**EXHIBIT      10.1**

**I.**
**THE      SETTLEMENT AGREEMENT**

*1.*
*Distribution      of the $100 Million Refund*

*2.*
*Accounting      Proposals Adopted from the ALJPO in Docket 01-0707*

*3.*
*Hardship      Reconnection Program*

*4.*
*Gas      Reconciliation*

**II.**
**THE      PROCEDURAL HISTORY OF THIS DOCKET**

*1.*
*Duty      Imposed on North Shore by Statute*

*2.*
*Burden      of Proof*

**III.**
**ENTITIES      INVOLVED**

**IV.**
**GENERAL      PRUDENCE ISSUES**

*1.*
*Findings      of Fact*

*1.*
*Findings      of Fact*

*2.*
*Conclusions      of Law*

*1.*
*Findings      of Fact*

*2.*
*Conclusions      of Law*

**VII.**
**AUDITS**

**VIII.**
**FINDING      AND ORDERING PARAGRAPHS**

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**STATE      OF ILLINOIS**

**ILLINOIS      COMMERCE COMMISSION**

| Illinois                Commerce Commission, On                Its Own Motion,  v.  North                Shore Gas Company,  Reconciliation                of revenues collected under fuel and gas adjustment charges with                actual                costs. | :::::::::: |      Docket                No: 01-0706 |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------|

**ORDER**

**By      the Commission:**

*See,*

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

**A.**
**Outstanding      Procedural Matters**

**B.**
****Legal        Basis for Adoption of the Proposed Settlement Agreement as a Resolution on        the        Merits****

*Business      and Professional People for the Public Interest v. Illinois Commerce      Commission*
*“BPI”)*
*BPI*
*Id.*
*Id.*

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*BPI*
*See*
*BPI*

*BPI*

*Citizens      Utility Board v. Illinois Commerce Commission,*

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*BPI*

**C.**
**Terms      of the Settlement**

**1.**
**Distribution      of the $100 Million Refund**

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| §   | The                number of customers receiving service on each Service Classification                as of                the date this Order is entered, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | The                usage of PGA gas by each Service Classification during the Reconciliation                Periods, and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------|

| §   | The                amount of the refund to be credited to each customer during the next                30-day billing cycle. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------|

| §   | The                number of current and former SC No.3 customers that held customer                accounts                and consumed PGA gas during the Reconciliation Periods, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | The                amount of PGA gas consumed during the Reconciliation Periods by each                current and former SC No.3 customer account, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | An                indication of whether former SC No. 3 customers are still a going                concern,                and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------|

| §   | The                amount to be refunded to each current and former SC No.3 customer                account                that received service during the Reconciliation                Periods. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**2.**
****Accounting        Proposals Adopted from the ALJPO in Docket        01-0707****

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*et.      seq.*

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

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

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

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

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

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

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

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**3.**
**Hardship      Reconnection Program**
** **

**4.**
**Gas      Reconciliation**

| 1.  Unamortized                Balance at 9/30/00 per 2000 reconciliation                (Refund)/Recovery                       |   | $       | 7,794,821.26   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|---------|----------------|--------|
| 2.  Factor                A Adjustments Amortized to Sch. I at 09/30/00 per 2000 reconciliation                (Refund)/Recovery |   |    | 1,885,194.72   |   |
| 3.  Factor                O (Refunded)/Recovered during 2000                                                                     |   |    | 0              |   |
| 4.  Balance                to be (Refunded)/Recovered during 2001 from prior periods                                             |   |    | 9,680,015.98   |   |
| 5.  2001                PGA Recoverable Costs                                                                                    |   |    | 175,017,347.00 |   |
| 6.  2001                PGA Actual Recoveries                                                                                    |   |    | 194,127,626.25 |   |
| 7.  Interest                                                                                                                     |   |    | 95,467.21      |   |
| 8.  Other                Adjustments                                                                                             |   |    | 0              |   |
| 9.  Pipeline                Refunds                                                                                              |   |    | (34,749.64     | )      |
| 10.  (Over)/Under                Recovery for 2001                                                                               |   |    | (19,049,561.68 | )      |
| 11.  PGA                Reconciliation Balance at 9/30/01 (Over)/Under                Collected                                  |   |    | (9,369,545.70  | )      |
| 12.  Factor                A Adjustments unreconciled at 9/30/01 (Refund)/Recovery                                               |   |    | (3,296,514.13  | )      |
| 13.  Unamortized                Balance at 9/30/01 (Refund)/Recovery                                                             |   |  $ | (6,073,031.57  | )      |
| 14.  Requested                Ordered Reconciliation Factor to be (Refunded)/Recovered [Factor                O]                 |   |    | 0              |   |

