FORM 10-Q

                SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C.  20549

  (Mark One)

           [ X ]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d)
              OF THE SECURITIES EXCHANGE ACT OF 1934

           For the Quarterly Period Ended March 31, 1998

                                OR

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

                   Commission File Number 1-5540


                    PEOPLES ENERGY CORPORATION
      (Exact name of registrant as specified in its charter)



                       Illinois            36-2642766
       (State or other jurisdiction of    (IRS Employer
       incorporation or organization)     Identification No.)


     24th Floor, 130 East Randolph Drive, Chicago, Illinois
60601-6207
                  (Address of principal executive offices)
(Zip Code)


                          (312) 240-4000
       (Registrant's telephone number, including area code)
                                 


Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes [x]   No [  ]


Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
35,301,276 shares of Common Stock, without par value, outstanding
at April 30, 1998.

<TABLE>
PART I.  FINANCIAL INFORMATION
Item 1. Financial Statements
<CAPTION>
                                                                        Peoples Energy Corporation
                                                                   CONSOLIDATED STATEMENTS OF INCOME
                                                                                 (Unaudited)

                                          Three Months Ended           Six Months Ended             Twelve Months Ended
                                                March 31,                  March 31,                    March 31,    
                                          1998           1997          1998         1997            1998          1997
                                          (Thousands, except per-share amounts)
OPERATING REVENUES:
<S>                                       <C>           <C>          <C>          <C>          <C>            <C>
Gas sales                                 $ 379,178     $509,693     $721,607     $853,672     $  992,766     $1,177,614
Transportation                               41,132       54,457       78,706       92,875        119,401        144,737
Other                                         4,200        3,164        9,347        7,925         16,710         14,637
     Total Operating Revenues               424,510      567,314      809,660      954,472      1,128,877      1,336,988

OPERATING EXPENSES:
Gas costs                                   206,625      319,848      404,648      508,594        511,588        664,565
Operation                                    53,018       49,116      103,104      103,133        200,766        206,860
Maintenance                                   9,700        9,937       20,240       21,463         46,405         45,942
Depreciation and amortization                18,769       18,392       37,647       36,844         74,878         72,946
Taxes - Income                               29,952       36,589       52,189       59,933         46,851         57,922
          - State and local revenue          41,607       56,590       77,129       95,884        107,469        131,412
          - Other                             8,626        5,362       13,648       10,389         24,555         21,511
     Total Operating Expenses               368,297      495,834      708,605      836,240      1,012,512      1,201,158

OPERATING INCOME                             56,213       71,480      101,055      118,232        116,365        135,830

OTHER INCOME
  AND (DEDUCTIONS):
Interest income                                 664        2,091        1,348        2,579          4,178          4,813
Allowance for funds used
  during construction                           357           35          593           62            799             85
Interest on long-term debt
  of subsidiaries                            (8,941)      (8,935)     (17,875)     (17,862)       (35,735)       (35,733)
Other interest expense                       (1,032)        (859)      (2,292)      (1,773)        (3,271)        (3,226)
Income taxes                                     59         (785)         (96)        (867)        (1,069)        (4,970)
Miscellaneous - net                            (204)         231          (74)         378           (953)         9,257
     Total Other Income
       and Deductions                        (9,097)      (8,222)     (18,396)     (17,483)       (36,051)       (29,774)

NET INCOME                                $  47,116     $ 63,258     $ 82,659    $ 100,749      $  80,314     $  106,056

Average Shares of Common
  Stock Outstanding                          35,213       34,981       35,175       34,976         35,100         34,964

Basic and Diluted Earnings
  Per Share of Common Stock               $       1.34         1.81         2.35         2.88           2.29           3.03

Dividends Declared Per Share              $       0.48         0.47         0.95         0.93           1.89           1.85

The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>

<TABLE>

                                              Peoples Energy Corporation

                                              CONSOLIDATED BALANCE SHEETS


                                                                   March 31,                            March 31,
                                                                      1998        September 30,            1997
                                                                  (Unaudited)           1997           (Unaudited)
                                                                (Thousands of Dollars)
PROPERTIES AND OTHER ASSETS

CAPITAL INVESTMENTS:
<S>                                                              <C>               <C>                <C>
Property, plant and equipment, at original cost                  $2,150,729        $ 2,117,509        $2,070,420
Less - Accumulated depreciation                                     739,934            715,279           691,931
Net property, plant and equipment                                 1,410,795          1,402,230         1,378,489
Other investments                                                    17,717             16,305            14,091
     Total Capital Investments - Net                              1,428,512          1,418,535         1,392,580

CURRENT ASSETS:
Cash and cash equivalents                                            62,903             33,298            49,870
Temporary cash investments                                           15,900             15,900            15,900
Receivables -
  Customers, net of allowance for uncollectible accounts
    of $26,154, $29,895, and $33,348, respectively                  141,493             72,290           232,099
  Other                                                              35,593             39,182            31,081
Accrued unbilled revenues                                            65,031             22,742            61,847
Materials and supplies, at average cost                              21,415             19,385            16,722
Gas in storage, at last-in, first-out cost                           34,799             77,843            29,887
Gas costs recoverable through rate adjustments                       13,181              5,164                 -
Regulatory assets of subsidiaries                                     6,679             15,460            31,419
Prepayments                                                          56,939             42,902            28,784
     Total Current Assets                                           453,933            344,166           497,609

OTHER ASSETS:
Non-current regulatory assets of subsidiaries                        36,352             38,676            40,261
Deferred charges                                                     21,438             19,428            20,030
     Total Other Assets                                              57,790             58,104            60,291

