Document:

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                                                                    Exhibit 4.10

                              CERTIFICATE OF TRUST
                                       OF
                               PEC FUNDING TRUST I

         THIS CERTIFICATE OF TRUST of PEC Funding Trust I (the "TRUST"), dated
as of March 12, 2002, is being duly executed and filed by the undersigned, as
trustees, with the Secretary of State of the State of Delaware to form a
business trust under the Delaware Business Trust Act (12 DEL. CODE SS.3801 ET
SEQ.).

         1. NAME. The name of the business trust being formed hereby is "PEC
Funding Trust I."

         2. DELAWARE TRUSTEE. The name and business address of the trustee of
the Trust with a principal place of business in the State of Delaware is Bank
One Delaware Inc., Three Christina, 201 North Walnut Street, Wilmington,
Delaware 19801.

         3. EFFECTIVE DATE. This Certificate of Trust shall be effective at the
time of its filing with the Secretary of State of the State of Delaware.

         4. COUNTERPARTS. This Certificate of Trust may be executed in one or
more counterparts.

                           [SIGNATURE PAGE TO FOLLOW]

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         IN WITNESS WHEREOF, the undersigned, being all of the trustees of the
Trust at the time of filing of this Certificate of Trust, have executed this
Certificate of Trust as of the date first above written.

                              Bank One Delaware Inc., not in
                              its individual capacity but
                              solely as trustee,
                              as Delaware Trustee

                              By:  /s/  CHRIS HOLLY
                                 -------------------------------------------
                                 Name:  Chris Holly
                                 Title: Vice President

                              Bank One Trust Company, National Association, not
                              in its individual capacity but solely as trustee
                              as Property Trustee

                              By:  /s/  CHRIS HOLLY
                                 -------------------------------------------
                                 Name:  Chris Holly
                                 Title: Vice President

                              Thomas A. Nardi,
                              as Administrative Trustee

                                   /s/  THOMAS A. NARDI
                              ----------------------------------------------

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================================================================================

                           PEOPLES ENERGY CORPORATION

                               GUARANTEE AGREEMENT

                               PEC FUNDING TRUST I

                                ----------------

                         Dated as of ____________, 2002

                                ----------------

================================================================================

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                                TABLE OF CONTENTS

                                 --------------

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                                                                                             PAGE
                                                                                             ----
                              ARTICLE 1DEFINITIONS

<S>            <C>                                                                             <C>
SECTION 1.01.  DEFINITIONS......................................................................1

                          ARTICLE 2TRUST INDENTURE ACT

SECTION 2.01.  TRUST INDENTURE ACT; APPLICATION.................................................5
SECTION 2.02.  LISTS OF HOLDERS OF PREFERRED SECURITIES.........................................6
SECTION 2.03.  REPORTS BY THE GUARANTEE TRUSTEE.................................................6
SECTION 2.04.  PERIODIC REPORTS TO THE GUARANTEE TRUSTEE........................................6
SECTION 2.05.  EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.................................7
SECTION 2.06.  EVENTS OF DEFAULT; WAIVER........................................................7
SECTION 2.07.  DISCLOSURE OF INFORMATION........................................................7
SECTION 2.08.  CONFLICTING INTEREST.............................................................8

           ARTICLE 3POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

SECTION 3.01.  POWERS AND DUTIES OF THE GUARANTEE TRUSTEE.......................................8
SECTION 3.02.  CERTAIN RIGHTS AND DUTIES OF THE GUARANTEE TRUSTEE...............................9
SECTION 3.03.  NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE...........................12
SECTION 3.04.  THE GUARANTEE TRUSTEE MAY OWN PREFERRED SECURITIES..............................12
SECTION 3.05.  MONEYS RECEIVED BY THE GUARANTEE TRUSTEE TO BE HELD IN TRUST WITHOUT INTEREST...12
SECTION 3.06.  COMPENSATION AND EXPENSES OF GUARANTEE TRUSTEE..................................12

                           ARTICLE 4GUARANTEE TRUSTEE

SECTION 4.01.  QUALIFICATIONS..................................................................13
SECTION 4.02.  APPOINTMENT, REMOVAL AND RESIGNATION OF THE GUARANTEE TRUSTEE...................13

                               ARTICLE 5GUARANTEE

SECTION 5.01.  GUARANTEE.......................................................................14
SECTION 5.02.  WAIVER OF NOTICE................................................................15
SECTION 5.03.  OBLIGATIONS NOT AFFECTED........................................................15
SECTION 5.04.  ENFORCEMENT OF GUARANTEE........................................................16
</Table>

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<Table>
<S>            <C>                                                                             <C>
SECTION 5.05.  GUARANTEE OF PAYMENT............................................................16
SECTION 5.06.  SUBROGATION.....................................................................17
SECTION 5.07.  INDEPENDENT OBLIGATIONS.........................................................17

               ARTICLE 6LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 6.01.  LIMITATION OF TRANSACTIONS......................................................17
SECTION 6.02.  SUBORDINATION...................................................................18

                              ARTICLE 7TERMINATION

SECTION 7.01.  TERMINATION.....................................................................19

                ARTICLE 8LIMITATION OF LIABILITY; INDEMNIFICATION

SECTION 8.01.  EXCULPATION.....................................................................19
SECTION 8.02.  INDEMNIFICATION.................................................................20
SECTION 8.03.  SURVIVE TERMINATION.............................................................20

                             ARTICLE 9MISCELLANEOUS

SECTION 9.01.  SUCCESSORS AND ASSIGNS..........................................................20
SECTION 9.02.  AMENDMENTS......................................................................20
SECTION 9.03.  NOTICES.........................................................................20
SECTION 9.04.  GENDERS.........................................................................21
SECTION 9.05.  BENEFIT.........................................................................21
SECTION 9.06.  GOVERNING LAW...................................................................22
SECTION 9.07.  COUNTERPARTS....................................................................22
SECTION 9.08.  INTENTIONALLY OMITTED...........................................................22
SECTION 9.09.  LIMITED LIABILITY...............................................................22
</Table>

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                                                                            PAGE

                                       iii
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                               GUARANTEE AGREEMENT

     This GUARANTEE AGREEMENT, dated as of _________, 2002, is executed and
delivered by Peoples Energy Corporation, an Illinois corporation (the
"GUARANTOR"), and Bank One Trust Company, N.A., a national banking corporation,
as the initial Guarantee Trustee (as defined herein) for the benefit of the
Holders (as defined herein) from time to time of the Preferred Securities (as
defined herein) of PEC Funding Trust I, a Delaware statutory business trust (the
"ISSUER").

     WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"DECLARATION"), dated as of ___________, 2002 among the trustees of the Issuer
named therein, Peoples Energy Corporation, as Sponsor, and the Holders from time
to time of preferred undivided beneficial interests in the assets of the Issuer,
the Issuer may issue $___________ [($___________ if the over-allotment option
granted in the Underwriting Agreement (as defined herein) is exercised in full)]
aggregate liquidation amount of its Preferred Securities (the "PREFERRED
SECURITIES") representing preferred undivided beneficial interests in the assets
of the Issuer and having the terms set forth in the Declaration; and

     WHEREAS, as incentive for the Holders to purchase Preferred Securities, the
Guarantor desires to irrevocably and unconditionally agree, to the extent set
forth herein, to pay to the Holders the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth herein;

     NOW, THEREFORE, in consideration of the purchase by the initial purchasers
thereof of Preferred Securities, which purchase the Guarantor hereby agrees
shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee
Agreement for the benefit of the Holders from time to time.

                                    ARTICLE 1

                                   DEFINITIONS

     SECTION 1.1. DEFINITIONS.

     (a) Capitalized terms used in this Guarantee Agreement but not defined in
the preamble or recitals above have the respective meanings assigned to them in
this Section 1.01.

     (b) A term defined anywhere in this Guarantee Agreement has the same
meaning throughout.

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     (c) All references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or amended
from time to time.

     (d) All references in this Guarantee Agreement to Articles and Sections are
to Articles and Sections of this Guarantee Agreement unless otherwise specified.

     (e) A term defined in the Trust Indenture Act has the same meaning when
used in this Guarantee Agreement unless otherwise defined in this Guarantee
Agreement or unless the context otherwise requires.

     (f) A reference to the singular includes the plural and vice versa.

     "AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, such specified Person. For purposes of this definition, "control"
of a Person shall mean the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" shall have meanings correlative to the foregoing.

     "BUSINESS DAY" has the meaning set forth in the Indenture.

     "COMMISSION" means the Securities and Exchange Commission.

     "COMMON SECURITIES" means the securities representing common undivided
beneficial interests in the assets of the Issuer and having the terms set forth
in Article 7 of the Declaration.

     "DECLARATION" has the meaning set forth in the recitals above.

     "DISTRIBUTIONS" means the periodic distributions and other payments payable
to Holders in accordance with the terms of the Preferred Securities set forth in
Article 7 of to the Declaration.

     "DOLLAR" has the meaning set forth in the Indenture.

     "EVENT OF DEFAULT" means a default by the Guarantor on any of its payment
or other obligations under this Guarantee Agreement; PROVIDED, HOWEVER, that,
except with respect to a default in payment of any Guarantee Payment, any such
default shall constitute an Event of Default only if the Guarantor shall have
received notice of such default from the Guarantee Trustee or any Holder (with a
copy to the Guarantee Trustee) and shall not have cured such default within 90
days after receipt of such notice.

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     "EXTENSION PERIOD" has the meaning set forth in Section 2.8 of the
Supplemental Indenture.

     "GUARANTEE PAYMENTS" means the following payments or distributions, without
duplication, with respect to the Preferred Securities, to the extent not paid or
made by or on behalf of the Issuer: (i) any accumulated and unpaid Distributions
and the Redemption Price, including all accumulated and unpaid Distributions to
the date of redemption, with respect to the Preferred Securities called for
redemption by the Issuer but only if and to the extent that in each case the
Guarantor has made a payment to the Property Trustee of principal of or any
premium or interest on the Notes and (ii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Issuer (other than in connection
with the distribution of Notes to Holders in exchange for Preferred Securities
or the redemption of the Preferred Securities in full upon the maturity or
redemption of the Notes as provided in the Declaration), the lesser of (a) the
aggregate of the liquidation amount and all accumulated and unpaid Distributions
on the Preferred Securities to the date of payment, to the extent the Issuer has
funds on hand legally available therefor, and (b) the amount of assets of the
Issuer remaining available for distribution to Holders in liquidation of the
Issuer as required by applicable law.

     "GUARANTEE TRUSTEE" means Bank One Trust Company, N.A., a national banking
corporation, until a Successor Guarantee Trustee has been appointed and has
accepted such appointment pursuant to the terms of this Guarantee Agreement, and
thereafter means each such Successor Guarantee Trustee.

     "HOLDER" means any holder, as registered on the books and records of the
Issuer, of any Preferred Securities; PROVIDED, HOWEVER, that in determining
whether the holders of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor or any Affiliate of the Guarantor.

     "INDEMNIFIED PERSON" means the Guarantee Trustee, any Affiliate of the
Guarantee Trustee, and any officers, directors, shareholders, members, partners,
employees, representatives or agents of the Guarantee Trustee.

     "INDENTURE" means the Indenture dated as of _____________, 2002 between the
Guarantor and [ ], as trustee, as supplemented or amended from time to time,
pursuant to which the Notes are to be issued to the Property Trustee.

     "MAJORITY OF OUTSTANDING PREFERRED SECURITIES" means Holder(s) of
outstanding Preferred Securities, voting together as a single class, who are the

                                        3
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record owners of Preferred Securities representing more than 50% of the
outstanding Preferred Securities.

