas Corporation

Notes to Consolidated Financial Statements — (Continued)

depreciation. Subsequent to the acquisition of NCNG by PGN, utility plant continues to be presented on a gross basis to reflect the treatment of such plant in cost-based regulation.

The balances of utility plant in service at December 31 are listed below with a range of depreciable lives for each:


		2002		2001


		(In Thousands)
Transmission plant (24-50 years)		$	247,489	$	223,779
Distribution plant (22-50 years)			224,165		203,171
General plant (5-37 years)			53,723		37,543
Natural gas storage and processing plant (16–30 years)			26,257		24,638
Capital leases			1,380		1,146
Intangible plant			991		991
Production plant (44 years)			733		733

	Total utility plant in service	$	554,738	$	492,001

The Company is engaged in a capital lease with Exxon for use of a six-inch pipeline in Wilmington, NC. The initial lease agreement was entered into during 1997 for a term of five years. The agreement contains an automatic renewal provision with an annual rent escalation factor of 2.65%. The agreement will continue in perpetuity after the conclusion of the initial term, unless notice of termination is provided no less than twenty-four months prior to the effective date of termination. The outstanding obligation under this lease for the next twenty-four months was $462 thousand and $435 thousand at December 31, 2002 and 2001, respectively.

Allowance for funds used during construction (AFUDC) represents the estimated debt and equity costs of capital funds necessary to finance the construction of new regulated assets. As prescribed in the regulatory uniform systems of accounts, AFUDC is charged to the cost of the plant. The equity funds portion of AFUDC is credited to other income and the borrowed funds portion is credited to interest charges. Regulatory authorities consider AFUDC an appropriate charge for inclusion in the rates charged to customers by the utilities over the service life of the property. The total equity funds portion of AFUDC was $0.8 million, $2.1 million and $2.5 million in 2002, 2001 and 2000, respectively. The total borrowed funds portion of AFUDC was $0.5 million, $1.2 million and $1.5 million in 2002, 2001 and 2000, respectively. The composite AFUDC rate for NCNG’s gas utility plant was 10.09% in 2002, 2001 and 2000.

F. Depreciation and Amortization

For financial reporting purposes, depreciation of utility plant is computed on the straight-line method based on the estimated remaining useful life of the property, adjusted for estimated net salvage. Depreciation provisions as a percent of average depreciable property were approximately 3.7% in 2002, 2001 and 2000. Depreciation provisions totaled $19.8 million, $17.2 million and $13.5 million in 2002, 2001 and 2000, respectively.

Effective January 1, 2002 the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” and no longer amortizes goodwill. Prior to the adoption of SFAS No. 142, the Company amortized goodwill on a straight-line basis over a period not exceeding 40 years.

A-6

North Carolina Natural Gas Corporation

Notes to Consolidated Financial Statements — (Continued)

G. Diversified Business Property

Diversified business property consists of land, which had a balance of $928 thousand and $923 thousand at December 31, 2002 and 2001, respectively.

H. Inventory

Inventory is carried at average cost. As of December 31, 2002 and 2001, inventory was comprised of:


		2002		2001


		(In Thousands)
Fuel		$	12,300	$	16,136
Materials and supplies			4,898		5,112

	Total Inventory	$	17,198	$	21,248

I. Impairment of Long-Lived Assets and Investments

The Company reviews the recoverability of long-lived and intangible assets whenever indicators exist. Examples of these indicators include current period losses, combined with a history of losses or a projection of continuing losses, or a significant decrease in the market price of a long-lived asset group. If an indicator exists, then the asset group is tested for recoverability by comparing the carrying value to the sum of undiscounted expected future cash flows directly attributable to the asset group. If the asset group is not recoverable through undiscounted cash flows, then an impairment loss is recognized for the difference between the carrying value and the fair value of the asset group. The accounting for impairment of assets is based on SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which was adopted by the Company effective January 1, 2002. Prior to the adoption of this standard, impairments were accounted for using SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” which was superceded by SFAS No. 144.

J. Cost-Based Regulation

The Company’s regulated operations are subject to SFAS No. 71. SFAS No. 71 allows a regulated company to record costs that have been or are expected to be allowed in the ratemaking process in a period different from the period in which the costs would be charged to expense by a nonregulated enterprise. Accordingly, the Company records assets and liabilities that result from the regulated ratemaking process that would not be recorded under GAAP for nonregulated entities. These regulatory assets and liabilities represent expenses deferred for future recovery from customers or obligations to be refunded to customers and are primarily classified in the accompanying Consolidated Balance Sheets as regulatory assets and regulatory liabilities (See Note 5).

K. Income Taxes

PGN and its affiliates file a consolidated federal income tax return. Federal income taxes are provided as if the Company filed a separate return. Amounts shown as income taxes payable are due to PGN. Deferred income taxes have been provided for temporary differences. These occur when there are differences between the book and tax carrying amounts of assets and liabilities. Investment

A-7

North Carolina Natural Gas Corporation

Notes to Consolidated Financial Statements — (Continued)

tax credits related to regulated operations have been deferred and are being amortized over the estimated service life of the related properties (See Note 7).

L. Derivatives

Effective January 1, 2001, the Company adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities — an amendment of FASB Statement No. 133”. SFAS No. 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS No. 133 requires that an entity recognize all derivatives as assets or liabilities in the balance sheet and measure those instruments at fair value.

M. Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts receivable, which totaled approximately $2.0 million at December 31, 2002 and 2001.

N. Unamortized Debt Premiums, Discounts and Expenses

Any expenses or call premiums associated with the reacquisition of debt obligations are amortized over the remaining life using the straight-line method consistent with ratemaking treatment.

O. Revenue Recognition

In the year ended December 31, 2002, the Company performed an analysis of its revenue recognition practices and changed the way it records revenues and cost of gas related to volumes delivered but not yet billed. Recording unbilled revenues implements the practice in use by most gas utilities. NCNG previously followed the practice of rendering customer bills on a cycle basis throughout each month and recording revenue at the time of billing. The Company deferred the cost of gas delivered but unbilled due to cycle billing and recognized the revenue and related cost of gas in the period in which it was billed. Recording unbilled revenues changes the timing of revenue recognition from the cycle-billing method to the accrual method based on when the service is provided. The effect on earnings for the year ended December 31, 2002 was an after-tax increase in earnings of approximately $1.6 million.

P. Fuel Cost Deferrals

Cost of gas includes gas costs or recoveries that are deferred through purchased gas adjustment provisions established by the NCUC. The provisions allow NCNG to recover the costs of gas purchased for resale through customer rates.

Q. Environmental

The Company accrues environmental remediation liabilities when the criteria for SFAS No. 5, “Accounting for Contingencies,” has been met. The Company defers environmental expenditures consistent with rate making treatment (See Note 5B). Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as additional information develops or

A-8

North Carolina Natural Gas Corporation

Notes to Consolidated Financial Statements — (Continued)

circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recognized when their receipt is deemed probable (See Note 10).

R. Other Policies

The carrying amounts of cash and cash equivalents, notes payable and accounts payable approximate their fair values due to the short-term maturities of these financial instruments.

S. Benefit Plans

The Company follows the guidance in SFAS No. 87, “Employers’ Accounting for Pensions,” to account for its defined benefit retirement obligations. In addition to pension benefits, the Company provides other postretirement benefits which are accounted for using SFAS No. 106 “Employers’ Accounting for Postretirement Benefits Other Than Pensions.” See Note 9 for related disclosures for these plans.

T. Impact of New Accounting Standards

The Financial Accounting Standards Board (FASB) issued SFAS No. 143, “Accounting for Asset Retirement Obligations,” in July 2001. This statement provides accounting and disclosure requirements for retirement obligations associated with long-lived assets and is effective January 1, 2003. This statement requires that the present value of retirement costs for which NCNG has a legal obligation be recorded as liabilities with an equivalent amount added to the asset cost and depreciated over an appropriate period. The liability is then accreted over time by applying an interest method of allocation to the liability. Cumulative accretion and accumulated depreciation will be recognized for the time period from the date the liability would have been recognized had the provisions of this statement been in effect, to the date of adoption of this Statement. The cumulative effect of implementing this Statement is to be recognized as a change in accounting principle. The adoption of this statement will have no impact on NCNG’s net income.

NCNG has previously recognized removal costs as a component of depreciation in accordance with regulatory treatment. To the extent these amounts do not represent SFAS No. 143 legal retirement obligations, they will be disclosed as regulatory liabilities upon adoption of the standard.

In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” This newly issued statement rescinds SFAS No. 4, “Reporting Gains and Losses from Extinguishment of Debt — an amendment of Accounting Principles Board (APB) Opinion No. 3,” which required all gains and losses from the extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria set forth by APB Opinion 30 will now be used to classify those gains and losses. Any gain or loss on extinguishment will be recorded in the most appropriate line item to which it relates within net income before extraordinary items. For NCNG, any expenses or call premiums associated with the reacquisition of debt obligations are amortized over the remaining life of the original debt using the straight-line method consistent with ratemaking treatment. SFAS No. 145 also amends SFAS No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions. In addition, SFAS No. 145 amends other existing authoritative pronouncements to make various technical corrections, clarify meanings or describe their

A-9

North Carolina Natural Gas Corporation

Notes to Consolidated Financial Statements — (Continued)

applicability under changed conditions. For the provisions related to the rescission of SFAS No. 4, SFAS No. 145 is effective for NCNG beginning in fiscal year 2003. The remaining provisions of SFAS No. 145 were effective for NCNG in fiscal year 2002. Adoption of this statement will have no impact on NCNG’s results of operations or financial position.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure — an Amendment of FASB Statement No. 123,” and provided alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. This statement requires that companies having a year-end after December 15, 2002 follow the prescribed format and provide the additional disclosures in their annual reports. NCNG applies the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees” as allowed by SFAS Nos. 123 and 148, and related interpretations in accounting for its stock-based compensation plans as described in Note 12.

The following table illustrates the effect on NCNG’s net income if NCNG had applied the fair value recognition provisions of SFAS No. 123 to the stock option plan. The stock option plan was not in effect in 2000.


	2002			2001


	(In Thousands)
Net income, as reported	$	(172,747	)	$	2,868
Deduct: Total stock option expense determined under fair value method for all awards, net of related tax effects		175			38

Proforma net income	$	(172,922	)	$	2,830

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others — an Interpretation of FASB Statements No. 5, 57 and 107 and Rescission of FASB Interpretation No. 34” (FIN No. 45). This interpretation clarifies the disclosures to be made by a guarantor in its interim and annual financial statements about obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of certain guarantees, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and initial measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. NCNG is currently evaluating the effects, if any, that this interpretation will have on its results of operations and financial position.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities — an Interpretation of ARB No. 51” (FIN No. 46). This interpretation provides guidance related to identifying variable interest entities (previously known as special purpose entities or SPEs) and determining whether such entities should be consolidated. Certain disclosures are required when FIN No. 46 becomes effective if it is reasonably possible that a company will consolidate or disclose information about a variable interest entity when it initially applies FIN No. 46. NCNG is currently

A-10

North Carolina Natural Gas Corporation

Notes to Consolidated Financial Statements — (Continued)

evaluating what effects, if any, this interpretation will have on its results of operations and financial position.

In June 2002, the Emerging Issues Task Force (EITF) reached consensus on a portion of Issue 02-03, “Accounting for Contracts Involved in Energy Trading and Risk Management Activities.” EITF Issue 02-03 is effective for financial statements issued for periods ending after July 15, 2002, and requires all gains and losses (realized or unrealized) on energy trading contracts to be shown on a net basis in the income statement. NCNG’s policy already required the gains and losses to be recorded on a net basis. NCNG does not recognize a dealer profit or unrealized gain or loss at the inception of a derivative unless the fair value of that instrument, in its entirety, is evidenced by quoted market prices or current market transactions.

Note 2. Acquisitions and Dispositions

On July 15, 1999, the Company was acquired by CP&L for an aggregate purchase price of approximately $364 million, including approximately $3.7 million of merger related costs. As a result of the merger, the former common shareholders of NCNG now own common shares of PGN. The merger was accounted for as a purchase of the Company’s net assets with approximately 8.3 million shares of CP&L Common Stock issued through the conversion of each outstanding NCNG share into .8054 of a share of CP&L Common Stock (fractional shares were paid in cash). Goodwill of approximately $240 million was recorded in connection with the purchase, which represented the excess of the purchase price over the Company’s net assets after fair value adjustments. Effective January 1, 2002, goodwill, which was being amortized on a straight-line basis over 40 years, is no longer subject to amortization over its estimated useful life (See Note 3).

On September 29, 2000, NCNG sold its propane business for $14.3 million. The sale resulted in a pretax gain of $2.4 million.

On October 16, 2002, PGN announced its intention to sell NCNG to Piedmont Natural Gas Company, Inc. for approximately $417.5 in gross proceeds. The sale is expected to close by summer 2003 and must be approved by the NCUC and federal regulatory agencies.

Note 3. Goodwill

Effective January 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” This statement clarifies the criteria for recording of other intangible assets separately from goodwill. Effective January 1, 2002, goodwill is no longer subject to amortization over its estimated useful life. Instead, goodwill is subject to at least an annual assessment for impairment by applying a two-step fair-value based test.

In accordance with the provisions of SFAS No. 142, the Company completed the transitional impairment test within six months of adoption, which resulted in a non-cash charge of approximately $52.3 million to reduce the carrying value of goodwill. The initial impairment of $52.3 million is reflected net of tax as a cumulative effect of an accounting change in the consolidated statement of income. In addition, the Company performed the annual impairment test in the third quarter 2002, and recognized an additional goodwill impairment of $126.3 million based on the expected proceeds from the sale of NCNG (See Note 2), which is shown as goodwill impairment on the consolidated statement of income.

A-11

North Carolina Natural Gas Corporation

Notes to Consolidated Financial Statements — (Continued)

As required by SFAS No. 142, the results for the prior year periods have not been restated. A reconciliation of net income as if SFAS No. 142 had been adopted is presented below for years ending December 31.


	2001		2000


	(In Thousands)
Reported net income (loss)	$	2,868	$	9,915
Goodwill amortization (net of tax)		3,572		3,543

Adjusted net income	$	6,440	$	13,458

Note 4. Related Party Transactions

NCNG participates in an internal money pool, operated by the parent company, PGN, to more effectively utilize cash resources and to reduce outside short-term borrowings. Short-term borrowing needs are met first by available funds of the money pool participants. Borrowing companies pay interest at a rate designed to approximate the cost of outside short-term borrowings. Subsidiaries of PGN, which invest in the money pool, earn interest on a basis proportionate to their average monthly investment. The interest rate used to calculate earnings approximates external interest rates. The weighted-average interest rates associated with such money pool balances were 2.18% and 4.47% at December 31, 2002 and 2001, respectively. Funds may be withdrawn from or repaid to the pool at any time without prior notice. At December 31, 2002, there were no amounts payable to the money pool. At December 31, 2001, NCNG had $3.9 million payable to the money pool, which is included in accounts payable to affiliated companies on the Consolidated Balance Sheets. The Company recorded interest income on money pool lending totaling $0.2 million during 2002 and interest expense on money pool borrowings totaling $0.1 million, $1.9 million and $0.4 million during 2002, 2001 and 2000, respectively. In December 2001, PGN converted $50 million in money pool debt to an equity investment in NCNG.

During the years ended December 31, 2002, 2001 and 2000, gas sales from NCNG to CP&L and Florida Power Corporation (an affiliated company) totaled $19.5 million, $18.8 million and $5.9 million, respectively.

During 2000, PGN formed Progress Energy Service Company, LLC (PESC) to provide specialized services, at cost, to PGN and its subsidiaries, as approved by the SEC. NCNG has an agreement with PESC under which services, including purchasing, accounting, treasury, tax, marketing, legal and human resources are rendered to NCNG at cost. Amounts billed to NCNG by PESC for these services during 2002 and 2001 totaled $16.3 million and $15.1 million, respectively. NCNG was not billed for these services in 2000 because an amount was not determinable.

At December 31, 2002 and 2001, NCNG had payables of $14.6 million and $30.5 million, respectively, to PGN and its subsidiaries that are included in accounts payable to affiliated companies on the Consolidated Balance Sheets. Receivables from PGN and its subsidiaries totaled $3.6 million in 2002 and 2001. These receivables are included in accounts receivable from affiliated companies on the Consolidated Balance Sheets.

On December 15, 2001, NCNG restructured its $150.0 million line of credit with PGN. At December 31, 2002 and 2001, there was $150.0 million outstanding under this line of credit at an interest rate of 6.425%.

A-12

North Carolina Natural Gas Corporation

Notes to Consolidated Financial Statements — (Continued)

Note 5. Regulatory Matters

A. Regulatory Assets and Liabilities

As a regulated entity, NCNG is subject to the provisions of SFAS No. 71, “Accounting for the Effects of Certain Types of Regulation.” Accordingly, NCNG records certain assets and liabilities resulting from the effects of the ratemaking process, which would not be recorded under generally accepted accounting principles for unregulated entities.

At December 31, 2002 and 2001, the balances of the Company’s regulatory assets (liabilities) were as follows:


		2002			2001


		(In Thousands)
Loss on reacquired debt		$	2,803		$	3,282
Environmental costs			4,447			4,343
Deferred gas			(13,860	)		(4,506	)
Income taxes recoverable through future rates			(1,382	)		(1,640	)

	Total	$	(7,992	)	$	1,479

All regulatory assets included in the table above earn a return.

The Company monitors the regulatory and competitive environment in which it operates to determine that regulatory assets continue to be probable of recovery. At some point in the future, if it is determined that all or a portion of these regulatory assets no longer meet the criteria for continued application of SFAS No. 71, then the Company would be required to write-off that portion which it could not recover, net of any regulatory liabilities which would be deemed no longer necessary.

B. Retail Rate Matters

On October 27, 1995, the NCUC issued its Order granting a general rate increase amounting to approximately $4.2 million in annual revenues effective November 1, 1995. The Order provided for a rate of return on net investment of 10.09% but, pursuant to the Stipulation of Settlement, did not state separately the rate of return on common equity or the capital structure used to calculate revenue requirements. The Order provided for significant rate design changes by increasing residential and commercial rates while reducing industrial sales and transportation rates to recognize, among other things, the differences in costs of servicing the various customer classes. The Order also established several new rate schedules, including an economic development rate to assist in attracting new industry to the Company’s service area and a rate to provide standby, on-peak gas supply service to industrial and other customers whose gas service would otherwise be interrupted. In conjunction with the acquisition by CP&L, NCNG signed a stipulation agreement with the Public Staff of the NCUC in which the Company agreed to cap margin rates for gas sales and transportation service, with limited exceptions, through November 1, 2003. Management is of the opinion that this agreement will not impair the Company’s ability to recover prudent costs through rates and will not have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.

As part of the October 27, 1995, Rate Order, the NCUC approved continued use of the Weather Normalization Adjustment (WNA) for the space-heating market, originally approved in the

A-13

North Carolina Natural Gas Corporation

Notes to Consolidated Financial Statements — (Continued)

December 6, 1991 Rate Order. The WNA stabilizes the Company’s winter revenues and customers’ bills by adjusting rates when weather deviates from normal. The non-gas component of rates for space heating customers is adjusted upward when weather is warmer than normal and downward when weather is colder than normal. The WNA increased net billings to customers by $2.4 million, $1.6 million and $0.9 million for 2002, 2001 and 2000, respectively.

Also as a part of the October 27, 1995 Rate Order, the NCUC approved establishment of the Price Sensitive Volume Adjustment (PSVA). The PSVA protects the Company against loss of load from eight large, fuel-switchable customers using heavy fuel oil as an alternative fuel, while providing that all actual margins earned on deliveries of gas to such customers should be flowed through to all other customers. This mechanism was modified as part of the rate rebalancing agreement described below to reflect a sharing of the margin earned between the Company and its customers.

The Company defers reasonable costs in connection with the investigation and remediation of former manufactured gas plant (MGP) sites. As a part of the October 27, 1995 Rate Order, the NCUC approved the accounting for and recovery in rates of costs associated with environmental assessments and remediation of a former MGP in Kinston, North Carolina. The NCUC found that NCNG acted in a reasonable and prudent manner, and, accordingly, approved the Company’s proposal to recover an annualized amount of MGP costs based on amounts expended, net of recoveries from third parties.

In February 2002, NCNG filed a general rate case with the NCUC requesting an annual rate increase of $47.6 million. On May 3, 2002, NCNG withdrew the application, based upon the NCUC Public Staff’s and other parties’ interpretation of the order approving the merger of CP&L and NCNG that such a case was not permitted until 2003. On May 16, 2002, NCNG filed a request to increase its margin rates and rebalance its rates with the NCUC, requesting an annual rate increase of $4.1 million to recover costs associated with specific system improvements. On September 23, 2002, the NCUC issued its order approving the $4.1 million rate increase. The rate increase was effective October 1, 2002.

In February 1993, the NCUC issued its Order establishing an Expansion Fund for the Company to be funded initially by refunds the Company had received from its pipeline suppliers. The Expansion Fund provides financing for the extension of natural gas service into areas that otherwise would not be economically feasible to serve. These refunds, along with interest thereon, are periodically remitted to the NCUC. The balance not yet remitted is included in other current assets.

In April 1998, the Company filed an application with the NCUC to extend its pipeline 38 miles to provide natural gas service to Bertie and Martin Counties using the Fund. In July 1998, the Company filed an amendment to extend this project an additional six miles to Robersonville in Martin County. The amended main extension project would run approximately 44 miles from Ahoskie to Robersonville and cost $12.6 million. The negative net present value of the project requested from the Fund was $7.5 million. Hearings were held in September 1998 and a Commission Order was issued in November 1998 approving $7.5 million from the Expansion Fund. On July 1, 1999, the Company filed a petition for additional funding of $2.8 million due to the closing of an industrial plant. The NCUC issued an order in October 1999 approving an additional $2.8 million from the Expansion Fund. This line was completed in December 2000 at a total cost of $12.2 million.

In August 2000, the Company filed an application with the NCUC to extend its pipelines approximately 12.8 miles to provide natural gas service to Tabor City in Columbus County. The negative net present value of the project requested from the Fund was $3.4 million. Hearings were

A-14

North Carolina Natural Gas Corporation

Notes to Consolidated Financial Statements — (Continued)

held in January and February 2001 and a Commission Order was issued in March 2001 approving $3.4 million from the Expansion Fund. This line was completed in the spring of 2002. NCNG filed for and received a reimbursement of $3.1 million in October 2002 and received the balance of $0.3 million in February 2003.

The NCUC’s annual review of the Company’s gas costs for the 12 months ended October 31, 2001 was held in April 2002. The NCUC issued an order on July 2, 2002 approving NCNG’s gas costs and gas purchasing practices for the review period. NCNG requested purchased gas adjustments three times in 2002 for total net increases of $20.1 million, six times in 2001 for net decreases of $56.2 million and five times in 2000 for net increases of $86.5 million.

Both of the Company’s interstate pipeline suppliers, Transcontinental Gas Pipe Line Corporation (Transco) and Columbia Gas Transmission Corporation (Columbia), have ongoing rate and certificate matters under jurisdiction of the Federal Energy Regulatory Commission (FERC). Transco implemented new rates in September 2002 reflecting the settlement of most issues in their general rate case with the remaining issues going to hearing with a resolution expected in 2003. The Company does not expect that any regulatory decisions or court orders will have a material impact on its consolidated financial position, results of operations, or cash flows because all prudently incurred gas costs, including interstate pipeline capacity and storage service costs, are eligible for immediate recovery from the Company’s customers, and refunds from interstate pipelines must be transferred to the Expansion Fund or refunded directly to the Company’s customers.

Note 6. Risk Management & Derivative Activities

The Company may enter into certain forward and option contracts involving physical delivery of gas that reduce exposure to market fluctuations relative to the price and delivery of gas. The gains and/or losses on such contracts were not material during 2002, 2001 and 2000. Also, the Company did not have a material outstanding position in such contracts at December 31, 2002 and 2001.

Note 7. Income Taxes

Deferred income taxes are provided for temporary differences between book and tax basis of assets and liabilities. Investment tax credits related to regulated operations are amortized over the service life of the related property. A regulatory asset or liability has been recognized for the impact of tax expenses or benefits that are recovered or refunded in different periods by the utilities pursuant to rate orders.

A-15

North Carolina Natural Gas Corporation

Notes to Consolidated Financial Statements — (Continued)

Net accumulated deferred income tax liabilities at December 31 are:


		2002			2001


		(In Thousands)
Accelerated depreciation and property cost differences		$	37,817		$	33,912
Deferred costs			1,107			1,296
Other postretirement benefits			(6,059	)		(2,057	)
Other postemployment benefits			(1,409	)		(1,209	)
Regulatory liability related to income taxes			(3,834	)		(3,834	)
Reserves			(776	)		(809	)
Voluntary employee beneficiary association program benefits			(53	)		29
Miscellaneous other temporary differences, net			379			(441	)

	Net accumulated deferred income tax liability	$	27,172		$	26,887

Reconciliations of the Company’s effective income tax rate to the statutory federal income tax rate are:


		2002			2001			2000

Effective income tax rate			(1.2	)%		56.6	%		45.5	%
State income taxes, net of federal benefit			0.1			(7.7	)		(5.6	)
Amortization of investment tax credits			(0.1	)		2.0			0.7
Amortization of excess deferred income taxes			(0.2	)		4.4			1.6
Goodwill amortization			36.6			(31.2	)		(11.7	)
Allowance for funds used during construction			(0.2	)		11.0			4.8
Other differences			—			(0.1	)		(0.3	)

	Statutory federal income tax rate		35.0	%		35.0	%		35.0	%

The provisions for income tax expense before cumulative effect of accounting charge are comprised of:


		2002			2001			2000


		(In Thousands)
Income tax expense (credit):
Current — federal		$	(1,492	)	$	3,112		$	5,572
state			(434	)		659			1,642
Deferred — federal			3,113			(451	)		(257	)
state			751			4			45
Investment tax credit			(132	)		(132	)		(132	)

	Subtotal		1,806			3,192			6,870
Income taxes charged to non-utility operations — federal			396			451			1,541
state			(160	)		102			(133	)

	Total	$	2,042		$	3,745		$	8,278

A-16

North Carolina Natural Gas Corporation

Notes to Consolidated Financial Statements — (Continued)

Note 8. Stock Based Compensation

NCNG accounts for stock-based compensation in accordance with the provisions of APB Opinion No. 25, as allowed by SFAS Nos. 123 and 148.

A. Employee Stock Ownership Plan

Progress Energy sponsors the Progress Energy 401(k) Savings and Stock Ownership Plan (401(k)) for which substantially all full-time non-bargaining unit employees and certain part-time non-bargaining employees within participating subsidiaries are eligible. NCNG participates in the 401(k). The 401(k), which has matching and incentive goal features, encourages systematic savings by employees and provides a method of acquiring Progress Energy common stock and other diverse investments. The 401(k), as amended in 1989, is an Employee Stock Ownership Plan (ESOP) that can enter into acquisition loans to acquire Progress Energy common stock to satisfy 401(k) common share needs. Qualification as an ESOP did not change the level of benefits received by employees under the 401(k). Common stock acquired with the proceeds of an ESOP loan is held by the 401(k) Trustee in a suspense account. The common stock is released from the suspense account and made available for allocation to participants as the ESOP loan is repaid. Such allocations are used to partially meet common stock needs related to Progress Energy matching and incentive contributions and/or reinvested dividends.

There were 4,616,400 and 5,199,388 ESOP suspense shares at December 31, 2002 and 2001, respectively, with a fair value of $200.1 million and $234.1 million, respectively. NCNG’s matching and incentive goal compensation cost under the 401(k) is determined based on matching percentages and incentive goal attainment as defined in the plan. Such compensation cost is allocated to participants’ accounts in the form of Progress Energy common stock, with the number of shares determined by dividing compensation cost by the common stock market value at the time of allocation. The 401(k) common stock share needs are met with open market purchases and with shares released from the ESOP suspense account. NCNG’s matching and incentive cost met with shares released from the suspense account totaled approximately $0.4 million for the year ended December 31, 2002 and $0.2 million for the years ended December 31, 2001 and 2000, respectively.

B. Stock Option Agreements

Pursuant to Progress Energy’s 1997 Equity Incentive Plan, Amended and Restated as of September 26, 2001, Progress Energy may grant options to purchase shares of common stock to officers and eligible employees. During 2002 and 2001, respectively, approximately 2.9 million and 2.4 million common stock options were granted to officers and eligible employees of Progress Energy. Of this amount, approximately 43,220 and 33,100 were granted to officers and eligible employees of NCNG, respectively. No compensation expense was recognized under the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees and related Interpretations.”

C. Other Stock-Based Compensation Plans

Progress Energy has additional compensation plans for officers and key employees that are stock-based in whole or in part. NCNG participates in these plans. The two primary active stock-based compensation programs are the Performance Share Sub-Plan (PSSP) and the Restricted Stock

A-17

North Carolina Natural Gas Corporation

Notes to Consolidated Financial Statements — (Continued)

Awards program (RSA), both of which were established pursuant to Progress Energy’s 1997 Equity Incentive Plan.

Under the terms of the PSSP, officers and key employees are granted performance shares on an annual basis that vest over a consecutive three-year period. Each performance share has a value that is equal to, and changes with, the value of a share of Progress Energy’s common stock, and dividend equivalents are accrued on, and reinvested in, the performance shares. The PSSP has two equally weighted performance measures, both of which are based on Progress Energy’s results as compared to a peer group of utilities. Compensation expense is recognized over the vesting period based on the expected ultimate cash payout. Compensation expense is reduced by any forfeitures.

The RSA allows Progress Energy to grant shares of restricted common stock to key employees. The restricted shares vest on a graded vesting schedule over a minimum of three years. There were 6,800 shares of restricted stock outstanding for key employees of NCNG at December 31, 2002 and 2001.

Compensation expense, which is based on the fair value of common stock at the grant date, is recognized over the applicable vesting period and is reduced by forfeitures. NCNG is allocated expense from Progress Energy based on the restricted shares outstanding for NCNG employees. The total amount for NCNG’s other stock based compensation plans was $0.1 million during 2002 and 2001, respectively and $0.2 million during 2000.

Note 9. Postretirement Benefit Plans

A. Pension Benefits

The Company has a noncontributory defined benefit retirement (pension) plan for substantially all full-time employees. The Company also has a supplementary defined benefit pension plan that provides benefits to higher level employees. No additional benefits are being earned under the supplementary plan.

The components of net periodic pension (benefit) cost are:


		2002			2001			2000


		(In Thousands)
Service cost		$	501		$	433		$	446
Interest cost			2,252			2,275			2,201
Expected return on plan assets			(2,906	)		(2,889	)		(2,823	)
Amortization of prior service cost			29			22			33
Recognized net actuarial gain			—			(214	)		—

	Net periodic pension (benefit) cost	$	(124	)	$	(373	)	$	(143	)

The weighted-average discount rate used to measure the pension obligation was 6.6% in 2002 and 7.5% in 2001, respectively. The weighted-average rate of increase in future compensation used to measure the pension obligation was 4.0% in 2002, 2001 and 2000. The expected long-term rate of return on pension plan assets used in determining the net periodic pension benefit was 9.25% in 2002, 2001 and 2000.

A-18

North Carolina Natural Gas Corporation

Notes to Consolidated Financial Statements — (Continued)

the pension obligation or the market-related value of assets are amortized over the average remaining service period of active participants.

Reconciliations of the changes in the plans’ benefit obligations and the plans’ funded status is:


			2002			2001


			(In Thousands)
Change in benefit obligation
	Benefit obligation at beginning of period		$	32,253		$	31,108
	Service cost			501			433
	Interest cost			2,235			2,275
	Actuarial (gain) loss			3,226			(91	)
	Benefits paid			(1,765	)		(1,558	)
	Amendments			—			86

	Benefit obligation at end of period			36,450			32,253

Change in plan assets
	Fair value of plan assets at beginning of period			27,650			29,796
	Actual return on plan assets			(3,755	)		(716	)
	Employer contributions			128			128
	Benefits paid			(1,766	)		(1,558	)

		Fair value of plan assets at end of period		22,257			27,650

	Funded status			(14,193	)		(4,603	)
	Unrecognized net actuarial loss (gain)			(10	)		5,097
	Unrecognized prior service cost			14,984			19
	Minimum pension liability adjustment			(9,721	)		—

		Prepaid (accrued) pension cost, net	$	(8,940	)	$	513

The accrued pension cost of $8.9 million at December 31, 2002 is included in other liabilities and deferred credits in the accompanying Consolidated Balance Sheets. The net prepaid pension cost of $0.5 million at December 31, 2001 is recognized in the accompanying Consolidated Balance Sheets as prepaid pension cost of $2.0 million, which is included in other assets and deferred debits, and accrued benefit cost of $1.5 million, which is included in other liabilities and deferred credits. The defined benefit plans with accumulated benefit obligations in excess of plan assets had projected benefit obligations totaling $36.5 million and $1.5 million at December 31, 2002 and 2001, respectively. Those plans had accumulated benefit obligations totaling $31.2 million and $1.5 million, respectively, plan assets totaling $22.3 million at December 31, 2002, and no plan assets at December 31, 2001.

