**MEMORANDUM
      OF UNDERSTANDING**











This
      Memorandum of Understanding (“MOU”) is entered into this 20th day of July, 2007,
      by and between Northern Illinois Gas Company d/b/a Nicor Gas Company (“Nicor”)
      and Commonwealth Edison Company (“ComEd”) (collectively, the “Utilities”) to
      reflect the agreement, in principle, entered into by Nicor and ComEd concerning
      allocation of certain costs
      relating to the remediation of particular manufactured gas plant sites (“Sites”)
      in Illinois .


The
      terms
“Shared Costs,” “Final Cost Allocation,” and “Coordinator/Utility,” as used
      anywhere in this MOU, have the same meaning that they have in the Utilities’
Interim Cooperative Agreement dated October 28, 1993, as amended.





1.  With
      respect to the Sites listed on Attachment A hereto, the Final Cost Allocation
      shall be and shall result in Nicor being responsible for 51.73 percent, and
      ComEd being responsible for 48.27 percent, of any and all past and future Shared
      Costs.


2.  With
      respect to the Sites listed on Attachment B hereto, the Final Cost Allocation
      shall be and shall result in Nicor being responsible for 0 percent, and ComEd
      being responsible for 100 percent, of any and all past and future Shared Costs.
      ComEd will become the Coordinator/Utility at any and all Sites listed on
      Attachment B other than the site described on Attachment B as “MGP Site at
      Clinton and Jackson, Ottawa, Illinois.”




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3.  With
      respect to Shared Costs that do not relate exclusively either to the Sites
      listed on Attachment A or to the Sites listed on Attachment B, but rather relate
      to the Utilities’ MGP remediation program in general (“Program Costs”), the
      Final Cost Allocation shall be and shall result in Nicor being responsible
      for
      50 percent, and ComEd being responsible for 50 percent, of any and all past
      and
      future Shared Costs.


4.  The
      Utilities will use the Final Cost Allocations described herein in all future
      Illinois Commerce Commission (“ICC”) rate reconciliation proceedings.


5.  This
      MOU
      is subject to the negotiation of a definitive Settlement Agreement inclusive
      of,
      but not limited to, terms consistent with those set forth in this MOU. The
      Utilities agree to use their best efforts and to act in good faith promptly
      to
      negotiate and execute such a Settlement Agreement on or before September 10,
      2007.


6.  The
      Settlement Agreement will be subject to and contingent upon approval by the
      ICC.
      The Utilities agree to use their best efforts and to act in good faith promptly
      to seek and obtain such approval. In the event that the ICC does not approve
      the
      Settlement Agreement, the Settlement Agreement and this MOU will be
      void.


7.  On
      the
      date of ICC approval of the Settlement Agreement, to the extent that either
      Utility has paid more or less than the amounts determined by the percentages
      in
      paragraphs 1 through 3 of this MOU, appropriate credits and debits, if required,
      will be made promptly to reflect the agreed upon percentage of each Utility’s
      Final Cost Allocation, as specified in paragraphs 1 through 3 of this MOU.
      These
      credits and debits will be reflected in invoices for future remediation costs
      at
      Sites listed on Attachment A.




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8.  If,
      before the ICC approval contemplated by this MOU becomes final and
      non-appealable, the Illinois General Assembly approves a change in Illinois
      law
      such that either party reasonably anticipates that it may be prevented by such
      change from obtaining, in whole or in part, recovery from customers of Shared
      Costs, then either party so potentially affected by such legislative action
      shall have the right to terminate this MOU and the Settlement Agreement, by
      giving notice of such termination to the other party within thirty (30) days
      of
      such change. In the event of such termination, neither Utility shall have any
      continuing obligation under either this MOU or the Settlement Agreement.


9.  The
      Utilities
      will promptly notify the arbitrators who are presiding over the Arbitration
      that
      is currently pending and captioned *Northern
      Illinois Gas Company v. Commonwealth Edison Company* , ** CPR
      File
      No. G-06-26H, that the Utilities have entered into this MOU, and will request
      that the arbitrators stay the Arbitration pending negotiation, execution, and
      ICC review and approval of the Settlement Agreement.


10.  The
      Settlement Agreement will provide that, subject to the provisions of paragraph
      8
      hereof, once a final Order of the ICC approving the Settlement Agreement becomes
      final and non-appealable, (A) the Utilities will request that the Arbitration
      be
      dismissed with prejudice, and (B) mutual releases, specified in the Settlement
      Agreement, releasing all claims for liability with respect to Shared Costs
      (other than as may arise out of the Settlement Agreement), will become
      effective.