     Total Properties and Other Assets                           $1,940,235        $ 1,820,805        $1,950,480

The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>

<TABLE>

                                                   Peoples Energy Corporation

                                                  CONSOLIDATED BALANCE SHEETS


                                                                              March 31,                          March 31,
                                                                                 1998       September 30,           1997
                                                                             (Unaudited)          1997          (Unaudited)
                                                                           (Thousands of Dollars)
CAPITALIZATION AND LIABILITIES

CAPITALIZATION:
<S>                                                                        <C>               <C>               <C>
Common Stockholders' Equity:
Common stock, without par value -
   Authorized 60,000,000 shares
   Outstanding 35,234,424, 35,069,517, and
       34,981,897 shares, respectively                                      $  287,528       $   281,847       $  278,335
Retained earnings                                                              483,871           434,652          471,521
     Total Common Stockholders' Equity                                         771,399           716,499          749,856

Long-term debt of subsidiaries, exclusive of sinking
  fund payments and maturities due within one year                             527,004           527,004          527,039
     Total Capitalization                                                    1,298,403         1,243,503        1,276,895

CURRENT LIABILITIES:
Interim loans of subsidiaries                                                      855             2,810              700
Accounts payable                                                               128,649           134,870          144,080
Dividends payable on common stock                                               16,911            16,479           16,441
Customer gas service and credit deposits                                        27,837            45,386           17,837
Accrued taxes                                                                   73,872            20,645           97,439
Gas sales revenue refundable through rate adjustments                              227            14,894           11,817
Accrued interest                                                                10,606            10,800           10,599
Temporary LIFO liquidation credit                                               42,203                 -           56,603
     Total Current Liabilities                                                 301,160           245,884          355,516

DEFERRED CREDITS AND OTHER LIABILITIES:

Deferred income taxes - primarily accelerated depreciation                     259,559           249,178          238,973
Investment tax credits being amortized over
   the average lives of related property                                        33,176            33,942           34,648
Other                                                                           47,937            48,298           44,448
     Total Deferred Credits and Other Liabilities                              340,672           331,418          318,069

     Total Capitalization and Liabilities                                   $1,940,235       $ 1,820,805       $1,950,480

The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE> 


                                                    Peoples Energy Corporation
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                             (Unaudited)

                                                            Six Months Ended
                                                               March 31,
                                                           1998           1997
                                                         (Thousands of Dollars)
Operating Activities:
Net Income                                              $  82,659   $  100,749
Adjustments to reconcile net income to net cash:
  Depreciation and amortization                            37,647       36,844
  Deferred income taxes and investment tax credits - net    8,596        4,657
  Change in deferred credits and other liabilities            658        4,518
  Change in other assets                                   (2,493)       2,050
  Change in current assets and liabilities:
    Receivables - net                                     (65,614)    (162,106)
    Accrued unbilled revenues                             (42,289)     (32,533)
    Materials and supplies                                 (2,030)        (594)
    Gas in storage                                         43,044       35,615
    Gas costs recoverable                                  (8,017)      19,920
    Regulatory assets                                       8,781       10,861
    Prepayments                                           (14,037)     (16,497)
    Accounts payable                                       (6,221)      (3,892)
    Customer gas service and credit deposits              (17,549)     (24,553)
    Accrued taxes                                          53,227       64,618
    Gas sales revenue refundable                          (14,667)      (2,104)
    Accrued interest                                         (193)        (197)
    Temporary LIFO liquidation credit                      42,203       56,603

     Net Cash Provided by (Used in) Operating Activities  103,705       93,959

Investing Activities:
Capital expenditures of subsidiaries - construction       (38,715)     (31,207)
Other assets                                                  127          528
Other capital investments                                  (6,229)      (2,511)
Other temporary cash investments                                -      (15,000)

     Net Cash Used in Investing Activities                (44,817)     (48,190)

Financing Activities:
Interim loans of subsidiaries - net                        (1,955)      (1,925)
Retirement of long-term debt of subsidiaries                    -          (25)
Dividends paid on common stock                            (33,009)     (32,173)
Proceeds from issuance of common stock                      5,681          454

     Net Cash Provided by (Used in) Financing Activities  (29,283)     (33,669)

Net Increase (Decrease) in Cash and Cash Equivalents       29,605       12,100
Cash and Cash Equivalents at Beginning of Period           33,298       37,770

Cash and Cash Equivalents at End of Period              $  62,903   $   49,870

The Notes to Consolidated Financial Statements are an integral part of these 
statements.


                    

                   Peoples Energy Corporation
                                
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           (Unaudited)


1.  BASIS OF PRESENTATION

   The accompanying consolidated financial statements include the
accounts of Peoples Energy Corporation (Company) and its wholly
owned subsidiaries, The Peoples Gas Light and Coke Company
(Peoples Gas), North Shore Gas Company (North Shore Gas), Peoples
District Energy Corporation (Peoples District Energy), Peoples
Energy Services Corporation, Peoples Energy Resources Corp.,
Peoples Energy Ventures Corporation, and Peoples NGV Corp., and
comprise the assets, liabilities, revenues, expenses, and
underlying common stockholders' equity of these companies.
Income is principally derived from the Company's utility
subsidiaries, Peoples Gas and North Shore Gas.  The statements
have been prepared by the Company in conformity with the rules
and regulations of the Securities and Exchange Commission (SEC)
and reflect all adjustments that are, in the opinion of
management, necessary to present fairly the results for the
interim periods herein and to prevent the information from being
misleading.

