UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

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

For the quarterly period ended March 31, 2005

or

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

For the transition period from                      to                     

Commission File Number: 1-4125

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: Cumulative Preferred Stock - $100 Par Value (4-1/2%, 4.22%, 4.88%, 7.44% and 7.50% Series)

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of May 1, 2005, 73,282,258 shares of the registrant’s Common Shares, no par value, were issued and outstanding, all held beneficially and of record by NiSource Inc.

NORTHERN INDIANA PUBLIC SERVICE COMPANY
FORM 10-Q QUARTERLY REPORT
FOR THE QUARTER ENDED MARCH 31, 2005

Table of Contents

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DEFINED TERMS

The following is a list of frequently used abbreviations or acronyms that are found in this report:

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DEFINED TERMS (continued)

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Northern Indiana Public Service Company

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

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ITEM 1. FINANCIAL STATEMENTS (continued)

Northern Indiana Public Service Company

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

6

ITEM 1. FINANCIAL STATEMENTS (continued)

Northern Indiana Public Service Company
Consolidated Balance Sheets (continued)

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

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ITEM 1. FINANCIAL STATEMENTS (continued)

Northern Indiana Public Service Company

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

8

ITEM 1. FINANCIAL STATEMENTS (continued)

Northern Indiana Public Service Company

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

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ITEM 1. FINANCIAL STATEMENTS (continued)

Northern Indiana Public Service Company

1.	Basis of Accounting Presentation

Northern Indiana is a wholly-owned subsidiary of NiSource. NiSource is an energy holding company that provides natural gas, electricity and other products and services to approximately 3.8 million customers located within a corridor that runs from the Gulf Coast through the Midwest to New England. NiSource is a Delaware corporation and a registered holding company under the Public Utility Holding Company Act of 1935, as amended.

The accompanying unaudited consolidated financial statements for Northern Indiana reflect all normal recurring adjustments that are necessary, in the opinion of management, to present fairly the results of operations in accordance with accounting principles generally accepted in the United States of America.

The accompanying financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Northern Indiana’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004. Income for interim periods may not be indicative of results for the calendar year due to weather variations and other factors. Certain reclassifications have been made to the 2004 financial statements to conform to the 2005 presentation.

2.	Recent Accounting Pronouncements

FASB Interpretation No. 47 – Accounting for Conditional Asset Retirement Obligations. In March 2005, the FASB issued FIN 47 to clarify the accounting for conditional asset retirement obligations and to provide additional guidance for when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation, as used in SFAS No. 143. This interpretation is effective for fiscal years ending after December 15, 2005, and early adoption is encouraged. Northern Indiana is currently reviewing the legal obligations surrounding future retirement of tangible long-lived assets with regards to this interpretation.

SFAS No. 123 (revised 2004) – Share-Based Payment. In December 2004, the FASB issued SFAS No. 123R which requires that the cost resulting from all share-based payment transactions be recognized in the financial statements and establishes fair value as the measurement objective in accounting for these transactions. This statement is effective for public entities as of the beginning of the first interim or annual reporting period beginning after December 15, 2005, as directed by the SEC in their April 15, 2005 amendment to Rule 4-01(a) of Regulation S-X. Northern Indiana plans to adopt this standard on January 1, 2006, using a modified version of the prospective application for NiSource share-based awards issued to employees of Northern Indiana.

3.	Restructuring Activities

Since 2000, NiSource has implemented restructuring initiatives to streamline its operations and realize efficiencies from the acquisition of Columbia. The restructuring activities were primarily associated with reductions in headcount.

In connection with these restructuring initiatives, a total of approximately 170 management, professional, administrative and technical positions have been identified for elimination at Northern Indiana. As of March 31, 2005, 162 employees were terminated, of whom none were terminated during the first quarter 2005. As of March 31, 2005 and December 31, 2004, the Consolidated Balance Sheets reflected liabilities of $0.4 million and $0.5 million related to the restructuring initiatives, respectively. For the first quarter of 2005, no payments were made in association with the restructuring initiatives. Additionally, during the first quarter of 2005, the liability associated with the restructuring initiatives was reduced by $0.1 million due to a reduction in estimated expenses related to previous restructuring initiatives. The reduction in the estimated liability was reflected in “Operation and Maintenance” expense.

