Exhibit 10(m)
                                
                       SEVERANCE AGREEMENT
                             BETWEEN
                   PEOPLES ENERGY CORPORATION
                               AND
                     KENNETH S. BALASKOVITS
                  Vice President and Controller
                                
                                
          THIS AGREEMENT, effective as of December 4, 1996, by
and between Peoples Energy Corporation, an Illinois corporation
and Kenneth S. Balaskovits, Vice President and Controller (the
"Executive").
          
                           WITNESSETH
          
          
          WHEREAS, the Executive is a valuable employee of the
Company and an integral part of the management of the Company;
and
          
          WHEREAS, the Company wishes to encourage the Executive
to continue his career and services with the Company for the
period during and after an actual or threatened Change in
Control; and
          
          WHEREAS, the Board of Directors of PEC, at its meeting
on December 4, 1996, determined that it would be in the best
interests of the Company and its shareholders to assure
continuity in the management of the Company's administration and
operations in the event of a Change in Control by entering into
this Agreement with the Executive;
          
          NOW THEREFORE, it is hereby agreed by and between the
parties hereto as follows:

          1.  Definitions.
          
          "AAA" shall have the meaning set forth in paragraph 5
of this Agreement.
          
          "Affiliate" shall mean the subsidiaries of PEC and
other entities controlled by such subsidiaries.
          
          "Agreement" shall mean this Severance Agreement.
          
          "Benefit Service" shall mean the Benefit Service as
defined in the PEC Retirement Plan.
          
          "Board" shall mean the Board of Directors of PEC.
          
"Cause" shall mean the Executive's fraud or dishonesty which has
resulted in or is likely to result in material economic damage to
the Company as determined in good faith by a vote of at least two-
thirds of the non-employee directors of PEC at a meeting of the
Board at which the Executive is provided an opportunity to be
heard.
          
          "Change in Control" shall mean:
          
          (i) either (A) receipt by PEC of a report on Schedule
13D, or an amendment to such a report, filed with the Securities
and Exchange Commission ("SEC") pursuant to Section 13(d) of the
Securities Exchange Act of 1934 (the "1934 Act") disclosing that
any person (as such term is used in Section 13(d) of the 1934
Act) ("Person"), is the beneficial owner, directly or indirectly,
of twenty (20) percent or more of the outstanding stock of PEC,
or (B) actual knowledge by PEC of facts, on the basis of which
any Person is required to file such a report on Schedule 13D, or
to make an amendment to such a report, with the SEC (or would be
required to file such a report or amendment upon the lapse of the
applicable period of time specified in Section 13 (d) of the 1934
Act) disclosing that such Person is the beneficial owner,
directly or indirectly, of twenty (20) percent or more of the
outstanding stock of PEC;
          
          (ii) purchase by any Person, other than PEC or a wholly-
owned subsidiary of the Company, of shares pursuant to a tender
or exchange offer to acquire any stock of PEC (or securities
convertible into stock) for cash, securities or any other
consideration provided that, after consummation of the offer,
such Person is the beneficial owner (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly, of twenty (20)
percent or more of the outstanding stock of PEC (calculated as
provided in paragraph (d) of Rule 13d-3 under the 1934 Act in the
case of rights to acquire stock);
          
          (iii) approval by the shareholders of PEC of (a) any
consolidation or merger of PEC in which PEC is not the continuing
or surviving corporation or pursuant to which shares of stock of
PEC would be converted into cash, securities or other property,
other than a consolidation or merger of PEC in which holders of
its stock immediately prior to the consolidation or merger have
substantially the same proportionate ownership of common stock of
the surviving corporation immediately after the consolidation or
merger as immediately before, or (b) any consolidation or merger
in which PEC is the continuing or surviving corporation, but in
which the common shareholders of PEC immediately prior to the
consolidation or merger do not hold at least ninety (90) percent
of the outstanding common stock of the continuing or surviving
corporation (except where such holders of common stock hold at
least ninety (90) percent of the common stock of the corporation
which owns all of the common stock of PEC), or (c) any sale,
lease, exchange or other transfer (in one transaction or a series
of related transactions) of all or substantially all the assets
of PEC (Transfer Transaction), (except where (A) PEC owns all of
the outstanding stock of the transferee entity or (B) the holders
of PEC's common stock immediately prior to the Transfer
Transaction own at least ninety (90) percent of the outstanding
stock of the transferee entity, immediately after the Transfer
Transaction), or (d) any consolidation or merger of PEC where,
after the consolidation or merger, one Person owns one hundred
(100) percent of the shares of stock of PEC (except where the
holders of PEC's common stock immediately prior to such merger or
consolidation own at least ninety (90) percent of the outstanding
stock of such Person immediately after such consolidation or
merger); or
          
          (iv) a change in the majority of the members of the
Board within a twenty-four (24)month period, unless the election
or nomination for election by PEC's shareholders of each new
director was approved by the vote of at least two-thirds of the
directors then still in office who were in office at the
beginning of the twenty-four (24)month period.
          