   Certain footnote disclosures and other information, normally
included in financial statements prepared in accordance with
generally accepted accounting principles, have been condensed or
omitted from these interim financial statements, pursuant to SEC
rules and regulations.  Therefore, the statements should be read
in conjunction with the consolidated financial statements and
related notes contained in the Company's Annual Report on Form 10-
K for the fiscal year ended September 30, 1997.  Certain items
previously reported for the prior periods have been reclassified
to conform with the presentation in the current periods.

   The business of the Company's utility subsidiaries is
influenced by seasonal weather conditions because a large element
of the utilities' customer load consists of gas used for space
heating.  Weather-related deliveries can, therefore, have a
significant positive or negative impact on net income.
Accordingly, the results of operations for the interim periods
presented are not indicative of the results to be expected for
all or any part of the balance of the current fiscal year.

2.  SIGNIFICANT ACCOUNTING POLICIES

2A     Use of Estimates

  The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from those estimates.

2B Revenue Recognition

  Gas sales revenues are recorded on the accrual basis for all
gas delivered during the month, including an estimate for gas
delivered but unbilled at the end of each month.

2C Regulated Operations

   Peoples Gas' and North Shore Gas' utility operations are
subject to regulation by the Illinois Commerce Commission
(Commission).  Regulated operations are accounted for in
accordance with Statement of Financial Accounting Standards
(SFAS) No. 71, "Accounting for the Effects of Certain Types of
Regulation."  This standard controls the application of generally
accepted accounting principles for companies whose rates are
determined by an independent regulator such as the Commission.
Regulatory assets represent certain costs that are expected to be
recovered from customers through the ratemaking process.  When
incurred, such costs are deferred as assets in the balance sheet
and subsequently recorded as expenses when those same amounts are
reflected in rates.

2D Income Taxes

   The Company follows the liability method of accounting for
deferred income taxes.  Under the liability method, deferred
income taxes have been recorded using currently enacted tax rates
for the differences between the tax basis of assets and
liabilities and the basis reported in the financial statements.
Due to the effects of regulation on Peoples Gas and North Shore
Gas, certain adjustments made to deferred income taxes are, in
turn, debited or credited to regulatory assets or liabilities.

2E Statement of Cash Flows

   For purposes of the balance sheet and the statement of cash
flows, the Company considers all short-term liquid investments
with maturities of three months or less to be cash equivalents.

     Income taxes and interest paid (excluding capitalized
   interest) were as follows:

        For the six months
        ended March 31,            1998       1997
                                     (Thousands)
         Income taxes paid       $16,104     $28,903
         Interest paid            19,052      19,195

2F Recovery of Gas Costs

   Under the tariffs of Peoples Gas and North Shore Gas, the
difference for any month between costs recoverable through the
Gas Charge and revenues billed to customers under the Gas Charge
is refunded to or recovered from customers.  Consistent with
these tariff provisions, such difference for any month is
recorded either as a current liability or as a current asset
(with a contra entry to Gas Costs).

   For each gas utility, the Commission conducts annual
proceedings regarding the reconciliation of revenues from the Gas
Charge and related costs incurred for gas.  In such proceedings,
costs recovered by a utility through the Gas Charge are subject
to challenge.  Such proceedings regarding Peoples Gas and North
Shore Gas for fiscal year 1997 are currently pending before the
Commission.

2G Accounting Standard

   In February 1997, the Financial Accounting Standards Board
(FASB) issued SFAS No. 128, "Earnings Per Share".  This statement
simplifies the calculation of earnings per share (EPS) and
increases conformity to international standards.  Under SFAS No.
128, primary EPS is replaced by "basic" EPS, which excludes the
effects of any dilution.  It is calculated by dividing net income
available to common shareholders by the weighted-average number
of common shares outstanding for the period.  "Diluted" EPS,
which is computed similarly to fully diluted EPS, reflects the
potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into
common stock.  This standard was adopted October 1, 1997.
Previous periods have been restated to reflect this standard.
(See Note 6.)

3.  ENVIRONMENTAL MATTERS

3A Former Manufactured Gas Plant Operations

   The Company's utility subsidiaries, their predecessors, and
certain former affiliates operated facilities in the past at
multiple sites for the purpose of manufacturing gas and storing
manufactured gas (Manufactured Gas Sites).  In connection with
manufacturing and storing gas, various by-products and waste
materials were produced, some of which might have been disposed
of rather than sold.  Under certain laws and regulations 
relating to the protection of the environment, the subsidiaries 
might be required to undertake remedial action with respect to 
some of these materials.  Three of the Manufactured Gas Sites 
are discussed in more detail below. Peoples Gas and North Shore 
Gas, under the supervision of the Illinois Environmental 
Protection Agency (IEPA), are conducting investigations of an
additional 29 Manufactured Gas Sites.  These investigations 
may require the utility subsidiaries to perform additional 
investigation and remediation.  The investigations are in a 
preliminary stage and are expected to occur over an extended
period of time.

   In 1990, North Shore Gas entered into an Administrative Order
on Consent (AOC) with the United States Environmental Protection
Agency (EPA) and the IEPA to implement and conduct a remedial
investigation/feasibility study (RI/FS) of a Manufactured Gas
Site located in Waukegan, Illinois, where manufactured gas and
coking operations were formerly conducted (Waukegan Site).  The
RI/FS is comprised of an investigation to determine the nature
and extent of contamination at the Waukegan Site and a
feasibility study to develop and evaluate possible remedial
actions.  North Shore Gas entered into the AOC after being
notified by the EPA that North Shore Gas, General Motors
Corporation (GMC), and Outboard Marine Corporation were each a
potentially responsible party (PRP) under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended (CERCLA), with respect to the Waukegan Site.  A PRP is
potentially liable for the cost of any investigative and/or
remedial work that the EPA determines is necessary.  Other
parties identified as PRPs did not enter into the AOC.