Due to a combination of decreases in the fair value of plan assets and a decrease in the discount rate used to measure the pension obligation, a minimum pension liability adjustment of $9.7 million was recorded at December 31, 2002. This adjustment resulted in a after tax charge of $5.9 million to accumulated other comprehensive loss, a component of common stock equity.

A-19

North Carolina Natural Gas Corporation

Notes to Consolidated Financial Statements — (Continued)

B. Retiree Health and Life Insurance Benefits

In addition to pension benefits, the Company provides contributory other postretirement benefits (OPEB), including certain health care and life insurance benefits, for retired employees who meet specified criteria.

The components of net periodic OPEB cost are:


		2002			2001			2000


		(In Thousands)
Service cost		$	325		$	353		$	472
Interest cost			695			693			668
Amortization of prior service cost			21			71			107
Amortization of transition obligation			183			215			237
Amortization of actuarial gain			(39	)		(23	)		(34	)

	Net periodic benefit cost	$	1,185		$	1,309		$	1,450

Prior service costs and benefits are amortized on a straight-line basis over the average remaining service period of active participants. Actuarial gains and losses in excess of 10.0% of the greater of the OPEB obligation or the market-related value of assets are amortized over the average remaining service period of active participants.

Reconciliations of the changes in the plan’s benefit obligations and the plan’s funded status are:


			2002			2001


			(In Thousands)
Change in benefit obligation
	Benefit obligation at beginning of period		$	9,406		$	10,906
	Service cost			325			353
	Interest cost			695			693
	Actuarial loss (gain)			1,512			(645	)
	Benefits paid			(513	)		(406	)
	Amendments			—			(1,495	)

Benefit obligation at end of period				11,425			9,406

Change in plan assets
	Fair value of plan assets at beginning of period			—			—
	Employer contributions			513			406
	Benefits paid			(513	)		(406	)

		Fair value of plan assets at end of period		—			—

	Funded status			(11,425	)		(9,406	)
	Unrecognized net actuarial (gain) loss			3,041			1,490
	Unrecognized transition obligation			1,842			2,025
	Unrecognized prior service cost			147			168

		Accrued postretirement benefit liability	$	(6,395	)	$	(5,723	)

A-20

North Carolina Natural Gas Corporation

Notes to Consolidated Financial Statements — (Continued)

The assumptions used to measure the OPEB obligation are:


	2002			2001

Weighted average discount rate		6.6	%		7.5	%
Initial medical cost trend rate for pre-Medicare benefits		7.5	%		7.5	%
Initial medical cost trend rate for post-Medicare benefits		7.5	%		7.5	%
Ultimate medical cost trend rate		5.25	%		5.0	%
Year ultimate medical cost trend rate is achieved		2009			2008

The assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have had the following effects for the year ended 2002:


	(In Thousands)

	One Percentage Point Increase
Effect on total of service and interest cost components	$	159
Effect on postretirement benefit obligation	$	1,130


	One Percentage Point Decrease
Effect on total of service and interest cost components	$	(137	)
Effect on postretirement benefit obligation	$	(1,028	)

Note 10. Commitments and Contingencies:

NCNG is subject to federal, state and local regulations addressing air and water quality, hazardous and solid waste management and other environmental matters.

Various organic materials associated with the production of manufactured gas, generally referred to as coal tar, are regulated under federal and state laws. There are five former manufactured gas plant (MGP) sites to which the Company, with other potentially responsible parties, is participating in investigating and, if necessary, remediating with several regulatory agencies, including, but not limited to, the U.S. Environmental Protection Agency (EPA), and the North Carolina Department of Environment and Natural Resources, Division of Waste Management.

As of December 31, 2002 and 2001, NCNG has accrued approximately $2.8 million and $2.7 million, respectively for remediation costs at these sites. These accruals have been recorded on an undiscounted basis. NCNG measures its liability for these sites based on available evidence including its experience in investigation and remediation of contaminated sites, which also involves assessing and developing cost-sharing arrangements with other potentially responsible parties. NCNG will accrue costs for the sites to the extent its liability is probable and the costs can be reasonably estimated. NCNG does not believe it can provide an estimate of the reasonably possible total remediation costs beyond the accrual because two of the five sites associated with NCNG have not begun investigation activities. Therefore, NCNG cannot currently determine the total costs that may be incurred in connection with the investigation and/or remediation of all sites. The Company cannot predict the outcome of these matters.

NCNG is periodically notified by regulators such as the EPA and various state agencies of their involvement or potential involvement in sites, other than MGP sites, that may require investigation and/or remediation. The Company cannot predict the outcome of these matters.

A-21

North Carolina Natural Gas Corporation

Notes to Consolidated Financial Statements — (Continued)

NCNG has filed claims with the Company’s general liability insurance carriers to recover costs arising out of actual or potential environmental liabilities. Some claims have settled and others are still pending. The Company cannot predict the outcome of these matters.

NCNG is engaged in various long-term agreements involving operating leases for office space. Rental expenses on these leases totaled $0.3 million during 2002, 2001 and 2000. Estimated annual payments for these lease agreements are approximately $0.3 million for 2003 through 2007.

The Company is involved in various litigation matters in the ordinary course of business, some of which involve substantial amounts. Where appropriate, accruals have been made in accordance with SFAS No. 5, “Accounting for Contingencies,” to provide for such matters. In the opinion of management, the final disposition of pending litigation would not have a material adverse effect on the Company’s results of operations or financial position.

Note 11. Subsequent Event

In March 2003, the Company filed a request with the NCUC, seeking a $46.9 million increase in natural gas service rates for its customers to be effective November 1, 2003. NCNG is seeking a return on its utility infrastructure investments and the recovery of increased operating costs. The Company cannot predict the outcome of this matter.

A-22

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Shareholder

of North Carolina Natural Gas Corporation:

We have audited the accompanying consolidated balance sheets of North Carolina Natural Gas Corporation and its subsidiaries as of December 31, 2002 and 2001, and the related consolidated statements of income and comprehensive income, changes in capitalization and cash flows for each of the three years in the period ended December 31, 2002. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of the North Carolina Natural Gas Corporation and its subsidiaries at December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 3 to the financial statements, in 2002 the Company changed its method of accounting for goodwill to conform to Statement of Financial Accounting Standards No. 142.

/s/ Deloitte & Touche LLP

Raleigh, North Carolina

April 7, 2003

A-23

We have not authorized anyone to give any information or make any representation about us that is different from, or in addition to, that contained in this prospectus or in any of the materials that we have incorporated by reference into this document. Therefore, if anyone does give you information of this sort, you should not rely on it. If you are in a jurisdiction where offers to sell, or solicitations of offers to purchase, the securities offered by this document are unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this document does not extend to you. The information contained in this document speaks only as of the date of this document, unless the information specifically indicates that another date applies.

Table of Contents


	Page

About this Prospectus		2
Where You Can Find More Information		2
Forward-Looking Statements		3
The Company		5
Use of Proceeds		6
Ratio of Earnings to Fixed Charges		6
Selected Historical Consolidated Financial Information		7
Selected Unaudited Pro Forma Combined Condensed Consolidated Financial Data		9
Unaudited Pro Forma Combined Condensed Consolidated Financial Statements		10
Securities We May Issue		17
Prospectus Supplements		17
Description of Debt Securities		17
Description of Common Stock		29
Description of Stock Purchase Contracts and Stock Purchase Units		31
Plan of Distribution		31
Legal Opinions		32
Experts		33
Audited Financial Statements of North Carolina Natural Gas Corporation		A-1

Piedmont Natural Gas

Company, Inc.

PART II. INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

The following table sets forth the various expenses to be paid by the Registrant in connection with the sale and distribution of the Debt Securities being registered hereby, other than underwriting or broker dealer fees, discounts and commissions. All amounts are estimated except for the Securities Act registration fee.


Securities Act registration fee		$	40,450
Printing and engraving			20,000
Legal fees and expenses			110,000
Accounting fees and expenses			100,000
Rating agency fees			82,000
Blue Sky fees and expenses			5,000
Trustee’s Fees and Expenses			3,500
Miscellaneous expenses			7,500

	Total	$	368,450

Item 15. Indemnification Of Directors And Officers

Sections 55-8-50 through 55-8-58 of the North Carolina Business Corporation Act and our By-Laws permit indemnification of our directors and officers in a variety of circumstances, which may include liabilities under the Securities Act of 1933, as amended (the “Securities Act”).

In addition, we have purchased insurance, permitted by the law of North Carolina, which is designed to protect us in the event we are required to pay any amounts to our directors and officers as indemnification against loss arising from certain civil claims, including certain claims under the Securities Act, which might be made against our officers and directors by reason of any alleged breach of duty, neglect, error, misstatement, misleading statement, omission or other act done or wrongfully attempted, while acting in their respective capacities as our directors or officers.

Our Articles of Incorporation provide that a director shall not be personally liable for monetary damages for breach of fiduciary duty as a director except to the extent such exemption from liability or limitation thereof is not permitted under the North Carolina Business Corporation Act.

Reference is made to the forms of Underwriting Agreement and Agency Agreement filed as Exhibits 1.1, 1.2 and 1.3 hereto which contain provisions for indemnification of us, our directors, officers and any controlling persons by underwriters against certain liabilities for information furnished by such underwriters expressly for use in this Registration Statement and Post-Effective Amendment No. 1.

Item 16. List of Exhibits

See “Index to Exhibits” on page II-5.

II-1

Item 17. Undertakings

A. Undertaking Related to Rule 415 Offering:

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

      (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

      (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

      (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

      provided, however, That paragraphs (a)1(i) and (a)(1)(ii) of this section do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

B. Undertaking Related to Filings Incorporating Subsequent Exchange Act Documents by Reference:

The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of our annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

C. Indemnification

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described under Item 15 above or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in

II-2

the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

II-3

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement and Post-Effective Amendment No. 1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Charlotte, State of North Carolina, on the 19th day of June, 2003.

PIEDMONT NATURAL GAS COMPANY, INC.

By: /s/ THOMAS E. SKAINS

Thomas E. Skains,

President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement and Post-Effective Amendment No. 1 have been signed by the following persons in the capacities and on the dates indicated.


Signatures	Title	Date


/s/ THOMAS E. SKAINS Thomas E. Skains	Director, President and Chief Executive Officer		June 19, 2003

/s/ DAVID J. DZURICKY David J. Dzuricky	Senior Vice President and Chief Financial Officer (Principal Financial Officer)		June 19, 2003

/s/ BARRY L. GUY Barry L. Guy	Vice President and Controller (Principal Accounting Officer)		June 19, 2003

/s/ JERRY W. AMOS Jerry W. Amos	Director		June 19, 2003

/s/ C.M. BUTLER III C.M. Butler III	Director		June 19, 2003

/s/ D. HAYES CLEMENT D. Hayes Clement	Director		June 19, 2003

/s/ MALCOLM E. EVERETT III Malcolm E. Everett III	Director		June 19, 2003

/s/ JOHN W. HARRIS John W. Harris	Director		June 19, 2003

/s/ AUBREY B. HARWELL, JR. Aubrey B. Harwell, Jr.	Director		June 19, 2003

/s/ MURIEL W. HELMS Muriel W. Helms	Director		June 19, 2003

/s/ DONALD W. RUSSELL Donald S. Russell	Director		June 19, 2003

/s/ JOHN E. SIMKINS John E. Simkins	Director		June 19, 2003

II-4

INDEX TO EXHIBITS


1.1	—	Form of Underwriting Agreement (Debt).*
1.2	—	Form of Underwriting Agreement (Equity).*
1.3	—	Form of Agency Agreement.
4.1	—	Indenture dated as of April 1, 1993, between Piedmont Natural Gas Company, Inc., and Citibank, N.A., as Trustee (incorporated by reference to Exhibit 4.1 of the Company’s Form S-3 Registration Statement No. 33-59369 filed on August 9, 1995).
4.2	—	First Supplemental Indenture dated as of February 25, 1994, between PNG Acquisition Company, Piedmont Natural Gas Company, Inc., and Citibank, N.A., as Trustee (incorporated by reference to Exhibit 4.2 of the Company’s Form S-3 Registration Statement No. 33-59369 filed on August 9, 1995).
4.3	—	Second Supplemental Indenture dated as of June 15, 2003, between Piedmont Natural Gas Company, Inc. and Citibank, N.A., as Trustee.
4.4	—	Form of Debt Security.*
4.5	—	Form of Master Global Note (incorporated by reference to Exhibit 4.4 of the Company’s Form S-3 Registration Statement No. 333-62222 filed on June 4, 2001).
4.6	—	Copy of Articles of Incorporation of the Company, filed with the North Carolina Secretary of State on December 14, 1993 (incorporated by reference to Exhibit 2 of the Company’s Form 8-B filed on March 2, 1994).
4.7	—	Copy of Certificate of Merger (New York) and Articles of Merger (North Carolina), each dated March 1, 1994, evidencing merger of Piedmont Natural Gas Company, Inc., with and into PNG Acquisition Company, with PNG Acquisition Company being renamed “Piedmont Natural Gas Company, Inc.” (incorporated by reference to Exhibits 3.2 and 3.1 of the Company’s Form 8-B filed on March 2, 1994).
4.8	—	By-Laws of the Company, as amended (incorporated by reference to Exhibit 3.1 of the Company’s Form 10-Q for the quarterly period ended January 31, 2002).
4.9	—	Copy of Rights Agreement dated as of February 27, 1998, between the Company and Wachovia Bank, N.A., as Rights Agent, including the Rights Certificate (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated February 27, 1998).
4.10	—	Specimen Common Stock Certificate (incorporated by reference to Exhibit 3.3 of the Company’s Registration Statement on Form 8-B dated March 2, 1994).
5.1	—	Opinion of Nelson, Mullins, Riley & Scarborough, L.L.P., regarding legality of securities being registered.
12.1	—	Computation of Ratio of Earnings to Fixed Charges (incorporated by reference to Exhibit 12 of the Company’s Form 10-Q for the quarterly period ended April 30, 2003).
23.1	—	Consent of Nelson, Mullins, Riley & Scarborough, L.L.P. (included in Exhibit 5.1).
23.2	—	Independent Auditors’ Consent.
23.3	—	Independent Auditors’ Consent.
25.1	—	Statement of Eligibility of Trustee on Form T-1.

* The Company will file any forms of securities and underwriting agreements not previously so filed in a Current Report on Form 8-K.

II-5

EXHIBIT 1.1

PIEDMONT NATURAL GAS COMPANY, INC.

DEBT SECURITIES

UNDERWRITING AGREEMENT

, 200

As [Representative(s) of] the Several Underwriters,

Gentlemen:

Piedmont Natural Gas Company, Inc., a North Carolina corporation (the “Company”), confirms its agreement with the several Underwriters listed in Schedule A hereto (the “Underwriters”, which term may refer to a single Underwriter if only one is listed in Schedule A) as follows:

1. Description Of Securities. The Company proposes to issue and sell to the several Underwriters securities of the title, amount and particular terms set forth or referred to in Schedule B hereto (“Securities”). The Securities are to be issued under the Indenture, dated as of April 1, 1993, between Piedmont Natural Gas Company, Inc., a New York corporation (the “Predecessor Company”), and Citibank, N.A., as trustee (the “Trustee”), as amended by the First Supplemental Indenture, dated as of February 25, 1994, among the Company, the Predecessor Company and the Trustee, and the Second Supplemental Indenture, dated as of June 15, 2003, between the Company and the Trustee (collectively, the “Indenture”).

2. Representations And Warranties Of The Company. The Company represents and warrants to, and agrees with, each Underwriter that:

(a) The Company meets the requirements for use of Form S-3 under the Securities Act of 1933, as amended (the “Act”). Two registration statements on such form (with the file numbers set forth in Schedule B hereto) with respect to the offering and sale of the Securities, including a related preliminary prospectus, have been prepared by the Company in conformity with the requirements of the Act, the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”), the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations (“Rules and Regulations”) of the Securities and Exchange Commission (“Commission”) thereunder, filed with the Commission and become effective. The registration statements and prospectus may have been amended or supplemented prior to the date of this Agreement; if any such amendment or supplement was made, such amendment or supplement was filed with the Commission, and any such amendment has become effective. No stop order suspending the effectiveness of the registration statements has been issued, and no proceeding for that purpose has been instituted or threatened by the Commission. A prospectus supplement (“Prospectus Supplement”) setting forth the terms of the Securities and of their sale and distribution has

been so prepared and will be filed pursuant to Rule 424(b) of the Act. The Company has delivered to you and counsel for the Underwriters copies of the registration statements and prospectus, any such amendment or supplement, the Prospectus Supplement and all documents incorporated by reference therein that were filed with the Commission on or prior to the date of this Agreement (including one fully executed copy of the registration statements and of each amendment thereto for counsel for the Underwriters and three conformed copies thereof for you). The registration statements, as they may have heretofore been amended or supplemented is referred to herein as the “Registration Statements”, and the final form of prospectus included in the Registration Statements, as supplemented by the Prospectus Supplement, is referred to herein as the “Prospectus”. Each form of Prospectus, or Prospectus and Prospectus Supplement, if any, heretofore made available for use in offering the Securities is referred to herein as a “Preliminary Prospectus”. Any reference herein to a Registration Statement, the Prospectus, any amendment or supplement thereto or any Preliminary Prospectus shall be deemed to refer to and include the documents incorporated by reference therein, and any reference herein to the terms “amend”, “amendment” or “supplement” with respect to a Registration Statement or Prospectus shall be deemed to refer to and include the filing after the execution hereof of any document with the Commission deemed to be incorporated by reference therein.

      (b) Each part of the Registration Statements, when such part became or becomes effective, the Preliminary Prospectus on the date of filing thereof with the Commission, and the Prospectus and any amendment or supplement thereto, on the date of filing thereof with the Commission and at the Closing Date (as hereinafter defined), complied or will comply in all material respects with the requirements of the Act, the Trust Indenture Act, the Exchange Act and the Rules and Regulations; each part of the Registration Statements, when such part became or becomes effective, did not or will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; the Preliminary Prospectus, and the Prospectus and any amendment or supplement thereto, on the date of filing thereof with the Commission and at the Closing Date, did not or will not include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; except that the foregoing shall not apply to statements in or omissions from any such document in reliance upon, and in conformity with, written information furnished to the Company by you, or by any Underwriter through you, specifically for use in the preparation thereof. The Indenture, including any amendment and supplement thereto, pursuant to which the Securities will be issued, conforms, or, in the case of any amendment or supplement filed after the date of this Agreement, will conform with the requirements of the Trust Indenture Act and the Rules and Regulations thereunder.

      (c) The financial statements of the Company and its subsidiaries set forth in the Registration Statements and Prospectus fairly present the financial condition of the Company and its subsidiaries as of the dates indicated and the results of operations and cash flows for the periods therein specified; said financial statements have been prepared in conformity with accounting principles generally accepted in the United States consistently applied throughout the periods involved (except as otherwise stated therein).

      (d) The Company and each of its significant subsidiaries within the meaning of Regulation S-X (individually, a “Subsidiary”, and collectively, the “Subsidiaries”) has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is chartered or organized, with full corporate power and authority to own its properties and conduct its business as described in the Prospectus, and is duly

qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification wherein it owns or leases material properties or conducts material business; and all of the outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued and are fully paid and non-assessable, and, except as otherwise set forth in the Prospectus, all outstanding shares of capital stock of the Subsidiaries are owned by the Company either directly or through wholly owned subsidiaries free and clear of any perfected security interest and any other security interests, claims, liens or encumbrances.

      (e) The Indenture and the Securities have been duly authorized, the Indenture has been duly qualified under the Trust Indenture Act, executed and delivered and constitutes, and the Securities, when duly executed, authenticated, issued and delivered as contemplated hereby and by the Indenture, will constitute, valid and legally binding obligations of the Company enforceable in accordance with their terms, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization, arrangement or other similar laws now or hereafter in effect affecting the rights of creditors generally and general principles of equity and rules of law governing and limiting the availability of specific performance, injunctive relief and other equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law).

      (f) There is no pending or threatened action, suit or proceeding before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries of a character required to be disclosed in the Registration Statements which is not adequately disclosed in the Prospectus, there is no statute required to be described in the Prospectus that is not described as required, and there is no franchise, contract or other document of a character required to be described in the Registration Statements or Prospectus, or to be filed as an exhibit, which is not described or filed as required, and the description in the Registration Statements and Prospectus of statutes, legal and governmental proceedings, contracts and other documents are accurate and fairly present the information required to be shown.

      (g) The Company’s authorized equity capitalization is as set forth in the Prospectus (if contained therein).

      (h) The execution, delivery and performance of the Indenture, of this Agreement and of any Delayed Delivery Contracts (as hereinafter defined), the issuance and sale of the Securities, the consummation of the transactions herein contemplated and the fulfillment of the terms hereof will not conflict with, result in a breach of, or constitute a default under the Articles of Incorporation or By-laws of the Company or the terms of any indenture or other agreement or instrument to which the Company or any of its subsidiaries is a party or bound, or any statute, rule, order or regulation applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over the Company or any of its subsidiaries; and the Company has full power and authority to authorize, issue and sell the Securities as contemplated by this Agreement.

      (i) No consent, approval, authorization or order of any court or governmental agency or body is required for the consummation of the transactions contemplated by this Agreement in connection with the issuance and sale of the Securities by the Company, except such as have been obtained and made under the Act and the Trust Indenture Act and as may be required under state securities laws and such other approvals as have been obtained.

      (j) This Agreement has been, and any Delayed Delivery Contracts will be, duly authorized, executed and delivered by the Company.

      (k) The Company and its subsidiaries have all necessary franchises or permits for natural gas operations in all communities now served, except as set forth in the Registration Statements and except where the failure to be so authorized by franchise or permit does not materially affect the right of the Company or such subsidiary to the use of its properties or the conduct of its business; and the franchises of the Company and its subsidiaries referred to in the Registration Statements are good and valid except for and subject only to such defects as may be set forth or referred to in the Registration Statements, and such others as do not materially affect the right of the Company or such subsidiary to the use of its properties or the conduct of its business, and said franchises impose no materially burdensome restrictions.

      (l) The Company is [not a “holding company” or a “subsidiary company” of a “holding company” within the meaning of the Public Utility Holding Company Act of 1935, as amended (the “Holding Company Act”)] [a “holding company” within the meaning of the Public Utility Holding Company Act of 1935, as amended (the “Holding Company Act”) that is exempt from all provisions of the Holding Company Act, except Section 9(a)(2) thereof, by order of the Commission pursuant to Section 3(a)(5) thereof. Neither the execution, delivery and performance by the Company of this Agreement or the issuance of the Securities violates any provision of the Holding Company Act or any rules or regulations thereunder].

      (m) No holders of securities of the Company have rights to registration of such securities under the Registration Statements.

      3. Purchase, Sale And Delivery Of Securities. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company agrees to issue and sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from the Company, at the purchase price set forth in Schedule B hereto, the amount of Securities set forth opposite the name of such Underwriter in Schedule A hereto less the reduction for such Underwriter’s portion of any Contract Securities determined as provided below.

      If so authorized in Schedule B hereto, the Underwriters may solicit offers from investors of the types set forth in the Prospectus to purchase Securities from the Company pursuant to delayed contracts (“Delayed Delivery Contracts”). Such contracts shall be substantially in the form of Exhibit I hereto but with such changes therein as the Company may approve. Securities to be purchased pursuant to Delayed Delivery Contracts are herein called “Contract Securities”. When Delayed Delivery Contracts are authorized in Schedule B, the Company will enter into a Delayed Delivery Contract in each case where a sale of Contract Securities arranged through you has been approved by the Company but, except as the Company may otherwise agree, such Delayed Delivery Contracts must be for at least the minimum amount of Contract Securities set forth in Schedule B hereto, and the aggregate amount of Contract Securities may not exceed the amount set forth in such Schedule. The Company will advise you not later than 10:00 A.M., New York City time, on the third full business day preceding the Closing Date (or at such later time as you may otherwise agree) of the sales of Contract Securities that have been so approved. You and the other Underwriters will not have any responsibility in respect of the validity or performance of Delayed Delivery Contracts.

      The amount of Securities to be purchased by each Underwriter as set forth in Schedule A hereto shall be reduced by an amount that shall bear the same proportion to the total amount of

Contract Securities as the amount of Securities set forth opposite the name of such Underwriter bears to the total amount of Securities set forth in Schedule A hereto, except to the extent that you determine that such reduction shall be otherwise than in such proportion and so advise the Company; provided, however, that the total amount of Securities to be purchased by all Underwriters shall be the total amount of Securities set forth in Schedule A hereto less the aggregate amount of Contract Securities.

      The Securities to be purchased by the Underwriters will be delivered by the Company to you for the accounts of the several Underwriters at the office specified in Schedule B hereto against payment of the purchase price therefor by the method, in the funds, on the date and at the times specified in such Schedule B, or at such other time not later than eight full business days thereafter as you and the Company determine, such time being herein referred to as the “Closing Date”. If Schedule B indicates that the Securities are to be delivered in definitive form, such Securities shall be in such authorized denominations and registered in such names as you may request upon at least two business days’ prior notice to the Company and will be made available for checking and packaging at the office at which they are to be delivered at the Closing Date (or such other office as may be specified for that purpose in Schedule B) at least one business day prior to the Closing Date. If Schedule B indicates that the Securities are to be delivered in global book-entry form, such Securities shall be in the denominations specified in the applicable letter of representations between the Company, the Trustee and The Depository Trust Company (“DTC”), shall be registered in the name of DTC or a nominee of DTC and shall be made available for checking at the office at which they are to be delivered at the Closing Date (or such other office as may be specified for that purpose in Schedule B) at least one business day prior to the Closing Date.

      It is understood that you, acting individually and not in a representative capacity, may (but shall not be obligated to) make payment to the Company on behalf of any other Underwriter for Securities to be purchased by such Underwriter. Any such payment by you shall not relieve any such Underwriter of any of its obligations hereunder.

      The Company will pay to you, at the Closing Date, for the account of each Underwriter any commission or other compensation that is specified in Schedule B hereto. Such payment will be made in the manner and type of funds specified in Schedule B, or to the extent provided in Schedule B may be deducted by you from the purchase price of the Securities.

      4. Covenants. The Company covenants and agrees with each Underwriter that:

(a) The Company will cause the Prospectus Supplement to be filed as required by Section 2(a) hereof (but only if you have not reasonably objected thereto by notice to the Company after having been furnished a copy a reasonable time prior to filing) and will notify you promptly of such filing. During the period in which a prospectus relating to the Securities is required to be delivered under the Act, the Company will notify you promptly of the time when any subsequent amendment to a Registration Statement has become effective or any subsequent supplement to the Prospectus has been filed and of any request by the Commission for any amendment or supplement to a Registration Statement or the Prospectus or for additional information; it will prepare and file with the Commission, promptly upon your request, any amendments or supplements to the Registration Statements or Prospectus that, in your reasonable opinion, may be necessary or advisable in connection with the distribution of the Securities by the Underwriters; it will file no amendment or supplement to the Registration Statements or Prospectus (other than any prospectus supplement relating to the offering of other securities registered under the Registration Statements or any document required to be filed under the Exchange Act that upon filing is deemed to be incorporated by reference therein) to which you shall reasonably object by

notice to the Company after having been furnished a copy a reasonable time prior to the filing; and it will furnish to you at or prior to the filing thereof a copy of any such prospectus supplement or any document that upon filing is deemed to be incorporated by reference in the Registration Statements or Prospectus.

      (b) The Company will advise you, promptly after it shall receive notice or obtain knowledge thereof, of the issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement, of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceeding for any such purpose; and it will promptly use its best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such a stop order should be issued.

      (c) Within the time during which a prospectus relating to the Securities is required to be delivered under the Act, the Company will comply as far as it is able with all requirements imposed upon it by the Act and by the Rules and Regulations, as from time to time in force, so far as necessary to permit the continuance of sales of or dealings in the Securities as contemplated by the provisions hereof and the Prospectus. If during such period any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances then existing, not misleading, or if during such period it is necessary to amend or supplement the Registration Statements or the Prospectus to comply with the Act the Company will promptly notify you and will amend or supplement the Registration Statements or the Prospectus (at the expense of the Company) so as to correct such statement or omission or effect such compliance.

      (d) The Company will use its best efforts to qualify the Securities for sale under the securities laws of such jurisdictions as you reasonably designate and to continue such qualifications in effect so long as required for the distribution of the Securities, except that the Company shall not be required in connection therewith to qualify as a foreign corporation or to execute a general consent to service of process in any jurisdiction. The Company will also arrange for the determination of the eligibility for investment of the Securities under the laws of such jurisdictions as you reasonably request.

      (e) The Company will furnish to the Underwriters and counsel for the Underwriters, without charge, one signed and three conformed copies of the Registration Statements, the Prospectus (including all documents incorporated by reference therein) and all amendments and supplements to the Registration Statements or Prospectus that are filed with the Commission during the period in which a prospectus relating to the Securities is required to be delivered under the Act (including all documents filed with the Commission during such period that are deemed to be incorporated by reference therein), in each case as soon as available and in such quantities as you may from time to time reasonably request.

      (f) The Company will make generally available to its security holders as soon as practicable, but in any event not later than 15 months after the end of the Company’s current fiscal quarter, an earnings statement (which need not be audited) covering a 12-month period beginning after the date upon which the Prospectus Supplement is filed pursuant to Rule 424 under the Act that shall satisfy the provisions of Section 11(a) of the Act and Rule 158 thereunder.

      (g) The Company, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, will pay all authorized expenses incident to the performance of its obligations hereunder, will pay the expenses of printing all documents

relating to the offering, and will reimburse the Underwriters for any expenses (including fees and disbursements of counsel) incurred by them in connection with the matters referred to in Section 4(d) hereof and the preparation of memoranda relating thereto, for any filing fee of the National Association of Securities Dealers, Inc. relating to the Securities, for any fees charged by investment rating agencies for rating the Securities and, if the Securities are issued in global book-entry form, for any fees charged by DTC. If the sale of Securities to be purchased by the several Underwriters as provided for herein is not consummated by reason of any failure, refusal or inability on the part of the Company to perform any agreement on its part to be performed, or because any other condition of the Underwriters’ obligations hereunder required to be fulfilled by the Company is not fulfilled, the Company will reimburse the several Underwriters for all reasonable out-of-pocket disbursements (including fees and disbursements of counsel) incurred by the Underwriters in connection with their investigation, preparing to market and marketing the Securities or in contemplation of performing their obligations hereunder. The Company shall not in any event be liable to any of the Underwriters for loss of anticipated profits from the transactions covered by this Agreement.

(h) The Company will apply the net proceeds from the sale of the Securities as set forth in the Prospectus and Prospectus Supplement.

(i) The Company will not, directly or indirectly, offer or sell, or determine to offer or sell, any debt securities that are substantially similar to the Securities (except under prior contractual commitments) during the period beginning at the time of execution of this Agreement and ending on the first business day after the Closing Date without your prior written consent.

5. Conditions Of Underwriters’ Obligations. The obligations of the several Underwriters to purchase and pay for Securities as provided herein shall be subject to the accuracy, as of the date hereof and the Closing Date (as if made at the Closing Date), of the representations and warranties of the Company herein, to the performance by the Company of its obligations hereunder and to the following additional conditions:

      (a) No stop order suspending the effectiveness of the Registration Statements shall have been issued and no proceeding for that purpose shall have been instituted or, to the knowledge of the Company or any Underwriter, threatened by the Commission, and any request of the Commission for additional information (to be included in the Registration Statements or the Prospectus or otherwise) shall have been complied with to your satisfaction.

      (b) No Underwriter shall have advised the Company that the Registration Statements or the Prospectus, or any amendment or supplement thereto, contains an untrue statement of fact that in your opinion is material, or omits to state a fact that in your opinion is material and is required to be stated therein or is necessary to make the statements therein not misleading.

      (c) Except as contemplated in the Prospectus, subsequent to the respective dates as of which information is given in the Registration Statements and the Prospectus, there shall not have been any change, on a consolidated basis, in the capital stock, long-term debt of the Company and its subsidiaries, or any adverse change, or any development involving a prospective adverse change, in the condition (financial or other), business, prospects, net worth or results of operations of the Company and its subsidiaries, or any change in the rating assigned to any securities of the Company, that, in your judgment, makes it

impractical or inadvisable to offer or deliver the Securities on the terms and in the manner contemplated in the Prospectus.