          "Code" shall mean the United States Internal Revenue
Code of 1986, as amended, or any successor thereto.
          
          "Company" shall mean PEC and include any Affiliate and
successor or successors to PEC.
          
          "Compensation" shall mean the sum of (i) the
Executive's annual rate of salary on the last day the Executive
was an employee of the Company, including any elective
contributions made by the Company on behalf of the Executive that
are not includable in the gross income of the Executive under
Section 125 or 402(a)(8) of the Code or any successor provision
thereto, and including any amount of salary that has been
deferred by the Executive, (ii) an award equal to the average of
the amounts awarded to the Executive under the PEC STIC during
the three years preceding termination of employment, and (iii)
the economic equivalent value of any awards received by Executive
under the PEC LTIC in the calendar year preceding termination of
employment (as determined in good faith by the PEC Directors'
Compensation- Nominating Committee).
          
          "Computed Award" shall mean Computed Award as defined
in the PEC STIC.
          
          "Constructive Discharge" shall mean a good faith
determination by the Executive that there has been any (i)
material change by the Company of the Executive's functions,
duties or responsibilities which change would cause the
Executive's position with the Company to become of less dignity,
responsibility, importance, prestige or scope, including, without
limitation, the assignment to the Executive of duties and
responsibilities inconsistent with his position, (ii) assignment
or reassignment by the Company of the Executive, without the
Executive's consent, to another place of employment more than
fifty (50) miles from the Executive's current place of
employment, (iii) liquidation, dissolution, consolidation or
merger of PEC, or transfer of all or substantially all of its
assets, other than a transaction or series of transactions in
which the resulting or surviving transferee entity has, in the
aggregate, a net worth at least equal to that of PEC immediately
before such transaction and such resulting or surviving
transferee entity expressly assumes this Agreement and all
obligations and undertakings hereunder, or (iv) reduction, which
is more than de minimis, in the Executive's total compensation
(Compensation, perquisites and benefits).  It is understood and
agreed by all parties hereto that a reduction in (a) the amount
the Executive receives under PEC STIC, (b) the awards received by
the Executive under the PEC LTIC, or (c) the prerequisites or
benefits of the Executive shall not be deemed a reduction if such
amount received under the PEC STIC, awards received under the PEC
LTIC, or such prerequisites or benefits are the same as received
by the Company's similarly situated officers.  An event shall not
be considered Constructive Discharge unless the Executive
provides written notice to PEC specifying the event relied upon
for Constructive Discharge within six months after the occurrence
of such event.  Within thirty days of receiving such written
notice from the Executive, the Company may cure or cause to be
cured the event upon which the Executive claims a Constructive
Discharge and no Constructive Discharge shall have been
considered to have occurred with respect to such event.  PEC and
the Executive, upon mutual written agreement, may waive any of
the foregoing provisions which would otherwise constitute a
Constructive Discharge.
          
          "Coverage Period" shall mean the period commencing with
the month in which termination of employment as described in
paragraph 3.a. of this Agreement shall have occurred, and ending
thirty-six (36) months thereafter.
          
          "Effective Date" shall mean December 4, 1996.
          
          "PEC" shall mean Peoples Energy Corporation, an
Illinois corporation.
          
          "PEC Directors' Compensation-Nominating Committee"
shall mean the Peoples Energy Corporation Board of Directors'
Compensation-Nominating Committee.
          
          "PEC LTIC" shall mean the Peoples Energy Corporation
Long Term Incentive Compensation Plan as in effect on the
Effective Date, as amended from time to time or any successor
plan.
          
          "PEC Retirement Plan" shall mean the Peoples Energy
Corporation Retirement Plan as in effect on the Effective Date,
as amended from time to time, or any successor plan.
          
