FORM 10-Q

               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C.  20549

  (Mark One)

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

        For the Quarterly Period Ended December 31, 1997

                               OR

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

                  Commission File Number 1-5540


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



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


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


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


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


Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
35,225,709 shares of Common Stock, without par value, outstanding
at January 31, 1998.
                                

                                     Part I.  FINANCIAL INFORMATION

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

                                             Three Months Ended    Twelve Months Ended
                                                 December 31,          December 31,
                                               1997      1996       1997         1996
<S>                                         <C>        <C>       <C>         <C>
                                                (Thousands, except per-share amounts)
OPERATING REVENUES:
Gas sales                                   $ 342,429  $ 343,979 $ 1,123,281 $ 1,095,643
Transportation                                 37,575     38,418     132,732     157,993
Other                                           5,147      4,761      15,674      14,594
     Total Operating Revenues                 385,151    387,158   1,271,687   1,268,230

OPERATING EXPENSES:
Gas costs                                     197,963    188,746     624,751     588,750
Operation                                      50,146     54,018     196,930     220,206
Maintenance                                    10,541     11,525      46,641      47,113
Depreciation and amortization                  18,879     18,451      74,502      72,430
Taxes - Income                                 22,238     23,344      53,489      58,453
          - State and local revenue            35,521     39,295     122,451     126,702
          - Other                               5,021      5,027      21,291      21,955
     Total Operating Expenses                 340,309    340,406   1,140,055   1,135,609

OPERATING INCOME                               44,842     46,752     131,632     132,621

OTHER INCOME AND (DEDUCTIONS):
Interest income                                   683        488       5,605       3,231
Allowance for funds used during construction      236         27         477          51
Interest on long-term debt of subsidiaries     (8,934)    (8,927)    (35,728)    (35,803)
Other interest expense                         (1,260)      (915)     (3,098)     (4,030)
Income taxes                                     (155)       (81)     (1,914)     (6,846)
Miscellaneous - net                               131        146        (517)     15,588
     Total Other Income and Deductions         (9,299)    (9,262)    (35,175)    (27,809)

NET INCOME                                  $  35,543  $  37,490   $  96,457  $  104,812

Average Shares of Common Stock Outstanding     35,133     34,973      35,043      34,954

Basic Earnings Per Share of Common Stock    $    1.01  $    1.07   $    2.75  $     3.00

Diluted Earnings Per Share of Common Stock  $    1.01  $    1.07   $    2.74  $     2.98

Dividends Declared Per Share                $    0.47  $    0.46   $    1.88  $     1.84

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

</TABLE>

<TABLE>
                               Peoples Energy Corporation

                                CONSOLIDATED BALANCE SHEETS

<CAPTION>
                                                      December 31,            December 31,
                                                         1997     September 30,   1996
                                                      (Unaudited)    1997     (Unaudited)
                                                              (Thousands of Dollars)
PROPERTIES AND OTHER ASSETS

<S>                                                    <C>         <C>         <C>
CAPITAL INVESTMENTS:
Property, plant and equipment, at original cost       $2,131,306  $2,117,509  $2,058,831
Less - Accumulated depreciation                          726,278     715,279     678,801
Net property, plant and equipment                      1,405,028   1,402,230   1,380,030
Other investments                                         16,301      16,305      13,794
     Total Capital Investments - Net                   1,421,329   1,418,535   1,393,824

CURRENT ASSETS:
Cash and cash equivalents                                 44,073      33,298      25,683
Temporary cash investments                                   900      15,900         900
Receivables -
   Customers, net of allowance for uncollectible accounts
       of $26,929, $29,895, and $27,329, respectively     130,650     72,290     137,503
   Other                                                   30,714     39,182      25,330
Accrued unbilled revenues                                  80,615     22,742      90,766
Materials and supplies, at average cost                    20,845     19,386      17,408
Gas in storage, at last-in, first-out cost                 73,652     77,843      78,496
Gas costs recoverable through rate adjustments              6,584      5,164      41,951
Regulatory assets of subsidiaries                          10,518     19,020      42,277
Prepayments                                                49,122     42,902      16,836
     Total Current Assets                                 447,673    347,727     477,150

