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 December 31, 1995

                              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:
34,938,792 shares of Common Stock, without par value, outstanding
at January 31, 1996.


<TABLE>
                         PART I.   FINANCIAL INFORMATION

Item 1.  Financial Statements

                           Peoples Energy Corporation
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)
<CAPTION>
                                    Three Months Ended      Twelve Months Ended
                                        December 31,            December 31,       
                                     -------------------  ------------------------
                                       1995       1994         1995        1994    
                                     --------   --------   ----------   ----------
                                         (Thousands, except per-share amounts)
<S>                                  <C>        <C>        <C>          <C>

OPERATING REVENUES:
  Gas sales                          $275,173   $266,552   $  901,659   $1,078,200
  Transportation of customer-
   owned gas                           39,270     32,752      129,332      109,481
  Other                                 3,162      7,819       12,892       19,648
                                     --------   --------   ----------   ----------
   Total Operating Revenues           317,605    307,123    1,043,883    1,207,329
                                     --------   --------   ----------   ----------
OPERATING EXPENSES:
  Gas costs                           129,871    146,087      441,220      613,424
  Operation                            54,129     48,724      204,501      215,264
  Maintenance                          10,055      9,422       42,363       38,967
  Depreciation and amortization        16,655     16,518       66,545       65,978
  Taxes - Income                       22,903     13,890       41,569       28,790
        - State & local revenue        33,765     31,246      112,239      124,786
        - Other                         5,073      5,015       21,759       20,681
                                     --------   --------   ----------   ----------
   Total Operating Expenses           272,451    270,902      930,196    1,107,890
                                     --------   --------   ----------   ----------
OPERATING INCOME                       45,154     36,221      113,687       99,439
                                     --------   --------   ----------   ----------
OTHER INCOME AND (DEDUCTIONS):
  Interest income                       2,654      1,359       11,361        7,069
  Interest on long-term debt
   of subsidiaries                    (10,951)   (11,551)     (45,812)     (46,176)
  Other interest expense               (1,998)    (1,375)      (8,081)      (2,942)
  Miscellaneous - net                   1,257        473        1,988        3,148
                                     --------   --------   ----------   ----------
   Total Other Income 
     and Deductions                    (9,038)   (11,094)     (40,544)     (38,901)
                                     --------   --------   ----------   ----------
NET INCOME                           $ 36,116   $ 25,127   $   73,143   $   60,538
                                     ========   ========   ==========   ==========
Average Shares of Common Stock
  Outstanding                          34,928     34,886       34,913       34,867

Earnings Per Share of Common Stock   $   1.03   $   0.72   $     2.10   $     1.74
                                     ========   ========   ==========   ==========

Dividends Declared Per Share         $   0.45   $   0.45   $     1.80   $     1.80
                                     ========   ========   ==========   ==========
<FN>
The Notes to Consolidated Financial Statements are an integral part of
these statements.
</TABLE>

<TABLE>
                             Peoples Energy Corporation
                             CONSOLIDATED BALANCE SHEETS
 
<CAPTION>
                                               December 31,                   December 31,
                                                   1995       September 30,      1994
                                               (Unaudited)         1995       (Unaudited)
                                               ------------   -------------   ------------   
                                                               (Thousands)
<S>                                              <C>             <C>            <C>

PROPERTIES AND OTHER ASSETS

CAPITAL INVESTMENTS:

Property, plant and equipment,
   at original cost                              $1,999,439      $2,088,277     $2,035,774
     Less - Accumulated depreciation                635,123         715,208        690,291
       Net property, plant and equipment          1,364,316       1,373,069      1,345,483
Other investments                                    10,391          10,367         15,115
                                                 ----------      ----------     ----------
     TOTAL CAPITAL INVESTMENTS - NET              1,374,707       1,383,436      1,360,598
                                                 ----------      ----------     ----------
CURRENT ASSETS:

Cash                                                  5,938           3,328          4,788
Cash equivalents                                     27,399         172,911         56,898
Other temporary cash investments,
   at cost that approximates market value             1,100           1,100          1,000
Trust fund - utility construction                        --              --         16,440
           - bond redemption                             --             237            --
Receivables -
   Customers, net of allowance for 
     uncollectible accounts of $18,447,
       $19,013, and $20,862, respectively           130,437          56,715        120,591
   Other                                              7,905           1,897          5,959
Accrued unbilled revenues                            68,731          21,167         72,280
Materials and supplies, at average cost              16,242          16,466         25,152
Gas in storage, at last-in, first-out cost          105,367         100,547        124,898
Gas costs recoverable through rate adjustments        4,988           6,205         19,203
Prepayments                                           1,727           2,302          1,646
                                                 ----------      ----------     ----------
     TOTAL CURRENT ASSETS                           369,834         382,875        448,855
                                                 ----------      ----------     ----------
OTHER ASSETS:

Regulatory assets of subsidiaries                    71,449          39,706         36,250
Deferred charges                                     15,048          16,475         17,569
                                                 ----------      ----------     ----------
     TOTAL OTHER ASSETS                              86,497          56,181         53,819
                                                 ----------      ----------     ----------
       TOTAL PROPERTIES AND OTHER ASSETS         $1,831,038      $1,822,492     $1,863,272
                                                 ==========      ==========     ==========
<FN>
The Notes to Consolidated Financial Statements are an integral part of
these statements.
</TABLE>

<TABLE>
                           Peoples Energy Corporation
                           CONSOLIDATED BALANCE SHEETS

<CAPTION>
                                               December 31,                   December 31,
                                                  1995        September 30,      1994
                                               (Unaudited)        1995        (Unaudited)
                                               ------------   -------------   ------------
                                                         (Thousands of Dollars)
<S>                                              <C>             <C>            <C>
CAPITALIZATION AND LIABILITIES

CAPITALIZATION:

