**EXHIBIT        10.3**

**STATE        OF ILLINOIS**

**ILLINOIS        COMMERCE COMMISSION**

| **Illinois                  Commerce Commission**               | **:** |        |
|-----------------------------------------------------------------|-------|-------------|
| **On                  Its Own Motion**                          | **:** |        |
|                                                            | **:** |        |
| **v.**                                                          | **:** | **02-0727** |
|                                                            | **:** |        |
| **The                  Peoples Gas Light and Coke Company**     | **:** |        |
|                                                            | **:** |        |
| **Reconciliation                  of revenues collected under** | **:** |        |
| **gas                  adjustment charges with actual**         | **:** |        |
| **costs                  prudently incurred**                   | **:** |        |

**ORDER**

**I.**
**The        Settlement**

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**II.**
**Legal        Basis for Approval of the Settlement**

*Business        and Professional Peoples for the Public Interest v. Illinois Commerce        Commission*
*BPI*

**III.**
**Terms        of the Settlement**

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**A.**
**Distribution        of the $100 Million Refund**

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| §   | the                number of customers receiving service on each Service Classification                as of                the date this Order is entered; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
| §   | the                usage of PGA gas by each Service Classification during the Reconciliation                Periods; |
|--------------------|----------------------------------------------------------------------------------------------------------------------|
| §   | the                amount to be refunded to each customer account in each service                classification; |
|--------------------|------------------------------------------------------------------------------------------------------------------|
| §   | the                number of current and former customers that held customer accounts                on                Service Classification No. 3 and Service Classification No. 4 during                the                Reconciliation Periods and consumed PGA gas at any time during the                Reconciliation Periods; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| §   | the                amount of PGA gas consumed during the Reconciliation Periods by each                current and former customer that held a Service Classification No.                3 or                Service Classification No. 4 account during the Reconciliation                Periods; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| §   | an                indication of whether former SC No. 3 and SC No. 4 customers are                still a                going concern, the amount to be refunded to customers in each service                classification; and, |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| §   | the                amount to be refunded to each current and former customer account                that                received service under Service Classification No. 3 and Service                Classification No. 4 during the Reconciliation                Periods. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**B.**
**Accounting        Proposals Adopted from the ALJPO in Docket No. 01-**
**0707**

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*et.        seq.*

|   | (7) | Peoples                  Gas Light and Coke Company shall update its operating agreement,                  which was                  approved by this Commission in Docket No. 55071, prior to filing                  its                  petition with the ICC for its next rate case or within sixty days                  after                  the date a final order is entered in this docket, whichever occurs                  first; |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (8) | Peoples                  Gas Light and Coke Company shall account for all gas physically                  injected                  into Manlove Field by including the cost associated with maintenance                  gas                  in the amount transferred from purchased gas expense to the gas                  stored                  underground account, Account 164.1; |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (9) | Peoples                  Gas Light and Coke Company shall account for the portion of gas                  injected                  into the Manlove Storage Field to maintain pressure, as credits                  from                  Account 164.1, Gas Stored Underground, as charges to Account 117,                  Gas                  Stored Underground, in the case of recoverable cushion gas, or                  to Account                  101, in the case of non-recoverable portions of cushion                  gas; |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | (11) | Peoples                  Gas Light and Coke Company shall revise its maintenance gas accounting                  procedures related to gas injected for the benefit of the North                  Shore Gas                  Company and third-parties to require those entities to bear the                  cost of                  maintenance gas, and it shall revise its maintenance gas accounting                  procedures to ensure that all customers/consumers bear equal                  responsibility for maintenance gas; |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (12) | Peoples                  Gas Light and Coke Company shall submit its revised maintenance                  gas                  accounting procedures to the Commission’s Chief Clerk with a copy to the                  Manager of the Accounting Department within 30 days after the date,                  upon                  which, a final Order is entered in this                  docket; |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (14) | Peoples                  Gas Light and Coke Company shall submit quarterly reports reflecting                  its                  use of journal entries regarding maintenance gas to the Manager                  of this                  Commission’s Accounting Department within 45 days of the end of each                  quarter, after the date of a final order is entered in this docket,                  through the quarter ending September 30,                  2009; |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (15) | Peoples                  Gas Light and Coke Company shall engage outside consultants to                  perform a                  management audit of its gas purchasing practices, gas storage operations                  and storage activities. The firm selected to perform the management                  audit                  shall be independent of Peoples Gas Light and Coke Company, its                  affiliates, Staff, and all parties in this docket, and approved                  by this                  Commission. Monthly reporting of the progress of the conduct of                  the                  management audit shall be submitted to the Bureau Chief of the                  Commission’s Public Utilities Bureau, with a copy to the Manager of the                  Commission’s Accounting Department, until the management audit report has                  been submitted. Completion of this management audit shall occur                  no later                  than eighteen months after the date, upon which, a final order                  is entered                  in this docket. Upon completion, copies of the management audit                  reports                  shall be submitted to the Commission’s Public Utilities Bureau Chief and                  the Manager of the Commission’s Accounting                  Department; |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**C.**
**Hardship        Reconnection Program**

