|FORM 10-Q                         
|----------------------------------
|                                  
|UNITED STATES                     
|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, 2000
|                                                 |                                                  
|OR                                              
|                                                 |                                                  
|[ ]                                              | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
|OF THE SECURITIES EXCHANGE ACT OF 1934          

|                                                                                                                                                                                                                                                                                                                                                                      | Exact Name of Registrant as            |                      
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------- | ---------------------
|                                                                                                                                                                                                                                                                                                                                                                      | Specified in Charter, State of         |                      
|                                                                                                                                                                                                                                                                                                                                                                      | Incorporation, Address of              |                      
|Commission                                                                                                                                                                                                                                                                                                                                                            | Principal Executive                    | IRS Employer         
|File Number                                                                                                                                                                                                                                                                                                                                                           | Office and Telephone Number            | Identification Number
|1-5540                                                                                                                                                                                                                                                                                                                                                                | PEOPLES ENERGY CORPORATION             | 36-2642766           
|                                                                                                                                                                                                                                                                                                                                                                      | (an Illinois Corporation)              |                      
|                                                                                                                                                                                                                                                                                                                                                                      | 130 East Randolph Drive, 24th Floor    |                      
|                                                                                                                                                                                                                                                                                                                                                                      | Chicago, Illinois 60601-6207           |                      
|                                                                                                                                                                                                                                                                                                                                                                      | Telephone (312) 240-4000               |                      
|                                                                                                                                                                                                                                                                                                                                                                      |                                        |                      
|2-26983                                                                                                                                                                                                                                                                                                                                                               | THE PEOPLES GAS LIGHT AND COKE COMPANY | 36-1613900           
|                                                                                                                                                                                                                                                                                                                                                                      | (an Illinois Corporation)              |                      
|                                                                                                                                                                                                                                                                                                                                                                      | 130 East Randolph Drive, 24th Floor    |                      
|                                                                                                                                                                                                                                                                                                                                                                      | Chicago, Illinois 60601-6207           |                      
|                                                                                                                                                                                                                                                                                                                                                                      | Telephone (312) 240-4000               |                      
|                                                                                                                                                                                                                                                                                                                                                                      |                                        |                      
|2-35965                                                                                                                                                                                                                                                                                                                                                               | NORTH SHORE GAS COMPANY                | 36-1558720           
|                                                                                                                                                                                                                                                                                                                                                                      | (an Illinois Corporation)              |                      
|                                                                                                                                                                                                                                                                                                                                                                      | 130 East Randolph Drive, 24th Floor    |                      
|                                                                                                                                                                                                                                                                                                                                                                      | Chicago, Illinois 60601-6207           |                      
|                                                                                                                                                                                                                                                                                                                                                                      | Telephone (312) 240-4000               |                      
|                                                                                                                                                                                                                                                                                                                                                                      |                                        |                      
|Indicate by check mark whether the registrants (1) have 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) have 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 (January 31, 2001):                                                                                                                                                                                                    
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                   
|Peoples Energy Corporation                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                   
|The Peoples Gas Light and Coke Company                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                   
|North Shore Gas Company                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                   
|This combined Form 10-Q is separately filed by Peoples Energy Corporation, The Peoples Gas Light and Coke Company, and North Shore Gas Company. Information contained herein relating to any individual company is filed by such company on
its own behalf. Each company makes no representation as to information relating to the other companies.





Part I - Financial Information

Item I. Financial Statements

The condensed unaudited financial statements of Peoples Energy Corporation (the Company) have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).

This Quarterly Report on Form 10-Q is a combined report of the Company, The Peoples Gas Light and Coke Company (Peoples Gas) and North Shore Gas Company (North Shore Gas).

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, Peoples Gas' and North Shore Gas' Annual Report on Form 10-K, as amended, for the
fiscal year ended September 30, 2000. Certain items previously reported for the prior periods have been reclassified to conform with the presentation in the current period.

The business of the Company's utility subsidiaries (Peoples Gas and North Shore Gas) 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. The quarterly results should not be considered indicative of the year as a whole.

The information furnished reflects, in the opinion of management, all adjustments (consisting of only normal recurring adjustments) necessary for a fair statement of the results for the interim periods presented.





|Peoples Energy Corporation                                                               | 
|---------------------------------------------------------------------------------------- | 
|CONSOLIDATED STATEMENTS OF INCOME                                                        | 
|(Unaudited)                                                                              | 
|                                                                                         | 
|                                                                                         | 
|                                                                                         | 
|                                                                                         | 
|                                                                                         | 
|                                                                                         | 
|Operating Revenues                                                                       | 
|                                                                                         | 
|Operating Expenses:                                                                      | 
|Cost of energy sold                                                                      | 
|Operation and maintenance                                                                | 
|Depreciation, depletion and amortization                                                 | 
|Taxes, other than income taxes                                                           | 
|Total Operating Expenses                                                                 | 
|                                                                                         | 
|Operating Income                                                                         | 
|                                                                                         | 
|Equity Investment Income                                                                 | 
|                                                                                         | 
|Total Operating Income and Equity Investment Income                                      | 
|                                                                                         | 
|Other Income and (Deductions)                                                            | 
|                                                                                         | 
|Interest Expense                                                                         | 
|                                                                                         | 
|Earnings Before Income Taxes                                                             | 
|                                                                                         | 
|Income Taxes                                                                             | 
|                                                                                         | 
|Income Before Cumulative Effect of Change                                                | 
|in Accounting Principle                                                                  | 
|                                                                                         | 
|Cumulative Effect of Accounting Change, net of tax (See Note 1)                          | 
|                                                                                         | 
|Net Income                                                                               | 
|                                                                                         | 
|Average Shares of Common Stock Outstanding                                               | 
|Basic                                                                                    | 
|Diluted                                                                                  | 
|                                                                                         | 
|Earnings Per Share of Common Stock                                                       | 
|Basic                                                                                    | 
|Diluted                                                                                  | 
|                                                                                         | 
|Dividends Declared Per Share                                                             | 
|                                                                                         | 
|The Notes to Consolidated Financial Statements are an integral part of these statements. | 





|Peoples Energy Corporation                                                              
|----------------------------------------------------------------------------------------
|                                                                                        
|CONSOLIDATED BALANCE SHEETS                                                             
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|ASSETS                                                                                  
|                                                                                        
|CAPITAL INVESTMENTS:                                                                    
|Property, plant and equipment, at original cost                                         
|Less - Accumulated depreciation and depletion                                           
|Net property, plant and equipment                                                       
|Investment in equity investees                                                          
|Other investments                                                                       
|Total Capital Investments - Net                                                         
|                                                                                        
|CURRENT ASSETS:                                                                         
|Cash and cash equivalents                                                               
|Temporary investments and special deposits                                              
|Advances to joint venture partnerships                                                  
|Receivables -                                                                           
|Customers, net of allowance for uncollectible accounts                                  
|of $33,218, $24,958 and $22,546, respectively                                           
|Other                                                                                   
|Materials and supplies, at average cost                                                 
|Gas in storage                                                                          
|Gas costs recoverable through rate adjustments                                          
|Regulatory assets of subsidiaries                                                       
|Prepayments                                                                             
|Total Current Assets                                                                    
|                                                                                        
|OTHER ASSETS:                                                                           
|Prepaid pension costs                                                                   
|Non-current regulatory assets of subsidiaries                                           
|Deferred charges                                                                        
|Total Other Assets                                                                      
|                                                                                        
|Total Assets                                                                            
|                                                                                        
|* Unaudited                                                                             
|The Notes to Consolidated Financial Statements are an integral part of these statements.





|Peoples Energy Corporation                                                              
|----------------------------------------------------------------------------------------
|                                                                                        
|CONSOLIDATED BALANCE SHEETS                                                             
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|CAPITALIZATION AND LIABILITIES                                                          
|                                                                                        
|CAPITALIZATION:                                                                         
|Common Stockholders' Equity:                                                            
|Common stock, without par value -                                                       
|Authorized 60,000 shares                                                                
|Outstanding 35,630, 35,544 and 35,533 shares, respectively                              
|Retained earnings                                                                       
|Treasury stock (248, 248, 0 shares, respectively at cost)                               
|Accumulated other comprehensive income                                                  
|Total Common Stockholders' Equity                                                       
|                                                                                        
|Long-term debt of subsidiaries, exclusive of sinking                                    
|fund payments, maturities due within one year, and                                      
|long-term maturities classified as short-term debt                                      
|Total Capitalization                                                                    
|                                                                                        
|CURRENT LIABILITIES:                                                                    
|Short-term debt                                                                         
|Accounts payable                                                                        
|Dividends payable on common stock                                                       
|Customer gas service and credit deposits                                                
|Accrued taxes                                                                           
|Gas sales revenue refundable through rate adjustments                                   
|Temporary LIFO Liquidation Credit                                                       
|Accrued interest                                                                        
|Total Current Liabilities                                                               
|                                                                                        
|DEFERRED CREDITS AND OTHER LIABILITIES:                                                 
|Deferred income taxes                                                                   
|Investment tax credits being amortized over                                             
|the average lives of related property                                                   
|Other                                                                                   
|Total Deferred Credits and Other Liabilities                                            
|                                                                                        
|Total Capitalization and Liabilities                                                    
|                                                                                        
|* Unaudited                                                                             
|The Notes to Consolidated Financial Statements are an integral part of these statements.