(d) You shall have received the opinion of Nelson, Mullins, Riley & Scarborough, L.L.P., counsel for the Company, dated the Closing Date, to the effect that:

      (i) The Company and each of its Subsidiaries has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is chartered or organized, with full corporate power and authority to own its properties and conduct its business as described in the Prospectus, and is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification wherein it owns or leases material properties or conducts material business; and all of the outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued and are fully paid and non-assessable, and, except as otherwise set forth in the Prospectus, all outstanding shares of capital stock of the Subsidiaries are owned by the Company either directly or through wholly owned subsidiaries free and clear of any perfected security interest and, to the best knowledge of such counsel, any other security interest, claims, liens or encumbrances;

      (ii) The Indenture and the Securities have been duly authorized, the Indenture has been duly qualified under the Trust Indenture Act, executed and delivered, the Securities purchased by the Underwriters have been duly executed, authenticated, issued and delivered, and the Indenture and such Securities constitute, and any Contract Securities, when executed, authenticated, issued and delivered in the manner provided in the Indenture and the Delayed Delivery Contracts, will constitute, valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject, as to enforcement, to applicable bankruptcy, insolvency, moratorium, reorganization, arrangement or other similar laws now or hereafter in effect affecting the rights of creditors generally and general principles of equity and rules of law governing and limiting the availability of specific performance, injunctive relief and other equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law);

      (iii) To the best knowledge of such counsel, there is no pending or threatened action, suit or proceeding before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries of a character required to be disclosed in the Registration Statements by Item 103 of Regulation S-K which is not disclosed in the Prospectus, there is no statute required to be described in the Prospectus that is not described as required, and there is no franchise, contract or other document of a character required to be described in the Registration Statements or Prospectus, or to be filed as an exhibit, which is not described or filed as required; and the descriptions in the Registration Statements and Prospectus of statutes, legal and governmental proceedings, contracts and other documents are accurate and fairly present the information required to be shown;

      (iv) The Registration Statements have become effective under the Act, the Prospectus was filed with the Commission pursuant to the subparagraph of Rule 424(b) under the Act specified in such opinion on the date specified therein, and, to the best knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statements or of any part thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Act;

      (v) Each part of the Registration Statements, when such part became effective, and the Prospectus and any amendment or supplement thereto, on the date of filing thereof with the Commission and at the Closing Date, complied as to form in all material respects with the requirements of the Act, the Trust Indenture Act, the Exchange Act and the Rules and Regulations; such counsel has no reason to believe that either any part of the Registration Statements, when such part became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Preliminary Prospectus or the Prospectus and any amendment or supplement thereto, on the date of filing thereof with the Commission or at the Closing Date, included an untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading; it being understood that such counsel need express no opinion as to the financial statements or other financial or statistical data included in any of the documents mentioned in this clause;

      (vi) The Company’s authorized equity capitalization is as set forth in the Prospectus (if contained therein);

      (vii) No consent, approval, authorization or order of any court or governmental agency or body is required for the consummation of the transactions contemplated by this Agreement in connection with the issuance and sale of the Securities by the Company, except such as have been obtained and made under the Act and the Trust Indenture Act and as may be required under state securities laws and such other approvals (specified in such opinion) as have been obtained;

      (viii) The execution, delivery and performance of the Indenture, this Agreement or any Delayed Delivery Contracts, the issue and sale of the Securities, the consummation of the other transactions herein contemplated or the fulfillment of the terms hereof will not conflict with, result in a breach of, or constitute a default under the Articles of Incorporation or By-laws of the Company or the terms of any indenture or other agreement or instrument known to such counsel and to which the Company or any of its subsidiaries is a party or bound, or any statute, rule, order or regulation known to such counsel to be applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over the Company or any of its subsidiaries; and the Company has full power and authority to authorize, issue and sell the Securities as contemplated by this Agreement;

      (ix) This Agreement and any Delayed Delivery Contracts have been duly authorized, executed and delivered by the Company;

      (x) The Company and its Subsidiaries have all necessary franchises or permits for natural gas operations in all communities now served, except as set forth in the Registration Statements and except where the failure to be so authorized by franchise or permit does not, in the opinion of such counsel, materially affect the right of the Company or such Subsidiary to the use of its properties or the conduct of its business; and the franchises of the Company and its Subsidiaries referred to in the Registration Statements are good and valid except for and subject only to such defects as may be set forth or referred to in the Registration Statements, and such others as do not, in the opinion of such counsel, materially affect the right of the Company or such Subsidiary to the use of its properties or the conduct of its business, and said franchises impose no materially burdensome restrictions; and

(xi) The Company is [ not a “holding company” or a “subsidiary company” of a “holding company” within the meaning of the Holding Company Act ] [ a “holding company” within the meaning of the Holding Company Act that is exempt from all provisions of the Holding Company Act, except Section 9(a)(2) thereof, by order of the Commission pursuant to Section 3(a)(5) thereof. Neither the execution, delivery and performance of this Agreement nor the issuance of the Securities violates any provision of the Holding Company Act or any rules or regulations thereunder. ]

      In rendering such opinion, such counsel may (A) state, except as to certain matters involving the absence of the need to obtain the approvals of the South Carolina Public Service Commission and the Tennessee Regulatory Authority for the transactions contemplated herein, its opinion is limited to the federal laws of the United States and the laws of the State of North Carolina and (B) rely, as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Issuer and public officials. The opinion to be delivered pursuant to Section 5(d)(x) may be given by Martin Ruegsegger, Vice President, Corporate Counsel and Secretary of the Company, in lieu of Nelson, Mullins, Riley & Scarborough, L.L.P.

      (e) You shall have received from Orrick, Herrington & Sutcliffe LLP, counsel for the Underwriters, such opinion or opinions, dated the Closing Date, with respect to the validity of the Securities, the Registration Statements, the Prospectus and other related matters as you reasonably may request, and such counsel shall have received such papers and information as they request to enable them to pass upon such matters. In rendering their opinion, such counsel may rely upon the opinion of Nelson, Mullins, Riley & Scarborough, L.L.P., referred to above as to all matters governed by North Carolina law, and may rely as to the execution and authentication of the Securities and the execution of the Indenture on certificates of the Trustee.

      (f) At or prior to the time of execution of this Agreement and at the Closing Date, you shall have received a letter from Deloitte & Touche LLP, dated the date of delivery thereof, to the effect set forth in Exhibit II hereto.

      (g) You shall have received from the Company a certificate, signed by the President and Chief Executive Officer or a Vice President and by the principal financial or accounting officer of the Company, dated the Closing Date, to the effect that, to the best of their knowledge based upon reasonable investigation:

      (i) The representations and warranties of the Company in this Agreement are true and correct, as if made at and as of the Closing Date, and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date;

      (ii) No stop order suspending the effectiveness of the Registration Statements has been issued, and no proceeding for that purpose has been instituted or is threatened, by the Commission; and

      (iii) Since the date of this Agreement, there has occurred no event required to be set forth in an amendment or supplement to the Registration Statements or Prospectus that has not been so set forth and there has been no document required to be filed under the Exchange Act and the Rules and Regulations thereunder that upon such filing would be deemed to be incorporated by reference in the Prospectus that has not been so filed.

(h) The Company shall have furnished to you such further certificates and documents as you shall have reasonably requested.

(i) At or prior to the time of execution of this Agreement and at the Closing Date, you shall also have received a letter from Deloitte & Touche LLP, dated the date of delivery thereof, regarding the financial statements and other financial information of North Carolina Natural Gas Corporation included or incorporated by reference in the Prospectus. Such letter shall be in substantially the form of the letter from Deloitte & Touche LLP regarding the Company’s financial statements pursuant to Exhibit II hereto or in such other form reasonably acceptable to you.

All such opinions, certificates, letters and other documents will be in compliance with the provisions hereof only if they are satisfactory in form and substance to you. The Company will furnish you with such conformed copies of such opinions, certificates, letters and other documents as you shall reasonably request.

6. Indemnification And Contribution. (a) The Company will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any part of a Registration Statement when such part became effective, or in a Registration Statement, any Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by it in connection with investigating or defending against such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by you, or by any Underwriter through you, specifically for use in the preparation thereof.

(b) Each Underwriter will indemnify and hold harmless the Company against any losses, claims, damages or liabilities to which the Company may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any part of a Registration Statement when such part became effective, or in a Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made therein in reliance upon and in conformity with written information furnished to the Company by you, or by such Underwriter through you, specifically for use in the preparation thereof, and will reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending against any such loss, claim, damage, liability or action as such expenses are incurred. The Company acknowledges that the statements set forth in the penultimate paragraph of the cover page, under the heading “Plan of Distribution” in any Preliminary Prospectus and the Prospectus and under the heading “Underwriting” in the Prospectus Supplement constitute the only information furnished in writing by or on behalf of such Underwriters for inclusion in the documents referred to in the forgoing indemnity, and you confirm that such statements are correct.

(c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party (i) shall not relieve it from any liability which it may have to any indemnified party under such subsection unless and to the extent such failure prejudices the indemnifying party of substantial rights or defenses and (ii) shall not relieve it, in any event, from any liability that it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party, and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to appoint counsel satisfactory to such indemnified party to represent the indemnified party in such action; provided, however, that if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to defend such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election so to appoint counsel to defend such action and approval by the indemnified party of such counsel, the indemnifying party will not be liable to such indemnified party under this Section 6 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel (plus any local counsel), approved by the Underwriters in the case of paragraph (a) of this Section 6, representing the indemnified parties under such paragraph (a) who are parties to such action), (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party; and except that, if clause (i) or (iii) is applicable, such liability shall be only in respect of the counsel referred to in such clause (i) or (iii).

(d) If the indemnification provided for in this Section 6 is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total proceeds from the offering of the Securities (before deducting expenses) received by the Company bear to the total compensation or profit (before deducting expenses) received or realized by the Underwriters from the purchase and resale, or underwriting, of the Securities. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged

omission to state a material fact relates to information supplied by the Company or the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this subsection (d) were to be determined by pro rata allocations (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the first sentence of this subsection (d). The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending against any action or claim that is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters’ obligations in this subsection (d) to contribute are several in proportion to their respective underwriting obligations and not joint.

(e) The obligations of the Company under this Section 6 shall be in addition to any liability that the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act; and the obligations of the Underwriters under this Section 6 shall be in addition to any liability that the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each director of the Company (including any person who, with his consent, is named in the Registration Statements as about to become a director of the Company), to each officer of the Company who has signed the Registration Statements and to each person, if any, who controls the Company within the meaning of the Act.

7. Representations And Agreements To Survive Delivery. All representations, warranties and agreements of the Company herein or in certificates delivered pursuant hereto, and the agreements of the several Underwriters contained in Section 6 hereof, shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any Underwriter or any controlling persons, or the Company or any of its officers, directors or any controlling persons, and shall survive delivery of and payment for the Securities.

8. Substitution Of Underwriters. (a) If any Underwriter or Underwriters shall fail to take up and pay for the amount of Securities agreed by such Underwriter or Underwriters to be purchased hereunder, upon tender of such Securities in accordance with the terms hereof, and the amount of Securities not purchased does not aggregate more than 10% of the total amount of Securities set forth in Schedule A hereto, the remaining Underwriters shall be obligated to take up and pay for (in proportion to their respective underwriting obligations hereunder as set forth in Schedule A hereto except as may otherwise be determined by you) the Securities that the withdrawing or defaulting Underwriter or Underwriters agreed but failed to purchase.

(b) If any Underwriter or Underwriters shall fail to take up and pay for the amount of Securities agreed by such Underwriter or Underwriters to be purchased hereunder, upon tender of such Securities in accordance with the terms hereof, and the amount of Securities not purchased aggregates more than 10% of the total amount of Securities set forth in

Schedule A hereto, and arrangements satisfactory to you and the Company for the purchase of such Securities by other persons are not made within 36 hours thereafter, this Agreement shall terminate. In the event of any such termination the Company shall not be under any liability to any Underwriter (except to the extent provided in Section 4(g) and Section 6 hereof) nor shall any Underwriter (other than an Underwriter who shall have failed, otherwise than for some reason permitted under this Agreement, to purchase the amount of securities agreed by such Underwriter to be purchased hereunder) be under any liability to the Company (except to the extent provided in Section 6 hereof).

      9. Termination. You shall have the right by giving notice as hereinafter specified at any time at or prior to the Closing Date, to terminate this Agreement if (i) the Company shall have failed, refused or been unable, at or prior to the Closing Date, to perform any agreement on its part to be performed hereunder, (ii) any other condition of the Underwriters’ obligations hereunder is not fulfilled, (iii) trading of securities generally on the New York Stock Exchange shall have been suspended, or minimum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required on such exchange, (iv) a banking moratorium shall have been declared by Federal or New York authorities, or (v) any outbreak or escalation of hostilities, declaration of war by Congress, any other substantial national or international calamity or emergency shall have occurred since the execution of this Agreement that, in your judgment, makes it impractical or inadvisable to proceed with the completion of the sale of and payment for the Securities to be purchased by the Underwriters. Any such termination shall be without liability of any party to any other party except that the provisions of Section 4(g) and Section 6 hereof shall at all times be effective. If you elect to terminate this Agreement as provided in this Section, the Company shall be notified promptly by you by telephone, telex or telecopy, confirmed by letter.

      10. Notices. All notices or communications hereunder shall be in writing and if sent to you shall be mailed, delivered, telexed or telecopied and confirmed to you at the address set forth for that purpose in Schedule B hereto, or if sent to the Company, shall be mailed, delivered, telexed or telecopied and confirmed to the Company at 1915 Rexford Road, Charlotte, North Carolina 28211, Attention: Robert O. Pritchard, Treasurer. Notice to any Underwriter pursuant to Section 6 hereof shall be mailed, delivered, telexed or telecopied and confirmed to such Underwriter’s address as it appears in Schedule B or other notice furnished to the Company in writing for the purpose of communications hereunder. Any party to this Agreement may change such address for notices by sending to the parties to this Agreement written notice of a new address for such purpose.

      11. Parties. This Agreement shall inure to the benefit of and be binding upon the Company and the Underwriters and their respective successors and the controlling persons, officers and directors referred to in Section 6 hereof, and no other person will have any right or obligation hereunder. No purchaser of any Securities from any Underwriter shall be construed a successor or assign by reason merely of such purchase.

      In all dealings with the Company under this Agreement, you shall act on behalf of each of the several Underwriters, and any action under this Agreement taken by you or by any one of you designated in Schedule B hereto will be binding upon all the Underwriters.

      12. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

[Remainder of page intentionally left blank]

If the foregoing correctly sets forth the understanding between the Company and the several Underwriters, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between the Company and the several Underwriters. Alternatively, the execution of this Agreement by the Company and its acceptance by or on behalf of the Underwriters may be evidenced by an exchange of telecopied or other written communications.

Very truly yours,

PIEDMONT NATURAL GAS COMPANY, INC.

By

Name:

Title:

ACCEPTED as of the date first above written

[on behalf of ourselves and as

Representative(s) of the other Underwriters

named in Schedule A hereto].

[Name(s) of Representative(s)]

By

By

Name:

Title:

SCHEDULE A


		Amount of
		Securities to
		be
Underwriter		Purchased












Total		$

SCHEDULE B

Registration Statements No. 333- and 333-


Titles of Securities:
Amounts of Securities:
Purchase Price:
Delayed Delivery:
Closing
	Office for delivery of Securities:
	Office for payment for Securities:
	Date and time of Closing:
	Method of Payment:
	Type of Funds:
Underwriting Commission/Discount
	Amount:
	Method of payment:
Address for notices per Section 10:
Name of Underwriter to act: per Section 11:
Form of Securities:
Particular terms of the Securities
	Interest:
	Maturity:
	Other terms:

EXHIBIT I

PIEDMONT NATURAL GAS COMPANY, INC.

[Title of Securities]

DELAYED DELIVERY CONTRACT

, 200

Piedmont Natural Gas Company, Inc.

c/o

[As Representative of the Several Underwriters,]

Gentlemen:

The undersigned hereby agrees to purchase from Piedmont Natural Gas Company, Inc. (the “Company”), and the Company agrees to sell to the undersigned, [If one delayed closing, insert — as of the date hereof, for delivery on , 200 (the “Delivery Date”)] $ principal amount of the Company’s (the “Securities”), offered by the Company’s Prospectus relating thereto, receipt of a copy of which is hereby acknowledged, at a purchase price of % of the principal amount thereof plus accrued interest, if any, from to the Delivery Date and on the further terms and conditions set forth in this contract.

[If two or more delayed closings, insert — The undersigned will purchase from the Company as of the date hereof, for delivery on the dates set forth below, Securities in the amounts set forth below:

Each of such delivery dates is hereinafter referred to as a Delivery Date.]

Payment for the Securities that the undersigned has agreed to purchase for delivery on a Delivery Date shall be made to the Company by (certified or official bank check) [wire transfer] of [next day] [immediately available] funds [payable to the order of the Company] [to the Company’s account at ] on that Delivery Date upon delivery to the undersigned of the Securities to be purchased by the undersigned for delivery on that Delivery Date in [definitive] (book-entry) form [and in such denominations and registered in such names as the undersigned may designate by written or telecopied communication addressed to the Company not less than five full business days prior to that Delivery Date. If no request is received, the Securities will be registered in the name of the undersigned and issued in a denomination equal to the total amount of Securities to be purchased by the undersigned on that Delivery Date.]

The obligation of the Company to make delivery of and accept payment for, and the obligation of the undersigned to take delivery of and make payment for, Securities on a Delivery Date shall be

subject only to the conditions that (1) investment in the Securities shall not at that Delivery Date be prohibited under the laws of any jurisdiction in the United States to which the undersigned is subject, which investment the undersigned represents is not prohibited on the date hereof, and (2) the Company shall have sold to the Underwriters the amount of Securities to be sold to them pursuant to the Underwriting Agreement referred to in the Prospectus mentioned above.

Promptly after completion of the sale to the Underwriters, the Company will mail or deliver to the undersigned at its address set forth below notice to such effect, accompanied by a copy of the opinion of counsel for the Company delivered to the Underwriters in connection therewith.

This contract will inure to the benefit of and be binding upon the parties hereto and their respective successors, but will not be assignable by either party hereto without the written consent of the other.

It is understood that the acceptance of this contract and any other similar contracts is in the Company’s sole discretion and, without limiting the foregoing, need not be on a first-come, first-served basis. If this contract is acceptable to the Company, it is requested that the Company sign the form of acceptance below and mail or deliver one of the counterparts hereof to the undersigned at its address set forth below. This will become a binding contract between the Company and the undersigned when such counterpart is so mailed or delivered.

This contract shall be governed by, and construed in accordance with, the laws of the State of New York.

Very truly yours,

[Name of Purchaser]

By

Name:

Title:

(Address of Purchaser)

Accepted, as of the above date.

PIEDMONT NATURAL GAS COMPANY, INC.

By

Name:

Title:

EXHIBIT II

1. They are independent certified public accountants with respect to the Company and its subsidiaries within the meaning of the Act and the Exchange Act and the Rules and Regulations.

2. In their opinion, the financial statements and any schedules audited by them and included or incorporated by reference in the Registration Statements and Prospectus comply as to form in all material respects with the applicable accounting requirements of the Act or the Exchange Act, as applicable, and the published rules and regulations of the Commission thereunder.

3. They have performed the procedures specified by the American Institute of Certified Public Accountants for a review of interim financial information as described in SAS 71, Interim Financial Information, on the unaudited financial statements included in the Company’s Quarterly Reports on Form 10-Q incorporated by reference in the Prospectus.

4. On the basis of a reading of the latest unaudited financial statements made available by the Company and its subsidiaries; carrying out certain specified procedures (but not an examination in accordance with generally accepted auditing standards) which would not necessarily reveal matters of significance with respect to the comments set forth in such letter; a reading of the minutes of the meetings of the stockholders, directors and the audit committee of the Company and the Subsidiaries; and inquiries of certain officials of the Company who have responsibility for financial and accounting matters of the Company and its subsidiaries, nothing came to their attention which caused them to believe that:

      (A) any material modifications should be made to the unaudited financial statements, if any, included or incorporated by reference in the Prospectus, for them to be in conformity with accounting principles generally accepted in the United States;

      (B) the unaudited financial statements, if any, included or incorporated by reference in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Act or the Exchange Act and the published rules and regulations of the Commission thereunder;

      (C) the unaudited capsule information, if any, included in the Prospectus does not agree with the amounts set forth in the unaudited consolidated financial statements from which such capsule information was derived or was not determined on a basis substantially consistent with that of the audited financial statements included in the Prospectus;

      (D) the unaudited pro forma consolidated condensed financial statements, if any, included or incorporated by reference in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Act or the Exchange Act and the published rules and regulations of the Commission thereunder or the pro forma adjustments have not been properly applied to the historical amounts in the compilation of those statements;

      (E) at the date of the latest available balance sheet read by such accountants, or at a subsequent specified date not more than five days prior to the date of such letter, there was any change in the capital stock (except for the issuance of Common Stock under the Company’s Employee Stock Purchase Plan, Executive Long-Term Incentive Plan and Dividend Reinvestment and Stock Purchase Plan) or any increase in short-term indebtedness or consolidated long-term debt or any decrease in total common stock equity of the company and consolidated subsidiaries; or, at the date of the latest available balance sheet read by such accountants, there was any increase in consolidated net current liabilities or any decrease in consolidated net assets, as compared with amounts shown on the latest balance sheet included in the Prospectus; or

      (F) for the period from the date of the latest income statement included in the Prospectus to the date of the latest available income statement read by such accountants there were any

decreases, as compared with the corresponding period of the previous year, in consolidated operating revenues, utility operating income or net income; except in all cases set forth in clauses (E) and (F) above for changes, increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter.

5. They have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial information contained in the Prospectus (in each case to the extent that such dollar amounts, percentages and other financial information are derived from the general accounting records of the Company and its subsidiaries subject to the internal controls of the Company’s accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter.

All financial statements and schedules included in material incorporated by reference into the Prospectus shall be deemed included in the Prospectus for purposes of this subsection. References to the Prospectus in this Exhibit II include any supplement thereto at the date of the letter.

Exhibit 1.2

PIEDMONT NATURAL GAS COMPANY, INC.

Shares*

Common Stock
(no par value)

Underwriting Agreement

[Names and Addresses
of Underwriters]

Dear Sirs:

Piedmont Natural Gas Company, Inc., a North Carolina corporation (the “Company”), proposes to sell to [ the Several Underwriters in Schedule I hereto/you ] (the “Underwriters”), shares of Common Stock, no par value (“Common Stock”), of the Company (said shares to be issued and sold by the Company being hereinafter called the “Underwritten Securities”). The Company also proposes to grant to the Underwriters an option to purchase up to additional shares of Common Stock (the “Option Securities”; the Option Securities, together with the Underwritten Securities, being hereinafter called the “Securities”).

1. Representations and Warranties. The Company represents and warrants to, and agrees with, each Underwriter as set forth below in this Section 1. Certain terms used in this Section 1 are defined in paragraph (c) hereof.

(a) The Company meets the requirements for use of Form S-3 under the Securities Act of 1933, as amended (the “Act”) and has filed with the Securities and Exchange Commission (the “Commission”) two registration statements (file numbers 333-62222 and 333- ) on such Form, including a related preliminary prospectus, for the registration under the Act of the offering and sale of debt and equity securities including the Securities , and such registration statements have become effective. The Company may have filed one or more amendments or supplements thereto, including the related preliminary prospectus, each of which has been furnished to you and any such amendment has become effective. No stop order suspending the effectiveness of the registration statements has been issued, and no proceeding for that purpose has been instituted or threatened by the Commission. The Company has prepared and will file with the Commission a final prospectus in accordance with Rules 415 and 424(b). The Company has previously delivered to you and counsel for the Underwriters copies of the registration statements and prospectus, any such amendment or supplement, the final prospectus and all documents incorporated by reference therein that were filed with the

* PLUS an option to purchase from Piedmont Natural Gas Company, Inc. up to [ ] additional shares to cover over-allotments.

Commission on or prior to the date of this Agreement (including one fully executed copy of the registration statements and of each amendment thereto for counsel for the Underwriters and three conformed copies thereof for you). As filed, the registration statements, as amended at the Effective Date, and form of final prospectus, or such final prospectus, except to the extent the Underwriters shall agree in writing to a modification, shall be in all substantive respects in the form furnished to you prior to the Execution Time or, to the extent not completed at the Execution Time, shall contain only such specific additional information and other changes (beyond that contained in the latest Preliminary Prospectus) as the Company has advised you, prior to the Execution Time, will be included or made therein. If the Registration Statements contain the undertaking specified by Regulation S-K Item 512(x), the Registration Statements, at the Execution Time, meet the requirements set forth in Rule 415(a)(1)(x).

(b) On the Effective Date, each part of the Registration Statements did or will, and when the Preliminary Prospectus is filed with the Commission and when the Prospectus is first filed (if required) in accordance with Rule 424(b), on the Closing Date (as hereinafter defined) and on any settlement date pursuant to Section 3(c) hereof, the Preliminary Prospectus and the Prospectus (and any supplements thereto) will, comply in all material respects with the applicable requirements of the Act and the Securities Exchange Act of 1934 (the “Exchange Act”) and the respective rules thereunder; on the Effective Date, each part of the Registration Statements did not or will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; the Preliminary Prospectus, on the date of filing with the Commission did not and, on the Closing Date and on any settlement date pursuant to Section 3(c) hereof, will not, include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; and, on the Effective Date, the Prospectus, if not filed pursuant to Rule 424(b), did not or will not, and on the date of any filing pursuant to Rule 424(b), on the Closing Date and on any settlement date pursuant to Section 3(c) hereof, the Prospectus (together with any supplement thereto) will not, include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representations or warranties as to the information contained in or omitted from the Registration Statements or the Prospectus (or any supplement thereto) in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of any Underwriter specifically for use in connection with the preparation of the Registration Statements, the Preliminary Prospectus or the Prospectus (or any supplement thereto).

(c) The terms which follow, when used in this Agreement, shall have the meanings indicated. The term “Effective Date” shall mean each date that the Registration Statements and any post-effective amendment or amendments thereto became or become effective. “Execution Time” shall mean the date and time that this Agreement is executed and delivered by the parties hereto. “Preliminary Prospectus” shall mean any preliminary prospectus referred to in paragraph (a). “Prospectus” shall mean the prospectus relating to the Securities that is first filed pursuant to Rule 424(b) after the Execution Time or, if no filing pursuant to Rule 424(b) is required, shall mean the form of final prospectus relating to the Securities included in the Registration Statements at the Effective Date. “Registration Statements” shall mean the registration statements referred to in paragraph (a) above, including incorporated

documents, exhibits and financial statements, as amended at the Execution Time and, in the event any post-effective amendment thereto becomes effective prior to the Closing Date, shall also mean such registration statements as so amended. “Rule 415”, “Rule 424”, and “Regulation S-K” refer to such rules or regulation under the Act. Any reference herein to the Registration Statements, a Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 which were filed under the Exchange Act on or before the Effective Date of the Registration Statements or the issue date of such Preliminary Prospectus or the Prospectus, as the case may be; and any reference herein to the terms “amend”, “amendment” or “supplement” with respect to the Registration Statements, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act after the Effective Date of the Registration Statements, or the issue date of any Preliminary Prospectus or the Prospectus, as the case may be, deemed to be incorporated therein by reference.

(d) The financial statements of the Company and its subsidiaries set forth in the Registration Statements and the Prospectus fairly present the financial condition of the Company and its subsidiaries as of the dates indicated and the results of operations and cash flows for the periods therein specified; said financial statements have been prepared in conformity with accounting principles generally accepted in the United States consistently applied throughout the periods involved (except as otherwise stated therein).

(e) The Company and each of its significant subsidiaries within the meaning of Regulation S-X (individually a “Subsidiary” and collectively the “Subsidiaries”) has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is chartered or organized, with full corporate power and authority to own its properties and conduct its business as described in the Prospectus, and is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification wherein it owns or leases material properties or conducts material business.

(f) The Company and its subsidiaries have all necessary franchises or permits for natural gas operations in all communities now served, except as set forth in the Registration Statements and except where the failure to be so authorized by franchise or permit does not materially affect the right of the Company or such subsidiary to the use of its properties or the conduct of its business; and the franchises of the Company and its subsidiaries referred to in the Registration Statements are good and valid except for and subject only to such defects as may be set forth or referred to in the Registration Statements, and such others as do not materially affect the right of the Company or such subsidiary to the use of its properties or the conduct of its business, and said franchises impose no materially burdensome restrictions.

(g) All outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable, and, except as otherwise set forth in the Prospectus, all outstanding shares of capital stock of the Subsidiaries are owned by the Company either directly or through wholly owned subsidiaries free and clear of any perfected security interest and any other security interests, claims, liens or encumbrances.

(h) The Company’s authorized equity capitalization is as set forth in the Prospectus; the capital stock of the Company conforms to the description thereof contained in the Prospectus; all outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid and nonassessable; the Securities have been duly authorized, and, when issued and delivered to and paid for by the Underwriters pursuant to this Agreement, will be validly issued, fully paid and nonassessable; on the Closing Date the Securities will be duly authorized for listing, subject to official notice of issuance, on the New York Stock Exchange; the certificates for the Securities are in valid and sufficient form; and the holders of outstanding shares of capital stock of the Company are not entitled to preemptive or other rights to subscribe for the Securities.

(i) There is no pending or threatened action, suit or proceeding before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries of a character required to be disclosed in the Registration Statements which is not adequately disclosed in the Prospectus, there is no statute required to be described in the Prospectus that is not described as required, and there is no franchise, contract or other document of a character required to be described in the Registration Statements or Prospectus, or to be filed as an exhibit, which is not described or filed as required, and the description in the Registration Statements and Prospectus of statutes, legal and governmental proceedings, contracts and other documents are accurate and fairly present the information required to be shown.

(j) This Agreement has been duly authorized, executed and delivered by the Company.

(k) No consent, approval, authorization or order of any court or governmental agency or body is required for the consummation of the transactions contemplated herein, except such as have been obtained under the Act and such as may be required under the blue sky laws of any jurisdiction in connection with the purchase and distribution of the Securities by the Underwriters and such other approvals as have been obtained.

(l) Neither the issue and sale of the Securities, nor the consummation of the other transactions herein contemplated nor the fulfillment of the terms hereof will conflict with, result in a breach of, or constitute a default under the Articles of Incorporation or By-Laws of the Company or the terms of any indenture or other agreement or instrument to which the Company or any of its subsidiaries is a party or bound, or any statute, rule, order or regulation applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over the Company or any of its subsidiaries; and the Company has full power and authority to authorize, issue and sell the Securities as contemplated by this Agreement.

(m) No holders of securities of the Company have rights to the registration of such securities under the Registration Statements.

(n) The Company is [not a “holding company” or a “subsidiary company” of a “holding company” within the meaning of the Public Utility Holding Company Act of 1935, as amended (the “Holding Company Act”)] [a “holding company” within the meaning of the Public Utility Holding Company Act of 1935, as amended (the “Holding Company Act”) that is exempt

from all provisions of the Holding Company Act, except Section 9(a)(2) thereof, by order of the Commission pursuant to Section 3(a)(5) thereof. Neither the execution, delivery and performance by the Company of this Agreement or the issuance of the Securities violates any provision of the Holding Company Act or any rules or regulations thereunder].

2. Purchase and Sale. (a) Subject to the terms and conditions and in reliance upon the representations, warranties and agreements herein set forth, the Company agrees to issue and sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from the Company, at a purchase price of $ per share, the amount of the Underwritten Securities set forth opposite such Underwriter’s name in Schedule I hereto. Delivery of certificates for the Underwritten Securities, and payment therefor, shall be made as provided in Section 3 hereof.

(b) Subject to the terms and conditions and in reliance upon the representations, warranties and agreements herein set forth, the Company hereby grants an option to the several Underwriters to purchase, severally and not jointly, up to shares of Option Securities at the same purchase price per share as the Underwriters shall pay for the Underwritten Securities. Said option may be exercised only to cover over-allotments in the sale of the Underwritten Securities by the Underwriters. Said option may be exercised in whole or in part at any time (but not more than once) on or before the 30th day after the date of the Prospectus upon written or facsimile notice by , acting on behalf of the Underwriters (the “Representative”), to the Company setting forth the number of shares of the Option Securities as to which the several Underwriters are exercising the option and the settlement date. Delivery of certificates for the shares of Option Securities, and payment therefor, shall be made as provided in Section 3 hereof. The number of shares of the Option Securities to be purchased by each Underwriter shall be the same percentage of the total number of shares of the Option Securities to be purchased by the several Underwriters as such Underwriter is purchasing of the Underwritten Securities, subject to such adjustments as you in your absolute discretion shall make to eliminate any fractional shares.

