<PAGE>


                                  $325,000,000


                           PEOPLES ENERGY CORPORATION


                        6.90% NOTES DUE JANUARY 15, 2011


                          REGISTRATION RIGHTS AGREEMENT



                                                              January 11, 2001



Credit Suisse First Boston Corporation
Banc of America Securities LLC
ABN AMRO Incorporated
Banc One Capital Markets, Inc.
Credit Lyonnais Securities (USA) Inc.
Loop Capital Markets, LLC
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629

Ladies and Gentlemen:

         Peoples Energy Corporation, an Illinois corporation (the "COMPANY"),
proposes to issue and sell to Credit Suisse First Boston, Banc of America
Securities LLC, ABN AMRO Incorporated, Banc One Capital Markets, Inc., Credit
Lyonnais Securities (USA) Inc., and Loop Capital Markets, LLC (the "INITIAL
PURCHASERS"), upon the terms set forth in a purchase agreement of even date
herewith (the "PURCHASE AGREEMENT"), $325,000,000 aggregate principal amount of
its 6.90% Notes due January 15, 2011 (the "INITIAL SECURITIES"). The Initial
Securities will be issued pursuant to an Indenture, dated as of January 18, 2001
(the "INDENTURE"), between the Company and Bank One Trust Company National
Association, as trustee (the "TRUSTEE"). As an inducement to the Initial
Purchasers to enter into the Purchase Agreement, the Company agrees with the
Initial Purchasers, for the benefit of the Initial Purchasers and the holders of
the Securities (as defined below) (collectively the "HOLDERS"), as follows:

          1. REGISTERED EXCHANGE OFFER. Unless not permitted by applicable law
(after the Company has complied with the ultimate paragraph of this Section 1)
or the policy of the Securities and Exchange Commission (the "COMMISSION"), the
Company shall prepare and, not later than 60 days (such 60th day being a "FILING
DEADLINE") after the date on which the Initial Purchasers purchase the Initial
Securities pursuant to the Purchase Agreement (the "CLOSING DATE"), file with
the Commission a registration statement (the "EXCHANGE OFFER REGISTRATION
STATEMENT") on an appropriate form under the Securities Act of 1933, as amended
(the


<PAGE>

"SECURITIES ACT"), with respect to a proposed offer (the "REGISTERED EXCHANGE
OFFER") to the Holders of Transfer Restricted Securities (as defined in
Section 6 hereof), who are not prohibited by any law or policy of the
Commission from participating in the Registered Exchange Offer, to issue and
deliver to such Holders, in exchange for the Initial Securities, a like
aggregate principal amount of debt securities of the Company issued under the
Indenture, identical in all material respects to the Initial Securities and
registered under the Securities Act (the "EXCHANGE SECURITIES"). The Company
shall use its reasonable best efforts to (i) cause such Exchange Offer
Registration Statement to become effective under the Securities Act within
180 days after the Closing Date (such 180th day being an "EFFECTIVENESS
DEADLINE") and (ii) keep the Exchange Offer Registration Statement effective
for not less than 30 days (or longer, if required by applicable law) after
the date notice of the Registered Exchange Offer is mailed to the Holders
(such period being called the "EXCHANGE OFFER REGISTRATION PERIOD").

         If the Company commences the Registered Exchange Offer, the Company (i)
will be entitled to consummate the Registered Exchange Offer 30 days after such
commencement (PROVIDED that the Company has accepted all the Initial Securities
theretofore validly tendered in accordance with the terms of the Registered
Exchange Offer) and (ii) will be required to consummate the Registered Exchange
Offer no later than 40 days after the date on which the Exchange Offer
Registration Statement is declared effective (such 40th day being the
"CONSUMMATION DEADLINE").

         Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of Transfer Restricted Securities electing to exchange the
Initial Securities for Exchange Securities (assuming that such Holder is not an
affiliate of the Company within the meaning of the Securities Act, acquires the
Exchange Securities in the ordinary course of such Holder's business and has no
arrangements with any person to participate in the distribution of the Exchange
Securities and is not prohibited by any law or policy of the Commission from
participating in the Registered Exchange Offer) to trade such Exchange
Securities from and after their receipt without any limitations or restrictions
under the Securities Act and without material restrictions under the securities
laws of the several states of the United States.

         The Company acknowledges that, pursuant to current interpretations by
the Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder which is a broker-dealer
electing to exchange Initial Securities, acquired for its own account as a
result of market making activities or other trading activities, for Exchange
Securities (an "EXCHANGING DEALER"), is required to deliver a prospectus
containing the information set forth in (a) Annex A hereto on the cover, (b)
Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of
the Exchange Offer" section, and (c) Annex C hereto in the "Plan of
Distribution" section of such prospectus in connection with a sale of any such
Exchange Securities received by such Exchanging Dealer pursuant to the
Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell
Securities (as defined below) acquired in exchange for Initial Securities
constituting any portion of an unsold allotment, is required to deliver a
prospectus containing the information required by Items 507 or 508 of Regulation
S-K under the Securities Act, as applicable, in connection with such sale.


                                     -2-

<PAGE>

         The Company shall use its reasonable best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
prospectus contained therein, in order to permit such prospectus to be lawfully
delivered by all persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such persons must comply with such
requirements in order to resell the Exchange Securities; PROVIDED, HOWEVER, that
(i) in the case where such prospectus and any amendment or supplement thereto
must be delivered by an Exchanging Dealer or an Initial Purchaser, such period
shall be the lesser of 180 days and the date on which all Exchanging Dealers and
the Initial Purchasers have sold all Exchange Securities held by them (unless
such period is extended pursuant to Section 3(j) below) and (ii) the Company
shall make such prospectus and any amendment or supplement thereto available to
any broker-dealer for use in connection with any resale of any Exchange
Securities for a period of not less than 180 days after the consummation of the
Registered Exchange Offer.

