NORTHERN ILLINOIS GAS CO /IL/ /NEW/ - FORM 10-Q

Attached files

file	filename
EX-31.01 - NICOR GAS EXHIBIT 31.01 CERTIFICATION - NORTHERN ILLINOIS GAS CO /IL/ /NEW/	nicorgas3101certification.htm
EX-32.01 - NICOR GAS EXHIBIT 32.01 CERTIFICATION - NORTHERN ILLINOIS GAS CO /IL/ /NEW/	nicorgas3201certification.htm
EX-31.02 - NICOR GAS EXHIBIT 31.02 CERTIFICATION - NORTHERN ILLINOIS GAS CO /IL/ /NEW/	nicorgas3102certification.htm
EX-32.02 - NICOR GAS EXHIBIT 32.02 CERTIFICATION - NORTHERN ILLINOIS GAS CO /IL/ /NEW/	nicorgas3202certification.htm
EX-12.01 - NICOR GAS EXHIBIT 12.01 RATIO OF EARNINGS TO FIXED CHARGES - NORTHERN ILLINOIS GAS CO /IL/ /NEW/	nicorgasratioearnfixedcharge.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

	For the quarterly period ended September 30, 2010

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

Commission File Number 1-7296

NORTHERN ILLINOIS GAS COMPANY

(Doing business as Nicor Gas Company)

(Exact name of registrant as specified in its charter)

Illinois	36-2863847
(State of Incorporation)	(I.R.S. Employer
	Identification No.)

1844 Ferry Road
Naperville, Illinois 60563-9600	(630) 983-8888
(Address of principal executive offices) (Zip Code)	(Registrant’s telephone number, including area code)

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with a reduced disclosure format.

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 and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months. Yes [ ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]	Accelerated filer [ ]

Non-accelerated filer [X]	Smaller reporting company [ ]

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

All shares of common stock are owned by Nicor Inc.

Table of Contents

Glossary			ii

Part I – Financial Information

	Item 1.	Financial Statements (Unaudited)

		Condensed Consolidated Statements of Operations: Three and nine months ended September 30, 2010 and 2009	1

		Condensed Consolidated Statements of Cash Flows: Nine months ended September 30, 2010 and 2009	2

		Condensed Consolidated Balance Sheets: September 30, 2010 and 2009, and December 31, 2009	3

		Notes to the Condensed Consolidated Financial Statements	4

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

	Item 4.	Controls and Procedures	28

Part II – Other Information

	Item 1.	Legal Proceedings	29

	Item 6.	Exhibits	29

		Signature	30

Table of Contents

Glossary

ALJs. Administrative Law Judges.

Chicago Hub. A venture of Nicor Gas, which provides natural gas storage and transmission-related services to marketers and other gas distribution companies.

Degree day. The extent to which the daily average temperature falls below 65 degrees Fahrenheit. Normal weather for Nicor Gas’ service territory, for purposes of this report, is considered to be 5,600 degree days.

FERC. Federal Energy Regulatory Commission, the agency that regulates the interstate transportation of natural gas, oil and electricity.

Financial Reform Legislation. Dodd-Frank Wall Street Reform and Consumer Protection Act.

Health Care Act. Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010.

Horizon Pipeline. Horizon Pipeline Company, L.L.C. (“Horizon”), a 50-percent-owned joint venture of Nicor, operates an interstate regulated natural gas pipeline of approximately 70 miles stretching from Joliet, Illinois to near the Wisconsin/Illinois border.

ICC. Illinois Commerce Commission, the agency that establishes the rules and regulations governing utility rates and services in Illinois.

IDR. Illinois Department of Revenue.

IRS. Internal Revenue Service.

LIFO. Last-in, first-out.

Mcf, MMcf, Bcf. Thousand cubic feet, million cubic feet, billion cubic feet.

Nicor. Nicor Inc., the parent company of Nicor Gas.

Nicor Advanced Energy. Prairie Point Energy, L.L.C. (doing business as Nicor Advanced Energy), a wholly owned business of Nicor that provides natural gas and related services on an unregulated basis to residential and small commercial customers.

Nicor Enerchange. Nicor Enerchange, L.L.C., a wholly owned business of Nicor that engages in wholesale marketing of natural gas supply services primarily in the Midwest, administers the Chicago Hub for Nicor Gas, serves commercial and industrial customers in the Chicago market area, and manages Nicor Solutions’ and Nicor Advanced Energy’s product risks, including the purchase of natural gas supplies.

Nicor Gas. Northern Illinois Gas Company (doing business as Nicor Gas Company), or the registrant.

Nicor Services. Nicor Energy Services Company, a wholly owned business of Nicor that provides customer move connection services for utilities and product warranty contracts, heating, ventilation and air conditioning repair, maintenance and installation services and equipment to retail markets, including residential and small commercial customers.

Table of Contents

Nicor Solutions. Nicor Solutions, L.L.C., a wholly owned business of Nicor that offers residential and small commercial customers energy-related products that provide for natural gas cost stability and management of their utility bill.

NYMEX. New York Mercantile Exchange.

PBR. Performance-based rate, a regulatory plan which ended on January 1, 2003, that provided economic incentives based on natural gas cost performance.

Rider. A rate adjustment mechanism that is part of a utility’s tariff which authorizes it to provide specific services or assess specific charges.

SEC. The United States Securities and Exchange Commission.

iii

Table of Contents

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements

Nicor Gas Company
Condensed Consolidated Statements of Operations (Unaudited)
(millions)

	Three months ended						Nine months ended
	September 30						September 30
	2010			2009			2010			2009

Operating revenues (includes revenue taxes of $14.0, $13.1, $111.8 and $114.5, respectively)	$	233.5		$	215.0		$	1,601.8		$	1,525.3

Operating expenses
Cost of gas		75.5			70.2			982.3			943.2
Operating and maintenance		74.1			63.1			216.2			222.0
Depreciation		45.9			44.4			137.8			133.4
Taxes, other than income taxes		18.3			17.6			124.4			127.3
Mercury-related		(1.3	)		-			(1.3	)		-
Income tax expense		4.3			4.0			42.8			26.0
		216.8			199.3			1,502.2			1,451.9

Operating income		16.7			15.7			99.6			73.4

Other income (expense), net
Interest income		.1			.3			.8			1.1
Other income		.3			.2			.9			.8
Other expense		(.2	)		(.2	)		(1.1	)		(1.1	)
Income tax expense on other income		(.1	)		(.2	)		(.3	)		(.4	)
		.1			.1			.3			.4

Interest expense
Interest on debt, net of amounts capitalized		9.1			8.8			27.1			25.3
Other		-			.1			.2			.6
		9.1			8.9			27.3			25.9

Net income	$	7.7		$	6.9		$	72.6		$	47.9

The accompanying notes are an integral part of these statements.