   Under the terms of the AOC, North Shore Gas is responsible for
the cost of the RI/FS.  North Shore Gas believes, however, that
it will recover a significant  portion of the costs of the RI/FS
from other entities. GMC has agreed to share equally with North
Shore Gas in funding of the RI/FS cost, without prejudice to
GMC's or North Shore Gas' right to seek a lesser cost
responsibility at a later date.

   Peoples Gas has observed what appear to be gas purification
wastes on a Manufactured Gas Site in Chicago, formerly called the
110th Street Station, and property contiguous thereto (110th
Street Station Site).  Peoples Gas has fenced the 110th Street
Station Site and is conducting a study under the supervision of
the IEPA to determine the feasibility of a limited removal
action.

   The current owner of a site in Chicago, formerly called Pitney
Court Station, filed suit against Peoples Gas in federal district
court under CERCLA.  The suit seeks recovery of the past and
future costs of investigating and remediating the site.  Peoples
Gas is contesting this suit.

   The utility subsidiaries are accruing and deferring the costs
they incur in connection with all of the Manufactured Gas Sites,
including related legal expenses, pending recovery through rates
or from insurance carriers or other entities.  At March 31, 1998,
the total of the costs deferred by the subsidiaries, net of
recoveries and amounts billed to other entities, was $17.2
million.  This amount includes an estimate of the costs of
completing the studies required by the EPA at the Waukegan Site
and the investigations being conducted under the supervision of
the IEPA referred to above.  The amount also includes an estimate
of the costs of remediation at the Waukegan Site and at the 110th
Street Station Site in Chicago, at the minimum amount of the 
current estimated range of such costs.  The costs of
remediation at the other sites cannot be determined at this time.
While each subsidiary intends to seek contribution from other
entities for the costs incurred at the sites, the full extent of
such contributions cannot be determined at this time.

   Peoples Gas and North Shore Gas have filed suit against a
number of insurance carriers for the recovery of environmental
costs relating to the utilities' former manufactured gas
operations.  The suit asks the court to declare that the insurers
are liable under policies in effect between 1937 and 1986 for
costs incurred or to be incurred by the utilities in connection
with five of their Manufactured Gas Sites in Chicago and
Waukegan.  The utilities are also asking the court to award
damages stemming from the insurers' breach of their contractual
obligation to defend and indemnify the utilities against these 
costs.  At this time, management cannot determine the timing 
and extent of the subsidiaries' recovery of costs from their 
insurance carriers. Accordingly, the costs deferred at 
March 31, 1998 have not been reduced to reflect recoveries from
insurance carriers.

   The Company believes that the costs incurred by Peoples Gas
and by North Shore Gas for environmental activities relating to
former manufactured gas operations are recoverable from insurance
carriers or other entities or through rates for utility service.
Accordingly, management believes that the costs incurred by the
subsidiaries in connection with former manufactured gas
operations will not have a material adverse effect on the
financial position or results of operations of the utilities.
Peoples Gas and North Shore Gas are recovering the costs of
environmental activities relating to the utilities' former
manufactured gas operations, including carrying charges on the
unrecovered balances, under rate mechanisms approved by the
Commission.  At March 31, 1998, the subsidiaries had recovered
$13.2 million of such costs through rates.

3B Former Mineral Processing Site in Denver, Colorado

   In 1994, North Shore Gas received a demand from the S.W.
Shattuck Chemical Company, Inc. (Shattuck), a responsible party
under CERCLA, for reimbursement, indemnification, and
contribution for response costs incurred at a former mineral
processing site in Denver, Colorado.  Shattuck is a wholly owned
subsidiary of Salomon, Inc. (Salomon).  The demand alleges that
North Shore Gas is a successor-in-interest to certain companies
that were allegedly responsible during the period 1934-1941 for
the disposal of mineral processing wastes containing radium and
other hazardous substances at the site.  The cost of the remedy
at the site has been estimated by Shattuck to be approximately
$31 million.  Salomon has provided financial assurance for the
performance of the remediation at the site.

   North Shore Gas filed a declaratory judgment action against
Salomon in the District Court for the Northern District of
Illinois.  The suit asks the court to declare that North Shore
Gas is not liable for response costs incurred or to be incurred
at the Denver site.  Salomon filed a counterclaim for costs to be
incurred by Salomon and Shattuck with respect to the site.  On
March 7, 1997, the District Court granted North Shore Gas' motion
for summary judgment, declaring that North Shore Gas is not
liable for any response costs in connection with the Denver site.
Salomon has appealed the ruling of the District Court to the
United States Court of Appeals, Seventh Circuit.

   North Shore Gas does not believe that it has liability for the
response costs, but cannot determine the matter with certainty.
At this time, North Shore Gas cannot reasonably estimate what
range of loss, if any, may occur.  In the event that North Shore
Gas incurred liability, it would pursue reimbursement from
insurance carriers, other responsible parties, if any, and
through its rates for utility service.