         If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Initial Securities acquired by it as part of its initial
distribution, the Company, simultaneously with the delivery of the Exchange
Securities pursuant to the Registered Exchange Offer, shall issue and deliver to
such Initial Purchaser upon the written request of the Initial Purchaser, in
exchange (the "PRIVATE EXCHANGE") for the Initial Securities held by the Initial
Purchaser, a like principal amount of debt securities of the Company issued
under the Indenture and identical in all material respects to the Initial
Securities (the "PRIVATE EXCHANGE SECURITIES"). The Initial Securities, the
Exchange Securities and the Private Exchange Securities are herein collectively
called the "SECURITIES."

         In connection with the Registered Exchange Offer, the Company shall:

                  (a) mail to each Holder a copy of the prospectus forming part
         of the Exchange Offer Registration Statement, together with an
         appropriate letter of transmittal and related documents;

                  (b) keep the Registered Exchange Offer open for not less than
         30 days (or longer, if required by applicable law) after the date
         notice thereof is mailed to the Holders;

                  (c) utilize the services of a depositary for the Registered
         Exchange Offer with an address in the Borough of Manhattan, The City of
         New York, which may be the Trustee or an affiliate of the Trustee;

                  (d) permit Holders to withdraw tendered Securities at any time
         prior to the close of business, New York time, on the last business day
         on which the Registered Exchange Offer shall remain open; and

                  (e) otherwise comply with all applicable laws.


                                      -3-

<PAGE>


         As soon as practicable after the close of the Registered Exchange Offer
or the Private Exchange, as the case may be, the Company shall:

                  (x) accept for exchange all the Securities validly tendered
         and not withdrawn pursuant to the Registered Exchange Offer and the
         Private Exchange;

                  (y) deliver to the Trustee for cancellation all the Initial
         Securities so accepted for exchange; and

                  (z) cause the Trustee to authenticate and deliver promptly to
         each Holder of the Initial Securities, Exchange Securities or Private
         Exchange Securities, as the case may be, equal in principal amount to
         the Initial Securities of such Holder so accepted for exchange.

         The Indenture will provide that the Exchange Securities will not be
subject to the transfer restrictions set forth in the Indenture and that all the
Securities will vote and consent together on all matters as one class and that
none of the Securities will have the right to vote or consent as a class
separate from one another on any matter.

         Interest on each Exchange Security and Private Exchange Security issued
pursuant to the Registered Exchange Offer and in the Private Exchange will
accrue from the last interest payment date on which interest was paid on the
Initial Securities surrendered in exchange therefor or, if no interest has been
paid on the Initial Securities, from the date of original issue of the Initial
Securities.

         Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Securities or the Exchange Securities within the meaning of
the Securities Act, (iii) such Holder is not an "affiliate," as defined in Rule
405 of the Securities Act, of the Company or if it is an affiliate, such Holder
will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable, (iv) if such Holder is not a
broker-dealer, that it is not engaged in, and does not intend to engage in, the
distribution of the Exchange Securities and (v) if such Holder is a
broker-dealer, that it will receive Exchange Securities for its own account in
exchange for Initial Securities that were acquired as a result of market-making
activities or other trading activities and that it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Securities.

         Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming part of any Exchange Offer


                                      -4-

<PAGE>

Registration Statement, and any supplement to such prospectus, does not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.

         If following the date hereof there has been announced a change in
Commission policy with respect to exchange offers that in the reasonable opinion
of counsel to the Company raises a substantial question as to whether the
Registered Exchange Offer is permitted by applicable federal law, the Company
will seek a no-action letter or other favorable decision from the Commission
allowing the Company to consummate the Registered Exchange Offer. The Company
will pursue the issuance of such a decision to the Commission staff level. In
connection with the foregoing, the Company will take all such other actions as
may be requested by the Commission or otherwise required in connection with the
issuance of such decision, including without limitation (i) participating in
telephonic conferences with the Commission, (ii) delivering to the Commission
staff an analysis prepared by counsel to the Company setting forth the legal
bases, if any, upon which such counsel has concluded that the Registered
Exchange Offer should be permitted and (iii) diligently pursuing a resolution
(which need not be favorable) by the Commission staff.

          2. SHELF REGISTRATION. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the Company
is not permitted to effect a Registered Exchange Offer, as contemplated by
Section 1 hereof, (ii) the Registered Exchange Offer is not consummated by the
180th day after the Closing Date, (iii) any Initial Purchaser so requests with
respect to the Initial Securities (or the Private Exchange Securities) not
eligible to be exchanged for Exchange Securities in the Registered Exchange
Offer and held by it following consummation of the Registered Exchange Offer or
(iv) any Holder (other than an Exchanging Dealer) is not eligible to participate
in the Registered Exchange Offer or, in the case of any Holder (other than an
Exchanging Dealer) that participates in the Registered Exchange Offer, such
Holder does not receive freely tradeable Exchange Securities on the date of the
exchange and any such Holder so requests, the Company shall take the following
actions (the date on which any of the conditions described in the foregoing
clauses (i) through (iv) occur, including in the case of clauses (iii) or (iv)
the receipt of the required notice, being a "TRIGGER DATE"):

                  (a) The Company shall promptly (but in no event more than 60
         days after the Trigger Date (such 60th day being a "FILING DEADLINE"))
         file with the Commission and thereafter use its reasonable best efforts
         to cause to be declared effective no later than 180 days after the
         Trigger Date (such 180th day being an "EFFECTIVENESS DEADLINE") a
         registration statement (the "SHELF REGISTRATION STATEMENT" and,
         together with the Exchange Offer Registration Statement, a
         "REGISTRATION STATEMENT") on an appropriate form under the Securities
         Act relating to the offer and sale of the Transfer Restricted
         Securities by the Holders thereof from time to time in accordance with
         the methods of distribution set forth in the Shelf Registration
         Statement and Rule 415 under the Securities Act (hereinafter, the
         "SHELF REGISTRATION"); PROVIDED, HOWEVER, that no Holder (other than an
         Initial Purchaser) shall be entitled to have the Securities held by it
         covered by such Shelf Registration Statement unless such Holder agrees
         in writing to be bound by all the provisions of this Agreement
         applicable to such Holder.