OTHER ASSETS:
Regulatory assets of subsidiaries                          34,082     35,116      39,654
Deferred charges                                           21,613     19,427      18,108
     Total Other Assets                                    55,695     54,543      57,762

     Total Properties and Other Assets                 $1,924,697 $1,820,805  $1,928,736

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

<TABLE>
                                   Peoples Energy Corporation

                                     CONSOLIDATED BALANCE SHEETS

<CAPTION>
                                                          December 31,            December 31,
                                                              1997   September 30,    1996
                                                           (Unaudited)    1997    (Unaudited)
CAPITALIZATION AND LIABILITIES
                                                                   (Thousands of Dollars)
<S>                                                         <C>         <C>        <C>
CAPITALIZATION:
Common Stockholders' Equity:
Common stock, without par value -
   Authorized 60,000,000 shares
   Outstanding 35,161,215, 35,069,517, and
       34,979,929 shares, respectively                     $  284,745 $   281,847 $  278,282
Retained earnings                                             453,666     434,652    424,704
     Total Common Stockholders' Equity                        738,411     716,499    702,986

Long-term debt of subsidiaries, exclusive of sinking
  fund payments and maturities due within one year            527,004     527,004    527,039
     Total Capitalization                                   1,265,415   1,243,503  1,230,025

CURRENT LIABILITIES:
Interim loans of subsidiaries                                  60,501       2,810     29,025
Accounts payable                                              137,286     134,870    200,783
Dividends payable on common stock                              16,526      16,479     16,091
Customer gas service and credit deposits                       46,421      45,386     40,728
Accrued taxes                                                  52,621      20,645     72,420
Gas sales revenue refundable through rate adjustments               -      14,894     15,818
Accrued interest                                                7,151      10,800      7,155
Temporary LIFO liquidation credit                               1,625           -      1,603
     Total Current Liabilities                                322,131     245,884    383,623

DEFERRED CREDITS AND OTHER LIABILITIES:

Deferred income taxes - primarily accelerated depreciation    254,927     249,178    234,882
Investment tax credits being amortized over
   the average lives of related property                       33,559      33,942     35,032
Other                                                          48,665      48,298     45,174
     Total Deferred Credits and Other Liabilities             337,151     331,418    315,088

     Total Capitalization and Liabilities                  $1,924,697 $ 1,820,805 $1,928,736

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

</TABLE>
                               Peoples Energy Corporation
                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                      (Unaudited)

                                                         Three Months Ended
                                                             December 31,
                                                           1997       1996
                                                       (Thousands of Dollars)
Operating Activities:
Net Income                                               $ 35,543  $ 37,490
Adjustments to reconcile net income to net cash:
  Depreciation and amortization                            18,879    18,451
  Deferred income taxes and investment tax credits - net    4,856     1,375
  Change in deferred credits and other liabilities            877     4,820
  Change in other assets                                   (2,555)    4,198
  Change in current assets and liabilities:
    Receivables - net                                     (49,892)  (61,759)
    Accrued unbilled revenues                             (57,873)  (61,452)
    Materials and supplies                                 (1,459)   (1,280)
    Gas in storage                                          4,191   (12,994)
    Gas costs recoverable                                  (1,420)  (22,031)
    Regulatory assets                                       8,502     1,788
    Prepayments                                            (6,220)   (4,549)
    Accounts payable                                        2,416    52,811
    Customer gas service and credit deposits                1,035    (1,662)
    Accrued taxes                                          31,976    39,599
    Gas sales revenue refundable                          (14,894)    1,897
    Accrued interest                                       (3,649)   (3,641)
    Temporary LIFO liquidation credit                       1,625     1,603

     Net Cash Provided by (Used in) Operating Activities  (28,062)   (5,336)

Investing Activities:
Capital expenditures of subsidiaries - construction       (20,257)  (15,874)
Other assets                                                   (5)      632
Other capital investments                                      (7)   (2,203)
Other temporary cash investments                           15,000         -

     Net Cash Used in Investing Activities                 (5,269)  (17,445)

