SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D. C. 20549




FORM
      10-Q




[
                X ]
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 For the Quarter Ended
                December 31, 2007


OR


[    
                ]
            TRANSITION
                REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934




Commission
                File Number
            Exact
                Name of Registrant as Specified in its Charter and Principal Office
                Address and Telephone Number
            State
                of Incorporation
            I.R.S.
              Employer
                Identification Number1-16681
            The
                Laclede Group, Inc.
              720
                Olive Street
              St.
                Louis, MO 63101
              314-342-0500
            Missouri
            74-29765041-1822
            Laclede
                Gas Company
              720
                Olive Street
              St.
                Louis, MO 63101
              314-342-0500
            Missouri
            43-0368139





Indicate
      by check mark whether the registrants (1) have filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such report) and (2) have been subject to such filing requirements
      for
      the past 90 days.





Yes
            [
                X ]
            No
            [    
                ]





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of
      the
      Exchange Act):




The
                Laclede Group, Inc.:
            Large
                accelerated filer
            [    
                ]
            Accelerated
                filer
            [
                X ]
            Non-accelerated
                filer
            [    
                ]Laclede
                Gas Company:
            Large
                accelerated filer
            [    
                ]
            Accelerated
                filer
            [    
                ]
            Non-accelerated
                filer
            [
                X ]




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act):





The
                Laclede Group,
                Inc.:
            Yes
            [    
                ]
            No
            [
                X ]Laclede
                Gas
                Company:
            Yes
            [    
                ]
            No
            [
                X ]






Indicate
      the number of shares outstanding of each of the issuer’s classes of common stock
      as of the latest practicable date:




Shares
                Outstanding AtRegistrant
            Description
                of Common
                Stock
            January
                31,
                2008The
                Laclede Group,
                Inc.:
            Common
                Stock ($1.00 Par Value)
            21,788,966Laclede
                Gas
                Company:
            Common
                Stock ($1.00 Par Value)
            10,337  *


*
      100% owned by The Laclede Group, Inc.





















TABLE
                OF CONTENTS
            Page
                No.PART
                1.  FINANCIAL INFORMATIONItem
                1
            Financial
                StatementsThe
                Laclede Group, Inc.:Statements
                of Consolidated Income
            4Statements
                of Consolidated Comprehensive Income
            5Consolidated
                Balance Sheets
            6-7Statements
                of Consolidated Cash Flows
            8Notes
                to Consolidated Financial Statements
            9-18Laclede
                Gas Company:Statements
                of Income
            Ex.
                99.1, p. 1Statements
                of Comprehensive Income
            Ex.
                99.1, p. 2Balance
                Sheets
            Ex.
                99.1, p. 3-4Statements
                of Cash Flows
            Ex.
                99.1, p. 5Notes
                to Financial Statements
            Ex.
                99.1, p. 6-11Item
                2
            Management’s
                Discussion and Analysis of Financial Condition andResults
                of Operations (The Laclede Group, Inc.)
            19-28Management’s
                Discussion and Analysis of Financial Condition andResults
                of Operations (Laclede Gas Company)
            Ex.
                99.1, p. 12-19Item
                3
            Quantitative
                and Qualitative Disclosures About Market Risk
            29Item
                4
            Controls
                and Procedures
            29PART
                II.  OTHER INFORMATIONItem
                1
            Legal
                Proceedings
            30Item
                2
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            30Item
                6
            Exhibits
            30SIGNATURES
                – The Laclede Group, Inc.
            31SIGNATURES
                – Laclede Gas Company
            32INDEX
                TO EXHIBITS





FILING
              FORMAT


This
      Quarterly Report on Form 10-Q is a combinedreport beingfiled by two separate registrants: TheLaclede Group,
      Inc. (Laclede Group or the Company) and Laclede Gas Company (Laclede Gas
      or the Utility).











2




PART
              I. FINANCIAL INFORMATION





The
      interim financial statements included herein have been prepared by the Company,
      without audit, pursuant to the rules and regulations of the Securities and
      Exchange Commission. These financial statements should be read in conjunction
      with the financial statements and the notes thereto included in the Company’s
      Form 10-K for the fiscal year ended September 30, 2007.











3


Item
      1. Financial Statements




THE
                  LACLEDE GROUP, INC.STATEMENTS
                  OF
                  CONSOLIDATED INCOME(UNAUDITED)


Three
                Months EndedDecember
                31,(Thousands,
                Except Per Share Amounts)
            
            2007
            
            2006Operating
                Revenues:RegulatedGas
                distribution
            
            $
            320,892
            
            $
            348,488Non-RegulatedServices
            
            
            37,362
            
            
            36,429Gas
                marketing
            
            
            181,798
            
            
            153,467Other
            
            
            1,299
            
            
            1,177Total
                Operating Revenues
            
            
            541,351
            
            
            539,561Operating
                Expenses:RegulatedNatural
                and propane gas
            
            
            222,841
            
            
            251,523Other
                operation expenses
            
            
            35,213
            
            
            33,680Maintenance
            
            
            6,235
            
            
            5,598Depreciation
                and amortization
            
            
            8,713
            
            
            8,497Taxes,
                other than income taxes
            
            
            16,681
            
            
            18,759Total
                Regulated Operating Expenses
            
            
            289,683
            
            
            318,057Non-RegulatedServices
            
            
            37,699
            
            
            36,361Gas
                marketing
            
            
            172,872
            
            
            147,668Other
            
            
            1,051
            
            
            1,077Total
                Operating Expenses
            
            
            501,305
            
            
            503,163Operating
                Income
            
            
            40,046
            
            
            36,398Other
                Income and (Income Deductions) – Net
            
            
            2,650
            
            
            3,303Interest
                Charges:Interest
                on long-term debt
            
            
            5,126
            
            
            5,626Interest
                on long-term debt to unconsolidated affiliate trust
            
            
            893
            
            
            893Other
                interest charges
            
            
            4,163
            
            
            3,434Total
                Interest Charges
            
            
            10,182
            
            
            9,953Income
                Before Income Taxes and Dividends onRedeemable
                Preferred Stock – Laclede Gas
            
            
            32,514
            
            
            29,748Income
                Tax Expense
            
            
            11,601
            
            
            10,649Dividends
                on Redeemable Preferred Stock – Laclede Gas
            
            
            10
            
            
            12Net
                Income
            
            $
            20,903
            
            $
            19,087Average
                Number of Common Shares Outstanding
            
            
            21,554
            
            
            21,381Basic
                Earnings Per Share of Common Stock
            
            $
            0.97
            
            $
            0.89Diluted
                Earnings Per Share of Common Stock
            
            $
            0.97
            
            $
            0.89Dividends
                Declared Per Share of Common Stock
            
            $
            0.375
            
            $
            0.365





See
      Notes to Consolidated Financial Statements.


4







THE
                LACLEDE GROUP, INC.STATEMENTS
                OF CONSOLIDATED COMPREHENSIVE INCOME(UNAUDITED)Three
                Months EndedDecember
                31,(Thousands)
            
            2007
            
            2006Net
                Income
            
            $
            20,903
            
            $
            19,087Other
                Comprehensive Income (Loss), Before Tax:Net
                gains (losses) on cash flow hedging derivative
                instruments:Net
                hedging gain arising during the period
            
            
            144
            
            
            1,035Reclassification
                adjustment for gains included in net income
            
            
            (2,734
            )
            
            (580
            )Net
                unrealized gains (losses) on cash flow hedging derivative
                instruments
            
            
            (2,590
            )
            
            455Amortization
                of actuarial loss included in net periodic pension cost
            
            
            43
            
            
            —Other
                Comprehensive Income (Loss), Before Tax
            
            
            (2,547
            )
            
            455Income
                Tax Expense (Benefit) Related to Items of Other Comprehensive
                Income
            
            
            (984
            )
            
            176Other
                Comprehensive Income (Loss), Net of Tax
            
            
            (1,563
            )
            
            279Comprehensive
                Income
            
            $
            19,340
            
            $
            19,366

















See
      Notes to Consolidated Financial Statements.


























5











THE
                LACLEDE GROUP, INC.CONSOLIDATED
                BALANCE SHEETS(UNAUDITED)Dec.
                31,
            
            
            
            Sept.
                30,
            
            
            
            Dec.
                31,(Thousands)
            
            2007
            
            
            
            2007
            
            
            
            2006ASSETSUtility
                Plant
            
            $
            1,195,431
            
            
            
            $
            1,187,828
            
            
            
            $
            1,158,480Less:  Accumulated
                depreciation and amortization
            
            
            395,447
            
            
            
            
            394,034
            
            
            
            
            389,433Net
                Utility Plant
            
            
            799,984
            
            
            
            
            793,794
            
            
            
            
            769,047Goodwill
            
            
            33,595
            
            
            
            
            33,595
            
            
            
            
            33,595Non-utility
                property
            
            
            10,654
            
            
            
            
            11,270
            
            
            
            
            12,276Other
                investments
            
            
            47,103
            
            
            
            
            45,436
            
            
            
            
            44,358Other
                Property and Investments
            
            
            57,757
            
            
            
            
            56,706
            
            
            
            
            56,634Current
                Assets:Cash
                and cash equivalents
            
            
            66,930
            
            
            
            
            52,746
            
            
            
            
            51,918Accounts
                receivable:Gas
                customers – billed and unbilled
            
            
            199,067
            
            
            
            
            102,224
            
            
            
            
            176,181Other
            
            
            110,173
            
            
            
            
            86,713
            
            
            
            
            126,579Allowances
                for doubtful accounts
            
            
            (8,680
            )
            
            
            
            (11,268
            )
            
            
            
            (9,401
            )Inventories:Natural
                gas stored underground at LIFO cost
            
            
            132,059
            
            
            
            
            138,256
            
            
            
            
            135,275Propane
                gas at FIFO cost
            
            
            19,913
            
            
            
            
            19,950
            
            
            
            
            20,325Materials,
                supplies, and merchandise at average cost
            
            
            5,041
            
            
            
            
            4,990
            
            
            
            
            6,028Derivative
                instrument assets
            
            
            15,953
            
            
            
            
            31,057
            
            
            
            
            15,976Unamortized
                purchased gas adjustments
            
            
            8,613
            
            
            
            
            12,813
            
            
            
            
            34,538Prepayments
                and other
            
            
            13,344
            
            
            
            
            29,854
            
            
            
            
            16,815Total
                Current Assets
            
            
            562,413
            
            
            
            
            467,335
            
            
            
            
            574,234Deferred
                Charges:Prepaid
                pension cost
            
            
            —
            
            
            
            
            —
            
            
            
            
            62,472Regulatory
                assets
            
            
            288,868
            
            
            
            
            285,054
            
            
            
            
            178,334Other
            
            
            5,068
            
            
            
            
            4,669
            
            
            
            
            6,835Total
                Deferred Charges
            
            
            293,936
            
            
            
            
            289,723
            
            
            
            
            247,641Total
                Assets
            
            $
            1,747,685
            
            
            
            $
            1,641,153
            
            
            
            $
            1,681,151

















6










THE
                LACLEDE GROUP, INC.CONSOLIDATED
                BALANCE SHEETS (Continued)(UNAUDITED)Dec.
                31,
            
            
            
            Sept.
                30,
            
            
            
            Dec.
                31,(Thousands,
                except share amounts)
            
            2007
            
            
            
            2007
            
            
            
            2006CAPITALIZATION
                AND LIABILITIESCapitalization:Common
                stock (70,000,000 shares authorized, 21,761,629,
              21,645,637,
                and 21,542,117 shares issued, respectively)
            
            $
            21,762
            
            
            
            $
            21,646
            
            
            
            $
            21,542Paid-in
                capital
            
            
            137,903
            
            
            
            
            136,061
            
            
            
            
            131,308Retained
                earnings
            
            
            280,438
            
            
            
            
            268,761
            
            
            
            
            261,747Accumulated
                other comprehensive income
            
            
            294
            
            
            
            
            1,857
            
            
            
            
            3,934Total
                Common Stock Equity
            
            
            440,397
            
            
            
            
            428,325
            
            
            
            
            418,531Redeemable
                preferred stock (less current sinking fund
              requirements)
                – Laclede Gas
            
            
            627
            
            
            
            
            627
            
            
            
            
            787Long-term
                debt to unconsolidated affiliate trust
            
            
            46,400
            
            
            