                                      -5-

<PAGE>

                  (b) The Company shall use its reasonable best efforts to keep
         the Shelf Registration Statement continuously effective in order to
         permit the prospectus included therein to be lawfully delivered by the
         Holders of the relevant Securities, for a period of two years (or for
         such longer period if extended pursuant to Section 3(j) below) from the
         date of its effectiveness or such shorter period that will terminate
         when all the Securities covered by the Shelf Registration Statement (i)
         have been sold pursuant thereto or (ii) are no longer restricted
         securities (as defined in Rule 144 under the Securities Act, or any
         successor rule thereof). The Company shall be deemed not to have used
         its reasonable best efforts to keep the Shelf Registration Statement
         effective during the requisite period if it voluntarily takes any
         action that would result in Holders of Securities covered thereby not
         being able to offer and sell such Securities during that period, unless
         such action is required by applicable law.

                  (c) Notwithstanding any other provisions of this Agreement to
         the contrary, the Company shall cause the Shelf Registration Statement
         and the related prospectus and any amendment or supplement thereto, as
         of the effective date of the Shelf Registration Statement, amendment or
         supplement, (i) to comply in all material respects with the applicable
         requirements of the Securities Act and the rules and regulations of the
         Commission and (ii) not to contain any untrue statement of a material
         fact or omit to state a material fact required to be stated therein or
         necessary in order to make the statements therein, in light of the
         circumstances under which they were made, not misleading.

         3. REGISTRATION PROCEDURES. In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any Registered
Exchange Offer contemplated by Section 1 hereof, the following provisions shall
apply:

                  (a) The Company shall (i) furnish to each Initial Purchaser,
         prior to the filing thereof with the Commission, a copy of the
         Registration Statement and each amendment thereof and each supplement,
         if any, to the prospectus included therein and, in the event that an
         Initial Purchaser (with respect to any portion of an unsold allotment
         from the original offering) is participating in the Registered Exchange
         Offer or the Shelf Registration Statement, the Company shall use its
         reasonable best efforts to reflect in each such document, when so filed
         with the Commission, such comments as such Initial Purchaser reasonably
         may propose; (ii) include the information set forth in Annex A hereto
         on the cover, in Annex B hereto in the "Exchange Offer Procedures"
         section and the "Purpose of the Exchange Offer" section and in Annex C
         hereto in the "Plan of Distribution" section of the prospectus forming
         a part of the Exchange Offer Registration Statement and include the
         information set forth in Annex D hereto in the Letter of Transmittal
         delivered pursuant to the Registered Exchange Offer; (iii) if requested
         by an Initial Purchaser, include the information required by Items 507
         or 508 of Regulation S-K under the Securities Act, as applicable, in
         the prospectus forming a part of the Exchange Offer Registration
         Statement; (iv) include within the prospectus contained in the Exchange
         Offer Registration Statement a section entitled "Plan of Distribution,"
         reasonably acceptable to the Initial Purchasers, which shall contain a
         summary statement of the positions taken or policies made by the staff
         of the Commission with respect to the potential "underwriter" status of
         any broker-dealer that is the beneficial owner (as defined


                                      -6-

<PAGE>

         in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
         (the "EXCHANGE ACT")) of Exchange Securities received by such
         broker-dealer in the Registered Exchange Offer (a "PARTICIPATING
         BROKER-DEALER"), whether such positions or policies have been
         publicly disseminated by the staff of the Commission or such
         positions or policies, in the reasonable judgment of the Initial
         Purchasers based upon advice of counsel (which may be in-house
         counsel), represent the prevailing views of the staff of the
         Commission; and (v) in the case of a Shelf Registration Statement,
         include the names of the Holders who propose to sell Securities
         pursuant to the Shelf Registration Statement as selling
         securityholders.

                  (b) The Company shall give written notice to the Initial
         Purchasers, the Holders of the Securities and any Participating
         Broker-Dealer from whom the Company has received prior written notice
         that it will be a Participating Broker-Dealer in the Registered
         Exchange Offer (which notice pursuant to clauses (ii)-(v) hereof shall
         be accompanied by an instruction to suspend the use of the prospectus
         until the requisite changes have been made):

                           (i) when the Registration Statement or any amendment
                  thereto has been filed with the Commission and when the
                  Registration Statement or any post-effective amendment thereto
                  has become effective;

                           (ii) of any request by the Commission for amendments
                  or supplements to the Registration Statement or the prospectus
                  included therein or for additional information;

                           (iii) of the issuance by the Commission of any stop
                  order suspending the effectiveness of the Registration
                  Statement or the initiation of any proceedings for that
                  purpose;

                           (iv) of the receipt by the Company or its legal
                  counsel of any notification with respect to the suspension of
                  the qualification of the Securities for sale in any
                  jurisdiction or the initiation or threatening of any
                  proceeding for such purpose; and

                           (v) of the happening of any event that requires the
                  Company to make changes in the Registration Statement or the
                  prospectus in order that the Registration Statement or the
                  prospectus do not contain an untrue statement of a material
                  fact nor omit to state a material fact required to be stated
                  therein or necessary to make the statements therein (in the
                  case of the prospectus, in light of the circumstances under
                  which they were made) not misleading.

                  (c) The Company shall use its reasonable best efforts to
         obtain the withdrawal at the earliest possible time, of any order
         suspending the effectiveness of the Registration Statement.


                                      -7-

<PAGE>


                  (d) The Company shall furnish to each Holder of Securities
         included within the coverage of the Shelf Registration, without charge,
         at least one copy of the Shelf Registration Statement and any
         post-effective amendment thereto, including financial statements and
         schedules, and, if the Holder so requests in writing, all exhibits
         thereto (including those, if any, incorporated by reference).

