FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-5540
PEOPLES ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Illinois 36-2642766
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
24th Floor, 130 East Randolph Drive, Chicago, Illinois 60601-6207
(Address of principal executive offices) (Zip Code)
(312) 240-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [x] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
34,951,938 shares of Common Stock, without par value, outstanding
at July 31, 1996.
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Peoples Energy Corporation
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Nine Twelve
Months Ended Months Ended Months Ended
June 30, June 30, June 30,
--------------- -------------- ---------------
1996 1995 1996 1995 1996 1995
------- ------- ------- ------ ------ -------
(Thousands, except per-share amounts)
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Gas sales $216,654 $158,069 $944,118 $800,262 $1,036,893 $898,093
Transportation of customer-
owned gas 28,330 25,835 110,735 103,900 129,649 121,286
Other 3,516 3,283 9,809 14,533 12,826 18,139
-------- -------- --------- -------- ---------- ---------
Total Operating Revenues 248,500 187,187 1,064,662 918,695 1,179,368 1,037,518
-------- -------- --------- -------- ---------- ---------
OPERATING EXPENSES:
Gas costs 110,346 68,682 484,249 425,804 515,882 465,859
Operation 54,659 49,212 171,251 147,611 222,735 205,513
Maintenance 11,381 10,848 32,543 30,711 43,563 40,682
Depreciation and amortization 18,095 16,124 52,627 49,479 69,556 66,077
Taxes - Income 5,557 (205) 64,188 39,811 53,102 23,186
- State & local revenue 23,479 20,697 109,124 97,988 120,856 109,323
- Other 5,509 5,499 16,389 16,245 21,844 21,544
-------- ------- --------- ------- --------- ---------
Total Operating Expenses 229,026 170,857 930,371 807,649 1,047,538 932,184
-------- ------- --------- ------- --------- ---------
OPERATING INCOME 19,474 16,330 134,291 111,046 131,830 105,334
-------- ------- --------- ------- --------- ---------
OTHER INCOME AND (DEDUCTIONS):
Interest income 1,156 3,492 4,318 6,643 7,742 8,877
Interest on long-term debt
of subsidiaries (8,936) (11,663) (28,891) (34,866) (40,437) (46,408)
Other interest expense (830) (2,268) (4,492) (5,640) (6,310) (6,021)
Income taxes (2,614) (1,393) (4,349) (2,624) (5,557) (3,755)
Miscellaneous - net 5,997 65 11,501 950 11,755 1,886
-------- ------- -------- ------- --------- --------
Total Other Income
and Deductions (5,227) (11,767) (21,913) (35,537) (32,807) (45,421)
-------- ------- ------- ------- ---------- --------
NET INCOME $ 14,247 $ 4,563 $ 112,378 $ 75,509 $ 99,023 $ 59,913
======== ======= ========= ======== ======== ========
Average Shares of Common
Stock Outstanding 34,946 34,906 34,938 34,897 34,932 34,890
Earnings Per Share of
Common Stock $ .41 $ .13 $ 3.22 $ 2.16 $ 2.83 $ 1.72
======= ======= ========= ========= ======== ========
Dividends Declared Per Share $ .46 $ .45 $ 1.37 $ 1.35 $ 1.82 $ 1.80
======= ======= ========= ======= ======== ========
<FN>
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
<TABLE>
Peoples Energy Corporation
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, June 30,
1996 September 30, 1995
(Unaudited) 1995 (Unaudited)
----------- ------------ ----------
(Thousands)
<S> <C> <C> <C>
PROPERTIES AND OTHER ASSETS
- ---------------------------
CAPITAL INVESTMENTS
Property, plant and equipment,
at original cost $2,024,574 $2,088,277 $2,068,616
Less - Accumulated depreciation 656,589 715,208 710,014
---------- ---------- ----------
Net property, plant and equipment 1,367,985 1,373,069 1,358,602
Other investments 9,904 10,367 13,471
---------- ---------- ----------
TOTAL CAPITAL INVESTMENTS - NET 1,377,889 1,383,436 1,372,073
---------- ---------- ----------
CURRENT ASSETS:
Cash 4,328 3,328 3,650
Cash equivalents 77,655 172,911 245,643
Other temporary cash investments,
at cost that approximates market value 900 1,100 1,000
Trust fund - bond redemption -- 237 50,237
Receivables -
Customers, net of allowance for
uncollectible accounts of $26,581,
$19,013, and $19,821, respectively 120,718 56,715 75,239
Other 42,539 1,897 1,126
Accrued unbilled revenues 20,586 21,167 15,873
Materials and supplies, at average cost 16,377 16,466 19,180
Gas in storage, at last-in, first-out cost 45,494 100,547 88,696
Gas costs recoverable through rate adjustments 24,650 6,205 6,252
Prepayments 5,132 2,302 2,634
---------- ---------- ----------
TOTAL CURRENT ASSETS 358,379 382,875 509,530
---------- ---------- ----------
OTHER ASSETS:
Regulatory assets of subsidiaries 73,653 39,706 31,672
Deferred charges 14,582 16,475 18,356
---------- ---------- ----------
TOTAL OTHER ASSETS 88,235 56,181 50,028
---------- ---------- ----------
TOTAL PROPERTIES AND OTHER ASSETS $1,824,503 $1,822,492 $1,931,631
========== ========== ==========
<FN>
The Notes to Consolidated Financial Statements are an integral part of
these statements.
