LONG TERM INCENTIVE AWARD AGREEMENT

This Agreement is entered into as of January 11, 2006, between Cascade Natural Gas Corporation, a Washington corporation (the Company), and David W. Stevens (Recipient).

On December 20, 2005, the Governance, Nominating and Compensation Committee (the Committee) of the Companys Board of Directors (the Board) authorized an objectively-determinable performance-based award (the Award) to Recipient pursuant to Section 6 of the Companys 1998 Stock Incentive Plan (the Plan) of the Plan.  Compensation paid pursuant to the Award is intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986 (the Code).  Recipient desires to accept the awards subject to the terms and conditions of this Agreement.

NOW, THEREFORE, the parties agree as follows:

1.             Award.

Recipients Target Shares for purposes of this Agreement shall be 9,100 shares. Subject to the terms and conditions of this Agreement, the Company shall issue or otherwise deliver to the Recipient the number of shares of Common Stock of the Company (the Award Shares) determined under this Agreement based on (a) the Companys return on equity as defined in Section 2.4 (ROE) relative to the ROE of a peer group of companies during the three-year period from July 1, 2005 to June 30, 2008 (the Award Period) as described in Section 2 and (b) Recipients continued employment during the Award Period as described in Section 3.  If the Company issues or otherwise delivers Award Shares to Recipient, the Company shall also pay to Recipient the amount of cash determined under Section 4 (the Dividend Equivalent Cash Award).

2.             Award Performance Condition.

2.1           Subject to possible reduction under Section 3, the number of Award Shares to be issued or otherwise delivered to Recipient shall be determined by multiplying the Payout Factor (as defined below) by the Award Shares.

2.2           To determine the Payout Factor, the eight Peer Group Companies (as defined below) and the Company shall be ranked based on their respective ROEs from highest to lowest, with the company with the highest ROE having a ROE Ranking of 1 and the company with the lowest ROE having a ROE Ranking of 9.  The Payout Factor will be the percentage in the following table corresponding to the Companys ROE Ranking.