          "PEC SRB" shall mean the Peoples Energy Corporation
Supplemental Retirement Benefit Plan, as in effect on the
Effective Date, as amended from time to time or any successor
plan.
          
          "PEC STIC" shall mean the Peoples Energy Corporation
Short Term Incentive Compensation Plan, as in effect on the
Effective Date, as amended from time to time or any successor
plan.
          
          "PEC TAP" shall mean the Peoples Energy Corporation
Termination Allowance Plan as in effect on the Effective Date, as
amended from time to time and as
enhanced as described in that certain PEC brochure for nonunion
employees titled, "Career Transition Opportunities", dated
November 1996.
          
          "Plan Year" shall mean the Plan Year as defined under
the PEC STIC.
          
          "Present Value Amount" shall mean the amount calculated
by the PEC Directors' Compensation-Nominating Committee as of the
date of the termination of the Executive's employment as
described in paragraph 3.a., using as a mortality basis the
mortality basis used by the PEC Retirement Plan for determining
benefits, or if such mortality basis is not available, a
mortality basis determined by the PEC Retirement Plan's
consulting actuaries, and assuming a discount rate equal to the
average of the yield on Thirty (30) year United States Treasury
Bonds for the second calendar month preceding the Executive's
termination of employment as described in paragraph 3.a.
          
          "Rule of Eighty-Five" shall mean the Rule of Eighty-
Five as defined under the PEC Retirement Plan.
          
          "SARs" shall mean SARs as defined under the PEC LTIC.
          
          "Stock Options" shall mean Options as defined under the
PEC LTIC.
          
          "Term" shall mean the term of this Agreement as set
forth in paragraph 2.
          
          "Trust" shall mean the Trust under Peoples Energy
Corporation Executive Deferred Compensation Plan and Supplemental
Retirement Benefit Plan, Part A and Part B, dated September 22,
1995, as amended July 1, 1996, in effect on the Effective Date,
as amended from time to time.
          
          2.  Term.
          
              This Agreement shall be effective as of the
Effective Date and shall continue thereafter until the later of:
(i) thirty-six (36) full calendar months following the date on
which occurs any of the events described in subparagraphs (i),
(ii) or (iv) of the definition of Change in Control in paragraph
1; or (ii) twenty-four (24) full calendar months following the
date on which the transaction that was the subject of shareholder
approval pursuant to subparagraph (iii) of the definition of
Change in Control in paragraph 1 has been completed.
          
          3.  Severance Benefit.
          
              a.  If, during the period commencing on the date of
a Change in Control and ending on the last day of the Term, the
Executive's employment hereunder is terminated by the Company for
any reason, other than Cause, death, or disability, or is
terminated by the Executive in the event of a Constructive
Discharge, then, within five (5) business days after such
termination, PEC shall pay to the Executive (if the Executive has
died before receiving all payments to which he has become
entitled hereunder to the beneficiary or estate of the Executive
as described in paragraph 14) the sum of (i) accrued but unpaid
salary and accrued but unused paid time off under the Company's
"Paid Time Off Bank" policy for all employees, effective
January 1, 1997, or any successor plan, (ii) severance pay in a
lump sum cash amount equal to three (3) years of the Executive's
Compensation, and (iii) the amount determined pursuant to
paragraph 3.e.  The Executive (if the Executive has died before
receiving all payment to which he becomes entitled hereunder, the
beneficiary or the estate of the Executive as described in
paragraph 14) will be paid in cash within ten (10) business days
after termination as described in paragraph 3.a., the Present
Value Amount of the benefits accrued by the Executive under the
PEC SRB, Part A and Part B on the date of termination of
employment as described in this paragraph 3.a., determined as if
the Executive had received credit for an additional three (3)
years of Benefit Service.  For purposes of determining the
Executive's accrued benefits under the preceding sentence, such
benefits shall be determined as full benefits, without actuarial
reduction, as if the Executive qualified for the Rule of Eighty-
Five under the PEC Retirement Plan and PEC SRB (regardless of
whether the Executive so qualifies).  All non-vested Options and
SARs awarded to the Executive under the PEC LTIC shall be deemed
vested as of the earlier of the date of a Change in Control as
defined in this Agreement or Change in Control as defined in the
PEC LTIC.  The Company shall treat the Executive as employed by
the Company for purposes of exercising Stock Options and SARs
during the Coverage Period.  All non-vested restricted stock
awarded to the Executive under the PEC LTIC shall be deemed
vested and owned by the Executive as of the earlier of the date
of a Change in Control as defined in this Agreement or a Change
in Control as defined in the PEC LTIC and such stock shall be
delivered to the Executive within five (5) business days after
the date of such Change in Control.  The Executive's termination
of employment with the Company to become an employee of a
corporation which directly or indirectly owns one hundred percent
(100%) of or which is owned one hundred percent (100%) by the
Company shall not be considered a termination of employment for
purposes of this Agreement.  The subsequent termination of the
Executive's employment from such corporation, without employment
at a company that is wholly-owned by such corporation, shall be
considered a termination of employment for purposes of this
Agreement.
          
