| UNITED      STATES                                                                                                                                                                                                                                                                                       |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| SECURITIES      AND EXCHANGE COMMISSION                                                                                                                                                                                                                                                                  |
| Washington,      D.C.  20549                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                     |
| FORM      10-K                                                                                                                                                                                                                                                                                           |
| (Mark      One)                                                                                                                                                                                                                                                                                          |   |   |
|                                                                                                                                                                                                                                                                                                     |   |
| [X]                                                                                                                                                                                                                                                                                                      | ANNUAL REPORT      PURSUANT TO SECTION 13 OR 15(d) |
|                                         OF      THE SECURITIES EXCHANGE ACT OF 1934              |
|                                                                                                                                                                                                                                                                                                     |
| For the      fiscal year ended December 31, 2009                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                     |
|                OR                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                     |   |
| [  ]                                                                                                                                                                                                                                                                                           | TRANSITION      REPORT PURSUANT TO SECTION 13 OR 15(d) |
|                                                 OF THE SECURITIES EXCHANGE ACT OF 1934 |
|                                                                                                                                                                                                                                                                                                     |
|   For      the transition period from __________to  __________                                                                                                                                                                                                                                      |

| CommissionFile Number | Registrant;      State of Incorporation;Address; and Telephone    Number | IRS      EmployerIdentification No. |
|-----------------------|--------------------------------------------------------------------------|-------------------------------------|
|                  |                                                                     |                                |
| 2-35965               | NORTH SHORE      GAS COMPANY                                             | 36-1558720                          |
|                  | (An Illinois      Corporation)                                           |                                |
|                  | 130 East      Randolph Drive, 18th Floor                                 |                                |
|                  | Chicago,      Illinois  60601-6207                             |                                |
|                  | (312)      240-4000                                                      |                                |

| Indicate by      check mark if the Registrant is a well-known seasoned issuer, as defined      in Rule 405 of the Securities Act. |
|-----------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                              |
|          Yes      [  ]   No[X]                              |

| Indicate by      check mark if the Registrant is not required to file reports pursuant to      Section 13 or 15(d) of the Exchange Act. |
|-----------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                    |
|          Yes      [X]   No[  ]                                    |

| 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 such 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 by      check mark whether the registrant has submitted electronically and posted      on its corporate website, if any, every Interactive Data File required to      be submitted and posted pursuant to Rule 405 of Regulation S-T during the      preceding 12 months (or for such shorter period that the registrant was      required to submit and post such files).  (Registrant is not yet      required to provide financial disclosure in an Interactive Data File      format.) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
|           Yes [  ]   No [  ]                                                                                                                                                                                                                                                                                                                                                                                   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |
| Indicate by      check mark if disclosure of delinquent filers pursuant to Item 405 of      Regulation S-K is not contained herein, and will not be contained, to the      best of Registrant's knowledge, in definitive proxy or information      statements incorporated by reference in Part III of this Form 10-K or any      amendment to this Form 10-K. [X]                                                                                                                                            |

----

| Indicate by      check mark whether the Registrant is a large accelerated filer, an      accelerated filer, a non-accelerated filer, or a smaller reporting      company. See definitions of "large accelerated filer," "accelerated filer"      and "smaller reporting company" in Rule 12b-2 of the Exchange      Act.                                                                                                                                                                                                                                                         |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|      Large      accelerated filer      [  ]                                                                         Accelerated      filer [  ]        |
|      Non-accelerated      filer      [X]                                                                           Smaller      Reporting Company [  ] |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

| Indicate by      check mark whether the Registrant is a shell company (as defined in Rule      12b-2 of the Exchange Act).           Yes      [  ]   No[X] |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Number of      shares outstanding of each class ofcommon stock, as of      February 24, 2010 Common Stock,      no par value, 3,625,887 shares(all of which      are owned beneficially and of record by Peoples Energy      Corporation,a wholly      owned subsidiary of Integrys Energy Group,Inc.) |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Definitive      proxy statement for the Integrys Energy Group, Inc. Annual Meeting of      Shareholders to be held on May 13, 2010, is incorporated by reference into      Part III.                                                         |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                         |
| The      Registrant meets the conditions set forth in General Instruction I(1)(a)      and (b) of Form 10-K and is therefore filing this Form with the reduced      disclosure format permitted by General Instruction I(2)(b) and      (c). |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Forward-Looking      Statements                                                                                                                                         | 1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| PART      I                                                                                                                                                                  | 2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |
| ITEM      1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | BUSINESS                                                                                                                        | 2 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | GENERAL | 2 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | B.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | REGULATED      NATURAL GAS UTILITY OPERATIONS | 2 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | C.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | ENVIRONMENTAL      MATTERS | 4 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | D.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | CAPITAL      REQUIREMENTS | 4 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | E.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | EMPLOYEES | 5 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | F.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | AVAILABLE      INFORMATION | 5 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |
| ITEM      1A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | RISK      FACTORS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 6 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |
| ITEM      1B                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | UNRESOLVED      STAFF COMMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 10 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |
| ITEM      2.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | PROPERTIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 11 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |
| ITEM      3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | LEGAL      PROCEEDINGS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 12 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |
| ITEM      4.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | SUBMISSION OF      MATTERS TO A VOTE OF SECURITY HOLDERS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 12 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |

| PART      II                                                                                                                                         | 12                                                                                                              |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                            |   |   |   |
| ITEM      5.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | MARKET FOR      NSG's COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF      EQUITY SECURITIES | 12 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                            |   |
| ITEM      6.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | SELECTED      FINANCIAL DATA                                                                               | 13 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                            |   |   |
| ITEM      7.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | MANAGEMENT'S      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF      OPERATIONS                 | 14-26 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                            |   |   |
| ITEM      7A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | QUANTITATIVE      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                 | 26 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                            |   |   |
| ITEM      8.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | FINANCIAL      STATEMENTS AND SUPPLEMENTARY DATA                                                                | 27 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                            |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | A.                                                                                                              | Management      Report on Internal Control over Financial Reporting | 27 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | B.                                                                                                              | Statements of      Income | 28 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | C.                                                                                                              | Balance      Sheets | 29 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | D.                                                                                                              | Statements of      Capitalization  | 30 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | E.                                                                                                              | Statements of      Common Shareholder's Equity | 31 |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | F.                                                                                                       | Statements of      Cash Flows                                                             | 32                                               |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------|--------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | G.                                                                                                       | Notes to      Financial Statements                                                        | 33-53                                            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     | Note      1                                                                               | Summary of      Significant Accounting Policies  | 33 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     | Note      2                                                                               | Risk      Management Activities                  | 36 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     | Note      3                                                                               | Restructuring      Expense                       | 37 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     | Note      4                                                                               | Property,      Plant, and Equipment              | 38 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     | Note      5                                                                               | Regulatory      Assets And Liabilities           | 38 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     | Note      6                                                                               | Long-Term      Debt                              | 39 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     | Note      7                                                                               | Asset      Retirement Obligations                | 39 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     | Note      8                                                                               | Income      Taxes                                | 40 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     | Note      9                                                                               | Commitments      and Contingencies          | 42 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     | Note      10                                                                              | Employee      Benefit Plans                      | 44 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     | Note      11                                                                              | Preferred      Stock                             | 49 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     | Note      12                                                                              | Common      Equity                               | 49 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     | Note      13                                                                              | Fair      Value                                  | 50 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     | Note      14                                                                              | Miscellaneous      Income                        | 51 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     | Note      15                                                                              | Regulatory      Environment                      | 51 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     | Note      16                                                                              | Segments of      Business                        | 52 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     | Note      17                                                                              | Related Party      Transactions             | 52 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     | Note      18                                                                              | Quarterly      Financial Information (Unaudited) | 53 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | H.                                                                                                       | Report of      Independent Registered Public Accounting Firm on Financial      Statements | 54                                               |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     |                                                                                      |                                             |
| ITEM      9.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | CHANGES IN      AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL      DISCLOSURE           | 55                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     |                                                                                      |
| ITEM      9A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | CONTROLS AND      PROCEDURES                                                                             | 55                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     |                                                                                      |
| ITEM      9B.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | OTHER      INFORMATION                                                                                   | 55                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     |                                                                                      |
| PART      III                                                                                                                                         | 56                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     |                                                                                      |
| ITEM      10.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | DIRECTORS,      EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                              | 56                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     |                                                                                      |
| ITEM      11.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | EXECUTIVE      COMPENSATION                                                                              | 56                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     |                                                                                      |                                             |
| ITEM      12.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | SECURITY      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED      STOCKHOLDER MATTERS | 56                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     |                                                                                      |                                             |
| ITEM      13.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | CERTAIN      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR      INDEPENDENCE                      | 56                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     |                                                                                      |                                             |
| ITEM      14.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | PRINCIPAL      ACCOUNTING FEES AND SERVICES                                                              | 56                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     |                                                                                      |
| PART      IV                                                                                                                                          | 58                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     |                                                                                      |
| ITEM      15.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | EXHIBITS AND      FINANCIAL STATEMENT SCHEDULES                                                          | 58                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     |
| SIGNATURES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 59                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     |
| SCHEDULE II -      VALUATION AND QUALIFYING ACCOUNTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 60                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                     |
| EXHIBIT      INDEX                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | 61                                                                                                       |

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| ASC    | Accounting      Standards Codification                      |
|--------|-------------------------------------------------------------|
|   |                                                        |
| EEP    | Enhanced      Efficiency Program                            |
|   |                                                        |
| EPA    | United States      Environmental Protection Agency          |
|   |                                                        |
| ESOP   | Employee      Stock Ownership Plan                          |
|   |                                                        |
| FASB   | Financial      Accounting Standards Board                   |
|   |                                                        |
| FERC   | Federal      Energy Regulatory Commission                   |
|   |                                                        |
| GAAP   | United States      Generally Accepted Accounting Principles |
|   |                                                        |
| IBS    | Integrys      Business Support, LLC                         |
|   |                                                        |
| ICC    | Illinois      Commerce Commission                           |
|   |                                                        |
| IRS    | United States      Internal Revenue Service                 |
|   |                                                        |
| LIFO   | Last-in,      First-out                                     |
|   |                                                        |
| N/A    | Not      Applicable                                         |
|   |                                                        |
| NSG    | North Shore      Gas Company                                |
|   |                                                        |
| NYMEX  | New York      Mercantile Exchange                           |
|   |                                                        |
| PEC    | Peoples      Energy Corporation                             |
|   |                                                        |
| PGL    | The Peoples      Gas Light and Coke Company                 |
|   |                                                        |
| SEC    | United States      Securities and Exchange Commission       |
|   |                                                        |
| SFAS   | Statement of      Financial Accounting Standards            |

----

Forward-Looking Statements

nts concerning expectations,beliefs, plans, objectives, goals, strategies, and future events or performance.Such statements are "forward-looking statements" within the meaning of Section21E of the Securities Exchange Act of 1934, as amended. Forward-lookingstatements are subject to assumptions and uncertainties; therefore, actualresults may differ materially from those expressed or implied by suchforward-looking statements.  Although NSG believes that theseforward-looking statements and the underlying assumptions are reasonable, itcannot provide assurance that such statements will provecorrect.