</TABLE>
<TABLE>
Peoples Energy Corporation
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, June 30,
1996 September 30, 1995
(Unaudited) 1995 (Unaudited)
----------- ------------- ----------
(Thousands of Dollars)
<S> <C> <C> <C>
CAPITALIZATION AND LIABILITIES
- ------------------------------
CAPITALIZATION:
Common Stockholders' Equity:
Common stock, without par value
Authorized - 60,000,000 shares
Outstanding - 34,951,938, 34,913,426,
and 34,913,426 shares, respectively $ 277,959 $ 277,113 $ 277,113
Retained earnings 429,087 364,581 393,648
---------- ---------- ----------
Total Common Stockholders' Equity 707,046 641,694 670,761
Long-term debt of subsidiaries,
exclusive of sinking fund payments
and maturities due within one year 527,104 621,874 621,874
---------- ---------- -----------
TOTAL CAPITALIZATION 1,234,150 1,263,568 1,292,635
---------- ---------- -----------
CURRENT LIABILITIES
Interim loans of subsidiaries 4,000 900 --
Accounts payable 120,481 102,377 92,292
Dividends payable on common stock 16,078 15,711 15,711
Customer gas service and credit deposits 18,803 40,577 30,148
Sinking fund payments and maturities,
due within one year -
Long-term debt of subsidiaries -- 4,000 54,000
Accrued taxes 87,066 28,160 55,325
Gas sales revenue refundable through
rate adjustments 9,407 79,502 68,441
Accrued interest 7,444 12,796 9,975
Temporary LIFO liquidation credit 40,209 -- 40,869
--------- ---------- ----------
TOTAL CURRENT LIABILITIES 303,488 284,023 366,761
--------- ---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes - primarily
accelerated depreciation 213,053 208,424 203,832
Investment tax credits being amortized
over the average lives of related property 35,858 38,132 38,565
Other 37,954 28,345 29,838
---------- ---------- ----------
TOTAL DEFERRED CREDITS AND
OTHER LIABILITIES 286,865 274,901 272,235
---------- ---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES $1,824,503 $1,822,492 $1,931,631
========== ========== ==========
<FN>
The Notes to Consolidated Financial Statements are an integral part of
these statements.
</TABLE>
<TABLE>
Peoples Energy Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
June 30,
-----------------
1996 1995
------ -----
(Thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $112,378 $ 75,509
Adjustments to reconcile net income to net cash:
Depreciation 52,627 49,479
Deferred income taxes and investment tax credits - net 2,326 10,366
Change in deferred credits and other liabilities 9,638 (11,997)
Change in other assets (32,748) 4,547
Other 63 38
Change in current assets and liabilities:
Receivables - net (103,950) (877)
Accrued unbilled revenues 581 4,049
Materials and supplies 89 4,675
Gas in storage 55,052 62,309
Gas costs recoverable (18,445) 8,174
Accounts payable 18,104 (16,843)
Customer gas service and credit deposits (21,774) (15,272)
Accrued taxes 58,906 26,389
Gas sales revenue refundable (70,095) 17,498
Accrued interest (5,352) (2,967)
Temporary LIFO liquidation credit 40,209 40,869
Other (2,830) (584)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 94,779 255,362
-------- --------
INVESTING ACTIVITIES:
Capital expenditures of subsidiaries - construction (56,205) (65,200)
Other assets 8,662 (949)
Other investments 601 2,781
-------- ---------
NET CASH USED IN INVESTING ACTIVITIES (46,942) (63,368)
-------- --------
FINANCING ACTIVITIES:
Interim loans of subsidiaries - net 3,100 (900)
Issuance of long-term debt of subsidiaries -- 50,000
Trust fund, bond redemption 237 (50,237)
Trust fund, utility construction -- 31,493
Retirement of long-term debt of subsidiaries (98,770) (4,201)
Dividends paid on common stock (47,506) (47,100)
Issuance of common stock 846 993
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (142,093) (19,952)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (94,256) 172,042
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 176,239 77,251
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 81,983 $249,293
======== ========
<FN>
The Notes to Consolidated Financial Statements are an integral part of
these statements.
</TABLE>
Peoples Energy Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
accounts of Peoples Energy Corporation (Company) and its wholly
owned subsidiaries, The Peoples Gas Light and Coke Company
(Peoples Gas), North Shore Gas Company (North Shore Gas), Peoples
District Energy Corporation (Peoples District Energy), Peoples
Energy Services Corporation, and Peoples NGV Corp., and comprise
the assets, liabilities, revenues, expenses, and underlying common
stockholders' equity of these companies. Income is principally
derived from the Company's utility subsidiaries, Peoples Gas and
North Shore Gas. The statements have been prepared by the Company
in conformity with the rules and regulations of the Securities and
Exchange Commission (SEC) and reflect all adjustments that are, in
the opinion of management, necessary to present fairly the results
for the interim periods herein and to prevent the information from
being misleading. Certain items previously reported for the prior
periods have been reclassified to conform with the presentation in
the current periods.
Certain footnote disclosures and other information, normally
included in financial statements prepared in accordance with
generally accepted accounting principles, have been condensed or
omitted from these interim financial statements, pursuant to SEC
rules and regulations. Therefore, the statements should be read
in conjunction with the consolidated financial statements and
related notes contained in the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1995.
The business of the Company's utility subsidiaries is
influenced by seasonal weather conditions because a large element
of the utilities' customer load consists of gas used for space
heating. Weather-related deliveries can, therefore, have a
significant positive or negative impact on net income.
Accordingly, the results of operations for the interim periods
presented are not indicative of the results to be expected for all
or any part of the balance of the current fiscal year.
2. SIGNIFICANT ACCOUNTING POLICIES
2A Revenue Recognition
Gas sales revenues for retail customers are recorded on the
accrual basis for all gas delivered during the month, including
an estimate for gas delivered but unbilled at the end of each
month.
2B Regulated Operations
Peoples Gas' and North Shore Gas' utility operations are
subject to regulation by the Illinois Commerce Commission
(Commission). Regulated operations are accounted for in
accordance with Statement of Financial Accounting Standards
(SFAS) No. 71, "Accounting for the Effects of Certain Types of
Regulation." This standard controls the application of
generally accepted accounting principles for companies whose
rates are determined by an independent regulator such as the
Commission. Regulatory assets represent certain costs that are
expected to be recovered from customers through the ratemaking
process. When incurred, such costs are deferred as assets in
the balance sheet and subsequently recorded as expenses when
those same amounts are reflected in rates.
2C Statement of Cash Flows
For purposes of the balance sheet and the statement of cash
flows, the Company considers all short-term liquid investments
with maturities of three months or less to be cash equivalents.
<TABLE>
Income taxes and interest paid (excluding capitalized
interest) were as follows:
<CAPTION>
For the nine months
ended June 30, 1996 1995
----------------------------------------------
(Thousands)
<S> <C> <C>
Income taxes paid $27,168 $12,659
Interest paid 35,604 38,655
</TABLE>
2D Income Taxes
The Company follows the liability method of accounting for
deferred income taxes. Under the liability method, deferred
income taxes have been recorded using currently enacted tax
rates for the differences between the tax basis of assets and
liabilities and the basis reported in the financial statements.