Common Stockholders' Equity:
   Common stock, without par value
       Authorized - 60,000,000 shares
       Outstanding - 34,937,321, 34,913,426,
         and 34,898,353 shares, respectively     $  277,629      $  277,113     $  276,702
   Retained earnings                                384,976         364,581        374,681
                                                 ----------      ----------     ----------
       Total Common Stockholders' Equity            662,605         641,694        651,383
Long-term debt of subsidiaries,
   exclusive of sinking fund payments
   and maturities due within one year               527,104         621,874        622,013
                                                 ----------      ----------     ----------
       TOTAL CAPITALIZATION                       1,189,709       1,263,568      1,273,396
                                                 ----------      ----------     ----------
CURRENT LIABILITIES:

Interim loans of subsidiaries                        12,025             900         10,135
Accounts payable                                    161,827         102,377        114,630
Dividends payable on common stock                    15,722          15,711         15,704
Customer gas service and credit deposits             43,897          40,577         57,790
Sinking fund payments and maturities,
   due within one year -
     Long-term debt of subsidiaries                   8,000           4,000          4,000
Accrued taxes                                        63,291          28,160         49,672
Gas sales revenue refundable through
   rate adjustments                                  52,032          79,502         49,811
Accrued interest                                      7,303          12,796          9,428
Temporary LIFO liquidation credit                     1,389              --          4,298
                                                 ----------      ----------     ----------
       TOTAL CURRENT LIABILITIES                    365,486         284,023        315,468
                                                 ----------      ----------     ----------
DEFERRED CREDITS AND OTHER LIABILITIES:

Deferred income taxes - primarily
   accelerated depreciation                         211,899         208,424        195,535
Investment tax credits being amortized
   over the average lives of related property        36,638          38,132         39,444
Other                                                27,306          28,345         39,429
                                                 ----------      ----------     ----------
       TOTAL DEFERRED CREDITS AND
          OTHER LIABILITIES                         275,843         274,901        274,408
                                                 ----------      ----------     ----------
       TOTAL CAPITALIZATION AND LIABILITIES      $1,831,038      $1,822,492     $1,863,272
                                                 ==========      ==========     ==========
<FN>
The Notes to Consolidated Financial Statements are an integral part of
these statements.
</TABLE>

<TABLE>
                        Peoples Energy Corporation
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Unaudited)
<CAPTION>
                                                            Three Months Ended
                                                               December 31,    
                                                          ---------------------
                                                            1995         1994  
                                                          ---------   ---------
                                                                (Thousands)
<S>                                                        <C>         <C>
OPERATING ACTIVITIES:
  Net Income                                               $ 36,116    $ 25,127
  Adjustments to reconcile net income to net cash:
    Depreciation and amortization                            16,655      16,518
    Deferred income taxes and investment tax credits - net      280       4,524
    Change in deferred credits and other liabilities            662      (3,983)
    Change in other assets                                  (30,316)         61
    Other                                                        19          28
    Change in current assets and liabilities:
     Receivables - net                                      (79,730)    (50,367)
     Accrued unbilled revenues                              (47,564)    (52,358)
     Materials and supplies                                     224      (1,297)
     Gas in storage                                          (4,820)     26,107
     Gas costs recoverable                                    1,217      (4,777)
     Accounts payable                                        59,450       5,495
     Customer gas service and credit deposits                 3,320      12,370
     Accrued taxes                                           35,132      20,736
     Gas sales revenue refundable                           (27,470)     (1,131)
     Accrued interest                                        (5,493)     (3,514)
     Temporary LIFO liquidation credit                        1,389       4,298
     Other                                                      575         404
                                                           ---------   ---------
  NET CASH USED IN OPERATING ACTIVITIES                     (40,354)     (1,759)
                                                           ---------   ---------
INVESTING ACTIVITIES:
  Capital expenditures of subsidiaries - construction       (19,783)    (19,721)
  Other assets                                               11,881        (349)
  Other long-term cash investments                               --       1,424
  Other capital investments                                     (43)       (278)
                                                           ---------   ---------
  NET CASH USED IN INVESTING ACTIVITIES                      (7,945)    (18,924)
                                                           ---------   ---------
FINANCING ACTIVITIES:
  Interim loans of subsidiaries - net                        11,125       9,235
  Trust fund - utility construction                              --      15,053
            - bond redemption                                   237          --
  Retirement of long-term debt of subsidiaries              (90,770)     (4,062)
  Dividends paid on common stock                            (15,711)    (15,691)
  Proceeds from issuance of common stock                        516         583
                                                           ---------   ---------
  NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES       (94,603)      5,118
                                                           ---------   ---------

NET DECREASE IN CASH AND CASH EQUIVALENTS                  (142,902)    (15,565)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD            176,239      77,251
                                                           ---------   ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                 $ 33,337    $ 61,686
                                                           =========   =========
<FN>                                                                           
The Notes to Consolidated Financial Statements are an integral part of
these statements.
</TABLE>


                    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, 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, 1995.

   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 Revenue Recognition

      Gas sales revenues for retail customers 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.

2B  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.

2C 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.
<TABLE>
      Income taxes and interest paid (excluding capitalized
   interest) were as follows:
<CAPTION>
         For the three months
         ended December 31,          1995           1994
         -----------------------------------------------
                                         (Thousands)
         <S>                      <C>          <C>      

         Income taxes paid        $  1,451     $     722
         Interest paid              16,946        14,532
</TABLE>

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 Recovery of Gas Costs, Including Charges for Transition Costs

      Pursuant to Federal Energy Regulatory Commission (FERC)
   Order 636 and successor orders, pipelines are allowed to
   recover from their customers so-called transition costs.  These
   costs arise from the restructuring of pipeline service
   obligations required by the 636 Orders.  The utilities are
   currently recovering pipeline charges for transition costs
   through the Gas Charge.  (See Notes 4A and 4B.)

      Under the tariffs of Peoples Gas and North Shore Gas, the
   difference for any fiscal year between costs recoverable
   through the Gas Charge and revenues billed to customers under
   the Gas Charge is refunded or recovered over a 12-month billing
   cycle beginning the following January 1.  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), and the fiscal year-end balance is
   amortized over the 12-month period beginning the following
   January 1.