Table of Contents

Nicor Gas Company
Condensed Consolidated Statements of Cash Flows (Unaudited)
(millions)

	Nine months ended
	September 30
	2010			2009

Operating activities
Net income	$	72.6		$	47.9
Adjustments to reconcile net income to net cash flow provided from operating activities:
Depreciation		137.8			133.4
Deferred income tax expense		8.4			25.0
Changes in assets and liabilities:
Receivables, less allowances		256.0			413.0
Gas in storage		(80.5	)		6.0
Deferred/accrued gas costs		6.9			90.4
Derivative instruments		12.4			(86.8	)
Margin accounts - derivative instruments		(13.4	)		83.5
Other assets		14.2			7.4
Accounts payable		(70.8	)		(126.0	)
Customer credit balances and deposits		(10.5	)		(19.6	)
Other liabilities		2.3			(14.7	)
Other items		(8.1	)		(6.5	)
Net cash flow provided from operating activities		327.3			553.0

Investing activities
Additions to property, plant & equipment		(124.5	)		(147.2	)
Other investing activities		3.1			4.7
Net cash flow used for investing activities		(121.4	)		(142.5	)

Financing activities
Proceeds from issuing long-term debt		-			50.0
Disbursements to retire long-term obligations		-			(50.5	)
Net repayments of commercial paper		(120.7	)		(352.9	)
Debt issuance costs		(3.7	)		(2.5	)
Dividends paid		(81.9	)		(54.6	)
Net cash flow used for financing activities		(206.3	)		(410.5	)

Net decrease in cash and cash equivalents		(.4	)		-

Cash and cash equivalents, beginning of period		.6			2.3

Cash and cash equivalents, end of period	$	.2		$	2.3

The accompanying notes are an integral part of these statements.

Table of Contents

Nicor Gas Company
Condensed Consolidated Balance Sheets (Unaudited)
(millions)

	September 30			December 31			September 30
	2010			2009			2009
Assets
Gas distribution plant, at cost	$	4,680.3		$	4,598.2		$	4,575.1
Less accumulated depreciation		1,857.5			1,803.4			1,792.7
Gas distribution plant, net		2,822.8			2,794.8			2,782.4

Current assets
Cash and cash equivalents		.2			.6			2.3
Receivables, less allowances of $35.6, $30.8 and $39.8, respectively		148.1			398.9			169.0
Receivables - affiliates		6.9			12.1			7.2
Gas in storage		185.2			104.7			167.7
Derivative instruments		3.1			4.7			11.0
Margin accounts - derivative instruments		58.8			43.6			50.2
Other		127.0			144.4			132.9
Total current assets		529.3			709.0			540.3

Regulatory postretirement asset		183.6			195.4			218.0
Other assets		137.9			130.5			107.4

Total assets	$	3,673.6		$	3,829.7		$	3,648.1

Capitalization and Liabilities
Capitalization
Long-term obligations
Long-term debt, net of unamortized discount	$	423.4		$	498.2		$	498.2
Mandatorily redeemable preferred stock		1.8			2.1			2.1
Total long-term obligations		425.2			500.3			500.3
Non-redeemable preferred stock		1.4			1.4			1.4
Common equity
Common stock		76.2			76.2			76.2
Paid-in capital		108.1			108.1			108.1
Retained earnings		468.4			486.7			474.7
Accumulated other comprehensive loss		(7.2	)		(7.0	)		(8.4	)
Total common equity		645.5			664.0			650.6
Total capitalization		1,072.1			1,165.7			1,152.3

Current liabilities
Long-term obligations due within one year		75.3			.5			.5
Short-term debt		373.3			494.0			365.0
Accounts payable		193.6			264.4			185.9
Customer credit balances and deposits		131.2			141.7			167.7
Derivative instruments		68.6			55.6			59.3
Other		79.9			82.0			107.9
Total current liabilities		921.9			1,038.2			886.3

Deferred credits and other liabilities
Regulatory asset retirement liability		836.0			796.8			791.6
Deferred income taxes		353.6			328.2			319.8
Health care and other postretirement benefits		201.9			199.7			198.0
Asset retirement obligation		188.4			191.3			189.9
Other		99.7			109.8			110.2
Total deferred credits and other liabilities		1,679.6			1,625.8			1,609.5

Commitments and contingencies

Total capitalization and liabilities	$	3,673.6		$	3,829.7		$	3,648.1

The accompanying notes are an integral part of these statements.

Table of Contents

Nicor Gas Company

Notes to the Condensed Consolidated Financial Statements (Unaudited)

1.	BASIS OF PRESENTATION

The unaudited Condensed Consolidated Financial Statements of Nicor Gas have been prepared by the company pursuant to the rules and regulations of the SEC. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to SEC rules and regulations. The unaudited Condensed Consolidated Financial Statements and Notes should be read in conjunction with the financial statements and the notes thereto included in the company’s 2009 Annual Report on Form 10-K.

The information furnished reflects, in the opinion of the company, all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the results for the interim periods presented. Results for the interim periods presented are not necessarily indicative of the results to be expected for the full fiscal year due to seasonal and other factors.

The company’s management evaluated subsequent events for potential recognition and disclosure through the date the financial statements were issued.

2.	ACCOUNTING POLICIES

Gas in storage. Gas inventory is carried at cost on a LIFO basis. Inventory decrements occurring during interim periods that are expected to be restored prior to year-end are charged to cost of gas at the estimated annual replacement cost, and the difference between this cost and the actual LIFO layer cost is recorded on the balance sheet as a temporary LIFO inventory liquidation. Interim inventory decrements not expected to be restored prior to year-end are charged to cost of gas at the actual LIFO cost of the layers liquidated.