3. Delivery and Payment. (a) Delivery of and payment for the Underwritten Securities and the Option Securities (if the option provided for in Section 2(b) hereof shall have been exercised on or before the third business day prior to the Closing Date) shall be made at 10:00 A.M., New York City time, on , 200 , or such later date (not later than , 200 ) as the Underwriters shall designate, which date and time may be postponed by agreement between the Underwriters and the Company or as provided in Section 9 hereof (such date and time of delivery and payment for the Securities being herein called the “Closing Date”). Delivery of the Securities shall be made to the Representative for the respective accounts of the several Underwriters against payment by the several Underwriters through the Representative of the purchase price thereof to or upon the order of the Company by the method and in the funds set forth in Schedule II hereto. Delivery of the Underwritten Securities and the Option Securities shall be made at such location as the Representative shall reasonably designate at least one business day in advance of the Closing Date and payment for such Securities shall be made at the offices of Orrick, Herrington & Sutcliffe LLP, 666 Fifth Avenue, New York, New York 10103. Certificates for the Securities shall be registered in such names and in such denominations as the Underwriters may request not less than three full business days in advance of the Closing Date.

(b) The Company agrees to have the Securities available for inspection, checking and packaging by the Underwriters in New York, New York, not later than 1:00 P.M. on the business day prior to the Closing Date.

(c) If the option provided for in Section 2(b) hereof is exercised after the third business day prior to the Closing Date, the Company will deliver (at the expense of the Company) to the Representative, at or through the facilities of The Depository Trust Company, on the date specified by the Representative (which shall be within three business days after exercise of said option), certificates for the Option Securities in such names and denominations as the Underwriters shall have requested against payment of the purchase price thereof to or upon the order of the Company by the method and in the funds set forth in Schedule II hereto. If settlement for the Option Securities occurs after the Closing Date, the Company will deliver to the Underwriters on the settlement date for the Option Securities, and the obligation of the Underwriters to purchase the Option Securities shall be conditioned upon receipt of, supplemental opinions, certificates and letters confirming as of such date the opinions, certificates and letters delivered on the Closing Date pursuant to Section 6 hereof.

4. Offering by Underwriters. It is understood that the several Underwriters propose to offer the Securities for sale to the public as set forth in the Prospectus.

5. Agreements. The Company agrees with the several Underwriters that:

(a) The Company will use its best efforts to cause the Registration Statements, if not effective at the Execution Time, and any amendment thereof, to become effective. Prior to the termination of the offering of the Securities, the Company will not file any amendment to the Registration Statements or supplement to the Prospectus unless the Company has furnished [ each Underwriter/you ] a copy for [its/your] review prior to filing and will not file any such proposed amendment or supplement to which [ each Underwriter/you ] reasonably object [ s ] . Subject to the foregoing sentence, if filing of the Prospectus is required under Rule 424(b), the Company will cause the Prospectus, properly completed, and any supplement thereto to be filed with the Commission pursuant to the applicable paragraph of Rule 424(b) within the time period prescribed and will provide evidence satisfactory to the Representative of such timely filing. The Company will promptly advise the Underwriters (i) when any amendment to the Registration Statements, if not effective at the Execution Time, shall have become effective, (ii) when the Prospectus, and any supplement thereto, shall have been filed (if required) with the Commission pursuant to Rule 424(b), (iii) when, prior to termination of the offering of the Securities, any amendment to the Registration Statements shall have been filed or become effective, (iv) of any request by the Commission for any amendment of a Registration Statement or supplement to the Prospectus or for any additional information, (v) of the issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement or the institution or threatening of any proceeding for that purpose and (vi) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. The Company will use its best efforts to prevent the issuance of any such stop order and, if issued, to obtain as soon as possible the withdrawal thereof. The Company will prepare and file with the Commission, promptly upon your request, any amendments or supplements to the

Registration Statements or Prospectus that, in your reasonable opinion, may be necessary or advisable in connection with the distribution of the Securities by the Underwriters.

(b) If, at any time when a prospectus relating to the Securities is required to be delivered under the Act, any event occurs as a result of which the Prospectus as then supplemented would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or if it shall be necessary to amend the Registration Statements or supplement the Prospectus to comply with the Act or the Exchange Act or the respective rules thereunder, the Company promptly will prepare and file with the Commission (at the expense of the Company), subject to the second sentence of paragraph (a) of this Section 5, an amendment or supplement which will correct such statement or omission or effect such compliance.

(c) As soon as practicable, but in any event not later than 15 months after the end of the Company’s current fiscal quarter, the Company will make generally available to its security holders and to the Underwriters an earnings statement or statements of the Company and its subsidiaries which will satisfy the provisions of Section 11(a) of the Act and Rule 158 under the Act.

(d) The Company will furnish to the Underwriters and counsel for the Underwriters, without charge, one signed and three conformed copies of the Registration Statements (including exhibits thereto) and [ to each other Underwriter a copy of the Registration Statement (without exhibits thereto) ] , so long as delivery of a prospectus by an Underwriter or dealer may be required by the Act, all amendments and supplements to the Registration Statements or Prospectus that are filed with the Commission and as many copies of each Preliminary Prospectus and the Prospectus and any supplement thereto as the Underwriters may reasonably request.

(e) The Company will arrange for the qualification of the Securities for sale under the laws of such jurisdictions as the Underwriters may designate and will maintain such qualifications in effect so long as required for the distribution of the Securities.

(f) The Company will not, for a period of 120 days following the Execution Time, without the prior written consent of the Underwriters, offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce the offering of, any other shares of Common Stock or any securities convertible into, or exchangeable for, shares of Common Stock; provided, however, that the Company may issue and sell Common Stock pursuant to any employee stock option plan, stock ownership plan or dividend reinvestment and stock purchase plan of the Company in effect at the Execution Time and the Company may issue Common Stock issuable upon the conversion of securities or the exercise of warrants outstanding at the Execution Time.

(g) The Company, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, will pay all authorized expenses incident to the performance of its obligations hereunder, will pay the expenses of printing all documents relating to the offering, and will reimburse the Underwriters for any expenses (including fees and disbursements of counsel) incurred by them in connection with the matters referred to in Section

5(e) hereof and the preparation of memoranda relating thereto and for any filing fee of the National Association of Securities Dealers, Inc. relating to the Securities.

(h) The Company will apply the net proceeds from the sale of the Securities as set forth in the Prospectus and Prospectus Supplement.

6. Conditions to the Obligations of the Underwriters. The obligations of the Underwriters to purchase the Underwritten Securities and the Option Securities, as the case may be, shall be subject to the accuracy of the representations and warranties on the part of the Company contained herein as of the Execution Time, the Closing Date and any settlement date pursuant to Section 3(c) hereof, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions:

(a) If the Registration Statements have not become effective prior to the Execution Time, unless the Underwriters agree in writing to a later time, the Registration Statements will become effective not later than (i) 6:00 P.M. New York City time, on the date of determination of the public offering price, if such determination occurred at or prior to 3:00 P.M. New York City time on such date or (ii) 12:00 Noon on the business day following the day on which the public offering price was determined, if such determination occurred after 3:00 P.M. New York City time on such date; if filing of the Prospectus, or any supplement thereto, is required pursuant to Rule 424(b), the Prospectus, and any such supplement, will be filed in the manner and within the time period required by Rule 424(b); and no stop order suspending the effectiveness of the Registration Statements shall have been issued and no proceedings for that purpose shall have been instituted or threatened by the Commission and any request of the Commission for additional information (to be included in the Registration Statements or the Prospectus or otherwise) shall have been complied with to your satisfaction.

(b) No Underwriter shall have advised the Company that the Registration Statements or the Prospectus, or any amendment or supplement thereto, contains an untrue statement of fact that in your opinion is material, or omits to state a fact that in your opinion is material and is required to be stated therein or is necessary to make the statements therein not misleading.

(c) Except as contemplated in the Prospectus, subsequent to the respective dates as of which information is given in the Registration Statements and the Prospectus, there shall not have been any change, on a consolidated basis, in the capital stock, long-term debt of the Company and its subsidiaries, or any adverse change, or any development involving a prospective adverse change, in the condition (financial or other), business, prospects, net worth or results of operations of the Company and its subsidiaries, or any change in the rating assigned to any securities of the Company, that, in your judgment, makes it impractical or inadvisable to offer or deliver the Securities on the terms and in the manner contemplated in the Prospectus.

(d) At the Closing Date and any settlement date pursuant to Section 3(c) hereof, the Company shall have furnished to the Underwriters the opinion of Nelson, Mullins, Riley & Scarborough, L.L.P., counsel to the Company, dated such date, to the effect that:

(i) the Company and each of its Subsidiaries has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is chartered or organized, with full corporate power and authority to own its properties and conduct its business as described in the Prospectus, and is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification wherein it owns or leases material properties or conducts material business;

(ii) the Company and its subsidiaries have all necessary franchises or permits for natural gas operations in all communities now served, except as set forth in the Registration Statements and except where the failure to be so authorized by franchise or permit does not, in the opinion of such counsel, materially affect the right of the Company or such subsidiary to the use of its properties or the conduct of its business; and the franchises of the Company and its subsidiaries referred to in the Registration Statements are good and valid except for and subject only to such defects as may be set forth or referred to in the Registration Statements, and such others as do not, in the opinion of such counsel, materially affect the right of the Company or such subsidiary to the use of its properties or the conduct of its business, and said franchises impose no materially burdensome restrictions;

(iii) all outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable, and, except as otherwise set forth in the Prospectus, all outstanding shares of capital stock of the Subsidiaries are owned by the Company either directly or through wholly owned subsidiaries free and clear of any perfected security interest and, to the best knowledge of such counsel, any other security interests, claims, liens or encumbrances;

(iv) the Company’s authorized equity capitalization is as set forth in the Prospectus; the capital stock of the Company conforms to the description thereof contained in the Prospectus; all outstanding shares of Common Stock, the Underwritten Securities and any Option Securities being delivered on the date of such opinion have been duly authorized and validly issued and are fully paid and nonassessable; any Option Securities to be delivered after the date of such opinion have been duly authorized, and, when issued and delivered to and paid for by the Underwriters pursuant to this Agreement, will be validly issued, fully paid and nonassessable; the Securities have been duly authorized for listing, subject to official notice of issuance, on the New York Stock Exchange; the certificates for the Securities are in valid and sufficient form; and the holders of outstanding shares of capital stock of the Company are not entitled to preemptive or other rights to subscribe for the Securities;

(v) to the best knowledge of such counsel, there is no pending or threatened action, suit or proceeding before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries of a character required to be disclosed in the Registration Statements by Item 103 of Regulation S-K which is not adequately disclosed in the Prospectus, there is no statute required to be described in the Prospectus that is not described as required, and there is no franchise, contract or other document of a character required to be described in the Registration

Statements or Prospectus, or to be filed as an exhibit, which is not described or filed as required; and the descriptions in the Registration Statements or Prospectus, of statutes, legal and governmental proceedings, contracts and other documents are accurate and fairly present the information required to be shown;

(vi) the Registration Statements have become effective under the Act; any required filing of the Prospectus, and any supplements thereto, pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b) pursuant to the subparagraph of Rule 424(b) specified in such opinion; to the best knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statements or any part thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Act; the Registration Statements and the Prospectus comply as to form in all material respects with the applicable requirements of the Act and the Exchange Act and the respective rules thereunder; and such counsel has no reason to believe that at the Effective Date the Registration Statements contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading or that the Preliminary Prospectus or the Prospectus, as of its date or as of date of such opinion, included any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; it being understood that such counsel need express no opinion as to the financial statements or other financial data contained in the Registration Statements, the Preliminary Prospectus or the Prospectus and that such counsel may rely solely on certificates of officers of the Company with respect to statistical data contained in the Registration Statements, the Preliminary Prospectus or the Prospectus;

(vii) this Agreement has been duly authorized, executed and delivered by the Company;

(viii) no consent, approval, authorization or order of any court or governmental agency or body is required for the consummation of the transactions contemplated herein, except such as have been obtained under the Act and such as may be required under the blue sky laws of any jurisdiction in connection with the purchase and distribution of the Securities by the Underwriters and such other approvals (specified in such opinion) as have been obtained;

(ix) neither the issue and sale of the Securities, nor the consummation of the other transactions herein contemplated nor the fulfillment of the terms hereof will conflict with, result in a breach of, or constitute a default under the Articles of Incorporation or By-Laws of the Company or the terms of any indenture or other agreement or instrument known to such counsel and to which the Company or any of its subsidiaries is a party or bound, or any statute, rule, order or regulation known to such counsel to be applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over the Company or any of its subsidiaries; and the Company has full corporate power and authority to authorize, issue and sell the Securities as contemplated by this Agreement;

(x) no holders of securities of the Company have rights to the registration of such securities under the Registration Statements; and

(xi) the Company is [not a “holding company” or a “subsidiary company” of a “holding company” within the meaning of the Public Utility Holding Company Act of 1935, as amended (the “Holding Company Act”)] [a “holding company” within the meaning of the Public Utility Holding Company Act of 1935, as amended (the “Holding Company Act”) that is exempt from all provisions of the Holding Company Act, except Section 9(a)(2) thereof, by order of the Commission pursuant to Section 3(a)(5) thereof. Neither the execution, delivery and performance by the Company of this Agreement or the issuance of the Securities violates any provision of the Holding Company Act or any rules or regulations thereunder].

(e) On the Closing Date and any settlement date pursuant to Section 3(c) hereof, the Underwriters shall have received from Orrick, Herrington & Sutcliffe LLP, counsel for the Underwriters, such opinion or opinions, dated such date, with respect to the issuance and sale of the Securities, the Registration Statements, the Prospectus (together with any supplement thereto) and other related matters as the Underwriters may reasonably require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. In rendering their opinion, such counsel may rely upon the opinion of Nelson, Mullins, Riley & Scarborough, L.L.P., referred to above as to all matters governed by North Carolina law.

(f) On the Closing Date and any settlement date pursuant to Section 3(c) hereof, the Company shall have furnished to the Underwriters a certificate of the Company, signed by the President and Chief Executive Officer or a Vice President and by the principal financial or accounting officer of the Company, dated such date, to the effect that the signers of such certificate have carefully examined the Registration Statements, the Prospectus, any supplement to the Prospectus and this Agreement and that:

(i) the representations and warranties of the Company in this Agreement are true and correct in all material respects on and as of the date of such certificate with the same effect as if made on such date and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to such date;

(ii) no stop order suspending the effectiveness of the Registration Statements have been issued and no proceedings for that purpose have been instituted or, to the Company’s knowledge, threatened; and

(iii) since the date of the most recent financial statements included in the Prospectus (exclusive of any supplement thereto), there has been no material adverse change in the condition (financial or other), earnings, business or properties of the Company and its subsidiaries, whether or not arising from transactions in the ordinary course of business, except as set forth or contemplated in the Prospectus (exclusive of any supplement thereto).

(g) At the Execution Time, at the Closing Date and at any settlement date pursuant to Section 3(c) hereof, Deloitte & Touche LLP shall have furnished to the Underwriters a letter or letters, dated such date, in form and substance satisfactory to the Underwriters, confirming that they are independent accountants within the meaning of the Act and the Exchange Act and the respective applicable published rules and regulations thereunder and stating in effect that:

(i) in their opinion the audited financial statements and financial statement schedules included or incorporated in the Registration Statements and the Prospectus and reported on by them comply in form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations;

(ii) they have performed the procedures specified by the American Institute of Certified Public Accountants for a review of interim financial information as described in SAS 71, Interim Financial Information, on the unaudited financial statements included in the Company’s Quarterly Reports on Form 10-Q incorporated by reference in the Prospectus;

(iii) on the basis of a reading of the latest unaudited financial statements made available by the Company and its subsidiaries; carrying out certain specified procedures (but not an examination in accordance with generally accepted auditing standards) which would not necessarily reveal matters of significance with respect to the comments set forth in such letter; a reading of the minutes of the meetings of the stockholders, directors and the audit committee of the Company and the Subsidiaries; and inquiries of certain officials of the Company who have responsibility for financial and accounting matters of the Company and its subsidiaries, nothing came to their attention which caused them to believe that:

(B) the unaudited financial statements, if any, included or incorporated by reference in the Prospectus do not comply as to form in all

material respects with the applicable accounting requirements of the Act or the Exchange Act and the published rules and regulations of the Commission thereunder;

(C) the unaudited capsule information, if any, included in the Prospectus does not agree with the amounts set forth in the unaudited consolidated financial statements from which such capsule information was derived or was not determined on a basis substantially consistent with that of the audited financial statements included in the Prospectus;

(D) the unaudited pro forma consolidated condensed financial statements, if any, included or incorporated by reference in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Act or the Exchange Act and the published rules and regulations of the Commission thereunder or the pro forma adjustments have not been properly applied to the historical amounts in the compilation of those statements;

(E) at the date of the latest available balance sheet read by such accountants, or at a subsequent specified date not more than five days prior to the date of such letter, there was any change in the capital stock (except for the issuance of Common Stock under the Company’s Employee Stock Purchase Plan and Dividend Reinvestment and Stock Purchase Plan and the Executive Long-Term Incentive Plan) or any increase in short-term indebtedness or consolidated long-term debt or any decrease in total common stock equity of the Company and consolidated subsidiaries or, at the date of the latest available balance sheet read by such accountants, there was any increase in consolidated net current liabilities or any decrease in consolidated net assets, as compared with amounts shown on the latest balance sheet included in the Prospectus; or

(F) for the period from the date of the latest income statement included in the Prospectus to the closing date of the latest available income statement read by such accountants there were any decreases, as compared with the corresponding period of the previous year, in consolidated operating revenues, utility operating income or net income;

except in all cases set forth in clauses (E) and (F) above for changes, increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and

(iv) they have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial information contained in the Prospectus (in each case to the extent that such dollar amounts, percentages and other financial information are derived from the general accounting records of the Company and its subsidiaries subject to the internal controls of the Company’s accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other

procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter.

All financial statements and schedules included in material incorporated by reference into the Prospectus shall be deemed included in the Prospectus for purposes of this subsection. References to the Prospectus in this paragraph (g) include any supplement thereto at the date of the letter.

(h) Subsequent to the Execution Time or, if earlier, the dates as of which information is given in the Registration Statements (exclusive of any amendment thereof) and the Prospectus (exclusive of any supplement thereto), there shall not have been (i) any change or decrease specified in the letter or letters referred to in paragraph (g) of this Section 6 or (ii) any change, or any development involving a prospective change, in or affecting the business or properties of the Company and its subsidiaries the effect of which, in any case referred to in clause (i) or (ii) of this paragraph (h), is, in the judgment of the Representative, so material and adverse as to make it impractical or inadvisable to proceed with the public offering or the delivery of the Securities as contemplated by the Registration Statements (exclusive of any amendment thereof) and the Prospectus (exclusive of any supplement thereto).

(i) Prior to the Closing Date and any settlement date pursuant to Section 3(c) hereof, the Company shall have furnished to the Underwriters such further information, certificates and documents as the Underwriters may reasonably request.

(j) At the Execution Time, at the Closing Date and at any settlement date pursuant to Section 3(c) hereof, Deloitte & Touche LLP shall have furnished to the Underwriters a letter or letters, dated such date, regarding the financial statements and other financial information of North Carolina Natural Gas Corporation included or incorporated by reference in the Prospectus. Such letter shall be in substantially the form of the letter from Deloitte & Touche LLP regarding the Company’s financial statements pursuant to Section 6(g) or in such other form and substance satisfactory to the Underwriters.

If any of the conditions specified in this Section 6 shall not have fulfilled in all material respects when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be in all material respects reasonably satisfactory in form substance to the Underwriters and counsel for the Underwriters, this Agreement and all obligations of the Underwriters hereunder may be cancelled at, or at any time prior to, the Closing Date by the Representative. Notice of cancellation shall be given to the Company in writing or by telephone or facsimile confirmed in writing.

7. Reimbursement of Underwriters’ Expenses. If the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Underwriters set forth in Section 6 hereof is not satisfied, because of any termination pursuant to Section 10 hereof or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof other than by reason of a default by any of the Underwriters, the Company will reimburse the Underwriters severally upon demand for all out-of-pocket expenses (including reasonable fees disbursements of counsel) that

shall have been incurred by them in connection with the proposed purchase and sale of the Securities.

8. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each Underwriter and each person who controls any Underwriter within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any part of a Registration Statement as originally filed or in any amendment thereof, or in any Preliminary Prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that (i) the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Underwriter specifically for use in connection with the preparation thereof, and (ii) such indemnity with respect to any Preliminary Prospectus shall not inure to the benefit of any Underwriter (or any person controlling such Underwriter) from whom the person asserting any such loss, claim, damage or liability purchased the Securities which are the subject thereof if such person did not receive a copy of the Prospectus (or the Prospectus as supplemented) excluding documents incorporated therein by reference at or prior to the confirmation of the sale of such Securities to such person in any case where such delivery is required by the Act and the untrue statement or omission of a material fact contained in such Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as supplemented). This indemnity agreement will be in addition to any liability which the Company may otherwise have.

(b) Each Underwriter severally agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who signs the Registration Statements, and each person who controls the Company within the meaning of either the Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company to each Underwriter, but only with reference to written information relating to such Underwriter furnished to the Company by or on behalf of such Underwriter specifically for use in the preparation of the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any Underwriter may otherwise have. The Company acknowledges that the statements set forth in the [ ] paragraph of the cover page and under the heading “Plan of Distribution” in any Preliminary Prospectus and the Prospectus constitute the only information furnished in writing by or on behalf of the several Underwriters for inclusion in any Preliminary Prospectus or the Prospectus, and you, as the Underwriters, confirm that such statements are correct.

(c) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnified party under this Section 8, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under this Section 8. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to appoint counsel satisfactory to such indemnified party to represent the indemnified party in such action; provided, however, that if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to defend such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election so to appoint counsel to defend such action and approval by the indemnified party of such counsel, the indemnifying party will not be liable to such indemnified party under this Section 8 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel (plus any local counsel), approved by the Underwriters in the case of paragraph (a) of this Section 8, representing the indemnified parties under such paragraph (a) who are parties to such action), (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party; and except that, if clause (i) or (iii) is applicable, such liability shall be only in respect of the counsel referred to in such clause (i) or (iii).

(d) In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in paragraph (a) of this Section 8 is due in accordance with its terms but is for any reason held by a court to be unavailable from the Company on grounds of policy or otherwise, the Company and the Underwriters shall contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) to which the Company and one or more of the Underwriters may be subject in such proportion so that the Underwriters are responsible for that portion represented by the percentage that the underwriting discount appearing on the cover page of the Prospectus bears to the public offering price appearing thereon and the Company is responsible for the balance; provided, however, that (y) in no case shall any Underwriter (except as may be provided in any Agreement Among Underwriters relating to the offering of the Securities) be responsible for any amount in excess of the underwriting discount applicable to the Securities purchased by such Underwriter hereunder and (z) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person who controls an Underwriter within the meaning of the Act shall have the same rights to contribution as such Underwriter, and each person who controls the Company within the meaning of either the Act or the Exchange

Act, each officer of the Company who shall have signed the Registration Statements and each director of the Company shall have the same rights to contribution as the Company, subject in each case to clauses (y) and (z) of this paragraph (d). Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties under this paragraph (d), notify such party or parties from whom contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have hereunder or otherwise than under this paragraph (d).

(e) The obligations of the Company under this Section 8 shall be in addition to any liability that the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act; and the obligations of the Underwriters under this Section 8 shall be in addition to any liability that the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each director of the Company (including any person who, with his consent, is named in the Registration Statements as about to become a director of the Company), to each officer of the Company who has signed the Registration Statements and to each person, if any, who controls the Company within the meaning of the Act.

9. Default by an Underwriter. If any one or more Underwriters shall fail to purchase Securities agreed to be purchased by such Underwriter or Underwriters hereunder and such failure to purchase shall constitute a default in the performance of its or their obligations under this Agreement, the remaining Underwriters shall be obligated severally to take up and pay for (in the respective proportions which the amount of Securities set forth opposite their names in Schedule I hereto bears to the aggregate amount of Securities set forth opposite the names of the remaining Underwriters) the Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase; provided, however, that in the event that the aggregate amount of Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase shall exceed 10% of the aggregate amount of Securities set forth in Schedule I hereto, the remaining Underwriters shall have the right to purchase all, but shall not be under any obligation to purchase any, of the Securities, and if such nondefaulting Underwriters do not purchase all the Securities, this Agreement will terminate without liability to any nondefaulting Underwriter or the Company. In the event of a default by any Underwriter as set forth in this Section 9, the Closing Date shall be postponed for such period, not exceeding seven days, as the Underwriters shall determine in order that the required changes in the Registration Statements and the Prospectus or in any other documents or arrangements may be effected. Nothing contained in this Agreement shall relieve any defaulting Underwriter of its liability, if any, to the Company and any nondefaulting Underwriter for damages occasioned by its default hereunder.

10. Termination. This Agreement shall be subject to termination in the absolute discretion of the Underwriters, by notice given to the Company prior to delivery of and payment for the Securities, if prior to such time (i) trading in the Company’s Common Stock shall have been suspended by the Commission or the New York Stock Exchange or trading in securities generally on the New York Stock Exchange or the American Stock Exchange shall have been suspended or limited or minimum or maximum prices shall have been established on either of such Exchanges, (ii) a banking moratorium shall have been declared either by Federal

or New York State authorities, (iii) there shall have occurred any outbreak or escalation of hostilities, declaration by the United States of a national emergency or war or other calamity or crises the effect of which on the financial markets is such as to make it, in the judgment of the Representative, impracticable or inadvisable to market the Securities; (iv) the Company shall have failed, refused or been unable, at or prior to the Closing Date, to perform any agreement on its part to be performed hereunder or (v) any other condition of the Underwriters’ obligations hereunder is not fulfilled. Any such termination shall be without liability of any party to any other party except that the provisions of Section 7 and Section 8 hereof shall at all times be effective. If you elect to terminate this Agreement as provided in this Section, the Company shall be notified promptly by you by telephone, telex or telecopy, confirmed by letter.

11. Representations and Agreements to Survive. The respective agreements, representations, warranties, indemnities and other statements of Company or its officers set forth in or made pursuant to this Agreement and the agreements of the Underwriters contained in Section 8 hereof will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or the Company or any of the officers, directors or controlling persons referred to in Section 8 hereof, and will survive delivery of and payment for the Securities.

12. Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to the Underwriters, will be mailed, delivered or transmitted via facsimile and confirmed to the Representative at ; or, if sent to Company, will be mailed, delivered or transmitted via facsimile and confirmed to it at 1915 Rexford Road, Charlotte, North Carolina 28211, Attention: Robert O. Pritchard, Treasurer.

13. Successors. This Agreement will inure to the benefit of and binding upon the parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 8 hereof, and no other person will have any right or obligation hereunder.

14. Representation of Underwriters. Any action under this Agreement taken by the Representative will be binding on each Underwriter.

15. Applicable Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW York.

16. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such executed counterparts shall together constitute one and the same Agreement.

[Remainder of page intentionally left blank]

If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement among the Company and the several Underwriters.


		Very truly yours,

		PIEDMONT NATURAL GAS COMPANY, INC.

		By:

				Name:
				Title:

foregoing Agreement is
hereby confirmed and
accepted as of the date
first above written.


By:

		Name:
		Title:

SCHEDULE I


		Number of Shares of
		Underwritten Securities to be
	Underwriters	Purchased






Total

SCHEDULE II

Manner of Payment:

Type of Funds:

EXHIBIT 1.3

$[ ]

PIEDMONT NATURAL GAS COMPANY, INC.

MEDIUM-TERM NOTES, SERIES [ ]

Agency Agreement

, [ ]

[Names and Addresses of Agents]

Dear Sirs:

1. Introduction. Piedmont Natural Gas Company, Inc., a North Carolina corporation (the “Issuer”), confirms its agreement with each of you (individually, an “Agent” and collectively, the “Agents”) with respect to the issue and sale from time to time by the Issuer of up to $[ ] aggregate principal amount of its Medium-Term Notes, Series [ ], Due Not Less Than Nine Months from Date of Issue registered under the registration statements referred to in Section 2(a) (any such Medium-Term Notes, being hereinafter referred to as the “Securities”, which expression shall, if the context so admits, include any permanent global Security). Securities may be sold pursuant to Section 3 of this Agreement or as contemplated by Section 11 of this Agreement in an aggregate amount not to exceed the amount of Registered Securities (as defined in Section 2(a) hereof) registered pursuant to such registration statements reduced by the aggregate amount of any other Registered Securities sold otherwise than pursuant to Sections 3 and 11 of this Agreement. The Securities will be issued under the Indenture, dated as of April 1, 1993, between Piedmont Natural Gas Company, Inc., a New York corporation (the “Predecessor Company”), and Citibank, N.A., as trustee (the “Trustee”), as amended by the First Supplemental Indenture, dated as of February 25, 1994, among the Issuer, the Predecessor Company and the Trustee, and the Second Supplemental Indenture, dated as of June 15, 2003, between the Issuer and the Trustee (collectively, the “Indenture”).

The Securities shall have the terms described in the Prospectus referred to in Section 2(a) as it may be amended or supplemented from time to time, including any supplement to the Prospectus that sets forth only the terms of a particular issue of the Securities (a “Pricing Supplement”). Securities will be issued, and the terms thereof established, from time to time by the Issuer in accordance with the Indenture and the Procedures (as defined in Section 3(d) hereof).

2. Representations and Warranties of the Issuer. The Issuer represents and warrants to, and agrees with, each Agent as follows:

(a) The Issuer meets the requirements for use of Form S-3 under the Securities Act of 1933, as amended (the “Act”), and the rules and regulations (“Rules and Regulations”) of the Securities and Exchange Commission (the “Commission”) and has filed with the Commission two registration statements on such form (No. 333-[ ] and 333-[ ]), including a prospectus, relating to equity and debt securities of the Issuer, including the Securities (such equity and debt securities, the “Registered Securities”), which have become effective under the Act. Such registration statements, as amended as of the date hereof and of the Closing Date (as defined in Section 3(e) hereof), is hereinafter referred to as the “Registration Statements”, and the prospectus included in such Registration Statements, as supplemented as of the date hereof and as of the Closing Date, including all material incorporated by reference therein, is hereinafter referred to as the “Prospectus.” Any reference in this Agreement to amending or supplementing the Prospectus shall be deemed to include the filing of materials incorporated by reference in the Prospectus after the date hereof or the Closing Date as the case may be, and any reference in this Agreement to any amendment or supplement to the Prospectus shall be deemed to include any such materials incorporated by reference in the Prospectus after the date hereof or the Closing Date, as the case may be. The Registration Statements, as such Registration Statements may be amended or supplemented, meet the requirements set forth in Rule 415(a)(1)(x) and (a)(2) under the Act and complies in all material respects with said Rule.

(b) On the effective date of the Registration Statements relating to the Registered Securities, such Registration Statements conformed in all respects to the requirements of the Act, the Rules and Regulations, the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”) and the rules and regulations under the Trust Indenture Act (the “Trust Indenture Act Rules and Regulations”) and did not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and as of the date hereof and on the Closing Date, the Registration Statements and the Prospectus, and at each of the times of acceptance and of delivery referred to in Section 6(a) hereof and at each of the times of amendment or supplementing referred to in Section 6(b) hereof (the Closing Date and each such time being herein sometimes referred to as a “Representation Date”), the Registration Statements and the Prospectus as then amended or supplemented will conform in all material respects to the requirements of the Act, the Trust Indenture Act and the Rules and Regulations, and none of such documents will include any untrue statement of a material fact or will omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, except that the foregoing does not apply to statements in or omissions from any of such documents based upon written information furnished to the Issuer by any Agent specifically for use therein. The Indenture, including any amendment and supplements thereto, pursuant to which the Securities will be issued, will conform with the requirements of the Trust Indenture Act and the Trust Indenture Act Rules and Regulations.

(c) The financial statements of the Issuer and its subsidiaries set forth in the Registration Statements and Prospectus fairly present the financial condition of the Issuer and its subsidiaries as of the dates indicated and the results of operations and cash flows for the periods therein specified in conformity with accounting principles generally accepted in the United States consistently applied throughout the periods involved (except as otherwise stated therein).

(d) The Issuer and each of its significant subsidiaries within the meaning of Regulation S-X (individually a “Subsidiary” and collectively the “Subsidiaries”) has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is chartered or organized, with full corporate power and authority to own its properties and conduct its business as described in the Prospectus, and is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification wherein it owns or leases material properties or conducts material business; and all of the outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued and are fully paid and non-assessable, and, except as otherwise set forth in the Prospectus, all outstanding shares of capital stock of the Subsidiaries are owned by the Issuer either directly or through wholly owned subsidiaries free and clear of any perfected security interest and any other security interest, claims, liens or encumbrances.