                  (e) The Company shall deliver to each Exchanging Dealer and
         each Initial Purchaser, and to any other Holder who so requests,
         without charge, at least one copy of the Exchange Offer Registration
         Statement and any post-effective amendment thereto, including financial
         statements and schedules, and, if any Initial Purchaser or any such
         Holder requests, all exhibits thereto (including those incorporated by
         reference).

                  (f) The Company shall, during the Shelf Registration Period,
         deliver to each Holder of Securities included within the coverage of
         the Shelf Registration, without charge, as many copies of the
         prospectus (including each preliminary prospectus) included in the
         Shelf Registration Statement and any amendment or supplement thereto as
         such person may reasonably request. The Company consents, subject to
         the provisions of this Agreement, to the use of the prospectus or any
         amendment or supplement thereto by each of the selling Holders of the
         Securities in connection with the offering and sale of the Securities
         covered by the prospectus, or any amendment or supplement thereto,
         included in the Shelf Registration Statement.

                  (g) The Company shall deliver to each Initial Purchaser, any
         Exchanging Dealer, any Participating Broker-Dealer and such other
         persons required to deliver a prospectus following the Registered
         Exchange Offer, without charge, as many copies of the final prospectus
         included in the Exchange Offer Registration Statement and any amendment
         or supplement thereto as such persons may reasonably request. The
         Company consents, subject to the provisions of this Agreement, to the
         use of the prospectus or any amendment or supplement thereto by any
         Initial Purchaser, if necessary, any Participating Broker-Dealer and
         such other persons required to deliver a prospectus following the
         Registered Exchange Offer in connection with the offering and sale of
         the Exchange Securities covered by the prospectus, or any amendment or
         supplement thereto, included in such Exchange Offer Registration
         Statement.

                  (h) Prior to any public offering of the Securities pursuant to
         any Registration Statement the Company shall register or qualify or
         cooperate with the Holders of the Securities included therein and their
         respective counsel in connection with the registration or qualification
         of the Securities for offer and sale under the securities or "blue sky"
         laws of such states of the United States as any Holder of the
         Securities reasonably requests in writing and do any and all other acts
         or things necessary or advisable to enable the offer and sale in such
         jurisdictions of the Securities covered by such Registration Statement;
         PROVIDED, HOWEVER, that the Company shall not be required to (i)
         qualify generally to do business in any jurisdiction where it is not
         then so qualified or (ii) take any action which would subject it to
         general service of process or to taxation in any jurisdiction where it
         is not then so subject.


                                     -8-

<PAGE>

                  (i) The Company shall cooperate with the Holders of the
         Securities to facilitate the timely preparation and delivery of
         certificates representing the Securities to be sold pursuant to any
         Registration Statement free of any restrictive legends and in such
         denominations and registered in such names as the Holders may request a
         reasonable period of time prior to sales of the Securities pursuant to
         such Registration Statement.

                  (j) Upon the occurrence of any event contemplated by
         paragraphs (ii) through (v) of Section 3(b) above during the period for
         which the Company is required to maintain an effective Registration
         Statement, the Company shall promptly prepare and file a post-effective
         amendment to the Registration Statement or a supplement to the related
         prospectus and any other required document so that, as thereafter
         delivered to Holders of the Securities or purchasers of Securities, the
         prospectus will not contain an untrue statement of a material fact or
         omit to state any material fact required to be stated therein or
         necessary to make the statements therein, in light of the circumstances
         under which they were made, not misleading. If the Company notifies the
         Initial Purchasers, the Holders of the Securities and any known
         Participating Broker-Dealer in accordance with paragraphs (ii) through
         (v) of Section 3(b) above to suspend the use of the prospectus until
         the requisite changes to the prospectus have been made, then the
         Initial Purchasers, the Holders of the Securities and any such
         Participating Broker-Dealers shall suspend use of such prospectus, and
         the period of effectiveness of the Shelf Registration Statement
         provided for in Section 2(b) above and the Exchange Offer Registration
         Statement provided for in Section 1 above shall each be extended by the
         number of days from and including the date of the giving of such notice
         to and including the date when the Initial Purchasers, the Holders of
         the Securities and any known Participating Broker-Dealer shall have
         received such amended or supplemented prospectus pursuant to this
         Section 3(j).

                  (k) Not later than the effective date of the applicable
         Registration Statement, the Company will provide a CUSIP number for the
         Initial Securities, the Exchange Securities or the Private Exchange
         Securities, as the case may be, and provide the applicable trustee with
         printed certificates for the Initial Securities, the Exchange
         Securities or the Private Exchange Securities, as the case may be, in a
         form eligible for deposit with The Depository Trust Company.

                  (l) The Company will comply with all rules and regulations of
         the Commission to the extent and so long as they are applicable to the
         Registered Exchange Offer or the Shelf Registration and will make
         generally available to its security holders (or otherwise provide in
         accordance with Section 11(a) of the Securities Act) an earnings
         statement satisfying the provisions of Section 11(a) of the Securities
         Act, no later than 45 days after the end of a 12-month period (or 90
         days, if such period is a fiscal year) beginning with the first month
         of the Company's first fiscal quarter commencing after the effective
         date of the Registration Statement, which statement shall cover such
         12-month period.

                  (m) The Company shall cause the Indenture to be qualified
         under the Trust Indenture Act of 1939, as amended, in a timely manner
         and containing such changes, if


                                      -9-

<PAGE>

         any, as shall be necessary for such qualification. In the event that
         such qualification would require the appointment of a new trustee
         under the Indenture, the Company shall appoint a new trustee
         thereunder pursuant to the applicable provisions of the Indenture.

                  (n) The Company may require each Holder of Securities to be
         sold pursuant to the Shelf Registration Statement to furnish to the
         Company such information regarding the Holder and the distribution of
         the Securities as the Company may from time to time reasonably require
         for inclusion in the Shelf Registration Statement, and the Company may
         exclude from such registration the Securities of any Holder that
         unreasonably fails to furnish such information within a reasonable time
         after receiving such request.