3C Gasoline Release in Wheeling, Illinois

   In June 1995, North Shore Gas received a letter from the IEPA
informing North Shore Gas that it was not in compliance with
certain provisions of the Illinois Environmental Protection Act
which prohibit water pollution within the State of Illinois.  On
November 14, 1995, the Illinois Attorney General filed a
complaint in the Circuit Court of Cook County naming North Shore
Gas and four other parties as defendants.  The complaint alleges
that the violations are the result of a gasoline release that
occurred in Wheeling, Illinois, in June 1992, when a contractor
who was installing a pipeline for North Shore Gas accidentally
struck a gasoline pipeline owned by West Shore Pipeline Company.
North Shore Gas is
contesting this suit.  Management does not believe the outcome of
this suit will have a material adverse effect on financial
position or results of operations of the Company or North Shore
Gas.

4.  COVENANTS REGARDING RETAINED EARNINGS

   North Shore Gas' indenture relating to its first mortgage
bonds contains provisions and covenants restricting the payment
of cash dividends and the purchase or redemption of capital
stock.  At March 31, 1998, such restrictions amounted to
$11.6 million out of North Shore Gas' total retained earnings of
$74.2 million.

5.  LONG-TERM DEBT

Interest-Rate Adjustments

   The rate of interest on the City of  Joliet 1984 Series C
Bonds, which are secured by Peoples Gas' Adjustable-Rate First
Mortgage Bonds, Series W, is subject to adjustment annually on
October 1.  Owners of the Series C Bonds have the right to tender
such bonds at par during a limited period prior to that date.
Peoples Gas is obligated to purchase any such bonds tendered if
they cannot be remarketed.  All Series C Bonds that were tendered
prior to October 1, 1997 have been remarketed.  The interest rate
on such bonds is 3.875 percent for the period October 1, 1997
through September 30, 1998.

   The rate of interest on the City of Chicago 1993 Series B
Bonds, which are secured by Peoples Gas' Adjustable-Rate First
Mortgage Bonds, Series EE, is subject to adjustment annually on
December 1.  Owners of the Series B Bonds have the right to
tender such bonds at par during a limited period prior to that
date.  Peoples Gas is obligated to purchase any such bonds
tendered if they cannot be remarketed.  All Series B Bonds that 
were tendered prior to December 1, 1997, have been remarketed.  
The interest rate on such bonds is 3.90 percent for the period 
December 1, 1997, through November 30, 1998.

   Peoples Gas classifies these adjustable-rate bonds as long-
term liabilities, since it would refinance them on a long-term
basis if they could not be remarketed.  In order to ensure its
ability to do so, on February 1, 1994, Peoples Gas established a
$37.4 million three year line of credit with The Northern Trust
Company, which has since been extended to January 31, 2000.

6.  EARNINGS PER SHARE

   In fiscal 1998, the Company adopted FASB Statement No. 128,
Earnings Per Share.  The statement simplifies the methodology for
computing both basic and diluted earnings per share.  The only
difference in the two methods for computing the Company's per
share amounts is attributable to stock options outstanding under
the Long-Term Incentive Compensation Plan.  The effect of the
stock options was determined using the treasury stock method.
Consolidated net income as reported was not affected.  Shares
used to compute diluted earnings per share are as follows:

                    Average Common Stock Shares (in thousands)
                     Three months     Six months           12-months
                         Ended            Ended               Ended
March 31,            1998     1997     1998     1997     1998    1997
As reported shares  35,213    34,981  35,175   34,976  35,100   34,964
Effects of options      24        20      22       24      25       27
Diluted shares      35,237    35,001  35,197   35,000  35,125   34,991


   Options for which the average stock price is lower than the
grant price are considered antidilutive and, therefore, are not
included in the calculation of diluted earnings per share. (See
Note 2G.)



Item 2.  Management's Discussion and Analysis of Results of
      Operations and Financial Condition

RESULTS OF OPERATIONS

Net Income

   Net income decreased $16.1 million, to $47.1 million, for the
current three-month period ended March 31, 1998, as a result of
weather that was 19 percent warmer than in the comparable period
last year.  Also, negatively affecting comparative results were
adjustments to accrued income taxes and pension expense in the
prior period.  Partially offsetting these effects was a decrease in
the provision for uncollectible accounts.

   Net income decreased $18.1 million, to $82.7 million, and $25.7
million, to $80.3 million, for the current six and 12-month
periods, reflecting weather that was 14 and 12 percent warmer,
respectively, than the year-ago periods.  Also contributing to the
decline in the 12-month comparative earnings was the previous
period's one-time gain associated with the expiration of gas
storage contracts.  For both periods, the decline in earnings was
partially offset by decreased operation and maintenance expense.

<TABLE>

   A summary of variations affecting income between periods is
presented below, with explanations of significant differences
following:
<CAPTION>

                                   Three Months Ended    Six Months Ended    12 Months Ended
                                     March 31, 1998       March 31, 1998        March 31, 1998
                                   Increase/(Decrease)  Increase/(Decrease)  Increase/(Decrease)
                                    From Prior Period    From Prior Period     From Prior Period
(Thousands of dollars)                Amount       %      Amount      %       Amount      %
<S>                                  <C>          <C>   <C>         <C>     <C>         <C>
Net operating revenues (a)           $(14,598)    (7.6) $(22,111)   (6.3)   $(31,191)   (5.8)
Operation and maintenance expenses      3,665      6.2    (1,252)   (1.0)     (5,631)   (2.2)
Depreciation and amortization expense     377      2.0       803     2.2       1,932     2.6
Income taxes                           (6,637)   (18.1)   (7,744)  (12.9)    (11,071)  (19.1)
Other income and deductions               875     10.6       913     5.2       6,277    21.1
Net income                            (16,142)   (25.5)  (18,090)  (18.0)    (25,742)  (24.3)
                                       


(a) Operating revenues, net of gas costs and revenue taxes.
</TABLE>

Net Operating Revenues

   Gross revenues of Peoples Gas and North Shore Gas are affected
by changes in the unit cost of the subsidiaries' gas purchases and
do not include the cost of gas supplies for customers who purchase
gas directly from producers and marketers rather than from the
subsidiaries.  The direct customer purchases have no effect on net
income because the utilities provide transportation service for
such gas volumes and recover margins similar to those applicable to
conventional gas sales.  Changes in the unit cost of gas do not
significantly affect net income because the utilities' tariffs
provide for dollar-for-dollar recovery of gas costs.  (See Note 2F
of the Notes to Consolidated Financial Statements.)  The utilities'
tariffs also provide for dollar-for-dollar recovery of the cost of
revenue taxes imposed by the State and various municipalities.