     "NOTES" means the series of unsecured subordinated notes issued to the
Property Trustee by the Guarantor under the Indenture and entitled the "[ ]%
[Subordinated] Notes due [ ]."

     "OFFICERS' CERTIFICATE" means, with respect to any Person, a certificate
signed by the Chairman of the Board, the President, any Vice President, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Assistant Secretary of such Person, and delivered to the
Guarantee Trustee. One of the officers signing an Officers' Certificate given
pursuant to Section 2.04 shall be the principal executive, financial or
accounting officer of the Guarantor. Any Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in this
Guarantee Agreement shall include:

          (i) a statement that the person making such certificate has read such
     covenant or condition;

          (ii) a brief statement as to the nature and scope of the examination
     or investigation upon which the statements or opinions contained in such
     certificate are based;

          (iii) a statement that, in the opinion of such person, he has made
     such examination or investigation as is necessary to enable him to express
     an informed opinion as to whether or not such covenant or condition has
     been complied with; and

          (iv) a statement as to whether or not, in the opinion of such person,
     such condition or covenant has been complied with.

     "PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, incorporated or unincorporated association, joint stock
company, trust, unincorporated organization or government or other agency or
political subdivision thereof or other entity of any kind.

     "PREFERRED SECURITIES" has the meaning set forth in the recitals above.

     "PROPERTY TRUSTEE" means the Person acting as Property Trustee under the
Declaration.

     "REDEMPTION PRICE" means the amount payable on redemption of the Preferred
Securities in accordance with the terms of the Preferred Securities.

                                        4
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     "RESPONSIBLE OFFICER" means, when used with respect to the Guarantee
Trustee, any officer within the corporate trust department of the Guarantee
Trustee, including any vice president, assistant vice president, assistant
secretary, assistant treasurer, trust officer or any other officer of the
Guarantee Trustee who customarily performs functions similar to those performed
by the Persons who at the time shall be such officers, respectively, or to whom
any corporate trust matter is referred because of such Person's knowledge of and
familiarity with the particular subject and, in either case, who shall have
direct responsibility for the administration of this Guarantee Agreement.

     "SUCCESSOR GUARANTEE TRUSTEE" means a successor Guarantee Trustee
possessing the qualifications to act as a Guarantee Trustee under Section 4.01.

     "SUPPLEMENTAL INDENTURE" means the First Supplemental Indenture dated as of
_____________, 2002 between the Guarantor and [ ], as trustee, relating to the
issuance of the Notes.

     "TRUST ENFORCEMENT EVENT" has the meaning specified in the Declaration.

     "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended.

     ["UNDERWRITING AGREEMENT" has the meaning set forth in the Declaration.]

     "VICE PRESIDENT" means any vice president, whether or not designated by a
number or word or words added before the title "vice president" and shall
include the Chief Financial Officer of the Guarantor.

                                    ARTICLE 2

                               TRUST INDENTURE ACT

     SECTION 2.1. TRUST INDENTURE ACT; APPLICATION.

     (a) This Guarantee Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions.

     (b) If and to the extent that any provision of this Guarantee Agreement
limits, qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.

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     (c) The application of the Trust Indenture Act to this Guarantee Agreement
shall not affect the nature of the Preferred Securities as equity securities
representing preferred undivided beneficial interests in the assets of the
Issuer.

     SECTION 2.2. LISTS OF HOLDERS OF PREFERRED SECURITIES.

     (a) The Guarantor shall provide the Guarantee Trustee (unless the Guarantee
Trustee is the registrar of the Preferred Securities) (i) within 14 days after
each record date for payment of Distributions, a list, in such form as the
Guarantee Trustee may reasonably require, of the names and addresses of the
Holders ("LIST OF HOLDERS") as of such date, and (ii) at any other time, within
30 days of receipt by the Guarantor of a written request for a List of Holders
as of a date no more than 15 days before such List of Holders is given to the
Guarantee Trustee; PROVIDED that in each case the Guarantor shall not be
obligated to provide such List of Holders at any time that the List of Holders
does not differ from the most recent List of Holders given to the Guarantee
Trustee by the Guarantor. The Guarantee Trustee shall preserve, in as current a
form as is reasonably practicable, all information contained in the Lists of
Holders given to it; PROVIDED that the Guarantee Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.

     (b) The Guarantee Trustee shall comply with its obligations under Section
312(b) of the Trust Indenture Act.

     SECTION 2.3. REPORTS BY THE GUARANTEE TRUSTEE.

     Within 60 days after ___________ of each year, commencing ___________,
2002, the Guarantee Trustee shall deliver to the Holders such reports as are
required by Section 313 of the Trust Indenture Act, if any, in the form, in the
manner and at the times provided by Section 313 of the Trust Indenture Act. The
Guarantee Trustee shall also comply with the other requirements of Section 313
of the Trust Indenture Act. A copy of each such report shall, at the time of
such transmission to the Holders, be filed by the Guarantee Trustee with the
Guarantor, with each stock exchange or quotation system upon which any Preferred
Securities are listed or traded (if so listed or traded) and also with the
Commission. The Guarantor agrees to promptly notify the Guarantee Trustee when
any Preferred Securities become listed on any stock exchange or quotation system
and of any delisting thereof.

     SECTION 2.4. PERIODIC REPORTS TO THE GUARANTEE TRUSTEE.

     The Guarantor shall provide to the Guarantee Trustee, the Commission and
the Holders, as applicable, such documents, reports and information (if any)

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as required by Section 314(a)(1)-(3) of the Trust Indenture Act and the
compliance certificates required by Section 314(a)(4) and (c) of the Trust
Indenture Act, any such certificates to be provided in the form, in the manner
and at the times required by Section 314(a)(4) and (c) of the Trust Indenture
Act (PROVIDED that any certificate to be provided pursuant to Section 314(a)(4)
of the Trust Indenture Act shall be provided within 120 days of the end of each
fiscal year of the Issuer). Delivery of such reports, information and documents
to the Guarantee Trustee is for informational purposes only and the Guarantee
Trustee's receipt of such shall not constitute constructive notice of any
information contained therein, including the Guarantor's compliance with any of
its covenants hereunder (as to which the Guarantee Trustee is entitled to rely
exclusively on Officers' Certificates or on certificates provided pursuant to
this Section 2.04).