There was no inventory decrement as of September 30, 2010. At September 30, 2009, Nicor Gas had an inventory decrement of approximately 1 Bcf which was not restored prior to year-end. The liquidated inventory was charged to cost of gas at a LIFO cost of $8.22 per Mcf. Applying LIFO cost in valuing the decrement, as opposed to the estimated annual replacement cost of $3.93 per Mcf, had the effect of increasing the cost of gas distributed by $3.1 million for the three and nine months ended September 30, 2009. Since the cost of gas, including inventory costs, is charged to customers without markup, subject to ICC review, this difference had no impact on net income.

Regulatory assets and liabilities. Nicor Gas is regulated by the ICC, which establishes the rules and regulations governing utility rates and services in Illinois. As a rate-regulated company, Nicor Gas is required to recognize the economic effects of rate regulation and, accordingly, has recorded regulatory assets and liabilities. Regulatory assets represent probable future revenue associated with certain costs that are expected to be recovered from customers through rate riders or base rates, upon approval by the ICC. Regulatory liabilities represent probable future reductions in revenues collected from ratepayers through a rate rider or base rates, or probable future expenditures. If Nicor Gas’ operations become no longer subject to rate regulation, a write-off of net regulatory liabilities would be required.

Table of Contents

The company had regulatory assets and liabilities as follows (in millions):

	September 30		December 31		September 30
	2010		2009		2009
Regulatory assets - current
Regulatory postretirement asset	$	20.6	$	20.6	$	23.3
Deferred gas costs		18.1		24.9		-
Other		11.4		5.4		4.0
Regulatory assets - noncurrent
Regulatory postretirement asset		183.6		195.4		218.0
Deferred gas costs		4.3		4.4		3.2
Deferred environmental costs		24.8		18.1		17.1
Unamortized losses on reacquired debt		13.4		14.2		14.5
Other		11.4		8.9		10.5
	$	287.6	$	291.9	$	290.6

Regulatory liabilities - current
Regulatory asset retirement liability	$	14.5	$	14.5	$	13.8
Accrued gas costs		-		-		39.6
Other		11.5		2.7		1.5
Regulatory liabilities - noncurrent
Regulatory asset retirement liability		836.0		796.8		791.6
Regulatory income tax liability		19.1		39.1		44.2
Other		10.2		.8		.8
	$	891.3	$	853.9	$	891.5

All items listed above are classified in Other on the Condensed Consolidated Balance Sheets, with the exception of the noncurrent portions of the Regulatory postretirement asset and the Regulatory asset retirement liability, which are stated separately.

The ICC does not presently allow Nicor Gas the opportunity to earn a return on its regulatory postretirement asset. This regulatory postretirement asset is expected to be recovered from ratepayers over a period of approximately 10 to 12 years. The regulatory assets related to debt are not included in rate base, but are recovered over the term of the debt through the rate of return authorized by the ICC. Nicor Gas is allowed to recover and is required to pay, using short-term interest rates, the carrying costs related to temporary under or overcollections of natural gas costs and certain environmental costs charged to its customers.

Revenue recognition. Nicor Gas accrues revenues for estimated deliveries to customers from the date of their last bill until the balance sheet date. Receivables include accrued unbilled revenues of $28.6 million, $137.7 million and $27.4 million at September 30, 2010, December 31, 2009 and September 30, 2009, respectively.

Nicor Gas classifies revenue taxes billed to customers as operating revenues and related taxes incurred as operating expenses. Revenue taxes included in operating expense for the three and nine months ended September 30, 2010 were $13.8 million and $110.2 million, respectively, and $12.9 million and $112.8 million, respectively, for the same periods in 2009.

Table of Contents

Derivative instruments. Cash flows from derivative instruments are recognized in the Condensed Consolidated Statements of Cash Flows, and gains and losses are recognized in the Condensed Consolidated Statements of Operations, in the same categories as the underlying transactions.

Cash flow hedge accounting may be elected only for highly effective hedges, based upon an assessment, performed at least quarterly, of the historical and probable future correlation of cash flows from the derivative instrument to changes in the expected future cash flows of the hedged item. To the extent cash flow hedge accounting is applied, the effective portion of any changes in the fair value of the derivative instruments is reported as a component of accumulated other comprehensive income. Ineffectiveness, if any, is immediately recognized in operating income. The amount in accumulated other comprehensive income is reclassified to earnings when the forecasted transaction is recognized in the Condensed Consolidated Statements of Operations, even if the derivative instrument is sold, extinguished or terminated prior to the transaction occurring. If the forecasted transaction is no longer expected to occur, the amount in accumulated other comprehensive income is immediately reclassified to operating income.

Derivative instruments, such as futures contracts, options and swap agreements, are utilized primarily in the purchase of natural gas for customers. These derivative instruments are carried at fair value. Realized gains or losses on such instruments are included in the cost of gas delivered and are passed directly through to customers, subject to ICC review, and therefore have no direct impact on earnings. Unrealized changes in the fair value of these derivative instruments are deferred as regulatory assets or liabilities.

At times, Nicor Gas enters into futures contracts, options, swap agreements and fixed-price purchase agreements to reduce the earnings volatility of certain forecasted operating costs arising from fluctuations in natural gas prices, such as the purchase of natural gas for use in company operations. These derivative instruments are carried at fair value, unless they qualify for the normal purchases and normal sales exception, in which case they are carried at cost. To the extent hedge accounting is not elected, changes in such fair values are immediately recorded in the current period as operating and maintenance expense.

Credit risk and concentrations. Nicor Gas has a diversified customer base and the company believes that it maintains prudent credit policies which mitigate customer receivable, supplier performance and derivative counterparty credit risk. The company is exposed to credit risk in the event a customer or supplier defaults on a contract to pay for or deliver product at agreed-upon terms and conditions, or a counterparty to a derivative instrument defaults on a settlement or otherwise fails to perform under contractual terms. To manage this risk, the company has established procedures to determine and monitor the creditworthiness of counterparties, to seek guarantees or collateral back-up in the form of cash or letters of credit, to acquire credit insurance in certain instances, and to limit its exposure to any one counterparty. Nicor Gas also, in some instances, enters into netting arrangements to mitigate counterparty credit risk. Fair value measurements consider credit risk. For assets and liabilities not carried at fair value, credit losses are accrued when probable and reasonably estimable.