|Peoples Energy Corporation                                                              
|----------------------------------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                                   
|(Unaudited)                                                                             
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Operating Activities:                                                                   
|Net Income                                                                              
|Adjustments to reconcile net income to net cash:                                        
|Depreciation, depletion, and amortization                                               
|Per statement of income                                                                 
|Charged to other accounts                                                               
|Cummulative effect of accounting change, net of tax                                     
|Deferred income taxes and investment tax credits - net                                  
|Change in deferred credits and other liabilities                                        
|Change in accumulated other comprehensive income                                        
|Change in other assets                                                                  
|Undistributed earnings from equity investments                                          
|Change in current assets and liabilities:                                               
|Receivables - net                                                                       
|Materials and supplies                                                                  
|Gas in storage                                                                          
|Gas costs recoverable                                                                   
|Regulatory assets                                                                       
|Prepayments                                                                             
|Accounts payable                                                                        
|Customer gas service and credit deposits                                                
|Accrued taxes                                                                           
|Gas sales revenue refundable                                                            
|Accrued interest                                                                        
|Temporary LIFO Liquidation                                                              
|Net Cash Used in Operating Activities                                                   
|                                                                                        
|Investing Activities:                                                                   
|Capital spending                                                                        
|Advances to joint venture partnerships                                                  
|Temporary investments and special deposits                                              
|Net Cash Used in Investing Activities                                                   
|                                                                                        
|Financing Activities:                                                                   
|Short-term debt - net                                                                   
|Retirement of long-term debt                                                            
|Dividends paid on common stock                                                          
|Proceeds from issuance of common stock                                                  
|Net Cash Provided by Financing Activities                                               
|                                                                                        
|Net Increase in Cash and Cash Equivalents                                               
|Cash and Cash Equivalents at Beginning of Period                                        
|Cash and Cash Equivalents at End of Period                                              
|                                                                                        
|Supplemental information                                                                
|Income taxes paid, net of refunds                                                       
|Interest paid, net of amounts capitalized                                               
|                                                                                        
|The Notes to Consolidated Financial Statements are an integral part of these statements.





|Part I.  FINANCIAL INFORMATION                                                          
|----------------------------------------------------------------------------------------
|                                                                                        
|Item 1.  Financial Statements                                                           
|                                                                                        
|The Peoples Gas Light and Coke Company                                                  
|CONSOLIDATED STATEMENTS OF INCOME                                                       
|(Unaudited)                                                                             
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Operating Revenues                                                                      
|                                                                                        
|Operating Expenses:                                                                     
|Gas costs                                                                               
|Operation and maintenance                                                               
|Depreciation and amortization                                                           
|Taxes - other than income taxes                                                         
|Total Operating Expenses                                                                
|                                                                                        
|Operating Income                                                                        
|                                                                                        
|Other Income and (Deductions)                                                           
|                                                                                        
|Interest Expense                                                                        
|                                                                                        
|Earnings Before Income Taxes                                                            
|                                                                                        
|Income Taxes                                                                            
|                                                                                        
|Net Income Applicable to Common Stock                                                   
|                                                                                        
|                                                                                        
|The Notes to Consolidated Financial Statements are an integral part of these statements.





|The Peoples Gas Light and Coke Company                                                  
|----------------------------------------------------------------------------------------
|                                                                                        
|CONSOLIDATED BALANCE SHEETS                                                             
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|ASSETS                                                                                  
|                                                                                        
|CAPITAL INVESTMENTS:                                                                    
|Property, plant and equipment, at original cost                                         
|Less - Accumulated depreciation and amortization                                        
|Net property, plant and equipment                                                       
|Other investments                                                                       
|Total Capital Investments - Net                                                         
|                                                                                        
|CURRENT ASSETS:                                                                         
|Cash and cash equivalents                                                               
|Temporary investments                                                                   
|Receivables -                                                                           
|Customers, net of allowance for uncollectible accounts                                  
|of $30,632, $22,821, and $21,167, respectively                                          
|Other                                                                                   
|Materials and supplies, at average cost                                                 
|Gas in storage, at last-in, first-out cost                                              
|Gas costs recoverable through rate adjustments                                          
|Regulatory assets                                                                       
|Prepayments                                                                             
|Total Current Assets                                                                    
|                                                                                        
|OTHER ASSETS:                                                                           
|Prepaid pension costs                                                                   
|Non-current regulatory assets                                                           
|Deferred charges                                                                        
|Total Other Assets                                                                      
|                                                                                        
|Total Assets                                                                            
|                                                                                        
|* Unaudited                                                                             
|The Notes to Consolidated Financial Statements are an integral part of these statements.





|The Peoples Gas Light and Coke Company                                                  
|----------------------------------------------------------------------------------------
|                                                                                        
|CONSOLIDATED BALANCE SHEETS                                                             
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|CAPITALIZATION AND LIABILITIES                                                          
|                                                                                        
|CAPITALIZATION:                                                                         
|Common Stockholder's Equity:                                                            
|Common stock, without par value -                                                       
|Authorized 40,000 shares                                                                
|Outstanding 24,817 shares                                                               
|Retained earnings                                                                       
|Accumulated other comprehensive income                                                  
|Total Common Stockholder's Equity                                                       
|                                                                                        
|Long-term debt, exclusive of sinking fund                                               
|payments, maturities due within one year, and                                           
|long-term maturities classified as short-term debt                                      
|Total Capitalization                                                                    
|                                                                                        
|CURRENT LIABILITIES:                                                                    
|Short-term debt                                                                         
|Accounts payable                                                                        
|Customer gas service and credit deposits                                                
|Accrued taxes                                                                           
|Gas sales revenue refundable through rate adjustments                                   
|Temporary LIFO Liquidation Credit                                                       
|Accrued interest                                                                        
|Total Current Liabilities                                                               
|                                                                                        
|DEFERRED CREDITS AND OTHER LIABILITIES:                                                 
|                                                                                        
|Deferred income taxes                                                                   
|Investment tax credits being amortized over                                             
|the average lives of related property                                                   
|Other                                                                                   
|Total Deferred Credits and Other Liabilities                                            
|                                                                                        
|Total Capitalization and Liabilities                                                    
|                                                                                        
|* Unaudited                                                                             
|The Notes to Consolidated Financial Statements are an integral part of these statements.





|The Peoples Gas Light and Coke Company                                                  
|----------------------------------------------------------------------------------------
|                                                                                        
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                                   
|(Unaudited)                                                                             
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Operating Activities:                                                                   
|Net Income                                                                              
|Adjustments to reconcile net income to net cash:                                        
|Depreciation and amortization                                                           
|Per statement of income                                                                 
|Charged to other accounts                                                               
|Deferred income taxes and investment tax credits - net                                  
|Change in deferred credits and other liabilities                                        
|Change in other assets                                                                  
|Change in current assets and liabilities:                                               
|Receivables - net                                                                       
|Materials and supplies                                                                  
|Gas in storage                                                                          
|Gas costs recoverable                                                                   
|Regulatory assets                                                                       
|Prepayments                                                                             
|Accounts payable                                                                        
|Customer gas service and credit deposits                                                
|Accrued taxes                                                                           
|Gas sales revenue refundable                                                            
|Temporary LIFO liquidation                                                              
|Accrued interest                                                                        
|Net Cash Used in Operating Activities                                                   
|                                                                                        
|Investing Activities:                                                                   
|Capital spending                                                                        
|Temporary investments                                                                   
|Other assets                                                                            
|Net Cash Used in Investing Activities                                                   
|                                                                                        
|Financing Activities:                                                                   
|Short-term debt - net                                                                   
|Dividends paid on common stock                                                          
|Net Cash Provided by Financing Activities                                               
|                                                                                        
|Net Increase in Cash and Cash Equivalents                                               
|Cash and Cash Equivalents at Beginning of Period                                        
|                                                                                        
|Cash and Cash Equivalents at End of Period                                              
|                                                                                        
|Supplemental information                                                                
|Income taxes paid, net of refunds                                                       
|Interest paid, net of amounts capitalized                                               
|                                                                                        
|The Notes to Consolidated Financial Statements are an integral part of these statements.