(e) The Indenture and the Securities have been duly authorized, the Indenture has been duly qualified under the Trust Indenture Act and executed and delivered and constitutes, and the Securities, when duly executed, authenticated, issued and delivered as contemplated herein and in the Indenture, will constitute, valid and legally binding obligations of the Issuer enforceable in accordance with its terms, subject, as to enforcement, to applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization, arrangement or other similar laws now or hereafter in effect affecting the rights of creditors generally and general principles of equity and rules of law governing and limiting the availability of specific performance, injunctive relief and other equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law).

(f) There is no pending or threatened action, suit or proceeding before any court or governmental agency, authority or body or any arbitrator involving the Issuer or any of its subsidiaries of a character required to be disclosed in the Registration Statements which is not disclosed in the Prospectus, there is no statute required to be described in the Prospectus that is not described as required, and there is no franchise, contract or other document of a character required to be described in the Registration Statements or the Prospectus, or to be filed as an exhibit, which is not described or filed as required, and the descriptions in the Registration Statements and Prospectus of statutes, legal and governmental proceedings, contracts and other documents are accurate and fairly present the information required to be shown.

(g) The Issuer’s authorized equity capitalization is as set forth in the Prospectus (if contained therein).

(h) No consent, approval, authorization or order of any court or governmental agency or body is required for the consummation of the transactions contemplated by this Agreement in connection with the issuance and sale of the Securities by the Issuer, except such as have been obtained and made under the Act and the Trust Indenture Act and as may be required under state securities laws and such other approvals as have been obtained.

(i) The execution, delivery and performance of the Indenture or this Agreement, the issue and sale of the Securities, the consummation of the other transactions herein contemplated or the fulfillment of the terms hereof will not conflict with, result in a breach of, or constitute a default under the Articles of Incorporation or By-laws of the Issuer or the terms of any indenture or other agreement or instrument to which the Issuer or any of its subsidiaries is a party or bound, or any statute, rule, order or regulation applicable to the Issuer or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over the Issuer or any of its subsidiaries; and the Issuer has full power and authority to authorize, issue and sell the Securities as contemplated by this Agreement.

(j) This Agreement has been duly authorized, executed and delivered by the Issuer.

(k) The Issuer and its subsidiaries have all necessary franchises or permits for natural gas operations in all communities now served, except as set forth in the Registration Statements and except where the failure to be so authorized by franchise or permit does not materially affect the right of the Issuer or such subsidiary to the use of its properties or the conduct of its business; and the franchises of the Issuer and its subsidiaries referred to in the Registration Statements are good and valid except for and subject only to such defects as may be set forth or referred to in the Registration Statements, and such others as do not materially affect the right of the Issuer or such subsidiary to the use of its properties or the conduct of its business, and said franchises impose no materially burdensome restrictions.

(l) The Issuer is [ not a “holding company” or a “subsidiary company” of a “holding company” within the meaning of the Public Utility Holding Company Act of 1935, as amended (the “Holding Company Act”) ] [ a “holding company” within the meaning of the Public Utility Holding Company Act of 1935, as amended (the “Holding Company Act”) that is exempt from all provisions of the Holding Company Act, except Section 9(a)(2) thereof, by order of the Commission pursuant to Section 3(a)(5) thereof. Neither the execution, delivery and performance by the Issuer of this Agreement or the issuance of the Securities violates any provision of the Holding Company Act or any rules or regulations thereunder ] .

3. Appointment as Agents; Agreement of Agents; Solicitations as Agents.

(a) Subject to the terms and conditions stated herein, the Issuer hereby appoints each of the Agents as an agent of the Issuer (such appointment to be effective with respect to each Agent as set forth in Section 16 hereof) for the purpose of soliciting or receiving offers to

purchase the Securities from the Issuer by others. So long as this Agreement shall remain in effect with respect to any Agent, the Issuer shall not, without the consent of any such Agent, solicit or accept offers to purchase Securities otherwise than through one of the Agents (except as contemplated by Section 11 hereof); provided, however, that, subject to all of the terms and conditions of this Agreement and any agreement contemplated by Section 11 hereof, the foregoing shall not be construed to prevent the Issuer from (i) selling at any time any Registered Securities in a firm commitment underwriting pursuant to an underwriting agreement that does not provide for a continuous offering of such Registered Securities, and, in the case of such sales, no commission will be payable to the Agents with respect to such sales or (ii) soliciting and accepting offers to purchase Registered Securities, other than the Securities directly on its own behalf in transactions with persons other than the Agents, and, in the case of any such sales not resulting from a solicitation made by any Agent, no commission will be payable to the Agents with respect to such sale.

(b) On the basis of the representations and warranties contained herein, but subject to the terms and conditions herein set forth, each Agent agrees, as agent of the Issuer, to use its reasonable best efforts when requested by the Issuer to solicit offers to purchase the Securities upon the terms and conditions set forth in the Prospectus, as from time to time amended or supplemented.

Upon receipt of notice from the Issuer as contemplated by Section 4(b) hereof, each Agent shall suspend its solicitation of offers to purchase Securities until such time as the Issuer shall have furnished it with an amendment or supplement to the Registration Statements or the Prospectus, as the case may be, contemplated by Section 4(b) and shall have advised such Agent that such solicitation may be resumed.

The Issuer reserves the right, in its sole discretion, to instruct the Agents to suspend solicitation of offers to purchase the Securities commencing at any time for any period of time or permanently. As soon as reasonably practicable, but in any event not later than one Business Day after receipt of notice from the Issuer, the Agents will forthwith suspend solicitation of offers to purchase Securities from the Issuer until such time as the Issuer has advised the Agents that such solicitation may be resumed. For the purpose of the foregoing sentence, “Business Day” shall mean any day that is not a Saturday or Sunday, and that in The City of New York is not a day on which banking institutions generally are authorized or obligated by law or executive order to close.

The Agents are authorized to solicit offers to purchase Securities as described in the Prospectus, as amended or supplemented and only in a minimum aggregate amount of $100,000. Each Agent shall communicate to the Issuer, orally or in writing, each reasonable offer to purchase Securities received by it as agent. The Issuer shall have the sole right to accept offers to purchase the Securities and may reject any such offer, in whole or in part. Each Agent shall have the right, in its discretion reasonably exercised, without notice to the Issuer, to reject any offer to purchase Securities received by it, in whole or in part, and any such rejection shall not be deemed a breach of its agreement contained herein.

No Security which the Issuer has agreed to sell pursuant to this Agreement shall be deemed to have been purchased and paid for, or sold by the Issuer, until such Security shall have been delivered to the purchaser thereof against payment by such purchaser.

(c) At the time of delivery of, and payment for, any Securities sold by the Issuer as a result of a solicitation made by, or offer to purchase received by, an Agent, the Issuer agrees to pay such Agent a commission in accordance with the schedule set forth in Exhibit A hereto.

(d) Administrative procedures respecting the sale of Securities (the “Procedures”) shall be agreed upon from time to time by the Agents and the Issuer. The initial Procedures, which are set forth in Exhibit B hereto, shall remain in effect until changed by agreement among the Issuer and the Agents promptly confirmed in writing. Each Agent and the Issuer agree to perform the respective duties and obligations specifically provided to be performed by each of them herein and in the Procedures. The Issuer will furnish to the Trustee a copy of the Procedures as from time to time in effect, and will furnish the Trustee a copy of the Procedures promptly after any change therein.

(e) The documents required to be delivered by Section 5 hereof shall be delivered at the office of Orrick, Herrington & Sutcliffe LLP, 666 Fifth Avenue, New York, New York 10103, not later than 10:00 A.M., New York City time, on the date of this Agreement or at such later time as may be mutually agreed by the Issuer and the Agents, which in no event shall be later than the time at which the Agents commence solicitation of purchases of Securities hereunder, such time and date being herein called the “Closing Date.”

(f) Each Agent agrees to keep and maintain confidential any information provided by the Issuer pursuant to the second sentence of Section 4(c) or Section 4(g) and known by such Agent to be non-public, until such information is announced or otherwise disclosed to the general public.

4. Certain Agreements of the Issuer. The Issuer agrees with the Agents that it will furnish to Orrick, Herrington & Sutcliffe LLP, counsel for the Agents, one (1) signed copy and three conformed copies of the Registration Statements, including all exhibits, in the form that they became effective and of all amendments thereto and that, in connection with each offering of Securities,

(a) The Issuer will advise each Agent promptly of any proposal to amend or supplement the Registration Statements or the Prospectus and will afford the Agents a reasonable opportunity to comment on any such proposed amendment or supplement (other than any Pricing Supplement that relates to Securities not purchased through or by such Agent); and the Issuer will also advise each Agent of the filing and effectiveness of any such amendment or supplement and of the institution by the Commission of any stop order proceedings in respect of the Registration Statements or of any part thereof and will use its best efforts to prevent the issuance of any such stop order and to obtain as soon as possible its lifting, if issued.

(b) If, at any time when a prospectus relating to the Securities is required to be delivered under the Act and no suspension of solicitation of offers to purchase Securities

pursuant to Section 3(b) or this Section 4(b) shall be in effect (any such time and any time when either any Agent shall own any Securities with the intention of reselling them or the Issuer has accepted an offer to purchase Securities but the related settlement has not occurred being referred to herein as a “Marketing Time”), any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading, or if it is necessary at any such time to amend the Prospectus to comply with the Act, the Issuer will promptly notify each Agent to suspend solicitation of offers to purchase the Securities; and if the Issuer shall decide to amend or supplement the Registration Statements or the Prospectus, it will promptly advise each Agent by telephone (with confirmation in writing) and, subject to the provisions of subsection (a) of this Section, will promptly prepare and file with the Commission an amendment or supplement which will correct such statement or omission or an amendment which will effect such compliance and will supply any such amended or supplemented Prospectus to such Agent in such quantities as such Agent may reasonably request. Notwithstanding the foregoing, if, at the time any such event occurs or it becomes necessary to amend the Prospectus to comply with the Act, any Agent shall own any of the Securities with the intention of reselling them, or the Issuer has accepted an offer to purchase Securities but the related settlement has not occurred, the Issuer, subject to the provisions of subsection (a) of this Section, will promptly prepare and file with the Commission an amendment or supplement which will correct such statement or omission or an amendment which will effect such compliance and will supply any such amended or supplemented Prospectus to such Agent in such quantities as such Agent may reasonably request. Neither the Agents’ consent to, nor their delivery of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 5.

(c) The Issuer will file promptly all documents required to be filed with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, on or prior to the date on which the Issuer makes any announcement to the general public concerning earnings or concerning any other event which is required to be described, or which the Issuer proposes to describe, in a document filed pursuant to the Exchange Act, the Issuer will furnish the information contained or to be contained in such announcement to each Agent, confirmed in writing and, subject to the provisions of subsections (a) and (b) of this Section, will cause the Prospectus to be amended or supplemented to reflect the information contained in such announcement. The Issuer also will furnish each Agent with copies of all other press releases or announcements to the general public. The Issuer will immediately notify each Agent of any downgrading in the rating of the Securities or any other debt securities of the Issuer or any proposal to downgrade the rating of the Securities or any other debt securities of the Issuer by any “nationally recognized statistical rating organization” (as defined for purposes of Rule 436(g) under the Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities of the Issuer (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading of such rating), as soon as the Issuer learns of such downgrading, proposal to downgrade or public announcement.

(d) As soon as practicable, after the date of each acceptance by the Issuer of an offer to purchase Securities hereunder, but in any event not later than the Applicable Availability Date (as defined below), the Issuer will make generally available to its security-holders an earnings statement covering a period of at least 12 months beginning after the Applicable Effective Date (as defined below) which will satisfy the provisions of Section 11(a) of the Act and Rule 158 thereunder. For the purpose of the preceding sentence only, “Applicable Effective Date” means the latest of (i) the effective date of a Registration Statement, (ii) the effective date of the most recent post-effective amendment to a Registration Statement to become effective prior to the date of such acceptance, and (iii) the date of filing of the Issuer’s most recent Annual Report on Form 10-K filed with the Commission prior to the date of such acceptance, and “Applicable Availability Date” means (A) the 45th day after the end of the fourth fiscal quarter following the fiscal quarter that includes the Applicable Effective Date or (B) if such fourth fiscal quarter is the last quarter of the Issuer’s fiscal year, the 90th day after the end of such fourth fiscal quarter.

(e) The Issuer will furnish to each Agent copies of the Registration Statements, including all exhibits, the Prospectus and all amendments and supplements to such documents (including any Pricing Supplement), in each case as soon as available and in such quantities as are reasonably requested.

(f) The Issuer will arrange for the qualification of the Securities for sale and the determination of their eligibility for investment under the laws of such jurisdictions as the Agents designate and will continue such qualifications in effect so long as required for the distribution; provided, however, that in connection therewith the Issuer shall not be required to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified other than the State of New York or to file a general consent to service of process in any jurisdiction.

(g) So long as any Securities are outstanding, the Issuer will furnish to the Agents, (i) as soon as practicable after the end of each fiscal year, a copy of its annual report to stockholders for such year, (ii) as soon as available, a copy of each report or definitive proxy statement of the Issuer filed with the Commission under the Exchange Act or mailed to stockholders, and (iii) from time to time, such other information concerning the Issuer as the Agents may reasonably request; provided, however, that the Issuer need furnish exhibits to the reports specified in clause (ii) only to the extent requested by the Agents.

(h) The Issuer will pay all expenses incident to the performance of its obligations under this Agreement or any agreement contemplated by Section 11 hereof and will reimburse each Agent for any expenses (including reasonable fees and disbursements of counsel) incurred by it in connection with qualification of the Securities for sale and determination of their eligibility for investment under the laws of such jurisdictions as such Agent may designate and the printing of memoranda relating thereto, for any fees charged by investment rating agencies for the rating of the Securities, for any filing fee of the National Association of Securities Dealers, Inc. relating to the Securities, for expenses incurred by each Agent in distributing the

Prospectus and all supplements thereto (including any Pricing Supplement), for costs incurred by each Agent in advertising any offering of Securities and for each Agent’s reasonable expenses (including the reasonable fees and disbursements of counsel to the Agents) incurred in connection with the establishment or maintenance of the program contemplated by this Agreement or otherwise in connection with the activities of the Agents under this Agreement.

5. Conditions of Obligations. The obligation of each Agent, as agent of the Issuer, under this Agreement at any time to solicit offers to purchase the Securities is subject to the accuracy, on the date hereof, on each Representation Date and on the date of each such solicitation, of the representations and warranties of the Issuer herein, to the accuracy, on each such date, of the statements of the Issuer’s officers made pursuant to the provisions hereof, to the performance, on or prior to each such date, by the Issuer of its obligations hereunder, and to each of the following additional conditions precedent:

(a) The Prospectus, as amended or supplemented as of the date hereof, as of any Representation Date or date of such solicitation, as the case may be, shall have been filed with the Commission in accordance with the Rules and Regulations and no stop order suspending the effectiveness of the Registration Statements or of any part thereof shall have been issued and no proceedings for that purpose shall have been instituted or, to the knowledge of the Issuer or any Agent, shall be contemplated by the Commission.

(b) Neither the Registration Statements nor the Prospectus, as amended or supplemented as of the date hereof or as of any Representation Date or date of such solicitation, as the case may be, shall contain any untrue statement of fact which, in the opinion of any Agent, is material or omit to state a fact which, in the opinion of any Agent, is material and is required to be stated therein or is necessary to make the statements therein not misleading, other than any statement contained in, or other matter omitted from, the Registration Statements or Prospectus in reliance upon, and in conformity with, information furnished in writing by the Agents to the Issuer expressly for use in the Registration Statements or Prospectus.

(c) There shall not have occurred (i) any change, or any development involving a prospective change, in or affecting particularly the business or properties of the Issuer and its subsidiaries on a consolidated basis which, in the judgment of such Agent, makes it impracticable or inadvisable to proceed with the soliciting of offers to purchase the Securities as contemplated by the Registration Statements or the Prospectus, (ii) any downgrading in the rating of the Securities or any other debt securities of the Issuer by any “nationally recognized statistical rating organization” (as defined for purposes of Rule 436(g) under the Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities of the Issuer (other than any announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating), (iii) any suspension or limitation of trading in securities generally on the New York Stock Exchange, or any setting of minimum prices for trading on such exchange, or any suspension of trading of any securities of the Issuer on any exchange or in the over-the-counter market if, in the judgment of such Agent, any such event or any condition giving rise thereto or existing

concurrently therewith makes it impracticable or inadvisable to proceed with the solicitation of offers to purchase, or sales of, Securities on the terms and in the manner contemplated by the applicable Pricing Supplement and the Prospectus, (iv) any banking moratorium declared by Federal or New York authorities, or (v) any outbreak or escalation of hostilities, any declaration of war by Congress or any other substantial national or international calamity or emergency if, in the judgment of such Agent, the effect of any such outbreak, escalation, declaration, calamity or emergency makes it impractical or inadvisable to proceed with solicitations of offers to purchase, or sales of, Securities on the terms and in the manner contemplated by the applicable Pricing Supplement and the Prospectus.

(d) At the Closing Date, the Agents shall have received an opinion, dated the Closing Date, of Nelson, Mullins, Riley & Scarborough, L.L.P., counsel for the Issuer, to the effect that:

(i) The Issuer and each of its Subsidiaries has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is chartered or organized, with full corporate power and authority to own its properties and conduct its business as described in the Prospectus, and is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification and wherein it owns or leases material properties or conducts material business; and all of the outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued and are fully paid and non-assessable, and, except as otherwise set forth in the Prospectus, all outstanding shares of capital stock of the Subsidiaries are owned by the Issuer either directly or through wholly owned subsidiaries free and clear of any perfected security interest and, to the best knowledge of such counsel, any other security interest, claim, lien or encumbrance;

(ii) The Indenture has been duly authorized, executed and delivered by the Issuer, has been duly qualified under the Trust Indenture Act and constitutes a valid and legally binding obligation of the Issuer enforceable in accordance with its terms, subject, as to enforcement, to applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization, arrangement or other similar laws now or hereafter in effect affecting the rights of creditors generally and general principles of equity and rules of law governing and limiting the availability of specific performance, injunctive relief and other equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law);

(iii) Any series of Securities established on or prior to the date of such opinion has been duly authorized and established in conformity with the Indenture, the Master Note has been duly executed by the Company and, when the terms of a particular Security and of its issuance and sale have been duly authorized and established by all necessary corporate action in conformity with the Indenture and this Agreement, and communicated to the Trustee as provided

in the Officer’s Certificate delivered pursuant to Section 2.01 and 2.04 of the Indenture, and such Security has been duly completed, executed, authenticated and issued in accordance with the Indenture and delivered against payment as contemplated by this Agreement, such Security will have been duly issued and will constitute a valid and legally binding obligation of the Issuer enforceable in accordance with its terms, subject, as to enforcement, to applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization, arrangement or other similar laws now or hereafter in effect affecting the rights of creditors generally and general principles of equity and rules of law governing and limiting the availability of specific performance, injunctive relief and other equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law), and the Securities, when so issued and delivered and sold, will conform, in all material respects, to the description thereof contained in the Prospectus, it being understood that such counsel may assume that at the time of the issuance, sale and delivery of each Security (a) the authorization of such series will not have been modified or rescinded and there will not have occurred any change in law affecting the validity, legally binding character or enforceability of such Security, and (b) that neither of the issuance, sale and delivery of any Security, nor any of the terms of such Security, nor compliance by the Issuer with such terms, will violate any then applicable law, any agreement or instrument then binding upon the Issuer or any restriction then imposed by any court or governmental body having jurisdiction over the Issuer;

(iv) To the best knowledge of such counsel, there is no pending or threatened action, suit or proceeding before any court or governmental agency, authority or body or any arbitrator involving the Issuer or any of its subsidiaries of a character required to be disclosed in the Registration Statements by Item 103 of Regulation S-K which is not disclosed in the Prospectus, there is no statute required to be described in the Prospectus that is not described as required, and there is no franchise, contract or other document of a character required to be described in the Registration Statements or Prospectus, or to be filed as an exhibit, which is not described or filed as required; and the descriptions in the Registration Statements and Prospectus of statutes, legal and governmental proceedings, contracts and other documents are accurate and fairly present the information required to be shown;

(v) The Registration Statements have become effective under the Act, the Prospectus was filed with the Commission pursuant to the subparagraph of Rule 424(b) under the Act specified in such opinion on the date specified therein, and, to the best knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statements or of any part thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Act, and the Registration Statements and the Prospectus, as of the Closing Date, and any amendment or supplement thereto, as of its date, complied as to form in all material respects with the requirements of the Act, the Trust Indenture Act and the Rules and Regulations; such counsel has no reason to believe that the Registration Statements or the Prospectus, or any

amendment or supplement, as of their respective effective or issue dates and at the Closing Date, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading; it being understood that such counsel need express no opinion as to the financial statements or other financial data contained in the Registration Statements or the Prospectus and that such counsel may rely solely on certificates of officers of the Issuer with respect to statistical data contained in the Registration Statements or the Prospectus;

(vi) The Issuer’s authorized equity capitalization is as set forth in the Prospectus (if contained therein);

(vii) No consent, approval, authorization or order of any court or governmental agency or body is required for the consummation of the transactions contemplated by this Agreement in connection with the issuance and sale of the Securities by the Issuer, except such as have been obtained and made under the Act and the Trust Indenture Act and as may be required under state securities laws and such other approvals (specified in such opinion) as have been obtained (it being understood that such counsel may assume with respect to each particular Security that the inclusion of any alternative or additional terms in such Security that are not currently specified in the Prospectus or the forms of Securities examined by such counsel would not require the Issuer to obtain any regulatory consent, authorization or approval or make any regulatory filing in order for the Issuer to issue, sell and deliver such Security);

(viii) The execution, delivery and performance of the Indenture or this Agreement, the issue and sale of the Securities, the consummation of the other transactions herein contemplated or the fulfillment of the terms hereof will not conflict with, result in a breach of, or constitute a default under the Articles of Incorporation or By-laws of the Issuer or the terms of any indenture or other agreement or instrument known to such counsel and to which the Issuer or any of its subsidiaries is a party or bound, or any statute, rule, order or regulation known to such counsel to be applicable to the Issuer or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over the Issuer or any of its subsidiaries; and the Issuer has full power and authority to authorize, issue and sell the Securities as contemplated by this Agreement (it being understood that such counsel may assume with respect to each particular Security that the inclusion of any alternative or additional terms in such Security that are not currently specified in the Prospectus or the forms of Securities examined by such counsel will not cause the issuance, sale or delivery of such Security, the terms of such Security, or the compliance by the Issuer with such terms, to violate any of the court orders or laws specified in this paragraph or to result in a default under or a breach of any of the agreements specified in this paragraph);

(ix) This Agreement has been duly authorized, executed and delivered by the Issuer;

(x) The Issuer and its subsidiaries have all necessary franchises or permits for natural gas operations in all communities now served, except as set forth in the Registration Statements and except where the failure to be so authorized by franchise or permit does not, in the opinion of such counsel, materially affect the right of the Issuer or such subsidiary to the use of its properties or the conduct of its business; and the franchises of the Issuer and its subsidiaries referred to in the Registration Statements are good and valid except for and subject only to such defects as may be set forth or referred to in the Registration Statements, and such others as do not, in the opinion of such counsel, materially affect the right of the Issuer or such subsidiary to the use of its properties or the conduct of its business, and said franchises impose no materially burdensome restrictions; and

(xi) The Issuer is [ not a “holding company” or a “subsidiary company” of a “holding company” within the meaning of the Holding Company Act ] [ a “holding company” within the meaning of the Holding Company Act that is exempt from all provisions of the Holding Company Act, except Section 9(a)(2) thereof, by order of the Commission pursuant to Section 3(a)(5) thereof. Neither the execution, delivery and performance of this Agreement nor the issuance of the Securities violates any provision of the Holding Company Act or any rules or regulations thereunder. ]

(e) At the Closing Date, the Agents shall have received a certificate, dated the Closing Date, of the President or any Vice President and a principal financial or accounting officer of the Issuer in which such officers, shall state that, to the best of their knowledge after reasonable investigation, (i) the representations and warranties of the Issuer in this Agreement are true and correct, (ii) the Issuer has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date, (iii) no stop order suspending the effectiveness of the Registration Statements or of any part thereof has been issued and no proceedings for that purpose have been instituted or are contemplated by the Commission, and (iv) subsequent to the date of the most recent financial statements included or incorporated by reference in the Prospectus, there has been no material adverse change in the financial position or results of operations of the Issuer and its subsidiaries, except as set forth in or contemplated by the Prospectus.

(f) At the Closing Date, the Agents shall have received a letter, dated the Closing Date, of Deloitte & Touche LLP confirming that they are independent public accountants within the meaning of the Act and the applicable published Rules and Regulations thereunder and stating in effect that:

(i) In their opinion, the financial statements and schedules examined by them and included in the Registration Statements and Prospectus comply in form in all material respects with the applicable accounting requirements of the Act and the related published Rules and Regulations;

(ii) On the basis of a reading of the latest available interim financial statements of the Issuer; carrying out certain specified procedures (but not an examination in accordance with generally accepted auditing standards) which would not necessarily reveal matters of significance with respect to the comments set forth in such letter; a reading of the minutes of the meetings of the stockholders, directors and the audit committee of the Company and Subsidiaries; and inquiries of officials of the Issuer who have responsibility for financial and accounting matters and other specified procedures, nothing came to their attention that caused them to believe that:

(A) the unaudited consolidated financial statements, if any, included in the Prospectus do not comply in form in all material respects with the applicable accounting requirements of the Act or the Exchange Act and the related published Rules and Regulations or any material modification should be made to such unaudited consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States;

(B) the unaudited capsule information, if any, included in the Prospectus does not agree with the amounts set forth in the unaudited consolidated financial statements from which such capsule information was derived or was not determined on a basis substantially consistent with that of the audited financial statements included in the Prospectus;

(C) the unaudited pro forma consolidated condensed financial statements, if any, included in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Act or the Exchange Act and the published rules and regulations of the Commission thereunder or the pro forma adjustments have not been properly applied to the historical amounts in the compilation of those statements,

(D) at the date of the latest available balance sheet read by such accountants, or at a subsequent specified date not more than five days prior to the Closing Date, there was any change in the capital stock (except for the issuance of common stock under the

Company’s Employee Stock Purchase Plan, Executive Long-Term Incentive Plan and Dividend Reinvestment and Stock Purchase Plan) or any increase in short-term indebtedness or long-term debt of the Issuer and consolidated subsidiaries or, at the date of the latest available balance sheet read by such accountants, there was any increase in consolidated net current liabilities or any decrease in consolidated net assets, as compared with amounts shown on the latest balance sheet included in the Prospectus; or

(E) for the period from the date of the latest income statement included in the Prospectus to the closing date of the latest available income statement read by such accountants there were any decreases, as compared with the corresponding period of the previous year, in consolidated operating revenues, utility operating income, or net income, or in the ratio of earnings to fixed charges;

except in all cases set forth in clauses (D) and (E) above for changes, increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and

(iii) They have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial information contained in the Prospectus (in each case to the extent that such dollar amounts, percentages and other financial information are derived from the general accounting records of the Issuer and its subsidiaries subject to the internal controls of the Issuer’s accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter.

All financial statements and schedules included in material incorporated by reference into the Prospectus shall be deemed included in the Prospectus for purposes of this subsection.

(g) The Agents shall have received from Orrick, Herrington & Sutcliffe LLP, counsel for the Agents, such opinion or opinions, dated the Closing Date, with respect to the validity of the Securities, the Registration Statements, the Prospectus, the conclusions of law set forth under the caption “Certain United States Federal Income Tax Consequences” in the Prospectus and other related matters as they may require, and the Issuer shall have furnished to such counsel such documents as they request for the purpose of enabling their, to pass upon such matters. In rendering such opinion, Orrick, Herrington & Sutcliffe LLP may rely as to all matters governed by North Carolina law and to the matters relating to state regulatory consents and approvals upon the opinion of Nelson, Mullins, Riley & Scarborough, L.L.P., counsel for the Issuer.

(h) Subsequent to the execution of this Agreement (1) the Issuer shall not have received notice that either Moody’s Investors Service Inc. (“Moody’s”) or Standard & Poor’s Ratings Group, a division of McGraw-Hill, Inc. (“S&P”) intends to reduce, or is considering a reduction in, the ratings of any of the Issuer’s debt securities unless Moody’s or S&P’s intention to so reduce or consideration of such a reduction is then publicly known and (2) the Issuer’s debt securities shall be rated as investment grade debt by Moody’s and S&P.

(i) At the Closing Date, the Agents shall have received a letter, dated the Closing Date, of Deloitte & Touche LLP, regarding the financial statements and other financial information of North Carolina Natural Gas Corporation included or incorporated by reference in the Prospectus. Such letter shall be in substantially the form of the letter from Deloitte & Touche LLP regarding the Issuer’s financial statements pursuant to Section 5(f) or in such other form reasonably acceptable to the Agents.

The Issuer will furnish the Agents with such conformed copies of such opinions, certificates, letters and documents as they may reasonably request.

6. Additional Covenants of the Issuer. The Issuer agrees that:

(a) Each acceptance by the Issuer of an offer for the purchase of Securities shall be deemed to be an affirmation that its representations and warranties contained in this Agreement are true and correct at the time of such acceptance and a covenant that such representations and warranties will be true and correct at the time of delivery to the purchaser of the Securities as though made at and as of each such time, it being understood that such representations and warranties shall relate to the Registration Statements and the Prospectus as amended or supplemented at each such time. Each such acceptance by the Issuer of an offer for the purchase of Securities shall be deemed to constitute an additional representation, warranty and agreement by the Issuer that, as of the settlement date for the sale of such Securities, after giving effect to the issuance of such Securities, of any other Securities to be issued on or prior to such settlement date and of any other Registered Securities to be issued and sold by the Issuer on or prior to such settlement date, the aggregate amount of Registered Securities (including any Securities) which have been issued and sold by the Issuer will not exceed the amount of Registered Securities registered pursuant to the Registration Statements.

(b) Each time that the Registration Statements or the Prospectus shall be amended or supplemented (other than by a Pricing Supplement), the Issuer shall, (A) concurrently with such amendment or supplement, if such amendment or supplement shall occur during a Marketing Time, or (B) at or immediately prior to commencement of the next Marketing Time if such amendment or supplement shall not occur during a Marketing Time, furnish the Agents with a certificate, dated the date of delivery thereof, of the President or any Vice President and a principal financial or accounting officer of the Issuer, in form satisfactory to the Agents, to the effect that the statements contained in the certificate covering the matters set forth in Section 5(e) hereof which was last furnished to the Agents are true and correct at the time of such amendment or supplement, as though made at and as of such time or, in lieu of such certificate, a

certificate of the same tenor as the certificate referred to in Section 5(e); provided, however, that any certificate furnished under this Section 6(b) shall relate to the Registration Statements and the Prospectus as amended or supplemented at the time of delivery of such certificate and, in the case of the matters set forth in clause (ii) of Section 5(e), to the time of delivery of such certificate.

(c) At each Representation Date referred to in Section 6(b), the Issuer shall (A) concurrently if such Representation Date shall occur during a Marketing Time, or (B) at or immediately prior to commencement of the next Marketing Time if such Representation Date shall not occur during a Marketing Time, furnish the Agents with a written opinion or opinions, dated the date of such Representation Date, of counsel for the Issuer, in form satisfactory to the Agents, to the effect set forth in Section 5(d) hereof; provided, however, that to the extent appropriate such opinion or opinions may reconfirm matters set forth in a prior opinion delivered under Section 5(d) or this Section 6(c); provided further, however, that any opinion or opinions furnished under this Section 6(c) shall relate to the Registration Statements and the Prospectus as amended or supplemented at the time of delivery of such opinion or opinions and shall state that the Securities sold in the relevant Applicable Period have been duly executed, authenticated, issued and delivered and constitute valid and legally binding obligations of the Issuer enforceable in accordance with their terms, subject, as to enforcement, to applicable bankruptcy, insolvency, moratorium, reorganization, arrangement or other similar laws now or hereafter in effect affecting the rights of creditors generally and general principles of equity and rules of law governing and limiting the availability of specific performance, injunctive relief and other equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law), and conform to the description thereof contained in the Prospectus as amended or supplemented at the relevant settlement date or dates for the sale of such Securities. For the purpose of this Section 6(c), “Applicable Period” shall mean with respect to any opinion delivered pursuant to this Section 6(c) the period commencing on the date of the most recent prior opinion delivered under Section 5(d) or this Section 6(c) and ending on the date of delivery of the opinion to be delivered pursuant to this Section 6(c).