   Since income is not significantly affected by changes in
revenue from customers' gas purchases from producers or marketers
rather than from the utility subsidiaries, changes in gas costs,
or changes in revenue taxes, the discussion below pertains to
"net operating revenues" (operating revenues, net of gas costs
and revenue taxes).  The Company considers net operating revenues
to be a more pertinent measure of operating results than gross
revenues.

   Net operating revenues declined $14.6 million, to $176.3
million, for the current three-month period, due primarily to El
Nino which caused weather to be 19 percent warmer than the same
period a year ago.

   Net operating revenues declined $22.1 million, to $327.9
million, and $31.2 million, to $509.8 million, for the current
six- and 12-month periods, respectively, due primarily to weather
that was 14 and 12 percent warmer, respectively, than comparable
periods a year ago.

   See Other Matters - Operating Statistics for details of
selected financial and operating information by gas service
classification.

Operation and Maintenance Expenses

   Operation and maintenance expenses increased $3.7 million, to
$62.7 million, for the current three-month period, due mainly to
a $4.0 million increase in pension expense caused by a prior
period adjustment to reflect changes in settlement accounting.
Also contributing were increases in costs of outside professional
services ($1.9 million) and a prior period adjustment to costs
associated with claim settlements ($842,000).  Partially
offsetting these effects was a $3.6 million decrease in the
provision for uncollectible accounts, reflecting decreased
revenues due to warmer weather.

   Operation and maintenance expenses decreased $1.3 million, to
$123.3 million, for the current six-month period, due primarily
to decreases in the provision for uncollectible accounts ($4.4
million), environmental costs recovered through rates ($2.3
million) and group insurance expense ($879,000).  These decreases
were offset, in part, by increases in outside professional
services ($2.7 million) and a prior period adjustment to costs
associated with claim settlements ($1.1 million).

   Operation and maintenance expenses decreased $5.6 million, to
$247.2 million, for the current 12-month period, due principally
to an $8.0 million decrease in pension expense caused by a change
in settlement accounting attributed to employees choosing early
retirement, and a $6.6 million decrease in the provision for
uncollectible accounts.  Partially offsetting these reductions
were increases in outside professional services ($6.0 million)
and higher administrative and general expenses.

Depreciation and Amortization Expense

   Depreciation and amortization expense increased $377,000, to
$18.8 million, $803,000, to $37.6 million, and $1.9 million, to
$74.9 million, for the current three-, six- and 12-month periods,
respectively, due mainly to depreciable property additions.

Income Taxes

   Income taxes, exclusive of taxes in other income and
deductions, decreased $6.6 million, to $30.0 million, $7.7
million, to $52.2 million, and $11.1 million, to $46.9 million,
for the current three-, six-, and 12-month periods, respectively,
due primarily to lower pre-tax income.  Partially offsetting the
effect of lower pre-tax income in each of the comparative periods
was a prior year adjustment to reduce income tax accruals.

Other Income and Deductions

   Other income and deductions increased $875,000 and $913,000
for the current three- and six-month periods, respectively, due
chiefly to decreases in miscellaneous interest revenues.
Partially offsetting these effects were increases in the
allowance for funds used during construction.

   Other income and deductions increased $6.3 million, for the
current 12-month period, due principally to the prior period's
gain of $5.1 million, net of income taxes, associated with the
expiration of natural gas storage contracts.  This increase was
offset, in part, by an increase in the allowance for funds used
during construction and a decrease in interest expense on amounts
refundable to customers.

Other Matters

Effect of Weather.  Weather variations affect the volumes of gas
delivered for heating purposes and, therefore, can have a
significant positive or negative impact on net income, cash
position, and coverage ratios.

Accounting Standards.  In October 1997, the Company adopted SFAS
No. 128, "Earnings Per Share".  (See Note 2G and 6 of the Notes
to Consolidated Financial Statements.)

Large Volume Gas Service Agreements.  Peoples Gas and North Shore
Gas have entered into gas service contracts with certain large
volume customers under specific rate schedules approved by the
Commission.  These contracts were negotiated to overcome the
potential threat of bypassing the utilities distribution systems.
The impact on the net income of Peoples Gas and North Shore Gas
as a result of these contracts is not material.

Small-Volume Transportation Service.  On June 25, 1997, the
Commission allowed Riders SVT and AGG to go into effect for
Peoples Gas, thus initiating a two year pilot program designed to
provide transportation service to certain small-volume industrial
and commercial customers of the utility as well as to some of its
large residential customers.  The Commission also ordered a
concurrent investigation of the program to ascertain if program
adjustments or revisions are required.

Investment in Non-utility Energy Business..  The Company has a
financial goal to earn 25% of its earnings from non-utility
investments by the end of 2002.  In accordance with this goal,
during April, the Company entered into two commitments, totaling
$35 million, to acquire oil and gas production properties.