|Part I.  FINANCIAL INFORMATION                                                          
|----------------------------------------------------------------------------------------
|
|Item 1.  Financial Statements                                                           
|                                                                                        
|North Shore Gas Company                                                                 
|CONSOLIDATED STATEMENTS OF INCOME                                                       
|(Unaudited)                                                                             
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Operating Revenues                                                                      
|                                                                                        
|Operating Expenses:                                                                     
|Gas costs                                                                               
|Operation and maintenance                                                               
|Depreciation                                                                            
|Taxes - other than income taxes                                                         
|Total Operating Expenses                                                                
|                                                                                        
|Operating Income                                                                        
|                                                                                        
|Other Income and (Deductions)                                                           
|                                                                                        
|Interest Expense                                                                        
|                                                                                        
|Earnings Before Income Taxes                                                            
|                                                                                        
|Income Taxes                                                                            
|                                                                                        
|Net Income Applicable to Common Stock                                                   
|                                                                                        
|The Notes to Consolidated Financial Statements are an integral part of these statements.





|North Shore Gas Company                                                                 
|----------------------------------------------------------------------------------------
|                                                                                        
|CONSOLIDATED BALANCE SHEETS                                                             
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|ASSETS                                                                                  
|                                                                                        
|CAPITAL INVESTMENTS:                                                                    
|Property, plant and equipment, at original cost                                         
|Less - Accumulated depreciation                                                         
|Net property, plant and equipment                                                       
|Other investments                                                                       
|Total Capital Investments - Net                                                         
|                                                                                        
|CURRENT ASSETS:                                                                         
|Cash and cash equivalents                                                               
|Receivables -                                                                           
|Customers, net of allowance for uncollectible                                           
|accounts of $1,263, $978, and $790, respectively                                        
|Other                                                                                   
|Materials and supplies, at average cost                                                 
|Gas in storage, at last-in, first-out cost                                              
|Gas costs recoverable through rate adjustments                                          
|Regulatory assets                                                                       
|Prepayments                                                                             
|Total Current Assets                                                                    
|                                                                                        
|OTHER ASSETS:                                                                           
|Prepaid pension costs                                                                   
|Non-current regulatory assets                                                           
|Deferred charges                                                                        
|Total Other Assets                                                                      
|                                                                                        
|Total Assets                                                                            
|                                                                                        
|*Unaudited                                                                              
|The Notes to Consolidated Financial Statements are an integral part of these statements.





|North Shore Gas Company                                                                 
|----------------------------------------------------------------------------------------
|                                                                                        
|CONSOLIDATED BALANCE SHEETS                                                             
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|CAPITALIZATION AND LIABILITIES                                                          
|                                                                                        
|CAPITALIZATION:                                                                         
|Common Stockholder's Equity:                                                            
|Common stock, without par value -                                                       
|Authorized 5,000 shares                                                                 
|Outstanding 3,625 shares                                                                
|Retained earnings                                                                       
|Total Common Stockholder's Equity                                                       
|                                                                                        
|Long-term debt, exclusive of sinking fund                                               
|payments and maturities due within one year                                             
|Total Capitalization                                                                    
|                                                                                        
|CURRENT LIABILITIES:                                                                    
|Short-term debt                                                                         
|Accounts payable                                                                        
|Customer gas service and credit deposits                                                
|Accrued taxes                                                                           
|Gas sales revenue refundable through rate adjustments                                   
|Temporary LIFO liquidation                                                              
|Accrued interest                                                                        
|Total Current Liabilities                                                               
|                                                                                        
|DEFERRED CREDITS AND OTHER LIABILITIES:                                                 
|                                                                                        
|Deferred income taxes                                                                   
|Investment tax credits being amortized over                                             
|the average lives of related property                                                   
|Other                                                                                   
|Total Deferred Credits and Other Liabilities                                            
|                                                                                        
|Total Capitalization and Liabilities                                                    
|                                                                                        
|*Unaudited                                                                              
|The Notes to Consolidated Financial Statements are an integral part of these statements.





|North Shore Gas Company                                                                 
|----------------------------------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                                   
|(Unaudited)                                                                             
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Operating Activities:                                                                   
|Net Income                                                                              
|Adjustments to reconcile net income to net cash:                                        
|Depreciation and amortization                                                           
|Per statement of income                                                                 
|Charged to other accounts                                                               
|Deferred income taxes and investment tax credits - net                                  
|Change in deferred credits and other liabilities                                        
|Change in other assets                                                                  
|Change in current assets and liabilities:                                               
|Receivables - net                                                                       
|Materials and supplies                                                                  
|Gas in storage                                                                          
|Gas costs recoverable                                                                   
|Regulatory assets                                                                       
|Accounts payable                                                                        
|Customer gas service and credit deposits                                                
|Accrued taxes                                                                           
|Gas sales revenue refundable                                                            
|Accrued interest                                                                        
|Temporary LIFO liquidation                                                              
|Prepayments                                                                             
|Net Cash Used in Operating Activities                                                   
|                                                                                        
|Investing Activities:                                                                   
|Capital spending                                                                        
|Temporary investments                                                                   
|Net Cash Provided by (Used in) Investing Activities                                     
|                                                                                        
|Financing Activities:                                                                   
|Short-term debt - net                                                                   
|Dividends paid on common stock                                                          
|Retirement of long-term debt                                                            
|Net Cash Provided by Financing Activities                                               
|                                                                                        
|Net Increase in Cash and Cash Equivalents                                               
|Cash and Cash Equivalents at Beginning of Period                                        
|                                                                                        
|Cash and Cash Equivalents at End of Period                                              
|                                                                                        
|Supplemental information                                                                
|Income taxes paid, net of refunds                                                       
|Interest paid, net of amounts capitalized                                               
|                                                                                        
|The Notes to Consolidated Financial Statements are an integral part of these statements.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES

Recovery of Gas Costs

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

For each gas distribution utility, the Illinois Commerce Commission (the "Commission") conducts annual proceedings regarding the reconciliation of revenues from the Gas Charge and related costs incurred for gas. In such proceedings, costs
recovered by a utility through the Gas Charge are subject to challenge. Such proceedings regarding Peoples Gas and North Shore Gas for the fiscal years 1999 and 2000 are currently pending before the Commission.

Derivative Instruments and Hedging Activities

In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, amended by SFAS No. 137, and SFAS No. 138, (hereinafter
referred to as SFAS No. 133).  SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an
asset or liability measured at its fair value.  SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met.  Special accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.

The Company hedges forecasted cash flows related to commodities and certain interest rate risks.  The impact on the financial statements of adopting SFAS No. 133 as of October 1, 2000, was to reduce earnings by $34,000, net of tax, reduce accumulated
other comprehensive income by $23.6 million, net of tax, record a liability of $40.0 million, record an increase in investment in equity investees of $900,000 and record deferred taxes of $15.5 million.

The Company has hedged various transactions through 2006.  During the quarter ended December 31, 2000, the Company reclassified $4.5 million of deferred losses from accumulated other comprehensive income to the Consolidated Statement of Income to
offset gains realized by the hedged transactions.  The Company estimates that in 2001, it will reclassify to the Consolidated Statement of Income deferred losses totaling $17.9 million, net of tax, which are expected to offset gains on the hedged
transactions.  As of December 31, 2000, the Company has $53.2 million of derivative liabilities and has cumulative deferred losses in accumulated other comprehensive income of $30.5, net of tax.  Peoples Gas and North Shore Gas have no derivative
instruments.