| ● | Resolution of      pending and future rate cases and negotiations (including the recovery of      deferred costs) and other regulatory decisions impacting    NSG;                                                                                                                                                                                                                                                                                                                |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ● | The impact of      recent and future federal and state regulatory changes, including      legislative and regulatory initiatives regarding deregulation and      restructuring of the natural gas utility industry, changes in      environmental and other regulations, including but not limited to,      greenhouse gas emissions, energy efficiency mandates, and reliability      standards, and changes in tax and other laws and regulations to which NSG      is subject; |
| ● | Current and      future litigation and regulatory investigations, enforcement actions or      inquiries, including but not limited to, manufactured gas plant site      cleanup, third-party intervention in permitting and licensing projects,      and prudence and reconciliation of costs recovered in revenues through an      automatic gas cost recovery mechanism;                                                                                                        |
| ● | The impacts      of changing financial market conditions, credit ratings, and interest      rates on the liquidity and financing efforts of NSG;                                                                                                                                                                                                                                                                                                                                  |
| ● | The risks      associated with changing commodity prices (particularly natural gas), and      the available sources of natural gas;                                                                                                                                                                                                                                                                                                                                               |
| ● | Resolution of      audits or other tax disputes with the IRS, Illinois state revenue      agencies, or other revenue agencies;                                                                                                                                                                                                                                                                                                                                                    |
| ● | The effects,      extent, and timing of additional competition or regulation in the markets      in which NSG operates;                                                                                                                                                                                                                                                                                                                                                           |
| ● | Investment      performance of employee benefit plan assets and the related impact on      future funding requirements;                                                                                                                                                                                                                                                                                                                                                           |
| ● | Effects of      and changes in political and legal developments, as well as economic      conditions and the related impact on customer demand;                                                                                                                                                                                                                                                                                                                                   |
| ● | Potential      business strategies, including acquisitions and construction or      disposition of assets or businesses, which cannot be assured to be      completed timely or within budgets;                                                                                                                                                                                                                                                                                   |
| ● | The direct or      indirect effects of terrorist incidents, natural disasters, or responses      to such events;                                                                                                                                                                                                                                                                                                                                                                  |
| ● | The      effectiveness of risk management strategies, the use of financial and      derivative instruments, and the ability to recover costs from customers in      rates associated with the use of those strategies and financial      instruments;                                                                                                                                                                                                                             |
| ● | The risk of      financial loss associated with the inability of NSG's counterparties and      affiliates to meet their obligations;                                                                                                                                                                                                                                                                                                                                              |
| ● | Customer      usage, weather, and other natural phenomena;                                                                                                                                                                                                                                                                                                                                                                                                                        |
| ● | The effect of      accounting pronouncements issued periodically by standard-setting bodies;      and                                                                                                                                                                                                                                                                                                                                                                             |
| ● | Other factors      discussed elsewhere herein and in other reports filed by NSG and/or      Integrys Energy Group from time to time with the  SEC.                                                                                                                                                                                                                                                                                                                                |

----

----

| (MDth)                                                                                                             |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|--------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Natural gas      purchases                                                                                         |   |   | 24,329 |   |   |   | 26,137 |   |   |   | 23,432 |   |
| Customer-owned      natural gas received                                                                           |   |   | 13,686 |   |   |   | 13,589 |   |   |   | 12,782 |   |
| Liquefied      petroleum gas                                                                                       |   |   | 12     |   |   |   | 5      |   |   |   | 7 |   |
| Underground      storage, net                                                                                      |   |   | (158   | )      |   |   | 95     |   |   |   | 767 |   |
| Contracted      pipeline and storage compressor fuel, franchise requirements,      and unaccounted-for natural gas |   |   | (972   | )      |   |   | (1,110 | )      |   |   | (559 | ) |
| Total                                                                                                              |   |   | 36,897 |   |   |   | 38,716 |   |   |   | 36,429 |   |

----

----

| · | Annual Report      on Form 10-K;   |
|--------|-----------------------------------------|
| · | Quarterly      Reports on Form 10-Q;    |
| · | Current      Reports on Form 8-K; and   |
| · | Any      amendments to these documents. |

----

----

| · | Fluctuations      in economic activity and growth in NSG's regulated service areas;      and |
|--------|----------------------------------------------------------------------------------------------|
| · | Weather      conditions, seasonality, and temperature  extremes.                             |

----

| · | Require the      payment of higher interest rates in future financings and possibly reduce      the potential pool of creditors; |
|--------|----------------------------------------------------------------------------------------------------------------------------------|
| · | Increase      borrowing costs under certain of its existing credit facilities;      and                                          |
| · | Require      provision of additional credit assurance to contract      counterparties.                                           |

----

----

|   |   |
|--------|--------|

----

| ● | Approximately      2,400 miles of natural gas distribution mains located in      Illinois,            |
|---------|-------------------------------------------------------------------------------------------------------|
| ● | Approximately      30 miles of natural gas transmission mains located in Illinois and      Wisconsin, |
| ● | 6 natural gas      distribution and transmission gate stations, and                                   |
| ● | Approximately      144,000 natural gas lateralservices.                                               |

----

----

| ITEM      6.  SELECTED FINANCIAL DATA   |   |              |   |   |               |   |   |               |   |
|---------------------------------------------------|--------|-------------------|--------|--------|--------------------|--------|--------|--------------------|--------|
|                                              |   |              |   |   |               |   |   |               |   |
| NORTH      SHORE GAS COMPANY                      |   |
| COMPARATIVE      FINANCIAL DATA AND               |   |
| OTHER      STATISTICS (2005 TO 2009)              |   |
|                                              |   |              |   |   |               |   |   |               |   |
|                                              |   |              |   |   |               |   |   |               |   |
|                                              |   | Year      Ended   |   |   | Year      Ended    |   |   | Year      Ended    |   |
|                                              |   | December      31, |   |   | December      31,  |   |   | December      31,  |   |
| (Millions,      except weather information)       |   | 2009              |   |   | 2008               |   |   | 2007               |   |
|                                              |   |              |   |   |               |   |   |               |   |
| Natural gas      operating revenues               |   | $                 | 228.2  |   |               | $      | 312.9  |               |   | $ | 271.0 |   |
| Net      income                                   |   |              | 4.3    |   |               |   | 7.0    |               |   |   | 7.9 |   |
| Total      assets                                 |   |              | 453.7  |   |               |   | 483.6  |               |   |   | 424.9 |   |
| Long-term      debt (excluding current portion)   |   |              | 75.0   |   |               |   | 75.3   |               |   |   | 69.0 |   |
|                                              |   |              |   |   |               |   |   |               |   |   |   |   |
| Weather      information                          |   |              |   |   |               |   |   |               |   |   |   |   |
| Heating      degree days                          |   |              | 6,429  |   |               |   | 6,688  |               |   |   | 6,025 |   |
| Heating      degree days as a percent of normal * |   |              | 105.5  | %      |               |   | 109.7  | %                  |   |   | 97.6 | % |
|                                              |   |              |   |   |               |   |   |               |   |   |   |   |
|                                              |   |              |   |   |               |   |   |               |   |   |   |   |
|                                              |   | Transition        |   |   |               |   |   |               |   |   |   |
|                                              |   | Period      Ended |   |   | Year      Ended    |   |   | Year      Ended    |   |
|                                              |   | December      31, |   |   | September      30, |   |   | September      30, |   |
| (Millions,      except weather information)       |   | 2006              |   |   | 2006               |   |   | 2005               |   |
|                                              |   |              |   |   |               |   |   |               |   |   |   |   |
| Natural gas      operating revenues               |   | $                 | 73.5   |   |               | $      | 285.1  |               |   | $ | 246.3 |   |
| Net      income                                   |   |              | 4.4    |   |               |   | 6.7    |               |   |   | 11.4 |   |
| Total      assets                                 |   |              | 410.9  |   |               |   | 400.0  |               |   |   | 371.2 |   |
| Long-term      debt (excluding current portion)   |   |              | 69.1   |   |               |   | 69.2   |               |   |   | 69.3 |   |
|                                              |   |              |   |   |               |   |   |               |   |   |   |   |
| Weather      information                          |   |              |   |   |               |   |   |               |   |   |   |   |
| Heating      degree days                          |   |              | 2,116  |   |               |   | 5,775  |               |   |   | 5,864 |   |
| Heating      degree days as a percent of normal * |   |              | 95.4   | %      |               |   | 90.1   | %                  |   |   | 91.2 | % |

|   | * Normal      heating degree days for fiscal 2005 were based on a 30-year average of      monthly temperatures at Chicago's                                   |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   O'Hare      Airport for the years 1970 through 1999.  Normal heating degree      days for fiscal 2006 were based on a                   |
|   |   30-year      average of monthly temperatures at Chicago's O'Hare Airport for the years      1975 through 2004.  Normal                  |
|   |   heating      degree days for the transition period ended December 31, 2006, and fiscal      2007 were based on a 10-year                          |
|   |   average      of monthly total heating degree days at Chicago’s O’Hare Airport for the      years 1996 through 2005.  Normal |
|   |   heating      degree days for fiscal 2008 and 2009 were based on a 12-year average of      monthly total heating degree                            |
|   |   days      at Chicago’s O’Hare Airport for the years 1996 through    2007.                                                             |   |   |   |   |

----

| ITEM      7. | MANAGEMENT'S      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF      OPERATIONS |
|--------------|-------------------------------------------------------------------------------------------------|

| · | IBS, a wholly      owned service company of Integrys Energy Group, was formed to achieve      consolidation and efficient delivery of various support services, and to      provide more consistent and transparent allocation of costs throughout      Integrys Energy Group and its subsidiaries.                        |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                       |
| · | "Operational      Excellence" initiatives were implemented to provide top performance in the      areas of project management, process improvement, contract administration,      and compliance in order to reduce costs and manage projects and activities      within appropriate budgets, schedules, and  regulations. |

----

|            |   | Year Ended December 31 |   |   | Change      in |   |   | Change      in |   |
|-----------------|--------|------------------------|--------|--------|----------------|--------|--------|----------------|--------|
| (Millions)      |   | 2009                   |   |   | 2008           |   |   | 2007           |   |   | 2009      Over 2008 |   |   | 2008      Over 2007 |   |
|            |   |                   |   |   |           |   |   |           |   |   |   |   |   |   |   |
| Net      income |   | $                      | 4.3    |   |           | $      | 7.0    |           |   | $ | 7.9 |   |   |   | (38.6 | )% |   |   | (11.4 | )% |

----

|                                        |   |                   |   |   |           |   |   |           |   |
|---------------------------------------------|--------|------------------------|--------|--------|----------------|--------|--------|----------------|--------|
|                                        |   | Year Ended December 31 |   |   | Change      in |   |   | Change      in |   |
| (Millions, except heating      degree days) |   | 2009                   |   |   | 2008           |   |   | 2007           |   |   | 2009      Over 2008 |   |   | 2008      Over 2007 |   |
|                                        |   |                   |   |   |           |   |   |           |   |   |   |   |   |   |   |
| Natural gas      operating revenues         |   | $                      | 228.2  |   |           | $      | 312.9  |           |   | $ | 271.0 |   |   |   | (27.1 | )% |   |   | 15.5 | % |
| Natural gas      purchased for resale       |   |                   | 157.9  |   |           |   | 240.6  |           |   |   | 205.2 |   |   |   | (34.4 | )% |   |   | 17.3 | % |
| Margins                                     |   |                   | 70.3   |   |           |   | 72.3   |           |   |   | 65.8 |   |   |   | (2.8 | )% |   |   | 9.9 | % |
|                                        |   |                   |   |   |           |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating and      maintenance expense      |   |                   | 50.7   |   |           |   | 49.1   |           |   |   | 39.3 |   |   |   | 3.3 | % |   |   | 24.9 | % |
| Natural gas      charge settlement          |   |                   | -      |   |           |   | -      |           |   |   | 2.0 |   |   |   | N/A |   |   |   | (100.0 | )% |
| Restructuring      expense *                |   |                   | 0.4    |   |           |   | -      |           |   |   | - |   |   |   | N/A |   |   |   | N/A |   |
| Depreciation      and amortization expense  |   |                   | 6.2    |   |           |   | 6.6    |           |   |   | 6.0 |   |   |   | (6.1 | )% |   |   | 10.0 | % |
| Taxes other      than income taxes          |   |                   | 2.4    |   |           |   | 2.1    |           |   |   | 2.4 |   |   |   | 14.3 | % |   |   | (12.5 | )% |
| Operating      income                       |   |                   | 10.6   |   |           |   | 14.5   |           |   |   | 16.1 |   |   |   | (26.9 | )% |   |   | (9.9 | )% |
|                                        |   |                   |   |   |           |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |
| Miscellaneous      income                   |   |                   | 0.4    |   |           |   | 0.8    |           |   |   | 1.2 |   |   |   | (50.0 | )% |   |   | (33.3 | )% |
| Interest      expense                       |   |                   | (4.3   | )      |           |   | (4.2   | )              |   |   | (4.2 | ) |   |   | 2.4 | % |   |   | - | % |
| Other      expense                          |   |                   | (3.9   | )      |           |   | (3.4   | )              |   |   | (3.0 | ) |   |   | 14.7 | % |   |   | 13.3 | % |
|                                        |   |                   |   |   |           |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |
| Income before      taxes                    |   |                   | 6.7    |   |           |   | 11.1   |           |   |   | 13.1 |   |   |   | (39.6 | )% |   |   | (15.3 | )% |
| Provision for      income taxes             |   |                   | 2.4    |   |           |   | 4.1    |           |   |   | 5.2 |   |   |   | (41.5 | )% |   |   | (21.2 | )% |
| Net      income                             |   | $                      | 4.3    |   |           | $      | 7.0    |           |   | $ | 7.9 |   |   |   | (38.6 | )% |   |   | (11.4 | )% |
|                                        |   |                   |   |   |           |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |
| Throughput      in therms                   |   |                   |   |   |           |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |
|  Residential                           |   |                   | 194.2  |   |           |   | 205.6  |           |   |   | 193.3 |   |   |   | (5.5 | )% |   |   | 6.4 | % |
|  Commercial      and industrial        |   |                   | 39.9   |   |           |   | 44.4   |           |   |   | 41.7 |   |   |   | (10.1 | )% |   |   | 6.5 | % |
|  Transport                             |   |                   | 134.9  |   |           |   | 137.2  |           |   |   | 129.3 |   |   |   | (1.7 | )% |   |   | 6.1 | % |
| Total sales      in therms                  |   |                   | 369.0  |   |           |   | 387.2  |           |   |   | 364.3 |   |   |   | (4.7 | )% |   |   | 6.3 | % |
|                                        |   |                   |   |   |           |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |
| Weather                                     |   |                   |   |   |           |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |
| Heating      degree days                    |   |                   | 6,429  |   |           |   | 6,688  |           |   |   | 6,025 |   |   |   | (3.9 | )% |   |   | 11.0 | % |

| · | An      approximate $72 million decrease in revenue as a result of an approximate      30% decrease in the per-unit cost of natural gas sold during 2009,      compared with 2008.  Prudently incurred natural gas commodity      costs are passed directly through to customers in current      rates. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                              |
| · | An      approximate $9 million decrease in revenue from warmer year-over-year      weather during the heating season as evidenced by the 3.9% decrease in      heating degree days.                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                              |
| · | An      approximate $5 million decrease in revenue as a result of lower      weather-normalized natural gas throughput volumes, attributed primarily to      the negative impact of the general economic slowdown and customer      conservation and efficiencyefforts.                                      |