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ITEM 1. FINANCIAL STATEMENTS (continued)

Northern Indiana Public Service Company
Notes to Consolidated Financial Statements (continued) (unaudited)

4.	Regulatory Matters

Gas Distribution Operations Related Matters

Northern Indiana continues to offer a Choice Program where customers can choose to purchase gas from a third party supplier, through a regulatory initiative. Through the month of March 2005, approximately 59 thousand of Northern Indiana’s residential and small commercial customers selected an alternate supplier.

Northern Indiana’s gas costs are recovered under a flexible GCA mechanism approved by the IURC in 1999. Under the approved procedure, a demand component of the fuel adjustment factor is determined annually effective November 1 of each year, after hearings and IURC approval. The commodity component of the adjustment factor is determined by monthly filings, which do not require IURC approval but are reviewed by the IURC during the annual hearing that takes place regarding the demand component filing. Northern Indiana’s GCA factor also includes a GCIM which allows the sharing of any cost savings or cost increases with customers based on a comparison of actual gas supply portfolio cost to a market-based benchmark price.

Northern Indiana’s GCA5 annual demand cost recovery filing, covering the period November 1, 2003 through October 31, 2004, was made on August 26, 2003. The IURC authorized the collection of the demand charge, subject to refund, effective November 1, 2003. On June 8, 2004, Northern Indiana and the OUCC entered into a joint stipulation and agreement resolving all issues in GCA5. Among the settlement agreement’s provisions, Northern Indiana has agreed to return $3.8 million to its customers over a twelve-month period following IURC approval, which occurred on August 18, 2004. An additional provision of the agreement extended the current ARP, including Northern Indiana’s GCIM, from the current expiration date of December 31, 2004 to March 31, 2005. This date has been further extended through March 31, 2006, as discussed below.

Northern Indiana’s GCA6 annual demand cost recovery filing, covering the period November 1, 2004 through October 31, 2005 was made on August 26, 2004. The IURC authorized the collection of the demand charge, subject to refund, effective November 1, 2004 on October 20, 2004. The IURC held an evidentiary hearing in this Cause on March 2, 2005. Northern Indiana expects the IURC’s order in the second quarter of 2005.

Northern Indiana, the OUCC, Testimonial Staff of the IURC, and the Marketer Group (a group which collectively represents marketers participating in Northern Indiana Choice) filed a Stipulation and Settlement Agreement with the IURC on October 12, 2004, that, among other things, extends the expiration date of the 1997 ARP to March 31, 2006. The IURC approved the settlement agreement on January 26, 2005. The agreement, as approved by the IURC, grandfathers the terms of existing contracts that marketers have with Choice customers and establishes a scope for negotiations that parties will follow when convening within the next several months to establish a long-term resolution of ARP. Parties have been meeting since early January to establish the future terms of ARP, to be effective post March 31, 2006. The filing of an agreement or petition is expected in the second quarter of 2005.

Electric Operations Related Matters

During 2002, Northern Indiana settled certain regulatory matters related to an electric rate review. On September 23, 2002, the IURC issued an order adopting most aspects of the settlement. The order approving the settlement provides that electric customers of Northern Indiana will receive bill credits of approximately $55.1 million each year, for a cumulative total of $225 million, for the minimum 49-month period, beginning on July 1, 2002. The order also provides that 60% of any future earnings beyond a specified earnings level will be retained by Northern Indiana. Credits amounting to $14.4 million and $13.1 million were recognized for electric customers for the first quarter of 2005 and 2004, respectively.