<TABLE>
Operating Statistics.  The following table represents margin components:
<CAPTION>
                                  Three Months Ended          Six Months Ended            Twelve Months Ended
                                       March 31,                   March 31,                   March 31,
                                   1998          1997          1998          1997          1998            1997
Operating Revenues (Thousands):
  <S>                            <C>           <C>           <C>           <C>           <C>             <C>
  Gas sales
    Residential                  $ 301,597     $ 425,150     $ 570,318     $ 716,640     $   795,242     $   993,210
    Commercial                      47,593        68,720        85,602       112,746         119,719         153,083
    Industrial                       9,180        14,953        16,552        23,248          22,272          30,256
    Non-utility                     20,808           870        49,135         1,038          55,533           1,065
                                   379,178       509,693       721,607       853,672         992,766       1,177,614

  Transportation
    Residential                     13,411        13,967        24,258        25,414          35,650          39,658
    Commercial                      16,760        18,123        31,574        32,913          46,317          49,741
    Industrial                       8,377         9,610        16,373        18,946          28,394          35,301
    Contract Pooling                 2,483        12,757         5,968        15,203           8,507          19,637
    Other                              101             -           533           399             533             400

                                    41,132        54,457        78,706        92,875         119,401         144,737

  Other                              4,200         3,164         9,347         7,925          16,710          14,637

Total Operating Revenues           424,510       567,314       809,660       954,472       1,128,877       1,336,988
Less- Gas Costs                    206,625       319,848       404,648       508,594         511,588         664,565
    - Revenues Taxes                41,607        56,590        77,129        95,884         107,469         131,412

Net Operating Revenues           $ 176,278     $ 190,876     $ 327,883     $ 349,994     $   509,820     $   541,011

Deliveries (MDth):
  Gas Sales
    Residential                     52,421        64,427        94,278       111,093         126,022         145,725
    Commercial                       9,046        10,979        15,488        18,648          21,833          24,755
    Industrial                       1,929         2,584         3,283         4,159           4,492           5,422
                                    63,396        77,990       113,049       133,900         152,347         175,902

  Transportation (a)
    Residential                     10,383        11,701        18,539        20,514          25,934          28,537
    Commercial                      14,819        16,079        27,460        28,792          39,149          41,013
    Industrial                      12,128        11,497        22,696        22,979          38,624          40,858
    Other                                -           224             -           234               -             234
                                    37,330        39,501        68,695        72,519         103,707         110,642

  Total Gas Sales
    and Transportation             100,726       117,491       181,744       206,419         256,054         286,544

  Margin per Dth delivered       $    1.75     $    1.62     $    1.80     $    1.70     $      1.99     $      1.89
                                      


  (a)  Volumes associated with contract pooling revenues are included in their
     respective customer classes.
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

Indenture Restrictions.  North Shore Gas' indenture relating to
its first mortgage bonds contains provisions and covenants
restricting the payment of cash dividends and the purchase or
redemption of capital stock.  At March 31, 1998, such
restrictions amounted to $11.6 million out of North Shore Gas'
total retained earnings of $74.2 million.

Environmental Matters.  The Company's utility subsidiaries are
conducting environmental investigations and work at certain sites
that were the location of former manufactured gas operations.
(See Note 3A of the Notes to Consolidated Financial Statements.)

   In 1994, North Shore Gas received a demand from a responsible
party under CERCLA for reimbursement, indemnification, and
contribution for response costs incurred at a former mineral
processing site in Denver, Colorado.  North Shore Gas filed a
declaratory judgment action asking the court to declare that
North Shore Gas is not liable for response costs relating to the
site.  Salomon filed a counterclaim for costs to be incurred by
Salomon and Shattuck with respect to the site.  On March 7, 1997,
the District Court granted North Shore Gas' motion for summary
judgment, declaring that North Shore Gas is not liable for any
response costs in connection with the Denver site.  Salomon has
appealed the ruling of the District court to the United States
Court of Appeals, Seventh Circuit.  (See Note 3B of the Notes to
Consolidated Financial Statements.)

   On November 14, 1995, the Illinois Attorney General filed a
complaint in the Circuit Court of Cook County naming North Shore
Gas and four other parties as defendants.  The complaint alleges
violations arising out of a gasoline release that occurred in
Wheeling, Illinois in June 1992 when a contractor who was
installing a pipeline for North Shore Gas accidentally struck a
gasoline pipeline owned by West Shore Pipeline Company.  North
Shore Gas is currently contesting this suit.  (See Note 3C of the
Notes to Consolidated Financial Statements.)

Credit Lines.  The Company has lines of credit totaling $170.0
million.  At March 31, 1998, the Company had unused credit
available of $169.1 million.

   The utility subsidiaries have lines of credit totaling
$129.4 million.  At March 31, 1998, the utility subsidiaries had
unused credit available from banks of $91.2 million.

Interest Coverage.  The fixed charges coverage ratios for Peoples
Gas for the 12 months ended March 31, 1998, and for fiscal 1997
and 1996 were 4.29, 5.01, and 4.84, respectively.

   The corresponding coverage ratios for North Shore Gas for the
same periods were 5.00, 5.74, and 5.62, respectively.

Dividends.  On February 4, 1998, the Directors of the Company
voted to increase the regular quarterly dividend on the Company's
common stock to 48 cents per share from the 47 cents per share
previously in effect.  The annualized dividend rate now amounts
to $1.92 per share.