            
            46,400
            
            
            
            
            46,400Long-term
                debt (less current portion) – Laclede Gas
            
            
            309,138
            
            
            
            
            309,122
            
            
            
            
            309,062Total
                Capitalization
            
            
            796,562
            
            
            
            
            784,474
            
            
            
            
            774,780Current
                Liabilities:Notes
                payable
            
            
            294,450
            
            
            
            
            211,400
            
            
            
            
            257,150Accounts
                payable
            
            
            145,581
            
            
            
            
            106,829
            
            
            
            
            149,969Advance
                customer billings
            
            
            27,382
            
            
            
            
            25,440
            
            
            
            
            19,583Current
                portion of long-term debt and preferred stock
            
            
            160
            
            
            
            
            40,160
            
            
            
            
            40,159Wages
                and compensation accrued
            
            
            17,789
            
            
            
            
            15,482
            
            
            
            
            16,883Dividends
                payable
            
            
            8,247
            
            
            
            
            7,970
            
            
            
            
            7,923Customer
                deposits
            
            
            15,128
            
            
            
            
            15,899
            
            
            
            
            16,600Interest
                accrued
            
            
            6,371
            
            
            
            
            11,103
            
            
            
            
            6,270Taxes
                accrued
            
            
            17,994
            
            
            
            
            20,183
            
            
            
            
            27,100Deferred
                income taxes current
            
            
            1,525
            
            
            
            
            2,644
            
            
            
            
            4,413Other
            
            
            17,585
            
            
            
            
            16,555
            
            
            
            
            16,289Total
                Current Liabilities
            
            
            552,212
            
            
            
            
            473,665
            
            
            
            
            562,339Deferred
                Credits and Other Liabilities:Deferred
                income taxes
            
            
            232,417
            
            
            
            
            225,068
            
            
            
            
            234,670Unamortized
                investment tax credits
            
            
            4,143
            
            
            
            
            4,200
            
            
            
            
            4,377Pension
                and postretirement benefit costs
            
            
            67,648
            
            
            
            
            63,678
            
            
            
            
            20,385Asset
                retirement obligations
            
            
            26,517
            
            
            
            
            26,125
            
            
            
            
            26,409Regulatory
                liabilities
            
            
            39,687
            
            
            
            
            39,589
            
            
            
            
            34,137Other
            
            
            28,499
            
            
            
            
            24,354
            
            
            
            
            24,054Total
                Deferred Credits and Other Liabilities
            
            
            398,911
            
            
            
            
            383,014
            
            
            
            
            344,032Total
                Capitalization and Liabilities
            
            $
            1,747,685
            
            
            
            $
            1,641,153
            
            
            
            $
            1,681,151











See
      Notes to Consolidated Financial Statements.


7






THE
                LACLEDE GROUP, INC.STATEMENTS
                OF CONSOLIDATED CASH FLOWS(UNAUDITED)Three
                Months EndedDecember
                31,(Thousands)
            
            2007
            
            
            
            2006Operating
                Activities:Net
                Income
            
            $
            20,903
            
            
            
            $
            19,087Adjustments
                to reconcile net income to net cash provided by (used in)
              operating
                activities:Depreciation,
                amortization, and accretion
            
            
            9,672
            
            
            
            
            9,606Deferred
                income taxes and investment tax credits
            
            
            1,884
            
            
            
            
            (6,560
            )Other
                – net
            
            
            630
            
            
            
            
            627Changes
                in assets and liabilities:Accounts
                receivable – net
            
            
            (122,891
            )
            
            
            
            (130,217
            )Unamortized
                purchased gas adjustments
            
            
            4,200
            
            
            
            
            9,843Deferred
                purchased gas costs
            
            
            1,943
            
            
            
            
            14,796Accounts
                payable
            
            
            38,752
            
            
            
            
            46,695Advance
                customer billings
            
            
            1,942
            
            
            
            
            (11,860
            )Taxes
                accrued
            
            
            (2,189
            )
            
            
            
            12,074Natural
                gas stored underground
            
            
            6,197
            
            
            
            
            2,201Other
                assets and liabilities
            
            
            31,238
            
            
            
            
            2,017Net
                cash used in operating activities
            
            
            (7,719
            )
            
            
            
            (31,691
            )Investing
                Activities:Capital
                expenditures
            
            
            (13,369
            )
            
            
            
            (11,920
            )Other
                investments
            
            
            (1,194
            )
            
            
            
            (1,174
            )Net
                cash used in investing activities
            
            
            (14,563
            )
            
            
            
            (13,094
            )Financing
                Activities:Maturity
                of first mortgage bonds
            
            
            (40,000
            )
            
            
            
            —Issuance
                of short-term debt – net
            
            
            83,050
            
            
            
            
            49,850Issuance
                of common stock
            
            
            1,305
            
            
            
            
            3,599Dividends
                paid
            
            
            (7,897
            )
            
            
            
            (7,580
            )Other
            
            
            8
            
            
            
            
            56Net
                cash provided by financing activities
            
            
            36,466
            
            
            
            
            45,925Net
                Increase in Cash and Cash Equivalents
            
            
            14,184
            
            
            
            
            1,140Cash
                and Cash Equivalents at Beginning of Period
            
            
            52,746
            
            
            
            
            50,778Cash
                and Cash Equivalents at End of Period
            
            $
            66,930
            
            
            
            $
            51,918Supplemental
                Disclosure of Cash Paid During the Period for:Interest
            
            $
            15,226
            
            
            
            $
            14,204Income
                taxes
            
            
            5,931
            
            
            
            
            24





See
      Notes to Consolidated Financial Statements.





8





THE
      LACLEDE GROUP, INC.


NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS





1.
            SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES





These
      notes are an integral part of the accompanying consolidated financial statements
      of The Laclede Group, Inc. (Laclede Group or the Company) and its subsidiaries.
      In the opinion of Laclede Group, this interim report includes all adjustments
      (consisting of only normal recurring accruals) necessary for the fair
      presentation of the results of operations for the periods presented. This Form
      10-Q should be read in conjunction with the Notes to Consolidated Financial
      Statements contained in the Company’s Fiscal Year 2007 Form
      10-K.


The
      consolidated financial position, results of operations, and cash flows of
      Laclede Group are comprised primarily from the financial position, results
      of
      operations, and cash flowsof Laclede Gas Company
      (Laclede Gas or the Utility). Laclede Gas is a regulated natural gas
      distribution utility having a material seasonal cycle. As a result, these
      interim statements of income for Laclede Group are not necessarily indicative
      of
      annual results or representative of succeeding quarters of the fiscal year.
      Due
      to the seasonal nature of the business of Laclede Gas, earnings are typically
      concentrated in the November through April period, which generally corresponds
      with the heating season. SM&P Utility Resources, Inc. (SM&P) is a
      non-regulated underground facility locating and marking service business.
      SM&P’s results can be influenced by seasonality and trends in the
      construction sector.


REVENUE
      RECOGNITION - Laclede
      Gas reads meters and bills its customers on monthly cycles. The Utility records
      its regulated gas distribution revenues from gas sales and transportation
      services on an accrual basis that includes estimated amounts for gas delivered,
      but not yet billed. The accruals for unbilled revenues are reversed in the
      subsequent accounting period when meters are actually read and customers are
      billed. The amounts of accrued unbilled revenues at December 31, 2007
      and 2006, for the Utility, were $50.7 million and $41.4 million, respectively.
      The amount of accrued unbilled revenue at September 30, 2007 was $11.9
      million.


INCOME
      TAXES - Laclede Group
      and its subsidiaries have elected, for tax purposes only, various accelerated
      depreciation provisions of the Internal Revenue Code. In addition, certain
      other
      costs are expensed currently for tax purposes while being deferred for book
      purposes. Effective October 1, 2007, generally accepted accounting
      principles require that tax benefits be recognized in the financial statements
      as determined by new recognition and measurement provisions. These provisions
      permit the benefit from a tax position to be recognized only if, and to the
      extent that, it is more likely than not that the tax position will be sustained
      upon examination by the taxing authority, based on the technical merits of
      the
      position. Unrecognized tax benefits and related interest and penalties, if
      any,
      are recorded as liabilities. Laclede Group companies record deferred tax
      liabilities and assets measured by enacted tax rates for the net tax effect
      of
      all temporary differences between the carrying amounts of assets and liabilities
      in the financial statements, and the related tax basis. Changes in enacted
      tax
      rates, if any, and certain property basis differences will be reflected by
      entries to regulatory asset or liability accounts for regulated companies,
      and
      will be reflected as income or loss for non-regulated companies.


Laclede
      Gas’ investment tax credits utilized prior to 1986 have been deferred and are
      being amortized in accordance with regulatory treatment over the useful life
      of
      the related property.


GROSS
      RECEIPTS TAXES - Gross
      receipts taxes associated with Laclede Gas’ natural gas utility service are
      imposed on the Utility and billed to its customers. These amounts are recorded
      gross in the Statements of Consolidated Income. Amounts recorded in Regulated
      Gas Distribution Operating Revenues for the quarters ended
      December 31, 2007 and 2006 were $13.0 million, and $14.7 million,
      respectively. Gross receipts taxes are expensed by the Utility and included
      in
      the Taxes Other Than Income line.


STOCK-BASED
      COMPENSATION–
Awards of stock-based compensation are made pursuant to The Laclede
      Group 2006
      Equity Incentive Plan and the Restricted Stock Plan for Non-Employee Directors.
      Refer to Note 1 of the Consolidated Financial Statements included in the
      Company’s Form 10-K for the fiscal year ended September 30, 2007 for
      descriptions of these plans.


During
      the quarter ended December 31, 2007, the Company awarded 74,100 shares
      of performance-contingent restricted stock to executive officers. This number
      of
      shares represents the maximum shares that can be earned pursuant to the terms
      of
      the awards. The shares have a performance period ending in September 2010,
      during which participants are entitled to receive full dividends and voting
      rights on 49,400 of these shares based on the target level of performance.
      The
      number of shares that will ultimately vest is dependent upon the attainment
      of
      certain levels of earnings and dividend growth performance goals; further,
      under
      the terms of the award, the Compensation Committee (Committee) of the Board
      of
      Directors may reduce by up to 50% the number of shares that vest if the
      Company’s total shareholder return (TSR) during the performance period ranks in
      the bottom quartile relative to a comparator group of companies. This TSR
      provision is considered a market condition under generally accepted accounting
      principles and is discussed further below.


9


During
      the quarter ended December 31, 2007, the Company made a separate award
      of 15,000 shares of performance-contingent restricted stock to an executive
      officer. This number of shares represents the maximum shares that can be earned
      pursuant to the terms of the award. The shares have a performance period ending
      in September 2009, during which the participant is entitled to receive full
      dividends and voting rights on 10,000 of these shares based on the target level
      of performance. The number of shares that will ultimately vest is dependent
      upon
      the attainment of certain business development performance metrics and
      succession management objectives and is not subject to the aforementioned TSR
      provision.


For
      performance-contingent restricted shares that do not pay dividends during the
      performance period, the estimate of fair value is reduced by the present value
      of the dividends expected to be paid on the Company’s common stock during the
      performance period, discounted using an appropriate U.S. Treasury yield. Initial
      accruals of compensation cost for performance-contingent restricted stock awards
      are based upon the probable outcome of the performance conditions. For shares
      that do not vest or are not expected to vest due to the outcome of the
      performance conditions, no compensation cost is recognized and any previously
      recognized compensation cost is reversed. For shares subject to the TSR
      provision, the estimated impact of this market condition is reflected in the
      grant date fair value per share of the awards. Accordingly, compensation cost
      is
      not reversed to reflect any actual reductions in the awards that may result
      from
      the TSR provision. However, if the Company’s TSR during the performance period
      ranks in the bottom quartile relative to a comparator group of companies and
      the
      Committee elects not to reduce the award (or reduce by a lesser amount), this
      election would be accounted for as a modification of the original award and
      additional compensation cost would be recognized at that time. The grant date
      fair value per share of the awards subject to the TSR provision awarded during
      the quarter ended December 31, 2007 was valued by a model that assessed the
      probabilities of various TSR outcomes. Performance-contingent restricted stock
      awards without a TSR provision are valued at the closing price of the Company’s
      stock on the date of the grant.