      The Commission conducts annual proceedings regarding, for
   each gas utility, 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 for fiscal years 1992 through 1995 and North Shore
   Gas for fiscal years 1991 through 1995 are currently pending
   before the Commission.

3.  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
December 31, 1995, such restrictions amounted to $11.6 million out
of North Shore Gas' total retained earnings of $64.6 million.

4.  RATES AND REGULATION

4A Utility Rate Proceedings

Peoples Gas' Rate Order.  On November 8, 1995, the Commission
issued an order approving changes in rates of Peoples Gas that are
designed to increase annual revenues by approximately $30.8
million, exclusive of additional charges for revenue taxes. 
Peoples Gas was allowed a rate of return on original-cost rate base
of 9.19 per cent, which reflects an 11.10 per cent cost of common
equity.  The new rates were implemented on November 14, 1995. 
Peoples Gas and a group of industrial transportation customers have
appealed the Commission's order to the Illinois Appellate Court. 
Any change made by the Appellate Court would have a prospective
effect only.

North Shore Gas' Rate Order.  On November 8, 1995, the Commission
issued an order approving changes in rates of North Shore Gas that
are designed to increase annual revenues by approximately $5.6
million, exclusive of additional charges for revenue taxes.  North
Shore Gas was allowed a rate of return on original-cost rate base
of 9.75 per cent, which reflects an 11.30 per cent cost of common
equity.  The new rates were implemented on November 14, 1995.  A
group of industrial transportation customers has appealed the
Commission's order to the Illinois Appellate Court.  Any change
made by the Appellate Court would have a prospective effect only.

Environmental Cost Recovery.  In 1992, the Commission issued an
order in its consolidated proceedings, initiated in 1991, regarding
the appropriate ratemaking treatment of environmental costs
incurred by Illinois utilities, including Peoples Gas and North
Shore Gas, in connection with the investigation and treatment of
residues associated with past manufactured gas operations
("environmental costs").  In its order, the Commission approved
rate recovery of environmental costs over a five-year period, but
required the utilities to "share" the environmental costs by
disallowing rate recovery of carrying charges on unrecovered
balances.  Reimbursements of environmental costs from insurance
carriers or other entities are to be netted against costs and
reflected in rates over a five-year period.  In April 1995, the
Illinois Supreme Court upheld in part and reversed in part the
Commission's order.  The Supreme Court upheld the Commission in
ruling that environmental costs are recoverable through rates.  The
Supreme Court also ruled that the Commission's approval of a rate
recovery method called a "rider" (the method utilized by Peoples
Gas and North Shore Gas) as the preferred mechanism for recovery of
environmental costs is within the Commission's authority.  The
Supreme Court reversed the part of the Commission's order that
required the utilities to share environmental costs by disallowing
recovery of carrying charges on unrecovered balances.  The order
was remanded to the Commission for further proceedings consistent
with the Supreme Court's opinion.  On November 21, 1995, the
Commission entered its order on remand.  Consistent with the
Illinois Supreme Court's April 20, 1995 decision, the Commission,
in its order on remand, reversed its earlier order to allow
utilities to recover carrying charges on such environmental costs
incurred on and after April 20, 1995, the date of the Supreme
Court's decision.  (See Note 5A.)

FERC Order 636 Cost Recovery.  On September 15, 1993,  the
Commission entered an order initiating an investigation into the
appropriate means of recovery by Illinois gas utilities of pipeline
charges for FERC Order 636 transition costs.  The Commission issued
a final order in this proceeding on March 9, 1994.  The order
provides for the full recovery of transition costs from Peoples
Gas' and North Shore Gas' gas service customers and transportation
customers to the extent they contract for firm standby service. 
The Citizens Utility Board and State's Attorney of Cook County
filed an application for rehearing of the March 9 order with the
Commission.  In its orders on rehearing, the Commission continued
to provide for full recovery of transition costs, but directed
that, effective November 1, 1994, gas supply realignment (GSR)
costs (one of the four categories of transition costs) be recovered
on a uniform volumetric basis from all transportation and sales
customers.  In December 1994, a group of industrial transportation
customers of Illinois utilities appealed the Commission's orders on
rehearing to the Illinois Appellate Court.  The Illinois Appellate 
Court, on September 21, 1995, affirmed the Commission's order.  
A group of industrial transportation customers of Illinois utilities
gave notice of their intent to appeal the Appellate Court's order 
to the Illinois Supreme Court.  If the Illinois Supreme Court accepts
the appeal, any change made by it to the Commission's order would 
have a prospective effect only.  (See Notes 2E and 4B.)

4B FERC Orders 636, 636-A, and 636-B

   FERC Order 636 and successor orders require pipelines to make
separate rate filings to recover transition costs.  There are four
categories of such costs, the largest of which for Peoples Gas and
North Shore Gas is GSR costs.  The utilities are subject to charges
for transition cost recovery by Natural Gas Pipeline Company of
America (Natural).  Charges by Natural for transition costs
commenced on January 1, 1994.  On September 29, 1994, the FERC
approved a Stipulation and Agreement (Agreement) filed by Natural. 
The Agreement places a cap on the amount of GSR costs recoverable
by Natural from Peoples Gas and North Shore Gas.  For Peoples Gas,
that cap is approximately $103 million and for North Shore Gas,
that cap is approximately $25 million.  However, subject to these
caps, the level of costs that Peoples Gas and North Shore Gas will
incur is dependent primarily upon the future market price of
natural gas and pipeline negotiations with producers.  Peoples Gas
and North Shore Gas are currently recovering transition costs
through the Gas Charge.  At December 31, 1995, Peoples Gas and
North Shore Gas have made payments of $51 million and $12.5
million, and have accrued an additional $5.2 million and $1.3
million, respectively, toward the caps.

   The 636 Orders are not expected to have a material adverse
effect on financial position or results of operations of the
Company or its subsidiaries.  (See Notes 2E and 4A.)