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**II.**
**The      Procedural History of this Docket**

**A.**
**Disclosure      of Pertinent Information During Discovery**

*See,      e.g., Mann v. Upjohn Co.,*
*Besco      v. Henslee, Monek & Henslee,*
*See,      e.g.,*

*See,      e.g.,*

*See,      e.g., *

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**B.**
**Applicable      Legal Standards**

**1.**
**Duty      Imposed on North Shore by Statute**

*See,      e.g., Ill. Power Co. v. Ill. Commerce Comm.,*
*Id.*

*Id.*
*Id.*

*Illinois      Power Co. v. Ill. Commerce Comm.,*
*Id.*

*Business      and Professional People for the Public Interest v. Ill. Commerce      Comm.,*

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**2.**
**Burden      of Proof**

*See,      e.g.,Witherell v. Weimer, *

**III.**
**Entities      Involved**

**IV.**
**General      Prudence Issues**

**A.**
**The      Gas Purchase Agency Agreement**

**1.**
**Findings      of Fact**

**a.**
**Background**

----

*See,      North Shore Gas Company, Proposal to Eliminate its Purchased Gas Adjustment      (PGA) Clause and Include Gas Charges in Base Rates,*

*Id.*

----

**b.**
**The      Terms of the GPAA**

*Id.*

*Id.*

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**1)**
**Baseload      Quantity Gas**

**2)**
**The      SIQ and DIQ Provisions**

*Id.      *
*Id.*
*Id.*
*Id.*

*See,*

*See,      e.g.,*

----

*See,      e.g.,*

*Id.*

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**3)**
****Provisions        that Allowed Enron NA to Increase the Cost of        Gas****

**4)**
**Released      Pipeline Capacity and Fore**
**gone      Demand Credits **

*See,      e.g.,*
*Id.*
*Id.      *

*Id.      *

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**5)**
**Flexible        Pricing**
** **

**6)**
****Penalties        Paid on Resales of Gas to Enron        NA****

----

*Id.*

**7)**
**Annual      Review **

**8)**
**Conversion      to Performance-Based **
**Rates**

**9)**
**Books      and Records **

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**b.**
**Economic      Analyses Made of the GPAA Just Before it **
**was      Executed**

*See,      e.g.,*
*Id.*

*See,      e.g.,*
*increase*

----

*See,      *

**c.**
****The        Reasons Articulated by North Shore for Entering into the        GPAA****

**1)**
**The      Eroding Value of Basis**

*Id.*

----

*Id*

*See,      e.g.,Staff Ex. 2.00 at 15*

----

*.*

*.*

*See,      e.g.,*

----

**2)**
**The      CERA Report and Other Industry **
**Information**

**3)**
**A      Liquidity Premium**

*See,*

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**4)**
**Unquantifiable      Benefits **

**2.**
**Conclusions      of Law **

**a.**
**Ignoring      Unfavorable Economic Analyses**

**1)**
**Staff’s      Position**

----

*Id.*
*Id.*

**2)**
**North      Shore’s Position**

*See,*
*Id.*

----

*Id.*

**3)**
**The      AG’s Position**

----

**4)**
**Commission      Analysis and Conclusions**

*increase*

*increased*

----

*See,      e.g.,*

** **

----

*Id.*

*Fraley      v. City of Elgin,*

*See,      e.g., People v. Robinson,*
*Fleeman      v. Fischer, *

*Illinois      Power, 245 *

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**b.        **
****Enron’s        Ability to Change the Price of Gas: Articles 4.2(b) and 4.2(c) of the GPAA****

**                            1)**
**Staff’s      Position **

*Id.*

**                            2)**
**North      Shore’s Position**

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**                            3)**
**The      AG’s Position**