Due to the effects of regulation on Peoples Gas and North Shore
Gas, certain adjustments made to deferred income taxes are, in
turn, debited or credited to regulatory assets or liabilities.
2E Recovery of Gas Costs, Including Charges for Transition Costs
Pursuant to Federal Energy Regulatory Commission (FERC)
Order 636 and successor orders, pipelines are allowed to
recover from their customers so-called transition costs. These
costs arise from the restructuring of pipeline service
obligations required by the 636 Orders. The utilities are
currently recovering pipeline charges for transition costs
through the Gas Charge. (See Notes 4A and 4B.)
Under the tariffs of Peoples Gas and North Shore Gas, the
difference for any fiscal year between costs recoverable
through the Gas Charge and revenues billed to customers under
the Gas Charge is refunded or recovered over a 12-month billing
cycle beginning the following January 1. Consistent with these
tariff provisions, such difference for any month is recorded
either as a current liability or as a current asset (with a
contra entry to Gas Costs), and the fiscal year-end balance is
amortized over the 12-month period beginning the following
January 1.
The Commission conducts annual proceedings regarding, for
each gas utility, the reconciliation of revenues from the Gas
Charge and related costs incurred for gas. In such
proceedings, costs recovered by a utility through the Gas
Charge are subject to challenge. Such proceedings regarding
Peoples Gas and North Shore Gas for fiscal years 1992 through
1996 are currently pending before the Commission.
3. COVENANTS REGARDING RETAINED EARNINGS
North Shore Gas' indenture relating to its first mortgage bonds
contains provisions and covenants restricting the payment of cash
dividends and the purchase or redemption of capital stock. At June
30, 1996, such restrictions amounted to $11.6 million out of North
Shore Gas' total retained earnings of $70.9 million.
4. RATES AND REGULATION
4A Utility Rate Proceedings
Peoples Gas' Rate Order. On November 8, 1995, the Commission
issued an order approving changes in rates of Peoples Gas that are
designed to increase annual revenues by approximately $30.8
million, exclusive of additional charges for revenue taxes.
Peoples Gas was allowed a rate of return on original-cost rate base
of 9.19 per cent, which reflects an 11.10 per cent cost of common
equity. The new rates were implemented on November 14, 1995. A
group of industrial transportation customers has appealed the
Commission's order to the Illinois Appellate Court. Any change
made by the Appellate Court would have a prospective effect only.
North Shore Gas' Rate Order. On November 8, 1995, the Commission
issued an order approving changes in rates of North Shore Gas that
are designed to increase annual revenues by approximately $5.6
million, exclusive of additional charges for revenue taxes. North
Shore Gas was allowed a rate of return on original-cost rate base
of 9.75 per cent, which reflects an 11.30 per cent cost of common
equity. The new rates were implemented on November 14, 1995. A
group of industrial transportation customers has appealed the
Commission's order to the Illinois Appellate Court. Any change
made by the Appellate Court would have a prospective effect only.
FERC Order 636 Cost Recovery. On September 15, 1993, the
Commission entered an order initiating an investigation into the
appropriate means of recovery by Illinois gas utilities of pipeline
charges for FERC Order 636 transition costs. The Commission issued
a final order in this proceeding on March 9, 1994. The order
provided for the full recovery of transition costs from Peoples
Gas' and North Shore Gas' gas service customers and transportation
customers to the extent they contracted for firm standby service.
The Citizens Utility Board and State's Attorney of Cook County
filed an application for rehearing of the March 9 order with the
Commission. In its orders on rehearing, the Commission continued
to provide for full recovery of transition costs, but directed
that, effective November 1, 1994, gas supply realignment (GSR)
costs (one of the four categories of transition costs) be recovered
on a uniform volumetric basis from all transportation and sales
customers. In December 1994, a group of industrial transportation
customers of Illinois utilities appealed the Commission's orders on
rehearing to the Illinois Appellate Court. The Illinois Appellate
Court, on September 21, 1995, affirmed the Commission's order. A
group of industrial transportation customers of Illinois utilities
filed a petition for leave to appeal the Appellate Court's order to
the Illinois Supreme Court. If the Illinois Supreme Court accepts
the appeal, any change made by it to the Commission's order would
have a prospective effect only. (See Notes 2E and 4B.)
4B FERC Orders 636, 636-A, and 636-B
FERC Order 636 and successor orders require pipelines to make
separate rate filings to recover transition costs. There are four
categories of such costs, the largest of which for Peoples Gas and
North Shore Gas is GSR costs. The utilities are subject to charges
for transition cost recovery by Natural Gas Pipeline Company of
America (Natural). Charges by Natural for transition costs
commenced on January 1, 1994. On September 29, 1994, the FERC
approved a Stipulation and Agreement (Agreement) filed by Natural.
The Agreement placed a cap on the amount of GSR costs recoverable
by Natural from Peoples Gas and North Shore Gas. For Peoples Gas,
that cap is approximately $103 million and for North Shore Gas,
that cap is approximately $25 million. However, subject to these
caps, the level of costs that Peoples Gas and North Shore Gas will
incur is dependent primarily upon the future market price of
natural gas and pipeline negotiations with producers. Peoples Gas
and North Shore Gas are currently recovering
transition costs through the Gas Charge. At June 30, 1996, Peoples
Gas and North Shore Gas have made payments of $63.9 million and
$15.7 million, and have accrued an additional $17.8 million and
$4.4 million, respectively, toward the caps.
The 636 Orders are not expected to have a material adverse
effect on financial position or results of operations of the
Company or its subsidiaries. (See Notes 2E and 4A.)
5. ENVIRONMENTAL MATTERS
5A Former Manufactured Gas Plant Operations
The Company's utility subsidiaries, their predecessors, and
certain former affiliates operated facilities in the past at 37
sites for the purpose of manufacturing gas and storing manufactured
gas (Manufactured Gas Sites). In connection with manufacturing and
storing gas, various by-products and waste materials were produced,
some of which might have been disposed of rather than sold. Under
certain laws and regulations relating to the protection of the
environment, the subsidiaries might be required to undertake
remedial action with respect to some of these materials. Three of
the Manufactured Gas Sites are discussed in more detail below.