During
      the quarter ended December 31, 2007, the Company awarded 23,250 shares
      of time-vested restricted stock to executives and key employees. These shares
      vest in December 2010. In the interim, participants receive full dividends
      and voting rights. Time-vested restricted stock awards are valued at the closing
      price of the Company’s stock on the date of the grant.


No
      stock options were granted during the quarter ended December 31, 2007.
      The weighted average fair value of stock options granted during the quarter
      ended December 31, 2006 was $8.07 per option.


Stock
      option activity for the quarter ended December 31, 2007 is presented
      below:





WeightedAverageWeighted
            
            
            
            Remaining
            
            
            
            AggregateAverage
            
            
            
            Contractual
            
            
            
            IntrinsicExercise
            
            
            
            Term
            
            
            
            ValueShares
            
            
            
            Price
            
            
            
            (Years)
            
            
            
            ($000)Outstanding
                at September 30, 2007
            
            617,100
            
            
            
            $
            30.04Granted
            
            —
            
            
            
            $
            —Exercised
            
            (11,000
            )
            
            
            $
            28.07Forfeited
            
            (11,875
            )
            
            
            $
            30.86Expired
            
            (7,750
            )
            
            
            $
            31.14Outstanding
                at December 31, 2007
            
            586,475
            
            
            
            $
            30.04
            
            
            
            6.9
            
            
            
            $
            2,536Fully
                Vested and Expected to Vest
              at
                December 31, 2007
            
            573,612
            
            
            
            $
            29.99
            
            
            
            6.8
            
            
            
            $
            2,511Exercisable
                at December 31, 2007
            
            402,725
            
            
            
            $
            28.90
            
            
            
            6.4
            
            
            
            $
            2,171





10





The
      closing price of the Company’s common stock was $34.24 at
      December 31, 2007.


The
      amounts of compensation cost recognized for share-based compensation
      arrangements for the quarters ended December 31, 2007 and 2006 are
      presented below:





Three
                Months EndedDecember
                31,(Thousands)
            
            
            2007
            
            
            2006Total
                compensation cost
            
            $
            656
            
            $
            540Compensation
                cost capitalized
            
            
            (135
            )
            
            (118
            )Compensation
                cost recognized in net income
            
            
            521
            
            
            422Income
                tax benefit recognized in net income
            
            
            (201
            )
            
            (163
            )Compensation
                cost recognized in net income, net of income tax
            
            $
            320
            
            $
            259





As
      of December 31, 2007, there was approximately $5.5 million of total
      unrecognized compensation cost related to nonvested share-based compensation
      arrangements (options and restricted stock). That cost is expected to be
      recognized over a weighted average period of approximately 2.4
      years.


NEW
      ACCOUNTING STANDARDS –In
      June 2006, the Financial Accounting Standards Board (FASB) issued
      Interpretation Number 48 (FIN 48), “Accounting for Uncertainty in Income Taxes.”
FIN 48 clarifies the accounting for uncertainty in income taxes recognized
      in an
      enterprise’s financial statements in accordance with FASB Statement No. 109,
“Accounting for Income Taxes.” Under FIN 48, the Company may recognize the tax
      benefit from a tax position only if it is at least more likely than not that
      the
      tax position will be sustained on examination by the taxing authorities, based
      on the technical merits of the position. The tax benefits recognized in the
      financial statements from such a position should be measured based on the
      largest benefit that has a greater than fifty percent likelihood of being
      realized upon settlement with the taxing authorities. FIN 48 also provides
      guidance on derecognition, classification, interest and penalties, accounting
      in
      interim periods, disclosure, and transition. The Company adopted the provisions
      of FIN 48 as of October 1, 2007. For details regarding the cumulative
      effect of adoption and other pertinent information, see Note 5, Income
      Taxes.


In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      (SFAS) No. 157, “Fair Value Measurements.” This Statement defines fair value,
      establishes a framework for measuring fair value in generally accepted
      accounting principles, and expands disclosures about fair value measurements.
      The Statement applies to fair value measurements required under other accounting
      guidance that require or permit fair value measurements. Accordingly, this
      Statement does not require any new fair value measurements. The guidance in
      this
      Statement does not apply to the Company’s stock-based compensation plans
      accounted for in accordance with SFAS No. 123(R), “Share-Based Payment.” This
      Statement will be effective for the Company as of the beginning of fiscal year
      2009. The Company is currently evaluating the provisions of this
      Statement.


In
      September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for
      Defined Benefit Pension and Other Postretirement Plans.” As discussed in Note 2
      to the Consolidated Financial Statements included in the Company’s Fiscal
      Year 2007 Form 10-K, Laclede Group adopted the recognition and disclosure
      provisions of this Statement effective September 30, 2007. The
      Statement also requires that plan assets and benefit obligations be measured
      as
      of the date of the employer’s fiscal year-end statement of financial position.
      This requirement is effective for the Company as of the end of fiscal year
      2009.
      In conjunction with adoption of this provision of SFAS No. 158, the Company
      will
      be required to change its valuation date for its pension and other
      postretirement plans from June 30 to September 30. The Company is
      currently evaluating the impact of adoption of the change in measurement date
      on
      its consolidated financial statements.


In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities.” The Statement permits entities to
      choose to measure many financial instruments and certain other items at fair
      value that are not currently required to be measured at fair value. SFAS No.
      159
      also establishes presentation and disclosure requirements designed to facilitate
      comparisons between entities that choose different measurement attributes for
      similar types of assets and liabilities. This Statement does not affect any
      existing accounting literature that requires certain assets and liabilities
      to
      be carried at fair value. Upon adoption of SFAS No. 159, entities are permitted
      to choose, at specified election dates, to measure eligible items at fair value
      (fair value option). Unrealized gains and losses on items for which the fair
      value option has been elected are reported in earnings at each reporting date.
      The decision about whether to elect the fair value option is applied instrument
      by instrument with few exceptions. The decision is also irrevocable (unless
      a
      new election date occurs) and must be applied to entire instruments and not
      to
      portions of instruments. SFAS No. 159 requires that cash flows related to items
      measured at fair value be classified in the statement of cash flows according
      to
      their nature and purpose as required by SFAS No. 95, “Statement of Cash Flows”
(as amended). SFAS No. 159 is effective for the Company as of the beginning
      of
      fiscal year 2009. The Company is currently evaluating the provisions of this
      Statement.


11





In
      June 2007, the FASB ratified the consensus reached in Emerging Issues Task
      Force (EITF) Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends
      on Share-Based Payment Awards.” This Issue addresses how an entity should
      recognize the tax benefit received on dividends that are (a) paid to employees
      holding equity-classified nonvested shares, equity-classified nonvested share
      units, or equity-classified outstanding share options and (b) charged to
      retained earnings under SFAS No. 123(R). The Task Force reached a consensus
      that
      such tax benefits should be recognized as an increase in additional paid-in
      capital. This EITF Issue also addresses how the accounting for these tax
      benefits is affected if an entity’s estimate of forfeitures changes in
      subsequent periods. This EITF Issue is effective for Laclede Group as of the
      beginning of fiscal year 2009. The Company is currently evaluating the
      provisions of this EITF Issue.


In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements.” This Statement amends Accounting Research
      Bulletin No. 51, “Consolidated Financial Statements.” A noncontrolling interest,
      sometimes called a minority interest, is the portion of equity in a subsidiary
      not attributable, directly or indirectly, to a parent. SFAS No. 160 clarifies
      that noncontrolling interests should be separately reported as equity in the
      balance sheet. Additionally, SFAS No. 160 requires certain changes in
      presentation to income statements. SFAS No. 160 also addresses accounting for
      changes in the parent’s ownership interest of a subsidiary, accounting for the
      deconsolidation of a subsidiary, and disclosure requirements. This Statement
      is
      effective for Laclede Group as of the beginning of fiscal year 2010. Currently,
      all of Laclede Group’s consolidated subsidiaries are wholly owned and therefore
      adoption of this Statement is not expected to have any effect on the Company’s
      consolidated financial statements.


In
      December 2007, the FASB issued SFAS No. 141 (revised 2007) (141(R)),
“Business Combinations.” This Statement revises SFAS No. 141 but retains the
      fundamental requirements in SFAS No. 141 that the acquisition method
      (formerly known as purchase method) of accounting be used for all business
      combinations. SFAS No. 141(R) requires an acquirer to recognize the assets
      acquired, the liabilities assumed, and any noncontrolling interest in the
      acquiree at the acquisition date, measured at their fair values as of that
      date,
      with limited exceptions specified in the Statement. SFAS 141(R) requires
      acquisition-related costs to be accounted for separately instead of being
      allocated to the assets acquired and liabilities assumed. SFAS No. 141(R) also
      amends the guidance related to the recognition of certain assets acquired and
      liabilities assumed that relate to contingencies, research and development
      assets acquired that have no alternative future use, and negative goodwill
      arising from a bargain purchase. Laclede Group is required to adopt SFAS No.
      141(R) prospectively to business combinations with acquisition dates on or
      after
      October 1, 2009 (fiscal 2010). Because this Statement is only applicable to
      future business combinations, existing amounts reported on the Company’s
      consolidated financial statements will not be impacted by adoption of this
      Statement.








2.
            EARNINGS
                PER SHARE





SFAS
      No. 128, “Earnings Per Share,” requires dual presentation of basic and diluted
      earnings per share (EPS). Basic EPS does not include potentially dilutive
      securities and is computed by dividing net income by the weighted average number
      of common shares outstanding during the period. Diluted EPS assumes the issuance
      of common shares pursuant to the Company’s stock-based compensation plans at the
      beginning of each respective period, or at the date of grant or award, if later.
      Shares attributable to stock options and time-vested restricted stock are
      excluded from the calculation of diluted earnings per share if the effect would
      be antidilutive. For the quarters ended December 31, 2007 and 2006,
      105,500 and 115,500 shares, respectively, attributable to antidilutive
      outstanding stock options were excluded from the calculation of diluted earnings
      per share. Performance-contingent restricted stock awards are only included
      in
      the calculation of diluted earnings per share to the extent the underlying
      performance conditions are satisfied (a) prior to the end of the reporting
      period or (b) would be satisfied if the end of the reporting period were the
      end
      of the related contingency period and the result would be dilutive. For the
      quarters ended December 31, 2007 and 2006, 191,100 and 110,000 shares,
      respectively, of nonvested performance-contingent restricted stock were excluded
      from the calculation of diluted earnings per share.


12




Three
                Months EndedDecember
                31,(Thousands,
                Except Per Share Amounts)
            
            
            
            
            
            
            2007
            
            
            2006Basic
                EPS:Net
                Income
            
            
            
            
            
            $
            20,903
            
            $
            19,087Weighted
                Average Shares Outstanding
            
            
            
            
            
            
            21,554
            
            
            21,381Earnings
                Per Share of Common Stock
            
            
            
            
            
            $
            0.97
            
            $
            0.89Diluted
                EPS:Net
                Income
            
            
            
            
            
            $
            20,903
            
            $
            19,087Weighted
                Average Shares Outstanding
            
            
            
            
            
            
            21,554
            
            
            21,381Dilutive
                Effect of Stock Optionsand
                Restricted Stock
            
            
            
            
            
            
            67
            
            
            61Weighted
                Average Diluted Shares
            
            
            
            
            
            
            21,621
            
            
            21,442Earnings
                Per Share of Common Stock
            
            
            
            
            
            $
            0.97
            
            $
            0.89








3.
            PENSION
                PLANS AND OTHER POSTRETIREMENT
                BENEFITS





Laclede
      Gas has non-contributory defined benefit, trusteed forms of pension plans
      covering substantially all employees over the age of twenty-one. Benefits are
      based on years of service and the employee’s compensation during the highest
      three years of the last ten years of employment. Plan assets consist primarily
      of corporate and U.S. government obligations and pooled equity
      funds.


Pension
      costs for the quarters ending December 31, 2007 and 2006 were $1.5
      million and $1.4 million, respectively, including amounts charged to
      construction.


