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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Commission File Number 1-935

(801) 324-5555
(Registrant's telephone number, including area code)

Questar Gas Company

Form 10-Q for the Quarterly Period Ended March 31, 2005

TABLE OF CONTENTS

GLOSSARY OF COMMONLY USED TERMS

3

FORWARD-LOOKING STATEMENTS

3

PART I. FINANCIAL INFORMATION

4

Item 1.

Financial Statements

4

Statements of Income for the three and twelve months ended

    March 31, 2005 and 2004

5

Condensed Balance Sheets at March 31, 2005, March 31, 2004,

    and December 31, 2004

6

Condensed Statements of Cash Flows for the three months ended

    March 31, 2005 and 2004

7

Notes Accompanying Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and

    Results of Operations

10

Item 4.

Controls and Procedures

12

PART II.

OTHER INFORMATION

13

Item 6.

Exhibits

13

Signatures

14

GLOSSARY OF COMMONLY USED TERMS

Btu

One British thermal unit – a measure of the amount of energy required to raise the temperature of one pound of water one degree Fahrenheit.

cf

Cubic foot is a common unit of gas measurement. One standard cubic foot equals the volume of gas in one cubic foot measured at standard conditions – a temperature of 60 degrees Fahrenheit and a pressure of 30 inches of mercury (approximately 14.73 pounds per square inch).    

dth

Decatherms or ten therms. One dth equals one million Btu or approximately one Mcf.

gas

   All references to “gas” in this report refer to natural gas.

heating-degree days

A measure of the number of degrees the average-daily outside temperature is below 65 degrees Fahrenheit.

Mbbl

One thousand barrels.

Mcf

One thousand cubic feet.

Mdth

One thousand decatherms.

proved reserves

Those quantities of natural gas, crude oil, condensate and NGL on a net-revenue-interest basis, which geological and engineering data demonstrate with reasonable certainty to be recoverable under existing economic and operating conditions. See 17 C.F.R. Section 4-10(a)(2) for a complete definition.

proved-developed

Reserves that include proved developed-producing reserves

reserves

and proved-developed behind-pipe reserves. See 17 C.F.R. Section 4-10(a)(3).

proved-developed-

Reserves expected to be recovered from existing completion intervals in

producing reserves

existing wells.

proved-undeveloped

Reserves expected to be recovered from new wells on proved-undrilled acreage

reserves

or from existing wells where a relatively major expenditure is required for recompletion. See 17 C.F.R. Section 4-10(a)(4).

FORWARD-LOOKING STATEMENTS

This report includes “forward-looking statements” within the meaning of Section 27(a) of the Securities Act of 1933, as amended, and Section 21(e) of the Securities Exchange Act of 1934 as amended. All statements other than statements of historical facts included or incorporated by reference in this report, including, without limitation, statements regarding the future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “could,” “expect,” “intend,” “project,” “estimate,” “anticipate,” “believe,” “forecast,” or “continue” or the negative ther eof or variations thereon or similar terminology. Although these statements are made in good faith and are reasonable representations of Questar Gas Company (Questar Gas or the Company) expected performance at the time, actual results may vary from management’s stated expectations and projections due to a variety of factors.

Important assumptions and other significant factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements include, but are not limited to, the following:

Questar Gas must comply with numerous regulations from the federal, state and local level

Questar Gas is subject to federal, state and local environmental, health and safety laws and regulations. Environmental laws and regulations are complex, change frequently and tend to become more onerous over time. In addition to the costs of compliance, the Company may incur substantial costs to take corrective actions at both owned and previously owned facilities. Accidental spills and leaks requiring cleanup may occur in the ordinary course of business. As standards change, the Company may incur significant costs in cases where past operations followed practices that were considered acceptable at the time but that now require remedial work to meet current standards. Failure to comply with these laws and regulations may result in fines, significant costs for remedial activities, or injunctions.

Questar Gas must comply with numerous and complex regulations governing activities on federal and state lands in the Rocky Mountain region, notably the National Environmental Policy Act, the Endangered Species Act and the National Historic Preservation Act. Federal and state agencies frequently impose conditions on the Company’s activities. These restrictions tend to become more stringent over time.

Questar Gas must incur significant costs to comply with federal pipeline-safety regulations. The Company may also be affected by possible future regulations requiring the tracking, reporting and reduction of greenhouse-gas emissions.