                  (o) The Company shall enter into such customary agreements
         (including, if requested, an underwriting agreement in customary form)
         and take all such other action, if any, as any Holder of the Securities
         shall reasonably request in order to facilitate the disposition of the
         Securities pursuant to any Shelf Registration.

                  (p) In the case of any Shelf Registration, the Company shall
         (i) make reasonably available for inspection by the Holders of the
         Securities, any underwriter participating in any disposition pursuant
         to the Shelf Registration Statement and any attorney, accountant or
         other agent retained by the Holders of the Securities or any such
         underwriter all relevant financial and other records, pertinent
         corporate documents and properties of the Company and (ii) cause the
         Company's officers, directors, employees, accountants and auditors to
         supply all relevant information reasonably requested by the Holders of
         the Securities or any such underwriter, attorney, accountant or agent
         in connection with the Shelf Registration Statement, in each case, as
         shall be reasonably necessary to enable such persons, to conduct a
         reasonable investigation within the meaning of Section 11 of the
         Securities Act; PROVIDED, HOWEVER, that the foregoing inspection and
         information gathering shall be coordinated on behalf of the Initial
         Purchasers by you and on behalf of the other parties, by one counsel
         designated by and on behalf of such other parties as described in
         Section 4 hereof.

                  (q) In the case of any Shelf Registration, the Company, if
         requested by any Holder of Securities covered thereby, shall cause (i)
         its counsel to deliver an opinion and updates thereof relating to the
         Securities in customary form addressed to such Holders and the managing
         underwriters, if any, thereof and dated, in the case of the initial
         opinion, the effective date of such Shelf Registration Statement (it
         being agreed that the matters to be covered by such opinion shall
         include, without limitation, the due incorporation and good standing of
         the Company and its subsidiaries; the qualification of the Company and
         its subsidiaries to transact business as foreign corporations; the due
         authorization, execution and delivery of the relevant agreement of the
         type referred to in Section 3(o) hereof; the due authorization,
         execution, authentication and issuance, and the validity and
         enforceability, of the applicable Securities; the absence of material
         legal or governmental proceedings involving the Company and its
         subsidiaries; the absence of governmental approvals required to be
         obtained in connection with the Shelf Registration Statement, the
         offering and sale of the applicable Securities, or any agreement of the
         type referred to in Section 3(o) hereof; the compliance as to form of
         such Shelf Registration


                                     -10-


<PAGE>

         Statement and any documents incorporated by reference therein and of
         the Indenture with the requirements of the Securities Act and the
         Trust Indenture Act, respectively; and, as of the date of the
         opinion and as of the effective date of the Shelf Registration
         Statement or most recent post-effective amendment thereto, as the
         case may be, the absence from such Shelf Registration Statement and
         the prospectus included therein, as then amended or supplemented,
         and from any documents incorporated by reference therein of an
         untrue statement of a material fact or the omission to state therein
         a material fact required to be stated therein or necessary to make
         the statements therein not misleading (in the case of any such
         documents, in the light of the circumstances existing at the time
         that such documents were filed with the Commission under the
         Exchange Act)); (ii) its officers to execute and deliver all
         customary documents and certificates and updates thereof requested
         by any underwriters of the applicable Securities; and (iii) its
         independent public accountants to provide to the selling Holders of
         the applicable Securities and any underwriter therefor a comfort
         letter in customary form and covering matters of the type
         customarily covered in comfort letters in connection with primary
         underwritten offerings, subject to receipt of appropriate
         documentation as contemplated, and only if permitted, by Statement
         of Auditing Standards No. 72.

                  (r) In the case of the Registered Exchange Offer, if requested
         by any Initial Purchaser or any known Participating Broker-Dealer, the
         Company shall cause (i) its counsel to deliver to such Initial
         Purchaser or such Participating Broker-Dealer a signed opinion in the
         form set forth in Section 6(c) of the Purchase Agreement with such
         changes as are customary in connection with the preparation of a
         Registration Statement and (ii) its independent public accountants to
         deliver to such Initial Purchaser or such Participating Broker-Dealer a
         comfort letter, in customary form, meeting the requirements as to the
         substance thereof as set forth in Section 6(a) of the Purchase
         Agreement, with appropriate date changes.

                  (s) If a Registered Exchange Offer or a Private Exchange is to
         be consummated, upon delivery of the Initial Securities by Holders to
         the Company (or to such other Person as directed by the Company) in
         exchange for the Exchange Securities or the Private Exchange
         Securities, as the case may be, the Company shall mark, or caused to be
         marked, on the Initial Securities so exchanged that such Initial
         Securities are being canceled in exchange for the Exchange Securities
         or the Private Exchange Securities, as the case may be; in no event
         shall the Initial Securities be marked as paid or otherwise satisfied.

                  (t) The Company will use its reasonable best efforts to (a) if
         the Initial Securities have been rated prior to the initial sale of
         such Initial Securities, confirm such ratings will apply to the
         Securities covered by a Registration Statement, or (b) if the Initial
         Securities were not previously rated, cause the Securities covered by a
         Registration Statement to be rated with the appropriate rating
         agencies, if so requested by Holders of a majority in aggregate
         principal amount of Securities covered by such Registration Statement,
         or by the managing underwriters, if any.


                                     -11-

<PAGE>

                  (u) In the event that any broker-dealer registered under the
         Exchange Act shall underwrite any Securities or participate as a member
         of an underwriting syndicate or selling group or "assist in the
         distribution" (within the meaning of the Conduct Rules (the "RULES") of
         the National Association of Securities Dealers, Inc. ("NASD")) thereof,
         whether as a Holder of such Securities or as an underwriter, a
         placement or sales agent or a broker or dealer in respect thereof, or
         otherwise, the Company will assist such broker-dealer in complying with
         the requirements of such Rules, including, without limitation, by (i)
         if such Rules, including Rule 2720, shall so require, engaging a
         "qualified independent underwriter" (as defined in Rule 2720) to
         participate in the preparation of the Registration Statement relating
         to such Securities, to exercise usual standards of due diligence in
         respect thereto and, if any portion of the offering contemplated by
         such Registration Statement is an underwritten offering or is made
         through a placement or sales agent, to recommend the yield of such
         Securities, (ii) indemnifying any such qualified independent
         underwriter to the extent of the indemnification of underwriters
         provided in Section 5 hereof and (iii) providing such information to
         such broker-dealer as may be required in order for such broker-dealer
         to comply with the requirements of the Rules.