The
      net periodic pension costs include the following components:





Three
                Months EndedDecember
                31,(Thousands)
            
            
            2007
            
            
            2006Service
                cost - benefits earnedduring
                the period
            
            $
            3,242
            
            $
            3,106Interest
                cost on projectedbenefit
                obligation
            
            
            4,670
            
            
            4,482Expected
                return on plan assets
            
            
            (5,162
            )
            
            (5,074
            )Amortization
                of prior service cost
            
            
            272
            
            
            284Amortization
                of actuarial loss
            
            
            791
            
            
            920Sub-total
            
            
            3,813
            
            
            3,718Regulatory
                adjustment
            
            
            (2,280
            )
            
            (2,364
            )Net
                pension cost
            
            $
            1,533
            
            $
            1,354





Pursuant
      to the provisions of the Laclede Gas pension plans, pension obligations may
      be
      satisfied by lump-sum cash payments. Pursuant to a Missouri Public Service
      Commission (MoPSC or Commission) Order, lump-sum payments are recognized as
      settlements (which can result in gains or losses) only if the total of such
      payments exceeds 100% of the sum of service and interest costs. No lump-sum
      payments were recognized as settlements during the three months ended
      December 31, 2007 or 2006.


13





Pursuant
      to a MoPSC Order, the return on plan assets is based on the market-related
      value
      of plan assets implemented prospectively over a four-year period. Gains or
      losses not yet includible in pension cost are amortized only to the extent
      that
      such gain or loss exceeds 10% of the greater of the projected benefit obligation
      or the market-related value of plan assets. Such excess is amortized over the
      average remaining service life of active participants. The recovery in rates
      for
      the Utility’s qualified pension plans is based on an allowance of $4.1 million
      annually effective October 1, 2005 and $4.8 million annually effective
      August 1, 2007. The difference between this amount and pension expense
      as calculated pursuant to the above and that otherwise would be included in
      the
      Statements of Consolidated Income and Consolidated Comprehensive Income is
      deferred as a regulatory asset or regulatory liability.


SM&P
      maintains a non-qualified, defined benefit plan with four participants that
      was
      frozen to new participants in 2002. The plan is a non-qualified plan and
      therefore has no assets held in trust. Net pension cost related to the plan
      is
      not material.


Laclede
      Gas provides certain life insurance benefits at retirement. Medical insurance
      is
      available after early retirement until age 65. The transition obligation not
      yet
      includible in postretirement benefit cost is being amortized over 20 years.
      Postretirement benefit costs for the quarters ended December 31, 2007
      and 2006 were $1.9 million and $2.0 million, respectively, including amounts
      charged to construction.


Net
      periodic postretirement benefit costs consisted of the following
      components:





Three
                Months EndedDecember
                31,(Thousands)
            
            
            2007
            
            
            2006Service
                cost – benefits earned duringthe
                period
            
            $
            1,140
            
            $
            1,016Interest
                cost on accumulatedpostretirement
                benefit obligation
            
            
            977
            
            
            900Expected
                return on plan assets
            
            
            (510
            )
            
            (431
            )Amortization
                of transition obligation
            
            
            34
            
            
            34Amortization
                of prior service cost
            
            
            (582
            )
            
            (582
            )Amortization
                of actuarial loss
            
            
            746
            
            
            811Sub-total
            
            
            1,805
            
            
            1,748Regulatory
                adjustment
            
            
            105
            
            
            223Net
                postretirement benefit cost
            
            $
            1,910
            
            $
            1,971





Missouri
      state law provides for the recovery in rates of SFAS No. 106, “Employers’
Accounting for Postretirement Benefits Other Than Pensions,” accrued costs
      provided that such costs are funded through an independent, external funding
      mechanism. Laclede Gas established Voluntary Employees’ Beneficiary Association
      (VEBA) and Rabbi trusts as its external funding mechanisms. VEBA and Rabbi
      trusts’ assets consist primarily of money market securities and mutual funds
      invested in stocks and bonds.


Pursuant
      to a MoPSC Order, the return on plan assets is based on the market-related
      value
      of plan assets implemented prospectively over a four-year period. Gains and
      losses not yet includible in postretirement benefit cost are amortized only
      to
      the extent that such gain or loss exceeds 10% of the greater of the accumulated
      postretirement benefit obligation or the market-related value of plan assets.
      Such excess is amortized over the average remaining service life of active
      participants. Previously, the recovery in rates for the postretirement benefit
      costs was based on an alternative methodology for amortization of unrecognized
      gains and losses as ordered by the MoPSC. The Commission ordered that the
      recovery in rates be based on an annual allowance of $7.6 million, effective
      August 1, 2007. The difference between this amount and postretirement
      benefit cost based on the above and that otherwise would be included in the
      Statements of Consolidated Income and Consolidated Comprehensive Income is
      deferred as a regulatory asset or regulatory liability.








4.
            FINANCIAL
                INSTRUMENTS





In
      the course of its business, Laclede Group’s non-regulated gas marketing
      affiliate, Laclede Energy Resources, Inc. (LER), enters into fixed-price
      commitments associated with the purchase or sale of natural gas. LER manages
      the
      price risk associated with these commitments by either closely matching the
      offsetting physical purchase or sale of natural gas at fixed prices or through
      the use of exchange-traded futures contracts to lock in margins. At
      December 31, 2007, LER’s unmatched positions were not material to
      Laclede Group’s financial position or results of operations.


14





Settled
      and open futures positions were as follows at
      December 31, 2007:





Position
                Month
            
            MMBtu
              (millions)
            
            Average
              Price
                per
              MMBtuSettled
                short positions
            
            January
                2008
            
            1.46
            
            $
            8.17Settled
                long positions
            
            January
                2008
            
            .14
            
            
            7.29Open
                short futures positions
            
            February
                2008
            
            .11
            
            
            8.90March
                2008
            
            .03
            
            
            7.27April
                2008
            
            1.74
            
            
            8.28May
                2008
            
            .03
            
            
            7.36June
                2008
            
            .03
            
            
            7.46July
                2008
            
            .03
            
            
            7.55August
                2008
            
            .03
            
            
            7.64September
                2008
            
            .03
            
            
            7.67October
                2008
            
            .03
            
            
            7.74November
                2008
            
            .14
            
            
            8.67December
                2008
            
            .18
            
            
            8.82January
                2009
            
            .15
            
            
            8.87February
                2009
            
            .15
            
            
            8.87March
                2009
            
            .11
            
            
            8.83November
                2009
            
            .10
            
            
            8.80December
                2009
            
            .15
            
            
            8.83January
                2010
            
            .15
            
            
            8.83February
                2010
            
            .15
            
            
            8.83March
                2010
            
            .10
            
            
            8.80Open
                long futures positions
            
            May
                2008
            
            .06
            
            
            7.60June
                2008
            
            .06
            
            
            7.60July
                2008
            
            .06
            
            
            7.60August
                2008
            
            .06
            
            
            7.60September
                2008
            
            .06
            
            
            7.60October
                2008
            
            .06
            
            
            7.60November
                2008
            
            .06
            
            
            7.60December
                2008
            
            .06
            
            
            7.60





The
      above futures contracts are derivative instruments and management has designated
      these items as cash flow hedges of forecasted transactions. The fair values
      of
      the instruments are recognized on the Consolidated Balance Sheets. The change
      in
      the fair value of the effective portion of these hedge instruments is recorded,
      net of tax, in Other Comprehensive Income, a component of Common Stock Equity.
      These amounts will reduce or be charged to Non-Regulated Gas Marketing Operating
      Revenues or Expenses in the Statements of Consolidated Income as the hedged
      transactions occur. As of December 31, 2007, it is expected that
      approximately $3.1 million of pre-tax unrealized gains will be reclassified
      into
      the Consolidated Statement of Income during the next twelve months. The
      ineffective portions of these hedge instruments are charged or credited to
      Non-Regulated Gas Marketing Operating Revenues or Expenses. The net amount
      of
      pre-tax gains recognized in earnings for the ineffective portion of cash flow
      hedges was $0.3 million and $0.5 million for the quarters ended
      December 31, 2007 and 2006, respectively. Cash flows from hedging
      transactions are classified in the same category as the cash flows from the
      items that are being hedged in the Statements of Consolidated Cash
      Flows.








5.
            INCOME
                TAXES





The
      Company adopted the provisions of FIN 48, “Accounting for the Uncertainty in
      Income Taxes,” as of October 1, 2007. FIN 48 clarifies the accounting
      for uncertainty in income taxes recognized in an enterprise’s financial
      statements in accordance with FASB Statement No. 109, “Accounting for Income
      Taxes.” Pursuant to FIN 48, the Company may recognize the tax benefit from a tax
      position only if it is at least more likely than not that the tax position
      will
      be sustained on examination by the taxing authorities, based on the technical
      merits of the position.


15





Upon
      adoption of FIN 48, the Company recognized a reduction to beginning retained
      earnings for a cumulative-effect adjustment totaling $1.1 million, reclassified
      $2.5 million of income tax liabilities from current to non-current liabilities,
      and increased its liabilities for accrued interest and penalties. Total
      unrecognized tax benefits as of October 1, 2007 were $2.1 million, all
      of which would favorably impact the effective tax rate, if recognized. The
      Company recognizes potential accrued interest and penalties related to its
      uncertain tax positions as interest expense and other income deductions,
      respectively. Potential interest and penalties accrued (net of income tax
      benefit) associated with the Company’s uncertain tax positions were $1.5 million
      at October 1, 2007. Unrecognized tax benefits, accrued interest
      payable, and accrued penalties payable are included in the Other line of the
      Deferred Credits and Other Liabilities section of the Consolidated Balance
      Sheets. There have been no material changes in the Company’s unrecognized tax
      benefits since the date of adoption of FIN 48.


The
      Company is subject to U.S. federal income tax as well as income tax of state
      and
      city jurisdictions. The Company is no longer subject to examination for fiscal
      years prior to 2004. The Company cannot currently estimate the potential change
      in its unrecognized tax benefits within the next 12-month period because of
      current audit activity.








6.
            OTHER
                INCOME AND INCOME DEDUCTIONS – NET





Three
                Months EndedDecember
                31,(Thousands)
            
            
            
            
            2007
            
            
            2006Allowance
                for funds used during construction
            
            
            
            $
            (9
            )
            $
            (14
            )Interest
                income
            
            
            
            
            1,773
            
            
            1,945Other
                income
            
            
            
            
            537
            
            
            323Other
                income deductions
            
            
            
            
            349
            
            
            1,049Other
                income and (income deductions) – net
            
            
            
            $
            2,650
            
            $
            3,303





The
      decrease in other income and income deductions – net for the quarter ended
      December 31, 2007, compared with the quarter ended
      December 31, 2006, was due to decreased income associated with changes
      in the cash surrender value of life insurance policies, lower income associated
      with carrying costs applied to under-recoveries of gas costs, and other minor
      variations. Such carrying costs are recovered through the Utility’s Purchased
      Gas Adjustment (PGA) Clause.








7.
            INFORMATION
                BY OPERATING SEGMENT





All
      of Laclede Group’s subsidiaries are wholly owned. The Regulated Gas Distribution
      segment consists of the regulated operations of Laclede Gas and is the core
      business segment of Laclede Group. Laclede Gas is a public utility engaged
      in
      the retail distribution and sale of natural gas serving an area in eastern
      Missouri, with a population of approximately 2.1 million, including the City
      of
      St. Louis and parts of ten other counties in eastern Missouri. The Non-Regulated
      Services segment includes the results of SM&P, an underground facilities
      locating and marking business operating in ten Midwestern and Southwestern
      states. The underground facility locating industry remains competitive with
      many
      contracts subject to termination on short-term notice. Also, SM&P’s
      customers are concentrated primarily in the utility and telecommunications
      sectors. Additionally, SM&P’s results can be influenced by seasonality and
      trends in the construction sector. The Non-Regulated Gas Marketing segment
      includes the results of LER, a subsidiary engaged in the non-regulated marketing
      of natural gas and related activities. Other includes the transportation of
      liquid propane regulated by the Federal Energy Regulatory Commission (FERC)
      and
      other non-regulated activities, including real estate development, the
      compression of natural gas, and financial investments in other enterprises.
      These operations are conducted through five subsidiaries. Other also includes
      Laclede Gas’ non-regulated merchandise sales business. Certain intersegment
      revenues with Laclede Gas are not eliminated in accordance with the provisions
      of SFAS No. 71, “Accounting for the Effects of Certain Types of Regulation.”
Those types of transactions include sales of natural gas from Laclede Gas to
      LER, services performed by SM&P to locate and mark underground facilities
      for Laclede Gas, sales of natural gas from LER to Laclede Gas, and
      transportation services provided by Laclede Pipeline Company to Laclede Gas.
      These revenues are shown on the Intersegment revenues lines in the table under
      Regulated Gas Distribution, Non-Regulated Services, Non-Regulated Gas Marketing,
      and Other columns, respectively.