On June 20, 2002, Northern Indiana, Ameren Corporation and First Energy Corporation established terms for joining the MISO through participation in an ITC. Northern Indiana transferred functional control of its electric transmission assets to the ITC and MISO on October 1, 2003. In April 2005, Northern Indiana, as well as the other two participants of the ITC, announced their withdrawal from the ITC and the ITC will cease operations effective November 1, 2005. As part of Northern Indiana’s use of MISO’s transmission service, Northern Indiana will incur new categories of transmission charges based upon MISO’s FERC-approved tariff. One of the new categories of charges, Schedule 10, relates to the payment of administrative charges to MISO for its continuing management and

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ITEM 1. FINANCIAL STATEMENTS (continued)

Northern Indiana Public Service Company
Notes to Consolidated Financial Statements (continued) (unaudited)

operations of the transmission system. Northern Indiana filed a petition on September 30, 2003, with the IURC seeking approval to establish accounting treatment for the deferral of the Schedule 10 charges from MISO. On July 21, 2004, the IURC issued an order which denied Northern Indiana’s request for deferred accounting treatment for the MISO Schedule 10 administrative fees. Northern Indiana appealed this decision to the Indiana Appellate Court, but on April 27, 2005, the Court affirmed the IURC’s original decision. Northern Indiana recorded a charge during the second quarter 2004 in the amount of $2.1 million related to the MISO administrative charges deferred through June 30, 2004, and recognized $1.6 million in MISO fees for the second half of 2004. The MISO Schedule 10 administrative fees are currently estimated to be approximately $3.1 million annually.

The MISO has launched the MMI, implementing structures and processes of an electricity market for the MISO region. The MMI provides non-discriminatory transmission service, reliable grid operation, and the purchase and sale of electric energy in a competitive, efficient and non-discriminatory manner. MISO’s MMI tariffs have been approved by FERC. Financially binding activities began with the opening of the market for bids and offers on March 25, 2005, and the Real-Time Market on April 1, 2005. Northern Indiana is actively participating in the MMI. Management is assessing the impact of MMI, and, based on the first month of market operation, expects a financial impact of $3.5 to $4.0 million annually in operating expenses for MMI administrative costs. These are in addition to the MISO Schedule 10 administrative costs for which Northern Indiana was denied deferral treatment in 2004. MMI energy costs are being accounted for in the same manner that energy costs were recorded prior to the implementation of the MMI, and are recovered through the FAC, pending approval by the IURC of MISO Day 2 costs. The detailed MMI tariff manages system reliability through the use of a market-based congestion management system. The FERC approved tariff includes a centralized dispatch platform, which dispatches the most economic resources to meet load requirements efficiently and reliably in the MISO region. The tariff uses Locational Marginal Pricing (i.e. the energy price for the next lowest priced megawatt available at each location within the MISO footprint). The tariff also allows for the allocation, auction or sale of FTRs, which are instruments that hedge against congestion costs occurring in the day-ahead market. Northern Indiana has not yet been a participant in the auction market for FTRs, but has been allocated, at zero cost, a number of FTRs for use through the summer season. The MISO performs a day-ahead unit commitment and dispatch forecast for all resources in its market. The MISO also performs the real time resource dispatch for resources under its control on a five-minute basis.

Northern Indiana has been recovering the costs of electric power purchased for sale to its customers through the FAC. The FAC provides for costs to be collected if they are below a negotiated cap. If costs exceed this cap, Northern Indiana must demonstrate that the costs were prudently incurred to achieve approval for recovery. Northern Indiana is in discussions with the OUCC on a new basis for establishing the cap. An agreement is anticipated to be filed with the IURC in the second quarter of 2005, and Northern Indiana anticipates that approval will also be received from the IURC in the second quarter of 2005. A group of industrial customers challenged the manner in which Northern Indiana applied such costs under a specific interruptible sales tariff. A settlement was reached with the customers and the industrial customers’ challenge was withdrawn and dismissed in January 2004. In addition, as a result of the settlement, Northern Indiana has sought and received approval by the IURC to reduce the charges applicable to the interruptible sales tariff. This reduction will remain in effect until the Mitchell Station returns to service.