Financing Activities:
Interim loans of subsidiaries - net                        57,691    26,400
Retirement of long-term debt of subsidiaries                    -       (25)
Dividends paid on common stock                            (16,483)  (16,082)
Proceeds from issuance of common stock                      2,898       401

     Net Cash Provided by (Used in) Financing Activities   44,106    10,694

Net Increase (Decrease) in Cash and Cash Equivalents       10,775   (12,087)
Cash and Cash Equivalents at Beginning of Period           33,298    37,770

Cash and Cash Equivalents at End of Period               $ 44,073  $ 25,683

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



                   Peoples Energy Corporation
                                
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           (Unaudited)


1.  BASIS OF PRESENTATION

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

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

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

2.  SIGNIFICANT ACCOUNTING POLICIES

2A     Use of Estimates

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

2B Revenue Recognition

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

2C Regulated Operations

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

2D Income Taxes

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

2E Statement of Cash Flows

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

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

        For the three months
        ended December 31,      1997        1996
                                   (Thousands)
         Income taxes paid  $      31    $  3,877
         Interest paid         13,138      13,201

2F Recovery of Gas Costs

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

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

2G Accounting Standard

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

3.  ENVIRONMENTAL MATTERS

3A Former Manufactured Gas Plant Operations

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

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

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

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

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

   The utility subsidiaries are accruing and deferring the costs
they incur in connection with all of the Manufactured Gas Sites,
including related legal expenses, pending recovery through rates
or from insurance carriers or other entities.  At December 31,
1997, the total of the costs deferred by the subsidiaries, net of
recoveries and amounts billed to other entities, was $17.2
million.  This amount includes an estimate of the costs of
completing the studies required by the EPA at the Waukegan Site
and the investigations being conducted under the supervision of
the IEPA referred to above.  The amount also includes an estimate
of the costs of remediation at the Waukegan Site and at the 110th
Street Station Site in Chicago, at the minimum amount of the
current estimated range of such costs.  The costs of
remediation at the other sites cannot be determined at this time.
While each subsidiary intends to seek contribution from other
entities for the costs incurred at the sites, the full extent of
such contributions cannot be determined at this time.

   Peoples Gas and North Shore Gas have filed suit against a
number of insurance carriers for the recovery of environmental
costs relating to the utilities' former manufactured gas
operations.  The suit asks the court to declare that the insurers
are liable under policies in effect between 1937 and 1986 for
costs incurred or to be incurred by the utilities in connection
with five of their Manufactured Gas Sites in Chicago and
Waukegan.  The utilities are also asking the court to award
damages stemming from the insurers' breach of their contractual
obligation to defend and indemnify the utilities against these
costs.  At this time, management cannot determine the timing and
extent of the subsidiaries' recovery of costs from their
insurance carriers.  Accordingly, the costs deferred at December
31, 1997 have not been reduced to reflect recoveries from
insurance carriers.

   The Company believes that the costs incurred by Peoples Gas
and by North Shore Gas for environmental activities relating to
former manufactured gas operations are recoverable from insurance
carriers or other entities or through rates for utility service.
Accordingly, management believes that the costs incurred by the
subsidiaries in connection with former manufactured gas
operations will not have a material adverse effect on the
financial position or results of operations of the utilities.
Peoples Gas and North Shore Gas are recovering the costs of
environmental activities relating to the utilities' former
manufactured gas operations, including carrying charges on the
unrecovered balances, under rate mechanisms approved by the
Commission.  At December 31, 1997, the subsidiaries had recovered
$12.5 million of such costs through rates.

3B Former Mineral Processing Site in Denver, Colorado

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

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

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

3C Gasoline Release in Wheeling, Illinois

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

4.  COVENANTS REGARDING RETAINED EARNINGS

   North Shore Gas' indenture relating to its first mortgage
bonds contains provisions and covenants restricting the payment
of cash dividends and the purchase or redemption of capital
stock.  At December 31, 1997, such restrictions amounted to
$11.6 million out of North Shore Gas' total retained earnings of
$70.0 million.