16








Non-Regulated
            
            Non-
            
            Regulated
            
            
            
            AdjustmentsGas
            
            Regulated
            
            Gas
            
            
            
            &(Thousands)
            
            Distribution
            
            Services
            
            Marketing
            
            Other
            
            Eliminations
            
            ConsolidatedThree
                Months EndedDecember
                31, 2007Revenues
                from externalcustomers
            
            $
            319,674
            
            $
            37,260
            
            $
            178,660
            
            $
            1,039
            
            $
            —
            
            $
            536,633Intersegment
                revenues
            
            
            1,218
            
            
            102
            
            
            3,138
            
            
            260
            
            
            —
            
            
            4,718Total
                operating revenues
            
            
            320,892
            
            
            37,362
            
            
            181,798
            
            
            1,299
            
            
            —
            
            
            541,351Net
                income (loss)
            
            
            15,747
            
            
            (727
            )
            
            5,654
            
            
            229
            
            
            —
            
            
            20,903Total
                assets
            
            
            1,529,861
            
            
            74,818
            
            
            123,363
            
            
            97,021
            
            
            (77,378
            )
            
            1,747,685Three
                Months EndedDecember
                31, 2006Revenues
                from externalcustomers
            
            $
            340,456
            
            $
            36,337
            
            $
            137,688
            
            $
            917
            
            $
            —
            
            $
            515,398Intersegment
                revenues
            
            
            8,032
            
            
            92
            
            
            15,779
            
            
            260
            
            
            —
            
            
            24,163Total
                operating revenues
            
            
            348,488
            
            
            36,429
            
            
            153,467
            
            
            1,177
            
            
            —
            
            
            539,561Net
                income (loss)
            
            
            15,657
            
            
            (504
            )
            
            3,795
            
            
            139
            
            
            —
            
            
            19,087Total
                assets
            
            
            1,473,506
            
            
            71,884
            
            
            112,739
            
            
            79,518
            
            
            (56,496
            )
            
            1,681,151








8.
            COMMITMENTS
                AND CONTINGENCIES





Laclede
      Gas owns and operates natural gas distribution, transmission and storage
      facilities, the operations of which are subject to various environmental laws,
      regulations and interpretations. While environmental issues resulting from
      such
      operations arise in the ordinary course of business, such issues have not
      materially affected the Company’s or Laclede Gas’ financial position and results
      of operations. As environmental laws, regulations, and their interpretations
      change, however, Laclede Gas may be required to incur additional costs. See
      Note
      14 to the Consolidated Financial Statements included in the Company’s Fiscal
      Year 2007 Form 10-K for information relative to environmental matters
      generally. There have been no significant changes relative to environmental
      matters in the first quarter of 2008.


On
      December 28, 2006, the MoPSC Staff proposed a disallowance
      of $7.2 million related to Laclede Gas’ recovery of its purchased gas costs
      applicable to fiscal 2005. On September 14, 2007, the Staff withdrew
      its pursuit of $5.5 million of the disallowance it had originally proposed.
      Laclede Gas believes that the remaining $1.7 million of the MoPSC Staff’s
      proposed disallowance lacks merit and intends to vigorously oppose the
      adjustment in proceedings before the MoPSC.


On
      December 31, 2007, the MoPSC Staff filed a memorandum with the
      Commission proposing a disallowance of $2.8 million related to the
      Company’s recovery of its purchased gas costs applicable to fiscal 2006.
      Laclede Gas believes that the MoPSC Staff’s position lacks merit and intends to
      vigorously oppose the adjustment in proceedings before the MoPSC. In addition,
      the MoPSC’s Staff’s memorandum raised questions regarding whether certain sales
      and capacity release transactions subject to the FERC’s oversight were
      consistent with the FERC’s regulations and policies regarding capacity release.
      The Company has commenced an internal review of the questions raised by the
      MoPSC Staff and has notified the FERC Staff that it has taken this
      action.


Laclede
      Group is involved in other litigation, claims and investigations arising in
      the
      normal course of business. While the results of such litigation cannot be
      predicted with certainty, management, after discussion with counsel, believes
      that the final outcome will not have a material adverse effect on the
      consolidated financial position or results of operations of the
      Company.


Laclede
      Gas has several operating leases for the rental of vehicles that contain
      provisions requiring Laclede Gas to guarantee certain amounts related to the
      residual value of the leased property. These leases have various terms, the
      longest of which extends through 2014. At December 31, 2007, the
      maximum guarantees under these leases are $1.8 million. However, the Utility
      estimates that the residual value of the leased vehicles will be adequate to
      satisfy most of the guaranteed amounts. At December 31, 2007, the
      carrying value of the liability recognized for these guarantees was $0.3
      million.


17





SM&P
      has several operating leases, the aggregate annual cost of which is $8.3
      million, consisting primarily of 12-month operating leases, with renewal
      options, for vehicles used in its business. Laclede Group has parental
      guarantees of certain of those vehicle leases and anticipates that the maximum
      guarantees, including renewals and new leases, will not exceed $19.0 million.
      In
      the event Laclede Group would be required to make payments under these
      guarantees, it is expected that a significant portion of such payments would
      be
      recovered through proceeds from the liquidation of assets obtained under the
      terms of the leases. The fair market value of the vehicles being leased is
      estimated at $15.1 million. No amounts have been recorded for these guarantees
      in the financial statements.


Laclede
      Gas and LER have entered into various contracts, expiring on dates through
      2017,
      for the storage, transportation, and supply of natural gas. Minimum payments
      required under the contracts in place at December 31, 2007 are
      estimated at approximately $1.5 billion. Additional contracts are generally
      entered into prior to or during the heating season.


Laclede
      Group had guarantees totaling $48.8 million for performance and payment of
      certain wholesale gas supply purchases by LER, as of
      December 31, 2007. Since that date, total guarantees issued by Laclede
      Group on behalf of LER increased by $1.2 million bringing the total to $50.0
      million in guarantees outstanding at January 30, 2008. No amounts have
      been recorded for these guarantees in the financial statements.








Laclede
      Gas Company’s Financial Statements and Notes to Financial Statements are
      included in Exhibit 99.1 to this report.


18


ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





THE
      LACLEDE GROUP, INC.





This
      management’s discussion analyzes the financial condition and results of
      operations of The Laclede Group, Inc. (Laclede Group or the Company) and its
      subsidiaries. It includes management’s view of factors that affect its business,
      explanations of past financial results including changes in earnings and costs
      from the prior year periods, and their effects on overall financial condition
      and liquidity.





Certain
      matters discussed in this report, excluding historical information, include
      forward-looking statements. Certain words, such as “may,” “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “plan,” “seek,” and similar words and
      expressions identify forward-looking statements that involve uncertainties
      and
      risks. Future developments may not be in accordance with our expectations or
      beliefs and the effect of future developments may not be those anticipated.
      Among the factors that may cause results to differ materially from those
      contemplated in any forward-looking statement are:





•
            weather
                conditions and catastrophic events, particularly severe weather in
                the
                natural gas producing areas of the country;•
            volatility
                in gas prices, particularly sudden and sustained spikes in natural
                gas
                prices;•
            the
                impact of higher natural gas prices on our competitive position in
                relation to suppliers of alternative heating sources, such as
                electricity;•
            changes
                in gas supply and pipeline availability; particularly those changes
                that
                impact supply for and access to our market area;•
            legislative,
                regulatory and judicial mandates and decisions, some of which may
                be
                retroactive, including those affecting•
            allowed
                rates of return•
            incentive
                regulation•
            industry
                structure•
            purchased
                gas adjustment provisions•
            rate
                design structure and implementation•
            franchise
                renewals•
            environmental
                or safety matters•
            taxes•
            pension
                and other postretirement benefit liabilities and funding
                obligations•
            accounting
                standards;•
            the
                results of litigation;•
            retention
                of, ability to attract, ability to collect from and conservation
                efforts
                of customers;•
            capital
                and energy commodity market conditions, including the ability to
                obtain
                funds for necessary capital expenditures and general operations and
                the
                terms and conditions imposed for obtaining sufficient gas
                supply;•
            discovery
                of material weakness in internal controls; and•
            employee
                workforce issues.





Readers
      are urged to consider the risks, uncertainties and other factors that could
      affect our business as described in this report. All forward-looking statements
      made in this report rely upon the safe harbor protections provided under the
      Private Securities Litigation Reform Act of 1995. We do not, by including this
      statement, assume any obligation to review or revise any particular
      forward-looking statement in light of future events.





The
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations should be read in conjunction with the Company’s Consolidated
      Financial Statements and the Notes thereto.




















19





THE
      LACLEDE GROUP, INC.





RESULTS
      OF OPERATIONS





Laclede
      Group’s earnings are primarily derived from the regulated activities of its
      largest subsidiary, Laclede Gas Company (Laclede Gas or the Utility), Missouri’s
      largest natural gas distribution company. Laclede Gas is regulated by the
      Missouri Public Service Commission (MoPSC or Commission) and serves the City
      of
      St. Louis and parts of ten other counties in eastern Missouri. Laclede Gas
      delivers natural gas to retail customers at rates, and in accordance with
      tariffs, authorized by the MoPSC. The Utility’s earnings are primarily generated
      by the sale of heating energy. The Utility’s innovative weather mitigation rate
      design lessens the impact of weather volatility on Laclede Gas customers during
      cold winters and stabilizes the Utility’s earnings by recovering fixed costs
      more evenly during the heating season. Due to the seasonal nature of the
      business of Laclede Gas, Laclede Group’s earnings are seasonal in nature and are
      typically concentrated in the November through April period, which generally
      corresponds with the heating season.





SM&P
      Utility Resources, Inc. (SM&P) is a non-regulated underground facility
      locating and marking service business. The underground locating industry remains
      competitive with many contracts subject to termination on short-term notice.
      SM&P’s customers are concentrated primarily in the utility and
      telecommunications sectors. Additionally, SM&P’s results can be influenced
      by seasonality and trends in the construction sector. During fiscal
      year 2007, the Company received unsolicited inquiries from various third
      parties regarding the Company’s interest in exploring strategic alternatives
      involving SM&P. While the Board has made no decision to engage in any
      strategic transaction involving SM&P, toward the end of fiscal 2007 it
      authorized the Company’s management to assess: (1) the market value of SM&P;
      and (2) the benefits to the Company and its shareholders of a potential sale
      of
      SM&P. No decision regarding SM&P has been made as of the date of filing
      of this report. Accordingly, a transaction may or may not ultimately result
      from
      this process.





Laclede
      Energy Resources, Inc. (LER) is engaged in the non-regulated marketing of
      natural gas and related activities. LER markets natural gas to both on-system
      Utility transportation customers and customers outside of Laclede Gas’
traditional service territory, including large retail and wholesale customers.
      As such, LER’s operations and customer base are subject to fluctuations in
      market conditions.





Other
      subsidiaries provide less than 10% of consolidated revenues.





Laclede
      Group’s strategy continues to include efforts to stabilize and improve the
      performance of its core Utility, while developing non-regulated businesses
      and
      taking a measured approach in the pursuit of additional growth opportunities
      that complement the Utility business.