     SECTION 2.5. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.

     The Guarantor shall provide to the Guarantee Trustee such evidence of
compliance with any conditions precedent, if any, provided for in this Guarantee
Agreement which relate to any of the matters set forth in Section 314(c) of the
Trust Indenture Act. Any certificate or opinion required to be given by an
officer pursuant to Section 314(c) may be given in the form of an Officers'
Certificate.

     SECTION 2.6. EVENTS OF DEFAULT; WAIVER.

     (a) The Holders of a Majority of Outstanding Preferred Securities may, by
vote, on behalf of the Holders, waive any past Event of Default and its
consequences. Upon such waiver, any such Event of Default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Guarantee Agreement, but no such waiver shall extend
to any subsequent or other default or Event of Default, or impair any right
consequent thereon.

     (b) The right of any Holder to receive payment of the Guarantee Payments in
accordance with this Guarantee Agreement, or to institute suit for the
enforcement of any such payment, shall not be impaired without the consent of
each such Holder.

     SECTION 2.7. DISCLOSURE OF INFORMATION.

     The disclosure of information as to the names and addresses of the Holders
in accordance with Section 312 of the Trust Indenture Act, regardless of the
source from which such information was derived, shall not be deemed to be a
violation of any existing law, or any law hereafter enacted which does not
specifically refer to Section 312 of the Trust Indenture Act, nor shall the

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Guarantee Trustee be held accountable by reason of mailing any material pursuant
to a request made under Section 312(b) of the Trust Indenture Act.

     SECTION 2.8. CONFLICTING INTEREST.

     (a) The Declaration shall be deemed to be specifically described in this
Guarantee Agreement for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.

     (b) The Guarantee Trustee shall comply with its obligations under Sections
310(b) and 311 of the Trust Indenture Act.

                                    ARTICLE 3

               POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

     SECTION 3.1. POWERS AND DUTIES OF THE GUARANTEE TRUSTEE.

     (a) This Guarantee Agreement shall be held by the Guarantee Trustee in
trust for the benefit of the Holders. The Guarantee Trustee shall not transfer
its right, title and interest in this Guarantee Agreement to any Person except a
Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of
its appointment to act as Guarantee Trustee or to a Holder exercising his or her
rights pursuant to Section 5.04(iv). The right, title and interest of the
Guarantee Trustee to this Guarantee Agreement shall vest automatically in each
Person who may hereafter be appointed as Guarantee Trustee in accordance with
Article 4. Such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered.

     (b) If an Event of Default has occurred and is continuing, the Guarantee
Trustee shall enforce this Guarantee Agreement for the benefit of the Holders.

     (c) This Guarantee Agreement and all moneys received by the Guarantee
Trustee in respect of the Guarantee Payments will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of, or for the
benefit of, the Guarantee Trustee or its agents or their creditors.

     (d) The Guarantee Trustee shall, within 90 days after the occurrence of an
Event of Default actually known to a Responsible Officer of the Guarantee
Trustee, transmit by mail, first class postage prepaid, to the Holders, as their
names and addresses appear upon the List of Holders, notice of all such Events
of Default, unless such defaults shall have been cured before the giving of such

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notice; PROVIDED that the Guarantee Trustee shall be protected in withholding
such notice if and so long as the board of directors, the executive committee or
a trust committee of directors and/or Responsible Officers of the Guarantee
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders. The Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default except any Event of Default as to which the
Guarantee Trustee shall have received written notice or a Responsible Officer
charged with the administration of this Guarantee Agreement shall have obtained
written notice of such Event of Default.

     (e) The Guarantee Trustee shall continue to serve as a trustee until a
Successor Guarantee Trustee has been appointed and accepted that appointment in
accordance with Article 4.

     SECTION 3.2. CERTAIN RIGHTS AND DUTIES OF THE GUARANTEE TRUSTEE.

     (a) The Guarantee Trustee, before the occurrence of an Event of Default and
after the curing or waiving of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Guarantee Agreement, and no implied covenants shall be read into this
Guarantee Agreement against the Guarantee Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.06), the
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement, and use the same degree of care and skill in its
exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs.

     (b) No provision of this Guarantee Agreement shall be construed to relieve
the Guarantee Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that:

          (i) prior to the occurrence of an Event of Default and after the
     curing or waiving of all such Events of Default that may have occurred:

               (A) the duties and obligations of the Guarantee Trustee shall be
          determined solely by the express provisions of this Guarantee
          Agreement, and the Guarantee Trustee shall not be liable except for
          the performance of such duties and obligations as are specifically set
          forth in this Guarantee Agreement, and no implied covenants or
          obligations shall be read into this Guarantee Agreement against the
          Guarantee Trustee; and

               (B) in the absence of willful misconduct on the part of the
          Guarantee Trustee, the Guarantee Trustee may conclusively rely, as

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          to the truth of the statements and the correctness of the opinions
          expressed therein, upon any certificates or opinions furnished to the
          Guarantee Trustee and conforming to the requirements of this Guarantee
          Agreement; PROVIDED, HOWEVER, that in the case of any such
          certificates or opinions that by any provision hereof or the Trust
          Indenture Act are specifically required to be furnished to the
          Guarantee Trustee, the Guarantee Trustee shall be under a duty to
          examine the same to determine whether or not they conform to the
          requirements of this Guarantee Agreement or the Trust Indenture Act,
          as the case may be (but need not confirm or investigate the accuracy
          of mathematical calculations or other facts stated therein);

          (ii) the Guarantee Trustee shall not be liable for any error of
     judgment made in good faith by a Responsible Officer of the Guarantee
     Trustee, unless it shall be proved that the Guarantee Trustee was negligent
     in ascertaining the pertinent facts upon which such judgment was made;