          b.  During the longer of:  (i) the Coverage Period or
(ii) the period commencing with the date of the Executive's
termination of employment as described in paragraph 3a and ending
on the last day of the first month in which the Executive may
retire under the PEC Retirement Plan and be eligible to receive a
retirement annuity thereunder without actuarial reduction, the
Executive shall be entitled to all benefits under the Company's
welfare benefit plans (within the meaning of Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended), as
if the Executive were still employed during such period, at the
same level of benefits and at the same dollar cost to the
Executive as is available to all of the Company's executives
generally and if and to the extent that equivalent benefits shall
not be payable or provided under any such plans, the Company
shall pay or provide equivalent benefits on an individual basis;
provided, however, that PEC's obligations under this paragraph
3.b. shall cease upon the date following the termination of the
Executive's employment as described in paragraph 3.a. that the
Executive is eligible to receive benefits under welfare benefit
plans (within the meaning of Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended) provided by
an employer of the Executive other than the Company.
          
          c.  (i) If Independent Tax Counsel shall determine that
the aggregate payments made to the Executive pursuant to this
Agreement and any other payments to the Executive from the
Company which constitute "parachute payments" as defined in
Section 280G of the Code (or any successor provision thereto)
("Parachute Payments") would be subject to the excise tax imposed
by Section 4999 of the Code (the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount calculated at the highest
marginal tax rate applicable to the Executive for the tax year in
which such payments were paid to the Executive (determined by
Independent Tax Counsel) such that after payment by the Executive
of all federal, state and other taxes (including any Excise Tax)
imposed upon the Gross-Up Payment and any interest or penalties
imposed with respect to such taxes, the Executive retains from
the Gross-Up Payment an amount equal to the Excise Tax imposed
upon the payments.  For purposes of this paragraph 3.c.,
"Independent Tax Counsel" shall mean a lawyer, a certified public
accountant with a nationally recognized accounting firm, or a
compensation consultant with a nationally recognized actuarial
and benefits consulting firm, with expertise in the area of
executive compensation tax law, who shall be selected by the
Executive and shall be reasonably acceptable to PEC, and whose
fees and disbursements shall be paid by PEC.
          
              (ii)  If Independent Tax Counsel shall determine
that no Excise Tax is payable by the Executive, it shall furnish
the Executive with a written opinion that the Executive has
substantial authority not to report any Excise Tax on the
Executive's Federal income tax return.  If the Executive is
subsequently required to make a payment of any Excise Tax, then
the Independent Tax Counsel shall determine in the same manner as
a Gross-up Payment the amount (the amount of such additional
payments are referred herein as "Gross-Up Underpayment") of such
payment and any such Gross-Up Underpayment shall be promptly paid
by PEC to or for the benefit of the Executive.  The fees and
disbursements of the Independent Tax Counsel shall be paid by
PEC.
          
              (iii) The Executive shall notify PEC in writing
within 15 days of any claim by the Internal Revenue Service that,
if successful, would require the payment by PEC of a Gross-Up
Payment.  If PEC notifies the Executive in writing that it
desires to contest such claim and that it will bear the costs and
provide the indemnification as required by this subparagraph
(iii) of paragraph 3.c., the Executive shall:
          
                  (A) give the Company any information reasonably
requested by the Company relating to such claim,
          
                  (B) take such action in connection with
contesting such claim as the Company shall reasonably request in
writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an
attorney selected by the Company,
          
                  (C) cooperate with the Company in good faith in
order to effectively contest such claim, and
          
                  (D) permit the Company to participate in any
proceedings relating to such claim; provided, however, that the
Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis calculated at the
highest marginal tax rate applicable to the Executive, for any
Excise Tax or federal and state income tax or other taxes,
including interest and penalties with respect thereto, imposed as
a result of such representation and payment of costs and
expenses.  The Company shall control all proceedings taken in
connection with such contest; provided, however, that if the
Company directs the Executive to pay such claim and sue for a
refund, PEC shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis calculated at the
highest marginal tax rate applicable to the Executive, from any
Excise Tax or federal and state income tax or other taxes,
including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed
income with respect to such advance.
          