As
      for the Utility, mitigating the impact of weather fluctuations on Laclede Gas
      customers while improving the ability to recover its authorized distribution
      costs and return continues to be a fundamental component of Laclede Group’s
      strategy. The Utility’s distribution costs are the essential, primarily fixed
      expenditures it must incur to operate and maintain a more than 16,000 mile
      natural gas distribution system and related storage facilities. In addition,
      Laclede Gas is working to continually improve its ability to provide reliable
      natural gas service at a reasonable cost, while maintaining and building a
      secure and dependable infrastructure. The settlement of the Utility’s 2007 rate
      case resulted in enhancements to the Utility’s weather mitigation rate design
      that better ensure the recovery of its fixed costs and margins despite
      variations in sales volumes due to the impacts of weather and other factors
      that
      affect customer usage. The Utility’s income from off-system sales remains
      subject to fluctuations in market conditions. In conjunction with the settlement
      of the 2005 rate case, effective October 1, 2005, the Utility retained
      all pre-tax income from off-system sales and capacity release revenues up to
      $12
      million annually. Pre-tax amounts in excess of $12 million were shared with
      customers, with the Utility retaining 50% of amounts exceeding that threshold.
      The Stipulation & Agreement approved by the MoPSC in the Utility’s 2007 rate
      case increases the portion of pre-tax income from off-system sales and capacity
      release revenues that is shared with customers. Effective
      October 1, 2007, the Utility is allowed to retain 15% to 25% of the
      first $6 million in annual income earned (depending on the level of income
      earned) and 30% of income exceeding $6 million annually. Some of the factors
      impacting the level of off-system sales include the availability and cost of
      the
      Utility’s natural gas supply, the weather in its service area, and the weather
      in other markets. When Laclede Gas’ service area experiences warmer-than-normal
      weather while other markets experience colder weather or supply constraints,
      some of the Utility’s natural gas supply is available for off-system sales and
      there may be a demand for such supply in other markets.


20





Laclede
      Gas continues to work actively to reduce the impact of higher costs associated
      with wholesale natural gas prices by strategically structuring its natural
      gas
      supply portfolio and through the use of financial instruments. Nevertheless,
      the
      cost of purchased gas remains high, relative to historical levels. The Utility’s
      Purchased Gas Adjustment (PGA) Clause allows Laclede Gas to flow through to
      customers, subject to prudence review, the cost of purchased gas supplies,
      including costs, cost reductions, and related carrying costs associated with
      the
      use of financial instruments to hedge the purchase price of natural gas, as
      well
      as gas inventory carrying costs. The Utility believes it will continue to be
      able to obtain sufficient gas supply. The generally higher price levels may
      continue to affect sales volumes (due to the conservation efforts of customers)
      and cash flows (associated with the timing of collection of gas costs and
      related accounts receivable from customers).





Laclede
      Group continues to develop its non-regulated subsidiaries. SM&P is working
      to further the logical expansion of its business in both new and existing
      markets. LER continues to focus on growing its markets on a long-term and
      sustainable basis by providing both on-system Utility transportation customers
      and customers outside of Laclede Gas’ traditional service area with another
      choice in non-regulated natural gas suppliers. Nevertheless, income from LER’s
      operations is subject to fluctuations in market conditions.





Quarter
      Ended December 31, 2007





Earnings





Overview
–
Net
                Income (Loss) by
                Operating Segment
            
            
            
            Quarter
                EndedDecember
                31,(millions,
                after-tax)
            
            
            
            
            2007
            
            
            
            
            2006Regulated
                Gas Distribution
            
            
            
            $
            15.8
            
            
            
            $
            15.7Non-Regulated
                Services
            
            
            
            
            (0.7
            )
            
            
            
            (0.5
            )Non-Regulated
                Gas Marketing
            
            
            
            
            5.6
            
            
            
            
            3.8Other
            
            
            
            
            0.2
            
            
            
            
            0.1Net
                Income
            
            
            
            $
            20.9
            
            
            
            $
            19.1





Laclede
      Group’s net income was $20.9 million for the quarter ended
      December 31, 2007, compared with $19.1 million for the quarter ended
      December 31, 2006. Basic and diluted earnings per share for the
      quarter ended December 31, 2007 were $.97 compared with $.89 per share
      reported for the same quarter last year. Earnings per share increased compared
      to last year primarily due to improved results reported by Laclede Group’s
      non-regulated gas marketing segment. Earnings recorded by both Laclede Group’s
      regulated gas distribution and non-regulated services segments were essentially
      the same as last year. Variations in net income were primarily attributable
      to
      the factors described below.





Regulated
      Gas Distribution net income for the quarter ended December 31, 2007
      was slightly better than the quarter ended December 31, 2006. The
      benefit of the general rate increase effective August 1, 2007,
      totaling $10.1 million, was largely offset by the following factors, quantified
      on a pre-tax basis:





•
            lower
                income from off-system sales and capacity release, totaling $3.4
                million,
                primarily due to a reduction in the Utility’s share of such income
                (pursuant to the 2007 rate case);•
            the
                net effect of lower system gas sales margins, primarily due to an
                unusually late start to the heating season, and other variations
                totaling
                $3.2 million; and,•
            increases
                in operation and maintenance expenses totaling $2.2
                million.





The
      Non-Regulated Services segment reported a loss of $0.7 million during the
      quarter ended December 31, 2007 compared with a loss of $0.5 million
      for the same period last year. The greater loss was primarily attributable
      to
      increases in SM&P’s operating costs, partially offset by increased
      revenues.





The
      Non-Regulated Gas Marketing segment reported an increase in earnings of $1.8
      million compared with the same period last year, primarily due to higher margins
      on sales of natural gas by LER, and to a lesser extent, increased sales
      volumes.


21





Regulated
      Operating Revenues and Operating Expenses





Laclede
      Gas passes on to Utility customers (subject to prudence review) increases and
      decreases in the wholesale cost of natural gas in accordance with its PGA
      Clause. The volatility of the wholesale natural gas market results in
      fluctuations from period to period in the recorded levels of, among other items,
      revenues and natural gas cost expense. Nevertheless, increases and decreases
      in
      the cost of gas associated with system gas sales volumes have no direct effect
      on net revenues and net income.





Regulated
      operating revenues for the quarter ended December 31, 2007 were $320.9
      million, or $27.6 million less than the same period last year. Temperatures
      experienced in the Utility’s service area during the quarter were 8.5% warmer
      than normal and essentially the same as the comparable period last year. Total
      system therms sold and transported were 0.27 billion for the quarter ended
      December 31, 2007 compared with 0.28 billion for the same period last
      year. Total off-system therms sold and transported were 0.05 billion for the
      quarter ended December 31, 2007 compared with 0.07 billion for the
      same period last year. The decrease in regulated operating revenues was
      primarily attributable to the following factors:





MillionsLower
                wholesale gas costs passed on to Utility customers (subject to prudence
                review by the MoPSC)
            
            $
            (20.8
            )General
                rate increase, effective August 1, 2007
            
            
            10.1Lower
                off-system sales volumes
            
            
            (9.6
            )Lower
                system sales volumes and other variations
            
            
            (8.1
            )Higher
                prices charged for off-system sales
            
            
            1.3Lower
                Infrastructure System Replacement Surcharges (ISRS)
                revenues
            
            
            (0.5
            )Total
                Variation
            
            $
            (27.6
            )





Regulated
      operating expenses for the quarter ended December 31, 2007 decreased
      $28.4 million from the same quarter last year. Natural and propane gas expense
      decreased $28.7 million, or 11.4%, from last year’s level, primarily
      attributable to lower rates charged by our suppliers, lower system volumes
      purchased for sendout, and lower off-system gas expense. Other operation and
      maintenance expenses increased $2.2 million, or 5.5%, primarily due to higher
      injuries and damages expense, increased maintenance charges, a higher provision
      for uncollectible accounts, and higher wage rates, partially offset by lower
      group insurance charges. Taxes, other than income, decreased $2.1 million,
      or
      11.1%, primarily due to decreased gross receipts taxes (attributable to the
      decreased revenues) and lower property taxes.





Non-Regulated
      Services Operating Revenues and Operating Expenses





Laclede
      Group’s non-regulated services operating revenues for this quarter increased
      $0.9 million compared to the same quarter last year primarily due to SM&P’s
      attainment of new business in existing markets. The increase in non-regulated
      services operating expenses totaling $1.3 million was attributable to increased
      operating expenses due to growth and other cost increases.





Non-Regulated
      Gas Marketing Operating Revenues and Operating Expenses





Non-regulated
      gas marketing operating revenues increased $28.3 million primarily due to
      increased sales volumes and higher per unit gas sales prices by LER. The
      increase in non-regulated gas marketing operating expenses totaling $25.2
      million was primarily associated with increased volumes purchased and higher
      prices charged by suppliers.





Other
      Income and (Income Deductions) - Net





Other
      income and income deductions – net decreased $0.7 million due to decreased
      income associated with changes in the cash surrender value of life insurance
      policies, lower income associated with carrying costs applied to
      under-recoveries of gas costs, and other minor variations. Such carrying costs
      are recovered through the Utility’s PGA Clause.





Income
      Taxes





The
      $1.0 million increase in income taxes was primarily due to higher pre-tax
      income.


22





REGULATORY
      MATTERS





During
      fiscal 2006, the MoPSC approved permanent modifications to the Cold Weather
      Rule
      affecting the disconnection and reconnection practices of utilities during
      the
      winter heating season. Those modifications included provisions to allow the
      Utility to obtain accounting authorizations and defer for future recovery
      certain costs incurred with the modifications. During fiscal 2007, the
      Utility deferred for future recovery $2.7 million of costs associated with
      the
      fiscal 2007 heating season. On October 31, 2007, the Utility
      filed for determination and subsequent recovery of the deferred amount. On
      November 16, 2007, the MoPSC directed the MoPSC Staff and the Missouri
      Office of Public Counsel to submit their positions regarding the Utility’s
      filing by February 28, 2008.





On
      November 9, 2007, the Utility made an ISRS filing with the Commission
      designed to increase revenues by $1.6 million annually, pending approval by
      the
      Commission. On January 15, 2008, the Commission approved
      implementation of the surcharge to be effective
      January 18, 2008.





On
      December 28, 2006, the MoPSC Staff proposed a disallowance of $7.2
      million related to Laclede Gas’ recovery of its purchased gas costs applicable
      to fiscal 2005. On September 14, 2007, the Staff withdrew its pursuit
      of $5.5 million of the disallowance it had originally proposed. Laclede Gas
      believes that the remaining $1.7 million of the MoPSC Staff’s proposed
      disallowance lacks merit and intends to vigorously oppose the adjustment in
      proceedings before the MoPSC.





On
      December 31, 2007, the MoPSC Staff filed a memorandum with the
      Commission proposing a disallowance of $2.8 million related to the Company’s
      recovery of its purchased gas costs applicable to fiscal 2006. Laclede Gas
      believes that the MoPSC Staff’s position lacks merit and intends to vigorously
      oppose the adjustment in proceedings before the MoPSC. In addition, the MoPSC’s
      Staff’s memorandum raised questions regarding whether certain sales and capacity
      release transactions subject to the Federal Energy Regulatory Commission
      (FERC)’s oversight were consistent with the FERC’s regulations and policies
      regarding capacity release. The Company has commenced an internal review of
      the
      questions raised by the MoPSC Staff and has notified the FERC Staff that it
      has
      taken this action.








CRITICAL
      ACCOUNTING POLICIES





Our
      discussion and analysis of our financial condition, results of operations,
      liquidity, and capital resources is based upon our consolidated financial
      statements, which have been prepared in accordance with accounting principles
      generally accepted in the United States of America. Generally accepted
      accounting principles require that we make estimates and judgments that affect
      the reported amounts of assets, liabilities, revenues and expenses, and related
      disclosure of contingent assets and liabilities. We evaluate our estimates
      on an
      ongoing basis. We base our estimates on historical experience and on various
      other assumptions that we believe are reasonable under the circumstances, the
      results of which form the basis for making judgments about the carrying values
      of assets and liabilities that are not readily apparent from other sources.
      Actual results may differ from these estimates. We believe the following
      represent the more significant items requiring the use of judgment and estimates
      in preparing our consolidated financial statements:





Allowances
                for doubtful accounts – Estimates of the collectibility of trade accounts
                receivable are based on historical trends, age of receivables, economic
                conditions, credit risk of specific customers, and other factors.
                The
                Utility’s provision for uncollectible accounts is dependent on the
                regulatory treatment provided for such costs. As approved by the
                MoPSC,
                the Utility is allowed to defer for future recovery certain costs
                associated with amendments to the Cold Weather Rule.Employee
                benefits and postretirement obligations – Pension and postretirement
                obligations are calculated by actuarial consultants that utilize
                several
                statistical factors and other assumptions related to future events,
                such
                as discount rates, returns on plan assets, compensation increases,
                and
                mortality rates. For the Utility, the amount of expense recognized
                and the
                amounts reflected in other comprehensive income are dependent upon
                the
                regulatory treatment provided for such costs, as discussed further
                below.
                Certain liabilities related to group medical benefits and workers’
                compensation claims, portions of which are self-insured and/or contain
                “stop-loss” coverage with third-party insurers to limit exposure, are
                established based on historical
                trends.