Peoples Gas and North Shore Gas, under the supervision of the
Illinois Environmental Protection Agency (IEPA), are conducting
investigations of other Manufactured Gas sites. These
investigations may require the utility subsidiaries to perform
additional investigation and remediation. The investigations are
in a preliminary stage and are expected to occur over an extended
period of time.
In 1990, North Shore Gas entered into an Administrative Order on
Consent (AOC) with the United States Environmental Protection
Agency (EPA) and the IEPA to implement and conduct a remedial
investigation/feasibility study (RI/FS) of a Manufactured Gas site
located in Waukegan, Illinois, where manufactured gas and coking
operations were formerly conducted (Waukegan Site). The RI/FS is
comprised of an investigation to determine the nature and extent of
contamination at the Waukegan site and a feasibility study to
develop and evaluate possible remedial actions. North Shore Gas
entered into the AOC after being notified by the EPA that North
Shore Gas, General Motors Corporation (GMC) and Outboard Marine
Corporation were each a potentially responsible party (PRP) under
the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (CERCLA) with respect to the
Waukegan Site. A PRP is potentially liable for the cost of any
investigative and/or remedial work that the EPA determines is
necessary. Other parties identified as PRPs did not enter into the
AOC. Under the terms of the AOC, North Shore Gas is responsible
for the cost of the RI/FS. North Shore Gas believes, however, that
it will recover a significant portion of the costs of the RI/FS
from other entities. GMC has agreed to share equally with North
Shore Gas in funding of the RI/FS cost, without prejudice to GMC's
or North Shore Gas' right to seek a lesser cost responsibility at a
later date.
Peoples Gas has observed what appear to be gas purification
wastes on a Manufactured Gas site in Chicago, formerly called the
110th Street Station, and property contiguous thereto (110th Street
Station Site). Peoples Gas has fenced the 110th Street Station
site and is conducting a study under the supervision of the IEPA to
determine the feasibility of a limited removal action.
In May 1996, the current owner of a site in Chicago, formerly
called Pitney Court Station, filed suit against Peoples Gas in
federal district court under CERCLA. The suit seeks recovery of
the past and future costs of investigating and remediating the site
and an order directing Peoples Gas to remediate the site. Peoples
Gas is currently evaluating this suit.
The utility subsidiaries are accruing and deferring the costs
they incur in connection with all of the Manufactured Gas Sites,
including related legal expenses, pending recovery through rates or
from insurance carriers or other entities. At June 30, 1996, the
total of the costs deferred by the subsidiaries, net of recoveries
and amounts billed to other entities, was $17.1 million. This
amount includes an estimate of the costs of completing the studies
required by the EPA at the Waukegan Site and the investigations
being conducted under the supervision of the IEPA referred to
above. The amount also includes an estimate of the costs of
remediation at the Waukegan Site and at the 110th Street Station
Site in Chicago, at the minimum amount of the current estimated
range of such costs. The costs of remediation at the other sites
cannot be determined at this time. While each subsidiary intends
to seek contribution from other entities for the costs incurred at
the sites, the full extent of such contributions cannot be
determined at this time.
Peoples Gas and North Shore Gas have filed suit against a number
of insurance carriers for the recovery of environmental costs
relating to the utilities' former manufactured gas operations. The
suit asks the court to declare that the insurers are liable under
policies in effect between 1937 and 1986 for costs incurred or to
be incurred by the utilities in connection with five Manufactured
Gas sites in Chicago and Waukegan. The utilities are also asking
the court to award damages stemming from the insurers' breach of
their contractual obligation to defend and indemnify the utilities
against these costs. At this time, management cannot determine the
timing and extent of the subsidiaries' recovery of costs from their
insurance carriers. Accordingly, the costs deferred at June 30,
1996 have not been reduced to reflect recoveries from insurance
carriers.
Costs incurred by Peoples Gas or North Shore Gas for
environmental activities relating to former manufactured gas
operations will be recovered from insurance carriers or other
entities or through rates for utility service. Accordingly,
management believes that the costs incurred by the subsidiaries in
connection with former manufactured gas operations will not have a
material adverse effect on the financial position or results of
operations of the subsidiaries. Peoples Gas and North Shore Gas
are recovering the costs of environmental activities relating to
the utilities' former manufactured gas operations, including
carrying charges on the unrecovered balances, under rate mechanisms
approved by the Commission. At June 30, 1996, the subsidiaries had
recovered $7.5 million of such costs through rates.
5B Former Mineral Processing Site in Denver, Colorado
In February 1994, North Shore Gas received a demand from the
S.W. Shattuck Chemical Company, Inc. (Shattuck), a responsible
party under CERCLA, for reimbursement, indemnification and
contribution for response costs incurred at a former mineral
processing site in Denver, Colorado. Shattuck is a wholly owned
subsidiary of Salomon, Inc. (Salomon). The demand alleges that
North Shore Gas is a successor-in-interest to certain companies
that were allegedly responsible during the period 1934-1941 for the
disposal of mineral processing wastes containing radium and other
hazardous substances at the site. The cost of the remedy at the
site has been estimated by Shattuck to be approximately $31
million. Salomon has provided financial assurance for the
performance of the remediation at the site.
North Shore Gas does not believe that it has liability for the
response costs, but cannot determine the matter with certainty. At
this time, North Shore Gas cannot reasonably estimate what range of
loss, if any, may occur. In the event that North Shore Gas
incurred liability, it would pursue reimbursement from insurance
carriers, other responsible parties, if any, and through its rates
for utility service.
In November 1994, North Shore Gas filed a declaratory judgment
action against Salomon in the District Court for the Northern
District of Illinois. The suit asks the court to declare that
North Shore Gas is not liable for response costs incurred or to be
incurred at the Denver site. Salomon has filed a counterclaim for
costs incurred and to be incurred by Salomon and Shattuck with
respect to the site.
5C Gasoline Release in Wheeling, Illinois
In June 1995, North Shore Gas received a letter from the IEPA
informing North Shore Gas that it was not in compliance with
certain provisions of the Illinois Environmental Protection Act
which prohibit water pollution within the State of Illinois. On
November 14, 1995, the Illinois Attorney General filed a complaint
in the Circuit Court of Cook County naming North Shore Gas and four
other parties as defendants. The complaint alleges that the
violations are the result of a gasoline release that occurred in
Wheeling, Illinois in June 1992 when a contractor who was
installing a pipeline for North Shore Gas accidentally struck a
gasoline pipeline owned by West Shore Pipeline Company.