5.  LONG-TERM DEBT

Interest-Rate Adjustments

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

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

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


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

RESULTS OF OPERATIONS

Net Income

   Net income decreased $1.9 million, to $35.5 million, for the
current three-month period ended December 31, 1997, as a result
of lower gas deliveries caused by warmer weather and
conservation.  These effects were offset, in part, by decreased
pension expense caused by changes in settlement accounting
attributed to employees choosing early retirement and actuarial
assumptions.

   Net income decreased $8.4 million, to $96.5 million, for the
current 12-month period ended December 31, 1997, primarily due to
lower gas deliveries due to warmer weather and conservation.
Also contributing was the previous period's one-time gain
associated with the expiration of gas storage contracts.
Partially offsetting these effects were a decrease in the
aforementioned pension expense, a tax accrual adjustment, and
lower interest expense as well as higher interest income.

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

                                   Three Months Ended     12 Months Ended
                                    December 31, 1997     December 31, 1997
                                   Increase/(Decrease)  Increase/(Decrease)
                                    from Prior Period     from Prior Period
                                          (Thousands of dollars)
                                       Amount Per Cent   Amount  Per Cent
Net operating revenues (a)             (7,450)  (4.7)   (28,293)  (5.1)
Operation and maintenance expenses     (4,856)  (7.4)   (23,748)  (8.9)
Depreciation and amortization expense     428    2.3      2,072    2.9
Income taxes                           (1,106)  (4.7)    (4,964)  (8.5)
Other income and deductions               (37)   .04     (7,366)  26.5
Net income                             (1,947)  (5.2)    (8,355)  (8.0)

(a) Operating revenues, net of gas costs and revenue taxes.


Net Operating Revenues

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

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

   Net operating revenues decreased $7.5 million, to $151.7
million, for the current three-month period, due primarily to
lower gas deliveries caused by weather that was eight percent warmer
and conservation.

   Net operating revenues decreased $28.3 million, to $524.5
million, for the current 12-month period, due principally to
reduced gas deliveries due to warmer weather and conservation.
Weather was six and one-half percent warmer than in the year-ago period.

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

Operation and Maintenance Expenses

   Operation and maintenance expenses decreased $4.9 million, to
$60.7 million, for the current three-month period, due primarily
to a $4.6 million decrease in pension expense caused by changes
in settlement accounting attributed to employees choosing early
retirement and actuarial assumptions, a reduction in
environmental costs ($1.7 million), a decrease in the provision
for uncollectible accounts ($727,000), lower reengineering
expenses ($530,000), and lower group insurance expenses
($472,000).  These decreases were offset, in part, by an increase
in amounts paid for outside services ($762,000) and higher
administrative and general expenses.

   Operation and maintenance expenses decreased $23.7 million, to
$243.6 million, for the current 12-month period, due principally
to a $22.0 million decrease in the aforementioned pension
expense.  Other expenses which were lower in the current period
were reengineering expenses ($3.5 million), environmental costs
($3.4 million), the provision for uncollectible accounts ($2.4
million), costs associated with liability insurance premiums and
claim settlements ($2.1 million), and group insurance expenses
($2.0 million).  These reductions were partially offset by an
increase in payments for outside services ($4.2 million) and
higher administrative and general expenses.

Depreciation and Amortization Expense

   Depreciation and amortization expense increased $428,000, to
$18.9 million, and $2.1 million, to $74.5 million, for the
current three- and 12-month periods, respectively, due mainly to
depreciable property additions.

Income Taxes

   Income taxes, exclusive of taxes in other income and
deductions, decreased $1.1 million, to $22.2 million, and $5.0
million, to $53.5 million, for the current three- and 12-month
periods, respectively, due primarily to lower pre-tax income and
a tax accrual adjustment in the most recent 12-month period.

Other Income and Deductions

   Other income and deductions increased $37,000, for the current
three-month period, due mainly to increases in interest expense on
promissory notes and amounts refundable to customers.  Partially
offsetting these effects was an increase in other income.

   Other income and deductions increased $7.4 million, for the
current 12-month period, due principally to the prior period's
gain associated with the expiration of natural gas storage
contracts.  This impact was partially offset by lower interest
expense and higher interest income.