23





Goodwill
                valuation – In accordance with Statement of Financial Accounting Standards
                (SFAS) No. 142, “Goodwill and Other Intangible Assets,” goodwill is
                required to be tested for impairment annually or whenever events
                or
                circumstances occur that may reduce the value of goodwill. In performing
                impairment tests, valuation techniques require the use of estimates
                with
                regard to discounted future cash flows of operations, involving judgments
                based on a broad range of information and historical results. If
                the test
                indicates impairment has occurred, goodwill would be reduced, adversely
                impacting earnings. This test of goodwill impairment may be carried
                forward from one year to the next if the most recent fair value
                determination exceeded the carrying value by a substantial margin,
                the
                assets and liabilities that comprise the reporting entity had not
                changed
                significantly, and the Company believes that based on an analysis
                of
                events that had occurred and circumstances that had changed since
                the most
                recent fair value determination, the likelihood that a current fair
                value
                determination would be less than the current carrying amount is
                remote.





Laclede
      Gas accounts for its regulated operations in accordance with SFAS No. 71,
“Accounting for the Effects of Certain Types of Regulation.” This Statement sets
      forth the application of accounting principles generally accepted in the United
      States of America for those companies whose rates are established by or are
      subject to approval by an independent third-party regulator. The provisions
      of
      SFAS No. 71 require, among other things, that financial statements of a
      regulated enterprise reflect the actions of regulators, where appropriate.
      These
      actions may result in the recognition of revenues and expenses in time periods
      that are different than non-regulated enterprises. When this occurs, costs
      are
      deferred as assets in the balance sheet (regulatory assets) and recorded as
      expenses when those amounts are reflected in rates. Also, regulators can impose
      liabilities upon a regulated company for amounts previously collected from
      customers and for recovery of costs that are expected to be incurred in the
      future (regulatory liabilities). Management believes that the current regulatory
      environment supports the continued use of SFAS No. 71 and that all regulatory
      assets and regulatory liabilities are recoverable or refundable through the
      regulatory process. Management believes the following represent the more
      significant items recorded through the application of SFAS No. 71:





The
                Utility’s PGA Clause allows Laclede Gas to flow through to customers,
                subject to prudence review, the cost of purchased gas supplies, including
                the costs, cost reductions and related carrying costs associated
                with the
                Utility’s use of natural gas financial instruments to hedge the purchase
                price of natural gas. The difference between actual costs incurred
                and
                costs recovered through the application of the PGA are recorded as
                regulatory assets and regulatory liabilities that are recovered or
                refunded in a subsequent period. The PGA Clause also authorizes the
                Utility to recover costs it incurs to finance its investment in gas
                supplies that are purchased during the storage injection season for
                sale
                during the heating season. The PGA Clause also permits the application
                of
                carrying costs to all over- or under-recoveries of gas costs, including
                costs and cost reductions associated with the use of financial
                instruments. Effective October 1, 2007, the PGA Clause also
                provides for a portion of income from off-system sales and capacity
                release revenues to be flowed through to customers.The
                Company records deferred tax liabilities and assets measured by enacted
                tax rates for the net tax effect of all temporary differences between
                the
                carrying amounts of assets and liabilities for financial reporting
                purposes, and the amounts used for income tax purposes. Changes in
                enacted
                tax rates, if any, and certain property basis differences will be
                reflected by entries to regulatory asset or liability accounts for
                regulated companies, and will be reflected as income or loss for
                non-regulated companies. Pursuant to the direction of the MoPSC,
                Laclede
                Gas’ provision for income tax expense for financial reporting purposes
                reflects an open-ended method of tax depreciation. Laclede Gas’ provision
                for income tax expense also records the income tax effect associated
                with
                the difference between overheads capitalized to construction for
                financial
                reporting purposes and those recognized for tax purposes without
                recording
                an offsetting deferred income tax expense. These two methods are
                consistent with the regulatory treatment prescribed by the
                MoPSC.Asset
                retirement obligations are recorded in accordance with SFAS No. 143,
                “Accounting for Asset Retirement Obligations” and Financial Accounting
                Standards Board Interpretation Number (FIN) 47, “Accounting for
                Conditional Asset Retirement Obligations.” Asset retirement obligations
                are calculated using various assumptions related to the timing, method
                of
                settlement, inflation, and profit margins that third parties would
                demand
                to settle the future obligations. These assumptions require the use
                of
                judgment and estimates and may change in future periods as circumstances
                dictate. As authorized by the MoPSC, Laclede Gas accrues future removal
                costs associated with its property, plant and equipment through its
                depreciation rates, even if a legal obligation does not exist as
                defined
                by SFAS No. 143 and FIN 47. The difference between removal costs
                recognized in depreciation rates and the accretion expense and
                depreciation expense recognizable under SFAS No. 143 and FIN 47 is
                a
                timing difference between the recovery of these costs in rates and
                their
                recognition for financial reporting purposes. Accordingly, consistent
                with
                SFAS No. 71, these differences are deferred as regulatory
                liabilities.


24





The
                amount of net periodic pension and other postretirement benefit cost
                recognized in the financial statements related to the Utility’s qualified
                pension plans and other postretirement benefit plans is based upon
                allowances, as approved by the MoPSC, which have been established
                in the
                rate-making process for the recovery of these costs from customers.
                The
                differences between these amounts and actual pension and other
                postretirement benefit costs incurred for financial reporting purposes
                are
                deferred as regulatory assets or regulatory liabilities. SFAS No.
                158,
                “Employers’ Accounting for Defined Benefit Pension and Other
                Postretirement Plans,” requires that changes that affect the funded status
                of pension and other postretirement benefit plans, but that are not
                yet
                required to be recognized as components of pension and other
                postretirement benefit cost, be reflected in other comprehensive
                income.
                For the Utility’s qualified pension plans and other postretirement benefit
                plans, amounts that would otherwise be reflected in other comprehensive
                income are deferred with entries to regulatory assets or regulatory
                liabilities.





For
      further discussion of significant accounting policies, see Note 1 to the
      Consolidated Financial Statements included in the Company’s Form 10-K for the
      fiscal year ended September 30, 2007.








ACCOUNTING
      PRONOUNCEMENTS





The
      Company has evaluated or is in the process of evaluating the impact that
      recently issued accounting standards will have on the Company’s financial
      position or results of operations upon adoption. For disclosures related to
      the
      adoption of new accounting standards, see the New Accounting Standards section
      of Note 1 to the Consolidated Financial Statements.








FINANCIAL
      CONDITION








CREDIT
      RATINGS





As
      of December 31, 2007, credit ratings for outstanding securities for
      Laclede Group and Laclede Gas issues were as follows:





Type
                of Facility
            S&P
            Moody’s
            FitchLaclede
                Group Corporate Rating
            A
            
            A-Laclede
                Gas First Mortgage Bonds
            A
            A3
            A+Laclede
                Gas Commercial Paper
            A-1
            P-2Laclede
                Capital Trust I Trust Preferred Securities
            A-
            Baa3
            BBB+





The
      Company has investment grade ratings, and believes that it will have adequate
      access to the financial markets to meet its capital requirements. These ratings
      remain subject to review and change by the rating agencies.








CASH
      FLOWS





The
      Company’s short-term borrowing requirements typically peak during colder months
      when Laclede Gas borrows money to cover the lag between when it purchases its
      natural gas and when its customers pay for that gas. Changes in the wholesale
      cost of natural gas, variations in the timing of collections of gas cost under
      the Utility’s PGA Clause, the seasonality of accounts receivable balances, and
      the utilization of storage gas inventories cause short-term cash requirements
      to
      vary during the year, and can cause significant variations in the Utility’s cash
      provided by or used in operating activities.





Net
      cash used in operating activities for the three months ended
      December 31, 2007 was $7.7 million, compared with $31.7 million for
      the same period last year. The variation is primarily attributable to increases
      in advance customer billings and a reduction in net cash payments associated
      with the Utility’s use of natural gas financial instruments. Additionally, while
      LER reported improved operating cash flows compared to last year, this was
      largely offset by variations associated with the timing of the collections
      of
      gas cost under the Utility’s PGA Clause.





Net
      cash used in investing activities for the three months ended
      December 31, 2007 was $14.6 million compared with $13.1 million for
      the three months ended December 31, 2006. Cash used in investing
      activities primarily reflected capital expenditures in both
      periods.


25





Net
      cash provided by financing activities was $36.5 million for the three months
      ended December 31, 2007 compared with $45.9 million for the three
      months ended December 31, 2006. The decrease primarily reflects the
      maturity of long-term debt, partially offset by the issuance of additional
      short-term debt this year.








LIQUIDITY
      AND CAPITAL RESOURCES





As
      indicated above, the Company’s short-term borrowing requirements typically peak
      during the colder months. These short-term cash requirements have traditionally
      been met through the sale of commercial paper supported by lines of credit
      with
      banks. Laclede Gas has a line of credit in place of $320 million, which expires
      in December 2010. In November 2007, the Utility established a seasonal
      line of credit of $40 million, which will expire in March 2008. The Utility
      had short-term borrowings aggregating to a maximum of $304.5 million at any
      one
      time during the quarter. Short-term borrowings outstanding at
      December 31, 2007 were $294.5 million, including $40 million from the
      seasonal line of credit, at a weighted average interest rate of 5.4% per annum.
      Based on short-term borrowings at December 31, 2007, a change in
      interest rates of 100 basis points would increase or decrease pre-tax earnings
      and cash flows by approximately $2.9 million on an annual basis. Portions of
      such increases or decreases may be offset through the application of PGA
      carrying costs.





Laclede
      Gas’ lines of credit include covenants limiting total debt, including short-term
      debt, to no more than 70% of total capitalization and requiring earnings before
      interest, taxes, depreciation and amortization (EBITDA) to be at least 2.25
      times interest expense. On December 31, 2007, total debt was 63% of
      total capitalization. For the twelve months ended December 31, 2007,
      EBITDA was 3.40 times interest expense.





Laclede
      Gas has on file with the Securities and Exchange Commission (SEC) an effective
      shelf registration on Form S-3 for issuance of $350 million of securities.
      The
      full amount of this shelf registration remains available to Laclede Gas at
      this time. The Utility has authority from the MoPSC to issue up to $500 million
      in first mortgage bonds, unsecured debt, and equity securities. In
      December 2007, pursuant to this authority, the Utility sold 30 shares of
      its common stock to Laclede Group for $1.0 million, leaving $495.2 million
      remaining under this authorization as of the date of this filing. The amount,
      timing and type of additional financing to be issued will depend on cash
      requirements and market conditions.





On
      November 1, 2007, Laclede Gas paid at maturity $40 million principal
      amount of 7 1/2% First Mortgage Bonds. This maturity was funded through
      short-term borrowings. At December 31, 2007, Laclede Gas had
      fixed-rate long-term debt totaling $310 million. While these long-term debt
      issues are fixed-rate, they are subject to changes in fair value as market
      interest rates change. However, increases or decreases in fair value would
      impact earnings and cash flows only if Laclede Gas were to reacquire any of
      these issues in the open market prior to maturity.





Laclede
      Group has on file a shelf registration on Form S-3 with the SEC, that allows
      for
      the issuance of equity securities, other than preferred stock, and debt
      securities. Of the $500 million of securities originally registered under this Form
      S-3, $362.4 million remain registered and unissued as of
      December 31, 2007. The amount, timing and type of additional financing
      to be issued under this shelf registration will depend on cash requirements
      and
      market conditions.





Short-term
      cash requirements outside of Laclede Gas have generally been met with
      internally-generated funds. However, Laclede Group has $50 million in working
      capital lines of credit, expiring in August 2008, to meet short-term
      liquidity needs of its subsidiaries. These lines of credit have covenants
      limiting the total debt of the consolidated Laclede Group to no more that 70%
      of
      the Company’s total capitalization, giving a 50% debt weighting to the
      subordinated debt issued to an unconsolidated affiliated trust. This ratio
      stood
      at 58% on December 31, 2007. These lines have been used to provide
      letters of credit on behalf of SM&P, which have not been drawn, and to
      provide for seasonal funding needs of the various subsidiaries from time to
      time. At December 31, 2007, letters of credit provided on behalf of
      SM&P totaled $2.8 million. There were no borrowings under Laclede Group’s
      lines during the quarter.