North Shore Gas is currently evaluating this matter.
6. DISTRICT ENERGY
Peoples District Energy is a 50 per cent participant in a
partnership, Trigen-Peoples District Energy Company, that provides
heating and cooling services to the McCormick Place exposition and
convention center in Chicago, Illinois. The partnership also
intends to offer district energy services to other large buildings
in Chicago. The services will ultimately be supplied from one or
more central plants, a concept known as district energy. The other
partner, Trigen-Chicago Energy Corporation (Trigen-Chicago), is a
subsidiary of Trigen Energy Corporation (Trigen). Neither the
partnership nor its partners are regulated as a public utility.
In December 1992, the partnership entered into a 28-year
contract with the Metropolitan Pier and Exposition Authority (MPEA)
to construct and operate a plant that will provide steam and
chilled water to McCormick Place for heating and cooling purposes
(MPEA Agreement). In November 1993, the partnership assumed
operation of the current space-conditioning system and began
providing service to the two existing halls. The partnership also
will provide heating and cooling to a planned exhibition hall that
is scheduled to be in operation early in fiscal 1997. The
partnership is obligated to provide services to McCormick Place for
the term of the MPEA Agreement at or below the cost (as determined
by a contractual formula) that the MPEA would incur to produce
heating and cooling for itself. The MPEA Agreement also obligates
the partnership to complete and pay for construction of the plant
by certain dates specified in the contract. To secure its
obligations during the service period under the MPEA Agreement, the
partnership is obligated to provide, maintain, and reinstate a
letter of credit upon which the MPEA can draw to pay its costs,
expenses, and damages, up to $4 million per incident, principally
in the event of the partnership's failure to cure timely an
interruption of service.
The Company and Trigen have provided two joint and several
guarantees to the MPEA of the partnership's performance of its
obligations under the MPEA Agreement. One of the guarantees covers
all obligations of the partnership relating to construction of the
project (Construction Obligations), and is limited in the aggregate
to $15 million, except for the guarantors' funding obligations
described above and costs to the extent incurred by the MPEA in
connection with enforcement of obligations of the partnership or
the guarantors. The second guarantee covers all obligations of the
partnership other than the Construction Obligations, including
liabilities arising from an interruption of service to McCormick
Place, insolvency of the partnership, or other partnership default.
This second guarantee is limited in the aggregate to $11 million,
except for an additional $4 million to $8 million in the event of
insolvency of the partnership or the installation (pursuant to
enforcement of lender or MPEA remedies) of any other operator of
the district energy plant in lieu of the partnership, and except
for the partnership's obligations relating to the letter of credit
in favor of the MPEA described above and costs to the extent
incurred by the MPEA in connection with the enforcement of
obligations of the partnership or the guarantors.
The district energy plant is estimated to cost approximately
$41.5 million. The MPEA has effectively funded $8 million of the
construction costs, and the partnership will fund the balance. In
August 1995, the partnership obtained a $28 million construction
and term loan to finance construction of a major portion of the
project. Upon completion of construction of the project, the
construction loans will be converted to a term loan with a 20-year
maturity. In connection with the financing, the Company pledged
its shares of common stock of Peoples District Energy to the lender
as security for the loan obligations. Additionally, the Company,
Peoples District Energy, Trigen, Trigen-Chicago and the partnership
executed a Sponsors Support and Equity Contribution Agreement
(Sponsors Support Agreement).
Under the Sponsors Support Agreement, the Company and Trigen
have certain contractual obligations to the lender that could
require payment by each of the Company and Trigen of 50 per cent of
the outstanding loan obligations upon the occurrence of certain
events relating to material destruction of the project,
condemnation of the project, purchase of the project by the MPEA
pursuant to provisions of the MPEA Agreement and default by the
partnership, the Company or Trigen of certain of its obligations to
the MPEA.
7. TAX MATTERS
On September 30, 1993, the Company received notification from
the Internal Revenue Service (IRS) that settlement of past income
tax returns had been reached for fiscal years 1978 through 1990.
The IRS settlement resulted in payments of principal and interest
to the Company in 1994 in total amount of approximately $28
million, or $21.6 million after income taxes. Both Peoples Gas and
North Shore Gas received regulatory authorization to defer the
recognition of the settlement amount in income for fiscal year
1993, and to recognize its portion of the settlement amount in
income for fiscal years 1994 and 1995. Each utility represented to
the Commission that, having received this accounting authorization,
it would not file a request for an increase in base rates before
December 1994. The regulatory treatment of the IRS settlement
having been resolved in November 1993, Peoples Gas and North Shore
Gas together included $14 million, or $10.8 million after income
taxes, in income in 1994. The amount after income taxes was
included in Other Income - Miscellaneous. At September 30, 1994,
approximately $14 million was included in Deferred Credits and
Other Liabilities - Other.
As a result of the Commission's accounting authorization, the
fiscal year 1995 portion of the settlement amount for Peoples Gas
and North Shore Gas was amortized (credited) to operation expense.
The effect was to offset increases in costs that the utilities
would incur during the year. In fiscal 1995, the utilities
together amortized approximately $14 million, or $10.8 million
after income taxes.
8. BONDS REDEEMED
On November 14, 1995, Peoples Gas notified the trustee of the
City of Joliet 1984 Gas Supply Revenue Refunding Bonds, Series A
and B, which were secured by Peoples Gas' Series U and V First and
Refunding Mortgage Bonds, of its intention to redeem approximately
$87 million aggregate principal amount of the bonds. The
redemption, from general corporate funds, was completed on December
29, 1995.
On December 18, 1995, North Shore Gas notified the trustee of
its intention to redeem $8 million aggregate principal amount of
Series I First Mortgage Bonds. The redemption, using the proceeds
of an interim short-term bank loan as well as other monies of North
Shore Gas, was completed on February 1, 1996.