**                            4)**
**Commission      Analysis and Conclusions**

**c.**
**Baseload,      SIQ and DIQ Gas**

**                            1)**
**Staff’s      Position**

----

*Id.*

----

**2)**
**North      Shore’s Position**

*See,      e.g.,*

*Id.*

**3)**
**The      AG’s Position**

**4)**
**Commission      Analysis and Conclusions**

*See,      e.g., Butler v. Butler,*

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**d.**
**Foregone      Demand Credits**

**1)**
**Staff’s      Position**

----

**2)**
**North      Shore’s Position**

**3)**
**Commission      Analysis and Conclusion **

**e.**
**Penalties      for Resales of Gas**

**1)**
**Staff’s      Position**

**2)**
**North      Shore’s Position**

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**3)**
**Commission      Analysis and Conclusion**

**f.**
**Released      Pipeline Capacity**

**1)**
**Staff’s      Position**

*See,*

**2)**
**North      Shore’s Position**

*See,*

**3)**
**Commission      Analysis and Conclusions**

----

*See,      e.g., *

**g.**
**Eroding      Basis**

**1)**
**North      Shore’s Position**

----

**2)**
**Staff’s      Position**

*Id.*

*Id.*

*Id.*

**3)**
**Commission      Analysis and Conclusions**

----

*Illinois      Power,*
*(Id.*

*Illinois      Power,*

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**h.        **
****The        CERA Report and Other Reasons for Possibly Higher        Basis****

**1)**
**North      Shore’s Position**

*See,      e.g.,*

*See,*
*See,      also,*
*existed*

----

**2)**
**Staff’s      Position**

**3)**
**Commission      Analysis and Conclusions**

----

*See,      e.g., *

*Illinois      Power,*

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**i.**
**North      Shore’s Previous Reconciliation**

**1)**
**North      Shore’s Position**

*See,      Ill. Commerce Commission, on its own Motion, v. Peoples Gas Light and Coke      Co.,*
*Ill.      Power Co. v. Ill. Commerce Commission,*

**2)**
**Staff’s      Position**

*Governors      Office of Consumer Services v. Ill. Commerce Comm.,*
*Ill.      Commerce Comm. on its own Motion, v. Ill. Power Co., Reconciliation of FAC      and      PGA Clauses,*
*res      judicata*

*See,      Business and Professional People for the Public Interest v. Ill. Commerce      Comm’n,*

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**3)**
**The      AG’s Position**

*Business      and Professional People for the Public Interest v. Ill. Commerce      Comm.,*

*See*
*      Mississippi River Fuel Corp. v. Illinois Commerce Cmm’n*
*See,      Governor’s Office of Consumer Services v. Illinois Commerce      Cmm’n*

**4)**
**Commission      Analysis and Conclusions**

*Illinois      Power*
*Ill.      Power,*
*Ill.      Power, *

*Id.*

----

*Illinois      Power *
*Ill.      Power*

*See,*
*Ill.      Power,*
*Illinois      Power,*

*Ill.      Power,*
*Ill.      Power,*

*Illinois      Power*

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**j.**
**Proxy      for Historical Gas Purchase Practices**

**1)**
**North      Shore’s Position**

*Id.*

**2)**
**Staff’s      Position**

*See,      e.g.,*

**3)**
**The      AG’s Position**

----

**4)**
**Commission      Analysis and Conclusions**

*i.e.*

**k.        **
****Market-based        Pricing with No Demand or Reservation        Charges****

**1)**
**North      Shore’s Position**

----

**2)**
**Staff’s      Position**

**3)**
**The      AG’s Position**

**4)**
**Commission      Analysis and Conclusions **

*See,      e.g.,*

** **

----

**l.**
**Flexible      Pricing**

**1)**
**North      Shore’s Position**

*.*

**2)**
**Staff’s      Position**

**3)**
**The      AG’s Position**

----

**4)**
**Commission      Analysis and Conclusions**

*See,      e.g., Schwinder v. Austin Bank,*
*Nebel      v. Mid-City National Bank of Chicago,*

**m.**
**Load      Flexibility**

**1)**
**North      Shore’s Position**

*See,      *

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**2)**
**Staff’s      Position**