          (iii) the Guarantee Trustee shall not be liable with respect to any
     action taken or omitted to be taken by it in good faith in accordance with
     the direction of the Holders of a Majority of Outstanding Preferred
     Securities relating to the time, method and place of conducting any
     proceeding for any remedy available to the Guarantee Trustee, or exercising
     any trust or power conferred upon the Guarantee Trustee under this
     Guarantee Agreement; and

          (iv) no provision of this Guarantee Agreement shall require the
     Guarantee Trustee to expend or risk its own funds or otherwise incur
     personal financial liability in the performance of any of its duties or in
     the exercise of any of its rights or powers, if it shall have reasonable
     grounds for believing that the repayment of such funds or liability is not
     reasonably assured to it under the terms of this Guarantee Agreement or
     indemnity reasonably satisfactory to it against such risk or liability is
     not reasonably assured to it.

     (c) Subject to the provisions of Section 3.02(a) and 3.02(b):

          (i) whenever in the administration of this Guarantee Agreement, the
     Guarantee Trustee shall deem it desirable that a matter be proved or
     established prior to taking, suffering or omitting any action hereunder,
     the Guarantee Trustee (unless other evidence is herein specifically
     prescribed) may, in the absence of willful misconduct on its part, request
     and rely upon an Officers' Certificate, which, upon receipt of such
     request, shall be promptly delivered by the Guarantor;

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          (ii) the Guarantee Trustee (A) may consult with counsel of its
     selection (which may be counsel to the Guarantor or any of its Affiliates
     and may include any of its employees) selected by it in good faith and with
     due care and the advice or opinion of such counsel with respect to legal
     matters shall be full and complete authorization and protection in respect
     of any action taken, suffered or omitted by it hereunder in good faith and
     in reliance thereon and in accordance with such advice and opinion and (B)
     shall have the right at any time to seek, at the expense of the Guarantor,
     instructions concerning the administration of this Guarantee Agreement from
     any court of competent jurisdiction;

          (iii) the Guarantee Trustee may execute any of the trusts or powers
     hereunder or perform any duties hereunder either directly or by or through
     agents or attorneys, and the Guarantee Trustee shall not be responsible for
     any willful misconduct or negligence on the part of any agent or attorney
     appointed by it in good faith and with due care;

          (iv) the Guarantee Trustee shall be under no obligation to exercise
     any of the rights or powers vested in it by this Guarantee Agreement at the
     request or direction of any Holder, unless such Holder shall have offered
     to the Guarantee Trustee reasonable indemnity against the costs, expenses
     (including attorneys' fees and expenses) and liabilities that might be
     incurred by it in complying with such request or direction; PROVIDED that
     nothing contained in this clause (iv) shall relieve the Guarantee Trustee
     of the obligation, upon the occurrence of an Event of Default (which has
     not been cured or waived) to exercise such of the rights and powers vested
     in it by this Guarantee Agreement, and to use the same degree of care and
     skill in this exercise as a prudent person would exercise or use under the
     circumstances in the conduct of his own affairs; and

          (v) any action taken by the Guarantee Trustee or its agents hereunder
     shall bind the Holders, and the signature of the Guarantee Trustee or its
     agents alone shall be sufficient and effective to perform any such action;
     and no third party shall be required to inquire as to the authority of the
     Guarantee Trustee to so act, or as to its compliance with any of the terms
     and provisions of this Guarantee Agreement, both of which shall be
     conclusively evidenced by the Guarantee Trustee's or its agent's taking
     such action.

     SECTION 3.3. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE.

     The recitals contained in this Guarantee Agreement shall be taken as the
statements of the Guarantor, and the Guarantee Trustee does not assume any

                                       11
<Page>

responsibility for their correctness. The Guarantee Trustee makes no
representations as to the validity or sufficiency of this Guarantee Agreement.

     SECTION 3.4. THE GUARANTEE TRUSTEE MAY OWN PREFERRED SECURITIES.

     The Guarantee Trustee, in its individual or any other capacity, may become
the owner or pledgee of Preferred Securities and may otherwise deal with the
Guarantor with the same rights it would have if it were not the Guarantee
Trustee.

     SECTION 3.5. MONEYS RECEIVED BY THE GUARANTEE TRUSTEE TO BE HELD IN TRUST
WITHOUT INTEREST.

     All moneys received by the Guarantee Trustee in respect of Guarantee
Payments shall, until used or applied as herein provided, be held in trust for
the purposes for which they were received, but need not be segregated from other
funds except to the extent required by law. The Guarantee Trustee shall be under
no liability for interest on any moneys received by it hereunder except such as
it may agree in writing to pay thereon.

     SECTION 3.6. COMPENSATION AND EXPENSES OF GUARANTEE TRUSTEE.

     The Guarantor covenants and agrees to pay to the Guarantee Trustee from
time to time, and the Guarantee Trustee shall be entitled to, such compensation
as the Guarantor and the Guarantee Trustee shall from time to time agree in
writing (which shall not be limited by any provision of law in regard to the
compensation of a Guarantee Trustee of an express trust) for all services
rendered by it in the exercise and performance of any of the powers and duties
hereunder of the Guarantee Trustee, and the Guarantor will pay or reimburse the
Guarantee Trustee upon its request for all reasonable expenses, disbursements
and advances incurred or made by the Guarantee Trustee in accordance with any of
the provisions of this Guarantee Agreement (including the reasonable
compensation and the reasonable expenses and disbursements of its counsel and of
all persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or willful misconduct. The
provisions of this Section 3.06 shall survive the termination of this Guarantee
Agreement and resignation or removal of the Guarantee Trustee.

                                       12
<Page>

                                    ARTICLE 4

                                GUARANTEE TRUSTEE

     SECTION 4.1. QUALIFICATIONS.