Equity Investments

The Company has a number of investments which are accounted for as unconsolidated equity method investments, the larger of which are reported in the Power Generation, Midstream Services and Oil and Gas Production segments. Individually the
Company's equity investments are not material, however, in aggregate these investments are material at December 31, 2000. The Company's pro rata share of financial results for the three months ended December 31, 2000 and 1999 are listed below.

|                                |  |  |  | 2000           |  | 1999      
|------------------------------- |  |  |  | -------------- |  | ----------
|                                |  |  |  | (In Thousands)
|                                |  |  |  |                |  |           
|Operating Revenues              |  |  |  | $  30,394      |  | $    6,878
|Operating Income                |  |  |  | 5,195          |  | 4,337     
|Earnings Before Income Taxes    |  |  |  | 4,797          |  | 4,078     
|                                |  |  |  |                |  |           
|Investments in Equity Investees |  |  |  | $ 142,510      |  | $ 113,767 



2. BUSINESS SEGMENTS

Financial data by business segment is presented below:

|                                              | The Company  
|--------------------------------------------- | -------------
|                                              |              
|(In Thousands)                                | Gas          
|Three Months Ended 12-31-00                   | Distribution 
|Operating Revenues                            | $    587,965 
|Depreciation, Depletion and Amortization      | 17,350       
|Operating Income (Loss)                       | 78,367       
|Equity Investment Income                      | -            
|Operating Income and Equity Investment Income | 78,367       
|Segment Assets                                | 1,507,073    
|Investments in Equity Investees               | -            
|Capital Spending                              | $      20,189
|                                              |              
|                                              |              
|                                              | Gas          
|Three Months Ended 12-31-99                   | Distribution 
|Operating Revenues                            | $    334,659 
|Depreciation, Depletion and Amortization      | 20,540       
|Operating Income (Loss)                       | 57,417       
|Equity Investment Income                      | -            
|Operating Income and Equity Investment Income | 57,417       
|Segment Assets                                | 1,483,053    
|Investments in Equity Investees               | -            
|Capital Spending                              | $      23,120



The following table reconciles total segment assets and investments in equity investees to the Company's consolidated total assets at December 31, 2000 and 1999 as follows:

|                                  |  | December 31,  
|--------------------------------- |  | --------------
|                                  |  | 2000          
|                                  |  | (In Thousands)
|                                  |  |               
|Capital Investments               |  |               
|Segment Assets                    |  | $ 1,657,889   
|Investments in Equity Investees   |  | 142,510       
|Other Investments not included in |  |               
|above Categories                  |  | 11,398        
|Total Capital Investments - Net   |  | 1,811,797     
|                                  |  |               
|Assets                            |  |               
|Current Assets                    |  | 926,869       
|Other Assets                      |  | 243,407       
|Total Assets                      |  | $ 2,982,073   



The activities of Peoples Gas are mainly within the Gas Distribution segment with only immaterial amounts of activity in other segments. North Shore Gas activities are entirely within the Gas Distribution segment.



3. ENVIRONMENTAL MATTERS

Former Manufactured Gas Plant Operations

The Company's utility subsidiaries, their predecessors, and certain former affiliates operated facilities in the past at multiple sites for the purpose of manufacturing gas and storing manufactured gas (Manufactured Gas Sites). In
connection with manufacturing and storing gas, various by-products and waste materials were produced, some of which might have been disposed of rather than sold. Under certain laws and regulations relating to the protection of the environment, the
subsidiaries might be required to undertake remedial action with respect to some of these materials. Two of the Manufactured Gas Sites are discussed in more detail below. The subsidiaries, under the supervision of the Illinois Environmental Protection
Agency (IEPA), are conducting investigations of an additional 31 Manufactured Gas Sites. These investigations may require the utility subsidiaries to perform additional investigation and remediation. The investigations are in a preliminary stage and are
expected to occur over approximately three years.

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

Under the terms of the AOC, North Shore Gas is responsible for the cost of the RI/FS. North Shore Gas believes, however, that it will recover a significant portion of the costs of the RI/FS from other entities. GMC has shared 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.

On May 14, 1999, the EPA notified GMC, OMC, Elgin Joliet and Eastern Railway Company, and North Shore Gas that they were potentially liable with respect to the Waukegan Site and that the EPA intended to begin discussions regarding the design and
implementation of the remedial action selected for the Waukegan Site.

On September 30, 1999, the EPA issued the Record of Decision (ROD) selecting the remedial action for the Waukegan Site. The remedy consists of on-site treatment of ground water, off-site treatment and disposal of soil containing polynuclear
aeromatic hydrocarbons or creosote, and on-site solidification/stabilization of arsenic contaminated soils. The EPA has estimated the present worth of the remedy to be $26.5 million (representing the present worth of estimated capital costs and of
estimated operation and maintenance costs).

North Shore Gas and the other parties notified by the EPA have entered into discussions regarding implementation of the remedy and the allocation of costs associated with the investigation and remediation of the Waukegan Site.

On December 22, 2000, OMC filed a petition in federal bankruptcy court seeking protection under Chapter 11 of the United States Bankruptcy Code.

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

The utility subsidiaries are accruing and deferring the costs they incur in connection with all of the Manufactured Gas Sites, including related legal expenses, pending recovery through rates or from insurance carriers or other entities. At
December 31, 2000, the total of the costs deferred (stated in current year dollars) for Peoples Gas was $33.3 million; for North Shore Gas the total was $20.3 million; and for the Company on a consolidated basis the total deferred was $53.6 million. This
amount includes management's best estimate of the costs of investigating and remediating the Manufactured Gas Sites. The estimate is based upon a comprehensive review by management and its outside consultants of potential costs associated with conducting
investigative and remedial actions at the Manufactured Gas Sites as well as the likelihood of whether such actions will be necessary. 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, among other things,
that the insurers are liable under policies in effect between 1937 and 1986 for costs incurred or to be incurred by the utilities in connection with five of their Manufactured Gas Sites in Chicago and Waukegan. The utilities are also asking the court to
award damages stemming from the insurers' breach of their contractual obligation to defend and indemnify the utilities against these costs. In November 1998, the utilities reached a settlement agreement with one of the insurance carriers. The costs
deferred at December 31, 2000 have been reduced by the proceeds of the settlement. At this time, management cannot determine the timing and extent of the subsidiaries' recovery of costs from the other insurance carriers. Accordingly, the costs deferred at
December 31, 2000 have not been reduced to reflect recoveries from other insurance carriers.

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

Former Mineral Processing Site in Denver, Colorado

In 1994, North Shore Gas received a demand from the S.W. Shattuck Chemical Company, Inc. (Shattuck), a responsible party under CERCLA, for reimbursement, indemnification, and contribution for response costs incurred at a former mineral
processing site in Denver, Colorado. Shattuck is a wholly owned subsidiary of Salomon, Inc. (Salomon). The demand alleges that North Shore Gas is a successor to the liability of a former entity that was allegedly responsible during the period 1934-1941
for the disposal of mineral processing wastes containing radium and other hazardous substances at the site. In 1992, the EPA issued the ROD for the Denver site. The remedy selected in the ROD consisted of the on-site stabilization, solidification and
capping of soils containing radioactive wastes. In 1997, the remedial action was completed. 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 of the site.

North Shore Gas filed a declaratory judgment action against Salomon in the District Court for the Northern District of Illinois. The suit asked the court to declare that North Shore Gas is not liable for response costs at the Denver site. Salomon
filed a counterclaim for costs incurred by Salomon and Shattuck with respect to the site. In 1997, the District Court granted North Shore Gas' motion for summary judgment, declaring that North Shore Gas is not liable for any response costs in connection
with the Denver site.

In August 1998, the U.S. Court of Appeals, Seventh Circuit, reversed the District Court's decision and remanded the case for determination of what liability, if any, the former entity has and therefore North Shore Gas has for activities at the site.

In November 1999, the EPA announced that it was reopening the ROD for the Denver site. The EPA's announcement followed a six-month scientific/technical review by the agency of the remedy's effectiveness. In June 2000, the EPA amended the ROD to
require removal of the radioactive wastes from the site to a licensed off-site disposal facility. The EPA estimates that this action will cost an additional $21.5 million (representing the present worth of estimated capital costs and estimated operation
and maintenance costs).

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.

Equipment Containing Mercury

Peoples Gas and North Shore Gas are inspecting for mercury contamination in certain of their customers' premises where gas pressure regulators, manometers and other equipment containing mercury may have been used. The utilities have
identified approximately 93,000 locations where gas pressure regulators, manometers and other equipment containing mercury may have been used. Virtually all of the gas pressure regulators containing mercury that were used for residences and other small
volume customers were removed by the utilities in the 1960's, 1970's and 1980's. The utilities' inspection program includes both a visual check for mercury and a verification with mercury detection equipment.

As of December 31, 2000, Peoples Gas has visually inspected approximately 30,432 premises (including 29,152 small volume customers, primarily residences) and small amounts of mercury were found in 34 of these locations (of which 16 were
residences). North Shore Gas has visually inspected approximately 32,966 premises (including 32,587 small volume customers, primarily residences) and small amounts of mercury were found in 18 of these locations (of which 17 were residences).

In each case where mercury contamination is found, Peoples Gas or North Shore Gas will perform appropriate remediation at the premises to eliminate contamination. Peoples Gas and North Shore Gas continue to investigate their historical use of any
mercury-containing equipment. Based on information available at December 31, 2000, it does not appear that mercury contamination discovered by the utilities has had or will have a significant harmful effect on the public.

The Company has incurred and expects to continue to incur costs for inspection and remediation and other costs related to the program. The Company charged $16.1 million (of which Peoples Gas and North Shore Gas charged $8.0 million and $8.1
million, respectively) to operating expense in the fourth quarter of fiscal year 2000, including the accrual recorded in accounts payable of $15 million (of which Peoples Gas and North Shore Gas recorded $7.0 million and $8.0 million, respectively) to
account for the estimated remaining costs related to the program. The accrual represents the Company's best estimate, based on an evaluation of currently available information. Actual costs incurred in the future may vary from this estimate. As of
December 31, neither the Company nor the utilities have been named as a defendant in any lawsuit. The Company intends to vigorously pursue the recovery of mercury-related costs from insurance.