In January 2002, Northern Indiana indefinitely shut down its Mitchell Station. In February 2004, the City of Gary announced an interest in acquiring the land on which the Mitchell Station is located for economic development, including a proposal to increase the length of the runways at the Gary International Airport. On May 7, 2004, the City of Gary filed a petition with the IURC seeking to have the IURC establish a value for the Mitchell Station and establish the terms and conditions under which the City of Gary would acquire the Mitchell Station. Northern Indiana has reached an agreement with the City of Gary that provides for a joint redevelopment process for the Mitchell Station where the City of Gary could ultimately receive ownership of the property provided that the City of Gary and Northern Indiana can find funding for the demolition and environmental cleanup cost associated with demolishing the facility. The agreement expressly provides that neither Northern Indiana nor its customers will be obligated to provide funds for these costs.

On May 25, 2004, Northern Indiana filed a petition for approval of a Purchased Power and Transmission Tracker Mechanism to recover the cost of purchased power to meet Northern Indiana’s retail electric load requirements and

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ITEM 1. FINANCIAL STATEMENTS (continued)

Northern Indiana Public Service Company
Notes to Consolidated Financial Statements (continued) (unaudited)

charges imposed on Northern Indiana by MISO and ITC. A hearing in this matter was held December 1st and 2nd of 2004. An IURC order is expected in the second quarter of 2005.

On March 31, 2005, Northern Indiana and the OUCC filed an MOU with the IURC that could result in settlements of the City of Gary petition and Purchased Power and Transmission Tracker petition. The settlement agreement that is contemplated by the MOU would provide, among other things, for the recovery of Northern Indiana’s costs for intermediate dispatchable power purchased from TPC and would require Northern Indiana to file a base rate case in 2007. The MOU provides that a settlement is contingent upon: 1) acceptable results of a third party evaluation study to be performed by an independent consultant relating to the use of Whiting Clean Energy and the Mitchell Station to meet the control performance standards required by the National Electric Reliability Council and 2) affirmative consent to the other terms of the MOU by Northern Indiana’s large industrial electric customers. The scope of the proposed settlement does not include MISO costs. The ability to recover or defer MISO costs will be determined in another proceeding before the IURC, filed by several of the investor-owned electric utilities in Indiana (see the following paragraph). Northern Indiana expects that it will be able to file a settlement with the OUCC, based upon the outcome of the independent consultant’s study, with the IURC in the second quarter of 2005, and that it would be approved in the third quarter of 2005. Northern Indiana has also filed a separate petition with the IURC in which it, TPC and Whiting Clean Energy, have requested expedited approval for the sale of intermediate dispatchable power this summer from Whiting Clean Energy through TPC to Northern Indiana.

On July 9, 2004, a verified joint petition was filed by PSI Energy, Inc., Indianapolis Power & Light Company, Northern Indiana and Vectren Energy Delivery of Indiana, Inc., seeking approval of certain changes in operations that are likely to result from the MISO’s implementation of energy markets, and for determination of the manner and timing of recovery of costs resulting from the MISO’s implementation of standard market design mechanisms, such as the MISO’s proposed real-time and day-ahead energy markets. The hearing in this matter was completed on February 11, 2005 and an IURC order is expected in the second quarter of 2005.

On November 26, 2002, Northern Indiana received approval for an ECT. Under the ECT Northern Indiana is permitted to recover (1) allowance for funds used during construction and a return on the capital investment expended by Northern Indiana to implement IDEM’s nitrogen oxide State Implementation Plan through an ECRM and (2) related operation and maintenance and depreciation expenses once the environmental facilities become operational through an EERM. Under the IURC’s November 26, 2002 order, Northern Indiana is permitted to submit filings on a semi-annual basis for the ECRM and on an annual basis for the EERM. Northern Indiana currently anticipates a total capital investment amounting to approximately $305 million. This amount was filed in Northern Indiana’s latest compliance plan, which was approved by the IURC on January 19, 2005. The ECRM revenues amounted to $6.3 million for the three months ended March 31, 2005, and $30.3 million from inception to date, while EERM revenues were $0.4 million for the first quarter of 2005. On February 4, 2005, Northern Indiana filed ECR-5 simultaneously with EER-2 for capital expenditures of $235.6 million and depreciation and operating expenses of $10.5 million through December 31, 2004.

On April 13, 2005, Northern Indiana received an order from the IURC in a complaint filed by Jupiter. The complaint asserted that Nort