     There shall at all times be a Guarantee Trustee that shall:

          (i) not be an Affiliate of the Guarantor; and

          (ii) be a national banking association or corporation organized and
     doing business under the laws of the United States of America or any State
     or Territory thereof or of the District of Columbia, or a corporation or
     Person permitted by the Commission to act as an institutional trustee under
     the Trust Indenture Act, authorized under such laws to exercise corporate
     trust powers, having a combined capital and surplus of at least
     $50,000,000, and subject to supervision or examination by Federal, State,
     Territorial or District of Columbia authority. If such corporation
     publishes reports of condition at least annually, pursuant to law or to the
     requirements of the supervising or examining authority referred to above,
     then for the purposes of this clause (ii), the combined capital and surplus
     of such corporation shall be deemed to be its combined capital and surplus
     as set forth in its most recent report of condition so published.

     If at any time the Guarantee Trustee shall cease to satisfy the
requirements of clauses (i) and (ii) above, the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.02. If
the Guarantee Trustee has or shall acquire any "conflicting interest" within the
meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee and
the Guarantor shall in all respects comply with the provisions of Section 310(b)
of the Trust Indenture Act.

     SECTION 4.2. APPOINTMENT, REMOVAL AND RESIGNATION OF THE GUARANTEE TRUSTEE.

     (a) Subject to Section 4.02(b), the Guarantee Trustee may be appointed or
removed without cause at any time by the Guarantor.

     (b) The Guarantee Trustee shall not be removed in accordance with Section
4.02(a) until a Successor Guarantee Trustee possessing the qualifications to act
as Guarantee Trustee under Section 4.01 has been appointed and has accepted such
appointment by written instrument executed by such Successor Guarantee Trustee
and delivered to the Guarantor and the Guarantee Trustee being removed.

     (c) The Guarantee Trustee appointed to office shall hold office until its
successor shall have been appointed or until its removal or resignation.

     (d) The Guarantee Trustee may resign from office (without need for prior or
subsequent accounting) by an instrument (a "RESIGNATION REQUEST") in writing
signed by the Guarantee Trustee and delivered to the Guarantor, which

                                       13
<Page>

resignation shall take effect upon such delivery or upon such later date as is
specified therein; PROVIDED, HOWEVER, that no such resignation of the Guarantee
Trustee shall be effective until a Successor Guarantee Trustee possessing the
qualifications to act as Guarantee Trustee under Section 4.01 has been appointed
and has accepted such appointment by instrument executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.

     (e) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.02 within 60 days after
delivery to the Guarantor of a Resignation Request or receipt of a notice of
removal by the Guarantee Trustee, the Guarantee Trustee resigning or to be
removed may, at the expense of the Guarantor, petition any court of competent
jurisdiction for appointment of a Successor Guarantee Trustee. Such court may
thereupon after such notice, if any, as it may deem proper, appoint a Successor
Guarantee Trustee.

                                    ARTICLE 5

                                    GUARANTEE

     SECTION 5.1. GUARANTEE.

     The Guarantor irrevocably and unconditionally agrees to pay in full to the
Holders the Guarantee Payments (without duplication of amounts theretofore paid
by the Issuer), as and when due, regardless of any defense, right of set-off or
counterclaim which the Issuer may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or to the Guarantee Trustee for
remittance to the Holders or by causing the Issuer to pay such amounts to the
Holders.

     SECTION 5.2. WAIVER OF NOTICE.

     The Guarantor hereby waives notice of acceptance of this Guarantee
Agreement and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the Issuer
or any other Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands. Notwithstanding anything to the contrary herein, the Guarantor retains
all of its rights under the Indenture to extend the interest payment period on
the Notes and the Guarantor shall not be obligated hereunder to make any
Guarantee

                                       14
<Page>

Payment during any Extension Period with respect to the Distributions on the
Preferred Securities.

     SECTION 5.3. OBLIGATIONS NOT AFFECTED.

     The obligations, covenants, agreements and duties of the Guarantor under
this Guarantee Agreement shall in no way be affected or impaired by reason of
the happening from time to time of any of the following:

     (a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Issuer;

     (b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions (other than an extension of time for payment of
Distributions that result from any Extension Period), Redemption Price,
Liquidation Distribution (as defined in the Declaration) or any other sums
payable under the terms of the Preferred Securities or the extension of time for
the performance of any other obligation under, arising out of, or in connection
with, the Preferred Securities (other than an extension of time for payment of
Distributions that result from any Extension Period);

     (c) any failure, omission, delay or lack of diligence on the part of the
Guarantee Trustee or the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Guarantee Trustee or the Holders
pursuant to the terms hereof or of the Preferred Securities, respectively, or
any action on the part of the Issuer granting indulgence or extension of any
kind;

     (d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;

     (e) any invalidity of, or defect or deficiency in, the Preferred
Securities;

     (f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or

     (g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.03 that the obligations of the Guarantor with respect to the
Guarantee Payments shall be absolute and unconditional under any and all
circumstances.

                                       15
<Page>

     There shall be no obligation of the Guarantee Trustee or the Holders to
give notice to, or obtain consent of, the Guarantor with respect to the
happening of any of the foregoing.

     SECTION 5.4. ENFORCEMENT OF GUARANTEE.

     The Guarantor and the Guarantee Trustee expressly acknowledge and agree
that (i) this Guarantee Agreement will be deposited with the Guarantee Trustee
to be held for the benefit of the Holders; (ii) the Guarantee Trustee has the
right to enforce this Guarantee Agreement on behalf of the Holders; (iii)
Holders representing not less than a Majority of Outstanding Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of this
Guarantee Agreement or exercising any trust or other power conferred upon the
Guarantee Trustee under this Guarantee Agreement; and (iv) if the Guarantee
Trustee fails to enforce this Guarantee Agreement as provided in clauses (ii)
and (iii) above, any Holder may institute a legal proceeding directly against
the Guarantor to enforce its rights under this Guarantee Agreement, without
first instituting a legal proceeding against the Issuer, the Guarantee Trustee
or any other Person. Notwithstanding the foregoing, if the Guarantor has failed
to make a Guarantee Payment, a Holder may directly institute a proceeding
against the Guarantor for enforcement of this Guarantee Agreement for such
payment without first instituting a legal proceeding against the Issuer, the
Guarantee Trustee or any other Person.