9. SNG PLANT CLOSING
Peoples Gas has closed its synthetic gas-making plant located
near Joliet, Illinois. The decision was effected after a
cost-benefit analysis was performed, which showed that, as of
December 1, 1995, it would not be cost-effective to use the plant
as a source of gas, given new, more economical supply arrangements
to become effective on that date. Those supply arrangements were
the result of initiatives undertaken by the utilities to
restructure their gas supply portfolios in response to FERC Order
636. The rates approved by the Commission in Peoples Gas' most
recent rate case reflect the annual effect of a five-year
amortization of the undepreciated investment in the plant and
decommissioning expenses. The plant closing did not have a
material effect on financial position or results of operations of
the Company or Peoples Gas.
10. EXPIRATION OF STORAGE CONTRACTS
Peoples Gas and North Shore Gas had certain natural gas storage
contracts with Natural that expired on or before December 1, 1995.
Associated with the expiration of the contracts, the utilities
realized a gain, after income taxes, of $3.3 million in the third
quarter of fiscal 1996 and $7.2 million in the nine and twelve
months ended June 30, 1996.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
RESULTS OF OPERATIONS
Net Income
Net income increased $9.7 million, to $14.2 million, for the
three months ended June 30, 1996, from the results of last year's
like quarter, due mainly to rate increases that went into effect
for Peoples Gas and North Shore Gas on November 14, 1995. (See
Note 4A of the Notes to Consolidated Financial Statements.) In
addition, net income benefited from weather that was 26 per cent
colder than last year's period. Also, the current quarter was
aided by gains associated with the expiration of certain natural
gas storage contracts. (See Note 10 of the Notes to Consolidated
Financial Statements.) These increases were partly offset by the
effect of last year's federal income tax settlement. (See Note 7
of the Notes to Consolidated Financial Statements).
Net income increased $36.9 million, to $112.4 million, and $39.1
million, to $99 million, for the current nine- and 12-month
periods, from the results of the similar prior periods, due
principally to higher gas deliveries, mostly the result of weather
that was 21 per cent and 22 per cent colder than the previous
respective periods. Both current periods also benefited from the
aforementioned rate increases and the gains associated with the
expiration of certain natural gas storage contracts. These
increases were offset, in part, by the prior periods' recognition
of the federal income tax settlement and the gains from the sale of
certain oil and gas rights.
<TABLE>
A summary of variations affecting income between periods is
presented below, with explanations of significant differences
following:
<CAPTION>
Three Months Ended Nine Months Ended 12 Months Ended
June 30, 1996 June 30,1996 June 30, 1996
Increase/(Decrease) Increase/(Decrease) Increase/(Decrease)
from Prior Period from Prior Period from Prior Period
-------------------- ------------------- -------------------
(Thousands of dollars) Amount % Amount % Amount %
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net operating revenues (a) $16,867 17.2 $76,386 19.3 $80,294 17.4
Operation and
maintenance expenses 5,980 10.0 25,472 14.3 20,103 8.2
Depreciation and
amortization expense 1,971 12.2 3,148 6.4 3,479 5.3
Income taxes 5,762 2,810.7 24,377 61.2 29,916 129.0
Other income and deductions (6,540) (55.6) (13,624) (38.3) (12,614) (27.8)
Net Income 9,684 212.2 36,869 48.8 39,110 65.3
- --------------------------------------------------------------------------------------
<FN>
(a) Operating revenues, net of gas costs and revenue taxes.
</TABLE>
Net Operating Revenues
Gross revenues of Peoples Gas and North Shore Gas are affected
by changes in the unit cost of the subsidiaries' gas purchases and
do not include the cost of gas supplies for customers who purchase
gas directly from producers and marketers rather than from the
subsidiaries. The direct customer purchases have no effect on net
income because the utilities provide transportation service for
such gas volumes and recover margins similar to those applicable to
conventional gas sales. Changes in the unit cost of gas do not
significantly affect net income because the utilities' tariffs
provide for dollar-for-dollar recovery of gas costs. (See Note 2E
of the Notes to Consolidated Financial Statements.) The utilities'
tariffs also provide for dollar-for-dollar recovery of the cost of
revenue taxes imposed by the state and various municipalities.
Since income is not significantly affected by changes in revenue
from customers' gas purchases from producers or marketers rather
than from the subsidiaries, changes in gas costs, or changes in
revenue taxes, the discussion below pertains to "net operating
revenues" (operating revenues, net of gas costs and revenue taxes).
The Company considers net operating revenues to be a more pertinent
measure of operating results than gross revenues.
Net operating revenues increased $16.9 million, to $114.7
million, $76.4 million, to $471.3 million, and $80.3 million, to
$542.6 million, for the current three-, nine-, and 12-month
periods, respectively, reflecting increased gas deliveries, mainly
caused by colder weather in each of the more recent periods. The
aforementioned rate increases for the Company's utility
subsidiaries improved net operating revenues in the current
three-month period by about $8.6 million, or $5.2 million after
income taxes. Rate increases benefited net operating revenues in
both the current nine- and 12-month periods by about $27.4 million,
and net income by $16.6 million.
See Other Matters - Operating Statistics for details of selected
financial and operating information by gas service classification.
Operation and Maintenance Expenses
Operation and maintenance expenses increased $6 million, to $66
million, for the current three-month period, due mainly to the
prior year's recognition of $2.3 million for an IRS settlement.
(See Note 7 of the Notes to Consolidated Financial Statements.) In
addition, the current period was affected by increases in the
provision for uncollectible accounts, due primarily to increased
revenues, the provision for injuries and damages, and environmental
costs recovered through rates. These increases were partially
offset by decreased group insurance and pension expenses,
reflecting a change in assumptions.
Operation and maintenance expenses increased $25.5 million, to
$203.8 million, and $20.1 million, to $266.3 million, in the
current nine- and 12-month periods, due principally to the prior
periods' recognition of an IRS settlement of $12.9 million and
$11.6 million, respectively. Also, both prior periods included the
benefit of $3.7 million from the sale of certain oil and gas
rights. In addition, increases between periods resulted from
reengineering costs and environmental costs recovered through
rates. The current nine-month period also includes an increase in
the provision for uncollectible accounts, due primarily to
increased revenues; whereas the provision for uncollectible
accounts decreased in the 12-month period, reflecting a prior
period adjustment. The above mentioned increases were offset, in
part, by decreased pension and group insurance expenses.