----

| · | An      approximate $2 million decrease related to the negative impact of the rate      order that was effective February 14, 2008.  Lower volumetric      rates under this rate order were fully in place for all of 2009, resulting      in this decrease in margin.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| · | An      approximate $1 million decrease in margin resulting from a 4.7% decrease      in natural gas throughput volumes attributed to the negative impact of the      general economic slowdown, customer conservation and efficiency efforts,      and warmer year-over-year weather.  This decrease in margin      includes the impact of a decoupling mechanism that was first effective for      NSG on March 1, 2008.  Decoupling allows NSG to adjust rates      going forward to recover or refund the difference between the actual and      authorized margin per customer impact of variations in      volumes.  The mechanism does not adjust for changes in volumes      resulting from changes in customer counts. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| · | An      approximate $1 million decrease driven by the accrual of refunds to      customers in January and February 2009 related to the decoupling mechanism      that was implemented on March 1, 2008.  The decoupling      mechanism was fully in place for all of 2009 resulting in this decrease in      margin.                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| · | The decrease      in margin was partially offset by $1.4 million of both higher recovery of      environmental cleanup expenditures related to former manufactured gas      plant sites and higher recovery of EEP expenses.  This increase      in margin was offset by an increase in operating and maintenance expense      from both the amortization of the related regulatory asset and EEP      expenses and, therefore, had no impact on  earnings.                                                                                                                                                                                                                                                                                         |

| · | A $1.4      million increase in both the amortization of the regulatory asset related      to environmental cleanup expenditures of former manufactured gas plant      sites and EEP expenses.  Both of these costs were recovered from      customers in rates. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                       |
| · | Restructuring      expenses of $0.4 million related to a reduction in workforce at NSG and      IBS.  See Note 3,      "Restructuring      Expense," for moreinformation.                                                                                        |

| · | Weather was      11.0% colder than the prior year, which led to a $21.7 million      increase in revenues.                 |
|--------|---------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                            |
| · | The per-unit      cost of natural gas increased 9.8% year-over-year, which drove a      $21.0 million increase inrevenues. |

----

| · | Revenues      increased $3.3 million due to NSG's higher year-over-year recovery of      expenditures related to the cleanup of former manufactured gas plant      sites.  This increase in revenues was offset by an increase in      operating and maintenance expense due to the amortization of the related      regulatory asset.                  |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                   |
| · | Partially      offsetting the increases discussed above was a decrease in revenues of      $3.4 million resulting from a decrease in natural gas throughput      volumes, excluding the impact of weather, which NSG believed was primarily      due to customer conservation efforts related to higher energy prices and a      general slowdown in the economy. |

| · | A $5.2      million increase in various operating costs, driven by increases in legal      expenses, customer call center expenses, and intercompany service      costs.                                                                                                                                                                                                                                                                                                                                 |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| · | An increase      of $3.3 million in the amortization of the regulatory asset related to      cleanup costs of manufactured gas plant sites.  These costs were      recovered from customers in rates.                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| · | A $1.1      million increase in the combined amortization expense related to costs to      achieve merger synergies and costs pertaining to the 2007/2008 rate case,      which were initially deferred as regulatory assets.  The      increase in operating expenses related to these costs was offset in margin      through an increase in revenues.  As a result, there was no      significant impact on earnings related to the amortization of these      regulatory assets. |

|                    |   | Year Ended December 31 |   |
|-------------------------|--------|------------------------|--------|
|                    |   | 2009                   |   |   | 2008 |   |   | 2007 |   |
| Effective Tax      Rate |   |                   | 35.8   | % |   |   | 36.9 | % |   |   | 39.7 | % |

----

| · | A $22.4      million increase related to lower working capital requirements, primarily      due to a $24.3 million decrease in accounts receivable and accrued      unbilled revenues in 2009, compared with a $12.2 million increase in      accounts receivable and accrued unbilled revenues in 2008, driven by the      impact that higher natural gas prices and colder weather at the end of      2008 had on the overall change in accounts receivable      balances. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| · | Partially      offsetting the net increase in cash provided by operating activities was a      $4.9 million increase in pension and other postretirement      funding.                                                                                                                                                                                                                                                                                                            |

----

|                      |   | Standard      & Poor's |   | Moody's |
|---------------------------|--------|----------------------------|--------|---------|
| Issuer credit      rating |   | BBB+                       |   | A3      |
| Senior      secured debt  |   | A                          |   | A2      |

----

|                                                              |   |                        |   |   | Payments      Due By Period |   |
|-------------------------------------------------------------------|--------|-----------------------------|--------|--------|-----------------------------|--------|
| (Millions)                                                        |   | Total      AmountsCommitted |   |   | 2010                        |   |   | 2011      to 2012 |   |   | 2013      to 2014 |   |   | 2015      and Thereafter |   |
|                                                              |   |                        |   |   |                        |   |   |   |   |   |   |   |   |   |   |
| Long-term      debt principal and interest payments      (1) |   | $                           | 109.8  |   |                        | $      | 3.7 |   |   | $ | 7.5 |   |   | $ | 50.3 |   |   | $ | 48.3 |   |
| Commodity      purchase obligations (2)                           |   |                        | 89.1   |   |                        |   | 19.2 |   |   |   | 36.1 |   |   |   | 24.3 |   |   |   | 9.5 |   |
| Purchase      orders (3)                                          |   |                        | 7.3    |   |                        |   | 7.3 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Pension and      other postretirementfunding obligations (4)      |   |                        | 32.3   |   |                        |   | 7.1 |   |   |   | 14.8 |   |   |   | 5.3 |   |   |   | 5.1 |   |
| Total      contractual cash obligations                           |   | $                           | 238.5  |   |                        | $      | 37.3 |   |   | $ | 58.4 |   |   | $ | 79.9 |   |   | $ | 62.9 |   |

----

----

----

| Actuarial      Assumption(Millions,      except percentages) | Percentage-PointChange      inAssumption | Impact      on Projected BenefitObligation | Impact      on 2009 Pension Cost |
|--------------------------------------------------------------|------------------------------------------|--------------------------------------------|----------------------------------|
| Discount      rate                                           | (0.5)                                    | $2.6                                       | $0.3                             |
| Discount      rate                                           | 0.5                                      | (2.3)                                      | (0.3)                            |
| Rate of      return on plan assets                           | (0.5)                                    | N/A                                        | 0.1                              |
| Rate of      return on plan assets                           | 0.5                                      | N/A                                        | (0.1)                            |

| Actuarial      Assumption(Millions,      except percentages) | Percentage-Point      Change in Assumption | Impact      on Postretirement Benefit Obligation | Impact      on 2009 Postretirement Benefit Cost |
|--------------------------------------------------------------|--------------------------------------------|--------------------------------------------------|-------------------------------------------------|
| Discount      rate                                           | (0.5)                                      | $0.8                                             | $  -                                  |
| Discount      rate                                           | 0.5                                        | (0.8)                                            |         -                             |
| Health care      cost trend rate                             | (1.0)                                      | (1.5)                                            | (0.2)                                           |
| Health care      cost trend rate                             | 1.0                                        | 1.7                                              | 0.2                                             |
| Rate of      return on plan assets                           | (0.5)                                      | N/A                                              |         -                             |
| Rate of      return on plan assets                           | 0.5                                        | N/A                                              |         -                             |

----

----

----

----

| B.  STATEMENTS      OF INCOME                                                                  |   |
|----------------------------------------------------------------------------------------------------------|--------|
|                                                                                                     |   |   |   |   |   |   |   |   |   |
|                                                                                                     |   |   |   |   |   |   |   |   |   |
| Year      Ended December 31                                                                              |   |   |   |   |   |   |   |   |   |
| (Millions)                                                                                               |   | 2009 |   |   | 2008 |   |   | 2007 |   |
|                                                                                                     |   |   |   |   |   |   |   |   |   |
| Natural      gas operating revenues                                                                      |   | $ | 228.2 |   |   | $ | 312.9 |   |   | $ | 271.0 |   |
|                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Natural gas      purchased for resale                                                                    |   |   | 157.9 |   |   |   | 240.6 |   |   |   | 205.2 |   |
| Operating and      maintenance expense                                                                   |   |   | 50.7 |   |   |   | 49.1 |   |   |   | 39.3 |   |
| Natural gas      charge settlement                                                                       |   |   | - |   |   |   | - |   |   |   | 2.0 |   |
| Restructuring      expense                                                                               |   |   | 0.4 |   |   |   | - |   |   |   | - |   |
| Depreciation      and amortization expense                                                               |   |   | 6.2 |   |   |   | 6.6 |   |   |   | 6.0 |   |
| Taxes other      than income taxes                                                                       |   |   | 2.4 |   |   |   | 2.1 |   |   |   | 2.4 |   |
| Operating      income                                                                                    |   |   | 10.6 |   |   |   | 14.5 |   |   |   | 16.1 |   |
|                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Miscellaneous      income                                                                                |   |   | 0.4 |   |   |   | 0.8 |   |   |   | 1.2 |   |
| Interest      expense                                                                                    |   |   | (4.3 | ) |   |   | (4.2 | ) |   |   | (4.2 | ) |
| Other      expense                                                                                       |   |   | (3.9 | ) |   |   | (3.4 | ) |   |   | (3.0 | ) |
|                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Income before      taxes                                                                                 |   |   | 6.7 |   |   |   | 11.1 |   |   |   | 13.1 |   |
| Provision for      income taxes                                                                          |   |   | 2.4 |   |   |   | 4.1 |   |   |   | 5.2 |   |
| Net      income                                                                                          |   | $ | 4.3 |   |   | $ | 7.0 |   |   | $ | 7.9 |   |
|                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| The      accompanying notes to NSG's financial statements are an integral part of      these statements. |   |