State agencies regulate the distribution of natural gas

Questar Gas’s natural gas-distribution business is regulated by the Public Service Commission of Utah (PSCU) and the Public Service Commission of Wyoming (PSCW). These commissions set rates for distribution services and establish policies and procedures for services, accounting, purchase, sale and other activities. PSCU and PSCW policies may adversely affect Questar Gas profitability.

Other factors may affect Questar Gas’s results

Other factors may affect Questar Gas’s results such as changes in general economic conditions; changes in regulation; availability and economic viability of gas and oil properties for sale or exploration; creditworthiness of counterparties; rate of inflation and interest rates; assumptions used in business combinations; weather and natural disasters; changes in customers’ credit ratings; competition from other forms of energy, other pipelines and storage facilities; effects of accounting policies issued periodically by accounting standard-setting bodies; terrorist attacks or acts of war; changes in the business or financial condition of the Company; changes in credit ratings; and availability of financing.

The Company cannot predict these factors nor can it assess the impact, if any, of such factors on its financial position or its results of operations. Accordingly, forward-looking statements should not be relied upon as a predictor of actual results.  Questar Gas undertakes no obligation to update any forward-looking statement provided in this report.

QUESTAR GAS COMPANY

NOTES ACCOMPANYING FINANCIAL STATEMENTS

March 31, 2005

(Unaudited)

Note 1 – Basis of Presentation of Interim Financial Statements

Questar Gas is a wholly owned subsidiary of Questar Corporation. The accompanying interim consolidated financial statements of Questar Gas have not been audited by an independent registered public accounting firm with the exception of the condensed consolidated balance sheet at December 31, 2004, which was derived from the audited consolidated financial statement at that date. The unaudited financial statements were prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  The interim financial statements reflect all normal, recurring adjustments and accruals that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the interim periods presented. The preparation of financial statements and notes in conformity with GAAP requires that management make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities. Certain reclassifications were made to the 2004 financial statements to conform with the 2005 presentation.

The results of operations for the three- and twelve-month periods ended March 31, 2005, are not necessarily indicative of the results that may be expected for the year ending December 31, 2005, due to the seasonal nature of the gas-distribution business and other risk factors listed in the Forward-Looking Statements section of this report.  Interim financial statements do not include all of the information and notes required by GAAP for audited annual financial statements. For further information please refer to the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

Note 2 – Rate Refund Obligation

On August 1, 2003, the Utah Supreme Court issued an order reversing an August 2000 decision made by the PSCU concerning certain natural gas-processing costs incurred by Questar Gas to manage the heat content of its gas supply. The court ruled that the PSCU did not comply with its statutory responsibilities and regulatory procedures when approving a stipulation in Questar Gas’s 1999 general rate case. The stipulation permitted Questar Gas to collect $5.0 million per year, a portion of the processing costs, through May 2004. The Committee of Consumer Services, a Utah state agency, appealed the PSCU’s decision, arguing that the PSCU had failed to explicitly address whether the costs were prudent.

As a result of the court’s order, Questar Gas recorded a liability for a potential refund to gas-distribution customers. A total liability of $29.0 million includes revenue received for processing costs and interest from June 1999 through September 2004.

On August 30, 2004, the PSCU ruled that Questar Gas failed in 1999 to prove that its decision to contract for gas processing with an affiliate was prudent. The PSCU rejected the stipulation, denied the request for rate recovery and ordered the refund of gas-processing costs previously collected in rates. Because Questar Gas had previously accrued a liability for the refund, the order did not have a material impact on 2004 earnings. Questar Gas reduced its rates on September 1, 2004, to eliminate the collection of gas-processing costs and on October 1 began refunding previously collected costs, plus interest, over a 12-month period. As of March 31, 2005, Questar Gas had a refund liability of $9.2 million.

In response to a Questar Gas petition, the PSCU clarified that its order did not preclude recovery of ongoing and certain past-processing costs. Ongoing processing costs are approximately $6.0 million per year. Questar Gas has requested ongoing rate coverage for gas-processing costs in its pass-through filings, but is not currently collecting these costs in rates. The PSCU has conducted several technical conferences to determine what actions should be taken to manage the heat content of the gas supply. On January 31, 2005, Questar Gas filed a rate request with the PSCU to recover $5.7 million per year of gas-processing costs through its gas-balance account. Questar Gas filed expert testimony supporting the rate request on April 15, 2005, and hearings before the PSCU are scheduled for October 2005.

