Exhibit 10(c)

[Peoples Energy Corporation Letterhead]









Thomas A. Nardi
Senior Vice President, Chief
  Financial Officer and Treasurer
Peoples Energy Corporation
130 E. Randolph Drive
Chicago, IL 60601

Dear Tom:

As you are aware, certain terms and conditions of the employment letter agreement between Peoples Energy Services Corporation ("PESCO") and you, dated October 9, 2000 (the "2000 Agreement") are no longer apposite to your situation and other matters require restatement or clarification.

Set forth below are provisions that I believe should replace the terms in the 2000 Agreement. Your acceptance of this letter will constitute a new agreement (this "Agreement") that supercedes the 2000 Agreement.

1. Accelerated Paid Time Off Benefits
2. Pension Benefit
3. Confidential Information
4. Waiver and Releases.
5. Entire UnderstandingThis Agreement contains the entire understanding between PEC and you with respect to the subject matter hereof and supersedes any prior agreement between PEC, PESCO and you, except that the provisions of this Agreement shall not affect or operate to reduce any benefit or compensation owing to you of any kind elsewhere provided including, without limitation, the C&S Agreement, and not expressly provided for in this Agreement. PEC and you agree that the 2000 Agreement is terminated and of no further force and effect, effective as of the date of your acceptance of this Agreement.

If you accept this Agreement, please evidence your acceptance by signing below in the indicated space.

| | Sincerely,                           
| | -------------------------------------
| |                                      
| | /s/ T. M. PATRICK                    
| |                                      
| | President and Chief Operating Officer





Accepted this 22nd day of 
May, 2002.



|By: | /s/ THOMAS A. NARDI            
|--- | -------------------------------
|    | Thomas A. Nardi                
|    | Senior Vice President, Chief   
|    | Financial Officer and Treasurer





Attachment A to Agreement between Peoples Energy Corporation and
Thomas A. Nardi, dated May 22, 2002

Pension Benefit

If Mr. Thomas A. Nardi ("Executive") has been employed by PEC or an Affiliate for at least five (5) years prior to termination of employment, the Executive will be paid in cash within ten (10) business days after termination of employment, an amount equal to the remainder of (x) the Present Value Amount of the benefits that would have been accrued by the Executive under the PEC Retirement Plan and the PEC SRB, Part A and Part B on the date of termination of employment, determined as if the Executive (i) had received credit for an additional twenty-one (21) years of Benefit Service, and (ii) had commenced participation in the PEC Retirement Plan and the PEC SRB as of the first date of Executive's actual employment with PESCO less (y) the Present Value Amount of the benefits accrued by the Executive under the PEC Retirement Plan and the PEC SRB, Part A and Part B on the date of termination of employment. If the Executive has been employed by PEC or an Affiliate for less than five (5) years at the date of termination of employment, then the Executive will be paid in cash within ten (10) business days after termination of employment, an amount equal to the Present Value Amount of the benefits that would have been accrued by the Executive under the PEC Retirement Plan and PEC SRB, Part A and Part B on the date of termination of employment, determined as if the Executive (i) had commenced participation in the PEC Retirement Plan and the PEC SRB as of the first date of Executive's actual employment with PESCO and (ii) had received credit for the number of years of Benefit Service equal to the sum of (x) the number of years that the Executive has been employed by the Company and (y) the product of 20 multiplied by a fraction, the numerator of which is equal to the number of whole months the Executive has been employed by PEC or Affiliate at the date of termination of employment and the denominator of which is equal to sixty (60). The following shall apply for purposes of determining the Executive's benefits under the preceding provisions.

1. 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).
2. Executive's benefit under the preceding provisions shall be determined as if Executive's participation in the PEC Retirement Plan and the PEC SRB commenced as of the first date of Executive's actual employment with Peoples Energy Services Corporation.
3. If Executive is terminated prior to completing three (3) years of employment with PEC or an Affiliate, Executive's 12-month average compensation for the purpose of calculating a benefit under the proceeding provisions shall be determined by utilizing all months of Executive's actual compensation that may be used to calculate a pension benefit under the PEC Retirement Plan and the PEC SRB.

All capitalized terms not otherwise specifically defined in this Attachment A, shall have the same meaning as defined in the Confidentiality and Severance Agreement between Peoples Energy Corporation and Thomas A. Nardi, Senior Vice President, Chief Financial Officer and Treasurer, effective as of May 22,  2002.





Attachment B To Agreement Between Peoples Energy Corporation and
Thomas A. Nardi, Dated May 22, 2002

RELEASE AGREEMENT

This Release Agreement is entered into on this 22nd day of May, 2002, between Thomas A. Nardi, Senior Vice President, Chief Financial Officer and Treasurer ("Executive") and Peoples Energy Corporation on behalf of Peoples Energy Corporation and any Affiliate and successor or successors to Peoples Energy Corporation. Any defined term not explicitly defined herein shall have the same meaning as defined in the Agreement.

1. In consideration of the benefits to be paid and provided to the Executive under that certain Agreement between Peoples Energy Corporation ("PEC") and the Executive, dated as of May 22, 2002, ("Agreement") Executive waives, releases and forever discharges PEC (including its current and former Affiliates, and their current and former officers, directors, employees and agents) from all claims which he may have against PEC (including its current and former Affiliates, and their current and former officers, directors, employees and agents and PEC's and its Affiliates', benefit plans and fiduciaries thereof) 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, the Employee Retirement Income Security Act, or any other federal, state or local statute, regulation, ordinance, or doctrine of common law.
2. The Executive acknowledges that, prior to his execution of this Release 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.
3. The Executive agrees that any change made to the Agreement and to this Release Agreement, whether or not material, will not extend the twenty-one day period for accepting this Release Agreement.

PEC encourages the Executive to consult with an attorney regarding this Release 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 Agreement will not become effective until seven days thereafter, and if the Executive changes his mind within that period, he may revoke this Release Agreement 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 Agreement prior to the (i) this Release Agreement being executed by and delivered by the Executive to the Secretary of PEC; and (ii) this Release Agreement becoming irrevocable.

PEOPLES ENERGY CORPORATION:

|By: _____________________________ | ____________________________
|--------------------------------- | ----------------------------
|                                  | Date                        

|By: _____________________________ | ____________________________
|--------------------------------- | ----------------------------
|Thomas A. Nardi                   | Date