----

| C.      BALANCE SHEETS                                                                                               |   |
|----------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                 |   |   |   |   |   |   |
| At      December 31                                                                                                  |   |   |   |   |   |   |
| (Millions)                                                                                                           |   | 2009 |   |   | 2008 |   |
|                                                                                                                 |   |   |   |   |   |   |
| Assets                                                                                                               |   |   |   |   |   |   |
| Cash and cash      equivalents                                                                                       |   | $ | 0.6 |   |   | $ | 0.1 |   |
| Collateral on      deposit                                                                                           |   |   | - |   |   |   | 0.8 |   |
| Accounts      receivable and accrued unbilled revenues, net of reserves of $0.9 and      $1.7, respectively          |   |   | 36.9 |   |   |   | 62.7 |   |
| Natural gas      in storage, primarily at LIFO                                                                       |   |   | 9.7 |   |   |   | 8.8 |   |
| Assets from      risk management activities                                                                          |   |   | 0.7 |   |   |   | 1.8 |   |
| Regulatory      assets                                                                                               |   |   | 15.3 |   |   |   | 32.3 |   |
| Prepaid      federal income tax                                                                                      |   |   | 4.1 |   |   |   | - |   |
| Other current      assets                                                                                            |   |   | 2.2 |   |   |   | 1.6 |   |
| Current      assets                                                                                                  |   |   | 69.5 |   |   |   | 108.1 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| Property,      plant, and equipment, net of accumulated depreciation of $163.5 and      $160.2, respectively    |   |   | 248.2 |   |   |   | 245.8 |   |
| Regulatory      assets                                                                                               |   |   | 134.5 |   |   |   | 128.3 |   |
| Other      long-term assets                                                                                          |   |   | 1.5 |   |   |   | 1.4 |   |
| Total      assets                                                                                                    |   | $ | 453.7 |   |   | $ | 483.6 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| Liabilities      and Shareholder's Equity                                                                            |   |   |   |   |   |   |   |   |
| Accounts      payable                                                                                                |   | $ | 21.7 |   |   | $ | 26.6 |   |
| Payables to      related parties                                                                                     |   |   | 7.3 |   |   |   | 6.7 |   |
| Notes payable      to related parties                                                                                |   |   | 7.6 |   |   |   | 9.0 |   |
| Liabilities      from risk management activities                                                                     |   |   | 4.1 |   |   |   | 26.7 |   |
| Accrued      taxes                                                                                                   |   |   | 3.9 |   |   |   | 6.1 |   |
| Customer      credit balances                                                                                        |   |   | 6.7 |   |   |   | 6.5 |   |
| Regulatory      liabilities                                                                                          |   |   | 10.4 |   |   |   | 8.1 |   |
| Other current      liabilities                                                                                       |   |   | 5.9 |   |   |   | 7.8 |   |
| Current      liabilities                                                                                             |   |   | 67.6 |   |   |   | 97.5 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| Long-term      debt                                                                                                  |   |   | 75.0 |   |   |   | 75.3 |   |
| Deferred      income taxes                                                                                           |   |   | 48.2 |   |   |   | 41.0 |   |
| Environmental      remediation liabilities                                                                           |   |   | 106.8 |   |   |   | 101.4 |   |
| Pension and      other postretirement benefit obligations                                                            |   |   | 32.4 |   |   |   | 32.5 |   |
| Asset      retirement obligations                                                                                    |   |   | 20.1 |   |   |   | 24.2 |   |
| Other      long-term liabilities                                                                                     |   |   | 8.7 |   |   |   | 9.6 |   |
| Long-term      liabilities                                                                                           |   |   | 291.2 |   |   |   | 284.0 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| Commitments      and contingencies                                                                                   |   |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| Common stock      - without par value, 5,000,000 shares authorized; 3,625,887      sharesissued and      outstanding |   |   | 24.8 |   |   |   | 24.8 |   |
| Retained      earnings                                                                                               |   |   | 70.2 |   |   |   | 77.4 |   |
| Accumulated      other comprehensive loss                                                                            |   |   | (0.1 | ) |   |   | (0.1 | ) |
| Total      liabilities and shareholder's equity                                                                      |   | $ | 453.7 |   |   | $ | 483.6 |   |
|                                                                                                                 |   |   |   |   |   |   |   |   |
| The      accompanying notes to NSG's financial statements are an integral part of      these statements.             |   |   |   |   |   |

----

| D.  STATEMENTS      OF CAPITALIZATION                                                          |   |
|----------------------------------------------------------------------------------------------------------|--------|
|                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |
| At      December 31                                                                                      |   |   |   |   |   |   |   |   |   |   |
| (Millions,      except share amounts)                                                                    |   |   |   |   | 2009 |   |   | 2008 |   |
|                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |
| Common      stock equity                                                                                 |   |   |   |   |   |   |   |   |   |
| Common stock,      without par value, 5,000,000 shares authorized,                                       |   |   |   |   |   |   |   |
| 3,625,887      shares outstanding                                                                        |   |   | $ | 24.8 |   | $ | 24.8 |   |
| Accumulated      other comprehensive loss                                                                |   |   |   | (0.1 | ) |   | (0.1 | ) |
| Retained      earnings                                                                                   |   |   |   |   |   | 70.2 |   |   | 77.4 |   |
| Total      common stock equity                                                                           |   |   |   |   | 94.9 |   |   | 102.1 |   |
|                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |
| Long-term      debt                                                                                      |   |   |   |   |   |   |   |   |   |   |
| First      Mortgage Bonds                                                                                |   |   |   |   |   |   |   |   |   |
|                                                                                                     | Series |   | Year Due |   |   |   |   |   |   |   |   |
|                                                                                                     | M      | 5.000% | 2028 |   |   |   | 28.5 |   |   | 28.8 |   |
|                                                                                                     | N-2    | 4.625% | 2013 |   |   |   | 40.0 |   |   | 40.0 |   |
|                                                                                                     | O      | 7.000% | 2013 |   |   |   | 6.5 |   |   | 6.5 |   |
| Total      long-term debt                                                                                |   |   |   |   | 75.0 |   |   | 75.3 |   |
| Total      capitalization                                                                                |   |   |   |   | $ | 169.9 |   | $ | 177.4 |   |
|                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |
| The      accompanying notes to NSG's financial statements are an integral part of      these statements. |   |

----

| E.  STATEMENTS      OF COMMON SHAREHOLDER'S EQUITY                                             |   |
|----------------------------------------------------------------------------------------------------------|--------|
|                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   | Accumulated      Other |   |
|                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   | Comprehensive |   |
|                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   | Loss |   |
|                                                                                                     |   |  Comprehensive |   |   |   | Common |   |   | Retained |   |   | Cash      Flow |   |
| (Millions)                                                                                               |   | Income |   |   | Total |   |   | Stock |   |   | Earnings |   |   | Hedges |   |
|                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2006                                                                        |   |   |   |   | $ | 102.8 |   |   | $ | 24.8 |   |   | $ | 78.2 |   |   | $ | (0.2 | ) |
| Net      income                                                                                          |   | $ | 7.9 |   |   |   | 7.9 |   |   |   |   |   |   |   | 7.9 |   |   |   |   |   |
| Other      comprehensive income - net unrealized gain on cash flowhedges(net of tax      of $0.1)        |   |   | 0.1 |   |   |   | 0.1 |   |   |   |   |   |   |   |   |   |   |   | 0.1 |   |
| Comprehensive      income                                                                                |   |   | 8.0 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends on      common stock                                                                           |   |   |   |   |   |   | (9.4 | ) |   |   |   |   |   |   | (9.4 | ) |   |   |   |   |
|                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2007                                                                        |   |   |   |   |   | $ | 101.4 |   |   | $ | 24.8 |   |   | $ | 76.7 |   |   | $ | (0.1 | ) |
| Net      income                                                                                          |   | $ | 7.0 |   |   |   | 7.0 |   |   |   |   |   |   |   | 7.0 |   |   |   |   |   |
| Effects of      changing pension plan measurement date pursuant to SFAS No.      158                     |   |   |   | (0.6 | ) |   |   |   |   |   |   | (0.6 | ) |   |   |   |   |
| Dividends on      common stock                                                                           |   |   |   |   |   |   | (5.7 | ) |   |   |   |   |   |   | (5.7 | ) |   |   |   |   |
|                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2008                                                                        |   |   |   |   |   | $ | 102.1 |   |   | $ | 24.8 |   |   | $ | 77.4 |   |   | $ | (0.1 | ) |
| Net      income                                                                                          |   | $ | 4.3 |   |   |   | 4.3 |   |   |   |   |   |   |   | 4.3 |   |   |   |   |   |
| Dividends on      common stock                                                                           |   |   |   |   |   |   | (11.5 | ) |   |   |   |   |   |   | (11.5 | ) |   |   |   |   |
|                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2009                                                                        |   |   |   |   |   | $ | 94.9 |   |   | $ | 24.8 |   |   | $ | 70.2 |   |   | $ | (0.1 | ) |
|                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The      accompanying notes to NSG's financial statements are an integral part of      these statements. |   |   |   |   |   |   |   |   |   |

----

| F.  STATEMENTS      OF CASH FLOWS                                                              |   |
|----------------------------------------------------------------------------------------------------------|--------|
|                                                                                                     |   |   |   |   |   |   |   |   |   |
| Year      Ended December 31                                                                              |   |   |   |   |   |   |   |   |   |
| (Millions)                                                                                               |   | 2009 |   |   | 2008 |   |   | 2007 |   |
| Operating      Activities                                                                                |   |   |   |   |   |   |   |   |   |
| Net      income                                                                                          |   | $ | 4.3 |   |   | $ | 7.0 |   |   | $ | 7.9 |   |
| Adjustments      to reconcile net income to net cash provided by operating      activities               |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation      and amortization expense                                                               |   |   | 6.2 |   |   |   | 6.6 |   |   |   | 6.0 |   |
| Bad debt      expense                                                                                    |   |   | 1.5 |   |   |   | 2.3 |   |   |   | 2.1 |   |
| Deferred      income taxes and investment tax credits, net                                               |   |   | 6.1 |   |   |   | 4.3 |   |   |   | (1.3 | ) |
| Pension and      other postretirement expense                                                            |   |   | 4.4 |   |   |   | 4.1 |   |   |   | 4.2 |   |
| Pension and      other postretirement funding                                                            |   |   | (6.2 | ) |   |   | (1.3 | ) |   |   | (0.1 | ) |
| Natural gas      charge settlement                                                                       |   |   | - |   |   |   | - |   |   |   | 1.6 |   |
| Other,      net                                                                                          |   |   | 0.1 |   |   |   | 0.2 |   |   |   | (2.6 | ) |
| Changes in      working capital                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Collateral on      deposit                                                                               |   |   | 0.8 |   |   |   | (0.6 | ) |   |   | (0.1 | ) |
| Accounts      receivable and accrued unbilled revenues                                                   |   |   | 24.3 |   |   |   | (12.2 | ) |   |   | (11.4 | ) |
| Natural gas      in storage                                                                              |   |   | (0.9 | ) |   |   | 0.1 |   |   |   | 1.1 |   |
| Other current      assets                                                                                |   |   | (7.4 | ) |   |   | (0.1 | ) |   |   | 6.5 |   |
| Accounts      payable                                                                                    |   |   | (5.2 | ) |   |   | (0.1 | ) |   |   | 4.3 |   |
| Accrued      taxes                                                                                       |   |   | (2.2 | ) |   |   | 3.6 |   |   |   | (6.1 | ) |
| Other current      liabilities                                                                           |   |   | 2.0 |   |   |   | (1.7 | ) |   |   | (5.1 | ) |
| Net      cash provided by operating activities                                                           |   |   | 27.8 |   |   |   | 12.2 |   |   |   | 7.0 |   |
|                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Investing      Activities                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital      expenditures                                                                                |   |   | (14.1 | ) |   |   | (10.0 | ) |   |   | (9.7 | ) |
| Proceeds from      sale of property                                                                      |   |   | 0.2 |   |   |   | - |   |   |   | - |   |
| Other                                                                                                    |   |   | (0.1 | ) |   |   | 0.2 |   |   |   | - |   |
| Net      cash used for investing activities                                                              |   |   | (14.0 | ) |   |   | (9.8 | ) |   |   | (9.7 | ) |
|                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Financing      Activities                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Net payments      of related-party short-term debt                                                       |   |   | (1.5 | ) |   |   | (2.9 | ) |   |   | 11.9 |   |
| Issuance of      long-term debt                                                                          |   |   | - |   |   |   | 6.5 |   |   |   | - |   |
| Retirement of      long-term debt                                                                        |   |   | (0.3 | ) |   |   | (0.2 | ) |   |   | - |   |
| Dividends to      parent                                                                                 |   |   | (11.5 | ) |   |   | (5.7 | ) |   |   | (9.3 | ) |
| Net      cash (used for) provided by financing activities                                                |   |   | (13.3 | ) |   |   | (2.3 | ) |   |   | 2.6 |   |
| Net      change in cash and cash equivalemnts                                                            |   |   | 0.5 |   |   |   | 0.1 |   |   |   | (0.1 | ) |
| Cash and cash      equivalents at beginning of year                                                      |   |   | 0.1 |   |   |   | - |   |   |   | 0.1 |   |
| Cash      and cash equivalents at end of year                                                            |   | $ | 0.6 |   |   | $ | 0.1 |   |   | $ | - |   |
|                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| The      accompanying notes to NSG's financial statements are an integral part of      these statements. |   |   |   |   |   |   |   |   |   |