On February 2, 2010, the ICC approved a bad debt rider that was filed in 2009 by Nicor Gas. The bad debt rider provides for the recovery from (or refund to) customers of the difference between the actual bad debt expense Nicor Gas incurs on an annual basis and the benchmark bad debt expense included in its rates for the respective year.

3. SHORT-TERM AND LONG-TERM DEBT

In February 2009, the $50 million 5.37 percent First Mortgage Bond series matured and was retired. In July 2009, Nicor Gas issued $50 million First Mortgage Bonds at 4.70 percent, due in 2019 through a private placement. In determining that these bonds qualified for exemption from registration under Section 4(2) of the Securities Act of 1933, Nicor Gas relied on the facts that the bonds were offered only

Table of Contents

to a limited number of large institutional investors and each institutional investor that purchased the bonds represented that it was purchasing the bonds for its own account and not with a view to distribute them.

In April 2010, Nicor Gas established a $400 million, 364-day revolver, expiring April 2011 to replace the $550 million, 364-day revolver, which was set to expire in May 2010 and Nicor and Nicor Gas established a $600 million, three-year revolver, expiring April 2013 to replace the $600 million, five-year revolver, which was set to expire in September 2010. These facilities were established with major domestic and foreign banks and serve as backup for the issuance of commercial paper. The company had $373.3 million, $494.0 million and $365.0 million of commercial paper borrowings outstanding at September 30, 2010, December 31, 2009 and September 30, 2009, respectively.

The company believes it is in compliance with all debt covenants.

4. INCOME TAXES

The effective income tax rate for the three months ended September 30, 2010 decreased to 36.1 percent from 37.8 percent for the prior year. Both periods reflect changes to forecasted annual pretax income identified in the respective quarters. The year-to-date adjustment to income taxes recognized in the quarter resulting from these changes to forecasted annual pretax income has a larger impact in quarters with lower income. The effective income tax rate for the nine months ended September 30, 2010 increased to 37.2 percent from 35.5 percent for the prior year. The higher effective income tax rate for the nine months ended September 30, 2010 was due primarily to higher forecasted annual pretax income (which causes a higher effective income tax rate since permanent differences and tax credits are a smaller share of pretax income) and the unfavorable impact of the tax law change with respect to Medicare Part D subsidies.

In March 2010, the Health Care Act was signed into law resulting in comprehensive health care reform. The Health Care Act contains a provision that eliminates the tax deduction related to Medicare Part D subsidies received after 2012. Federal subsidies are provided to sponsors of retiree health benefit plans, such as Nicor Gas, that provide a benefit that is at least actuarially equivalent to the benefits under Medicare Part D. Such subsidies have reduced the company’s actuarially determined projected benefit obligation and annual net periodic benefit costs. Due to the change in taxation, in the first quarter of 2010 Nicor Gas reduced deferred tax assets by $17.5 million, reversed an existing regulatory income tax liability of $10.0 million, established a regulatory income tax asset of $7.0 million and recognized a $0.5 million charge to income tax expense. Beginning in 2010, the change in taxation will also reduce earnings by an estimated $1.6 million annually for periods subsequent to the enactment date.

The company's major tax jurisdictions include the United States and Illinois, with tax returns examined by the IRS and IDR, respectively. At September 30, 2010, the years that remain subject to examination include years beginning after 2006 for the IRS and years beginning after 2005 for the IDR. The company had no liability for unrecognized tax benefits at September 30, 2010. The decrease in the liability for unrecognized tax benefits from $3.2 million at December 31, 2009 is due primarily to settlement of an item concerning the timing of inclusion in taxable income of recoveries for environmental clean-up expenditures. The company does not believe that it is reasonably possible that a significant change in the liability for unrecognized tax benefits could occur within 12 months.

The balance of unamortized investment tax credits at September 30, 2010, December 31, 2009 and September 30, 2009 was $23.7 million, $25.2 million and $24.5 million, respectively.

Table of Contents

5. FAIR VALUE MEASUREMENTS

The fair value of assets and liabilities that are measured on a recurring basis are categorized in the table below (in millions) into three broad levels (with Level 1 considered the most reliable) based upon the valuation inputs.

	Quoted prices in active markets		Significant observable inputs		Significant unobservable inputs
	(Level 1)		(Level 2)		(Level 3)		Total
September 30, 2010
Assets
Commodity derivatives	$	-	$	.4	$	3.4	$	3.8

Liabilities
Commodity derivatives	$	38.8	$	36.4	$	.8	$	76.0

December 31, 2009
Assets
Money market funds	$	.4	$	-	$	-	$	.4
Commodity derivatives		.5		2.6		2.4		5.5
	$	.9	$	2.6	$	2.4	$	5.9

Liabilities
Commodity derivatives	$	37.3	$	25.3	$	2.7	$	65.3

September 30, 2009
Assets
Money market funds	$	2.0	$	-	$	-	$	2.0
Commodity derivatives		3.0		8.3		2.8		14.1
	$	5.0	$	8.3	$	2.8	$	16.1

Liabilities
Commodity derivatives	$	44.7	$	19.3	$	.8	$	64.8

When available and appropriate, the company uses quoted market prices in active markets to determine fair value and classifies such items within Level 1. For derivatives, Level 1 values include only those derivative instruments traded on the NYMEX. The company enters into over-the-counter instruments with values that are similar to, and correlate with, quoted prices for exchange-traded instruments in active markets; the fair values of these over-the-counter items consider credit risk and are classified within Level 2. In certain instances, the company may be required to determine a fair value using significant unobservable inputs such as indicative broker prices; the resulting valuation is classified as Level 3.

The majority of commodity derivatives held by Nicor Gas are for the purpose of hedging natural gas purchases for its customers, and therefore their fair values do not affect net income, as their settlement is passed directly through to customers without markup, subject to ICC review. The change in fair value for these derivatives is accounted for through regulatory assets and liabilities.