Year 2000.  The Company is modifying all of its computer programs
to be year 2000 compliant.  The Company does not believe that the
amount of expenditures it will incur in connection with its year
2000 modifications will have a material adverse effect on the
financial position or results of operations of the Company.  The
Company's year 2000 modification program has achieved substantial
progress and the Company expects that the modifications will be
completed and fully tested prior to the year 2000.  The Company
is also requiring that other parties, particularly vendors with
whom the Company electronically interacts, have year 2000
compatible computer systems.  The Company, however, cannot
control the success of other parties' year 2000 modification
efforts.



Forward-Looking Information.  Management's Discussion and
Analysis of Results of Operations and Financial Condition
("MD&A") contains statements that may be considered forward-
looking, such as the statement of the Company's financial goal
regarding non-utility earnings, the effect of weather on net
income, cash position and coverage ratios, the insignificant
effect on income arising from changes in revenue from customers'
gas purchases from entities other than the utility subsidiaries,
environmental matters, and the discussion concerning year 2000
compliant information systems. These statements speak of the 
Company's plans, goals, beliefs, or expectations, refer to 
estimates or use similar terms.  Actual results could differ 
materially, because the realization of those results is subject
to many uncertainties including:

   "    The future health of the U.S. and Illinois economies.
     
   "    The timing and extent of changes in energy commodity 
        prices and interest rates.
     
   "    Regulatory developments in the U.S., Illinois and other
     states where the Company has investments.
     
   "    Changes in the nature of the Company's competition resulting
     from industry consolidation, legislative change, regulatory
     change and other factors, as well as action taken by particular
     competitors.
     
   "    The Company's success in identifying non-utility investments
     on financially acceptable terms and generating earnings from
     those investments in a reasonable time.
     
   "    The ability of various vendors and others with whom the
     Company electronically interacts to complete year 2000 systems
     modification efforts on a timely basis and in a manner that
     allows them to continue normal business transactions with the
     Company without disruption.

   Some of these uncertainties that may affect future results are
discussed in more detail in the sections of "Item 1 - Business"
of the Annual Report on Form 10-K captioned "Competition", "Sales
and Rates", "State Legislation and Regulation", "Federal
Legislation and Regulation", "Environmental Matters", and
"Current Gas Supply".  All forward-looking statements included in
this MD&A are based upon information presently available, and the
Company assumes no obligation to update any forward-looking
statements.


                  PART II.   OTHER INFORMATION

Item 1. Legal Proceedings

     See Note 3 of the Notes to Consolidated Financial Statements
for a discussion pertaining to environmental matters.

Item 4. Submission of Matters to a Vote of Security Holders

        a.  The Company held its Annual Meeting of Shareholders
            on February 27, 1998.

        b.  The following matters were voted upon at the Annual
            Meeting of Shareholders.
            
            There were no broker non-votes with respect to any
            matters voted upon.

           1. The election of nominees for directors who will
        serve for a one-year term or until their respective
        successors shall be duly elected.  The nominees, all of
        whom were elected, were as follows:  William J. Brodsky,
        Pastora San Juan Cafferty, J. Bruce Hasch,
        Homer J. Livingston, Jr., William G. Mitchell, Earl L.
        Neal, Richard E. Terry, Richard P. Toft, and Arthur R.
        Velasquez.  The Inspectors of Election certified the
        following vote tabulations:


                                       FOR          WITHHELD
        William J. Brodsky . .  . . 28,939,235        308,503
        Pastora San Juan Cafferty . 28,884,892        308,503
        J. Bruce Hasch . . .  . . . 28,956,626        308,503
        Homer J. Livingston, Jr. . .28,958,691        308,503
        William G. Mitchell . . .. .28,934,174        308,503
        Earl L. Neal . . . .        28,901,099        308,503
        Richard E. Terry  . .  . .  28,931,452        308,503
        Richard P. Toft  . . . . . .28,946,107        308,503
        Arthur R. Velasquez . . .. .28,948,883        308,503

           2. A proposal to amend the Long-Term Incentive
        Compensation Plan:

               FOR            AGAINST     ABSTAIN
            26,661,189       1,922,104    733,271

           3. A proposal to ratify the recommendation of the
        Audit Committee and the appointment by the Board of
        Directors of Arthur Andersen LLP as the independent
        public accountants for the Company and its subsidiaries
        for the fiscal year ending September 30, 1998.  The
        Inspectors of Election certified the following vote
        tabulations:

               FOR            AGAINST    ABSTAIN
            28,750,257        347,487    218,027



Item 6. Exhibits and Reports on Form 8-K

        a. Exhibits

               Exhibit
               Number   Description of Document

                3(a) Amendment to the By-Laws of the Registrant
                     dated February 27, 1998
                
                3(b) By-Laws of the Registrant as amended, dated
                     February 27, 1998
                
                10(a) Amendment to the Long-Term Incentive
                      Compensation Plan dated February 27, 1998
                
                10(b) Long-Term Incentive Compensation Plan
                      as amended, dated February 27, 1998
                
                27  Financial Data Schedule

        b. Reports on Form 8-K filed during the quarter ended
           March 31, 1998

           None













                            SIGNATURE



   Pursuant to the requirements of the Securities Exchange Act of

1934, as amended, the registrant has duly caused this report to

be signed on its behalf by the undersigned thereunto duly

authorized.




                         Peoples Energy
                           Corporation
                          (Registrant)




May 13, 1998                  By: /s/ K. S. BALASKOVITS
  (Date)                              K. S. Balaskovits
                                Vice President and Controller





                         (Same as above)
                      Principal Accounting
                             Officer