4. COMPREHENSIVE INCOME

SFAS No. 130, "Reporting Comprehensive Income," requires the reporting of comprehensive income in addition to net income. Comprehensive income is the total of net income and all other nonowner changes in equity (Other Comprehensive
Income). Comprehensive income includes net income, the effect of the additional pension liability not yet recognized as net periodic pension cost, and unrealized gains and losses from derivative instruments that qualify as hedges per SFAS No. 133. The
Company and Peoples Gas have reported accumulated other comprehensive income in their respective Consolidated Balance Sheets. The transition adjustment from SFAS No. 133 is discussed in Note 1, Derivative Instruments and Hedging Activities.

Comprehensive income for the Company for the three months ended December 31, 2000 and 1999 is as follows:

|                                           |  | Three Months Ended
|------------------------------------------ |  | ------------------
|                                           |  | December 31,      
|                                           |  | 2000              
|                                           |  | (In Thousands)    
|                                           |  |                   
|Net income                                 |  | $36,391           
|                                           |  |                   
|Other comprehensive income                 |  |                   
|Unrealized gain (loss) on cash flow hedges |  | (50,608)          
|Income tax (expense)/benefit               |  | 20,075            
|Other comprehensive income, net of tax     |  | (30,533)          
|                                           |  |                   
|Total Comprehensive income                 |  | $ 5,858           





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

RESULTS OF OPERATIONS

The following should be read in conjunction with the Management's Discussion and Analysis of Results of Operations and Financial Condition (MD&A) of Peoples Energy Corporation, The Peoples Gas Light and Coke Company and North Shore Gas
Company 2000 Annual Report on Form 10-K, as amended.

Summary

Net income for the three months ended December 31, 2000 increased to $36.4 million, compared to $29.6 million in the year ago period. The $6.8 million increase was mainly the result of increased gas delivery volumes due to weather that was
29 percent colder than the same period last year. Income from the gas distribution segment also benefited from lower depreciation expense ($3.2 million) and pension benefit accounting ($4.1 million). Results for the quarter were negatively impacted by an
increase in the utilities provision for uncollectible accounts ($4.5 million) due to unusually cold weather and higher gas prices as well as the accounting for the Company's long-term incentive compensation plans ($5.4 million). The diversified business
segments, mainly midstream services ($3.3 million) and oil and gas production ($2.8 million) partially offset by a decrease in power generation ($2.9 million), also demonstrated growth over the prior year's period. The current period also included higher
financing costs due to increased short-term borrowings ($4.4 million).

A summary of variations affecting income between years is presented below, followed by explanations of significant differences by segment.

|                                                    |  |             |             | Three months ended |              |               |              |           
|--------------------------------------------------- |  | ----------- | ----------- | ------------------ | ------------ | ------------- | ------------ | ----------
|                                                    |  |             |             | December 31,       |              | Increase /    |              |           
|                                                    |  |             |             | 2000               |              | 1999          |              | (Decrease)
|(In Thousands, Except Percents)                     |  |             |             |                    |              |               |              |           
|Operating Income and Equity Investment Income:      |  |             |             |                    |              |               |              |           
|Gas Distribution                                    |  |             | $    78,367 |                    | $     57,417 |               | $     20,950 |           
|Power Generation                                    |  |             | 395         |                    | 3,312        |               | (2,917)      |           
|Midstream Services                                  |  |             | 5,543       |                    | 2,237        |               | 3,306        |           
|Retail Energy Services                              |  |             | (1,989)     |                    | (1,583)      |               | (406)        |           
|Oil and Gas Production                              |  |             | 3,802       |                    | 977          |               | 2,825        |           
|Other                                               |  |             | (126)       |                    | (125)        |               | (1)          |           
|Corporate and Adjustments                           |  |             | (10,564)    |                    | (4,483)      |               | (6,081)      |           
|                                                    |  |             |             |                    |              |               |              |           
|Total Operating Income and Equity Investment Income |  | 75,428      |             | 57,752             |              | $     17,676  |              | 30.61     
|Other Income and (Deductions)                       |  | (1,009)     |             | 643                |              | (1,652)       |              | (256.92)  
|Interest Expense                                    |  | 17,297      |             | 11,340             |              | 5,957         |              | 52.53     
|Income Taxes                                        |  | 20,731      |             | 17,484             |              | 3,247         |              | 18.57     
|Income before Cumulative Effect of Change           |  |             |             |                    |              |               |              |           
|in Accounting Principle                             |  | 36,391      |             | 29,571             |              | 6,820         |              | 23.06     
|Cumulative Effect of Accounting Change, net of tax  |  | (34)        |             | -                  |              | (34)          |              | (100.00)  
|                                                    |  |             |             |                    |              |               |              |           
|Net Income                                          |  | $    36,357 |             | $     29,571       |              | $       6,786 |              | 22.95     



Gas Distribution Segment

The Company's core business is the distribution of natural gas. Its two regulated utilities purchase, distribute, sell and transport natural gas to approximately one million retail customers through a 6,000-mile distribution system serving
the City of Chicago and 54 communities in northeastern Illinois. The Company also owns a storage facility in central Illinois and a pipeline which connects the facility and six major interstate pipelines to Chicago.

Gross revenues of Peoples Gas and North Shore Gas are affected by changes in the unit cost of the utilities' 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 utilities. In general, the unit cost of gas does not have a significant direct effect on operating income because of the utilities' tariffs that provide for dollar-for-dollar recovery of gas costs. (See Note 1 of the Notes to Consolidated
Financial Statements.) However, unusually higher gas costs that continue for an extended period of time-, could adversely affect the accrual for the provision for uncollectible accounts and interest expense.

Operating revenues for the Company for the three months ended December 31, 2000 increased $253.3 million, to $588.0 million due mainly to higher unit prices of gas ($191.4 million) and 29 percent colder weather ($68.3 million). Operating
income increased $21.0 million to $78.4 million in 2000, due chiefly to the colder weather ($21.2 million), offset by the variation between quarters of the benefits associated with the Company's weather insurance policy ($5.1 million).
Current year results were also negatively impacted by an increase in the provision for uncollectible accounts ($4.5 million) due to unusually cold weather and higher gas prices. Operating income benefited from pension benefit accounting ($4.1
million) and lower depreciation expense ($3.2 million).

Operating revenues for Peoples Gas for the three months ended December 31, 2000 increased $217.9 million, to $504.4 million due principally to weather that was 29 percent colder ($58.0 million) and record level gas prices ($160.2 million).
Operating income increased $24.0 million to $72.2 million due to colder weather, lower depreciation expense ($2.6 million) and the positive effects of pension benefit accounting ($3.9 million). These results were offset in part by the increase in the
provision for uncollectible accounts ($4.3 million) due to colder weather and higher gas prices.

Operating revenues for North Shore Gas for the current quarter increased $40.5 million, to $87.8 million due primarily to weather that was 29 percent colder ($10.3 million) and record level gas prices ($31.2 million). Operating income increased
$2.5 million, to $10.8 million, due to colder weather, lower depreciation expense ($564,000) and the positive effects of pension benefit accounting ($226,000). These results were offset in part by the increase in the provision for uncollectible accounts
($203,000) due to colder weather and higher gas prices.

The Company's objectives for the Gas Distribution segment center on continuous improvement, technological advancements, safety and customer service. Operating revenues are expected to increase from the prior year due to colder weather and
increased gas prices. Segment operating income for fiscal 2001 is expected to improve due to the colder weather, reduced operation and maintenance expense and lower depreciation expense, partially offset by reduced consumption and increased uncollectible
expense due to colder weather and higher gas prices.

Power Generation Segment

The Company is engaged in the development, construction, operation and ownership of natural gas-fired electric generation facilities for sales to electric utilities and marketers. The Company and Dominion Energy, Inc. are equal investors
in Elwood Energy, which owns and operates a 600-megawatt peaking facility near Chicago, Illinois. Expansion of the Elwood facility has begun which will increase the generating capacity to 1,350 megawatts upon completion of construction in time to meet
power demand for summer 2001.

Operating income and equity investment income decreased $2.9 million to $395,000, due to the timing of contractual capacity revenues ($2.0 million) and higher fuel costs ($1.2 million). Partially offsetting the decrease were positive impacts of
SFAS 133 ($416,000).

In addition to further expansion of the Elwood facility, which is permitted for 3,850 megawatts in generating capacity, including 2,500 megawatts for combined-cycle power development, the Company is pursuing other, primarily regional, power
generation opportunities. The Company expects fiscal 2001 equity investment income to increase due to operational commencement of the 750-megawatt expansion of the Elwood facility.