              (iv)    If, after the receipt by the Executive of
an amount advanced by PEC pursuant to subparagraph (iii) of
paragraph 3.c., the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall within 10
days pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable
thereto).
          
          d.  In the event of any termination of the Executive's
employment as described in paragraph 3.a., the Executive shall be
under no obligation to seek other employment, and there shall be
no offset against amounts due the Executive under this Agreement
on account of any remuneration attributable to any subsequent
employment.
          
          e.  The Executive shall be paid the following described
amounts pursuant to subparagraph (iii) of paragraph 3.a.  If the
Executive has not received an award under the STIC for the Plan
Year in which his employment is terminated the PEC Directors'
Compensation-Nominating Committee shall determine in good faith,
specifically considering the Executive's Computed Award under the
STIC for such Plan Year, an award amount equal to a prorated
award for the portion of the Plan Year that the Executive was
employed by the Company.  If the Executive has not yet received
payment of his award amount under the STIC for the Plan Year
preceding the Executive's termination, the PEC Directors'
Compensation-Nominating Committee shall determine in good faith,
specifically considering the Executive's Computed Award under the
STIC for such Plan Year, an award amount under the STIC for such
Plan Year.

          4.  Source of Payments.
          
              All payments provided for in paragraph 3 shall be
paid in cash from the general funds of PEC; provided, however,
that such payments shall be reduced by the amount of any payments
made to the Executive or his dependents, beneficiaries or estate
from any trust or special or separate fund established or
utilized by PEC to assure such payments.  The Company shall not
be required to establish a special or separate fund or other
segregation of assets to assure such payments, and, if the
Company shall make any investments to aid it in meeting its
obligations hereunder, the Executive shall have no right, title
or interest whatever in or to any such investments except as may
otherwise be expressly provided in a separate written instrument
relating to such investments.  Nothing contained in this
Agreement, and no action taken pursuant to its provisions, shall
create or be construed to create a trust of any kind, or a
fiduciary relationship between the Company and the Executive or
any other person.  To the extent that any person acquires a right
to receive payments from the Company such right shall be no
greater than the right of an unsecured creditor of the Company.
          
          5.  Litigation Expenses:  Arbitration.
          
              a.  PEC's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the
Company may have against the Executive or others, except as set
forth in paragraph 7.  In no event shall the Executive be
obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement.  PEC agrees to pay, upon
written demand therefor by the Executive, all legal fees and
expenses which the Executive may reasonably incur as a result of
any dispute or contest (regardless of the outcome thereof) by or
with the Company or others regarding the validity or
enforceability of, or liability under, any provision of this
Agreement, plus in each case interest at the Federal long-term
rate in effect under Section 1274(d) of the Code, compounded
monthly.  In any such action brought by the Executive for damages
or to enforce any provisions of this Agreement, the Executive
shall be entitled to seek both legal and equitable relief and
remedies, including, without limitation, specific performance of
the Company's obligations hereunder, in his sole discretion.  The
obligation of the Company under this paragraph 5. shall survive
the termination for any reason of this Agreement (whether such
termination is by the Company, by the Executive, upon the
expiration of this Agreement or otherwise).
          
              b.  In the event of any dispute or difference
between the Company and the Executive with respect to the subject
matter of this Agreement and the enforcement of rights hereunder,
the Executive may, in his sole discretion by written notice to
PEC, require such dispute or difference to be submitted to
arbitration.  The arbitrator or arbitrators shall be selected by
agreement of the parties or, if they cannot agree on an
arbitrator or arbitrators within 30 days after the Executive had
notified PEC of his desire to have the question settled by
arbitration, then the arbitrator or arbitrators shall be selected
by the American Arbitration Association (the "AAA") in Illinois
upon the application of the Executive.  The determination reached
in such arbitration shall be final and binding on both parties
without any right of appeal of further dispute.  Execution of the
determination by such arbitrator may be sought in any court of
competent jurisdiction.  The arbitrators shall not be bound by
judicial formalities and may abstain from following the strict
rules of evidence and shall interpret this Agreement as an
honorable engagement and not merely as a legal obligation.
Unless otherwise agreed by the parties, any such arbitration
shall take place in Illinois, and shall be conducted in
accordance with the Rules of the AAA.
          