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**D.**
**Gas        Reconciliation**

| 1.  Unamortized                  Balance at 9/30/01 per 2001 reconciliation                  (Refund)/Recovery                         |   | $      | (20,930,626.44 | )      |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------|--------|
| 2.  Factor                  A Adjustments Amortized to Sch. I at 09/30/01 per 2001 reconciliation                  (Refund)/Recovery   |   |   | (10,342,032.56 | )      |
| 3.  Factor                  O (Refunded)/Recovered during 2001                                                                         |   |   | 0              |   |
| 4.  Balance                  to be (Refunded)/Recovered during 2002 from prior periods                                                 |   |   | (31,272,659.00 | )      |
| 5.  2002                  PGA Recoverable Costs                                                                                        |   |   | 413,610,066.90 |   |
| 6.  2002                  PGA Actual Recoveries                                                                                        |   |   | 375,314,400.38 |   |
| 7.  Interest                                                                                                                           |   |   | 11,731.05      |   |
| 8.  Other                  Adjustments                                                                                                 |   |   | 0              |   |
| 9.  Pipeline                  Refunds                                                                                                  |   |   | 0              |   |
| 10. (Over)/Under                  Recovery for 2002                                                                                         |   |   | 38,307,397.57  |   |
| 11.                    PGA Reconciliation Balance at 9/30/02 (Over)/Under                  Collected                                   |   |   | 7,034,738.57   |   |
| 12.                    Factor A Adjustments unreconciled at 9/30/02 (Refund)/Recovery                                                  |   |   | 4,104,778.44   |   |
| 13.                    Unamortized Balance at 9/30/02 (Refund)/Recovery                                                                |   | $      | 2,929,960.13   |   |
| 14.                    Requested Ordered Reconciliation Factor to be (Refunded)/Recovered                  [Factor                  O] |   |   | 0              |   |

**E.**
**Commission        Analysis and Conclusions **

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**IV.**
**Findings        and Ordering Paragraphs**

| (1)                 | The                Peoples Gas Light and Coke Company is                a corporation engaged in the distribution of natural gas service                to the                public in Illinois and, as such, is a public utility within the meaning                of                the Public Utilities Act; |
|-------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)                 | the                Commission has jurisdiction over Respondent and of the subject matter                of                this proceeding; |
|-------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------|
| (3)                 | the                Settlement (Exhibit 1 as revised by the Addendum (Exhibit 2) is adopted                and the terms incorporated herein as a settlement of allegations                that,                during the reconciliation period, Respondent had not acted reasonably                and                prudently in its purchases of natural gas and other activities that                affected the amounts collected through Gas Charges in its fiscal                year                2002; |
|-------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4)                 | the                unamortized balances at the end of Respondent’s 2002 reconciliation year                show a recoverable balance for the Commodity Gas Charge of $2,194,194.24;                a recoverable balance of $760,047.68 for the Non-Commodity Gas Charge                and                the Demand Gas Charge; and a refundable balance of $24,281.79 for                the                Transition Surcharge, for a total recoverable balance of $2,929,960.13;                the Factor O refund is zero; |
|-------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (5)                 | the                reconciliations submitted by The Peoples Gas Light and Coke Company                of the                costs actually incurred for the purchase of natural gas with revenues                received for such gas for the reconciliation period beginning October                1,                2001, through September 30, 2002, may properly be approved; |
|-------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (6)                 | pursuant                to the Settlement, a refund of $100 million is to be distributed                in the                manner set forth above as part of the consideration paid in global                settlement of this docket as well as I.C.C. Docket Nos. 01-0706,                01-0707,                02-0726, 03-0704, 03-0705, 04-0682 and                04-0683. |
|-------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (7)                 | The                Peoples Gas Light and Coke Company should follow the accounting procedures                recited above, the directives contained in the incorporated parts                of the                settlement agreement and the addendum thereto in all future gas adjustment                charge reconciliation dockets; |
|-------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (8)                 | The                Peoples Gas Light and Coke Company shall file quarterly reports with                the                Chief Clerk’s office detailing the progress of the Hardship Reconnection                program. |
|-------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**The        Peoples Gas Light and Coke Company**