5.  ENVIRONMENTAL MATTERS

5A Former Manufactured Gas Plant Operations

   The Company's utility subsidiaries, their predecessors, and
certain former affiliates operated facilities in the past for
manufacturing gas and storing manufactured gas.  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, if found at the sites.  Two sites in Waukegan, Illinois,
are the subjects of investigations (discussed below) initiated by
the United States Environmental Protection Agency (EPA).

   In May 1990, North Shore Gas was notified by the EPA that the
EPA had documented the release or threatened release of hazardous
substances, pollutants, and contaminants at a site located in
Waukegan, Illinois, where manufactured gas and coking operations
were formerly conducted (Waukegan I Site).  Also, North Shore Gas,
General Motors Corporation (GMC), and Outboard Marine Corporation
were notified that each may be a potentially responsible party
(PRP) under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended (CERCLA) with respect to the
Waukegan I Site.  A PRP is potentially liable for the cost of any
investigative and/or remedial work that the EPA determines is
necessary.

   In September 1990, North Shore Gas entered into an
Administrative Order on Consent (AOC) with the EPA and the IEPA to
implement and conduct a remedial investigation/feasibility study
(RI/FS) of the Waukegan I Site.  The RI/FS is comprised of an
investigation to determine the nature and extent of contamination
at the site and a feasibility study to develop and evaluate
possible remedial actions.  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.

   In September 1991, North Shore Gas, the Elgin, Joliet and
Eastern Railway (EJ&E), and the North Shore Sanitary District
(NSSD) each received an administrative order (AO) issued by the
EPA.  The AO directed all three entities to remove and dispose of
all visible free tar in a pit located within a separate site in
Waukegan, Illinois (Waukegan II Site) and to conduct a study to
determine the extent of contamination of the tar from the pit to
the surrounding property.  All of the work under the AO has been
completed.

   North Shore Gas has entered into a settlement agreement with
NSSD with respect to costs incurred under the AO.  In December
1994, North Shore Gas filed suit against EJ&E in the District Court
for the Northern District of Illinois, seeking recovery of response
costs incurred by North Shore Gas at the Waukegan II Site.

   The current owner of a site in McCook, Illinois, near Chicago,
has advised Peoples Gas that the owner has found what appear to be
wastes associated with by-products of the gas manufacturing process
under its property.  The owner has asserted that these wastes are
the responsibility of Peoples Gas.  Peoples Gas is currently
evaluating this claim.

   Peoples Gas and North Shore Gas, in cooperation with the IEPA,
are conducting investigations of other sites (a total of 32) to
determine whether remedial action might be necessary.  The
investigations were initiated pursuant to an informal request by
the IEPA.  To the best of the Company's knowledge, similar informal
requests have been made by the IEPA to other major Illinois gas and
electric utilities.  Peoples Gas and North Shore Gas have engaged
environmental consulting firms to assist in the utilities'
investigations.  At this time, except for the Waukegan I Site and
the 110th Street Station site (discussed below), it is not known
what, if any, remedial action will be necessary at the sites or, if
necessary, what the cost of any such action would be.  As discussed
below, Peoples Gas may conduct an RI/FS at the Division Street site
under the supervision of the IEPA.  In addition, Peoples Gas is
conducting investigations under the supervision of the IEPA at the
110th Street Station and Equitable Distribution Station sites.

   In August 1988, the IEPA conducted an inspection at Peoples Gas'
Division Street property in Chicago.  During the inspection, the
IEPA and Peoples Gas took several soil samples for laboratory
analysis.  The analysis of the samples collected by Peoples Gas
indicates the presence of certain substances within the soil of the
Division Street property that could be attributable to former
manufactured gas operations.  Peoples Gas may conduct an RI/FS of
the property under the supervision of the IEPA.

   Peoples Gas has been sued by a prior owner and has received
demands from the current owner of a site in Chicago formerly called
Pitney Court Station.  The former owner alleges damages of over $1
million arising from alleged contamination by Peoples Gas resulting
from past gas manufacturing activities on the property.  The
current owner has demanded that Peoples Gas assume responsibility
for investigation and remediation of the alleged contamination. 
Peoples Gas is currently evaluating these claims.

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

   The current owners at a site in Chicago, formerly called South
Station, have advised Peoples Gas that they have found what appear
to be gas manufacturing wastes underneath their property.  The
owners have demanded monetary compensation from Peoples Gas because
of the presence of such wastes.  Peoples Gas is currently
evaluating this claim.

   In 1994, Peoples Gas became aware of a planned residential
development at a site in Chicago, formerly called the Equitable
Distribution Station.  Peoples Gas is conducting a preliminary
investigation under the supervision of the IEPA to determine
whether gas manufacturing wastes are present at the site.

   The utility subsidiaries are accruing and deferring the costs
they incur in connection with all of the sites, including related
legal expenses, pending recovery through rates or from insurance
carriers or other entities.  At December 31, 1995, the total of the
costs deferred by the subsidiaries, net of recoveries and amounts
billed to other entities, was $18.5 million.  This amount includes
an estimate of the costs of completing the studies required by the
EPA at the Waukegan I Site and the Waukegan II Site and the
investigations initiated at the request of the IEPA at the other
sites referred to above.  The amount also includes an estimate of
the costs of remediation at the Waukegan I 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 until more is known about the
nature and extent of contamination and the remedial action, if any,
to be required by the EPA or the IEPA.  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 1938 and 1985 for costs incurred or to
be incurred by the utilities in connection with five former
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 December 31, 1995 have not been reduced to reflect
recoveries from insurance carriers.

   Costs incurred by Peoples Gas or North Shore Gas for
environmental activities relating to former manufactured gas
operations will be recovered 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 the sites will not have a material adverse effect
on financial position or results of operations of the subsidiaries.
Peoples Gas and North Shore Gas are recovering the costs of
environmental activities relating to the utilities' former
manufactured gas operations under rate mechanisms approved by the
Commission.  At December 31, 1995, the subsidiaries had recovered
$4.5 million of such costs through rates.  (See Note 4A for a
discussion of proceedings regarding the recovery of such costs
through utility rates.)