(d) At each Representation Date referred to in Section 6(b) on which the Registration Statements or the Prospectus shall be amended or supplemented to include additional financial information, the Issuer shall cause Deloitte & Touche LLP (A) concurrently if such Representation Date shall occur during a Marketing Time, or (B) at or immediately prior to commencement of the next Marketing Time if such Representation Date shall not occur during a Marketing Time, to furnish the Agents with a letter, addressed jointly to the Issuer and the Agents and dated the date of delivery of such letter, in form and substance satisfactory to the Agents, to the effect set forth in Sections 5(f) and 5(i) hereof; provided, however, that to the extent appropriate such letter may reconfirm matters set forth in prior letters delivered by Deloitte & Touche LLP pursuant to Sections 5(f) and 5(i) or this Section 6(d); provided further, however, that any letter furnished under this Section 6(d) shall relate to the Registration Statements and the Prospectus as amended or supplemented at the time of deliver of such letter, with such changes as may be necessary to reflect changes in the financial statements and other information derived from the accounting records of the Issuer.

(e) On each settlement date for the sale of Securities, the Issuer shall, if requested by the Agent that solicited or received the offer to purchase any Securities being delivered on such settlement date, furnish such Agent with a written opinion or opinions, dated the date of delivery thereof, of counsel for the Issuer, in form satisfactory to such Agent, to the effect set forth in clauses (i), (ii) and (iii) of Section 5(d) hereof; provided, however, that any opinion furnished under this Section 6(e) shall relate to the Prospectus as amended or supplemented at such settlement date and shall state that the Securities being sold by the Issuer on such settlement date, when delivered against payment therefor as contemplated by this Agreement, will have been duly executed, authenticated, issued and delivered and will constitute valid and legally binding obligations of the Issuer enforceable in accordance with their terms, subject, as to enforcement, to applicable bankruptcy, insolvency, moratorium, reorganization, arrangement or other similar laws now or hereafter in effect affecting the rights of creditors generally and general principles of equity and rules of law governing and limiting the availability of specific performance, injunctive relief and other equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law) and will conform to the description thereof contained in the Prospectus as amended or supplemented at such settlement date.

(f) The Issuer agrees that any obligation of a person who has agreed to purchase Securities to make payment for and take delivery of such Securities shall be subject to (i) the accuracy, on the related settlement date fixed pursuant to the Procedures, of the Issuer’s representation and warranty deemed to be made to the Agents pursuant to the last sentence of subsection (a) of this Section 6, and (ii) the satisfaction, on such settlement date, of each of the conditions set forth in Sections 5(a), (b) and (c), it being understood that under no circumstance shall any Agent have any duty or obligation to exercise the judgment permitted under Section 5(b) or (c) on behalf of any such person.

7. Indemnification and Contribution.

(a) The Issuer will indemnify and hold harmless each Agent against any losses, claims, damages or liabilities, joint or several, to which such Agent may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in a Registration Statement, the Prospectus, or any amendment or supplement thereto, or any related preliminary prospectus or preliminary prospectus supplement, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Agent for any legal or other expenses reasonably incurred by such Agent in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Issuer will not be liable to such Agent in any case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any of such documents in reliance upon and in conformity with written information furnished to the Issuer by such Agent specifically for use therein, unless such loss, claim, damage or liability arises out of the offer or sale of Securities occurring after such Agent has notified the Issuer in writing that such information should no longer be used therein.

(b) Each Agent will indemnify and hold harmless the Issuer against any losses, claims, damages or liabilities to which the Issuer may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in a Registration Statement, the Prospectus or any amendment or supplement thereto, or any related preliminary prospectus or preliminary prospectus supplement, or arise out of or based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Issuer by such Agent specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Issuer in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, unless such loss, claim, damage or liability arises out of the offer or sale of Securities occurring after the Agent has notified the Issuer in writing that such information should no longer be used therein. The Issuer acknowledges that the statements set forth in the last paragraph of the cover page and under the heading “Plan of Distribution” in any preliminary Prospectus and the Prospectus constitute the only information furnished in writing by or on behalf of such Agent for inclusion in the documents referred to in the forgoing indemnity, and you as Agents confirm that such statements are correct.

(c) Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under subsection (a) or (b) above, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party (i) will not relieve it from any liability which it may have to any indemnified party under subsection (a) or (b) above unless and to the extent such failure prejudices the indemnifying party of substantial rights or defenses and (ii) will not, in any event, relieve it from any liability which it may have to any indemnified party otherwise than under subsection (a) or (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to appoint counsel satisfactory to such indemnified party to represent the indemnified party in such action; provided, however, that if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to defend such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election so to appoint counsel to defend such action and approval by the indemnified party of such counsel, the indemnifying party will not be liable to such indemnified party under this Section 7 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel (plus any local counsel), approved by the Agents in the case of paragraph (a) of this Section 7, representing the indemnified parties under such paragraph (a) who are parties to such action), (ii) the indemnifying party shall not have employed counsel

satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party; and except that, if clause (i) or (iii) is applicable, such liability shall be only in respect of the counsel referred to in such clause (i) or (iii). No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act, by or on behalf of any indemnified party.

(d) If the indemnification provided for in this Section 7 is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Issuer on the one hand and any Agent on the other from the offering pursuant to this Agreement of the Securities which are the subject of the action or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Issuer on the one hand and any Agent on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Issuer on the one hand and any Agent on the other shall be deemed to be in the same proportions as the total net proceeds from the offering pursuant to this Agreement of the Securities which are the subject of the action (before deducting expenses) received by the Issuer bear to the total discounts and commissions received by such Agent from the offering of such Securities pursuant to this Agreement. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuer or such Agent and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Issuer and each Agent agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation (even if the Agents were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), no Agent shall be required to contribute any amount in excess of the amount by which the total price at which the Securities which are the subject of the action and which were distributed to the public through it pursuant to this Agreement or upon resale of Securities purchased by it from the Issuer exceeds the amount of any damages which such Agent has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of

fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The obligations of each Agent in this subsection (d) to contribute are several, in the same proportion which the amount of the Securities which are the subject of the action and which were distributed to the public through such Agent pursuant to this Agreement bears to the total amount of such Securities distributed to the public through all of the Agents pursuant to this Agreement, and not joint.

(e) The obligations of the Issuer under this Section 7 shall be in addition to any liability which the Issuer may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls each Agent within the meaning of the Act; and the obligations of each Agent under this Section 7 shall be in addition to any liability which each Agent may otherwise have and shall extend, upon the same terms and conditions, to each director of the Issuer (including any person who, with his consent, is named in the Registration Statements as about to become a director of the Issuer), to each officer of the Issuer who has signed the Registration Statements and to each person, if any, who controls the Issuer within the meaning of the Act.

8. Status of Each Agent. In soliciting offers to purchase the Securities from the Issuer pursuant to this Agreement and in assuming its other obligations hereunder (other than offers to purchase pursuant to Section 11), each Agent is acting individually and not jointly and is acting solely as agent for the Issuer and not as principal. Each Agent will use its reasonable best efforts to assist the Issuer in obtaining performance by each purchaser whose offer to purchase Securities from the Issuer has been solicited by such Agent and accepted by the Issuer, but such Agent shall have no liability to the Issuer in the event any such purchase is not consummated for any reason. If the Issuer shall default on its obligations to deliver Securities to a purchaser whose offer it has accepted, the Issuer (i) shall hold the Agents harmless against any loss, claim or damage arising from or as a result of such default by the Issuer, and (ii) in particular, shall pay to the Agents any commission to which they would be entitled in connection with such sale.

9. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of the Issuer or its officers and of the Agents set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of any Agent, the Issuer or any of their respective representatives, officers or directors or any controlling person and will survive delivery of and payment for the Securities. If this Agreement is terminated pursuant to Section 10 or for any other reason, the Issuer shall remain responsible for the expenses to be paid or reimbursed by it pursuant to Section 4(h) and the obligations of the Issuer under Sections 4(d) and 4(g) and the respective obligations of the Issuer and the Agents pursuant to Section 7 shall remain in effect. In addition, if any such termination shall occur either (i) at a time when any Agent shall own any of the Securities acquired pursuant to Section 11 hereof and shall have informed the Issuer of its intention of reselling them or (ii) after the Issuer has accepted an offer to purchase Securities and prior to the related settlement, the obligations of the Issuer under the second to last sentence of Section 4(b), under Sections 4(a), 4(c), 4(e) and 4(f) and, in the case of a termination occurring as described in (ii) above,

under Sections 3(c), 6(a), 6(e) and 6(f) and under the last sentence of Section 8, shall also remain in effect.

10. Termination. This Agreement may be terminated for any reason at any time by the Issuer as to any Agent or by such Agent insofar as this Agreement relates to such Agent, upon the giving of one day’s written notice of such termination to the other parties hereto. Any settlement with respect to Securities placed by an Agent occurring after termination of this Agreement shall be made in accordance with the Procedures and each Agent agrees, if requested by the Issuer, to take the steps therein provided to be taken by such Agent in connection with such settlement.

11. Purchases as Principal. From time to time, any Agent may agree with the Issuer to purchase Securities from the Issuer as principal and (unless the Issuer and such Agent may otherwise agree) such purchase shall be made in accordance with the terms of a separate agreement (a “Purchase Agreement”) in the form attached hereto as Exhibit C (or any such other form as may be agreed to between the Issuer and such Agent) with such additional provisions relating to the terms of the Securities and of the purchase and sale (and, if applicable, resale) thereof as shall be set forth in the Purchase Information delivered pursuant to the Procedures, and such Agent’s compensation shall, unless otherwise agreed between the Issuer and such Agent, be the amount thereof set forth in the Pricing Supplement. For the purposes of Section 12 of this Agreement the term “Purchaser” shall refer to each of you acting solely as principal hereunder and not as agent.

12. Conditions to the Obligations of a Purchaser. The obligations of a Purchaser to purchase Securities pursuant to any Purchase Agreement will be subject to the accuracy of the representations and warranties on the part of the Issuer herein as of the date of the respective Purchase Agreement and as of the settlement date for the sale of such Securities, to the performance and observance by the Issuer of all covenants and agreements herein and therein contained on its part to be performed and observed and to the following additional conditions precedent:

(a) No stop order suspending the effectiveness of the Registration Statements, as amended from time to time, shall have been issued and no proceedings for that purpose shall have been instituted or threatened.

(b) Except to the extent modified by the respective Purchase Agreement, the Purchaser shall have received, appropriately updated in a manner consistent with Section 5 hereof, (i) a certificate of the Issuer, dated as of the settlement date, to the effect set forth in Section 5(e), (ii) the opinion or opinions of Nelson, Mullins, Riley & Scarborough, L.L.P., counsel to the Issuer, dated as of the settlement date, to the effect set forth in Section 5(d), (iii) the opinion of Orrick, Herrington & Sutcliffe LLP, counsel for the Purchaser, dated as of the settlement date, to the effect set forth in Section 5(g) and (iv) letter of Deloitte & Touche LLP, dated as of the settlement date, to the effect set forth in Sections 5(f) and 5(i).

(d) Prior to the settlement date, the Issuer shall have furnished to the Purchaser such further information, certificates and documents as the Purchaser may reasonably request.

(e) Subsequent to the execution of any Purchase Agreement, there shall not have been any decrease in the ratings of any of the Issuer’s debt securities by Moody’s, S&P or D&P.

If any of the conditions specified in this Section 12 shall not have been fulfilled in all material respects when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in the Purchase Agreement shall not be in all material respects reasonably satisfactory in form and substance to the Purchaser and its counsel, the Purchase Agreement and all obligations of the Purchaser thereunder may be canceled at, or at any time prior to, the respective settlement date by the Purchaser. Notice of such cancellation shall be given to the Issuer in writing or by telephone or transmitted by any standard form of telecommunication confirmed in writing.

13. Notices. Except as otherwise provided herein, all notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to shall be directed to it at , Attention: ; notices to shall be directed to it at , Attention: ; notices to shall be directed to it at ,Attention: , and notices to the Issuer shall be directed to it at 1915 Rexford Road, Charlotte, North Carolina 28211, Attention: Robert O. Pritchard, Treasurer; or in the case of any party hereto, to such other address or person as such party shall specify to each other party by a notice given in accordance with the provisions of this Section 13. Any such notice shall take effect at the time of receipt.

14. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto, their respective successors and assigns, the officers and directors and controlling persons referred to in Section 7 and, to the extent provided in Section 6(f), any person who has agreed to purchase Securities from the Issuer, and no other person will have any right or obligation hereunder.

15. Governing Law; Counterparts. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such executed counterparts shall together constitute one and the same Agreement.

16. Effective Date . Notwithstanding anything to the contrary herein, this Agreement shall become effective with respect to an Agent only upon execution and delivery of its counterpart to this Agreement.

[Remainder of page intentionally left blank]

If the foregoing correctly sets forth our agreement, please indicate your acceptance hereof in the space provided for that purpose below.


		Very truly yours,

		PIEDMONT NATURAL GAS COMPANY, INC.

		By:

				Name:
				Title:

CONFIRMED AND ACCEPTED, as of
the date first above written:


[ ]

By:

		Name:
		Title:

[ ]

By:

		Name:
		Title:

[ ]

By:

		Name:
		Title:

EXHIBIT A

The Issuer agrees to pay each Agent a commission equal to the following percentage of the principal amount of Securities sold to purchasers solicited by such Agent:


	Commission Rate
	(as a percentage of
Term	principal amount)

From 9 months to less than 1 year		.125%

From 1 year to less than 18 months		.150

From 18 months to less than 2 years		.200

From 2 years to less than 3 years		.250

From 3 years to less than 4 years		.350

From 4 years to less than 5 years		.450

From 5 years to less than 6 years		.500

From 6 years to less than 7 years		.550

From 7 years to less than 10 years		.600

From 10 years to less than 15 years		.625

From 15 years to less than 20 years		.700

From 20 years to 30 years		.750

Greater than 30 years		To be determined at the time of sale

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EXHIBIT B

ADMINISTRATIVE PROCEDURES

The Medium-Term Notes, Series [ ] due nine months or more from their issue date (the “Notes”) are to be offered on a continuing basis by Piedmont Natural Gas Company, Inc., a North Carolina corporation (the “Issuer”). [ ], as agents (individually, an “Agent” and collectively, the “Agents”), have each agreed to use reasonable best efforts to solicit offers to purchase the Notes. No Agent will be obligated to purchase Notes for its own account. The Notes are being sold pursuant to an Agency Agreement, dated [ ] (the “Agency Agreement”), among the Issuer and the Agents, and will be issued pursuant to an Indenture, dated as of April 1, 1993, between Piedmont Natural Gas Company, Inc., a New York corporation (the “Predecessor Company”) and Citibank, N.A., as trustee (the “Trustee”), as amended by the First Supplemental Indenture, dated as of February 25, 1994, among the Issuer, the Predecessor Company and the Trustee (collectively, the “Indenture”). The Notes will rank equally and ratably with all other unsecured and unsubordinated indebtedness of the Issuer and will have been registered with the Securities and Exchange Commission (the “Commission”). For a description of the terms of the Notes and the offering and sale thereof, see the sections entitled “Description of Notes,” “Certain United States Federal Income Tax Consequences” and “Supplemental Plan of Distribution of Notes” in the Prospectus Supplement relating to the Notes, dated [ ], attached hereto and hereinafter referred to as the “Prospectus Supplement”, and the sections entitled “Description of Debt Securities”, and “Plan of Distribution” in the Prospectus relating to the Notes, dated [ ], attached hereto and hereinafter referred to as the “Prospectus”.

Unless otherwise specified in the applicable Pricing Supplement, the Notes will be issued in book-entry form (each, a “Book-Entry Note”) and will be represented by a fully registered master global note certificate (the “Master Global Note”). The Master Global Note shall be in a form approved by the Issuer, the Agents, The Depository Trust Company (“DTC”) and the Trustee. Prior to the issuance of any Notes, the Trustee shall authenticate the Master Global Note and hold it as custodian for DTC. Except under the limited circumstances described in the Indenture, beneficial owners of Book-Entry Notes will not be entitled to receive a certificate representing such Notes.

At the option of the Issuer, Notes may also be issued in certificated form. Prior to accepting any offer to purchase Notes in certificated form, the Issuer shall deliver to the Trustee an adequate supply of duly executed certificated Notes.

Administrative procedures and specific terms of the offering are explained below — Part I indicating procedures applicable to all Notes, Part II indicating specific procedures for Book-Entry Notes, and Part III indicating specific procedures for Notes issued in certificated form. Administrative and record keeping responsibilities will be handled for the Issuer by its Treasury Department. The Issuer will advise the Agents in writing of those persons handling administrative responsibilities with whom the Agents are to communicate regarding offers to purchase Notes and the details of their delivery.

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Unless otherwise defined herein, terms defined in the Indenture (or any applicable Board Resolution referred to therein related to the Notes) shall be used herein as therein defined.

PART I: ADMINISTRATIVE PROCEDURES APPLICABLE TO ALL NOTES

Issue Date

Each Note will be dated the date of its authentication. Each Note will also bear an original issue date (the “Issue Date”) which, with respect to any such Note (or portion thereof), shall mean the date of its original issuance and shall be specified therein. The Issue Date will remain the same for all Notes subsequently issued upon transfer, exchange or substitution of a Note, regardless of their dates of authentication.

Price to Public; Denominations; Registration

Except as otherwise specified in a Pricing Supplement, each Note will be issued at 100% of principal amount. The minimum denominations of the Notes will be $100,000 and integral multiples of $1,000 in excess thereof. Notes will be issued only in fully registered form.

Maturities; Minimum Purchase; Calculation of Interest

Each Note will mature on a date, selected by the purchaser and agreed to by the Issuer, which will be nine months or more from its Issue Date. The minimum aggregate amount of Notes which may be offered to any purchaser will be $100,000.

Interest on each interest-bearing Note will be calculated and paid in the manner described in such Note and in the Prospectus Supplement and the applicable Pricing Supplement. Unless otherwise set forth therein, interest on Fixed Rate Notes (including interest for partial periods) will be calculated on the basis of a 360-day year of twelve 30-day months and will not accrue on the 31st day of any month. Interest on Floating Rate Notes, except as otherwise set forth therein, will be calculated on the basis of actual days elapsed and a year of 360 days, except that in the case of a Floating Rate Note for which the Base Rate is the Treasury Rate, interest will be calculated on the basis of the actual number of days in the year.

Redemption/Repayment

If indicated in the applicable Pricing Supplement, the Notes of a particular tenor will be subject to redemption in whole or in part (subject to applicable minimum denominations), at the option of the Issuer on and after an initial redemption date as set forth in the applicable Pricing Supplement and in the applicable Note. The redemption price will be set forth in the applicable Pricing Supplement and in the applicable Note.

If indicated in the applicable Pricing Supplement, the Notes of a particular tenor will be subject to repayment at the option of the holders therefore in accordance with the terms of the Notes on a repayment date as set forth in the applicable Pricing Supplement and in the applicable Note. The repayment date or dates and repayment price will be set forth in the applicable Pricing Supplement and in the applicable Note.

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Procedures for Establishing the Terms of the Notes

The Issuer and the Agents will discuss from time to time the rates to be borne by the Notes that may be sold as a result of the solicitation of offers by the Agents. Once any Agent has recorded any indication of interest in Notes upon certain terms, and communicated with the Issuer, if the Issuer plans to accept an offer to purchase Notes upon such terms, it will prepare a Pricing Supplement to the Prospectus, as then amended or supplemented, reflecting the terms of such Notes and, after approval from the Agents, will arrange to have the Pricing Supplement filed via EDGAR with the Commission pursuant to Rule 424(b)(3) under the Securities Act of 1933, as amended, no later than the fifth Business Day following the earlier of the date of determination of the settlement information described below or the date such Pricing Supplement is first used. The Issuer will supply at least 10 copies of the Prospectus, as then amended or supplemented, and bearing such Pricing Supplement, to the Agent who presented the offer (the “Presenting Agent”). No settlements with respect to Notes upon such terms may occur prior to such filing and the Agents will not, prior to such filing, mail confirmations to customers who have offered to purchase Notes upon such terms. After such filing, sales, mailing or confirmations and settlements may occur with respect to Notes upon such terms, subject to the provisions of “Delivery of Prospectus” below.

If the Issuer decides to post rates and a decision has been reached to change interest rates, the Issuer will promptly notify each Agent. Each Agent will forthwith suspend solicitation of purchases. At that time, the Agents will recommend and the Issuer will establish rates to be so “posted”. Following establishment of posted rates and prior to the transmitting or filing described in the preceding paragraph, the Agents may only record indications of interest in purchasing Notes at the posted rates. Once any Agent has recorded any indication of interest in Notes at the posted rates and communicated with the Issuer, if the Issuer plans to accept an offer at the posted rate, it will prepare a Pricing Supplement reflecting such posted rates and, after approval from the Agents, will arrange to have the Pricing Supplement filed via EDGAR with the Commission and will supply at least 10 copies of the Prospectus, as then amended or supplemented, and bearing such Pricing Supplement, to the Presenting Agent at the address listed on Annex A attached hereto. No settlements at the posted rates may occur prior to such filing and the Agents will not, prior to such filing, mail confirmations to customers who have offered to purchase Notes at the posted rates. After such filing, sales, mailing of confirmations and settlements may resume, subject to the provisions of “Delivery of Prospectus” below.

Outdated Pricing Supplements, and copies of the Prospectus to which they are attached (other than those retained for files), will be destroyed.

Suspension of Solicitation; Amendment or Supplement

As provided in the Agency Agreement, the Issuer may instruct the Agents to suspend solicitation of offers to purchase at any time. As soon as reasonably practicable, but in no event later than one Business Day after notice from the Issuer, the Agents will each forthwith suspend solicitation until such time as the Issuer has advised them that solicitation of offers to purchase may be resumed.

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If the Agents receive the notice from the Issuer contemplated by Section 3(b) or 4(b) of the Agency Agreement, they will promptly suspend solicitation and will only resume solicitation as provided in the Agency Agreement. If the Issuer is required, pursuant to the second sentence of Section 4(b) of the Agency Agreement, to prepare an amendment or supplement, it will promptly furnish each Agent with the proposed amendment or supplement; if the Issuer decides to amend or supplement the Registration Statements or the Prospectus relating to the Notes, it will promptly advise each Agent and will furnish each Agent with the proposed amendment or supplement in accordance with the terms of the Agency Agreement. The Issuer will file such amendment or supplement with the Commission, provide the Agents with copies of any such amendment or supplement, confirm to the Agents that such amendment or supplement has been filed with the Commission and advise the Agents that solicitation may be resumed.

Any such suspension shall not affect the Issuer’s obligations under the Agency Agreement; and in the event that at the time the Issuer suspends solicitation of offers to purchase there shall be any offers already accepted by the Issuer outstanding for settlement, the Issuer will have the sole responsibility for fulfilling such obligations. The Issuer will in addition promptly advise the Agents and the Trustee if such offers are not to be settled and if copies of the Prospectus as in effect at the time of the suspension may not be delivered in connection with the settlement of such offers.

Acceptance of Offers

Each Agent will promptly advise the Issuer, at its option orally or in writing, of each reasonable offer to purchase Notes received by it, other than those rejected by such Agent. Each Agent may, in its discretion reasonably exercised, without notice to the Issuer, reject any offer received by it, in whole or in part. The Issuer will have the sole right to accept offers to purchase Notes and may reject any such offer, in whole or in part. Prior to accepting any offer the Issuer will have the specific terms of the Notes approved by the Finance Committee of the Board of Directors. If the Issuer accepts or rejects an offer, in whole or in part, the Issuer will promptly notify the Presenting Agent.

Confirmation

For each accepted offer, the Presenting Agent will issue a confirmation to the purchaser, with a separate confirmation to the Issuer’s Treasury Department, setting forth the Purchase Information (as defined under “Details for Settlement” in Part II for Book-Entry Notes and in Part III for certificated Notes) and delivery and payment instructions; provided, however, that, in the case of the confirmation issued to the purchaser, no confirmation shall be delivered to the purchaser prior to the delivery of the Prospectus referred to below.

Delivery of Prospectus

A copy of the Prospectus as most recently amended or supplemented on the date of delivery thereof (except as provided below) must be delivered to a purchaser prior to or simultaneously with the earlier of delivery of (i) the written confirmation provided for above, and (ii) any Note purchased by such purchaser. (For this purpose, entry of a Same Day Funds Settlement System (“SDFS”) delivery order through DTC’s Participant Terminal System to

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credit a Book-Entry Note to the account of a Participant purchasing, or acting for the purchaser of a Book-Entry Note, shall be deemed to constitute delivery of such Book-Entry Note). Subject to the foregoing, it is anticipated that delivery of the Prospectus, confirmation and Notes to the purchaser will be made simultaneously at settlement. The Issuer shall ensure that the Presenting Agent receives copies of the Prospectus and each amendment or supplement thereto (including appropriate Pricing Supplements) in such quantities and within such time limits as will enable the Presenting Agent to deliver such confirmation or Note to a purchaser as contemplated by these procedures and in compliance with the first sentence of this paragraph. If, since the date of acceptance of a purchaser’s offer, the Prospectus shall have been supplemented solely to reflect any sale of Notes on terms different from those agreed to between the Issuer and such purchaser or a change in posted rates not applicable to such purchaser, such purchaser shall not receive the Prospectus as supplemented by such new supplement, but shall receive the Prospectus as supplemented to reflect the terms of the Notes being purchased by such purchaser and otherwise as most recently amended or supplemented on the date of delivery of the Prospectus.

Authenticity of Signatures

The Issuer will cause the Trustee to furnish the Agents from time to time with the specimen signatures of each of the Trustee’s officers, employees or agents who have been authorized by the Trustee to authenticate Notes, but no Agent will have any obligation or liability to the Issuer or the Trustee in respect of the authenticity of the signature of any officer, employee or agent of the Issuer or the Trustee on any Note or Master Global Note.

Advertising Expenses

The Issuer will determine with the Agents the amount of advertising that may be appropriate in offering the Notes. Advertising expenses will be paid by the Issuer.

Business Day

“Business Day” means any day which is not a Saturday or Sunday and is not a day on which banking institutions are generally authorized or obligated by law or executive order to close in The City of New York and, with respect to LIBOR Notes, any day on which dealings in deposits in U.S. Dollars are transacted in the London interbank market.

Trustee Not to Risk Funds

Nothing herein shall be deemed to require the Trustee to risk or expend its own funds in connection with any payment made to the Issuer, the Agents, DTC, or to the holder of any Note, it being understood by all parties that payments made by the Trustee to the Issuer, the Agents, DTC, or to the holder of any Note shall be made only to the extent that funds are provided to the Trustee for such purpose.

PART II: ADMINISTRATIVE PROCEDURES FOR BOOK-ENTRY NOTES

In connection with the qualification of the Book-Entry Notes for eligibility in the book-entry system maintained by DTC, the Trustee will perform the custodial, document control and administrative functions described below, in accordance with its obligations under a letter dated

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[ ] (the “Letter”) from the Issuer and the Trustee to DTC and a Medium-Term Note Certificate Agreement (the “MTN Certificate Agreement”) between the Trustee and DTC dated as of [ ] and its obligations as a participant in DTC, including DTC’s SDFS.

Issuance

All Book-Entry Notes will be represented initially by a single Master Global Note in fully registered form without coupons. The Master Global Note will be dated and issued as of the date of its authentication by the Trustee. The Master Global Note will not represent any Note in certificated form.

Identification Numbers

The Issuer has arranged with the CUSIP Service Bureau of Standard & Poor’s Corporation (the “CUSIP Service Bureau”) for the reservation of a series of CUSIP numbers (including tranche numbers), such series consisting of approximately 25 CUSIP numbers and relating to Book-Entry Notes. The Issuer has obtained from the CUSIP Service Bureau a written list of such reserved CUSIP numbers and has delivered such list to the Trustee and DTC. The Trustee will assign CUSIP numbers serially to Book-Entry Notes as described below under Settlement Procedure “C”. DTC will notify the CUSIP Service Bureau periodically of the CUSIP numbers that the Trustee has assigned to Book-Entry Notes. The Trustee will notify the Issuer at any time when fewer than 10 of the reserved CUSIP numbers remain unassigned to Book-Entry Notes; and the Issuer will reserve 25 additional CUSIP numbers for assignment to Book-Entry Notes. Upon obtaining such additional CUSIP numbers, the Issuer shall deliver a list of such additional CUSIP numbers to the Trustee and DTC.

Registration

The Master Global Note will be registered in the name of Cede & Co., as nominee for DTC, on the Debt Security Register maintained under the Indenture. The beneficial owner of a Book-Entry Note (or one or more indirect participants in DTC designated by such owner) will designate one or more participants in DTC (the “Participants”) to act as agent or agents for such owner with respect to such Book-Entry Note in connection with the book-entry system maintained by DTC, and DTC will record in book-entry form, in accordance with instructions provided by such Participants, a credit balance with respect to such Book-Entry Note in the account of such Participants. The ownership interest of such beneficial owner in such Book-Entry Note will be recorded through the records of such Participants or through the separate records of such Participants and one or more indirect participants in DTC. So long as Cede & Co. is the registered owner of the Master Global Note, DTC will be considered the sole owner and holder of the Book-Entry Notes represented by the Master Global Note for all purposes under the Indenture.

Transfers

Transfers of beneficial interest in a Book-Entry Note will be accomplished by book entries made by DTC and, in turn, by Participants (and, in certain cases, one or more indirect participants in DTC) acting on behalf of beneficial transferors and transferees of such Note.

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Exchanges

The Trustee may upon notice to the Issuer deliver to DTC and the CUSIP Service Bureau at any time a written notice of consolidation specifying (i) the CUSIP numbers of two or more outstanding Book-Entry Notes having the same interest rate, Stated Maturity and other terms, and for which interest (if any) has been paid to the same date, (ii) a date, occurring at least thirty days after such written notice is delivered and at least thirty days before the next Interest Payment Date (if any) for such Notes, on which such Book-Entry Notes shall be exchanged for a single replacement Book-Entry Note, and (iii) a new CUSIP number to be assigned to such replacement Book-Entry Note. Upon receipt of such a notice, DTC will send to its Participants (including the Trustee) a written reorganization notice to the effect that such exchange will occur on such date. Prior to the specified exchange date, the Trustee will deliver to the CUSIP Service Bureau a written notice setting forth such exchange date and the new CUSIP number and stating that, as of such exchange date, the CUSIP numbers of the Book-Entry Notes to be exchanged will no longer be valid. On the specified exchange date, the Trustee will exchange such Book-Entry Notes for a single Book-Entry Note bearing the new CUSIP number and a new Original Issue Date, which shall be the most recent Interest Payment Date to which interest has been paid or duly provided for on the predecessor Book-Entry Notes, and the CUSIP numbers of the exchanged Book-Entry Notes will, in accordance with CUSIP Service Bureau procedures, be cancelled and not immediately reassigned.

Redemption

The Trustee will comply with the terms of the Letter with regard to redemptions of the Book-Entry Notes. In the case of Book-Entry Notes stated by their terms to be redeemable prior to Stated Maturity, at least 60 calendar days before the date fixed for redemption (the “Redemption Date”), the Issuer shall notify the Trustee of the Issuer’s election to redeem such Book-Entry Notes in whole or in part and the principal amount of such Book-Entry Notes to be so redeemed. At least 30 calendar days but not more than 60 days prior to the Redemption Date, the Trustee shall notify DTC of the Issuer’s election to redeem such Book-Entry Notes. The Trustee shall notify the Issuer and DTC of the CUSIP numbers of the particular Book-Entry Notes to be redeemed either in whole or in part. The Issuer, the Trustee and DTC will confirm the amounts of such principal and any premium and interest payable with respect to each such Book-Entry Note on or about the fifth Business Day preceding the Redemption Date of such Book-Entry Note. The Issuer will pay the Trustee, in accordance with the terms of the Indenture, the amount necessary to redeem each such Book-Entry Note or the applicable portion of each such Book-Entry Note. The Trustee will pay such amount to DTC at the times and in the manner set forth herein. Promptly after payment to DTC of the amount due on the Redemption Date for such Book-Entry Note, the Trustee shall make the appropriate entry on its records to cancel any such Book-Entry Note redeemed in whole and shall deliver an appropriate debit advice to the Issuer. If a Book-Entry Note is to be redeemed in part, the Trustee will make the appropriate entry on its records to cancel the portion of such Book-Entry Note to be redeemed and the remaining portion of such Book-Entry Note shall bear the same CUSIP number.

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Denominations

Book-Entry Notes will be issued in principal amounts of $100,000 or any amount in excess thereof that is an integral multiple of $1,000.

Interest

Standard & Poor’s Corporation will use the information received in the pending deposit message described under Settlement Procedure “C” to include the amount of any interest payable and certain other information regarding the related Book-Entry Note in the appropriate daily or weekly bond report published by Standard & Poor’s Corporation.