Note 3 – Questar Regulated Services Merger

Questar Gas and its parent company, Questar Regulated Services Company (Regulated Services) merged effective March 31, 2005 with Questar Gas the surviving company.  Regulated Services was a holding company that provided management, engineering and accounting services for its wholly owned subsidiaries, Questar Gas and its affiliated company, Questar Pipeline Company (Questar Pipeline). Regulated Services was a wholly owned subsidiary of Questar. Questar Gas and Questar Pipeline became wholly owned subsidiaries of Questar as a result of the merger.

Note 4 – Recent Accounting Development

On March 30, 2005, the Financial Accounting Standards Board issued Interpretation 47 (FIN 47), “Accounting for Conditional Asset Retirement Obligations.” FIN 47 clarifies that the term “conditional asset retirement obligation” as used in Statement of Financial Accounting Standards 143, “Accounting for Asset Retirement Obligations,” refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. Accordingly, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. FIN 47 is effective no later than the year end 2005 for the Company. FIN 47 is currently being evaluated by the Company and is not expected to have a material impact on the Company’s financial position or results of operations.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

(Unaudited)

Questar Gas distributes natural gas in Utah, southwestern Wyoming and southeastern Idaho. Following is a summary of financial results and operating information.

Questar Gas earned $28.7 million in the first quarter of 2005, $2.4 million higher than the first quarter of 2004. For the 12 months ended March 31, 2005, Questar Gas earned $33.9 million compared with $20.8 million in the 12 months ended March 31, 2004. Questar Gas’s earnings were reduced by $13.6 million after tax in the second quarter of 2003 as a result of a Utah Supreme Court order in a processing dispute.

Margin Analysis

Questar Gas’s margin (revenues less gas costs) increased $2.1 million, or 2% in the first quarter of 2005 compared to the first quarter of 2004 and increased 1% in the 12 months ended March 31, 2005 compared to the same period of 2004. Following is a summary of major changes in Questar Gas’s margin for the first quarter and 12 months of 2005.

Residential and commercial sales volumes were down 4% in the first quarter of 2005 compared with the first quarter of 2004 because warmer weather offset increased usage per customer. Residential and commercial sales volumes were up 1% in the 12 months ended March 31, 2005 due to an increase in the number of customers that offset lower usage per customer. At March 31, 2005, Questar Gas was serving 800,523 customers. Customer growth remained above national averages at 3.1% over the prior year. Housing construction in Utah remained strong, driven by population growth and low mortgage-interest rates. Usage per customer, adjusted for normal temperatures, was up 1% in the first quarter of 2005 and down 1% in the 12 months ended March 31, 2005 compared with 2004. Over the long-term, usage per customer has been decreasing due to more efficient appliances and homes and customer response to higher price s.

Weather, as measured in degree days, was 5% warmer than normal in the first quarter of 2005 compared with 12% colder than normal in the first quarter 2004. For the 12 months ended March 31, 2005 weather was 5% warmer than normal compared with 3% colder for the year-earlier period. A weather-normalization adjustment on customer bills generally offsets financial impacts of moderate temperature variations.

Industrial deliveries declined 20% in the first quarter of 2005 and 16% in the 12 months ended March 31, 2005 compared with 2004 primarily driven by lower power-generation requirements in the current period.

Expenses

Cost of natural gas sold increased 16% in the first quarter of 2005 and 22% in the 12 months ended March 31, 2005 compared with 2004. Increased gas purchase costs more than offset lower volumes due to the warmer weather. Questar Gas accounts for purchased-gas costs in accordance with procedures authorized by the PSCU and the PSCW. Purchased-gas costs that are different from those provided for in present rates are accumulated and recovered or credited through future rate changes. As of March 31, 2005, Questar Gas had a $14.8 million balance in the purchased-gas adjustment account representing gas costs incurred but not yet recovered from customers.

Operating and maintenance expenses increased 2% in the first quarter of 2005 and 5% in the 12 months ended March 31, 2005 compared with 2004, primarily due to higher labor and bad debt costs.