5B Former Mineral Processing Site in Denver, Colorado

   In February 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 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.

   In November 1994, 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 has filed a counterclaim for
costs incurred and to be incurred by Salomon and Shattuck with
respect to the site.

5C 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 currently evaluating this matter.

6.  GAS OVER-PRESSURE CONDITION

   On January 17, 1992, an over-pressure condition occurred in the
gas mains of Peoples Gas serving an approximately one-square-mile
area of the Near Northwest Side of the City of Chicago.  The
over-pressure condition caused a major explosion and numerous
fires.

   A number of lawsuits, some of which included wrongful-death
claims, were filed against the Company and Peoples Gas as a result
of the over-pressure condition.  All of the lawsuits alleging
wrongful-death claims have been settled.  While property damage
cases are still pending, management believes that any liability
that may arise from such cases will not have a material adverse
effect on financial position or results of operation of the Company
or Peoples Gas.

7.  DISTRICT ENERGY

   Peoples District Energy is a 50 per cent participant in a
partnership, Trigen-Peoples District Energy Company, that provides
heating and cooling services to the McCormick Place exposition and
convention center in Chicago, Illinois.  The partnership also
intends to offer district energy services to other large buildings
in Chicago.  The services will ultimately be supplied from one or
more central plants, a concept known as district energy.  The other
partner, Trigen-Chicago Energy Corporation (Trigen-Chicago), is a
subsidiary of Trigen Energy Corporation (Trigen).  Neither the
partnership nor its partners are regulated as a public utility.

   In December 1992, the partnership entered into a 28-year
contract with the Metropolitan Pier and Exposition Authority (MPEA)
to construct and operate a plant that will provide steam and
chilled water to McCormick Place for heating and cooling purposes
(MPEA Agreement).  In November 1993, the partnership assumed
operation of the current space-conditioning system and began
providing service to the two existing halls.  The partnership also
will provide heating and cooling to a planned exhibition hall that
is scheduled to be in operation early in 1997.  The partnership is
obligated to provide services to McCormick Place for the term of
the MPEA Agreement at or below the cost (as determined by a
contractual formula) that the MPEA would incur to produce heating
and cooling for itself.  The MPEA Agreement also obligates the
partnership to complete and pay for construction of the plant by
certain dates specified in the contract.  To secure its obligations
during the service period under the MPEA Agreement, the partnership
is obligated to provide, maintain, and reinstate a letter of credit
upon which the MPEA can draw to pay its costs, expenses, and
damages, up to $4 million per incident, principally in the event of
the partnership's failure to cure timely an interruption of
service.

   The Company and Trigen have provided two joint and several
guarantees to the MPEA of the partnership's performance of its
obligations under the MPEA Agreement.  One of the guarantees covers
all obligations of the partnership relating to construction of the
project (Construction Obligations), and is limited in the aggregate
to $15 million, except for the guarantors' funding obligations
described above and costs to the extent incurred by the MPEA in
connection with enforcement of obligations of the partnership or
the guarantors.  The second guarantee covers all obligations of the
partnership other than the Construction Obligations, including
liabilities arising from an interruption of service to McCormick
Place, insolvency of the partnership, or other partnership default.
This second guarantee is limited in the aggregate to $11 million,
except for an additional $4 million to $8 million in the event of
insolvency of the partnership or the installation (pursuant to
enforcement of lender or MPEA remedies) of any other operator of
the district energy plant in lieu of the partnership, and except
for the partnership's obligations relating to the letter of credit
in favor of the MPEA described above and costs to the extent
incurred by the MPEA in connection with the enforcement of
obligations of the partnership or the guarantors.

   The district energy plant is estimated to cost approximately $38
million.  The MPEA has effectively funded $8 million of the
construction costs, and the partnership will fund the balance.  In
August 1995, the partnership obtained a $28 million construction
and term loan to finance construction of a major portion of the
project.  Upon completion of construction of the project, the
construction loans will be converted to a term loan with a 20-year
maturity.  In connection with the financing, the Company pledged
its shares of common stock of Peoples District Energy to the lender
as security for the loan obligations.  Additionally,  the Company,
Peoples District Energy, Trigen, Trigen-Chicago and the partnership
executed a Sponsors Support and Equity Contribution Agreement
(Sponsors Support Agreement).

   Under the Sponsors Support Agreement, the Company and Trigen
have certain contractual obligations to the lender that could
require payment by each of the Company and Trigen of 50 per cent of
the outstanding loan obligations upon the occurrence of certain
events relating to material destruction of the project,
condemnation of the project, purchase of the project by the MPEA
pursuant to provisions of the MPEA Agreement and default by the
partnership, the Company or Trigen of certain of its obligations to
the MPEA.

8.  TAX MATTERS

   On September 30, 1993, the Company received notification from
the Internal Revenue Service (IRS) that settlement of past income
tax returns had been reached for fiscal years 1978 through 1990. 
The IRS settlement resulted in payments of principal and interest
to the Company in 1994 in total amount of approximately $28
million, or $21.6 million after income taxes.  Both Peoples Gas and
North Shore Gas received regulatory authorization to defer the
recognition of the settlement amount in income for fiscal year
1993, and to recognize its portion of the settlement amount in
income for fiscal years 1994 and 1995.  Each utility represented to
the Commission that, having received this accounting authorization,
it would not file a request for an increase in base rates before
December 1994.  The regulatory treatment of the IRS settlement
having been resolved in November 1993, Peoples Gas and North Shore
Gas together included $14 million, or $10.8 million after income
taxes, in income in 1994.  The amount after income taxes was
included in Other Income - Miscellaneous.  At September 30, 1994,
approximately $14 million was included in Deferred Credits and
Other Liabilities - Other.