          6.  Tax Withholding.
          
              The Company may withhold from any payments made
under this Agreement all federal, state or other taxes, including
excise taxes as shall be required pursuant to any law or
governmental regulation or ruling.
          
          7.  Waiver and Releases.
          
              a.  In consideration of the covenants under this
Agreement, including, but not limited to, paragraphs 3 and 5, the
Executive hereby waives, releases and forever discharges the
Company from any and all claims he has or may have against the
Company arising out of or relating to the following:  (a) The PEC
TAP, upon receipt by the Executive of all amounts due or owing to
the Executive under this Agreement; and (b) The PEC SRB, Part A
and Part B, provided that the amount paid to the Executive
pursuant to the second and third sentences of paragraph 3.a.
exceeds the amount of the Executive's accrued benefits under the
PEC SRB, Part A and Part B as of the date of the Executive's
termination of employment as described in paragraph 3.a.
          
              b.  In consideration of the covenants under this
Agreement, including, but not limited to, paragraphs 3 and 5, and
as a condition precedent to receiving any payments under this
Agreement, the Executive agrees to execute after the date of his
termination as described in paragraph 3.a., a release
substantially in the form of Exhibit A attached hereto and by
this reference made a part hereof.
          
          8.  Amendment of Trust and Deposit of Assets.
          
              On or before December 31, 1996, PEC shall amend the
Trust to provide that within ten (10) business days after the
date of a Change in Control, PEC shall deposit cash into the
Trust,  in an amount equal to the following:  (a) the payment
obligations of PEC under the Peoples Energy Corporation's
Executive Deferred Compensation Plan as in effect on the
Effective Date, as amended from time to time or any successor
plan, and (b) the accrued benefits of the participants, as of the
date of the Change in Control, under the PEC SRB, Part A and Part
B.
          9.  Outplacement Services.
          
              Unless PEC offers outplacement services to the
Executive during the Coverage Period, PEC shall reimburse the
Executive for the costs of outplacement services incurred by the
Executive up to a maximum amount of Seven Thousand Dollars
($7,000).
          
          10. Entire Understanding.
          
              This Agreement contains the entire understanding
between the Company and the Executive with respect to the subject
matter hereof and supersedes any prior severance agreement
between the Company and the Executive, except that this Agreement
shall not affect or operate to reduce any benefit or compensation
inuring to the Executive of any kind elsewhere provided and not
expressly provided for in this Agreement.
          
          11. Severability.
          
              If, for any reason, any one or more of the
provisions or part of a provision contained in this Agreement
shall be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall
not affect any other provision or part of a provision of this
Agreement not held so invalid, illegal or unenforceable, and each
other provision or part of a provision shall to the full extent
consistent with law continue in full force and effect.
          
          12  Consolidation, Merger, or Sale of Assets.
          
              If PEC consolidates or merges into or with, or
transfers all or substantially all of its assets to, another
corporation the term "the Company" as used herein shall include
such other corporation and this Agreement shall continue in full
force and effect.
          
          13. Notices.
          
              All notices, requests, demands and other
communications required or permitted hereunder shall be given in
writing and shall be deemed to have been duly given if delivered
or mailed, postage prepaid, first class with return receipt as
follows:
          
              a.  to PEC:
          
                  Peoples Energy Corporation
                  130 East Randolph Drive
                  Chicago, Illinois  60601
                  Attention:  E. P. Cassidy, Secretary

              b.  to the Executive:
          
                  Kenneth S. Balaskovits
                  Vice President and Controller
                  Peoples Energy Corporation
                  130 East Randolph Drive
                  Chicago, Illinois  60601
          
or to such other address as either party shall have previously
specified in writing to the other.
          