Other Matters

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

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

Large Volume Gas Service Agreements.  Peoples Gas has entered
into gas service contracts with certain large volume customers
under a specific rate schedule approved by the Commission.  These
contracts were negotiated to overcome the potential threat of
bypassing the utility's distribution system.  The impact on the
net income of Peoples Gas as a result of these contracts is not
material.

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

Operating Statistics.  The following table represents margin components:

                                 Three Months Ended     Twelve Months Ended
                                     December 31,           December 31,
                                    1997      1996        1997       1996
Operating Revenues (thousands):
 Gas sales
  Residential                     $ 268,722 $ 291,490 $  918,796 $  928,055
  Commercial                         38,008    44,026    140,846    140,736
  Industrial                          7,371     8,295     28,045     26,648
  Non-utility                        28,328       168     35,594        204
                                    342,429   343,979  1,123,281  1,095,643

 Transportation
  Residential                        10,848    11,447     36,206     48,994
  Commercial                         14,813    14,789     47,678     60,266
  Industrial                          7,996     9,336     29,625     41,453
  Contract Pooling                    3,485     2,446     18,790      6,880
  Other                                 433       400        433        400

                                     37,575    38,418    132,732    157,993

 Other                                5,147     4,761     15,674     14,594

Total Operating Revenues            385,151   387,158  1,271,687  1,268,230
Le- Gas Costs                       197,963   188,746    624,751    588,750
  - Revenues Taxes                   35,521    39,295    122,451    126,702

Net Operating Revenues            $ 151,667 $ 159,117 $  524,485 $  552,778

Deliveries (MDth):
 Gas Sales
  Residential                        41,857    46,666    138,028    150,310
  Commercial                          6,442     7,669     23,767     25,303
  Industrial                          1,354     1,575      5,147      5,400
                                     49,653    55,910    166,942    181,013

 Transportation (a)
  Residential                         8,156     8,813     27,252     29,165
  Commercial                         12,641    12,712     40,408     43,741
  Industrial                         10,568    11,482     37,993     43,856
                                     31,365    33,007    105,653    116,762

 Total Gas Sales and Transportation  81,018    88,917    272,595    297,775

 Margin per Dth delivered           $  1.87   $  1.79   $   1.92   $   1.86



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

LIQUIDITY AND CAPITAL RESOURCES

Indenture Restrictions.  North Shore Gas' indenture relating to
its first mortgage bonds contains provisions and covenants
restricting the payment of cash dividends and the purchase or
redemption of capital stock.  At December 31, 1997, such
restrictions amounted to $11.6 million out of North Shore Gas'
total retained earnings of $70.0 million.

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

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

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


Credit Lines.  The Company has lines of credit totaling $170 million.  At
December 31, 1997, the Company had unused credit available of
$169.3 million.

     The utility subsidiaries have lines of credit totaling $129.4
million,  At December 31, 1997, the utility subsidiaries had unused
credit available from banks of $68.8 million.



Interest Coverage.  The fixed charges coverage ratios for Peoples
Gas for the 12 months ended December 31, 1997, and for fiscal
1997 and 1996 were 4.90, 5.01, and 4.84, respectively.

   The corresponding coverage ratios for North Shore Gas for the
same periods were 5.51, 5.74, and 5.62, respectively.

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

Year 2000.  The Company is modifying all of its computer programs
to be year 2000 compatible.  The Company does not believe that
the amount of expenditures it will incur in connection with its
year 2000 modification will have a material adverse effect on the
financial position or results of operations of the Company.


                  PART II.   OTHER INFORMATION

Item 1. Legal Proceedings

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


Item 6. Exhibits and Reports on Form 8-K

        a. Exhibits

     Exhibit
     Number       Description of Document

     27   Financial Data Schedule

        b. Reports on Form 8-K filed during the quarter ended
December 31, 1997

           None




                            SIGNATURE



   Pursuant to the requirements of the Securities Exchange Act of

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

be signed on its behalf by the undersigned thereunto duly

authorized.




                         Peoples Energy
                           Corporation
                          (Registrant)




 February 11, 1998                 By: /s/ K. S. BALASKOVITS
     (Date)                                K. S. Balaskovits
                                   Vice President and Controller





                                         (Same as above)
                                   Principal Accounting Officer