Depreciation expense increased 10% in the first quarter of 2005 and 8% in the 12 months ended March 31, 2005 compared with 2004, due to plant additions, including a customer information system that was placed in service in July 2004 and transfers of information technology assets from affiliates.

Rate-refund Obligation

See Note 2 in the Notes Accompanying Financial Statements under Item 1. Financial Statements in Part I of this report for a discussion of the regulatory proceedings involving Questar Gas’s processing costs.

Regulation

Questar Gas is subject to the requirements of the Pipeline Safety Improvement Act. Questar Gas estimates that it will cost $4 to $5 million per year to comply with the act, not including costs of pipeline replacement if necessary. The PSCU has allowed Questar Gas to record a regulatory asset for incremental operating costs incurred to comply with this act until the next rate case or three years, whichever is sooner.

Debt rating downgrade

In April 2005, Standard & Poor’s (S&P) downgraded Questar Gas’s long-term debt rating and Questar’s commercial paper rating. S&P set an “A-2” rating for Questar’s commercial paper and “A-” long-term debt ratings for Questar Gas. S&P assigned a “stable outlook” for each Questar entity.

S&P said that Questar’s growing exploration and production business benefits Questar Gas and Questar Pipeline when commodity prices are high, but exposes them to greater risk when prices are low. S&P also cited a negative shift in Utah’s regulatory environment as a factor in its decision to downgrade the credit ratings of Questar Gas.

Moody’s ratings for the Company’s debt were unchanged during the quarter.

ITEM 4.  CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures.

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by the report (the Evaluation Date). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company, required to be included in the Company’s reports filed or submitted under the Exchange Act. The Company’s Chief Executive Officer and Chief Financial Officer also concluded that the controls and procedures were effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Act is accumulated and communicated to the Company’s management including its principal executive and financial officers or persons performing similar functions as appropriate to allow timely decisions regarding required disclosure.

Through ongoing evaluation of internal controls over financial reporting, management continues to implement procedures and controls to enhance the reliability of Questar Gas’s internal control procedures including planned improvements in financial closing and accounting processes. However, there have been no changes in internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, Questar Gas’s internal control over financial reporting.

PART II.  OTHER INFORMATION

ITEM 6.

EXHIBITS

a.

The following exhibits are filed as part of this report:

Exhibit No.

Exhibit

   31.1.

Certification signed by Alan K. Allred, Questar Gas Company’s Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

   31.2.

Certification signed by S. E. Parks, Questar Gas Company’s Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

   32.

Certification signed by Alan K. Allred and S. E. Parks, Questar Gas Company’s Chief Executive Officer and Chief Financial Officer, respectively, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

QUESTAR GAS COMPANY

(Registrant)

May 16, 2005

/s/Alan K. Allred

              Date

Alan K. Allred

President and Chief Executive Officer

May 16, 2005

/s/S/ E. Parks

              Date

S. E. Parks

Vice President and Chief Financial Officer

Exhibits List

Exhibit No.

Exhibit

31.1.

Certification signed by Alan K. Allred, Questar Gas Company's Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification signed by S. E. Parks, Questar Gas Company’s Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.

Certification signed by Alan K. Allred and S. E. Parks, Questar Gas Company’s Chief Executive Officer and Chief Financial Officer, respectively, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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Exhibit 31.1

CERTIFICATION

I, A. K. Allred, certify that:

1.

I have reviewed this quarterly report on Form 10-Q for first quarter 2005 of Questar Gas Company;

2

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 16, 2005

By:    /s/A. K. Allred

        Date

A. K. Allred,

President and Chief Executive Officer

Exhibit 31.2.

CERTIFICATION

I, S. E. Parks, certify that:

1.

I have reviewed this quarterly report on Form 10-Q for first quarter 2005 of Questar Gas Company;

2

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 16, 2005

By    /s/S. E. Parks

       Date

S. E. Parks

Vice President

and Chief Financial Officer

Exhibit No. 32.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Questar Gas Company (the "Company") on Form

10-Q for the period ending March 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Alan K. Allred, President and Chief Executive Officer of the Company, and S. E. Parks, Vice President and Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1)

The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

QUESTAR GAS COMPANY

May 16, 2005

/s/Alan K. Allred

          Date

Alan K. Allred

President and Chief Executive Officer

May 16, 2005

/s/S. E. Parks

          Date

S. E. Parks

Vice President and Chief Financial Officer

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