Payments of Principal and Interest

(a) Payments of Interest Only. Promptly after each Record Date, the Trustee will deliver to the Issuer and DTC a written notice specifying by CUSIP number the amount of interest to be paid on each Book-Entry Note on the following Interest Payment Date (other than an Interest Payment Date coinciding with Maturity) and the total of such amounts. DTC will confirm the amount payable on each Book-Entry Note on such Interest Payment Date by reference to the daily or weekly bond reports published by Standard & Poor’s Corporation. The Issuer will pay to the Trustee the total amount of interest due on such Interest Payment Date (other than at Maturity), and the Trustee will pay such amount to DTC at the times and in the manner set forth below under “Manner of Payment”.

(b) Payments at Maturity. On or about the first Business Day of each month, the Trustee will deliver to the Issuer and DTC a written list of principal, premium, if any, and interest to be paid on each Book-Entry Note maturing in the following month. The Issuer, the Trustee and DTC will confirm the amounts of such principal, premium, if any, and interest payments with respect to each such Book-Entry Note on or about the fifth Business Day preceding the Maturity of such Book-Entry Note. The Issuer will pay to the Trustee, as the paying agent, and the Trustee in turn will pay to DTC, the principal amount of and premium, if any, on such Book-Entry Note, together with interest due at such Maturity at the times and in the manner set forth below under “Manner of Payment”. Promptly after payment to DTC of the principal and interest and premium due at the Maturity of such Book-Entry Note, the Trustee will make the appropriate entry on its records to cancel such Book-Entry Note and shall deliver an appropriate debit advice to the Issuer.

(c) Manner of Payment. The total amount of any principal, premium, if any, and interest due on Book-Entry Notes on any Interest Payment Date or at Maturity shall be paid by the Issuer to the Trustee in funds available for use by the Trustee as of 9:30 a.m., New York City time, on such date. The Issuer will make such payment on such Book-Entry Notes by wire transfer to the Trustee. The Issuer will confirm instructions regarding payment in writing to the Trustee. Prior to 10:00 a.m., New York City time, on each maturity date or as soon as possible thereafter, following receipt of such funds from the Issuer, the Trustee will pay by wire transfer (using Fedwire message entry instructions in a form previously specified by DTC) to an account at the Federal Reserve Bank of New York previously specified by DTC, in funds available for immediate use by DTC, each payment of principal, premium, if any, and interest due on Book-

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Entry Notes on any maturity date. On each Interest Payment Date, interest payment shall be made to DTC in same day funds in accordance with existing arrangements between the Trustee and DTC. Thereafter, on each such date, DTC will pay, in accordance with its SDFS operating procedures then in effect, such amounts in funds available for immediate use to the respective Participants in whose names the Book-Entry Notes are recorded in the book-entry system maintained by DTC. NEITHER THE ISSUER NOR THE TRUSTEE SHALL HAVE ANY DIRECT RESPONSIBILITY OR LIABILITY FOR THE PAYMENT BY DTC TO SUCH PARTICIPANTS OF THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE BOOK-ENTRY NOTES.

(d) Withholding Taxes. The amount of any taxes required under applicable law to be withheld from any interest payment on a Book-Entry Note will be determined and withheld by the Participant, indirect participant in DTC or other person responsible for forwarding payments and materials directly to the beneficial owner of such Note.

Settlement

The receipt by the Issuer of immediately available funds in payment for a Book-Entry Note and entry by the Presenting Agent of an SDFS deliver order through DTC’s Participant Terminal System to credit such Note to the account of a Participant purchasing, or acting for the purchase of, such Note, shall constitute “settlement” with respect to such Note. All orders accepted by the Issuer will be settled from one to five Business Days from the date of the sale pursuant to the timetable for settlement set forth below unless the Issuer and the purchaser agree to settlement on a later date.

Details for Settlement

(i) Principal amount of each Note (in authorized denominations) to be purchased.

(ii) Issue price, interest rate if fixed or Initial Interest Rate and interest rate basis if floating, Spread or Spread Multiplier, maximum or minimum interest rates, interest calculation dates, Index Maturity, Interest Determination Date, Interest Reset Date, interest rate reset period, interest payment period, Record Dates and Interest Payment Dates (as such capitalized terms are defined in either the Indenture or the Prospectus Supplement), in each case, to the extent applicable.

(iii) Any index to determine the amounts of payments of principal and any premium and interest.

(iv) Maturity of each Note.

(v) Redemption, repayment or sinking fund provisions, if any, of each Note.

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(vi) If an Original Issue Discount Note, the Yield to Maturity and the initial accrual period of original issue discount.

(vii) Issue Date of each Note.

(viii) Settlement date for each Note.

(ix) Presenting Agent’s commission (to be paid in the form of a discount from the proceeds remitted to the Issuer upon settlement).

The Issue Date of, and the settlement date for, Notes will be the same.

Settlement Procedures

Settlement Procedures with regard to each Book-Entry Note sold by the Issuer through an Agent shall be as follows:

(A)           The Presenting Agent will advise the Issuer by telephone of the Purchase Information with respect to each Book-Entry Note to be issued.

(B)           The Issuer will advise the Trustee by electronic or facsimile transmission or by another mutually acceptable method of the information set forth in Settlement Procedure “A” above and the name of the Presenting Agent.

(C)           The Trustee will assign a CUSIP number to such Book-Entry Note and advise the Issuer by telephone of such CUSIP number. The Trustee will enter a pending deposit message through DTC’s Participant Terminal System, providing the following settlement information to DTC (which shall route such information to Standard & Poor’s Corporation and Interactive Data Corporation) and the Presenting Agent.

     a. The applicable information set forth in Settlement Procedure “A”.

     b. Initial Interest Payment Date for such Book-Entry Note, number of days by which such date succeeds the Record Date and the amount of interest payable on such Interest Payment Date per $1,000 principal amount of Book-Entry Notes.

     c. CUSIP number of such Book-Entry Note.

     d. Whether such CUSIP number will be assigned to any other Book-Entry Note (to the extent known at such time).

     e. Interest payment periods.

     f. Numbers of the participant accounts maintained by DTC on behalf of the Trustee and the Presenting Agent.

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(D)           DTC will credit such Book-Entry Note to the Trustee’s participant account at DTC.

(E)           The Trustee will enter an SDFS deliver order through DTC’s Participant Terminal System, with respect to each Book-Entry Note to be issued, instructing DTC to (i) debit such Book-Entry Note to the Trustee’s participant account and credit such Book-Entry Note to the Presenting Agent’s participant account and (ii) debit the Presenting Agent’s settlement account and credit the Trustee’s settlement account for an amount equal to the price of such Book-Entry Note less such Agent’s commission. The entry of such a deliver order shall constitute a representation and warranty by the Trustee to DTC that (i) the Master Global Note has been delivered and authenticated and (ii) the Trustee is holding such Master Global Note pursuant to the MTN Certificate Agreement.

(F)           The Presenting Agent will enter an SDFS deliver order through DTC’s Participant Terminal System, with respect to each Book-Entry Note to be issued, instructing DTC (i) to debit such Book-Entry Note to the Presenting Agent’s participant account and credit such Book-Entry Note to the participant accounts of the Participant with respect to such Book-Entry Note and (ii) to debit the settlement accounts of such Participant and credit the settlement account of the Presenting Agent for an amount equal to the price of such Book-Entry Note.

(G)           Transfers of funds in accordance with SDFS deliver orders described in Settlement Procedures “E” and “F” will be settled in accordance with SDFS operating procedures in effect on the settlement date.

(H)           The Trustee, upon confirming receipt of such funds, will transfer to the Issuer by wire transfer the amount transferred to the Trustee in accordance with Settlement Procedure “E”, in funds available for immediate use, to a bank account designated by the Issuer in its wire transfer instructions to the Trustee.

(I)           The Presenting Agent will confirm the purchase of each Book-Entry Note to the purchaser either by transmitting to the Participant with respect to such Book-Entry Note a confirmation order or orders through DTC’s institutional delivery system or by mailing a written confirmation to such purchaser.

Settlement Procedures Timetable

For orders of Book-Entry Notes solicited by an Agent, and accepted by the Issuer for settlement on the first Business Day after the sale date, Settlement Procedures “A” through “I” set forth above shall be completed as soon as possible but not later than the respective times (New York City time) set forth below:


Settlement
Procedure	Time

A-B	11:00 a.m.	on the sale date
C	2:00 p.m.	on the sale date
D	10:00 a.m.	on settlement date

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E-F	2:00 p.m.	on settlement date
G	4:45 p.m.	on settlement date
H-I	5:00 p.m.	on settlement date

If a sale is to be settled more than one Business Day after the sale date, Settlement Procedures “A”, “B” and “C” shall be completed as soon as practicable but not later than the times specified above on the first Business Day after the sale date. In connection with a sale which is to be settled more than one Business Day after the sale date, if the initial interest rate for a Floating Rate Note is not known at the time that Settlement Procedure “A” is completed, Settlement Procedures “B” and “C” shall be completed as soon as such rates have been determined, but no later than 11:00 a.m. and 2:00 p.m., respectively, on the second Business Day before the settlement date. Settlement Procedures “G” and “H” are subject to extension in accordance with any extension of Fedwire closing deadlines and in the other events specified in the SDFS operating procedures in effect on the settlement date.

If settlement of a Book-Entry Note is rescheduled or cancelled, the Issuer shall notify the Trustee, and upon receipt of such notice, the Trustee will deliver to DTC, through DTC’s Participant Terminal System, a cancellation message to such effect by no later than 2:00 p.m., New York City time, on the Business Day immediately preceding the scheduled settlement date.

Failure to Settle

If the Trustee has not entered an SDFS deliver order with respect to a Book-Entry Note pursuant to Settlement Procedure “E”, then upon written request (which may be evidenced by facsimile transmission) of the Issuer, the Trustee shall deliver to DTC, through DTC’s Participation Terminal System, as soon as practicable, but no later than 2:00 p.m. on any Business Day, a withdrawal message instructing DTC to debit such Book-Entry Note to the Trustee’s participant account. DTC will process the withdrawal message, provided that the Trustee’s participant account contains a principal amount of such Book-Entry Notes that is at least equal to the principal amount to be debited. The Trustee will make appropriate entries in the Trustee’s records and so advise the Issuer. If withdrawal messages are processed with respect to all the Book-Entry Notes identified by a single CUSIP number, the CUSIP number assigned to such Book-Entry Notes shall, in accordance with CUSIP Service Bureau procedures, be cancelled and not immediately reassigned.

If the purchase price for any Book-Entry Note is not timely paid to the Participants with respect to such Book-Entry Note by the beneficial purchaser thereof (or a person, including an indirect participant in DTC, acting on behalf of such purchaser), such Participant and, in turn the Presenting Agent for such Book-Entry Note may enter an SDFS deliver order through DTC’s Participant Terminal System debiting such Book-Entry Note to such Agent’s participant account and crediting such Book-Entry Note free to the participant account of the Trustee and shall notify the Trustee and the Issuer thereof. Thereafter, the Trustee, (i) will immediately notify the Issuer, once the Trustee has confirmed that such Book-Entry Note has been credited to its participant account, and the Issuer shall immediately transfer by Fedwire (in immediately available funds) to the Presenting Agent an amount equal to the price of such Book-Entry Note which was previously sent by wire transfer to the account of the Issuer maintained at the Trustee in

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accordance with Settlement Procedure “H”, and (ii) the Trustee will deliver the withdrawal message and take the related actions described in the preceding paragraph. The Presenting Agent will not be entitled to any commission with respect to any Book-Entry Note which the purchaser does not accept and make payment for. Such debits and credits will be made on the settlement date, if possible, and in any event not later than 5:00 p.m. on the following Business Day. If such failure shall have occurred for any reason other than failure by the Presenting Agent to perform its obligations hereunder or under the Agency Agreement, the Issuer will reimburse the Presenting Agent on an equitable basis for its loss of the use of funds during the period when the funds were credited to the account of the Issuer.

Notwithstanding the foregoing, upon any failure to settle with respect to a Book-Entry Note, DTC may take any actions in accordance with its SDFS operating procedures then in effect.

PART III: ADMINISTRATIVE PROCEDURES FOR CERTIFICATED NOTES

Before accepting any offer to purchase Notes in certificated form, the Issuer will prepare the forms of Notes and provide the Trustee with an adequate supply of such Notes.

Interest Payments

On the fifth Business Day immediately preceding each Interest Payment Date, the Trustee will furnish the Issuer with the total amount of the interest payments to be paid on such Interest Payment Date. The Trustee will provide monthly to the Issuer’s Treasury Department a list of the principal and interest to be paid on Notes maturing in the next succeeding month. The Trustee will assume responsibility for withholding taxes on interest paid as required by law to the extent holders have not produced a taxpayer identification number (TIN).

Payment at Maturity

Upon presentation of each Note at Maturity, the Trustee (or a duly authorized Paying Agent) will pay the principal amount thereof, together with any premium and accrued interest due at Maturity. Such payment will be made in immediately available funds, provided that the Note is presented in time for the Trustee (or any such Paying Agent) to make payment in such funds in accordance with its normal procedures. The Issuer will provide the Trustee (and any such Paying Agent) with funds available for immediate use for such purpose. Notes presented at Maturity will be cancelled by the Trustee as provided in the Indenture.

Determination of Settlement Date

The receipt of immediately available funds by the Issuer from the Presenting Agent in payment for a Note and the authentication and issuance of such Note shall, with respect to such Note, constitute “settlement”. All offers accepted by the Issuer will be settled on the third Business Day next succeeding the date of receipt unless otherwise agreed by any purchaser, the Issuer and the Trustee. The settlement date shall be specified upon receipt of an offer. Prior to 3:00 p.m., New York City time, on the Business Day prior to the settlement date, the Issuer will instruct the Trustee to authenticate and deliver the Notes no later than 2:15 p.m., New York City time, on the settlement day.

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Details for Settlement

For each offer accepted by the Issuer, the Presenting Agent will communicate to the Issuer’s Treasury Department by telephone, electronic or facsimile transmission or other acceptable means, the Purchase Information prior to 3:00 p.m., New York City time, on the Business Day prior to the applicable settlement date. For certificated Notes “Purchase Information” shall refer to the terms of the Notes described under “Details of Settlement” in Part II and the following additional information:

     a. Exact name in which the Note or Notes are to be registered (the “registered owner”).

     b. Exact address of the registered owner and, if different, the address for delivery, notices and payment of principal and premium and interest.

     c. Taxpayer Identification Number (TIN) of the registered owner.

     d. Delivery address for each Note.

The Issue Date of, and the settlement date for, Notes will be the same. Before accepting any offer to purchase Notes to be settled in less than three Business Days, the Issuer will verify that the Trustee will have adequate time to prepare and authenticate the Notes.

Immediately after receiving the details for each offer from the Presenting Agent (but in no event later than 3:00 p.m. on the Business Day prior to the settlement date for such Notes), the Issuer will, after recording the details and any necessary calculations, communicate the Purchase Information by electronic or facsimile transmission or other acceptable means, to the Trustee. The Trustee will assign to and enter on each Note a transaction number.

Settlement; Note Deliveries and Cash Payment

Upon the receipt of appropriate documentation and instructions from the Issuer the Trustee will cause the Notes to be completed and authenticated and hold the Notes for delivery against confirmation from the Issuer of receipt of payment.

The Trustee will deliver the Notes in accordance with instructions from the Issuer, to the Presenting Agent, as the Issuer’s agent, for the benefit of the purchaser against receipt therefor by stamping the delivery receipt with the date and time received and returned. If the Presenting Agent in any instance advances its own funds, the Issuer shall not use any of the proceeds of such sale to acquire securities.

The Presenting Agent, as the Issuer’s agent, will deliver the Notes (with the written confirmation provided for in Part I above) to the purchaser thereof against payment therefor by such purchaser. Delivery of any confirmation or Note will be made in compliance with “Delivery of Prospectus” in Part I.

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Fails

In the event that a purchaser shall fail to accept delivery of and make payment for a Note on the settlement date, the Presenting Agent will notify the Trustee and the Issuer by telephone, confirmed in writing. If such Note has been delivered to the Presenting Agent, as the Issuer’s agent, the Presenting Agent shall return such Note to the Trustee. If funds have been advanced by the Presenting Agent for the purchase of such Note, the Issuer will, immediately upon receipt of confirmation from the Trustee of receipt of such Note, debit its account for the amount so advanced and shall refund the payment previously made by the Presenting Agent in immediately available funds. Such payments will be made on the settlement date for such Note, if possible, and in any event not later than the Business Day following such settlement date. If any failure described in this paragraph shall have occurred for any reason other than the failure of the Presenting Agent to provide the Purchase Information to the Issuer or to provide a confirmation to the purchaser, the Issuer will reimburse the Presenting Agent on an equitable basis for its loss of the use of funds during the period when they were credited to the account of the Issuer.

Immediately upon receipt of the Note in respect of which the fail occurred, the Trustee will cause the Debt Security Registrar to make appropriate entries to reflect the fact that the Note was never issued and the Note will be cancelled and disposed of as provided in the Indenture.

B-15

ANNEX A

Agents’ Addresses for
Delivery of the Prospectus
with the Pricing Supplement

[ ]
Attention: [ ]

B-16

EXHIBIT C

PURCHASE AGREEMENT

, 200

Piedmont Natural Gas Company, Inc.
1915 Rexford Road
Charlotte, North Carolina 28211

Attention: Robert O. Pritchard, Treasurer

The undersigned agrees to purchase the following principal amount of the Securities described in the Agency Agreement dated , 200 (the “Agency Agreement”):


Principal Amount			$
Interest Rate			%
Maturity Date
Discount			% of Principal Amount
Price to be paid to Issuer (in immediately available funds)			$
Commission to Agent			$
Settlement Date

Except as otherwise expressly provided herein, all terms used herein which are defined in the Agency Agreement shall have the same meanings as in the Agency Agreement. The terms Agent and Agents, as used in the Agency Agreement, shall be deemed to refer only to the undersigned for purposes of this Agreement.

This Agreement incorporates by reference all of the provisions of the Agency Agreement, (including any amendment entered into pursuant thereto by the Issuer and the undersigned Agent, to the extent applicable), except provisions of the Agency Agreement relating specifically to solicitation by the Agents, as Agents, and except that (i) the last sentence of Section 7(d) shall not be applicable; and (ii) the term “this Agreement”, as used in Section 7(d) of the Agency Agreement, shall be deemed to refer to this Agreement (and not the Agency Agreement) except that in the fifth sentence such term shall be deemed to refer to the Agency Agreement. [Insert other appropriate changes.] You and we agree to perform, to the extent applicable, our respective duties and obligations specifically provided to be performed by each of us in the Procedures.

Our obligation to purchase Securities hereunder is subject to the accuracy on the above Settlement Date of your representations and warranties contained in Section 2 of the Agency Agreement (it being understood that such representations and warranties shall be deemed to be made as of the date of this Purchase Agreement and references to the Registration Statements and Prospectus shall be deemed to relate to the Registration Statements and the Prospectus as amended at such Settlement Date specified above) and to your performance and observance of

C-1

all covenants and agreements contained in Sections 4 and 6 thereof. Our obligation hereunder is also subject to the following conditions:

(a) the satisfaction, at such Settlement Date, of each of the conditions set forth in subsections (a) and (b) and (d) through (g) of Section 5 of the Agency Agreement (it being understood that each document so required to be delivered shall be dated such Settlement Date and that each such condition and the statements contained in each such document that relate to the Registration Statements or the Prospectus shall be deemed to relate to the Registration Statements or the Prospectus, as the case may be, as amended or supplemented as of the date hereof and at the time of settlement on such Settlement Date and except that the opinion described in Section 5(d) shall be modified so as to state that the Securities being sold on such Settlement Date, when delivered against payment therefor as provided in the Indenture and this Agreement, will have been duly executed, authenticated, issued and delivered and will constitute valid and legally binding obligations of the Issuer enforceable in accordance with their terms, subject only to the exceptions as to enforcement set forth in clause (iii) of Section 5(d) of the Agency Agreement, and will conform to the description thereof contained in the Prospectus as amended or supplemented at such Settlement Date; and

(b) there shall not have occurred between the date hereof and the above Settlement Date (i) any change, or any development involving a prospective change, in or affecting particularly the business or properties of the Issuer or its subsidiaries which, in our judgment, materially impairs the investment quality of the Securities; (ii) any downgrading in the rating of the Securities of any other debt securities of the Issuer by any “nationally recognized statistical rating organization” (as defined for purposes of Rule 436(g) under the Act), or any public announcement that any such organization has under surveillance or review its rating of the Securities or any other debt securities of the Issuer (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating); (iii) any suspension or limitation of trading in securities generally on the New York Stock Exchange, or any setting of minimum prices for trading on such exchange, or any suspension of trading of any securities of the Issuer on any exchange or in the over-the-counter market if, in our judgment, any such event or any condition giving rise thereto or existing concurrently therewith makes it impracticable or inadvisable to proceed with the solicitation of offers to purchase, or sales of, Securities on the terms and in the manner contemplated by the applicable Pricing Supplement and the Prospectus; (iv) any banking moratorium declared by Federal or New York authorities; or (v) any outbreak or escalation of hostilities, any declaration of war by Congress or any other substantial national or international calamity or emergency if, in our judgment, the effect of any such outbreak, escalation, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the sale of and payment for the Securities on the terms and in the manner contemplated applicable Pricing Supplement and the Prospectus.

In further consideration of our agreement hereunder, you agree that between the date hereof and the above Settlement Date, you will not offer or sell, or enter into any agreement to sell, any debt securities of the Issuer in the United States, other than sales of Securities,

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borrowings under your revolving credit agreements and lines of credit, the private placement of securities and issuances of your commercial paper.

[Insert appropriate provisions as agreed to between the parties hereto regarding responsibility for expenses.]

If for any reason our purchase of the above Securities is not consummated, the respective obligations of you and the undersigned pursuant to Section 7 shall remain in effect.

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such executed counterparts shall together constitute one and the same Agreement.


		[INSERT NAME OF PURCHASER]

		By:

				Name:
				Title:


CONFIRMED AND ACCEPTED , as of the date first above written:

PIEDMONT NATURAL GAS COMPANY, INC.

By:

Name:
Title:

C-3

Exhibit 4.3

PIEDMONT NATURAL GAS COMPANY, INC.

AND

CITIBANK, N.A. As Trustee

Second Supplemental Indenture

Dated as of

June 15, 2003

Supplemental to Indenture Dated as of April 1, 199 3

Debt Securities

THIS SECOND SUPPLEMENTAL INDENTURE dated as of June 15, 2003, between PIEDMONT NATURAL GAS COMPANY, INC., a corporation organized and existing under the laws of the State of North Carolina (the “Company”), and CITIBANK, N.A., a national banking association duly organized and existing under the laws of the United States (the “Trustee”).

WHEREAS, the Company has heretofore executed and delivered to the Trustee an Indenture dated as of April 1, 1993 (the “Indenture”); and

WHEREAS, the Company has heretofore executed and delivered to the Trustee a First Supplemental Indenture dated as of February 25, 1994; and

WHEREAS, the Company desires to modify and amend the Indenture, as amended, for the purposes of modifying Section 4.07 to permit the Company to incur certain liens in addition to the liens now permitted therein; and

WHEREAS, Section 10.01(g) of the Indenture provides that the Company and the Trustee may from time to time enter into indentures supplemental thereto to change or eliminate any provision of the Indenture or to add any new provision to the Indenture; provided that if such change, elimination or addition will adversely affect the interest of the holders of the Debt Securities of any series in any material respect, such change, elimination, or addition will become effective with respect to such series only when there is no Debt Security of such series remaining outstanding under the Indenture;

WHEREAS , the Company represents that all acts and things necessary to constitute this Second Supplemental Indenture a valid, binding and enforceable instrument have been done and performed, and the execution of this Second Supplemental Indenture has in all respects been duly authorized, and the Company, in the exercise of legal right and power in it vested, is executing this Second Supplemental Indenture; and

WHEREAS , the Company has heretofore delivered or is delivering contemporaneously herewith to the Trustee (i) a copy of the resolution of its Board of Directors certified by its Secretary or an Assistant Secretary authorizing the execution of the Second Supplemental Indenture, and (ii) an Officers’ Certificate and an Opinion of Counsel each stating that the execution and delivery of this Second Supplemental Indenture comply with the provisions of Article Ten of the Indenture, and that all conditions precedent provided for in the Indenture to the execution and delivery of this Second Supplemental Indenture have been complied with:

NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained and for other valuable consideration, the receipt whereof is hereby acknowledged, the parties have executed and delivered this Second Supplemental Indenture and the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective holders, from time to time, of the Debt Securities, as follows:

Section 1. Definitions . For all purposes of this Second Supplemental Indenture, except as otherwise expressly provided or unless the context otherwise requires, the terms used herein shall have the meanings assigned to them in the Indenture.

Section 2. Representations and Warranties of the Company . The Company hereby represents and warrants that the Company is not, and after giving effect to this Second Supplemental Indenture will not be, in default in the performance or observance of any of the covenants or conditions of the Indenture.

Section 3. Amendment of Indenture . Section 4.07 of the Indenture is amended by adding the following paragraph at the end thereof:

“With respect to any Debt Securities issued after June 15, 2003, liens, in addition to those permitted by paragraphs 1 through 12 above, securing indebtedness not at any time exceeding in the aggregate 5% of the consolidated stockholders’ equity of the Company and its subsidiaries as of such time.”

Section 4. Effectiveness of this Second Supplemental Indenture . This Second Supplemental Indenture shall become effective upon June 15, 2003.

Section 5. Concerning the Trustee . The Trustee accepts the trusts of the Indenture as supplemented by the First Supplemental Indenture and this Second Supplemental Indenture and agrees to perform the same, but only upon the terms and conditions set forth in the Indenture, as supplemented by the First Supplemental Indenture and this Second Supplemental Indenture to which the parties hereto and the Holders from time to time agree. Without limiting the generality of the foregoing, the Trustee assumes no responsibility for the correctness of the recitals herein contained, which shall be taken as the statements of the Company.

Section 6. Miscellaneous . (a) Except as hereby expressly amended, the Indenture is in all respects ratified and confirmed and all the terms, provisions and conditions thereof shall be and remain in full force and effect.

(b) All the covenants, stipulations, promises and agreements in this Second Supplemental Indenture contained by or on behalf of the Company shall bind its successors and assigns, whether so expressed or not.

(c) This Second Supplemental Indenture shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be governed by and construed in accordance with the laws of said State.

(d) If any provision of the Indenture as supplemented by the First Supplemental Indenture and this Second Supplemental Indenture limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of or govern the Indenture, such latter provision shall control. If any provision of the Indenture, as supplemented by the First Supplemental Indenture and this Second Supplemental Indenture, modifies or excludes any

provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to the Indenture as so modified or to be excluded, as the case may be.

(e) The titles and headings of the sections of this Second Supplemental Indenture have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof.

(f) This Second Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original.

(g) In case any provision in this Second Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof or of the Indenture shall not in any way be affected or impaired thereby.

IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed, and their respective corporate seals to be hereto affixed and attested, all as of the date first above written.


	PIEDMONT NATURAL GAS COMPANY, INC.

	By	/s/ David J. Dzuricky


Attest:

/s/ Martin C. Ruegsegger

[Corporate Seal]

	CITIBANK, N.A., AS TRUSTEE

	By	/s/ P. DeFelice


Attest:

/s/ John J. Byrnes

[Corporate Seal]

On the 17th day of June, 2003 before me personally came David J. Dzuricky to me known, who, being by me duly sworn, did depose and say that he resides at 1915 Rexford Road, Charlotte, North Carolina, that he is Senior Vice President and Chief Executive Officer of Piedmont Natural Gas Company, Inc., one of the parties described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to the said instrument is such corporate seal; that it was so affixed by authority of the board of directors of said corporation, and that he signed his name thereto by like authority.



		/s/ Wanda R. O’Neil
		Notary Public

[NOTARIAL SEAL]

On the 18th day of June, 2003 before me personally came P. DeFelice to me known, who, being by me duly sworn, did depose and say that (s)he resides at 47-09 169th Street, Flushing, New York 11358, that (s)he is Vice President of Citibank, N.A., as Trustee, one of the parties described in and which executed the above instrument; that (s)he knows the corporate seal of said corporation; that the seal affixed to the said instrument is such corporate seal; that it was so affixed by authority of the board of directors of said corporation, and that (s)he signed (his) (her) name thereto by like authority.



		/s/ Nanette Murphy
		Notary Public

[NOTARIAL SEAL]

Exhibit 5.1

LAW OFFICES
Nelson Mullins Riley & Scarborough, L.L.P.
A REGISTERED LIMITED LIABILITY PARTNERSHIP


Jerry W. Amos	BANK OF AMERICA CORPORATE CENTER	OTHER OFFICES:
(704) 417-3110 Internet Address: JWA@nmrs.com	SUITE 2400 100 NORTH TRYON STREET Charlotte, North Carolina 28202-4000 TELEPHONE (704) 417-3000 FACSIMILE (704) 377-4814 www.nmrs.com	Atlanta, Georgia Charleston, South Carolina Columbia, South Carolina Greenville, South Carolina Myrtle Beach, South Carolina Raleigh, North Carolina Winston-Salem, North Carolina

June 19, 2003

Piedmont Natural Gas Company, Inc.
1915 Rexford Road
Charlotte, North Carolina 28211


Re:		Registration Statement on Form S-3 filed on June 19, 2003 with respect to $500,000,000 Aggregate Principal Amount of Securities and Post-Effective Amendment No. 1 to Registration Statement No. 3333-62222 with respect to $190,000,000 Principal Amount of Securities.

Gentlemen:

We have acted as counsel to Piedmont Natural Gas Company, Inc., a North Carolina corporation (the “Company”), in connection with the registration by the Company of $690,000,000 aggregate principal amount of the following securities: (1) one or more series of its debt securities (the “Debt Securities”), (2) shares of its Common Stock (the “Common Stock”), (3) stock purchase contracts (the “Stock Purchase Contracts”), and (4) stock purchase units (the “Stock Purchase Units”). All capitalized terms which are not defined here shall have the meanings assigned to them in the Registration Statement on Form S-3 and the Post-Effective Amendment No. 1 to Registration Statement No. 333-62222 which are being filed on the date hereof with the Securities and Exchange Commission (“SEC”) by the Company pursuant to the Securities Act of 1933, as amended (the “Act”). As amended, the Registration Statement on Form S-3 filed on the date hereof and the Post-Effective Amendment to Registration Statement No. 333-62222 are collectively referred as the “Registration Statements.”

In connection with our examination of documents as hereinafter described, we have assumed the genuineness of all signatures on, and the authenticity of, all documents submitted to us as originals and the conformity to original documents of all documents submitted to us as copies. With respect to agreements and instruments executed by natural persons, we have assumed the legal competency of such persons.

For the purpose of rendering this opinion, we have made such factual and legal examination as we deemed necessary under the circumstances, and in that connection we have examined, among other things, originals or copies of the following:

(1) The Articles of Incorporation of the Company, as amended to date;

(2) The By-Laws of the Company, as amended to date;

Piedmont Natural Gas Company, Inc.
June 19, 2003
Page 2

(3) The Indenture filed as an exhibit to the Registration Statement (as amended or supplemented in accordance with the terms hereof, the “Indenture”);

(4) Such records of the corporate proceedings of the Company, and such other documents that we considered necessary or appropriate for the purpose of rendering this opinion; and

(5) Such other certificates and assurances from public officials, officers and representatives of the Company that we considered necessary or appropriate for the purpose of rendering this opinion.

On the basis of the foregoing examination, and in reliance thereon, we are of the opinion that (subject to compliance with the pertinent provisions of the Act and, with respect to the Indenture and the Debt Securities, the Trust Indenture Act of 1939, as amended, and to compliance with such securities or “blue sky” laws of any jurisdiction as may be applicable):

     1. When (a) the Debt Securities shall have been authorized, executed and authenticated in accordance with the terms of the Indenture, (b) the Indenture shall have been qualified under the Trust Indenture Act of 1939, duly executed and delivered, and (c) the Debt Securities shall have been issued and sold as described in the Registration Statements, and if in an underwritten offering, in accordance with the terms and conditions of the applicable underwriting agreement, and in a manner contemplated in the Registration Statements, including the Prospectus Supplement relating to any such Debt Securities, and in accordance with any applicable order of a regulatory agency having jurisdiction over the issuance of the Debt Securities, the Debt Securities will be duly authorized and valid and binding obligations of the Company, subject to the effect of any bankruptcy, insolvency, reorganization, moratorium, arrangement, or similar laws affecting the enforcement of creditors’ rights generally (including, without limitation, the effect of statutory or other laws regarding fraudulent transfers or preferential transfers) and general principles of equity, regardless of whether enforceability is considered in a proceeding in equity or at law.