----

| (Millions)                                 |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|--------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Cash paid for      interest                |   | $      | 3.9    |   |   | $      | 3.8    |   |   | $ | 3.8 |   |
| Cash paid      (received) for income taxes |   |   | 2.9    |   |   |   | (3.2   | )      |   |   | 12.3 |   |

----

----

----

----

|                     |                 |   | Risk      Management Assets    |   |
|--------------------------|----------------------|--------|--------------------------------|--------|
|                     |                 |   | December      31, 2009         |   |   | December      31, 2008 |   |
| (Millions)               | Classification       |   | Gross      Derivative Position |   |   | Netting |   |   | Balance      SheetPresentation |   |   | Gross      Derivative Position |   |   | Netting |   |   | Balance      Sheet Presentation |   |
| Commodity      contracts | Current              |   | $                              | 0.8    |   |   | $ | 0.1 |   |   | $ | 0.7 |   |   | $ | 4.3 |   |   | $ | 2.5 |   |   | $ | 1.8 |   |
| Commodity      contracts | Other      Long-term |   |                           | 0.4    |   |   |   | 0.1 |   |   |   | 0.3 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                    |                 |   | $                              | 1.2    |   |   | $ | 0.2 |   |   | $ | 1.0 |   |   | $ | 4.3 |   |   | $ | 2.5 |   |   | $ | 1.8 |   |

|                     |                 |   | Risk      Management Liabilities |   |
|--------------------------|----------------------|--------|----------------------------------|--------|
|                     |                 |   | December      31, 2009           |   |   | December      31, 2008 |   |
| (Millions)               | Classification       |   | Gross      Derivative Position   |   |   | Netting |   |   | Balance      SheetPresentation |   |   | Gross      Derivative Position |   |   | Netting |   |   | Balance      Sheet Presentation |   |
| Commodity      contracts | Current              |   | $                                | 4.2    |   |   | $ | 0.1 |   |   | $ | 4.1 |   |   | $ | 29.2 |   |   | $ | 2.5 |   |   | $ | 26.7 |   |
| Commodity      contracts | Other      Long-term |   |                             | 0.3    |   |   |   | 0.1 |   |   |   | 0.2 |   |   |   | 1.7 |   |   |   | - |   |   |   | 1.7 |   |
| Total                    |                 |   | $                                | 4.5    |   |   | $ | 0.2 |   |   | $ | 4.3 |   |   | $ | 30.9 |   |   | $ | 2.5 |   |   | $ | 28.4 |   |

| (Millions)               | Balance      Sheet Presentation                          |   | 2009   |   |
|--------------------------|----------------------------------------------------------|--------|--------|--------|
| Commodity      contracts | Balance Sheet      – Regulatory assets (current)   |   | $      | 21.8   |   |
| Commodity      contracts | Balance Sheet      – Regulatory assets (long-term) |   |   | 1.4    |   |

|                                  |   | Purchases |   |
|---------------------------------------|--------|-----------|--------|
| Natural gas      (millions of therms) |   |      | 128.4  |   |
| Petroleum      products (barrels)     |   |      | 3,414  |   |

----

| (Millions)                                     |   | 2009   |   |   | 2008   |   |
|------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Total utility      plant                       |   | $      | 411.2  |   |   | $      | 405.7 |   |
| Less:  Accumulated      depreciation |   |   | 163.5  |   |   |   | 160.2 |   |
| Net                                            |   |   | 247.7  |   |   |   | 245.5 |   |
| Construction      work in progress             |   |   | 0.5    |   |   |   | 0.3 |   |
| Total      property, plant, and equipment      |   | $      | 248.2  |   |   | $      | 245.8 |   |

| (Millions)                                                         |   | 2009   |   |   | 2008   |   |
|--------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                                               |   |   |   |   |   |   |
| Regulatory      assets                                             |   |   |   |   |   |   |
| Environmental      remediation costs (net of insurance recoveries) |   | $      | 114.4  |   |   | $      | 105.8 |   |
| Pension and      other postretirement benefit related items        |   |   | 17.9   |   |   |   | 16.4 |   |
| Asset      retirement obligations                                  |   |   | 5.4    |   |   |   | 4.4 |   |
| Derivatives                                                        |   |   | 5.0    |   |   |   | 28.2 |   |
| Rate case      costs                                               |   |   | 3.0    |   |   |   | 2.1 |   |
| Unamortized      loss on debt                                      |   |   | 1.7    |   |   |   | 1.8 |   |
| Other                                                              |   |   | 2.4    |   |   |   | 1.9 |   |
| Total                                                              |   | $      | 149.8  |   |   | $      | 160.6 |   |
| Balance      Sheet Presentation                                    |   |   |   |   |   |   |   |   |
| Current                                                            |   | $      | 15.3   |   |   | $      | 32.3 |   |
| Long-term                                                          |   |   | 134.5  |   |   |   | 128.3 |   |
| Total                                                              |   | $      | 149.8  |   |   | $      | 160.6 |   |
|                                                               |   |   |   |   |   |   |   |   |
| Regulatory      liabilities                                        |   |   |   |   |   |   |   |   |
| Gas costs      refundable through rate adjustments                 |   | $      | 9.8    |   |   | $      | 6.5 |   |
| Income tax      related items                                      |   |   | 1.6    |   |   |   | 1.7 |   |
| Other                                                              |   |   | 0.5    |   |   |   | 1.5 |   |
| Total                                                              |   | $      | 11.9   |   |   | $      | 9.7 |   |
| Balance      Sheet Presentation                                    |   |   |   |   |   |   |   |   |
| Current                                                            |   | $      | 10.4   |   |   | $      | 8.1 |   |
| Long-term –      included in other long-term liabilities     |   |   | 1.5    |   |   |   | 1.6 |   |
| Total                                                              |   | $      | 11.9   |   |   | $      | 9.7 |   |

----

| Year      ending December 31 |   |   |   |
|------------------------------|--------|--------|--------|
| (Millions)                   |   |   |   |
| 2010                         |   | $      | -      |   |
| 2011                         |   |   | -      |   |
| 2012                         |   |   | -      |   |
| 2013                         |   |   | 46.5   |   |
| 2014                         |   |   | -      |   |
| Later      years             |   |   | 28.5   |   |
| Total      payments          |   | $      | 75.0   |   |

----

| (Millions)                                             |   |   |   |
|--------------------------------------------------------|--------|--------|--------|
| Asset      retirement obligations at December 31, 2006 |   | $      | 19.5   |   |
| Accretion                                              |   |   | 1.2    |   |
| Additions and      revisions to estimated cash flows   |   |   | 2.3    |   |
| Asset      retirement obligations at December 31, 2007 |   |   | 23.0   |   |
| Accretion                                              |   |   | 1.2    |   |
| Asset      retirement obligations at December 31, 2008 |   |   | 24.2   |   |
| Accretion                                              |   |   | 1.3    |   |
| Additions and      revisions to estimated cash flows   |   |   | (5.4   | ) |
| Asset      retirement obligations at December 31, 2009 |   | $      | 20.1   |   |

| (Millions)                                                                                      |   | 2009   |   |   | 2008   |   |
|-------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                                                                            |   |   |   |   |   |   |
| Deferred      income tax assets:                                                                |   |   |   |   |   |   |
| Employee      benefits                                                                          |   | $      | 6.8    |   |   | $      | 7.8 |   |
| Other                                                                                           |   |   | 1.0    |   |   |   | 2.0 |   |
| Total      deferred income tax assets                                                           |   | $      | 7.8    |   |   | $      | 9.8 |   |
|                                                                                            |   |   |   |   |   |   |   |   |
| Deferred      income tax liabilities:                                                           |   |   |   |   |   |   |   |   |
| Plant      related                                                                              |   | $      | 51.3   |   |   | $      | 48.4 |   |
| Regulatory      deferrals                                                                       |   |   | 5.4    |   |   |   | 4.0 |   |
| Total      deferred income tax liabilities                                                      |   | $      | 56.7   |   |   | $      | 52.4 |   |
|                                                                                            |   |   |   |   |   |   |   |   |
| Balance      Sheet Presentation:                                                                |   |   |   |   |   |   |   |   |
| Current      deferred income tax liabilities – included in other current      liabilities |   | $      | 0.7    |   |   | $      | 1.6 |   |
| Long-term      deferred income tax liabilities                                                  |   |   | 48.2   |   |   |   | 41.0 |   |
| Net      deferred income tax liabilities                                                        |   | $      | 48.9   |   |   | $      | 42.6 |   |

----

|                                    |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|-----------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| (Millions,      except for percentages) |   | Rate   |   |   | Amount |   |   | Rate   |   |   | Amount |   |   | Rate |   |   | Amount |   |
|                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Statutory      federal income tax       |   |   | 35.0   | %      |   | $      | 2.3    |   |   |   | 35.0 | % |   | $ | 3.9 |   |   |   | 35.0 | % |   | $ | 4.6 |   |
| State income      taxes, net            |   |   | 4.5    |   |   |   | 0.3    |   |   |   | 4.5 |   |   |   | 0.5 |   |   |   | 4.6 |   |   |   | 0.6 |   |
| Unrecognized      tax benefits          |   |   | -      |   |   |   | -      |   |   |   | 0.9 |   |   |   | 0.1 |   |   |   | 2.3 |   |   |   | 0.3 |   |
| Benefits and      compensation          |   |   | (1.5   | )      |   |   | (0.1   | )      |   |   | (1.8 | ) |   |   | (0.2 | ) |   |   | (1.5 | ) |   |   | (0.2 | ) |
| Other      differences, net             |   |   | (2.2   | )      |   |   | (0.1   | )      |   |   | (1.7 | ) |   |   | (0.2 | ) |   |   | (0.7 | ) |   |   | (0.1 | ) |
| Effective      income tax               |   |   | 35.8   | %      |   | $      | 2.4    |   |   |   | 36.9 | % |   | $ | 4.1 |   |   |   | 39.7 | % |   | $ | 5.2 |   |
|                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current      provision                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal                                 |   |   |   |   |   | $      | (3.2   | )      |   |   |   |   |   | $ | (0.1 | ) |   |   |   |   |   | $ | 3.9 |   |
| State                                   |   |   |   |   |   |   | (0.5   | )      |   |   |   |   |   |   | - |   |   |   |   |   |   |   | 2.3 |   |
| Total      current provision            |   |   |   |   |   |   | (3.7   | )      |   |   |   |   |   |   | (0.1 | ) |   |   |   |   |   |   | 6.2 |   |
|                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deferred      provision                 |   |   |   |   |   |   | 6.1    |   |   |   |   |   |   |   | 4.2 |   |   |   |   |   |   |   | (1.3 | ) |
| Unrecognized      tax benefits          |   |   |   |   |   |   | -      |   |   |   |   |   |   |   | 0.1 |   |   |   |   |   |   |   | 0.3 |   |
| Investment      tax credit - net        |   |   |   |   |   |   | -      |   |   |   |   |   |   |   | (0.1 | ) |   |   |   |   |   |   | - |   |
| Total      provision for income taxes   |   |   |   |   |   | $      | 2.4    |   |   |   |   |   |   | $ | 4.1 |   |   |   |   |   |   | $ | 5.2 |   |

| (Millions)                                                   |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|--------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                         |   |   |   |   |   |   |   |   |   |
| Balance      at January 1                               |   | $      | 0.3    |   |   | $      | 0.4    |   |   | $ | 0.1 |   |
| Increase      related to tax positions taken in prior years  |   |   | 0.1    |   |   |   | 0.4    |   |   |   | 0.1 |   |
| Decrease      related to tax positions taken in prior years  |   |   | -      |   |   |   | (0.4   | )      |   |   | - |   |
| Increase      related to tax positions taken in current year |   |   | -      |   |   |   | -      |   |   |   | 0.2 |   |
| Decrease      related to settlements                         |   |   | -      |   |   |   | (0.1   | )      |   |   | - |   |
| Balance      at December 31                             |   | $      | 0.4    |   |   | $      | 0.3    |   |   | $ | 0.4 |   |