                  (v) The Company shall use its reasonable best efforts to take
         all other steps necessary to effect the registration of the Securities
         covered by a Registration Statement contemplated hereby.

         4. REGISTRATION EXPENSES. (a) All expenses incident to the Company's
performance of and compliance with this Agreement will be borne by the Company,
regardless of whether a Registration Statement is ever filed or becomes
effective, including without limitation;

                  (i) all registration and filing fees and expenses;

                  (ii) all fees and expenses of compliance with federal
         securities and state "blue sky" or securities laws;

                  (iii) all expenses of printing (including printing
         certificates for the Securities to be issued in the Registered Exchange
         Offer and the Private Exchange and printing of Prospectuses), messenger
         and delivery services and telephone;

                  (iv) all fees and disbursements of counsel for the Company;

                  (v) all application and filing fees in connection with listing
         the Exchange Securities on a national securities exchange or automated
         quotation system pursuant to the requirements hereof; and

                  (vi) all fees and disbursements of independent certified
         public accountants of the Company (including the expenses of any
         special audit and comfort letters required by or incident to such
         performance).


                                      -12-

<PAGE>


         The Company will bear its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expenses of any annual audit and the fees and
expenses of any person, including special experts, retained by the Company.

         (b) In connection with any Registration Statement required by this
Agreement, the Company will reimburse the Initial Purchasers and the Holders of
Transfer Restricted Securities who are tendering Initial Securities in the
Registered Exchange Offer and/or selling or reselling Securities pursuant to the
"Plan of Distribution" contained in the Exchange Offer Registration Statement or
the Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Chapman and Cutler,
unless another firm shall be chosen by the Holders of a majority in principal
amount of the Transfer Restricted Securities for whose benefit such Registration
Statement is being prepared.

         5. INDEMNIFICATION. (a) The Company agrees to indemnify and hold
harmless each Holder of the Securities, any Participating Broker-Dealer and each
person, if any, who controls such Holder or such Participating Broker-Dealer
within the meaning of the Securities Act or the Exchange Act (each Holder, any
Participating Broker-Dealer and such controlling persons are referred to
collectively as the "INDEMNIFIED Parties") from and against any losses, claims,
damages or liabilities, joint or several, or any actions in respect thereof
(including, but not limited to, any losses, claims, damages, liabilities or
actions relating to purchases and sales of the Securities) to which each
Indemnified Party may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary prospectus relating to a
Shelf Registration, or arise out of, or are based upon, the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse, as
incurred, the Indemnified Parties for any reasonable legal fees or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action in respect thereof;
PROVIDED, HOWEVER, that (i) the Company shall not be liable in any such case to
the extent that such loss, claim, damage or liability arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made in a Registration Statement or prospectus or in any amendment or
supplement thereto or in any preliminary prospectus relating to a Shelf
Registration in reliance upon and in conformity with written information
pertaining to such Holder and furnished to the Company by or on behalf of such
Holder specifically for inclusion therein and (ii) with respect to any untrue
statement or omission or alleged untrue statement or omission made in any
preliminary prospectus relating to a Shelf Registration Statement, the indemnity
agreement contained in this subsection (a) shall not inure to the benefit of any
Holder or Participating Broker-Dealer from whom the person asserting any such
losses, claims, damages or liabilities purchased the Securities concerned, to
the extent that a prospectus relating to such Securities was required to be
delivered by such Holder or Participating Broker-Dealer under the Securities Act
in connection with such purchase and any such loss, claim, damage or liability
of such Holder or Participating Broker-Dealer results from the fact that there
was not sent or given to such person, at or prior to the written confirmation of
the sale of such Securities to such person, a copy of the final prospectus if
the Company had


                                     -13-

<PAGE>

previously furnished copies thereof to such Holder or Participating
Broker-Dealer; PROVIDED FURTHER, HOWEVER, that this indemnity agreement will
be in addition to any liability which the Company may otherwise have to such
Indemnified Party. The Company shall also indemnify underwriters, their
officers and directors and each person who controls such underwriters within
the meaning of the Securities Act or the Exchange Act to the same extent as
provided above with respect to the indemnification of the Holders of the
Securities if requested by such Holders.

         (b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of the Securities Act or the Exchange Act from
and against any losses, claims, damages or liabilities or any actions in respect
thereof, to which the Company or any such controlling person may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact necessary to make the statements therein not misleading, but in
each case only to the extent that the untrue statement or omission or alleged
untrue statement or omission was made in reliance upon and in conformity with
written information pertaining to such Holder and furnished to the Company by or
on behalf of such Holder specifically for inclusion therein; and, subject to the
limitation set forth immediately preceding this clause, shall reimburse, as
incurred, the Company for any legal or other expenses reasonably incurred by the
Company or any such controlling person in connection with investigating or
defending any loss, claim, damage, liability or action in respect thereof. This
indemnity agreement will be in addition to any liability which such Holder may
otherwise have to the Company or any of its controlling persons.

         (c) Promptly after receipt by an indemnified party under this Section 5
of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 5,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. In case any
such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof the
indemnifying party will not be liable to such indemnified party under this
Section 5 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that


                                      -14-

<PAGE>

are the subject matter of such action, and does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of
any indemnified party.