Depreciation and Amortization Expense
Depreciation and amortization expense increased $2 million, to
$18.1 million, $3.1 million, to $52.6 million, and $3.5 million, to
$69.6 million, for the current three-, nine-, and 12-month periods,
respectively, due primarily to depreciable property additions and
the amortization of costs associated with the closing of Peoples
Gas' SNG Plant (see Note 9 of the Notes to Consolidated Financial
Statements).
Income Taxes
Income taxes, exclusive of income taxes included in other income
and deductions, increased $5.8 million, to $5.6 million, $24.4
million, to $64.2 million, and $29.9 million, to $53.1 million, in
the current three-, nine-, and 12-month periods, due principally to
higher pre-tax income.
Other Income and Deductions
Other income and deductions decreased $6.5 million, $13.6
million, and $12.6 million, for the current three-, nine-, and
12-month periods, respectively, due primarily to the gain of $3.3
million in the three-month period and $7.2 million in the nine- and
12-month periods, after income taxes, associated with the
expiration of certain natural gas storage contracts. (See Note 10
of the Notes to Consolidated Financial Statements.) In addition,
all three periods benefited from decreased interest on long-term
debt reflecting a reduction in debt outstanding, partially offset
by decreased interest income.
Other Matters
Effect of Weather. Weather variations affect the volumes of gas
delivered for heating purposes and, therefore, can have a
significant positive or negative impact on net income and coverage
ratios.
FERC Order 636 Costs. In 1992, the FERC issued Order 636 and
successor orders that required substantial restructuring of the
service obligations of interstate pipelines. (See Notes 2E, 4A,
and 4B of the Notes to Consolidated Financial Statements.)
On September 15, 1993, the Commission entered an order
initiating an investigation into the appropriate means of recovery
by Illinois gas utilities of pipeline charges for FERC Order 636
transition costs. The Illinois Appellate Court affirmed the
Commission's order on rehearing on September 21, 1995. (See Notes
2E, 4A, and 4B of the Notes to Consolidated Financial Statements.)
Reengineering Study. Peoples Gas and North Shore Gas have
undertaken a major project to reengineer their business processes
with the goal of increasing efficiency, responsiveness to customer
needs, and cost effectiveness.
Large Volume Gas Service Agreements. Peoples Gas has entered into
gas service contracts with certain large volume customers under a
specific rate schedule approved by the Commission. These contracts
were negotiated to overcome the potential threat of bypassing the
utility's distribution system. The impact on the net income of
Peoples Gas as a result of these contracts is not material.
<TABLE>
Operating Statistics. The following table represents gas
distribution margin components:
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
June 30, June 30, June 30,
------------------ ------------------ -------------------
1996 1995 1996 1995 1996 1995
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues (thousands):
Gas sales
Residential $182,717 $134,351 $787,405 $672,196 $868,005 $755,698
Commercial 26,780 19,435 126,883 105,766 137,229 117,462
Industrial 7,157 4,283 29,830 22,300 31,659 24,933
-------- -------- -------- -------- --------- --------
216,654 158,069 944,118 800,262 1,036,893 898,093
Transportation
Residential 7,661 7,873 32,392 32,933 37,309 37,736
Commercial 9,758 10,129 45,335 43,402 52,252 50,116
Industrial 9,001 7,833 31,098 27,565 38,178 33,434
Contract Pooling 1,910 -- 1,910 -- 1,910 --
-------- -------- -------- -------- --------- ---------
28,330 25,835 110,735 103,900 129,649 121,286
-------- -------- -------- -------- --------- ---------
Other 3,516 3,283 9,809 14,533 12,826 18,139
-------- -------- -------- -------- --------- ---------
Total Operating Revenues 248,500 187,187 1,064,662 918,695 1,179,368 1,037,518
Less - Gas Costs 110,346 68,682 484,249 425,804 515,882 465,859
- Revenues Taxes 23,479 20,697 109,124 97,988 120,856 109,323
-------- -------- --------- ------- --------- ---------
Net Operating Revenues $114,675 $97,808 $471,289 $394,903 $542,630 $462,336
======== ======== ========= ======== ========= =========
Deliveries (MDth):
Gas Sales
Residential 25,011 22,898 144,192 120,221 154,543 129,306
Commercial 4,185 3,865 25,251 20,216 27,114 21,958
Industrial 1,252 986 6,366 4,644 6,780 5,156
-------- -------- -------- -------- --------- ---------
30,448 27,749 175,809 145,081 188,437 156,420
-------- -------- -------- -------- --------- ---------
Transportation (a)
Residential 5,261 4,675 24,075 22,525 26,361 24,661
Commercial 7,708 7,793 38,165 36,474 43,340 41,516
Industrial 10,650 8,714 36,563 31,002 45,453 38,101
-------- -------- -------- --------- --------- ---------
23,619 21,182 98,803 90,001 115,154 104,278
-------- -------- -------- --------- --------- ---------
Total Gas Sales
and Transportation 54,067 48,931 274,612 235,082 303,591 260,698
======== ======== ======== ========= ========= =========
Margin per Dth
delivered $2.12 $2.00 $1.72 $1.68 $1.79 $1.77
<FN>
(a) Volumes associated with contract pooling service are included
in the respective customer classes.
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Indenture Restrictions. North Shore Gas' indenture relating to its
first mortgage bonds contains provisions and covenants restricting
the payment of cash dividends and the purchase or redemption of
capital stock. At June 30, 1996, such restrictions amounted to
$11.6 million out of North Shore Gas' total retained earnings of
$70.9 million. (See Note 3 of the Notes to Consolidated Financial
Statements.)
Regulatory Actions. On November 8, 1995, the Commission issued
orders approving changes in rates of Peoples Gas and North Shore
Gas. (See Note 4A of the Notes to Consolidated Financial
Statements.)
In September 1995, Peoples Gas and North Shore Gas filed
petitions with the Commission for approval of performance-based
rate programs (PBR Programs) for gas costs. The objectives of the
PBR Programs are to provide incentives to minimize gas supply and
capacity costs in a changing market and to pursue innovative gas
supply-related opportunities. Under specified conditions and up to
certain limits, Peoples Gas and North Shore Gas would share equally
with gas sales customers the savings or costs from these programs.