----

| ·   | Illinois      Department of Revenue - NSG has agreed to a statute extension for the      September 30, 2003 tax year. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------|

|  ·   | IRS – PEC and      consolidated subsidiaries have open examinations for the September 30,      2004 through December 31, 2006 taxyears. |
|--------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | IRS –      Integrys Energy Group and consolidated subsidiaries have open examinations      for the 2006 and 2007 tax years along with the February 21, 2007 PEC short      year. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Illinois      Department of Revenue – PEC and consolidated subsidiaries have open      examinations for the September 30, 2003 through December 31, 2006 tax      years. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| · | Closure of      the defined benefit pension plans to non-union new hires, effective      January 1, 2008; |
|--------|-----------------------------------------------------------------------------------------------------------|

| · | A freeze in      defined benefit pension service accruals for non-union employees,      effective January 1, 2013; |
|--------|-------------------------------------------------------------------------------------------------------------------------|

| · | A freeze in      compensation amounts used for determining defined benefit pension amounts      for non-union employees, effective January 1,  2018; |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Revised      eligibility requirements for retiree medical benefits for employees hired      on or after January 1, 2008, and the introduction of an annual premium      reduction credit for employees eligible to retire after December 31, 2012;      and |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Closure of      the retiree dental and life benefit programs to all new hires, effective      January 1, 2008, and elimination of these benefits for any existing      employees who are not eligible to retire before December 31,      2012. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                               |   | Pension Benefits |   |   | Other Benefits |   |
|----------------------------------------------------|--------|------------------|--------|--------|----------------|--------|
| (Millions)                                         |   | 2009             |   |   | 2008           |   |   | 2009 |   |   | 2008 |   |
| Reconciliation      of benefit obligation          |   |             |   |   |           |   |   |   |   |   |   |   |
| Obligation at      beginning of measurement period |   | $                | 28.0   |   |           | $      | 28.3 |   |   | $ | 15.5 |   |   | $ | 14.6 |   |
| Service      cost                                  |   |             | 1.3    |   |           |   | 1.2 |   |   |   | 0.8 |   |   |   | 0.9 |   |
| Interest      cost                                 |   |             | 1.8    |   |           |   | 1.8 |   |   |   | 0.9 |   |   |   | 0.9 |   |
| Participant      contributions                     |   |             | -      |   |           |   | - |   |   |   | - |   |   |   | 0.2 |   |
| Transfers      from (to) affiliates                |   |             | 0.8    |   |           |   | (0.1 | ) |   |   | - |   |   |   | - |   |
| Actuarial      (gain) loss, net                    |   |             | 3.5    |   |           |   | (1.1 | ) |   |   | 0.1 |   |   |   | (0.5 | ) |
| Benefit      payments                              |   |             | (2.0   | )      |           |   | (2.6 | ) |   |   | (0.8 | ) |   |   | (0.9 | ) |
| Federal      subsidy on benefits paid              |   |             | -      |   |           |   | - |   |   |   | 0.1 |   |   |   | 0.1 |   |
| Elimination      of early measurement period       |   |             | -      |   |           |   | 0.5 |   |   |   | - |   |   |   | 0.2 |   |
| Obligation at      end of measurement period       |   | $                | 33.4   |   |           | $      | 28.0 |   |   | $ | 16.6 |   |   | $ | 15.5 |   |

| Reconciliation      of fair value of plan assets                            |   |   |   |   |   |   |   |   |   |   |   |   |
|-----------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Fair value of      plan assets at beginning of measurement      period |   | $      | 9.6    |   |   | $      | 15.7   |   |   | $      | 1.4    |   |   | $ | 2.4 |   |
| Actual return      on plan assets                                           |   |   | 2.3    |   |   |   | (4.0   | )      |   |   | 0.1    |   |   |   | (0.5 | ) |
| Employer      contributions                                                 |   |   | 4.0    |   |   |   | 1.0    |   |   |   | 2.2    |   |   |   | 0.3 |   |
| Transfers      from (to) affiliates                                         |   |   | 0.8    |   |   |   | (0.1   | )      |   |   | -      |   |   |   | - |   |
| Participant      contributions                                              |   |   | -      |   |   |   | -      |   |   |   | -      |   |   |   | 0.2 |   |
| Benefit      payments                                                       |   |   | (2.0   | )      |   |   | (2.6   | )      |   |   | (0.8   | )      |   |   | (0.9 | ) |
| Elimination      of early measurement period                                |   |   | -      |   |   |   | (0.4   | )      |   |   | -      |   |   |   | (0.1 | ) |
| Fair value of      plan assets at end of measurement period            |   | $      | 14.7   |   |   | $      | 9.6    |   |   | $      | 2.9    |   |   | $ | 1.4 |   |

|                        |   | Pension Benefits |   |   | Other Benefits |   |
|-----------------------------|--------|------------------|--------|--------|----------------|--------|
| (Millions)                  |   | 2009             |   |   | 2008           |   |   | 2009 |   |   | 2008 |   |
| Noncurrent      liabilities |   | $                | 18.7   |   |           | $      | 18.4 |   |   | $ | 13.7 |   |   | $ | 14.1 |   |

|                                |   | December 31 |   |
|-------------------------------------|--------|------------------|--------|
| (Millions)                          |   | 2009             |   |   | 2008 |   |
| Projected      benefit obligation   |   | $                | 33.4   |   |   | $ | 28.0 |   |
| Accumulated      benefit obligation |   |             | 25.7   |   |   |   | 21.9 |   |
| Fair value of      plan assets      |   |             | 14.7   |   |   |   | 9.6 |   |

----

|                       |   | Pension Benefits |   |   | Other Benefits |   |
|----------------------------|--------|------------------|--------|--------|----------------|--------|
| (Millions)                 |   | 2009             |   |   | 2008           |   |   | 2009 |   |   | 2008 |   |
| Net      regulatory assets |   |             |   |   |           |   |   |   |   |   |   |   |
| Net actuarial      loss    |   | $                | 13.5   |   |           | $      | 11.7 |   |   | $ | 2.4 |   |   | $ | 2.4 |   |
| Prior service      cost    |   |             | 1.5    |   |           |   | 1.7 |   |   |   | - |   |   |   | - |   |
| Transition      obligation |   |             | -      |   |           |   | - |   |   |   | 0.5 |   |   |   | 0.6 |   |
| Total                      |   | $                | 15.0   |   |           | $      | 13.4 |   |   | $ | 2.9 |   |   | $ | 3.0 |   |

|                                                      |   | Pension Benefits |   |   | Other Benefits |   |
|-----------------------------------------------------------|--------|------------------|--------|--------|----------------|--------|
| (Millions)                                                |   | 2009             |   |   | 2008           |   |   | 2007 |   |   | 2009 |   |   | 2008 |   |   | 2007 |   |
| Net      periodic benefit cost                            |   |             |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service      cost                                         |   | $                | 1.3    |   |           | $      | 1.2 |   |   | $ | 1.3 |   |   | $ | 0.8 |   |   | $ | 0.8 |   |   | $ | 0.8 |   |
| Interest      cost                                        |   |             | 1.8    |   |           |   | 1.8 |   |   |   | 1.7 |   |   |   | 0.9 |   |   |   | 0.9 |   |   |   | 0.8 |   |
| Expected      return on plan assets                       |   |             | (1.2   | )      |           |   | (1.2 | ) |   |   | (1.2 | ) |   |   | (0.1 | ) |   |   | (0.1 | ) |   |   | (0.2 | ) |
| Amortization      of transition obligation                |   |             | -      |   |           |   | - |   |   |   | - |   |   |   | 0.1 |   |   |   | 0.1 |   |   |   | 0.1 |   |
| Amortization      of prior service cost                   |   |             | 0.2    |   |           |   | 0.2 |   |   |   | 0.2 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Amortization      of net actuarial loss                   |   |             | 0.2    |   |           |   | 0.1 |   |   |   | 0.3 |   |   |   | - |   |   |   | 0.1 |   |   |   | 0.1 |   |
| Net      periodic benefit cost                            |   |             | 2.3    |   |           |   | 2.1 |   |   |   | 2.3 |   |   |   | 1.7 |   |   |   | 1.8 |   |   |   | 1.6 |   |
| Effects of      lump sum settlements upon retirement |   |             | 0.4    |   |           |   | 0.2 |   |   |   | 0.3 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Net      benefit cost                                     |   | $                | 2.7    |   |           | $      | 2.3 |   |   | $ | 2.6 |   |   | $ | 1.7 |   |   | $ | 1.8 |   |   | $ | 1.6 |   |

|                                                | Pension Benefits | Other Benefits |
|-----------------------------------------------------|------------------|----------------|
|                                                | 2009             | 2008           | 2009 | 2008 |
| Discount      rate                                  | 6.15%            | 6.45%          | 5.80% | 6.45% |
| Rate of      compensation increase                  | 4.17%            | 4.17%          | N/A | N/A |
| Assumed      medical cost trend rate (under age 65) | N/A              | N/A            | 8.0% | 9.0% |
| Ultimate      trend rate                            | N/A              | N/A            | 5.0% | 5.0% |
| Ultimate      trend rate reached in                 | N/A              | N/A            | 2013 | 2013 |
| Assumed      medical cost trend rate (over age 65)  | N/A              | N/A            | 8.5% | 9.5% |
| Ultimate      trend rate                            | N/A              | N/A            | 5.5% | 5.5% |
| Ultimate      trend rate reached in                 | N/A              | N/A            | 2013 | 2013 |
| Assumed      dental cost trend rate                 | N/A              | N/A            | 5.0% | 5.0% |

----

|                               | Pension      Benefits |
|------------------------------------|-----------------------|
|                               | 2009                  | 2008 | 2007 |
| Discount      rate                 |  6.45%           |  6.40% |  6.00% |
| Expected      return on assets     |  8.50%           |  8.50% |  8.50% |
| Rate of      compensation increase |  4.17%           |  4.18% |  3.75% |

|                                                | Other      Benefits |
|-----------------------------------------------------|---------------------|
|                                                | 2009                | 2008 | 2007 |
| Discount      rate                                  |  6.45%         |  6.25% |  5.75% |
| Expected      return on assets                      |  8.50%         |  8.50% |  8.50% |
| Assumed      medical cost trend rate (under age 65) |  9.0%          |  10.0% |  8.0% |
| Ultimate      trend rate                            |  5.0%          |  5.0% |  5.0% |
| Ultimate      trend rate reached in                 |  2013          |  2013 |  2010 |
| Assumed      medical cost trend rate (over age 65)  |  9.5%          |  10.5% |  8.0% |
| Ultimate      trend rate                            |  5.5%          |  5.5% |  5.0% |
| Ultimate      trend rate reached in                 |  2013          |  2013 |  2010 |
| Assumed      dental cost trend rate                 |  5.0%          |  5.0% |  5.0% |

|                                                                                                                      |   | One-Percentage-Point |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|----------------------|--------|
| (Millions)                                                                                                                |   | Increase             |   |   | Decrease |   |
| Effect on      total of service and interest cost components of net periodic      postretirement health care benefit cost |   | $                    | 0.2    |   |   | $ | (0.2 | ) |
| Effect on the      health care component of the accumulated      postretirement benefit obligation                        |   |                 | 1.7    |   |   |   | (1.5 | ) |