Money market funds are included in cash equivalents, are categorized as trading and are carried at fair value.

Table of Contents

The following table presents a reconciliation of the Level 3 beginning and ending net derivative asset (liability) balances (in millions):

	Three months ended September 30						Nine months ended September 30
	2010			2009			2010			2009

Beginning of period	$	2.3		$	1.6		$	(.3	)	$	1.7
Net realized/unrealized gains (losses) included in regulatory assets and liabilities		(.9	)		.2			(1.7	)		(1.5	)
Settlements, net of purchases		1.1			.7			4.5			2.3
Transfers out of Level 3		.1			(.5	)		.1			(.5	)
End of period	$	2.6		$	2.0		$	2.6		$	2.0

Transfers out of Level 3 reflect the liquidity at the relevant natural gas trading locations and dates which affects the significance of unobservable inputs used in the valuation. Transfers out of Level 3 were determined using end of period values.

Nicor Gas maintains margin accounts related to financial derivative transactions. The company’s policy is not to offset the fair value of assets and liabilities recognized for derivative instruments or any related margin account. The following table represents the balance sheet classification of margin accounts related to derivative instruments (in millions):

	September 30		December 31		September 30
	2010		2009		2009
Assets
Margin accounts - derivative instruments	$	58.8	$	43.6	$	50.2
Other - noncurrent		9.5		11.3		6.1

In addition, the recorded amount of short-term borrowings approximates fair value. Long-term debt outstanding, including current maturities, is recorded at the principal balance outstanding, net of unamortized discounts. The principal balance of Nicor Gas’ First Mortgage Bonds outstanding at September 30, 2010, December 31, 2009 and September 30, 2009 was $500 million. Based on quoted prices or market interest rates, the fair value of the company’s First Mortgage Bonds outstanding was approximately $575 million, $543 million and $546 million at September 30, 2010, December 31, 2009 and September 30, 2009, respectively.

6. DERIVATIVE INSTRUMENTS

A description of the company’s objectives and strategies for using derivative instruments, and related accounting policies, is included in Note 2 – Accounting Policies – Derivative instruments and Credit risk and concentrations. All derivatives recognized on the Condensed Consolidated Balance Sheets are measured at fair value, as described in Note 5 – Fair Value Measurements.

Table of Contents

Condensed Consolidated Balance Sheets. Derivative assets and liabilities are classified as shown in the table below (in millions):

	September 30		December 31		September 30
	2010		2009		2009
Derivatives designated as hedging instruments
Assets
Derivative instruments	$	-	$	-	$	.1

Liabilities
Derivative instruments	$	1.3	$	.7	$	1.4
Other - noncurrent		.2		-		-
	$	1.5	$	.7	$	1.4

Derivatives not designated as hedging instruments
Assets
Derivative instruments	$	3.1	$	4.7	$	10.9
Other – noncurrent		.7		.8		3.1
	$	3.8	$	5.5	$	14.0

Liabilities
Derivative instruments	$	67.3	$	54.9	$	57.9
Other – noncurrent		7.2		9.7		5.5
	$	74.5	$	64.6	$	63.4

Volumes. As of September 30, 2010, December 31, 2009 and September 30, 2009, Nicor Gas held outstanding derivative contracts of approximately 48 Bcf, 64 Bcf and 62 Bcf, respectively, to hedge natural gas purchases for customer use, with hedges spanning approximately three years for each of the respective periods. Commodity price-risk exposure arising from Nicor Gas’ natural gas purchases for company use is mitigated with derivative instruments that total to a net long position of 1.0 Bcf, 0.9 Bcf and 1.1 Bcf as of September 30, 2010, December 31, 2009 and September 30, 2009, respectively. The above volumes exclude contracts, such as variable-priced contracts, which are accounted for as derivatives but whose fair values are not directly impacted by changes in commodity prices.

Condensed Consolidated Statements of Operations - cash flow hedges. Changes in the fair value of derivatives designated as a cash flow hedge are recognized in other comprehensive income until the hedged transaction is recognized in the Condensed Consolidated Statements of Operations. Cash flow hedges are used by Nicor Gas to hedge purchases of natural gas for company use.

Cash flow hedges affected accumulated other comprehensive income (effective portion) as shown in the following table (in millions):

	Three months ended September 30					Nine months ended September 30
	2010			2009		2010			2009
Pretax gain (loss) recognized in other comprehensive income	$	(.9	)	$	.1	$	(2.2	)	$	(3.7	)

Table of Contents

The pretax gain (loss) reclassified from accumulated other comprehensive income into income (effective portion) is shown in the following table (in millions):

	Three months ended September 30						Nine months ended September 30
Location	2010			2009			2010			2009
Operating and maintenance	$	(.5	)	$	(1.2	)	$	(1.1	)	$	(6.9	)

Any amounts recognized in operating income, related to ineffectiveness or due to a forecasted transaction that is no longer expected to occur, were immaterial for the three and nine months ended September 30, 2010 and 2009.

As of September 30, 2010, December 31, 2009 and September 30, 2009, the time horizon of cash flow hedges of natural gas purchases for Nicor Gas company use span as long as two years. For these hedges, the total pretax loss deferred in accumulated other comprehensive income at September 30, 2010, December 31, 2009 and September 30, 2009 was $1.8 million ($1.1 million after taxes), $0.7 million ($0.4 million after taxes) and $1.9 million ($1.1 million after taxes), respectively. At the respective reporting dates, substantially all of these amounts were expected to be reclassified to earnings within the next 12 months.

Condensed Consolidated Statements of Operations - derivatives not designated as hedges. The earnings of the company are subject to volatility for those derivatives not designated as hedges. Non-designated derivatives used by Nicor Gas, to hedge purchases of natural gas for company use, are recorded within operating and maintenance expense. Pretax earnings effects of these items are summarized in the table below (in millions):

	Three months ended September 30					Nine months ended September 30
Location	2010			2009		2010			2009
Operating and maintenance	$	(.3	)	$	-	$	(1.0	)	$	(1.8	)

Nicor Gas’ derivatives used to hedge the purchase of natural gas for its customers are also not designated as hedging instruments. Gains or losses on these derivatives are not recognized in pretax earnings, but are deferred as regulatory assets or liabilities until the related revenue is recognized. Net losses deferred for the three and nine months ended September 30, 2010 were $47.5 million and $121.6 million, respectively, and $8.1 million and $133.6 million, respectively, for the same periods in 2009.