   As a result of the Commission's accounting authorization, the
fiscal year 1995 portion of the settlement amount for Peoples Gas
and North Shore Gas was amortized (credited) to operation expense. 
The effect was to offset increases in costs that the utilities
would incur during the year.  In fiscal 1995, the utilities
together amortized approximately $14 million, or $10.8 million
after income taxes.

9.  LONG-TERM DEBT

9A Issuance of Bonds

   In March 1993, North Shore Gas filed a shelf registration with
the SEC for the issuance of $40 million aggregate principal amount
of first mortgage bonds.  In May 1993, North Shore Gas issued a
portion of those first mortgage bonds in an aggregate principal
amount of $15 million at 6.37 per cent due May 1, 2003.  Proceeds
of the offering were used to refund approximately $11 million
aggregate principal amount of North Shore Gas' previously issued
first mortgage bonds and for general corporate purposes.  North
Shore Gas may issue all or a portion of the remaining bonds early
in fiscal 1997.  Proceeds of any future offering will be used for
general corporate purposes.

9B 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, 1995, have been remarketed.  The interest rate on such bonds is
4 per cent for the period October 1, 1995, through September 30,
1996.

   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, 1995, have been remarketed.  The interest rate on such
bonds is 3.85 per cent for the period December 1, 1995, through
November 30, 1996.

   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, Peoples Gas established a $37.4 million three year line of
credit with The Northern Trust Company.  The term of this facility
has been extended to January 31, 1998.  (See Liquidity and Capital
Resources - Credit Lines.)

9C Bonds Redeemed

   On November 14, 1995, Peoples Gas notified the trustee of the
City of Joliet 1984 Gas Supply Revenue Refunding Bonds, Series A
and B, which were secured by Peoples Gas' Series U and V First
Mortgage Bonds, of its intention to redeem approximately $87
million aggregate principal amount of the bonds.  The redemption,
from general corporate funds, was completed on December 29, 1995.

   On December 18, 1995, North Shore Gas notified the trustee of
its intention to redeem $8 million aggregate principal amount of
Series I First Mortgage Bonds.  The redemption, using the proceeds
of an interim short-term bank loan as well as other monies of North
Shore Gas, was completed on February 1, 1996.

10.  SNG PLANT CLOSING

   Peoples Gas has closed its synthetic gas-making plant located
near Joliet, Illinois.  The decision was effected after a
cost-benefit analysis was performed, which showed that, as of
December 1, 1995, it  would not be cost-effective to use the plant
as a source of gas, given new, more economical supply arrangements
to become effective on that date.  Those supply arrangements were
the result of initiatives undertaken by the utilities to
restructure their gas supply portfolios in response to FERC Order
636.  The rates approved by the Commission in Peoples Gas' most
recent rate case reflect the annual effect of a five-year
amortization of the undepreciated investment in the plant and
decommissioning expenses.  The plant closing did not have a
material effect on financial position or results of operations of
the Company or Peoples Gas.

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

RESULTS OF OPERATIONS

Net Income

   Net income increased $11.0 million, to $36.1 million, for the
three months ended December 31, 1995, from the results of last
year's like quarter, due mainly to increased gas deliveries largely
resulting from weather that was 34 per cent colder than last year's
period, which was abnormally warm.  In addition, net income
benefited from rate increases that went into effect for Peoples Gas
and North Shore Gas on November 14, 1995.  (See Note 4A of the
Notes to Consolidated Financial Statements.)  Last year's first
quarter was helped by a federal income tax settlement (see Note 8
of the Notes to Consolidated Financial Statements) and by the sale
of interests in certain oil and gas rights.

   Net income increased $12.6 million, to $73.1 million, for the
current 12-month period, from the results of the similar prior
period, due principally to  weather that was 5 per cent colder than
the previous 12 months.  The current 12-month period also benefited
from the aforementioned rate increases and increased gas deliveries
to large volume customers.  In addition, positive impacts on net
income resulted from a decrease in the provision for uncollectible
accounts, and the timing difference in recognizing a federal income
tax settlement.  The prior period also benefited from the sale of
interest in certain oil and gas rights.
<TABLE>
   A summary of variations affecting income between periods is
presented below, with explanations of significant differences
following:
<CAPTION>
                                 Three Months Ended    12 Months Ended
                                  December 31, 1995    December 31, 1995
                                  Increase/(Decrease)  Increase/(Decrease)
                                   from Prior Period    from Prior Period
                                  -------------------  -------------------
(Thousands of dollars)                 Amount    %        Amount     %
--------------------------------------------------------------------------
<S>                                    <C>       <C>      <C>       <C>

Net operating revenues (a)             $24,179    18.6    $21,305    4.5
Operation and maintenance expenses       6,038    10.4     (7,367)  (2.9)
Depreciation and amortization expense      137     0.8        567    0.9
Income taxes                             9,013    64.9     12,779   44.4
Other income and deductions             (2,056)  (18.5)     1,643    4.2 
Net Income                              10,989    43.7     12,605   20.8
--------------------------------------------------------------------------
<FN>
(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 2E
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 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 increased $24.2 million, to $154 million,
and $21.3 million, to $490.4 million, for the current three- and
12-month periods, respectively, reflecting increased gas
deliveries, mainly caused by colder weather in each of the more
recent periods.  The aforementioned rate increases for the
Company's utility subsidiaries improved net operating revenues in
both periods by about $5.8 million, and net income by $3.5 million.
In addition, the 12-month period was impacted by increased
deliveries to large volume customers.

   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 $6.0 million, to
$64.2 million, for the current three-month period, due mainly to
the recognition in the prior year's first quarter of $3.7 million
from the sale of interests in certain oil and gas rights and $4.3
million for an IRS settlement.  (See Note 8 of the Notes to
Consolidated Financial Statements.)  The effect of these increases
was partially offset by reduced pension expenses of $1.8 million,
primarily resulting from a change in assumptions.