          14. No attachment.
          
              Except as required by law and as expressly provided
in his paragraph 14, no right to receive payments under this
Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge or
hypothecation or to execution, attachment, levy or similar
process or assignment by operation of law, and any attempt,
voluntary or involuntary, to effect any such action shall be
null, void and of no effect.  Notwithstanding the preceding
sentence, the Executive may, by giving notice to PEC during the
Executive's lifetime, designate a beneficiary or beneficiaries to
whom the severance benefits described in paragraph 3.a. shall be
transferred in the event of the Executive's death.  Any such
designation may be revoked or changed by the Executive at any
time and from time to time by similar notice.  If there is no
such designated beneficiary living upon the death of the
Executive or if all such designated beneficiaries die prior to
the receipt by the Executive of the referenced severance
benefits, such severance benefits shall be transferred to the
Executive's surviving spouse or, if none, then such severance
benefits will be transferred to the estate or personal
representative of the Executive.  If the Company, after
reasonable inquiry, is unable to determine within twelve months
after the Executive's death whether any designated beneficiary of
the Executive did in fact survive the Executive, such beneficiary
shall be conclusively presumed to have died prior to the
Executive's death.
          
          15. Binding Agreement.
          
              This Agreement shall be binding upon, and shall
inure to the benefit of, the Executive and the Company and their
respective permitted successors and assigns.
          
          16. Modification and Waiver.
          
              This Agreement may not be modified or amended
except by an instrument in writing signed by the parties hereto.
No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement except by written
instrument signed by the party charged with such waiver or
estoppel.  No such written waiver shall be deemed a continuing
waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived
and shall not constitute a waiver of such term or condition for
the future or as to any act other than that specifically waived.
          
          17. Headings of No Effect.
          
              The paragraph headings contained in this Agreement
are included solely for convenience of reference and shall not in
any way affect the meaning or interpretation of any of the
provisions of this Agreement.
          
          18. Governing Law.
          
              This Agreement and its validity, interpretation,
performance, and enforcement shall be governed by the laws of the
State of Illinois without giving effect to the choice of law
provisions in effect in such State.
          
              IN WITNESS WHEREOF, PEC has caused this Agreement
to be executed by its officers thereunto duly authorized, and the
Executive has signed this Agreement, all effective as of the date
first above written.
          
                  PEOPLES ENERGY CORPORATION
          
          
                  By: /s/ H. J. Livingston, Jr.
                          Director and Chairman of the
                          Compensation-Nominating Committee
                          of the Board of Directors
          
          
                  By:  /s/ Kenneth S. Balaskovits
                            Kenneth S. Balaskovits
                            Vice President and Controller





                            EXHIBIT A
                     TO SEVERANCE AGREEMENT
             BETWEEN PEOPLES ENERGY CORPORATION AND
                EXECUTIVE, DATED DECEMBER 4, 1996
                                
                        RELEASE AGREEMENT


         This Agreement is entered into on this ____ day of

_______________, between Kenneth S. Balaskovits, Vice President

and Controller ("Executive") and Peoples Energy Corporation on

behalf of Peoples Energy Corporation and any affiliate and

sucessor or sucessors to Peoples Energy Corporation.

          1.      In consideration of the benefits to be paid and

provided to the Executive under that certain Severance Agreement

between Peoples Energy Corporation ("PEC") and the Executive,

dated as of December 4, 1996, ("Severance Agreement") Executive

waives, releases and forever discharges PEC (including its

current and former affiliated companies, and their current and

former officers, directors, employees and agents) from all claims

which he may have against PEC (including its current and former

affiliated companies, and their current and former officers,

directors, employees and agents) arising out of the Americans

With Disabilities Act, the Age Discrimination in Employment Act,

Title VII of the Civil Rights Act of 1964, the Illinois Human

Rights Act, or any other federal, state or local statute,

regulation, ordinance, or doctrine of common law prohibiting

discrimination on the basis of disability or age or race or

gender or on any other substantially similar basis.

          2.      The Executive acknowledges that, prior to his

execution of this Agreement, he was encouraged to review it with

counsel or anyone else of his choosing.  Executive states that he

understands its meaning and that he knowingly, freely and

voluntarily executes it.

          The Company encourages the Executive to consult with an

attorney regarding this Agreement.  If after review, the

Executive wishes to accept, he should sign the document and

return it to the Secretary of Peoples Energy Corporation.  This

Release will not become effective until seven days thereafter,

and if the Executive changes his mind within that period, he may

revoke this Release by notifying the Secretary of Peoples Energy

Corporation.  The Executive understands and agrees that no

benefits will be paid or provided to the Executive under the

Severance Agreement prior to the receipt by PEC of this release

executed by the Executive.



PEOPLES ENERGY CORPORATION:



By: ___________________________________ _______________________
                                                         Date



By: ___________________________________ ________________________
         Kenneth S. Balaskovits                           Date