Credit-risk-related contingent features. Provisions within certain derivative agreements require the company to post collateral if the company’s net liability position exceeds a specified threshold. Also, certain derivative agreements contain credit-risk-related contingent features, whereby the company would be required to provide additional collateral or pay the amount due to the counterparty when a credit event occurs, such as if the company’s credit rating was to be lowered. As of September 30, 2010, December 31, 2009 and September 30, 2009 for agreements with such features, derivative contracts with liability fair values totaled approximately $17 million, $19 million and $15 million, respectively, for which the company had posted no collateral to its counterparties. If it was assumed that the company had to post the maximum contractually specified collateral or settle the liability, the company would have been required to pay approximately $16 million, $18 million and $11 million at September 30, 2010, December 31, 2009 and September 30, 2009, respectively.

Table of Contents

7. POSTRETIREMENT BENEFITS

Nicor Gas maintains a noncontributory defined benefit pension plan covering substantially all employees hired prior to 1998. Pension benefits are based on years of service and the highest average salary for management employees and job level for collectively bargained employees (referred to as pension bands). The benefit obligation related to collectively bargained benefits considers the company’s past practice of regular benefit increases. Nicor Gas also provides health care and life insurance benefits to eligible retired employees under a plan that includes a limit on the company’s share of cost for employees hired after 1982.

The company’s postretirement benefit costs have historically been considered in rate proceedings in the period they are accrued. As a regulated utility, Nicor Gas expects continued rate recovery of the eligible costs of its defined benefit postretirement plans and, accordingly, associated changes in the plan’s funded status have been deferred as a regulatory asset or liability until recognized in net income, instead of being recorded in accumulated other comprehensive income. However, to the extent Nicor Gas employees perform services for non-regulated affiliates and to the extent such employees are eligible to participate in these plans, the affiliates are charged for the cost of these benefits and the changes in the funded status relating to these employees are recorded in accumulated other comprehensive income.

About one-fourth of the net benefit cost related to these plans has been capitalized as a cost of constructing gas distribution facilities and the remainder is included in operating and maintenance expense, net of amounts charged to affiliates. Net benefit cost included the following components (in millions):

	Pension benefits						Health care and other benefits
	2010			2009			2010		2009
Three months ended September 30
Service cost	$	2.4		$	2.1		$	.6	$	.6
Interest cost		4.0			4.2			3.0		3.1
Expected return on plan assets		(7.2	)		(6.3	)		-		-
Recognized net actuarial loss		3.0			3.8			1.0		1.1
Amortization of prior service cost		.1			.1			-		(.1	)
Net benefit cost	$	2.3		$	3.9		$	4.6	$	4.7

Nine months ended September 30
Service cost	$	7.3		$	6.4		$	1.7	$	1.7
Interest cost		12.0			12.4			8.9		9.1
Expected return on plan assets		(21.7	)		(18.9	)		-		-
Recognized net actuarial loss		8.9			11.5			3.1		3.4
Amortization of prior service cost		.3			.3			.1		(.1	)
Net benefit cost	$	6.8		$	11.7		$	13.8	$	14.1

The decrease in postretirement benefit expense in 2010 compared to 2009 is due to the positive impact on the value of plan assets of the partial capital market recovery in 2009, which was somewhat offset by the negative impact of a decrease in the discount rate.

The company is evaluating the provisions of the Health Care Act and will evaluate future interpretations to determine the impact it may have on the company’s future results of operations, cash flows and financial condition.

Table of Contents

8. COMPREHENSIVE INCOME

Total comprehensive income is as follows (in millions):

	Three months ended					Nine months ended
	September 30					September 30
	2010			2009		2010			2009

Net income	$	7.7		$	6.9	$	72.6		$	47.9
Other comprehensive income (loss), after tax		(0.1	)		.9		(0.2	)		2.3
Total comprehensive income	$	7.6		$	7.8	$	72.4		$	50.2

Other comprehensive income (loss) consists primarily of net gains and losses from derivative financial instruments accounted for as cash flow hedges.

9. RELATED PARTY TRANSACTIONS

In the ordinary course of business, under the terms of an agreement approved by the ICC, Nicor Gas enters into transactions with Nicor and its other wholly owned subsidiaries for the use of facilities and services. The charges for these transactions are cost-based, except where the charging party has a prevailing price for which the facility or service is provided to the general public. In addition, Nicor charges Nicor Gas and its other wholly owned subsidiaries for the cost of corporate overheads. Corporate overheads are allocated to Nicor’s subsidiaries based upon a formula approved by the ICC. Nicor Gas had net charges to (from) affiliates of $(0.4) million and $7.8 million for the three and nine months ended September 30, 2010, respectively, and $(1.2) million and $4.4 million, respectively, for the same periods in 2009.

Key executives and managerial employees of Nicor Gas participate in Nicor’s stock-based compensation plans. Nicor Gas recognized compensation expense of $1.6 million and $3.6 million for the three and nine months ended September 30, 2010, respectively, in operating and maintenance expense related to these stock-based compensation plans and $1.1 million and $2.6 million, respectively, for the same periods in 2009.

Nicor Gas participates in a cash management system with other subsidiaries of Nicor. By virtue of making deposits or advances to Nicor, Nicor Gas is exposed to credit risk to the extent it is unable to secure the return of such deposits for any reason. Such deposits are due on demand. There are ICC regulations addressing the amount and circumstances under which Nicor Gas can deposit with the cash management pool or advance to Nicor. In addition, Nicor Gas may not extend cash advances to Nicor if Nicor Gas has any outstanding short-term borrowings. Nicor Gas’ practice also provides that the balance of cash deposits or advances from Nicor Gas to Nicor at any time shall not exceed the unused balance of funds actually available to Nicor under its existing bank credit agreements or its commercial paper facilities with unaffiliated third parties. Nicor Gas’ positive cash deposits, if any, may be applied by Nicor to offset negative balances of other Nicor subsidiaries and vice versa.