----

|                                                                                                  |   | Pension      Plan Assets |   |   | Other      Benefit Plan Assets |   |
|-------------------------------------------------------------------------------------------------------|--------|--------------------------|--------|--------|--------------------------------|--------|
| (Millions)                                                                                            |   | Level      1             |   |   | Level      2                   |   |   | Level      3 |   |   | Total |   |   | Level      1 |   |   | Level      2 |   |   | Level      3 |   |   | Total |   |
| Asset      Category                                                                                   |   |                     |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash      equivalents                                                                        |   | $                        | -      |   |                           | $      | 0.5 |   |   | $ | - |   |   | $ | 0.5 |   |   | $ | - |   |   | $ | 1.7 |   |   | $ | - |   |   | $ | 1.7 |   |
| Equity      securities:                                                                               |   |                     |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      United      States equity                                               |   |                     | 4.1    |   |                           |   | 3.1 |   |   |   | - |   |   |   | 7.2 |   |   |   | - |   |   |   | 0.1 |   |   |   | - |   |   |   | 0.1 |   |
|      International      equity                                               |   |                     | 0.5    |   |                           |   | 2.2 |   |   |   | - |   |   |   | 2.7 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Fixed income      securities:                                                                         |   |                     |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      United      States government                                      |   |                     | -      |   |                           |   | 1.9 |   |   |   | - |   |   |   | 1.9 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|      Foreign government                                                 |   |                     | -      |   |                           |   | 0.2 |   |   |   | - |   |   |   | 0.2 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|      Corporate      debt                                                     |   |                     | -      |   |                           |   | 2.1 |   |   |   | 0.1 |   |   |   | 2.2 |   |   |   | 0.1 |   |   |   | - |   |   |   | - |   |   |   | 0.1 |   |
|      Asset-backed      securities                                            |   |                     | -      |   |                           |   | 0.7 |   |   |   | - |   |   |   | 0.7 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Real estate      securities                                                                           |   |                     | -      |   |                           |   | - |   |   |   | 0.4 |   |   |   | 0.4 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                                                  |   |                     | 4.6    |   |                           |   | 10.7 |   |   |   | 0.5 |   |   |   | 15.8 |   |   |   | 0.1 |   |   |   | 1.8 |   |   |   | - |   |   |   | 1.9 |   |
| 401(h) other      benefit plan assets      invested      as pension assets * |   |                     | -      |   |                           |   | (1.0 | ) |   |   | - |   |   |   | (1.0 | ) |   |   | - |   |   |   | 1.0 |   |   |   | - |   |   |   | 1.0 |   |
|      Total                                                                   |   | $                        | 4.6    |   |                           | $      | 9.7 |   |   | $ | 0.5 |   |   | $ | 14.8 |   |   | $ | 0.1 |   |   | $ | 2.8 |   |   | $ | - |   |   | $ | 2.9 |   |

| * | Pension trust      assets are used to pay of other postretirement benefits as allowed under      Internal Revenue Code Section401(h). |
|---|---------------------------------------------------------------------------------------------------------------------------------------|

----

| (Millions)                                               |   | Corporate      Debt |   |   | Real      Estate Securities |   |   | Total  |   |
|----------------------------------------------------------|--------|---------------------|--------|--------|-----------------------------|--------|--------|--------|--------|
| Beginning      balance at December 31, 2008              |   | $                   | -      |   |                        | $      | 0.6    |   |   | $ | 0.6 |   |
| Actual return      on plan assets:                       |   |                |   |   |                        |   |   |   |   |   |   |   |
| Relating to      assets still held at the reporting date |   |                | 0.1    |   |                        |   | (0.2   | )      |   |   | (0.1 | ) |
| Ending      balance at December 31, 2009                 |   | $                   | 0.1    |   |                        | $      | 0.4    |   |   | $ | 0.5 |   |

| (Millions) |   | Pension      Benefits |   |   | Other      Benefits |   |   | Federal      Subsidies |   |
|------------|--------|-----------------------|--------|--------|---------------------|--------|--------|------------------------|--------|
| 2010       |   | $                     | 1.8    |   |                | $      | 1.1    |                   |   | $ | (0.1 | ) |
| 2011       |   |                  | 2.2    |   |                |   | 1.2    |                   |   |   | (0.1 | ) |
| 2012       |   |                  | 2.3    |   |                |   | 1.3    |                   |   |   | (0.1 | ) |
| 2013       |   |                  | 2.7    |   |                |   | 1.4    |                   |   |   | (0.2 | ) |
| 2014       |   |                  | 2.5    |   |                |   | 1.4    |                   |   |   | (0.2 | ) |
| 2015-2019  |   |                  | 16.6   |   |                |   | 9.1    |                   |   |   | (1.0 | ) |

----

|                             |   | December      31, 2009 |   |
|----------------------------------|--------|------------------------|--------|
| (Millions)                       |   | Level      1           |   |   | Level      2 |   |   | Level      3 |   |   | Total |   |   | Netting * |   |   | Balance      SheetPresentation |   |
| Risk      management assets      |   | $                      | 0.1    |   |   | $ | 1.1 |   |   | $ | - |   |   | $ | 1.2 |   |   | $ | 0.2 |   |   | $ | 1.0 |   |
| Risk      management liabilities |   |                   | -      |   |   |   | 4.5 |   |   |   | - |   |   |   | 4.5 |   |   |   | 0.2 |   |   |   | 4.3 |   |

|                             |   | December      31, 2008 |   |
|----------------------------------|--------|------------------------|--------|
| (Millions)                       |   | Level      1           |   |   | Level      2 |   |   | Level      3 |   |   | Total |   |   | Netting * |   |   | Balance      Sheet Presentation |   |
| Risk      management assets      |   | $                      | -      |   |   | $ | 4.3 |   |   | $ | - |   |   | $ | 4.3 |   |   | $ | 2.5 |   |   | $ | 1.8 |   |
| Risk      management liabilities |   |                   | -      |   |   |   | 30.9 |   |   |   | - |   |   |   | 30.9 |   |   |   | 2.5 |   |   |   | 28.4 |   |

| * | FASB ASC      815-10-45 permits the netting of risk management assets and liabilities      when a legally enforceable netting agreement exists, and requires the      netting of related cash collateral positions against the net derivative      positions. |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                |   | 2009                 |   |   | 2008      |   |
|---------------------|--------|----------------------|--------|--------|-----------|--------|
| (Millions)          |   | Carrying Amount |   |   | FairValue |   |   | Carrying Amount |   |   | FairValue |   |
| Long-term      debt |   | $                    | 75.0   |   |      | $      | 76.6 |   |   | $ | 75.3 |   |   | $ | 68.3 |   |

----

| (Millions)                         |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Environmental      carrying charge |   | $      | 0.3    |   |   | $      | 0.3    |   |   | $ | 0.1 |   |
| Interest and      dividend income  |   |   | 0.1    |   |   |   | 0.5    |   |   |   | 1.1 |   |
| Total      miscellaneous income    |   | $      | 0.4    |   |   | $      | 0.8    |   |   | $ | 1.2 |   |

----

|                                                                   |   | Year      Ended December 31, |   |   | Year      Ended December 31, |   |   | Year      Ended December 31, |   |
|------------------------------------------------------------------------|--------|------------------------------|--------|--------|------------------------------|--------|--------|------------------------------|--------|
| (Millions)                                                             |   | 2009                         |   |   | 2008                         |   |   | 2007                         |   |
|                                                                   |   |                         |   |   |                         |   |   |                         |   |
| Natural gas      sales to Integrys Energy Services                     |   | $                            | 0.2    |   |                         | $      | 0.2    |                         |   | $ | 0.3 |   |
| Interest      income from PGL                                          |   |                         | -      |   |                         |   | 0.3    |                         |   |   | 0.5 |   |
| Interest      expense to Integrys Energy Group, PGL, and      PEC |   |                         | 0.1    |   |                         |   | 0.1    |                         |   |   | - |   |

----

| (Millions)                                                                                  |   | 2009   |   |   | 2008   |   |
|---------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Total      short-term credit capacity under revolving short-term notes      payable         |   | $      | 100.0  |   |   | $      | 100.0 |   |
| Less:  Loans      outstanding from PEC                                            |   |   | -      |   |   |   | 9.0 |   |
|           Loans      outstanding from PGL |   |   | 7.6    |   |   |   | - |   |
| Available      capacity under existing agreements                                           |   | $      | 92.4   |   |   | $      | 91.0 |   |

| (Millions)              |   | Three      Months Ended |   |
|-------------------------|--------|-------------------------|--------|
|                    |   | 2009                    |   |
|                    |   | March                   |   |   | June |   |   | September |   |   | December |   |   | Total |   |
| Operating      revenues |   | $                       | 116.6  |   |   | $ | 28.0 |   |   | $ | 21.9 |   |   | $ | 61.7 |   |   | $ | 228.2 |   |
| Operating      income   |   |                    | 5.5    |   |   |   | 0.6 |   |   |   | 1.0 |   |   |   | 3.5 |   |   |   | 10.6 |   |
| Net income      (loss)  |   |                    | 2.9    |   |   |   | (0.2 | ) |   |   | - |   |   |   | 1.6 |   |   |   | 4.3 |   |
|                    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    |   | Three Months      Ended |   |
|                    |   | 2008                    |   |
|                    |   | March                   |   |   | June |   |   | September |   |   | December |   |   | Total |   |
| Operating      revenues |   | $                       | 131.7  |   |   | $ | 50.7 |   |   | $ | 33.2 |   |   | $ | 97.3 |   |   | $ | 312.9 |   |
| Operating      income   |   |                    | 8.9    |   |   |   | 0.8 |   |   |   | 0.6 |   |   |   | 4.2 |   |   |   | 14.5 |   |
| Net income      (loss)  |   |                    | 5.5    |   |   |   | (0.1 | ) |   |   | (0.4 | ) |   |   | 2.0 |   |   |   | 7.0 |   |

----

----

----

| Fees                        |   | 2009   |    |   | 2008   |   |
|-----------------------------|--------|--------|---------|--------|--------|--------|
| Audit Fees      (a)         |   | $      | 306,039 |   |   | $      | 295,905 |   |
| Audit Related      Fees (b) |   |   | 7,144   |   |   |   | 112,500 |   |
| Tax Fees      (c)           |   |   | 18,871  |   |   |   | - |   |
| Total      Fees             |   | $      | 332,054 |   |   | $      | 408,405 |   |

| a)   | Audit Fees. Consists of      aggregate fees for the audits of the annual financial statements, reviews      of the interim condensed financial statements included in quarterly      reports, and audits of the effectiveness of, and management's assessment      of the effectiveness of, internal control over financial      reporting.  Audit fees also include services that are normally      provided by Deloitte & Touche in connection with statutory and      regulatory filings. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b)   | Audit Related Fees.      Consists of fees billed for assurance and related services that are      reasonably related to the performance of the audit or review of the      financial statements or internal control over financial reporting and are      not reported under "Audit Fees."  These services in 2009      included an examination of forecasted financial statements in connection      with NSG’s rate filing with theICC. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c)   | Tax      Fees.  Consists of fees billed for professional services      rendered for tax compliance. |
|----------------|---------------------------------------------------------------------------------------------------------------|

----

----

| Documents      filed as part of this report: |
|----------------------------------------------|
|                                         |   |
| (1)                                          | Financial      Statements included in Part II at Item 8 above: |
|                                         |   |
|                                         | Description | Pages in 10-K |
|                                         |   |   |
|                                         | Statements of      Income for the three years ended December 31, 2009, 2008, and      2007 | 28 |
|                                         |   |
|                                         | Balance      Sheets as of December 31, 2009 and 2008 | 29 |
|                                         |   |
|                                         | Statements of      Capitalization as of December 31, 2009 and 2008 | 30 |
|                                         |   |
|                                         | Statements of      Common Shareholder's Equity for the three years ended December 31,      2009, 2008, and 2007 | 31 |
|                                         |   |
|                                         | Statements of      Cash Flows for the three years ended December 31, 2009, 2008, and      2007 | 32 |
|                                         |   |
|                                         | Notes to      Financial Statements | 33-53 |
|                                         |   |   |
|                                         | Report of      Independent Registered Public Accounting Firm | 54 |
|                                         |   |   |
| (2)                                          | Financial      Statement Schedules. The following      financial statement schedules are included in Part IV of this      report.  Schedules not included herein have been omitted because      they are not applicable or the required information is shown in the      financial statements or notes thereto. |
|                                         |   |
|                                         | Description | Pages in 10-K |
|                                         |   |   |
|                                         | Schedule II      NSG Valuation and Qualifying Accounts | 60 |
|                                         |   |   |
| (3)                                          | Listing of      all exhibits, including those incorporated by reference. See Exhibit      Index  |

----

|   |   | NORTH SHORE      GAS COMPANY |
|--------|--------|------------------------------|
|   |
|   |   |                         | (Registrant) |
|   |   |                         |   |
|   |   | By:                          | /s/  Lawrence T.      Borgard |
|   |   |                         | Lawrence T.      BorgardVice Chairman      of the Board and Chief ExecutiveOfficer |

| Signature                                 | Title                                                                 | Date                   |
|-------------------------------------------|-----------------------------------------------------------------------|------------------------|
|                                      |                                                                  |                   |
| /s/  Charles A.      Schrock    |                                                                  |                   |
| Charles A.      Schrock                   | Director and      Chairman of the Board                               | February 25,      2010 |
|                                      |                                                                  |                   |
| /s/  Lawrence T.      Borgard   |                                                                  |                   |
| Lawrence T.      Borgard                  | Director,      Vice Chairman of the Board and Chief Executive Officer | February 25,      2010 |
|                                      |                                                                  |                   |
| /s/  Willard S. Evans,      Jr. |                                                                  |                   |
| Willard S.      Evans, Jr.                | Director and      President                                           | February 25,      2010 |
|                                      |                                                                  |                   |
| /s/  Thomas P.    Meinz         |                                                                  |                   |
| Thomas P.      Meinz                      | Director                                                              | February 25,      2010 |
|                                      |                                                                  |                   |
| /s/  Phillip M.      Mikulsky   |                                                                  |                   |
| Phillip M.      Mikulsky                  | Director                                                              | February 25,      2010 |
|                                      |                                                                  |                   |
| /s/  Joseph P.      O'Leary     |                                                                  |                   |
| Joseph P.      O'Leary                    | Director,      Senior Vice President and Chief Financial Officer      | February 25,      2010 |
|                                      |                                                                  |                   |
| /s/  James F.    Schott         |                                                                  |                   |
| James F.      Schott                      | Director and      Vice President - Regulatory Affairs                 | February 25,      2010 |
|                                      |                                                                  |                   |
| /s/  Diane L.Ford               |                                                                  |                   |
| Diane L.      Ford                        | Vice      President and Corporate Controller                          | February 25,      2010 |
|                                      |                                                                  |                   |