Laclede
      Gas has several operating leases for the rental of vehicles that contain
      provisions requiring Laclede Gas to guarantee certain amounts related to the
      residual value of the leased property. These leases have various terms, the
      longest of which extends through 2014. At December 31, 2007, the
      maximum guarantees under these leases are $1.8 million. However, the Utility
      estimates that the residual value of the leased vehicles will be adequate to
      satisfy most of the guaranteed amounts. At December 31, 2007, the
      carrying value of the liability recognized for these guarantees was $0.3
      million.


26


SM&P
      has several operating leases,
      the aggregate annual cost of which is $8.3 million, consisting primarily of
      12-month operating leases, with renewal options, for vehicles used in its
      business. Laclede Group has parental guarantees of certain of those vehicle
      leases and anticipates that the maximum guarantees, including renewals and
      new
      leases, will not exceed $19.0 million. In the event that Laclede Group would
      be
      required to make payments under these guarantees, it is expected that a
      significant portion of such payments would be recovered through proceeds from
      the liquidation of assets obtained under the terms of the leases. The fair
      market value of the vehicles being leased is estimated at $15.1 million. No
      amounts have been recorded for these guarantees in the financial
      statements.





Laclede
      Group had guarantees totaling $48.8 million for performance and payment of
      certain wholesale gas supply purchases by LER, as of
      December 31, 2007. Since that date, total guarantees issued by Laclede
      Group on behalf of LER increased by $1.2 million bringing the total to $50.0
      million in guarantees outstanding at January 30, 2008. No amounts have
      been recorded for these guarantees in the financial statements.





Utility
      capital expenditures were $13.0 million for the three months ended
      December 31, 2007, compared with $11.8 million for the same period
      last year. Non-utility capital expenditures were $0.4 million for the three
      months ended December 31, 2007 compared with $0.1 million for the same
      period last year.





Consolidated
      capitalization at December 31, 2007, excluding current obligations of
      preferred stock, consisted of 55.3% Laclede Group common stock equity, 0.1%
      Laclede Gas preferred stock equity, 5.8% long-term debt to unconsolidated
      affiliate trust, and 38.8% Laclede Gas long-term debt.





It
      is management’s view that the Company has adequate access to capital markets and
      will have sufficient capital resources, both internal and external, to meet
      anticipated capital requirements.





The
      seasonal nature of Laclede Gas’ sales affects the comparison of certain balance
      sheet items at December 31, 2007 and at September 30, 2007,
      such as Accounts Receivable - Net, Gas Stored Underground, Notes Payable,
      Accounts Payable, Regulatory Assets and Regulatory Liabilities, and Advance
      Customer Billings. The Consolidated Balance Sheet at December 31, 2006
      is presented to facilitate comparison of these items with the corresponding
      interim period of the preceding fiscal year.








CONTRACTUAL
      OBLIGATIONS





As
      of December31,2007,
      Laclede Group had contractual
      obligations with payments due as summarized below(inmillions):





Payments
                due by periodRemaining
            
            
            
            
            
            Fiscal
                YearsContractual
                Obligations
            
            Total
            
            Fiscal
                Year
              2008
            
            Fiscal
                Years
              2009-2010
            
            Fiscal
                Years
              2011-2012
            
            2013
                and
              thereafterPrincipal
                Payments on Long-Term
                Debt
            
            $
            356.4
            
            $
            —
            
            $
            —
            
            $
            25.0
            
            $
            331.4Interest
                Payments on Long-Term
                Debt
            
            
            481.5
            
            
            13.6
            
            
            46.2
            
            
            43.7
            
            
            378.0Operating
                Leases
                (a)
            
            
            17.1
            
            
            5.1
            
            
            8.5
            
            
            2.5
            
            
            1.0Purchase
                Obligations – Natural Gas
                (b)
            
            
            1,514.0
            
            
            509.2
            
            
            538.0
            
            
            382.7
            
            
            84.1Purchase
                Obligations – Other
                (c)
            
            
            110.7
            
            
            12.6
            
            
            18.7
            
            
            16.3
            
            
            63.1Total
                (d)
            
            $
            2,479.7
            
            $
            540.5
            
            $
            611.4
            
            $
            470.2
            
            $
            857.6





(a)
            Operating
                lease obligations are primarily for office space, vehicles, and power
                operated equipment in the gas distribution and non-regulated services
                segments. Additional payments will be incurred if renewal options
                are
                exercised under the provisions of certain agreements.(b)
            These
                purchase obligations represent the minimum payments required under
                existing natural gas transportation and storage contracts and natural
                gas
                supply agreements in the utility gas distribution and non-regulated
                gas
                marketing segments. These amounts reflect fixed obligations as well
                as
                obligations to purchase natural gas at future market prices, calculated
                using December 31, 2007 New York Mercantile Exchange futures
                prices. Laclede Gas recovers the costs related to its purchases,
                transportation, and storage of natural gas through the operation
                of its
                Purchased Gas Adjustment Clause, subject to prudence review; however,
                variations in the timing of collections of gas costs from customers
                affect
                short-term cash requirements. Additional contractual commitments
                are
                generally entered into prior to or during the heating
                season.


27





(c)
            These
                purchase obligations reflect miscellaneous agreements for the purchase
                of
                materials and the procurement of services necessary for normal
                operations.(d)
            The
                categories of Capital Leases and Other Long-Term liabilities have
                been
                excluded from the table above because there are no applicable amounts
                of
                contractual obligations under these categories. Also, commitments
                related
                to pension and postretirement benefit plans have been excluded from
                the
                table above. The Company expects to make contributions to its qualified,
                trusteed pension plans totaling $0.9 million during the remainder
                of
                fiscal year 2008. Laclede Gas anticipates a $0.3 million contribution
                relative to its non-qualified pension plans during the remainder
                of fiscal
                year 2008. With regard to the postretirement benefits, the Company
                anticipates Laclede Gas will contribute $8.2 million to the qualified
                trusts and $0.3 million directly to participants from Laclede Gas’ funds
                during the remainder of fiscal year 2008. For further discussion of
                the Company’s pension and postretirement benefit plans, refer to Note 3,
                Pension Plans and Other Postretirement Benefits, of the Notes to
                Consolidated Financial Statements.








MARKET
      RISK





Laclede
      Gas adopted a risk management policy that provides for the purchase of natural
      gas financial instruments with the goal of managing price risk associated with
      purchasing natural gas on behalf of its customers. This policy prohibits
      speculation. Costs and cost reductions, including carrying costs, associated
      with the Utility’s use of natural gas financial instruments are allowed to be
      passed on to the Utility’s customers through the operation of its PGA Clause,
      through which the MoPSC allows the Utility to recover gas supply costs.
      Accordingly, Laclede Gas does not expect any adverse earnings impact as a result
      of the use of these financial instruments. At December 31, 2007, the
      Utility held 21.5 million MMBtu of futures contracts at an average price of
      $8.36 per MMBtu. These positions have various expiration dates, the longest
      of
      which extends through October 2008.





In
      the course of its business, Laclede Group’s non-regulated gas marketing
      affiliate, LER, enters into fixed price commitments associated with the purchase
      or sale of natural gas. As part of LER’s risk management policy, LER manages the
      price risk associated with these commitments by either closely matching the
      offsetting physical purchase or sale of natural gas at fixed prices or through
      the use of exchange-traded futures contracts to lock in margins. At
      December 31, 2007, LER’s unmatched positions are not material to
      Laclede Group’s financial position or results of operations.








ENVIRONMENTAL
      MATTERS





Laclede
      Gas owns and operates natural gas distribution, transmission and storage
      facilities, the operations of which are subject to various environmental laws,
      regulations and interpretations. While environmental issues resulting from
      such
      operations arise in the ordinary course of business, such issues have not
      materially affected the Company’s or Laclede Gas’ financial position and results
      of operations. As environmental laws, regulations, and their interpretations
      change, however, Laclede Gas may be required to incur additional costs. For
      information relative to environmental matters, see Note 14 to the Consolidated
      Financial Statements included in the Company’s Form 10-K for the fiscal year
      ended September 30, 2007. There have been no significant changes
      relative to environmental matters in the first quarter of fiscal
      year 2008.








OFF-BALANCE
      SHEET ARRANGEMENTS





Laclede
      Group has no off-balance sheet arrangements.








Laclede
      Gas Company’s Management’s Discussion and Analysis of Financial Condition is
      included in Exhibit 99.1 of this report.





28


Item
      3. Quantitative and Qualitative Disclosures About Market Risk





For
      this discussion, see the “Market Risk” subsection in Item 2. Management’s
      Discussion and Analysis of Financial Condition and Results of Operations, page
      28 of this report.





Item
      4. Controls and Procedures





As
      of the end of the period covered by this report, we carried out an evaluation,
      under the supervision and with participation of our management, including our
      Chief Executive Officer and Chief Financial Officer, of the effectiveness of
      the
      design and operation of our disclosure controls and procedures pursuant to
      Rule
      13a-15e and Rule 15d-15e under the Securities Exchange Act of 1934, as amended.
      Based upon that evaluation, the Chief Executive Officer and Chief Financial
      Officer concluded that our disclosure controls and procedures are
      effective.





There
      have been no changes in our internal control over financial reporting that
      occurred during our first fiscal quarter that have materially affected, or
      are
      reasonably likely to materially affect, our internal control over financial
      reporting.














29


PART
      II. OTHER INFORMATION





Item
      1. Legal Proceedings





For
      a description of environmental matters and legal proceedings, see Note 14 to
      the
      Consolidated Financial Statements included in the Company’s Form 10-K for the
      fiscal year ended September 30, 2007. For a description of pending
      regulatory matters of Laclede Gas, see Item 2. Management’s Discussion and
      Analysis of Financial Condition and Results of Operations - Regulatory Matters,
      on page 23 of this report.





Laclede
      Group and its subsidiaries are involved in litigation, claims and investigations
      arising in the normal course of business. While the results of such litigation
      cannot be predicted with certainty, management, after discussion with counsel,
      believes that the final outcome will not have a material adverse effect on
      the
      consolidated financial position or results of operations of the
      Company.





Item
      2. Unregistered Sales of Equity Securities and Use of Proceeds





On
      December 20, 2007, the Board of Directors of Laclede Gas approved the
      sale of 30 shares of Laclede Gas common stock to Laclede Group. The proceeds
      from the sale, totaling $1.0 million, were used to reduce short-term borrowings.
      Exemption from registration was claimed under Section 4(2) of the Securities
      Act
      of 1933.





Item
      6. Exhibits





(a)
            See
                Exhibit Index





























30





SIGNATURES




Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrants
      have
      duly caused this report to be signed on their behalf by the undersigned
      thereunto duly authorized.


The
                Laclede Group, Inc.Dated:
            
            January
                30, 2008
            
            By:
            /s/
                Mark D. WaltermireMark
                D. WaltermireChief
                Financial Officer(Authorized
                Signatory and Chief Financial
                Officer)




















31





SIGNATURES




Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrants
      have
      duly caused this report to be signed on their behalf by the undersigned
      thereunto duly authorized.


Laclede
                Gas CompanyDated:
            
            January
                30, 2008
            
            By:
            /s/
                Mark D. WaltermireMark
                D. WaltermireSenior
                Vice President andChief
                Financial Officer(Authorized
                Signatory and Chief Financial
                Officer)

















32








INDEX
      TO
      EXHIBITS








Exhibit
                No.10.1
            -
            Form
                of Restricted Stock Award Agreement.10.2
            -
            Form
                of Performance Contingent Restricted Stock Award Agreement for all
                participants except the Chief Executive Officer and the Executive
                Vice
                President – Energy and Administrative Services.10.3
            -
            Forms
                of Performance Contingent Restricted Stock Award Agreements for Chief
                Executive Officer.10.4
            -
            Form
                of Performance Contingent Restricted Stock Award Agreement for Executive
                Vice President – Energy and Administrative Services.12
            -
            Ratio
                of Earnings to Fixed Charges.31
            -
            CEO
                and CFO Certifications under Exchange Act Rule 13a – 14(a).32
            -
            CEO
                and CFO Section 1350 Certifications.99.1
            -
            Laclede
                Gas Company - Financial Statements, Notes to Financial Statements,
                and
                Management’s Discussion and Analysis of Financial Condition and Results of
                Operations.











33