Columbia Gets Relief on Costly Gas Contracts : Bankruptcy: A judge lets the utility pay lower market prices for 30 days rather than the higher rates negotiated years ago.

Columbia Gas System Inc. said Thursday that a bankruptcy judge has granted the natural gas supplier temporary price relief on contracts that required it to buy gas at above-market prices.

Columbia, which provides natural gas to customers in 15 Eastern states, filed for Chapter 11 bankruptcy protection Wednesday, contending that it faced potential losses of more than $1 billion on the contracts.

Because of that filing, Dow Jones & Co. announced Thursday, the stock of Columbia Gas will be deleted from the Dow Jones Utility Average, beginning Monday. It will be replaced by Arkla Inc., another large natural gas distributor.

John Croom, Columbia’s chairman and chief executive, said Judge Helen Balick’s 30-day order, which took effect Thursday morning, allows Columbia to pay market prices for natural gas under the contracts. That is about half of what it had been paying.

The judge’s order also allows the Wilmington, Del.-based company to take the minimum amounts of gas allowed daily under the contracts.

Sometime after Aug. 31, Croom said, Balick will consider the company’s request to nullify all the purchase contracts that require Columbia to buy gas at above-market prices.

Natural gas prices have fallen steadily in recent months as warmer-than-normal weather has cut demand. In recent weeks, they hit a 15-year low of about $1.30 per thousand cubic feet, while Columbia is stuck paying as much as $6.70.

Industry analysts said gas producers would likely fight Columbia’s effort to scrap the contracts, many of which were negotiated more than a decade ago amid a brighter outlook for natural gas prices.

Columbia will seek to achieve an accommodation with creditors, including gas producers, “as quickly as we can,” Croom said.

He said that the bankruptcy filing, rather than alienating producers, would ultimately help Columbia establish a more stable, equitable relationship with them. Croom said Wednesday that the filing will not affect customers.

He repeated that it was unclear how long Columbia would be in Chapter 11 bankruptcy. Under Chapter 11 of the Federal Bankruptcy Code, a company is protected from creditors as it keeps operating and seeks to work out a plan to pay its debts.

Columbia stock, which fell $3 Wednesday, rose $1.625 to $15.625 and was the most active issue on the New York Stock Exchange.