----

| SCHEDULE      II                                                                                                                               |   |              |   |   |            |   |   |                    |   |   |                |   |   |               |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|--------|--------|-----------------|--------|--------|-------------------------|--------|--------|---------------------|--------|--------|--------------------|--------|
| NORTH      SHORE GAS COMPANY                                                                                                                   |   |              |   |   |            |   |   |                    |   |   |                |   |   |
| VALUATION      AND QUALIFYING ACCOUNTS                                                                                                         |   |              |   |   |            |   |   |                    |   |   |
|                                                                                                                                           |   |              |   |   |            |   |   |                    |   |   |                |   |   |               |   |
|                                                                                                                                           |   |              |   |   |            |   |   |                    |   |   |                |   |   |               |   |
| Allowance      for Doubtful Accounts                                                                                                           |   |
| Years      Ended December 31, 2009, 2008, and 2007                                                                                             |   |
| (in      millions)                                                                                                                             |   |
|                                                                                                                                           |   |              |   |   |            |   |   |                    |   |   |                |   |   |               |   |
|                                                                                                                                           |   |              |   |   |            |   |   |                    |   |   |                |   |   |               |   |
|                                                                                                                                           |   | Balance      at   |   |   | Additions       |   |   | Additions               |   |   |                |   |   |               |   |
|                                                                                                                                           |   | Beginning      of |   |   | Charged      to |   |   | Charged      to         |   |   |                |   |   | Balance      at    |   |
| Fiscal      Year                                                                                                                               |   | Period            |   |   | Expense         |   |   | Other      Accounts (1) |   |   | Reductions      (2) |   |   | End of      Period |   |
|                                                                                                                                           |   |              |   |   |            |   |   |                    |   |   |                |   |   |               |   |
| 2007                                                                                                                                           |   | $                 | 1.6    |   |            | $      | 2.1    |                    |   | $      | -                   |   |   | $                  | 1.7    |   |   | $ | 2.0 |   |
|                                                                                                                                           |   |              |   |   |            |   |   |                    |   |   |                |   |   |               |   |   |   |   |   |   |
| 2008                                                                                                                                           |   | $                 | 2.0    |   |            | $      | 2.5    |                    |   | $      | -                   |   |   | $                  | 2.8    |   |   | $ | 1.7 |   |
|                                                                                                                                           |   |              |   |   |            |   |   |                    |   |   |                |   |   |               |   |   |   |   |   |   |
| 2009                                                                                                                                           |   | $                 | 1.7    |   |            | $      | 1.5    |                    |   | $      | 0.6                 |   |   | $                  | 2.9    |   |   | $ | 0.9 |   |
|                                                                                                                                           |   |              |   |   |            |   |   |                    |   |   |                |   |   |               |   |   |   |   |   |   |
| (1) Represents      amounts charged to tax liabilities related to revenue taxes and state use      taxes uncollectible from customers and |   |
| uncollectible      amounts deferred as a regulatory asset under the Illinois Senate Bill      1918.                                            |   |
| (2)      Represents amounts written off to the reserve, net of any      adjustments.                                                           |   |              |   |   |            |

----

| ExhibitNumber | Description of Documents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 3.1           | Articles of      Incorporation of NSG, as amended on April 24, 1995 (Incorporated by      reference to Form 10-K for fiscal year ended 1995, Exhibit 3(b) [File No.      2-35965]).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 3.2           | By-Laws of      NSG, as amended May 17, 2007 (Incorporated by reference to Form 10-Q for      the quarter ended June 30, 2007, Exhibit 3.2 [File No.      2-35965]).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 4.1           | NSG      Indenture, dated as of April 1, 1955, from NSG to U.S. Bank      National Association (as successor trustee to Continental Illinois      National Bank and Trust Company of Chicago), as Trustee; Third      Supplemental Indenture, dated as of December 20, 1963 (NSG—File      No. 2-35965, Exhibit 4-1); Fourth Supplemental Indenture, dated as of      May 1 1964 (NSG—File No. 2-35965, Exhibit 4-1); Fifth Supplemental      Indenture dated as of February 1, 1970 (NSG—File No. 2-35965,      Exhibit 4-2); Ninth Supplemental Indenture dated as of December 1, 1987      (Incorporated by reference to Form 10-K for the fiscal year ended      September 30, 1987, Exhibit 4 [File No. 1-05540]); Thirteenth Supplemental      Indenture dated December 1, 1998 ( Incorporated by reference to Form 10-Q      for the quarter ended March 31, 1999, Exhibit 4 [File No. 2-35965]);      Fourteenth Supplemental Indenture dated as of April 15, 2003, First      Mortgage 4.625% Bonds, Series N-1 and Series N-2 ( Incorporated by      reference to Form 10-Q for the quarter ended March 31, 2003, Exhibit 4(g)      [File No. 2-35965]) and Fifteenth Supplemental Indenture dated as of      November 1, 2008, First Mortgage 7.00% Bonds, Series O. (Incorporated by      reference to Exhibit 4.12 to Integrys Energy Group's Form 10-K filed      February 26, 2009 [File No. 1-11337]). |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.1+         | Amendment      Number One to the Amended and Restated Trust under PEC's Directors      Deferred Compensation Plan, Directors Stock and Option Plan, Executive      Deferred Compensation Plan and Supplemental Retirement Benefit Plan, dated      as of July 24, 2006 ( Incorporated by reference to Form 10-K for fiscal      year ended September 30, 2006, Exhibit 10(e) [File No.      2-35965]).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.2+         | Executive      Deferred Compensation Plan, amended as of December 4, 2002 (Incorporated      by reference to Form 10-Q for the quarter ended December 31, 2002, Exhibit      10(c) [File No. 2-35965]).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.3+         | Amended and      Restated Trust under PEC's Directors Deferred Compensation Plan, Directors      Stock and Option Plan, Executive Deferred Compensation Plan and      Supplemental Retirement Benefit Plan, dated as of August 13, 2003 (      Incorporated by reference to Form 10-K for fiscal year ended September 30,      2003, Exhibit 10(a) [File No. 2-35965]).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.4+         | Form of Key      Executive Employment and Severance Agreement entered into between Integrys      Energy Group and each of the following:  Lawrence T. Borgard,      Diane L. Ford, Bradley A. Johnson, Thomas P. Meinz, Joseph P. O'Leary,      Mark A. Radtke, Charles A. Schrock, and Barth J.      Wolf.  (Incorporated by reference to Exhibit 10.2 to Integrys      Energy Group's Form 10-K for the year ended December 31, 2008 [File      No. 1-11337]).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

----

| 10.5+  | Form of      Integrys Energy Group 2007 Omnibus Incentive Compensation Plan Performance      Stock Right Agreement approved May 17, 2007 (Incorporated by reference to      Exhibit 10.5 to Integrys Energy Group's Form 10-K for the year ended      December 31, 2007 [File No. 1-11337]).              |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                      |
| 10.6+  | Form of      Integrys Energy Group 2007 Omnibus Incentive Compensation Plan Performance      Stock Right Agreement approved February 14, 2008 (Incorporated by      reference to Exhibit 10.6 to Integrys Energy Group's Form 10-K for the      year ended December 31, 2007 [File No. 1-11337]).         |
|   |                                                                                                                                                                                                                                                                                                      |
| 10.7+  | Form of      Integrys Energy Group 2007 Omnibus Incentive Compensation Plan Restricted      Stock Award Agreement approved May 17, 2007 (Incorporated by reference to      Exhibit 10.8 to Integrys Energy Group's Form 10-K for the year ended      December 31, 2007 [File No. 1-11337]).               |
|   |                                                                                                                                                                                                                                                                                                      |
| 10.8+  | Form of      Integrys Energy Group 2007 Omnibus Incentive Compensation Plan Restricted      Stock Award Agreement approved February 14, 2008 (Incorporated by      reference to Exhibit 10.9 to Integrys Energy Group's Form 10-K for the      year ended December 31, 2007 [File No. 1-11337]).          |
|   |                                                                                                                                                                                                                                                                                                      |
| 10.9+  | Form of      Integrys Energy Group 2007 Omnibus Incentive Compensation Plan      NonQualified Stock Option Agreement approved May 17, 2007 (Incorporated by      reference to Exhibit 10.10 to Integrys Energy Group's Form 10-K for the      year ended December 31, 2007 [File No. 1-11337]).           |
|   |                                                                                                                                                                                                                                                                                                      |
| 10.10+ | Form of      Integrys Energy Group 2007 Omnibus Incentive Compensation Plan      NonQualified Stock Option Agreement approved February 14, 2008      (Incorporated by reference to Exhibit 10.11 to Integrys Energy Group's      Form 10-K for the year ended December 31, 2007 [File No.      1-11337]). |
|   |                                                                                                                                                                                                                                                                                                      |
| 10.11+ | Integrys      Energy Group, Inc. 2007 Omnibus Incentive Compensation Plan (Incorporated      by reference to Exhibit 10.17 to Integrys Energy Group's Form 10-K for the      year ended December 31, 2007 [File No. 1-11337]).                                                                            |
|   |                                                                                                                                                                                                                                                                                                      |
| 10.12+ | Integrys      Energy Group Pension Restoration and Supplemental Retirement Plan, as      Amended and Restated Effective April 1, 2008  (Incorporated by      reference to Exhibit 10.1 to Integrys Energy Group's Form 8-K filed April      15, 2008[File No. 1-11337).                         |
|   |                                                                                                                                                                                                                                                                                                      |
| 10.13  | Order of the      Illinois Commerce Commission in Docket No. 01-0706 for NSG (Incorporated      by reference to Form 10-Q for the quarter ended March 31, 2006, Exhibit      10.1 [File No. 2-35965]).                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                      |
| 10.14  | Order of the      Illinois Commerce Commission in Docket No. 02-0726 for NSG (Incorporated      by reference to Form 10-Q for the quarter ended March 31, 2006, Exhibit      10.2 [File No. 2-35965]).                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                      |
| 10.15  | Order of the      Illinois Commerce Commission in Docket No. 03-0704 for NSG (Incorporated      by reference to Form 10-Q for the quarter ended March 31, 2006, Exhibit      10.4 [File No. 2-35965]).                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                      |
| 10.16  | Order of the      Illinois Commerce Commission in Docket No. 04-0682 for NSG (Incorporated      by reference to Form 10-Q for the quarter ended March 31, 2006, Exhibit      10.6 [File No. 2-35965]).                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                      |
| 12     | NSG Ratio of      Earnings to Fixed Charges.                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                      |
| 24     | Powers of      Attorney.                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                      |
| 31.1   | Certification      of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley      Act and Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of      1934 for NSG.                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                      |
| 31.2   | Certification      of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley      Act and Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of      1934 for NSG.                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                      |

----

| 32     | Certification      of Chief Executive Officer and Chief Financial Officer pursuant to 18      U.S.C. Section 1350, as adopted pursuant to Section 906 of the      Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 99     | Proxy      Statement for Integrys Energy Group's 2010 Annual Meeting of Shareholders.      [To be filed with the SEC under Regulation 14A within 120 days after      December 31, 2009; except to the extent specifically incorporated by      reference, the Proxy Statement for the 2010 Annual Meeting of Shareholders      shall not be deemed to be filed with the SEC as part of this Annual Report      on Form10-K.] |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                         |
| +      | A management      contract or compensatory plan orarrangement.                                                                                                                                                                                                                                                                                                                                                               |

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