     SECTION 5.5. GUARANTEE OF PAYMENT.

     This Guarantee Agreement creates a guarantee of payment and not merely of
collection. This Guarantee Agreement will not be discharged except by payment of
the Guarantee Payments in full (without duplication of amounts theretofore paid
by the Issuer) or upon the distribution of the Notes to the Holders as provided
in the Declaration.

     SECTION 5.6. SUBROGATION.

     The Guarantor shall be subrogated to all (if any) rights of the Holders
against the Issuer in respect of any amounts paid to the Holders by the
Guarantor under this Guarantee Agreement; PROVIDED, HOWEVER, that the Guarantor
shall not (except to the extent required by mandatory provisions of law) be
entitled to enforce or exercise any rights which it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Guarantee Agreement, if, at the time of any such
payment, any amounts are due and unpaid under this Guarantee Agreement. If any
amount shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders or to the Guarantee Trustee for remittance to
the Holders.

                                       16
<Page>

     SECTION 5.7. INDEPENDENT OBLIGATIONS.

     The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Issuer with respect to the Preferred Securities and
that the Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Guarantee Agreement
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.03 hereof.

                                    ARTICLE 6

         LIMITATION OF TRANSACTIONS; SUBORDINATION; STATUS OF GUARANTEE

     SECTION 6.1. LIMITATION OF TRANSACTIONS.

     So long as any Preferred Securities remain outstanding, if at such time (i)
the Guarantor shall be in default with respect to its Guarantee Payments or
other payment obligations hereunder, (ii) there shall have occurred and be
continuing any event of default under the Declaration or (iii) the Guarantor
shall have given notice of its election of an Extension Period and such period,
or any extension thereof, is continuing, the Guarantor shall not (a) make any
payment of principal, interest or premium, if any, on or repay, repurchase or
redeem any debt securities that rank junior to the Notes in the right of payment
issued by the Guarantor, or (b) make any guarantee payments with respect to any
guarantee by the Guarantor of any debt securities of any of its subsidiaries if
such guarantee ranks junior to the Notes in the right of payment, (c) declare or
pay any dividends or distributions on any of the Guarantor's capital stock or
(d) redeem, purchase, acquire or make a liquidation payment with respect to, any
of the Guarantor's capital stock. Notwithstanding the foregoing, the Guarantor
may (1) purchase or acquire its capital stock in connection with the
satisfaction by it of its obligations under any employee benefit plans or
pursuant to any contract or security outstanding on the first day of any such
event requiring it to purchase its capital stock; (2) reclassify its capital
stock or exchange or convert one class or series of its capital stock for
another class or series of its capital stock; (3) purchase fractional interests
in shares of its capital stock pursuant to the conversion or exchange provisions
of such capital stock or the security being converted or exchanged; (4) declare
dividends or distributions in its capital stock (or rights to acquire capital
stock), or repurchase or redeem capital stock solely from the issuance or
exchange of capital stock; (5) redeem or repurchase any rights pursuant to a
rights agreement; and (6) make payments under this Guarantee related to the
Preferred Securities. In addition, so long as any Preferred Securities remain
outstanding, the Guarantor (i) will remain the sole direct or indirect owner of
all of the outstanding Common

                                       17
<Page>

Securities and shall not cause or permit the Common Securities to be transferred
except to the extent such transfer is permitted under the Declaration; PROVIDED
that any permitted successor of the Guarantor under the Indenture may succeed to
the Guarantor's direct or indirect ownership of the Common Securities, (ii) will
cause the holder of the Common Securities to satisfy the requirements of Section
5.03 of the Declaration and (iii) will use reasonable efforts to cause the
Issuer to continue to be treated as a grantor trust for United States federal
income tax purposes, except in connection with a distribution of Notes as
provided in the Declaration.

     SECTION 6.2. SUBORDINATION.

     If a Trust Enforcement Event has occurred and is continuing under the
Declaration the rights of the holders of the Common Securities to receive any
payments will be subordinated to the rights of the Holders of the Preferred
Securities to receive Guarantee Payments.

     Section 6.03. STATUS OF GUARANTEE.

     This Guarantee Agreement will constitute an unsecured obligation of the
Guarantor and will rank (i) subordinate and junior in right of payment to all
other liabilities of the Guarantor, except those made pari passu or subordinate
by their terms, (ii) pari passu with any guarantee now or hereafter entered into
by the Guarantor in respect of any preferred or preference stock of any
Affiliate of the Guarantor, and (iii) senior to all common stock of the
Guarantor. Each Person, by virtue of having become a Holder of a Security, shall
be deemed to have expressly assented and agreed to the terms of, and shall be
bound by, this Guarantee Agreement, the Declaration and the Indenture.

                                    ARTICLE 7

                                   TERMINATION

     SECTION 7.1. TERMINATION.

     This Guarantee Agreement shall terminate and be of no further force and
effect (i) upon full payment of the Redemption Price of, plus all accumulated
and unpaid Distributions on, all Preferred Securities, (ii) upon the
distribution of Notes to Holders and holders of Common Securities in exchange
for all of the Preferred Securities and Common Securities or (iii) upon full
payment of the amounts payable in accordance with the Declaration upon
liquidation of the Issuer. Notwithstanding the foregoing, this Guarantee
Agreement will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder

                                       18
<Page>

must restore payment of any sums paid with respect to the Preferred Securities
or under this Guarantee Agreement.

                                    ARTICLE 8

                    LIMITATION OF LIABILITY; INDEMNIFICATION

     SECTION 8.1. EXCULPATION.