Nicor Gas had no deposits in the Nicor cash management pool at September 30, 2010, December 31, 2009 and September 30, 2009. Nicor Gas records interest income from deposits in the Nicor cash management pool at a rate of interest equal to the higher of Nicor’s commercial paper rate or a market rate of return on a short-term investment. For the three and nine months ended September 30, 2010 and 2009, Nicor Gas recorded no interest income.

Table of Contents

Under their utility-bill management products, Nicor Solutions pays Nicor Gas for the utility bills issued to the utility-bill management customers. For the three and nine months ended September 30, 2010, Nicor Gas recorded revenues of $3.2 million and $25.6 million, respectively, associated with the payments Nicor Solutions makes to Nicor Gas on behalf of its customers. For the three and nine months ended September 30, 2009, such revenues were $3.0 million and $25.8 million, respectively.

As a natural gas supplier, Nicor Advanced Energy pays Nicor Gas for delivery charges, administrative charges and applicable taxes. For the three and nine months ended September 30, 2010, Nicor Advanced Energy paid Nicor Gas $1.2 million and $4.7 million, respectively, and $1.3 million and $4.6 million, respectively, for the same periods in 2009 for such items. Additionally, Nicor Advanced Energy may pay or receive inventory imbalance adjustments. For both the three and nine months ended September 30, 2010, Nicor Advanced Energy received $0.3 million from Nicor Gas. For the three and nine months ended September 30, 2009, Nicor Advanced Energy received $1.9 million and $1.5 million, respectively, for such items.

Nicor Gas enters into routine transactions with Nicor Enerchange that are governed by terms of an ICC order. For the three and nine months ended September 30, 2010, net commodity-based charges to (from) Nicor Enerchange were $0.6 million and $(3.1) million, respectively. For the three and nine months ended September 30, 2009, net commodity-based charges from Nicor Enerchange were $1.8 million and $4.9 million, respectively. Additionally, Nicor Enerchange administers the Chicago Hub for Nicor Gas in accordance with an agreement approved by the ICC. In both 2010 and 2009, charges from Nicor Enerchange were $0.2 million and $0.5 million, respectively, for the three and nine months ended September 30. Nicor Gas also charged Nicor Enerchange $0.3 million and $0.9 million, respectively, for the three and nine months ended September 30, 2009 for certain storage services at the Chicago Hub.

In both 2010 and 2009, Horizon charged Nicor Gas $2.6 million and $7.8 million, respectively, for the three and nine months ended September 30 for natural gas transportation under rates that have been accepted by the FERC.

Nicor sold its 50 percent ownership in EN Engineering L.L.C. (“EN Engineering”) on March 31, 2009. Prior to the sale, EN Engineering charged Nicor Gas $1.7 million for engineering and corrosion services rendered for the three months ended March 31, 2009. A majority of the work performed by EN Engineering is capital in nature, and is classified as property, plant and equipment on the Condensed Consolidated Balance Sheets.

In addition, certain related parties may acquire regulated utility services at rates approved by the ICC.

10. REGULATORY PROCEEDINGS

Rate proceeding. On March 25, 2009, the ICC issued an order approving an increase in base revenues of approximately $69 million, a rate of return on rate base of 7.58 percent and a rate of return on equity of 10.17 percent. The order also approved an energy efficiency rider. Nicor Gas placed the rates approved in the March 25, 2009 order into effect on April 3, 2009.

On April 24, 2009, Nicor Gas filed a request for rehearing with the ICC concerning the capital structure contained in the ICC’s rate order contending the company’s return on rate base should be higher. On October 7, 2009, the ICC issued its decision on rehearing in which it increased the annual base revenues approved for Nicor Gas in the March 25, 2009 order by approximately $11 million, increasing the rate of return on rate base to 8.09 percent. Nicor Gas placed the rates approved in the rehearing decision into effect on a prospective basis on October 15, 2009. Therefore, the total annual base revenue increase authorized in the rate case originally filed by the company in April 2008 is approximately $80 million.

Table of Contents

Bad debt rider. In September 2009, Nicor Gas filed for approval of a bad debt rider with the ICC under an Illinois state law which took effect in July 2009. On February 2, 2010, the ICC issued an order approving the company’s proposed bad debt rider. This rider provides for recovery from customers of the amount over the benchmark for bad debt expense established in the company’s rate cases. It also provides for refunds to customers if bad debt expense is below such benchmarks.

As a result of the February 2010 order, Nicor Gas recorded in the first quarter of 2010 a net recovery related to 2008 and 2009 of $31.7 million; substantially all of this amount is expected to be collected in 2010. The benchmark, against which 2010 actual bad debt expense will be compared, is approximately $63 million.

11. GUARANTEES AND INDEMNITIES

In certain instances, Nicor Gas has undertaken to indemnify current property owners and others against costs associated with the effects and/or remediation of contaminated sites for which the company may be responsible under applicable federal or state environmental laws, generally with no limitation as to the amount. These indemnifications relate primarily to ongoing coal tar cleanup, as discussed in Note 12 – Contingencies – Manufactured Gas Plant Sites. Nicor Gas believes that the likelihood of payment under its other environmental indemnifications is remote. No liability has been recorded for such indemnifications.

Nicor Gas has also indemnified, to the fullest extent permitted under the laws of the State of Illinois and any other applicable laws, its present and former directors, officers and employees against expenses they may incur in connection with litigation they are a party to by reason of their association with the company. There is generally no limitation as to the amount. While the company does not expect to incur significant costs under these indemnifications, it is not possible to estimate the maximum future potential payments.

12. CONTINGENCIES

The following contingencies of Nicor Gas are in various stages of investigation or disposition. Although in some cases the company is unable to estimate the amount of loss reasonably possible in addition to any amounts already recognized, it is possible that the resolution of these contingencies, either individually or in aggregate, will require the company to take charges against, or will result in reductions in, future earnings. It is the opinion of management that the resolution of these contingencies, either individually or in aggregate, could be material to earnings in a particular period but is not expected to have a material adverse impact on Nicor Gas’ liquidity or financial condition.