   Operation and maintenance expenses decreased $7.4 million, to
$246.9 million for the current 12-month period, due principally to
a decrease of $8.8 million for the provision for uncollectible
accounts, and an increased credit of $5.5 million between periods
for the timing difference in recognizing an IRS settlement.  In
addition, pension and group insurance expenses decreased $2.1
million and $1.8 million, respectively.  These decreases were
partially offset by increased costs of $3.4 million related to the
reengineering program, higher maintenance costs of $3.4 million,
and the prior year's benefit of $3.7 million from  the sale of
interests in certain oil and gas rights.

Depreciation and Amortization Expense

   Depreciation and amortization expense increased $567,000, to
$66.5 million, for the current 12-month period, due primarily to
depreciable property additions and the amortization of costs
associated with the closing of Peoples Gas' SNG Plant (see Note 10
of the Notes to Consolidated Financial Statements).  These
increases were largely offset by lower net dismantling costs in the
current period.

Income Taxes

   Income taxes, exclusive of taxes related to the closing of the
SNG Plant included in other income and deductions, increased $9.0
million, to $22.9 million, in the current three-month period, due
principally to higher pre-tax income.

   Income taxes, exclusive of taxes related to the closing of the
SNG Plant included in other income and deductions, increased $12.8
million, to $41.6 million, in the current 12-month period, due
mainly to higher pre-tax income together with an adjustment made in
1994 to reduce taxes accrued.

Other Income and Deductions

   Other income and deductions decreased $2.1 million, for the
current three-month period, due primarily to increased interest
income, reduced interest expense on long-term debt, and the
accelerated recognition of investment tax credits for Peoples 
Gas' SNG Plant closing.  These amounts were partially offset by
increased interest expense on amounts refundable to customers
and on budget accounts, and by a charge, after income taxes,
reflecting the disallowance of carrying charges associated with
the closing of the SNG Plant.  (See Note 10 of the Notes to
Consolidated Financial Statements.)

   Other income and deductions increased $1.6 million, for the
current 12-month period, due primarily to increased interest expense
on amounts refundable to customers and on budget accounts, and the
aforementioned charge for the SNG Plant closing.  Also, the
amortization of the net gain on the sale of the Peoples Gas
Building was completed in March 1995 with the expiration of
Peoples Gas' lease at its former headquarters.  These increases
were partially offset by increased interest income and the
accelerated recognition of investment tax credits for the SNG 
Plant closing.

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 and coverage
ratios.

FERC Order 636 Costs.  In 1992, the FERC issued Order 636 and
successor orders that required substantial restructuring of the
service obligations of interstate pipelines.  (See Notes 2E, 4A,
and 4B of the Notes to Consolidated Financial Statements.)

   On September 15, 1993, the Commission entered an order
initiating an investigation into the appropriate means of recovery
by Illinois gas utilities of pipeline charges for FERC Order 636
transition costs.  The Illinois Appellate Court affirmed the
Commission's order on rehearing on September 21, 1995.  (See Notes
2E, 4A, and 4B of the Notes to Consolidated Financial Statements.)

Reengineering Study.  Peoples Gas and North Shore Gas have
undertaken a major project to reengineer their business processes
with the goal of increasing efficiency, responsiveness to customer
needs, and cost effectiveness.

<TABLE>
Operating Statistics.  The following table represents gas
distribution margin components:
<CAPTION>
                           Three Months Ended      Twelve Months Ended
                               December 31,            December 31,        
                           ------------------    ----------------------
                             1995      1994         1995         1994  
                           --------  --------    ----------  ----------
<S>                        <C>       <C>         <C>         <C>
  
Operating Revenues (thousands):
  Gas sales
    Residential            $233,776  $226,508    $  760,065  $  891,392
    Commercial               33,982    33,468       116,627     149,311
    Industrial                7,415     6,576        24,967      37,497
                           --------  --------    ----------  ----------
                            275,173   266,552       901,659   1,078,200
                           --------  --------    ----------  ----------
  Transportation
    Residential              12,344    10,435        39,758      34,781
    Commercial               16,677    13,634        53,362      45,445
    Industrial               10,249     8,683        36,212      29,255
                           --------  --------    ----------  ----------
                             39,270    32,752       129,332     109,481
                           --------  --------    ----------  ----------
  Other                       3,162     7,819        12,892      19,648
                           --------  --------    ----------  ----------

Total Operating Revenues    317,605   307,123     1,043,883   1,207,329
Less  - Gas Costs           129,871   146,087       441,220     613,424
      - Revenues Taxes       33,765    31,246       112,239     124,786
                           --------  --------    ----------  ----------
Net Operating Revenues     $153,969  $129,790    $  490,424  $  469,119
                           ========  ========    ==========  ==========

Deliveries (MDth):
  Gas Sales
    Residential              47,793    36,818       141,546     135,229
    Commercial                7,417     5,788        23,708      24,624
    Industrial                1,825     1,206         5,678       6,636
                           --------  --------    ----------  ----------
                             57,035    43,812       170,932     166,489
                           --------  --------    ----------  ----------
  Transportation
    Residential               8,862     7,095        26,578      24,090
    Commercial               13,772    11,210        44,210      40,383
    Industrial               12,144    10,018        42,019      35,558
                           --------  --------    ----------  ----------
                             34,778    28,323       112,807     100,031
                           --------  --------    ----------  ----------
Total Gas Sales
  and Transportation         91,813    72,135       283,739     266,520
                           ========  ========    ==========  ==========

Margin per Dth delivered   $   1.68  $   1.80    $     1.73  $     1.76
</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 December 31, 1995, such restrictions amounted to
$11.6 million out of North Shore Gas' total retained earnings of
$64.6 million.  (See Note 3 of the Notes to Consolidated Financial
Statements.)

Regulatory Actions.  On November 8, 1995, the Commission issued
orders approving changes in rates of Peoples Gas and North Shore
Gas.  (See Note 4A of the Notes to Consolidated Financial
Statements.)