Midstream Services Segment

The Company performs wholesale activities that provide value to gas distribution marketers, utilities and pipelines. The Company, through Peoples Gas, operates a natural gas hub. It also owns and operates a natural gas liquids (NGL)
peaking facility and is active in other asset-based wholesale activities. The Company and Enron North America, Inc. ("Enron") are equal partners in enovate, L.L.C. ("enovate"), which is expanding the Peoples Gas hub by offering additional hub services and
peaking services, developing new products and pursuing strategic asset acquisitions. The Company is also an equal partner with The Coastal Corporation in Whitecap Energy System ("Whitecap"), which is pursuing the development of a pipeline to deliver
natural gas to new and existing power plants in Indiana, Illinois and Wisconsin. Whitecap would also service growth markets in existing gas utility systems.

Operating revenues for the Company increased $502,000 to $40.3 million compared to the quarter a year-ago, due primarily to increased hub service revenues ($714,000) and wholesale marketing activities ($291,000). Partially offsetting these
positive results were reduced revenues from the peaking plant ($503,000).

Operating income and equity investment income increased $3.3 million, to $5.5 million due mainly to positive results from wholesale marketing activities ($2.1 million) including the Company's enovate partnership. Gains from hub services ($474,000)
were offset by declines from the peaking plant ($552,000).

The Company's objective is to become the primary player in the Midwest energy market, developing additional hub services such as storage, transportation and title tracking while pursuing an exchange-traded Chicago contract. The enovate partnership
with Enron will enable the Company to expand its Chicago hub and gas peaking operations and pursue wholesale marketing opportunities. The Company expects operating income and equity investment income in fiscal 2001 to increase by at least 10 percent over
the prior year.

Retail Energy Services Segment

The Company markets gas and electricity and provides energy management and other services to retail customers through its Peoples Energy Services and Peoples Energy Home Services subsidiaries.

For the quarter ended December 31, 2000, operating revenues increased $46.4 million to $81.1 million due to increased gas sales resulting from higher gas prices and the start-up of electricity sales. First quarter results reflect an operating loss
of $2.0 million, slightly higher than the year-ago period loss of $1.6 million, reflecting lower margin from gas sales, higher costs for outside professional services and higher labor costs, partially offset by positive margins from electricity sales.

The Company intends to develop proprietary products as it participates in the electric and gas unbundling process in Illinois and adjoining states and will continue to build the necessary infrastructure as it grows through acquisitions of customer
contracts and direct marketing efforts. Operating income for fiscal 2001 is expected to improve as a result of growth in commercial and industrial gas and electric customers and volumes.

Oil and Gas Production Segment

The Company is active in the acquisition, development and production of reserves in selected onshore basins in North America. The Company also has an investment in EnerVest Energy, L.P. (EnerVest) which acquires, develops and manages a
portfolio of U.S. and Canadian oil and gas producing properties. The Company's focus is on natural gas, with growth coming from low risk drilling opportunities and the acquisition of proved reserves with upside potential which can be realized through
drilling, production enhancements and reservoir optimization programs. Certain producing properties owned by the Company qualify for income tax credits as defined in Section 29 of the Internal Revenue Code of 1986. These credits are computed based on
units of production.

Operating revenues increased $5.2 million, to $9.6 million due primarily to the impact of new reserve acquisitions subsequent to the year ago period and positive results from drilling programs. Operating income and equity investment income
increased $2.8 million to $3.8 million, due to the higher revenues and the positive results from our EnerVest partnership ($2.1 million).  Partially offsetting these gains were higher operating expenses ($1.0 million) and increased depletion expenses
($2.4 million).

The Company's objective is to become a top-fifty owner of U.S. gas reserves. Existing oil and gas properties will be developed through drilling and operational enhancements. The Company will continue to hedge a substantial portion of its
production in order to mitigate price risk and will pursue oil and gas reserve acquisitions that are consistent with its growth strategy. The Company is the operator for a limited number of its properties and is considering the expansion of its operating
capabilities. Operating income in fiscal 2001 is expected to increase due to full year impacts of reserves acquired in 2000, development drilling and anticipated reserve acquisitions.

Other Segment

The Company is involved in other activities such as district heating and cooling and the development of fueling stations for natural gas vehicles. The Company has invested in a venture capital fund specializing in energy-related and
telecommunication entities, providing the opportunity for attractive financial returns along with information regarding new technology developments. These and certain business development activities do not fall under the above segments and are reported in
the Other segment. Results for the quarter were virtually unchanged from the prior year period.

Corporate and Adjustments

This category encompasses corporate activities that support the six segments, as well as consolidating adjustments.

The $6.1 million decrease in operating income is mainly due to the accounting for the Company's long-term incentive compensation plans ($5.4 million), and increased operating expenses.

Other Income and Deductions

Other income and deductions for the three-month period ended December 31, 2000 decreased by $1.6 million to a loss of $1.0 million, primarily due to a loss on the disposition of equipment associated with development of the Company's
Calumet site ($2.8 million), partially offset by proceeds associated with advances to Elwood Energy ($1.3 million).

Other income and deductions for Peoples Gas decreased $395,000 to $307,000 primarily due to the prior period's recognition of the allowance for other funds used during construction ($617,000) and the disposition of property ($215,000). Partially
offsetting these effects were increases on the imputed interest on amounts recoverable from customers ($310,000) and increased interest income ($191,000).

Other income and deductions for North Shore Gas increased $54,000, due primarily to imputed interest on amounts recoverable from customers ($59,000).

Interest Expense

For the three-month period ended December 31, 2000, interest expense for the Company increased $6.0 million to $17.3 million, due primarily to an increase in interest on short-term borrowings ($4.4 million) and interest on the Company's
$100 million floating rate notes ($1.8 million).

Interest expense for the three-month period ended December 31, 2000, increased $1.4 million to $9.9 million for Peoples Gas and $170,000 to $1.5 million for North Shore Gas. The increased interest expense is primarily due to additional working
capital required to pay for gas supply in advance of collections from customers ($1.9 million and $149,000 for Peoples Gas and North Shore Gas, respectively), offset by interest savings due to refinancing of Peoples Gas long-term obligations ($1.0 million).

Income Taxes

For the three-months ended December 31, 2000, income taxes increased $3.3 million to $20.7 million, due mainly to higher pre-tax income. A partial offset was an increase of $966,000 in Section 29 tax credits associated with production from
certain oil and gas production properties.

Income taxes for Peoples Gas increased $9.2 million to $24.3 million for the three-month period ended December 31, 2000, due primarily to higher pre-tax income.

For the three months ended December 31, 2000, income taxes increased for North Shore Gas $906,000 to $3.6 million due primarily to higher pre-tax income.

Fiscal 2001 Outlook

The Company is maintaining its earnings per share range for fiscal 2001 of $3.05 to $3.15, assuming normal weather for the remaining nine months of the year. The financial target for the gas distribution segment is to achieve a 13 percent
return on common equity. The target for the diversified business segments is to achieve between 16 percent and 20 percent of the Company's total earnings from such segments, based on an Earnings Before Income Taxes (EBIT) range between $40 million and $45
million.

Other Matters

Accounting Standards. On October 1, 2000 the Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137 and SFAS No. 138. See Note 1 of the Notes to Consolidated Financial
Statements. The standard involves assessing and recording the effectiveness of a cash flow hedge when incurred and may result in additional volatility in reported earnings.



LIQUIDITY AND CAPITAL RESOURCES

The following is a summary of cash flows for the Company, Peoples Gas and North Shore Gas for the three months ended December 31, 2000 and 1999:



|                                                       | The Company |           | Peoples Gas |           | North Shore Gas
|------------------------------------------------------ | ----------- | --------- | ----------- | --------- | ---------------
|(In Thousands)                                         | 2000        | 1999      |             | 2000      | 1999           
|Net cash used in operations                            | ($59,074)   | ($31,315) |             | ($69,174) | ($13,028)      
|Net cash provided by (used in)
   investing activities | ($85,628)   | ($67,586) |             | ($20,621) | ($20,339)      
|Net cash Provided by financing
   activities           | $155,741    | $106,878  |             | $100,115  | $38,395        

See the consolidated statement of cash flows and the discussion of major balance sheet fluctuations for more detail.

Balance Sheet Variations

In addition to a comparison of the current quarter balance sheet to the prior year ended balance sheet, the Company, Peoples Gas and North Shore Gas have included the comparable prior year quarter ended balance sheet because many of the
fluctuations between the current quarter and the prior fiscal year end are due to normal seasonality.