**Gas        Charge Reconciliation Summary**

**Fiscal        2002**

|                                                                                                                                               | CommodityGas                  Charges(CGC) | Non-Commodity                  Gas Chargeand                  Demand Gas Charge(NCGC                  and DGC) | TransitionSurcharge(TS) | TotalGas                  Charge |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------|----------------------------------------------------------------------------------------------------------------|-------------------------|----------------------------------|
| Line                                                                                                                                               |                                       |                                                                                                           |                    |                             |
| **Fiscal                  2001**                                                                                                                   |                                       |                                                                                                           |                    |                             |
| 1 Unamortized                  Balance at September 30, 2001 (Refund)                  / Recovery                                             | ($23,876,327.85)                           | $2,969,282.01                                                                                                  | ($23,580.60)            | ($20,930,626.44)                 |
| 2 Factor                  A Adjustments unreconciled at September 30, 2001 (Refund) / Recovery                                                | ($11,852,706.48)                           | $1,514,897.62                                                                                                  | ($4,223.70)             | ($10,342,032.56)                 |
| 3 Factor                  O (Refunded)                  / Recovered                                                                           | $0.00                                      | $0.00                                                                                                          | $0.00                   | $0.00                            |
| **4** **Balance                  (Refundable) / Recoverable from Prior Periods (Line 1 + Line 2                  + Line                  3)** | ($35,729,034.33)                           | $4,484,179.63                                                                                                  | ($27,804.70)            | ($31,272,659.00)                 |
| **Fiscal                  2002**                                                                                                                   |                                       |                                                                                                           |                    |                             |
| 5                  Costs Recoverable through the Gas Charge                                                                                        | $355,217,841.47                            | $58,392,225.43                                                                                                 | $0.00                   | $413,610,066.90                  |
| 6                  Revenues Arising though Application of the Gas Charge                                                                           | $313,942,983.38                            | $61,371,402.88                                                                                                 | $14.12                  | $375,314,400.38                  |
| 7                  Separately Reported Pipeline Refunds or Surcharges                                                                              | $0.00                                      | $0.00                                                                                                          | $0.00                   | $0.00                            |
| 8                  Separately Reported Other Adjustments                                                                                           | $0.00                                      | $0.00                                                                                                          | $0.00                   | $0.00                            |
| 9                  Interest Calculated at 6.00% thru Dec. 2001; 2.00%                  thereafter                                                  | $525.36                                    | $11,757.62                                                                                                     | ($551.93)               | $11,731.05                       |
| 10 (Over)                  / Under Recovery for Reconciliation Year(Line                  5 - Line 6 + Line 7 + Line 8 + Line 9)              | $41,275,383.45                             | ($2,967,419.83)                                                                                                | ($565.05)               | $38,307,397.57                   |
| 11 (Over)                  / Under Recovery Balance for Reconciliation Year (Line 4 + Line                  10)                               | $5,546,349.12                              | $1,516,759.80                                                                                                  | ($28.370.35)            | $7,034,738.57                    |
| 12 Factor                  A Adjustments unreconciled at September 30, 2002 (Refund) / Recovery                                               | $3,352,154.88                              | $756,712.12                                                                                                    | ($4,088.56)             | $4,104,778.44                    |
| 13 Unamortized                  Balance at September 30, 2002(Refund)                  / Recovery (Line 11 - Line 12)                         | $2,194,194.24                              | $760,047.68                                                                                                    | ($24,281.79)            | $2,929,960.13                    |
| 14 Requested                  Factor O (Line 11 - Line 12 - Line 13) (Refund) / Recovery                                                      | $0.00                                      | $0.00                                                                                                          | $0.00                   | $0.00                            |

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