As modified by Peoples Gas and North Shore Gas during the
proceeding, the PBR Programs would be for a pilot period covering
October 1, 1996 through fiscal year 1998 and were filed pursuant to
a new provision of the Illinois Public Utilities Act which allows
experiments in performance-based rates. Hearings on the PBR
Program proposals have been concluded. On June 5, 1996, the
Hearing Examiner issued his proposed order recommending that the
petitions be denied. The Hearing Examiner's recommendation is not
binding on the Commission. Peoples Gas, North Shore Gas, and the
Commission Staff have filed briefs opposing that recommendation and
have presented oral argument before the Commission, which is
expected to enter an order prior to the close of fiscal 1996.
Environmental Matters. The Company's utility subsidiaries are
conducting environmental investigations and work at certain sites
that were the location of former manufactured gas operations. (See
Note 5A of the Notes to Consolidated Financial Statements.)
In February 1994, North Shore Gas received a demand from a
responsible party under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (CERCLA) for
reimbursement, indemnification and contribution for response costs
incurred at a former mineral processing site in Denver, Colorado.
In November 1994, North Shore Gas filed a declaratory judgment
action asking the court to declare that North Shore Gas is not
liable for response costs relating to the site. (See Note 5B of
the Notes to Consolidated Financial Statements.)
On November 14, 1995, the Illinois Attorney General filed a
complaint in the Circuit Court of Cook County naming North Shore
Gas and four other parties as defendants. The complaint alleges
violations arising out of a gasoline release that occurred in
Wheeling, Illinois in June 1992 when a contractor who was
installing a pipeline for North Shore Gas accidentally struck a
gasoline pipeline owned by West Shore Pipeline Company. North
Shore Gas is currently evaluating this matter. (See Note 5C of the
Notes to Consolidated Financial Statements.)
District Energy. Peoples District Energy is a 50 per cent
participant in a partnership, Trigen-Peoples District Energy
Company, that provides district energy services to the McCormick
Place exposition and convention center in Chicago, Illinois. The
partnership also intends to offer district energy services to other
large buildings in Chicago. The other partner is a subsidiary of
Trigen Energy Corporation (Trigen), a company whose primary
business includes constructing and operating district energy
facilities. Neither the partnership nor its partners are
regulated as a public utility. The Company and Trigen have
each provided two joint and several limited guarantees to
the owner and operator of McCormick Place and also have certain
limited obligations to the partnership's lender under a Sponsors
Support and Equity Contribution Agreement. (See Note 6 of the
Notes to Consolidated Financial Statements.)
Bonds Redeemed. On November 14, 1995, Peoples Gas notified the
trustee of the City of Joliet 1984 Gas Supply Revenue Refunding
Bonds, Series A and B, which were secured by Peoples Gas' Series U
and V First and Refunding Mortgage Bonds, of its intention to
redeem approximately $87 million aggregate principal amount of the
bonds. The redemption, from general corporate funds, was completed
on December 29, 1995. (See Note 8 of the Notes to Consolidated
Financial Statements.)
On December 18, 1995, North Shore Gas notified the trustee of
its intention to redeem $8 million aggregate principal amount of
Series I First Mortgage Bonds. The redemption, using the proceeds
of an interim short-term bank loan as well as other monies of North
Shore Gas, was completed on February 1, 1996. (See Note 8 of the
Notes to Consolidated Financial Statements.)
Credit Lines. The utility subsidiaries have lines of credit of
$129.4 million. Agreements covering $92 million of the total will
expire on June 25, 1997. The agreement covering the remaining
$37.4 million will expire on January 31, 1998. Such lines of
credit cover projected short-term credit needs of the subsidiaries
and support the long-term debt treatment of Peoples Gas'
adjustable-rate mortgage bonds.
The Company intends to seek an additional line of credit to
finance activities of its unregulated subsidiaries.
Interest Coverage. The fixed charges coverage ratios for Peoples
Gas for the 12-months ended June 30, 1996, and fiscal 1995 and 1994
were 4.35, 2.76, and 3.28, respectively.
The corresponding coverage ratios for North Shore Gas for the
same periods were 4.97, 2.93, and 3.33, respectively.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 5 of the Notes to Consolidated Financial Statements
for a discussion pertaining to environmental matters.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit
Number Description of Document
------- -----------------------
27 Financial Data Schedule
b. Reports on Form 8-K filed during the quarter ended June
30, 1996
Date of Report - April 29, 1996
Item 5. Other Events
Financial Information
Date of Report - May 1, 1996
Item 5. Other Events
Shareholder Rights Plan
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
Peoples Energy Corporation
---------------------------
(Registrant)
August 7, 1996 By: /s/ K. S. BALASKOVITS
-------------- ---------------------------------
(Date) K. S. Balaskovits
Vice President and Controller
(Same as above)
-----------------------------
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
STATEMENTS OF INCOME, CONSOLIDATED BALANCE SHEETS, AND CONSOLIDATED STATMENTS
OF CASH FLOWS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,367,985
<OTHER-PROPERTY-AND-INVEST> 9,904
<TOTAL-CURRENT-ASSETS> 358,379
<TOTAL-DEFERRED-CHARGES> 14,582
<OTHER-ASSETS> 73,653
<TOTAL-ASSETS> 1,824,503
<COMMON> 277,959
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 429,087
<TOTAL-COMMON-STOCKHOLDERS-EQ> 707,046
0
0
<LONG-TERM-DEBT-NET> 527,104
<SHORT-TERM-NOTES> 4,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 586,353
<TOT-CAPITALIZATION-AND-LIAB> 1,824,503
<GROSS-OPERATING-REVENUE> 1,064,662
<INCOME-TAX-EXPENSE> 64,188
<OTHER-OPERATING-EXPENSES> 866,183
<TOTAL-OPERATING-EXPENSES> 930,371
<OPERATING-INCOME-LOSS> 134,291
<OTHER-INCOME-NET> 11,470
<INCOME-BEFORE-INTEREST-EXPEN> 145,761
<TOTAL-INTEREST-EXPENSE> 33,383
<NET-INCOME> 112,378
0
<EARNINGS-AVAILABLE-FOR-COMM> 112,378
<COMMON-STOCK-DIVIDENDS> 47,506
<TOTAL-INTEREST-ON-BONDS> 28,398
<CASH-FLOW-OPERATIONS> 94,779
<EPS-PRIMARY> 3.22
<EPS-DILUTED> 3.22
</TABLE>