     2. When the Common Stock shall have been authorized, issued and sold within the limits and as described in the Registration Statements, and if in an underwritten offering, in accordance with the terms and conditions of the applicable underwriting agreement, and in a manner contemplated in the Registration Statements, including the Prospectus Supplement relating to the applicable offering of such Common Stock, and in accordance with any applicable order of a regulatory agency having jurisdiction over the issuance of the Common Stock, the Common Stock will be validly issued, fully paid and nonassessable.

     3. When the Stock Purchase Contract shall have been authorized, issued and sold within the limits and as described in the Registration Statements, and if in an underwritten offering, in accordance with the terms and conditions of the applicable underwriting agreement, and in a manner contemplated in the Registration Statements, including the Prospectus Supplement relating to the applicable offering of such Stock Purchase Contracts, and in accordance with any applicable order of a regulatory agency having jurisdiction over the issuance of the Stock Purchase Contracts, the Stock Purchase Contracts will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms.

Piedmont Natural Gas Company, Inc.
June 19, 2003
Page 3

4. When the Stock Purchase Units shall have been authorized, issued and sold within the limits and as described in the Registration Statements, and if in an underwritten offering, in accordance with the terms and conditions of the applicable underwriting agreement, and in a manner contemplated in the Registration Statements, including the Prospectus Supplement relating to the applicable offering of such Stock Purchase Units, and in accordance with any applicable order of a regulatory agency having jurisdiction over the issuance of the Stock Purchase Units, the Stock Purchase Units will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms.

In connection with the opinions expressed above, we have assumed that, at or prior to the time of the delivery of any such security, the Registration Statements have been declared effective, that the authorization of such securities will not have been modified or rescinded and there will not have occurred any change in the law affecting the validity or enforceability of such securities. We have also assumed that none of the terms of any security to be established subsequent to the date hereof nor the issuance and delivery of such security, nor the compliance by the Company with the terms of such security, will violate any applicable law or will result in a violation of any provision of any instrument or agreement then binding upon the Company, or any restriction imposed by any court or governmental body having jurisdiction over the Company.

This opinion is limited to the present laws of the State of North Carolina, the present federal laws of the United States, and to the present judicial interpretations thereof and to the facts as they presently exist. We undertake no obligation to advise you as a result of developments occurring after the date hereof or as a result of facts or circumstances brought to our attention after the date hereof.

This opinion may be filed as an exhibit to the Registration Statements. Consent is also given to the reference to this firm under the caption “Legal Opinions” in the prospectus contained in the Registration Statements. In giving this consent, we do not admit we are included in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the SEC promulgated thereunder.

Very truly yours,

Nelson Mullins Riley & Scarborough, LLP

/s/ Jerry W. Amos

Exhibit 23.2

INDEPENDENT AUDITORS’ CONSENT

We consent to the incorporation by reference in this Registration Statement and in Post-Effective Amendment No. 1 to Registration Statement No. 333-62222, of Piedmont Natural Company, Inc., on Form S-3, of our report dated December 12, 2002, appearing in the Annual Report on Form 10-K of Piedmont Natural Gas Company, Inc., for the year ended October 31, 2002, and to the reference to us under the heading “Experts” in the Prospectus, which is part of such Registration Statements.

/s/ DELOITTE & TOUCHE LLP

Charlotte, North Carolina

June 19, 2003

Exhibit 23.3

INDEPENDENT AUDITORS’ CONSENT

We consent to the use in this Registration Statement and in Post-Effective Amendment No. 1 to Registration Statement No. 333-62222 of Piedmont Natural Gas Company, Inc., on Form S-3 of our report dated April 7, 2003, relating to the financial statements of North Carolina Natural Gas Corporation (which expresses an unqualified opinion and includes an explanatory paragraph referring to the change in 2002 in the method of accounting for goodwill) appearing in the Prospectus, which is part of such Registration Statements. We also consent to the reference to us under the heading “Experts” in such Prospectus.

/s/ DELOITTE & TOUCHE LLP

Raleigh, North Carolina

June 19, 2003

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM T-1

STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE

Check if an application to determine eligibility of a Trustee
pursuant to Section 305 (b)(2) ____

CITIBANK, N.A.

(Exact name of trustee as specified in its charter)

13-5266470
(I.R.S. employer
identification no.)


399 Park Avenue, New York, New York		10043
(Address of principal executive office)		(Zip Code)

PIEDMONT NATURAL GAS COMPANY, INC.

(Exact name of obligor as specified in its charter)


North Carolina		56-0556998
(State or other jurisdiction of		(I.R.S. employer
incorporation or organization)		identification no.)


1915 Rexford Road
Post Office Box 33068
Charlotte, NC		28233
(Address of principal executive offices)		(Zip Code)

DEBT SECURITIES
(Title of the indenture securities)


Item 1.	General Information.

		Furnish the following information as to the trustee:

	(a)	Name and address of each examining or supervising authority to which it is subject.


				Name		Address

				Comptroller of the Currency		Washington, D.C.

				Federal Reserve Bank of New York 33 Liberty Street New York, NY		New York, NY

				Federal Deposit Insurance Corporation		Washington, D.C.


	(b)	Whether it is authorized to exercise corporate trust powers.

		Yes.

Item 2.	Affiliations with Obligor.

		If the obligor is an affiliate of the trustee, describe each such affiliation.

		None.

Item 16.		List of Exhibits.

		List below all exhibits filed as a part of this Statement of Eligibility.

		Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as exhibits hereto.

		Exhibit 1 — Copy of Articles of Association of the Trustee, as now in effect. (Exhibit 1 to T-1 to Registration Statement No. 2-79983)

		Exhibit 2 — Copy of certificate of authority of the Trustee to commence business. (Exhibit 2 to T-1 to Registration Statement No. 2-29577).

		Exhibit 3 — Copy of authorization of the Trustee to exercise corporate trust powers. (Exhibit 3 to T-1 to Registration Statement No. 2-55519)

		Exhibit 4 — Copy of existing By-Laws of the Trustee. (Exhibit 4 to T-1 to Registration Statement No. 33-34988)

		Exhibit 5 — Not applicable.


				Exhibit 6 — The consent of the Trustee required by Section 321(b) of the Trust Indenture Act of 1939. (Exhibit 6 to T-1 to Registration Statement No. 33-19227.)

				Exhibit 7 — Copy of the latest Report of Condition of Citibank, N.A. (as of March 31, 2003 — attached)

				Exhibit 8 — Not applicable.

				Exhibit 9 — Not applicable.

SIGNATURE

Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee, Citibank, N.A., a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York and State of New York, on the 17th day of June, 2003.


				CITIBANK, N.A.


		By		/s/ P. DeFelice Vice President

Charter No. 1461
Comptroller of the Currency
Northeastern District
REPORT OF CONDITION
CONSOLIDATING
DOMESTIC AND FOREIGN
SUBSIDIARIES OF
Citibank, N.A. of New York in the State of New York, at the close of business
on March 31, 2003, published in response to call made by Comptroller of the
Currency, under Title 12, United States Code, Section 161. Charter Number 1461
Comptroller of the Currency Northeastern District.


	Thousands of dollars

ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin	$	11,366,000
Interest-bearing balances		15,861,000
Held-to-maturity securities		59,000
Available-for-sale securities		81,671,000
Federal funds sold in domestic offices		5,636,000
Federal funds sold and securities purchased under agreements to resell		9,053,000
Loans and leases held for sale		3,456,000
Loans and lease financing receivables:
Loans and leases, net of unearned income		302,878,000
LESS: Allowance for loan and lease losses		8,127,000

Loans and leases, net of unearned income, allowance, and reserve		294,751,000
Trading assets		47,370,000
Premises and fixed assets (including capitalized leases)		3,902,000
Other real estate owned		106,000
Investments in unconsolidated subsidiaries and associated companies		700,000
Customers’ liability to this bank on acceptances outstanding		999,000
Intangible assets: Goodwill		5,399,000
Intangible assets: Other intangible assets		4,906,000
Other assets		29,568,000

TOTAL ASSETS	$	514,803,000

LIABILITIES
Deposits: In domestic offices	$	112,782,000
Noninterest-bearing		19,239,000
Interest-bearing		93,543,000
In foreign offices, edge and agreement subsidiaries, and IBFs		234,180,000
Noninterest-bearing		16,569,000
Interest-bearing		217,611,000
Federal funds purchased in domestic offices		15,066,000
Federal funds purchased and securities sold under agreements to repurchase		12,746,000
Demand notes issued to the U.S. Treasury		0
Trading liabilities		29,412,000
Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases): ss		29,761,000
Bank’s liability on acceptances executed and outstanding		999,000
Subordinated notes and debentures		11,500,000
Other liabilities		27,247,000

TOTAL LIABILITIES	$	473,693,000

Minority interest in consolidated subsidiaries		224,000

EQUITY CAPITAL
Perpetual preferred stock and related surplus		1,950,000
Common stock		751,000
Surplus		22,115,000
Retained Earnings		16,910,000
Accumulated net gains (losses) on cash flow hedges		-840,000
Other equity capital components		0

TOTAL EQUITY CAPITAL	$	40,886,000

TOTAL LIABILITIES AND EQUITY CAPITAL	$	514,803,000

I, Roger W. Trupin, Controller of the above-named bank do hereby declare that this Report of Condition is true and correct to the best of my knowledge and belief.

ROGER W. TRUPIN CONTROLLER

We, the undersigned directors, attest to the correctness of this Report of Condition. We declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the instructions and is true and correct.

GRACE B. VOGEL
ALAN S. MACDONALD
WILLIAM R. RHODES
VICTOR J. MENEZES
DIRECTORS


(1)	Estimated solely for the purpose of calculating the registration fee.
(2)	Excluding accrued interest and accrued amortization of discount, if any, to the date of delivery.
(3)	Plus such additional principal amount of Debt Securities as may be necessary such that, if Debt Securities are issued with an original issue discount, the aggregate initial offering price of all Debt Securities and Common Stock will equal $500,000,000.
(4)	Includes (a) such indeterminate number of shares of Common Stock of the Registrant (and accompanying Rights), if any as (i) shall be issuable or deliverable upon conversion of any Debt Securities registered hereby which are convertible into such Common Stock, (ii) as may be issuable or deliverable in connection with the settlement of any Purchase Contracts and (iii) as may be required for delivery upon conversion, exercise or settlement of any such convertible securities or Purchase Contracts as a result of the anti-dilution provisions thereof. The Rights are subject to the registrant’s Rights Agreement, dated as of February 27, 1998, as amended, between the registrant and Wachovia Bank, N.A., as Rights Agent, and until a triggering event thereunder, the Rights trade with, and cannot be separated from, the Common Stock.
(5)	There are being registered hereby such indeterminate number of Purchase Contracts as may be issued at indeterminate prices. Such Purchase Contracts may be issued together with any of the other securities being registered hereby. Purchase Contracts may require the holder thereof to purchase or sell any of the other securities registered hereby or to purchase or sell (i) securities of an entity unaffiliated with the Registrant, a basket of such securities, an index or indices of such securities or any combination of the above, (ii) currencies or (iii) commodities.
(6)	There are being registered hereby such indeterminate number of Units as may be issued at indeterminate prices. Units may consist of any combination of the securities being registered hereby.


	•	our debt securities,

	•	our common stock,

	•	our purchase contracts, or

	•	units.


	•	our Annual Report on Form 10-K for the year ended October 31, 2002,

	•	our Quarterly Reports on Form 10-Q for the quarters ended January 31, 2003 and April 30, 2003, and

	•	our Current Reports on Form 8-K filed with the SEC on November 6, 2002, December 23, 2002, January 8, 2003, February 28, 2003, May 30, 2003 and June 13, 2003.


	•	Regulatory issues, including those that affect allowed rates of return, terms and conditions of service, rate structures and financings. In addition to the impact of our three state regulatory commissions, we purchase natural gas transportation and storage services from interstate and intrastate pipeline companies whose rates and services are regulated by the Federal Energy Regulatory Commission (FERC) and the North Carolina Utilities Commission (NCUC), respectively.


	•	Residential, commercial and industrial growth in our service areas. The ability to grow our customer base and the pace of that growth are impacted by general business and economic conditions such as interest rates, inflation, fluctuations in the capital markets and the overall strength of the economy in our service areas and the country.

	•	Deregulation, unanticipated impacts of restructuring and competition in the energy industry. We face competition from electric companies and energy marketing and trading companies. As a result of deregulation, we expect this highly competitive environment to continue.

	•	The potential loss of large-volume industrial customers due to alternate fuels or to bypass or the shift by such customers to special competitive contracts at lower per-unit margins.

	•	Regulatory issues, customer growth, deregulation, economic and capital market conditions, the costs and availability of natural gas and weather conditions can impact our ability to meet internal performance goals.

	•	The capital-intensive nature of our business, including governmental approvals, development project delays or changes in project costs. Weather, general economic conditions and the cost of funds to finance our capital projects can materially alter the cost of a project.

	•	Changes in the availability and cost of natural gas. To meet firm customer requirements, we must acquire sufficient gas supplies and pipeline capacity to ensure delivery to our distribution system while also ensuring that our supply and capacity contracts will allow us to remain competitive. Natural gas is an unregulated commodity subject to market supply and demand and price volatility. We have a diversified portfolio of local peaking facilities, transportation and storage contracts with interstate pipelines and supply contracts with major producers and marketers to satisfy the supply and delivery requirements of our customers. Because these producers, marketers and pipelines are subject to operating and financial risks associated with exploring, drilling, producing, gathering, marketing and transporting natural gas, their risks also increase our exposure to supply and price fluctuations. We engage in hedging activity to reduce price volatility for our customers.

	•	Changes in weather conditions. Weather conditions and other natural phenomena can have a large impact on our earnings. Severe weather conditions can impact our suppliers and the pipelines that deliver gas to our distribution system. Extended mild or severe weather, either during the winter period or the summer period, can have a significant impact on the demand for and the cost of natural gas.

	•	Changes in environmental regulations and cost of compliance.

	•	Earnings from our equity investments. We have investments in unregulated retail energy marketing services, interstate liquefied natural gas (LNG) storage operations, intrastate and interstate pipeline operations and unregulated retail propane operations. These companies have risks that are inherent to their industries and, as an equity investor, we assume such risks.


(1)	For purposes of computing the consolidated ratios, “earnings” represent our net income from continuing operations plus applicable income taxes and fixed charges, and “fixed charges” represent interest expense, amortization of debt discount, premium and expense, and a portion of lease payments considered to represent an interest factor.


(1)	Includes an impairment charge of $126.3 million to goodwill attributable to Progress’ original acquisition of NCNG in 1999. Without this impairment charge, NCNG’s income from continuing operations would have been $5.8 million for the year ended December 31, 2002.

(2)	Includes the cumulative effective of an accounting change to reduce the carrying value of goodwill by $52.3 million upon the adoption of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”


	A. Certain revenues, expenses, assets and liabilities of NCNG have been reclassified to conform with Piedmont’s presentation. The income tax effects of such reclassifications, if any, are computed at NCNG’s composite income tax rate of 39.485%.

	B. Increase in cash of $16,375 is the excess of the proceeds from securities issued to finance the acquisitions over the stated purchase price.

	C. The purchase of working capital is in addition to the stated purchase price. At the date of this pro forma balance sheet, the excess of current assets over current liabilities results in a cash payment by Piedmont to Progress of $6,994.

	D. The purchase price for the interest in EasternNC is $7,500.

	E. NCNG’s other assets of $49,652, primarily consisting of goodwill, unamortized debt costs, deferred environmental costs and investment in Cape Fear Energy Corporation, are excluded as they will not be acquired by Piedmont.

	F. The proceeds from the issuance of common stock and long-term debt will be used to repay the short-term debt used to initially finance the acquisitions. Based on our assumptions, the following is a summary of the calculation of the proceeds from the issuance of common stock and long-term debt and the allocation of the purchase price to the fair value of the net assets acquired.


	Piedmont and NCNG expect to record direct costs of the acquisition (including fees of financial advisors, legal counsel, independent auditors and others). The estimated direct costs are $4,000 and are added to goodwill and reflected in accounts payable. The estimated charges and nature of costs included therein are subject to change as more accurate estimates become available. The pro forma statements of income do not reflect the costs and expenses associated with integrating the operations of the two companies, nor any of the anticipated recurring expense savings arising from the integration.

	Goodwill of $41,427 is recognized, representing the excess of the purchase price plus transaction costs over the net assets acquired. The final allocation of the purchase price will be based on the values of identified assets and liabilities as of the date the business combination is completed.


	G. The application of the purchase method of accounting eliminates the preexisting balances of NCNG’s common stock, capital in excess of par value, retained earnings and accumulated other comprehensive loss.

	H. NCNG’s other liabilities of $31,186, consisting of accumulated deferred income taxes, unamortized investment tax credits and a regulatory liability for income taxes, are excluded as they will not be assumed by Piedmont.

	I. NCNG’s interest charges on notes payables are eliminated, net of income taxes at NCNG’s composite income tax rate of 39.485%, as the debt generating such charges will not be assumed by Piedmont.

	J. In its third quarter ended September 30, 2002, NCNG performed the annual impairment test of goodwill and recognized an impairment of $126.7 million based on the expected proceeds from the sale of NCNG to Piedmont. Because of the non-recurring nature of this charge, the goodwill impairment was eliminated from the pro forma statement of income. Because NCNG considered this charge to be a permanent book/tax difference, no income tax effect was recorded by NCNG.

	K. The income tax effect, if any, on the pro forma adjustments, except for the reclassifications discussed in Note A and the elimination of NCNG’s interest charges discussed in Note I, are computed at the statutory rates of 35% for federal and 7% for state, for a composite rate of 39.55%.


	•	the trustee can enforce your rights against us if we default under the indenture. There are some limitations on the extent to which the trustee acts on your behalf, described later in this prospectus; and

	•	the trustee will perform certain administrative duties for us, which include sending you interest payments and notices.


	•	the specific title of the offered Debt Securities;

	•	any limit on the aggregate principal amount of the offered Debt Securities;

	•	the person to whom any interest on the offered Debt Securities will be payable, if other than the person in whose name that offered Debt Security is registered at the close of business on the record date for such interest;

	•	the date or dates on which the principal of the offered Debt Securities is payable;

	•	the rate or rates at which the offered Debt Securities will bear interest, if any, or the formula that will be used to determine which such rate or rates, and the date or dates from which any such interest will accrue, and the date or dates for any interest payable;

	•	the place or places where the principal, premium (if any) and interest on the offered Debt Securities will be payable, and the method of such payment;

	•	the period or periods within which the price or prices at which and the terms and conditions upon which the offered Debt Securities may be redeemed, in whole or in part, at our option;

	•	our obligations, if any, to purchase or redeem the offered Debt Securities under any sinking fund or analogous provision or at the option of holders of such securities and the period or periods within which, the price or prices at which and the terms and conditions upon which the offered Debt Securities will be redeemed or purchased, in whole or in part, pursuant to such obligation;

	•	the denominations in which the offered Debt Securities will be issuable, if other than denominations of $1,000 and any integral multiple thereof;

	•	if the amount of payments of principal, premium (if any) or interest on the offered Debt Securities may be determined with reference to an index, the manner in which such amounts shall be determined;

	•	whether the offered Debt Securities will be issuable in whole or in part in the form of one or more global securities (as defined under “Global Securities”) and, if so, the securities depository or depositories for such global security or securities and the circumstances under which any such global security or securities may be registered for transfer or exchange, or authenticated and delivered, in the name of a person other than such depository or its nominee, other than as set forth in the Indenture;


	•	if other than the principal amount thereof, the portion of the principal amount of the offered Debt Securities which shall be payable upon declaration of acceleration of the maturity thereof;

	•	any modification, amendment or addition to our covenants;

	•	whether the offered Debt Securities will be subject to defeasance or covenant defeasance, or such other means of satisfaction and discharge as may be specified in the prospectus supplement;

	•	any additional events of default; and

	•	any other terms or provisions of the offered Debt Securities not inconsistent with the provisions of the Indenture.


	•	you cannot cause the Debt Securities to be registered in your name, and cannot obtain non-global certificates for your interest in the Debt Securities, except in the special situations that we describe below;

	•	you will be an indirect holder and must look to your own bank or broker for payments on the Debt Securities and protection of your legal rights relating to the Debt Securities;

	•	you may not be able to sell interests in the Debt Securities to some insurance companies and to other institutions that are required by law to own their securities in non-book-entry form;

	•	you may not be able to pledge your interest in a global security in circumstances where certificates representing the Debt Securities must be delivered to the lender or other beneficiary of the pledge in order for the pledge to be effective;

	•	the depositary’s policies, which may change from time to time, will govern payments, transfers, exchanges and other matters relating to your interest in a global security. We and the Trustee have no responsibility for any aspect of the depositary’s actions or for its records of ownership interests in a global security. We and the Trustee also do not supervise the depositary in any way; and

	•	DTC requires that those who purchase and sell interests in a global security within its book-entry system use immediately available funds and your broker or bank may require you to do so as well, and financial institutions that participate in the depositary’s book-entry system, and through which you hold your interest in a global security, may also have their own policies affecting payments, notices and other matters relating to the debt security. Your chain of ownership may contain more than one financial intermediary. We do not monitor and are not responsible for the actions of any of those intermediaries.


	•	if the depositary notifies us that it is unwilling, unable or no longer qualified to continue as depositary for that global security and we do not appoint another institution to act as depositary within 60 days; and

	•	if we notify the Trustee that we wish to terminate that global security, or if an event of default has occurred with regard to Debt Securities represented by that global security and has not been cured or waived; we discuss defaults later under “Defaults and Rights of Acceleration.”


	•	only in fully registered form;

	•	without interest coupons; and

	•	unless we indicate otherwise in the prospectus supplement, in denominations of $1,000 and amounts that are multiples of $1,000.


	•	certain purchase money and existing liens in connection with property acquisitions and the extension, renewal or refunding of the same,

	•	pledges of current assets, in the ordinary course of business to secure current liabilities,

	•	liens on property to secure obligations to pay all or a part of the purchase price of such property only out of or measured by oil or gas production or the proceeds thereof, or liens upon production from oil and gas property or the proceeds of such production, to secure obligations to pay all or part of the expenses of exploration, drilling or development of such property only out of such production or proceeds,

	•	mechanics’ or materialman’s liens, certain good faith deposits, deposits to secure public or statutory obligations, deposits to secure, or in lieu of, surety, stay or appeal bonds, and deposits as security for payment of taxes, assessments or similar charges and liens or security interests created in connection with bid or completion bonds,

	•	liens arising by reason of deposits with, or the giving of security to, a governmental agency as a condition to the transaction of business or the exercise of a privilege or license, or to enable us or a subsidiary to maintain self-insurance or participate in any funds established to cover any insurance risks in connection with workmen’s compensation, unemployment insurance, old age pension or other social security,

	•	pledges or assignments of accounts receivable, including customers’ installment paper, to banks or others (including to or by any subsidiary which is principally engaged in the business of financing our business and the business of our subsidiaries) made in the ordinary course of business,

	•	liens of taxes or assessments for the current year or not due or being contested in good faith and against which an adequate reserve has been established,

	•	judgments or liens the finality of which is being contested and execution on which is stayed,

	•	assessments or similar encumbrances the existence of which does not impair the use of the property subject thereto for the purposes for which it was acquired,

	•	certain landlords’ liens so long as the rent secured thereby is not in default,


	•	liens on the assets of any limited liability company organized under a limited liability company act of any state which limited liability company is treated as a partnership for federal income tax purposes, and


	•	with respect to Debt Securities issued after June 15, 2003, liens, in addition to liens set forth above, securing indebtedness not at any time exceeding in the aggregate 5% of the consolidated stockholders’ equity of the Company and its subsidiaries as of such time.


	•	either we shall be the continuing corporation, or the successor corporation (if other than us) shall be a corporation organized and existing under the laws of the United States of America or a state thereof or the District of Columbia and such corporation shall expressly assume, by supplemental indenture, the due and punctual payment of the principal, premium (if any) and interest on all the Debt Securities and the performance of all of our covenants under the Indenture;

	•	we or such successor corporation, as the case may be, shall not, immediately after such merger or consolidation, or such sale or conveyance, be in default in the performance of any such covenant or condition; and

	•	we will have delivered to the Trustee an officers’ certificate and an opinion of counsel as provided in the Indenture.


	(a) default in the payment of the principal or premium (if any) on any of the Debt Securities of such series when due and payable;

	(b) default in the payment of any installment of interest upon any of the Debt Securities of such series when due and payable, and continuance of such default for a period of 30 days;

	(c) default in the payment of any sinking or purchase fund payment or analogous obligation when due and payable;

	(d) failure to observe or perform any other of our covenants or agreements for a period of 90 days after written notice of such failure has been given as provided in the Indenture;

	(e) a default under any bond, debenture, note or other evidence of indebtedness for money borrowed by us (including a default with respect to Debt Securities of any series other than that series) or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by us (including the Indenture) whether such indebtedness now exists or shall hereafter be created, which default shall constitute a failure to pay in excess of $50,000,000 principal amount of such indebtedness when due and payable after the expiration of any applicable grace period with respect thereto or shall have resulted in an excess of $50,000,000 of principal amount of such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such indebtedness having been discharged, or such acceleration having been rescinded or annulled, within a period of 10 days after there shall have been given, by registered or certified mail, to us by the Trustee or to us and the Trustee by the holders of at least 25% in principal amount of the outstanding Debt Securities of that series a written notice specifying such default and requiring us to cause such indebtedness to be discharged or cause such acceleration to be rescinded or annulled and stating that such notice is a “Notice of Default” thereunder; or

	(f) certain events in bankruptcy, insolvency or other similar occurrences.


	•	to evidence the succession of another corporation to us, or successive successions and the assumption by the successor corporation of our covenants, agreements and obligations pursuant to Article Eleven of the Indenture;

	•	to add to our covenants for the protection of the holders of the Debt Securities and to make the occurrence, or the occurrence or continuance, of a default in any of such additions, an event of default permitting the enforcement of all remedies provided in the Indenture, with such period of grace, if any, and subject to such conditions as such supplemental indenture may provide;

	•	to provide for the issuance under the Indenture of Debt Securities, whether or not then outstanding, in coupon form (including Debt Securities registrable as to principal only) and to provide for exchangeability of such Debt Securities with Debt Securities issued under the Indenture in fully registered form and to make all appropriate changes for such purpose;

	•	to modify, eliminate or add to the provisions of the Indenture to such extent as shall be necessary to effect the qualification of the Indenture under the Trust Indenture Act, or under any similar federal statute hereafter enacted, and to add to the Indenture such other provisions as may be expressly permitted by the Trust Indenture Act, excluding, however, the provisions referred to in Section 316(a)(2) of the Trust Indenture Act or any corresponding provision in any similar federal statute hereafter enacted;

	•	to convey, transfer, assign, mortgage or pledge any property to or with the Trustee;

	•	to evidence and provide for the acceptance and appointment hereunder of a successor trustee with respect to the Debt Securities of one or more series and to add or change any provisions


		of the Indenture as shall be necessary to provide for or facilitate the administration of the trusts by more than one trustee;

	•	to change or eliminate any provision of the Indenture or to add any new provision to the Indenture; provided that if such change, elimination or addition will adversely affect the interests of the holders of the Debt Securities of any series in any material respect, such change, elimination or addition will become effective with respect to such series only when there is no debt security of such series remaining outstanding under the Indenture;

	•	to provide collateral security for the Debt Securities;

	•	to change any place where (1) the principal, premium (if any) and interest on Debt Securities of any series shall be payable; (2) any Debt Securities of any series may be surrendered for registration of transfer; (3) Debt Securities of any series may be surrendered for exchange; and (4) notices and demands to or upon us in respect of the Debt Securities of any series and the Indenture may be served; and

	•	to establish the form or terms of Debt Securities of any series as permitted by the Indenture.


	•	Classified Board of Directors. Our Board of Directors is divided into three classes with staggered terms, which means that, as a general matter, only one-third of the Board must stand for re-election at any annual meeting of shareholders. The classification of directors could have the effect of making it more difficult for shareholders, including those holding a majority of the outstanding shares, to force an immediate change in the composition of our Board. Two shareholder meetings, instead of one, generally will be required to effect a change in the control of our Board. The provision for the classification of directors may be amended, altered, changed or repealed only upon the affirmative vote of 80% of the outstanding shares entitled to vote in the election of directors.

	•	Fixing and Changing Number of Directors. Our By-laws and Articles of Incorporation authorize the Board of Directors to fix the number of directors and provide that the number may be changed only by (a) the affirmative vote of 80% of the outstanding shares entitled to vote in the election of Directors or (b) a majority of the entire Board of Directors.

	•	Nominations to the Board. With certain exceptions, nominations to the Board must be made at least 60 days prior to the date of a meeting of shareholders.

	•	Removal of Directors. Directors may be removed for cause only by the affirmative vote of 80% of the outstanding shares entitled to vote in the election of directors.

	•	Fair Price Provisions. Our Articles of Incorporation require the affirmative vote of a super majority of the outstanding shares of voting stock to approve certain transactions such as actions in connection with any “Business Combination.” A Business Combination is defined to include any merger, consolidation, lease, sale or disposition of assets or certain other business transactions by us or our subsidiaries involving an “interested shareholder.” An interested shareholder is defined as any person who is or has announced an intention to become the beneficial owner of 10% or more of our voting stock (and certain defined affiliates) or an affiliate or associate of an interested shareholder and that, together with all such other arrangements, has an aggregate fair market value and/or involves aggregate commitments of $10,000,000 or more or more than 5% of our total assets or shareholders’ equity as reflected on our most recent fiscal year-end consolidated balance sheet. Our Articles of Incorporation require the affirmative vote of not less than 66 2/3% of our voting stock, voting together as a single class, excluding any voting stock held by an interested shareholder, with respect to all Business Combinations involving the interested shareholder unless (1) the transaction is approved by our Board of Directors prior to the date on which directors not affiliated with the interested shareholder and who were directors prior to the time the interested shareholder acquired such status (“Continuing Directors”) comprise less than a majority of our Board of Directors, and (2) if the Business Combination involves payment of consideration to


		shareholders, certain minimum price and disclosure requirements are satisfied as to all shareholders, and there has been no major change in our business or equity capital structure or any change or reduction in the payment of dividends since the date the interested shareholder acquired such status. To meet the minimum price criteria, the shareholders must receive consideration or retain value per share after the transaction that is not less than the highest price per share paid by the interested shareholder in the transaction or within two years preceding the announcement date of the transaction, or the fair market value per share of our common stock on the date the transaction is announced or the date on which the interested shareholder acquired such status, whichever is higher. The minimum price provisions must be met with respect to every class or series of our outstanding capital stock, whether or not the interested shareholder has previously acquired shares of any particular class or series. Our Articles of Incorporation require the same 66 2/3% shareholder approval to amend or repeal the foregoing provisions or to adopt any provision inconsistent with such provisions unless the change is proposed by the Board of Directors prior to the date on which Continuing Directors comprise less than a majority of the Board.

	•	Shareholder Rights Plan. Our shareholder rights plan generally provides the Board of Directors and shareholders the right to act to substantially dilute the share ownership position of any person who acquires 15% or more of our common stock. These provisions could discourage bids for the common stock at a premium and might adversely affect the market price of our common stock.

	•	Amendment to our By-Laws. Our By-Laws may be amended only by (a) the affirmative vote of 80% of the outstanding shares entitled to vote in the election of directors or by the Board of Directors or (b) a majority of the entire Board of Directors at a meeting at which a quorum is present.

	•	Opt out of North Carolina Anti-Takeover Statutes. Our Articles of Incorporation contain language to “opt out” of the provisions of two North Carolina anti-takeover statutes which, under the North Carolina Business Corporation Act, would otherwise apply to us. The first of these statutes, called the “North Carolina Shareholder Protection Act,” requires that any business combination (as defined therein) between a corporation and any 20% shareholder be approved by 95% of the corporation’s voting shares. Under the second statute, called the “North Carolina Control Share Acquisition Act,” control shares of a corporation that are acquired in a “control share acquisition” (as defined in the statute) have no voting rights unless such rights are granted by resolution adopted by a majority of the corporation’s shareholders, and in the event such voting rights were to be granted, all other shareholders would have the right to have their shares in the corporation redeemed at their fair value, subject to certain restrictions. Because application of these statutes to us would create material conflicts with existing provisions of our Articles of Incorporation regarding Business Combinations, our Articles of Incorporation include provisions stating that neither of these statutes will apply to us.


	•	to or through underwriting syndicates represented by managing underwriters, or by underwriters without a syndicate, such underwriters to be designated at the time of sale;

	•	through agents designated from time to time; or

	•	directly by us to other purchasers.


	(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

	(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

	(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

	provided, however, That paragraphs (a)1(i) and (a)(1)(ii) of this section do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.


	(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

	(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.


	B.	Undertaking Related to Filings Incorporating Subsequent Exchange Act Documents by Reference:


*	The Company will file any forms of securities and underwriting agreements not previously so filed in a Current Report on Form 8-K.