         (d) If the indemnification provided for in this Section 5 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to in
subsection (a) or (b) above (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party or parties on the one
hand and the indemnified party on the other from the offer of the Securities, or
(ii) if the allocation provided by the foregoing clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities (or actions in respect thereof) as well
as any other relevant equitable considerations. The relative fault of the
parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or such Holder or such other indemnified party, as the case may
be, on the other, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities referred to in the first sentence of this subsection (d)
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any action
or claim which is the subject of this subsection (d). Notwithstanding any other
provision of this Section 5(d), the Holders of the Securities shall not be
required to contribute any amount in excess of the amount by which the net
proceeds received by such Holders from the sale of the Securities pursuant to a
Registration Statement exceeds the amount of damages which such Holders have
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (d), each person,
if any, who controls such indemnified party within the meaning of the Securities
Act or the Exchange Act shall have the same rights to contribution as such
indemnified party and each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act shall have the same rights to
contribution as the Company.

         (e) The agreements contained in this Section 5 shall survive the sale
of the Securities pursuant to a Registration Statement and shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.

          6. ADDITIONAL INTEREST UNDER CERTAIN CIRCUMSTANCES. (a) Additional
interest (the "ADDITIONAL INTEREST") with respect to the Securities shall be
assessed as follows if any of the following events occur (each such event in
clauses (i) through (iv) below being herein called a "REGISTRATION DEFAULT"):


                                      -15-

<PAGE>

                  (i) any Registration Statement required by this Agreement is
         not filed with the Commission on or prior to the applicable Filing
         Deadline;

                  (ii) any Registration Statement required by this Agreement is
         not declared effective by the Commission on or prior to the applicable
         Effectiveness Deadline;

                  (iii) the Registered Exchange Offer has not been consummated
         on or prior to the Consummation Deadline; or

                  (iv) any Registration Statement required by this Agreement has
         been declared effective by the Commission but (A) such Registration
         Statement thereafter ceases to be effective or (B) such Registration
         Statement or the related prospectus ceases to be usable in connection
         with resales of Transfer Restricted Securities during the periods
         specified herein because either (1) any event occurs as a result of
         which the related prospectus forming part of such Registration
         Statement would include any untrue statement of a material fact or omit
         to state any material fact necessary to make the statements therein in
         the light of the circumstances under which they were made not
         misleading, or (2) it shall be necessary to amend such Registration
         Statement or supplement the related prospectus, to comply with the
         Securities Act or the Exchange Act or the respective rules thereunder.

         Each of the foregoing will constitute a Registration Default whatever
the reason for any such event and whether it is voluntary or involuntary or is
beyond the control of the Company or pursuant to operation of law or as a result
of any action or inaction by the Commission .

         Additional Interest shall accrue on the Securities over and above the
interest set forth in the title of the Securities from and including the date on
which any such Registration Default shall occur to but excluding the date on
which all such Registration Defaults have been cured, at a rate of 0.25% per
annum (the "ADDITIONAL INTEREST RATE") for the first 90-day period immediately
following the occurrence of such Registration Default. The Additional Interest
Rate shall increase by an additional 0.25% per annum with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum Additional Interest Rate of 1.0% per annum.

         (b) A Registration Default referred to in Section 6(a)(iv) hereof shall
be deemed not to have occurred and be continuing in relation to a Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related prospectus or (y) other material events, with respect
to the Company that would need to be described in such Shelf Registration
Statement or the related prospectus and (ii) in the case of clause (y), the
Company is proceeding promptly and in good faith to amend or supplement such
Shelf Registration Statement and related prospectus to describe such events;
PROVIDED, HOWEVER, that in any case if such Registration Default occurs for a
continuous period in excess of 30 days, Additional Interest shall be payable in
accordance with the above paragraph from the day such Registration Default
occurs until such Registration Default is cured.


                                     -16-

<PAGE>

         (c) Any amounts of Additional Interest due pursuant to Section 6(a)
will be payable in cash on the regular interest payment dates with respect to
the Securities. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest Rate by the principal amount of
the Securities and further multiplied by a fraction, the numerator of which is
the number of days such Additional Interest Rate was applicable during such
period (determined on the basis of a 360-day year comprised of twelve 30-day
months), and the denominator of which is 360.

         (d) "TRANSFER RESTRICTED SECURITIES" means each Security until (i) the
date on which such Security has been exchanged by a person other than a
broker-dealer for a freely transferable Exchange Security in the Registered
Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered
Exchange Offer of the Initial Security for an Exchange Note, the date on which
such Exchange Note is sold to a purchaser who receives from such broker-dealer
on or prior to the date of such sale a copy of the prospectus contained in the
Exchange Offer Registration Statement, (iii) the date on which such Security has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iv) the date on which such
Security is distributed to the public pursuant to Rule 144 under the Securities
Act or is saleable pursuant to Rule 144(k) under the Securities Act.

         (e) The parties hereto agree that the Additional Interest shall
constitute a reasonable estimate of the damages that may be incurred by the
Holders (other than the Initial Purchasers) for a Registration Default and shall
constitute liquidated damages; the actual damages that the Holders might sustain
as a result of a Registration Default would be difficult to ascertain; and the
payment of Additional Interest would be reasonable and just compensation for a
Registration Default.

          7. RULES 144 AND 144A. The Company shall use its reasonable best
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely manner and, if at any time the Company is not
required to file such reports, it will, upon the request of any Holder of
Securities, make publicly available other information so long as necessary to
permit sales of their securities pursuant to Rules 144 and 144A. The Company
covenants that it will take such further action as any Holder of Securities may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Securities without registration under the Securities Act within
the limitation of the exemptions provided by Rules 144 and 144A (including the
requirements of Rule 144A(d)(4)). The Company will provide a copy of this
Agreement to prospective purchasers of Initial Securities identified to the
Company by the Initial Purchasers upon request. Upon the request of any Holder
of Initial Securities, the Company shall deliver to such Holder a written
statement as to whether it has complied with such requirements. Notwithstanding
the foregoing, nothing in this Section 7 shall be deemed to require the Company
to register any of its securities pursuant to the Exchange Act.