The Company's total assets at December 31, 2000 increased $480.2 million, or 19 percent, from September 30, 2000 primarily due to a $330.0 million increase in accounts receivable resulting from higher gas prices and increased volumes due to colder
weather. Also contributing to the rise in assets were increases of $50.7 million in advances to Elwood Energy for expansion of the peaking facility and $64.7 million in gas costs recoverable through rate adjustments which were partially offset by $27.4
million of reduced gas in storage due to increased demand during colder weather periods.

The Company's current liabilities rose at December 31, 2000 $459.3 million from September 30, 2000 primarily due to an increase in short-term debt of $172.5 million and increased accounts payable of $206.7 million, both due to higher gas prices.
There was also an estimated LIFO liquidation credit ($42.0 million) recorded as of December 31, 2000 due to the anticipated replenishment of the lower cost LIFO price layer by fiscal year end.

Variations in the Company's deferred credits and other liabilities and accumulated other comprehensive Income are due to the adoption of SFAS No. 133, (See Note 1 of the Notes to Consolidated Financial Statements.)

Total assets of Peoples Gas at December 31, 2000 increased $327.4 million or 18 percent from September 30, 2000, primarily due to higher accounts receivable ($242.5 million) and gas costs recoverable ($54.6 million) resulting from higher gas
prices and increased volumes due to colder weather. These increases were partially offset by a decrease in gas in storage ($25.6 million) due to increased demand during colder weather periods. Current liabilities increased $308.8 million due to a higher
level of accounts payable ($110.1 million) resulting from higher gas prices. The short-term debt is $119.2 million higher to supplement working capital needs. The estimated LIFO liquidation credit ($36.1 million) in the first quarter anticipates the
replenishment of the lower cost LIFO price layer by fiscal year end. The LIFO adjustment was greater than in the comparable quarter because of additional withdrawals due to colder weather and higher gas prices.

Total assets of North Shore Gas at December 31, 2000 increased $60.5 million or 23 percent from September 30, 2000 primarily due to higher accounts receivable ($43.9 million) and gas costs recoverable ($10.0 million) due to higher gas prices,
increased volumes due to colder weather and more customers on deferred payment plans. Current Liabilities increased $58.4 million due to higher levels of accounts payable ($28.1 million) higher gas prices. Short-term debt increased $18.7 million due to
borrowings to supplement working capital needs. The LIFO liquidation credit ($7.5 million) was greater than in the comparable quarter because of additional withdrawals due to colder weather and higher gas prices.

Financial Sources

In the first quarter, Peoples Gas issued short-term debt of $200 million to supplement working capital needs and replace maturing short-term obligations. The Company, as of December 31, 2000, had a total of $305.0 million of available credit
facilities. Peoples Gas had $190.0 million of available credit facilities as of December 31, 2000 of which $24.0 million was available to North Shore.

In January 2001, the Company, issued $325.0 million of 6.9 percent Notes, due January 15, 2011.

Financial Uses

Capital Spending. In the first quarter, the Company, Peoples Gas and North Shore Gas spent $25.4 million, $17.9 million, and $2.3 million, respectively on property plant and equipment. The Company increased investments in partnerships by $3.2
million.

Dividends. On February 7, 2001, the Directors of the Company voted to increase the regular quarterly dividend on the Company's common stock to 51 cents per share from the 50 cents per share previously in effect. The annualized dividend rate now
amounts to $2.04 per share.

Environmental Matters. Peoples Gas and North Shore Gas are conducting environmental investigations and work at certain sites that were the location of former manufactured gas operations. (See Note 3 of the Notes to Consolidated Financial
Statements.)

In 1994, North Shore Gas has received a demand from a responsible party under CERCLA for reimbursement, indemnification and contribution for response costs incurred at a former mineral processing site in Denver, Colorado. North Shore Gas filed a
declaratory judgment action in the District Court for the Northern District of Illinois asking the court to declare that North Shore Gas is not liable for response costs relating to the site. The defendant filed a counterclaim for costs incurred by the
defendant with respect to the site. (See Note 3 of the Notes to Consolidated Financial Statements.)

Peoples Gas and North Shore Gas are conducting a mercury inspection and remediation program. (See Note 3 of the Notes to Consolidated Financial Statements.)

Market Risk Management

Commodity Price Risk. The Company uses forward contracts and financial instruments, including futures, swaps, collars and options, to manage its exposure to certain commodity price risks in its subsidiaries' operations. These risks occur
because of the changing prices of natural gas, power, crude oil, ethane and propane. Except as discussed below for enovate, the Company's policy for risk management activities stipulates that such financial instruments are only to be used for management
of price risk. The Company monitors and controls derivative and related physical positions using a mark-to-market (MTM) analysis. This analysis provides information on credit exposure as well as the current value of the portfolio.

Peoples Gas and North Shore Gas are not currently exposed to market risk caused by changes in commodity prices. This is due to current Illinois rate regulation, which allows for all reasonably incurred costs of natural gas to be recovered from the
utilities' customers through the operation of the utilities' Gas Charges.

Investments by the Company's diversified businesses are subject to a thorough analysis of related market risk and an acceptable plan for each investment is formulated to manage this risk. After a risk management program for the investment is
approved, both the operating unit's and the Company's senior management are kept apprised of any remaining market risk through daily MTM reports and established notification policies.

The Company has working interests in natural gas and crude oil producing properties. Using swaps and options, approximately 82 percent of the production for the next twelve months is hedged, thereby removing market risk on that portion of the
production. Price movements in natural gas and crude oil swaps and futures are highly correlated to any price changes in the underlying physical commodities. Therefore, a loss in the market value of the hedged commodity should be substantially offset by
an equal gain in value resulting from the financial transaction. Sensitivity analyses are used to estimate the Company's price exposure to the market risk of its physical natural gas and oil reserves and related financial instruments used to mitigate the
price exposure. As of December 31, 2000, the sensitivity analysis for oil and gas producing properties demonstrated an instantaneous 10 percent adverse movement in the NYMEX forward curve for natural gas and oil would have reduced future EBIT by
approximately $12.7 million.

The Company sells fixed price and variable priced products as part of its retail energy services. Risk is reduced through the use of fixed price supplier contracts that perfectly hedge the expected price for monthly volume of customer usage.
Variations in monthly usage from expected can expose the Company to additional price risk. Risk management trading and optimization of storage assets are utilized to mitigate this intramonth risk. As of December 31, 2000 and 1999, exposure from these
activities was not material. As of December 31, 2000 the retail energy services segment had open notional financial positions of 1,060 MMBTU's.

The Elwood partnership owns a natural gas-fired electric generating peaking facility. Elwood has agreed to sell all of the facility's current generation capacity and energy produced at fixed demand and commodity charges under multi-year contracts.
Therefore, Elwood has no price risk on its power sales during the term of these contracts. However, it does bear fuel price risk on a portion of its output when natural gas prices exceed its targeted weighted-average cost of gas. This total price risk
cannot be eliminated due to the uncertainty of run time for the peaker plant. However, the partnership has implemented a comprehensive risk management program that is intended to reduce price risk, stabilize cash flow and extract maximum value from its
investment. The program includes limits to minimize the threat of loss through market movements, daily review of price exposure and frequent senior management review. As of December 31, 2000, Elwood had open derivative instruments for hedges of 9.1 Bcf of
natural gas purchases.

The Company has an equity investment in enovate. It may participate in trading activities other than for hedging purposes and hold a number of open, uncovered positions. It is subject to position, dollar and Value at Risk loss limits established
by the Company and Enron through the risk management policy of enovate. Management believes that these maximum loss limits are at a level such that any adverse results from such trading activity would not have a material adverse effect on the results of
operations or the financial condition of the Company.

Interest Rate Risk. Interest rate risk generally is related to the Company's and its gas distribution subsidiaries' outstanding debt. A sensitivity analysis methodology is being utilized to determine potential loss of future earnings, fair
values, or cash flows from market risk sensitive instruments over a selected time period due to hypothetical changes in interest rates.

The Company manages its interest rate risk exposure by maintaining a mix of fixed and variable rate debt. The Company currently has outstanding a mix of $502.0 million in variable rate bonds and notes and $338.7 million in other short-term
borrowings. Assuming interest rates are 10 percent higher than the rates reported at the end of December 31, 2000, the Company's annualized interest expense would increase by approximately $3.3 million before considering the effect of income taxes.

Included in the Company's variable rate debt are its $100.0 million Notes due August 1, 2002. The Company's interest rate risk has been further reduced due to an interest rate swap effective February 1, 2001, to fix the rate for $75.0 million of
the $100.0 million at 6.8 percent.