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11.  In
      the
      event the ICC rejects the Settlement Agreement, or in the event of termination
      of this MOU and the Settlement Agreement as provided in paragraph 8 hereof,
      either Utility may reinstate the Arbitration, in which
      case neither Utility will be deemed to have waived any claim, right, or defense
      as a result of this MOU or the Settlement Agreement, and neither this MOU nor
      the Settlement Agreement nor any communication or document related to either
      will be admissible in any way in any reinstated Arbitration.





Executed
      as of the date set forth above.





COMMONWEALTH
      EDISON COMPANY





By
      /s/
      DARRYL M. BRADFORD


Darryl
      M.
      Bradford








NORTHERN
      ILLINOIS GAS COMPANY d/b/a Nicor Gas Company





By
      /s/
      PAUL C. GRACEY, JR.


Paul
      C.
      Gracey, Jr.


Senior
      Vice President and General Counsel


July
      24,
      2007




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**ATTACHMENT
      A***




1.
            Aurora
                Gas Light Company, River St. at North Avenue Bridge,
                Aurora


2.
            Belvidere
                Gas, Light & Fuel, Locust Street,
                Belvidere


3.
            Chicago
                Heights Gas Company, 17th & State Street, Chicago
                Heights


4.
            Cicero
                gas Company, Lombard & Garfield, Oak
                Park


5.
            Coal
                Products manufacturing Company, North Broadway,
                Lockport


6.
            Freeport
                Gas, Light & Coke Company, Liberty & Jackson St.,
                Freeport


7.
            Geneseo
                Electric Light & Gas Company, Oakwood & First St.,
                Geneseo


8.
            Illinois
                Northern Utility Company, Market & 14th,
                DeKalb


9.
            Illinois
                Northern Utilities Company, 227 Miller,
                Sterling


10.
            Joliet
                Gaslight Company, Station B, North Broadway & Ingalls St.,
                Joliet


11.
            Kankakee
                Gas Company, Birch & Harrison St.,
                Kankakee


12.
            LaGrange
                Gas Company, 47th & Bluff St.,
                LaGrange


13.
            Lemont
                Gas, Light Company, Main & Lockport Rd.,
                Lemont


14.
            Lincoln
                Water, Light & Gas Company, Sangamon & Dacatur St.,
                Lincoln


15.
            Lockport
                Gas Company, 17th & I & M Canal,
                Lockport


16.
            Mendota
                Gas Company, Fifth St. & Ninth Ave.,
                Mendota


17.
            Morris
                gas Company, Nettle & Jackson St.,
                Morris


18.
            Morrison
                Gas & Electric, Market & S. Orange,
                Morrison


19.
            Northwestern
                Gas, Light & Coke Company, 912 Clark St.,
                Evanston


20.
            Northwestern
                Gas, Light & Coke Company,
                Maple & Vermont, Blue Island


21.
            Northwestern
                Gas, Light & Coke Co./Niles Center Station, Oakton St. & McCormick
                Blvd., Skokie





22.
            Ottawa
                Gas, Light & Coke Company, Illinois & Walker St.,
                Ottawa


23.
            Pontiac
                Light & Water Company, Vermillion & Water St.,
                Pontiac


24.
            Streator
                Gas, Light & Coke Co., Water St. & Vermillion Rr.,
                Streator





*The Utilities are not admitting liability at any of these sites or,
          except
          as otherwise provided in this MOU, waiving any rights or
          defenses.


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**ATTACHMENT
      B***


1.
            MGP
                Site on Coal Gas Road, DuQuoin,
                Illinois


2.
            MGP
                Site on Bluff Street, Joliet,
                Illinois


3.
            MGP
                Site on Center Street, Geneseo,
                Illinois


4.
            MGP
                Site at Clinton and Jackson, Ottawa,
                Illinois


5.
            Dixon
                I (2nd St.)


6.
            Dixon
                II (River & Perry)


7.
            DuQuoin
                (Chestnut)


8.
            Elgin
                TDC-570-0044


9.
            Kenilworth


10.
            Mendota
                (Main St.)


11.
            Murphysboro
                I (Walnut)


12.
            Murphysboro
                II (Big Muddy)


13.
            Rockford
                (Avon & Cedar)


14.
            Rockford
                II (Mulberry)





*  The
          Utilities are not admitting liability at any of these sites or, except
          as
          otherwise provided in this MOU, waiving any rights or defenses.
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