          8. UNDERWRITTEN REGISTRATIONS. If any of the Transfer Restricted
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering ("MANAGING UNDERWRITERS") will be selected by
the Holders of a majority in aggregate principal amount of such Transfer
Restricted Securities to be included in such offering.


                                      -17-

<PAGE>

         No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.

          9.    MISCELLANEOUS.

         (a) NO INCONSISTENT AGREEMENTS. The Company will not on or after the
date of this Agreement enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's securities under any
agreement in effect on the date hereof.

         (b) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of the Holders of a majority in principal amount of the Securities
affected by such amendment, modification, supplement, waiver or consents.

         (c) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:

                  (1) if to a Holder of the Securities, at the most current
         address given by such Holder to the Company.

                  (2) if to the Initial Purchasers:

                                    Credit Suisse First Boston Corporation
                                    277 Park Avenue
                                    New York, NY 10172
                                    Fax No.:  (212) 892-0679
                                    Attention: Transactions Advisory Group

                      with a copy to:

                                    Chapman and Cutler
                                    111 West Monroe Street
                                    Chicago, IL 60603
                                    Fax No.:  (312)701-2361
                                    Attention:  Paul Kosin


                                     -18-

<PAGE>


                   (3)     if to the Company, at its address as follows:

                                    Peoples Energy Corporation
                                    130 East Randolph Drive
                                    Chicago, IL 60601
                                    Attention:  Treasurer

                           with a copy to:

                                    Peoples Energy Corporation
                                    130 East Randolph Drive
                                    Chicago, IL 60601
                                    Attention:  General Counsel

         All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air courier
guaranteeing next day delivery.

         (d) THIRD PARTY BENEFICIARIES. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect their rights or the rights of Holders
hereunder.

         (e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment or assumption, subsequent Holders; provided that nothing herein shall
be deemed to permit any assignment, transfer or other disposition of the Initial
Securities in violation of the terms of the Purchase Agreement. If any
transferees of any Holder shall acquire Initial Securities, in any manner,
whether by operation of law or otherwise, such Initial Securities, shall be held
subject to all of the terms of this Agreement, and by taking and holding such
Initial Securities such person shall be conclusively deemed to have agreed to be
bound by and to perform all of the terms and provisions of this Agreement and
such person shall be entitled to receive the benefits hereof. The Initial
Purchasers shall have no liability or obligation to the Company with respect to
any failure by a Holder to comply with, or any breach by any Holder of, the
obligations of such Holder under this Agreement.

         (f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

         (g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.


                                     -19-

<PAGE>

         (h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.

         (i) SEVERABILITY. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.

         (j) SECURITIES HELD BY THE COMPANY. Whenever the consent or approval of
Holders of a specified percentage of principal amount of Securities is required
hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Securities if such subsequent Holders are deemed to be
affiliates solely by reason of their holdings of such Securities) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.

         (k) SUBMISSION TO JURISDICTION; WAIVER OF IMMUNITIES. By the execution
and delivery of this Agreement, the Company submits to the nonexclusive
jurisdiction of any federal or state court in the State of New York in any suit
or proceeding brought under federal or state securities laws. To the extent that
the Company may acquire any immunity from jurisdiction of any such court or from
any legal process (whether through service of notice, attachment prior to
judgment, attachment in aid of execution, execution or otherwise) with respect
to itself or its property, it hereby irrevocably waives such immunity in respect
of this Agreement, to the fullest extent permitted by law.


                                     -20-
<PAGE>

         If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the several Initial Purchasers and the Company, in accordance with its
terms.

                          Very truly yours,

                          PEOPLES ENERGY CORPORATION



                          By   /S/   JAMES M. LUEBBERS
                            ---------------------------------------------------
                             Name: JAMES M. LUEBBERS
                                   --------------------------------------------
                             Title:  CHIEF FINANCIAL OFFICER AND CONTROLLER
                                     --------------------------------------


                                     -21-
<PAGE>

The foregoing Registration Rights Agreement is hereby confirmed and accepted as
of the date first above written.

CREDIT SUISSE FIRST BOSTON CORPORATION
BANC OF AMERICA SECURITIES LLC,
ABN AMRO INCORPORATED,
BANC ONE CAPITAL MARKETS, INC.,
CREDIT LYONNAIS SECURITIES (USA) INC.,
LOOP CAPITAL MARKETS,
C/O CREDIT SUISSE FIRST BOSTON CORPORATION

By:   CREDIT SUISSE FIRST BOSTON CORPORATION
         As authorized agent for the Initial Purchasers



By  /S/ GUY R. CIRINCIONE
  ---------------------------------------------------
    Name: GUY R. CIRINCIONE
          -------------------------------------------
    Title:    DIRECTOR
           ------------------------------------------


                                     -22-
<PAGE>

                                                                         ANNEX A

         Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Securities received in exchange for Initial Securities
where such Initial Securities were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."


                                     -23-

<PAGE>



                                                                         ANNEX B

         Each broker-dealer that receives Exchange Securities for its own
account in exchange for Initial Securities, where such Initial Securities were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Securities. See "Plan of
Distribution."


                                     -24-
<PAGE>

                                                                         ANNEX C


                              PLAN OF DISTRIBUTION

         Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received in
exchange for Initial Securities where such Initial Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until ___________________,
200__, all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus.(1)

         The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Securities. Any broker-dealer that resells Exchange Securities that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Securities and any commission or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.

         For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Securities) other than commissions or concessions of any brokers
or dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.

-------------
(1)      In addition, the legend required by Item 502(e) of Regulation S-K will
         appear on the back cover page of the Exchange Offer prospectus.


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<PAGE>

                                                                         ANNEX D

[  ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.

                  Name:________________________________________________________

                  Address:_____________________________________________________

         If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
Exchange Securities. If the undersigned is a broker-dealer that will receive
Exchange Securities for its own account in exchange for Initial Securities that
were acquired as a result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus in connection with
any resale of such Exchange Securities; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.


                                     -26-