OPERATING STATISTICS

The following table represents gross margin components and delivery statistics for the Company:

|                                    |  |  |  | Three Months Ended
|----------------------------------- |  |  |  | ------------------
|                                    |  |  |  | December 31,      
|                                    |  |  |  | 2000              
|Operating Revenues(In Thousands):   |  |  |  |                   
|Gas Distribution Sales              |  |  |  |                   
|Residential                         |  |  |  |                   
|Heating                             |  |  |  | $ 451,235         
|Non-heating                         |  |  |  | 16,388            
|Commercial                          |  |  |  | 68,392            
|Industrial                          |  |  |  | 13,576            
|                                    |  |  |  | 549,591           
|                                    |  |  |  |                   
|Gas Distribution Transportation     |  |  |  |                   
|Residential                         |  |  |  | 10,904            
|Commercial                          |  |  |  | 14,837            
|Industrial                          |  |  |  | 7,046             
|Contract Pooling                    |  |  |  | 3,550             
|                                    |  |  |  | 36,337            
|                                    |  |  |  |                   
|Other Gas Distribution Revenues     |  |  |  | 2,027             
|                                    |  |  |  |                   
|Diversified Segment Revenues        |  |  |  | 129,027           
|Total Operating Revenues            |  |  |  | 716,982           
|Less - Cost of Energy Sold          |  |  |  | 488,636           
|                                    |  |  |  |                   
|Gross Margin                        |  |  |  | $ 228,346         
|                                    |  |  |  |                   
|Gas Distribution Deliveries (MDth): |  |  |  |                   
|Gas Sales                           |  |  |  |                   
|Residential                         |  |  |  |                   
|Heating                             |  |  |  | 46,324            
|Non-heating                         |  |  |  | 1,010             
|Commercial                          |  |  |  | 7,228             
|Industrial                          |  |  |  | 1,464             
|                                    |  |  |  | 56,026            
|                                    |  |  |  |                   
|Transportation                      |  |  |  |                   
|Residential                         |  |  |  | 8,362             
|Commercial                          |  |  |  | 14,487            
|Industrial                          |  |  |  | 8,920             
|                                    |  |  |  | 31,769            
|                                    |  |  |  |                   
|Total Gas Distribution Deliveries   |  |  |  | 87,795            



The following table represents gross margin components and delivery statistics for Peoples Gas:

|                                  |  |  |  | Three Months Ended
|--------------------------------- |  |  |  | ------------------
|                                  |  |  |  | December 31,      
|                                  |  |  |  | 2000              
|Operating Revenues(In Thousands): |  |  |  |                   
|Gas Sales                         |  |  |  |                   
|Residential                       |  |  |  |                   
|Heating                           |  |  |  | $ 381,304         
|Non-heating                       |  |  |  | 15,928            
|Commercial                        |  |  |  | 56,892            
|Industrial                        |  |  |  | 10,948            
|                                  |  |  |  | 465,072           
|                                  |  |  |  |                   
|Transportation                    |  |  |  |                   
|Residential                       |  |  |  | 10,517            
|Commercial                        |  |  |  | 13,305            
|Industrial                        |  |  |  | 6,143             
|Contract Pooling                  |  |  |  | 3,243             
|                                  |  |  |  | 33,208            
|                                  |  |  |  |                   
|Diversified Segments              |  |  |  | 2,090             
|                                  |  |  |  |                   
|Other                             |  |  |  | 4,021             
|Total Operating Revenues          |  |  |  | 504,391           
|Less - Gas Costs                  |  |  |  | 312,839           
|                                  |  |  |  |                   
|Gross Margin                      |  |  |  | $ 191,552         
|                                  |  |  |  |                   
|Deliveries (MDth):                |  |  |  |                   
|Gas Sales                         |  |  |  |                   
|Residential                       |  |  |  |                   
|Heating                           |  |  |  | 38,681            
|Non-heating                       |  |  |  | 969               
|Commercial                        |  |  |  | 5,923             
|Industrial                        |  |  |  | 1,149             
|                                  |  |  |  | 46,722            
|                                  |  |  |  |                   
|Transportation                    |  |  |  |                   
|Residential                       |  |  |  | 8,115             
|Commercial                        |  |  |  | 12,956            
|Industrial                        |  |  |  | 7,484             
|                                  |  |  |  | 28,555            
|                                  |  |  |  |                   
|Total Deliveries                  |  |  |  | 75,277            



The following table represents gross margin components and delivery statistics for North Shore Gas:

|                                  |  |  |  | Three Months Ended
|--------------------------------- |  |  |  | ------------------
|                                  |  |  |  | December 31,      
|                                  |  |  |  | 2000              
|Operating Revenues(In Thousands): |  |  |  |                   
|Gas Sales                         |  |  |  |                   
|Residential                       |  |  |  |                   
|Heating                           |  |  |  | $  69,931         
|Non-heating                       |  |  |  | 460               
|Commercial                        |  |  |  | 11,500            
|Industrial                        |  |  |  | 2,628             
|                                  |  |  |  | 84,519            
|                                  |  |  |  |                   
|Transportation                    |  |  |  |                   
|Residential                       |  |  |  | 388               
|Commercial                        |  |  |  | 1,531             
|Industrial                        |  |  |  | 904               
|Contract Pooling                  |  |  |  | 307               
|                                  |  |  |  | 3,130             
|                                  |  |  |  |                   
|Other                             |  |  |  | 130               
|Total Operating Revenues          |  |  |  | 87,779            
|Less - Gas Costs                  |  |  |  | 62,416            
|                                  |  |  |  |                   
|Gross Margin                      |  |  |  | $  25,363         
|                                  |  |  |  |                   
|Deliveries (MDth):                |  |  |  |                   
|Gas Sales                         |  |  |  |                   
|Residential                       |  |  |  |                   
|Heating                           |  |  |  | 7,643             
|Non-heating                       |  |  |  | 41                
|Commercial                        |  |  |  | 1,305             
|Industrial                        |  |  |  | 315               
|                                  |  |  |  | 9,304             
|                                  |  |  |  |                   
|Transportation                    |  |  |  |                   
|Residential                       |  |  |  | 247               
|Commercial                        |  |  |  | 1,531             
|Industrial                        |  |  |  | 1,436             
|                                  |  |  |  | 3,214             
|                                  |  |  |  |                   
|Total Deliveries                  |  |  |  | 12,518            



FORWARD LOOKING INFORMATION

The MD&A contains statements that may be considered forward-looking, such as management's expectations, the statements of the Company's business and financial goals regarding its business segments, the effect of weather on net income,
cash position, source of funds, financing activities, market risk, completion of the Elwood facility expansion, the insignificant effect on income arising from changes in revenue from customers' gas purchases from entities other than the gas distribution
utility subsidiaries, and environmental matters. These statements speak of the Company's plans, goals, beliefs, or expectations, refer to estimates or use similar terms. Actual results could differ materially, because the realization of those results is
subject to many uncertainties including:

- the future health of the U.S. and Illinois economies;
- the timing and extent of changes in energy commodity prices, including but not limited to the effect of unusually high gas prices on cost of gas supplies, accounts receivable and the provision for uncollectible accounts, and interest expense;
- litigation concerning North Shore Gas' liability for CERCLA response costs relating to a former mineral processing site in Denver, Colorado;
- developments regarding Peoples Gas' and North Shore Gas' mercury investigation and remediation program;
- regulatory developments in the U.S., or in Illinois and other states where the Company does business;
- changes in the nature of the Company's competition resulting from industry consolidation, legislative change, regulatory change and other factors, as well as action taken by particular competitors;
- the Company's success in identifying diversified business segment projects on financially acceptable terms and generating earnings from projects in a reasonable time; and
- the uncertainty of gas and oil reserve estimates.

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



ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures About Market risk are reported under "Management's Discussion and Analysis of Results of Operations and Financial Condition - Market Risk Management," and Note 1 of the Notes to Consolidated
Financial Statements.



PART II. OTHER INFORMATION

|Item 1. Legal Proceedings                                                                                         
|------------------------------------------------------------------------------------------------------------------
|See Note 3 of the Notes to Consolidated Financial Statements for a discussion pertaining to environmental matters.



|None.
|-----



|Item 6. Exhibits and Reports on Form 8-K
|----------------------------------------
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        



| | The Peoples Gas Light and Coke Company:
| | ---------------------------------------
| |                                        
| |                                        
| |                                        
| |                                        
| |                                        
| |                                        
| |                                        
| |                                        
| |                                        
| |                                        
| |                                        
| |                                        
| | North Shore Gas Company:               
| |                                        
| |                                        
| |                                        
| |                                        
| |                                        
| |                                        
| |                                        
| |                                        
| |                                        
| |                                        
| |                                        







|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.
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|February 13, 2001                                                                                                                                                                                   
|(Date)                                                                                                                                                                                              
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|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.
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|February 13, 2001                                                                                                                                                                                   
|(Date)                                                                                                                                                                                              
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|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.
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|February 13, 2001                                                                                                                                                                                   
|(Date)                                                                                                                                                                                              
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|