   In 1992, the Commission issued an order in its consolidated
proceedings, initiated in 1991, regarding the appropriate
ratemaking treatment of environmental costs relating to past
manufactured gas operations incurred by Illinois utilities,
including Peoples Gas and North Shore Gas.  In its order, the
Commission approved rate recovery of such environmental costs but
required that the recovery occur over a five-year period without
recovery of carrying charges on unrecovered balances.  The part of
the Commission's order that disallowed recovery of carrying charges
on unrecovered balances has been reversed on appeal by the Illinois
Supreme Court, which has remanded the case to the Commission.  On
November 21, 1995, the Commission entered its order on remand. 
(See Note 4A of the Notes to Consolidated Financial Statements.)

   On September 29, 1995, Peoples Gas and North Shore Gas filed
petitions with the Commission for approval of performance-based
rate programs (PBR Programs) for gas costs.  The objectives of the
PBR Programs are to provide incentives to minimize gas supply and
capacity costs in a changing market and to pursue innovative gas
supply-related opportunities.  Under specified conditions and up to
certain limits, Peoples Gas and North Shore Gas would share equally
with gas sales customers the savings or costs from these programs. 
The PBR Programs would be for a pilot period covering fiscal years
1996 through 1998 and were filed pursuant to a new provision of the
Illinois Public Utilities Act which allows experiments in
performance-based rates.  The Commission has commenced hearings on
the PBR Program proposals, and orders are expected during the third
quarter of fiscal 1996.

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 5A of the Notes to Consolidated Financial Statements.)

   In February 1994, North Shore Gas received a demand from a
responsible party under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (CERCLA) for
reimbursement, indemnification and contribution for response costs
incurred at a former mineral processing site in Denver, Colorado. 
In November 1994, 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.  (See Note 5B 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 evaluating this matter.  (See Note 5C of the Notes
to Consolidated Financial Statements.)

District Energy.  Peoples District Energy is a 50 per cent
participant in a partnership, Trigen-Peoples District Energy
Company, that provides district energy services to the McCormick
Place exposition and convention center in Chicago, Illinois.  The
partnership also intends to offer district energy services to other
large buildings in Chicago.  The other partner is a subsidiary of 
Trigen Energy Corporation (Trigen), a company whose primary
business is constructing and operating district energy facilities. 
Neither the partnership nor its partners are regulated as a public
utility.  The Company and Trigen have each provided two joint and
several limited guarantees to the owner and operator of McCormick
Place and also have certain limited obligations to the
partnership's lender under a Sponsors Support and Equity
Contribution Agreement.  (See Note 7 of the Notes to Consolidated
Financial Statements.)

Bonds Issued.  In March 1993, North Shore Gas filed a shelf
registration with the Securities and Exchange Commission (SEC) for
the issuance of $40 million aggregate principal amount of first
mortgage bonds.  In May 1993, North Shore Gas issued a portion of
those first mortgage bonds in an aggregate principal amount of $15
million at 6.37 per cent, due May 1, 2003.  (See Note 9A of the
Notes to Consolidated Financial Statements.)

   Additional bonds are issuable by the utility subsidiaries, upon
approval by the Commission, subject to limitations imposed by
certain restrictive provisions of the subsidiaries' open-end
mortgages and supplements thereto.  These restrictions are not
expected to have an impact on the subsidiaries' ability to issue
additional debt, as needed.

Bonds Redeemed.  On November 14, 1995, Peoples Gas notified the
trustee of the City of Joliet 1984 Gas Supply Revenue Refunding
Bonds, Series A and B, which were secured by Peoples Gas' Series U
and V First Mortgage Bonds, of its intention to redeem
approximately $87 million aggregate principal amount of the bonds. 
The redemption, from general corporate funds, was completed on
December 29, 1995.  (See Note 9C of the Notes to Consolidated
Financial Statements.)

   On December 18, 1995, North Shore Gas notified the trustee of
its intention to redeem $8 million aggregate principal amount of
Series I First Mortgage Bonds.  The redemption, using the proceeds
of an interim short-term bank loan as well as other monies of North
Shore Gas, was completed on February 1, 1996.  (See Note 9C of the
Notes to Consolidated Financial Statements.)

Credit Lines.  The utility subsidiaries have lines of credit of
$131.1 million.  Agreements covering $93.7 million of the total
will expire on June 26, 1996.  The agreement covering the remaining
$37.4 million will expire on January 31, 1998.  Such lines of
credit cover projected short-term credit needs of the subsidiaries
and support the long-term debt treatment of Peoples Gas'
adjustable-rate mortgage bonds.  (See Note 9B of the Notes to
Consolidated Financial Statements.)

Interest Coverage.  The fixed charges coverage ratios for Peoples
Gas for the 12-months ended December 31, 1995, and fiscal 1995 and
1994 were 3.09, 2.76, and 3.28, respectively.

   The corresponding coverage ratios for North Shore Gas for the
same periods were 3.36, 2.93, and 3.33, respectively.

Dividends.  On February 7, 1996, the Directors of the Company voted
to increase the regular quarterly dividend on the Company's common
stock to 46 cents per share from 45 cents per share previously in
effect.  The annualized dividend rate is now equal to $1.84 per
share.



                   PART II.   OTHER INFORMATION

Item 1. Legal Proceedings

     See Note 5 of the Notes to Consolidated Financial Statements
for a discussion pertaining to environmental matters.

     See Note 6 of the Notes to Consolidated Financial Statements
for a discussion of an over-pressure condition that occurred on
January 17, 1992, in Peoples Gas' gas mains on the Near Northwest
Side of the City of Chicago.


Item 6. Exhibits and Reports on Form 8-K

        a. Exhibits

               Exhibit
               Number            Description of Document
              ----------       ----------------------------

                 27            Financial Data Schedule

        b. Reports on Form 8-K filed during the quarter ended
            December 31, 1995

               Date of Report - November 15, 1995

               Item 5.  Other Events

               Rates and Regulation





                             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)




February 13, 1996                By: /s/ K. S. BALASKOVITS
-----------------                    ----------------------------
    (Date)                               K. S. Balaskovits
                                     Vice President and Controller




                                        (Same as above)
                                     -----------------------------
                                     Principal Accounting Officer