     (a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Guarantor or any Holder for any loss, damage or
claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith in accordance with this Guarantee Agreement and
in a manner such Indemnified Person reasonably believed to be within the scope
of the authority conferred on such Indemnified Person by this Guarantee
Agreement or by law, except that an Indemnified Person shall be liable for any
such loss, damage or claim incurred by reason of such Indemnified Person's
negligence or willful misconduct with respect to such acts or omissions.

     (b) An Indemnified Person shall be fully protected in relying in good faith
upon the records of the Guarantor and upon such information, opinions, reports
or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders might properly be paid.

     SECTION 8.2. INDEMNIFICATION.

     To the fullest extent permitted by applicable law, the Guarantor shall
indemnify and hold harmless each Indemnified Person from and against any loss,
damage or claim incurred by such Indemnified Person by reason of any act or
omission performed or omitted by such Indemnified Person in good faith in
accordance with this Guarantee Agreement and in a manner such Indemnified Person
reasonably believed to be within the scope of authority conferred on such
Indemnified Person by this Guarantee Agreement, except that no Indemnified
Person shall be entitled to be indemnified in respect of any loss, damage or
claim incurred by such Indemnified Person by reason of negligence or willful
misconduct with respect to such acts or omissions.

                                       19
<Page>

     SECTION 8.3. SURVIVE TERMINATION.

     The provisions of Sections 8.01 and 8.02 shall survive the termination of
this Guarantee Agreement or the resignation or removal of the Guarantee Trustee.

                                    ARTICLE 9

                                  MISCELLANEOUS

     SECTION 9.1. SUCCESSORS AND ASSIGNS.

     All guarantees and agreements contained in this Guarantee Agreement shall
bind the successors, assignees, receivers, trustees and representatives of the
Guarantor and shall inure to the benefit of the Guarantee Trustee and the
Holders then outstanding. Except in connection with a consolidation, merger or
sale involving the Guarantor that is permitted under Article 8 of the Indenture,
the Guarantor shall not assign its obligations hereunder.

     SECTION 9.2. AMENDMENTS.

     Except with respect to any changes which do not adversely affect the rights
of Holders in any material respect (in which case no consent of Holders will be
required), this Guarantee Agreement may only be amended with the prior approval
of the Guarantor, the Guarantee Trustee and the Holders of not less than a
Majority of Outstanding Preferred Securities. The provisions of Section 11.02 of
the Declaration concerning meetings of Holders shall apply to the giving of such
approval.

     SECTION 9.3. NOTICES.

     Any notice, request or other communication required or permitted to be
given hereunder shall be in writing, in English, duly signed by the party giving
such notice, and delivered, telecopied or mailed by first class mail as follows:

     (a if given to the Guarantor, to the address set forth below or such other
address as the Guarantor may give notice of to the Holders:

          Peoples Energy Corporation
          130 East Randolph Drive
          Chicago, Illinois 60601-6207
          Attention:
          Facsimile:

                                       20
<Page>

          with a copy to:

          [                ]
          [                ]
          [                ]

     (b if given to the Guarantee Trustee, to the address set forth below or
such other address as the Guarantee Trustee may give notice of to the Holders:

          [                ]
          [    Address     ]
          Attention:
          Facsimile:

     (c if given to any Holder, at the address set forth on the books and
records of the Issuer.

     All notices hereunder shall be deemed to have been given when (i) received
in person, (ii) telecopied with receipt confirmed, or (iii) mailed by first
class mail, postage prepaid, when received, except that if a notice or other
document is refused delivery or cannot be delivered because of a changed address
of which no notice was given, such notice or other document shall be deemed to
have been delivered on the date of such refusal or inability to deliver.

     SECTION 9.4. GENDERS.

     The masculine, feminine and neuter genders used herein shall include the
masculine, feminine and neuter genders.

     SECTION 9.5. BENEFIT.

     This Guarantee Agreement is solely for the benefit of the Guarantee Trustee
and the Holders and, subject to Section 3.01(a), is not separately transferable
from the Preferred Securities.

     SECTION 9.6. GOVERNING LAW.

     THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS).

                                       21
<Page>

     SECTION 9.7. COUNTERPARTS.

     This Guarantee Agreement may be executed in counterparts, each of which
shall be an original; but such counterparts shall together constitute one and
the same instrument.

     SECTION 9.8. INTENTIONALLY OMITTED.

     SECTION 9.9. LIMITED LIABILITY.

     Neither the Guarantee Trustee nor the Holders, in their capacities as such,
shall be personally liable for any liabilities or obligations of the Guarantor
arising out of this Guarantee Agreement. The parties further hereby agree that
the Holders, in their capacities as such, shall be entitled to the same
limitation of personal liability extended to the stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware.

                                       22
<Page>

     THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.

                                                PEOPLES ENERGY CORPORATION

                                                By:
                                                    ----------------------------
                                                    Name:
                                                    Title:

                                                [                         ]
                                                    as Guarantee Trustee

                                                By:
                                                    ----------------------------
                                                    Name:
                                                    Title:

<Page>

                           CROSS-REFERENCE TARGET LIST

   NOTE: DUE TO THE NUMBER OF TARGETS SOME TARGET NAMES MAY NOT APPEAR IN THE
                             TARGET PULL-DOWN LIST.
   (This list is for the use of the wordprocessor only, is not a part of this
                         document and may be discarded.)

<Table>
<Caption>
ARTICLE/SECTION TARGET NAME   ARTICLE/SECTION TARGET NAME   ARTICLE/SECTION TARGET NAME   ARTICLE/SECTION TARGET NAME
===========================   ===========================   ===========================   ===========================
<S>                      <C>
1.01.....................01

2.04.....................02
2.06.....................05

3.01.....................03
3.01(a)..................04
3.02.....................06
3.02(a)..................07
3.02(b)..................08
3.06.....................09

4........................10
4.01.....................11
4.02.....................12
4.02(a)..................13
4.02(b)..................14

5.03.....................15
5.04.....................16

8.01.....................18
8.02.....................19
</Table>

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