**3)**
**The      AG’s Position**

**4)**
**Commission      Analysis and Conclusions**

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**n.**
**Unquantifiable      Benefits**

**1)**
**North      Shore’s Position**

**2)**
**Staff’s      Position**

**3)**
**The      AG’s Position**

----

**4)**
**Commission      Analysis and Conclusions**

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**B.**
**Storage      at Manlove Field**

**1.**
**Findings      of Fact**

*force      majeure*

*Id.*

*Id*

*force      majeure*
*Kahara      Bodas Co. v. Perusahaan Pertambangan,*

----

*force      majeure.*

**2.**
**Conclusions      of Law**

**a.**
**Staff’s      Position**

*Id.      *

----

**b.**
**North      Shore’s Position**

----

**c.**
**The      AG’s Position**

**d.**
**Commission      Analysis and Conclusions**

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**C.**
**Hedging**

**1.**
**Findings      of Fact**

----

**a.**
**North      Shore Expert Witness Mr. Graves’ **
**Testimony**

*Id.*

*Id.*

----

*Id.*
*Id.*

*Id.*

*Id.*
*Id.*

*Id.*

----

*Id.*

**b.**
**CUB      Expert Witness Mr. Ross’ Testimony**

*Id.*
*Id.*

----

*Id.*

*Id.*

----

*Id.*
*Id.*

**2.**
**Conclusions      of Law**

**a.**
**North      Shore’s Position**

**b.**
**Staff’s      Position**

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**c.**
**CUB’s      Position**

**d.**
**The      AG’s Position**

**e.**
**Commission      Analysis and Conclusions**

**VII.**
**Audits**

**A.**
**Staff’s      Position**

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**B.**
**North      Shore’s Position**

**C.**
**Commission      Analysis and Conclusions**

**VIII.**
**Finding      and Ordering Paragraphs**

|   | (1) | North                Shore Gas Company is a corporation engaged in the distribution of                natural                gas service to the public in Illinois, and, as such, it is a “public                utility” within the meaning of the Public Utilities                Act; |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | the                Commission has jurisdiction over North Shore Gas Company and of the                subject-matter of this proceeding; |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | the                statements of fact set forth in the prefatory portion of this Order                are                supported by the evidence of record and are hereby adopted as findings                of                fact; |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | as                is set forth in this Order, North Shore Gas Company acted imprudently,                or                otherwise acted contrary to law in its purchasing and storage of                gas                during the reconciliation period; |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | the                Settlement Agreement (Exhibit 1) as revised by the Addendum (Exhibit                2) is                adopted and their terms incorporated herein as a settlement of allegations                that, during the reconciliation period, North Shore had not acted                reasonably and prudently in its purchases of natural gas and other                activities that affected the amounts collected through Gas Charnges                in its                fiscal year 2001; |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | the                unamortized balances at the end of North Shore’s 2001 reconciliation year                show a recoverable balance for the Commodity Gas Charge of $7,981,620.48;                a recoverable balance of $1,899,343.69 for the Non-Commodity Gas                Charge                and the Demand Gas Charge; and a recoverable balance of $9,245.22                for the                Transition Surcharge, for the total refundable balance of $6,073,031.57,                the Factor O refund is zero; |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | (7) | the                reconciliations submitted by North Shore Gas Company of the costs                actually                incurred for the purchase of natural gas with revenues received for                such                gas for the reconciliation period beginning October 1, 2000, through                September 30, 2001, may properly be approved; |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (8) | pursuant                to the Settlement Agreement and Addendum, a refund of $100 million                is to                be distributed in the manner set forth above as part of the consideration                paid in global settlement of this docket, as well as I.C.C. Docket                Nos.                01-0707, 02-0726, 02-0727, 03-0704, 03-0705, 04-0682 and 04-0683; |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (9) | North                Shore Gas Company should follow the accounting procedures recited                above,                where applicable to it, the directive contained in the incorporated                parts                of the settlement agreement and the addendum thereto in all future                gas                adjustment charge reconciliation dockets; |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (10) | North                Shore Gas Company shall file quarterly reports with the Chief Clerk’s                office detailing the progress of the Hardship Reconnection                program. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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