PBR Plan. Nicor Gas’ PBR plan for natural gas costs went into effect in 2000 and was terminated by the company effective January 1, 2003. Under the PBR plan, Nicor Gas’ total gas supply costs were compared to a market-sensitive benchmark. Savings and losses relative to the benchmark were determined annually and shared equally with sales customers. The PBR plan is currently under ICC review. There are allegations that the company acted improperly in connection with the PBR plan, and the ICC and others are reviewing these allegations. On June 27, 2002, the Citizens Utility Board (“CUB”) filed a motion to reopen the record in the ICC’s proceedings to review the PBR plan (the “ICC Proceedings”). As a result of the motion to reopen, Nicor Gas, the staff of the ICC and CUB entered into a stipulation providing for additional discovery. The Illinois Attorney General’s Office (“IAGO”) has also intervened in this matter. In addition, the IAGO issued Civil Investigation Demands (“CIDs”) to CUB and the ICC staff. The CIDs ordered that CUB and the ICC staff produce all documents relating to any claims that Nicor Gas may have presented, or caused to be presented, false information related to its PBR plan. The company has committed to cooperate fully in the reviews of the PBR plan.

Table of Contents

In response to these allegations, on July 18, 2002, the Nicor Board of Directors appointed a special committee of independent, non-management directors to conduct an inquiry into issues surrounding natural gas purchases, sales, transportation, storage and such other matters as may come to the attention of the special committee in the course of its investigation. The special committee presented the report of its counsel (“Report”) to Nicor’s Board of Directors on October 28, 2002.

In response, the Nicor Board of Directors directed the company’s management to, among other things, make appropriate adjustments to account for, and fully address, the adverse consequences to ratepayers of the items noted in the Report, and conduct a detailed study of the adequacy of internal accounting and regulatory controls. The adjustments were made in prior years’ financial statements resulting in a $24.8 million liability. Included in such $24.8 million liability is a $4.1 million loss contingency. A $1.8 million adjustment to the previously recorded liability, which is discussed below, was made in 2004 increasing the recorded liability to $26.6 million. Nicor Gas estimates that there is $26.9 million due to the company from the 2002 PBR plan year, which has not been recognized in the financial statements due to uncertainties surrounding the PBR plan. In addition, interest due to the company on certain components of these amounts has not been recognized in the financial statements due to the same uncertainties. By the end of 2003, the company completed steps to correct the weaknesses and deficiencies identified in the detailed study of the adequacy of internal controls.

Pursuant to the agreement of all parties, including the company, the ICC re-opened the 1999 and 2000 purchased gas adjustment filings for review of certain transactions related to the PBR plan and consolidated the reviews of the 1999-2002 purchased gas adjustment filings with the PBR plan review.

On February 5, 2003, CUB filed a motion for $27 million in sanctions against the company in the ICC Proceedings. In that motion, CUB alleged that Nicor Gas’ responses to certain CUB data requests were false. Also on February 5, 2003, CUB stated in a press release that, in addition to $27 million in sanctions, it would seek additional refunds to consumers. On March 5, 2003, the ICC staff filed a response brief in support of CUB’s motion for sanctions. On May 1, 2003, the ALJs assigned to the proceeding issued a ruling denying CUB’s motion for sanctions. CUB has filed an appeal of the motion for sanctions with the ICC, and the ICC has indicated that it will not rule on the appeal until the final disposition of the ICC Proceedings. It is not possible to determine how the ICC will resolve the claims of CUB or other parties to the ICC Proceedings.

In 2004, the company became aware of additional information relating to the activities of individuals affecting the PBR plan for the period from 1999 through 2002, including information consisting of third party documents and recordings of telephone conversations from Entergy-Koch Trading, LP (“EKT”), a natural gas, storage and transportation trader and consultant with whom Nicor did business under the PBR plan. Review of additional information completed in 2004 resulted in the $1.8 million adjustment to the previously recorded liability referenced above.

The evidentiary hearings on this matter were stayed in 2004 in order to permit the parties to undertake additional third party discovery from EKT. In December 2006, the additional third party discovery from EKT was obtained and the ALJs issued a scheduling order that provided for Nicor Gas to submit direct testimony by April 13, 2007. In its direct testimony, Nicor Gas seeks a reimbursement of approximately $6 million, which includes interest due to the company, as noted above, of $1.6 million, as of March 31, 2007. In September 2009, the staff of the ICC, IAGO and CUB submitted direct testimony to the ICC requesting refunds of $109 million, $255 million and $286 million, respectively. No date has been set for evidentiary hearings on this matter.

Nicor Gas is unable to predict the outcome of the ICC’s review or the company’s potential exposure thereunder. Because the PBR plan and historical gas costs are still under ICC review, the final outcome could be materially different than the amounts reflected in the company’s financial statements as of September 30, 2010.

Table of Contents

Mercury. Nicor Gas has incurred, and expects to continue to incur, costs related to its historical use of mercury in various kinds of company equipment.

As of September 30, 2010, Nicor Gas had remaining an estimated liability of $0.6 million related to inspection, cleanup and legal defense costs. This represents management’s best estimate of future costs based on an evaluation of currently available information. Actual costs may vary from this estimate. Nicor Gas remains a defendant in several private lawsuits that were filed on August 29, 2000, all in the Circuit Court of Cook County, Illinois, seeking a variety of unquantified damages (including bodily injury and property damages) allegedly caused by mercury spillage resulting from the removal of mercury-containing regulators. Potential liabilities relating to these claims have been assumed by a contractor’s insurer subject to certain limitations.

The final disposition of these mercury-related matters is not expected to have a material adverse impact on the company’s liquidity or financial condition.

Manufactured Gas Plant Sites. Manufactured gas plants were used in the 1800’s and early to mid 1900’s to produce manufactured gas from coal, creating a coal tar byproduct. Current environmental laws may require the cleanup of coal tar at certain former manufactured gas plant sites.

Nicor Gas has identified properties for which it may have some responsibility. Most of these properties are not presently owned by the company. Nicor Gas and Commonwealth Edison Company (“ComEd”) are parties to an agreement to cooperate in cleaning up residue at many of these properties. The agreement allocates to Nicor Gas 51.73 percent of cleanup costs for 24 sites, no portion of the cleanup costs for 14 other sites and 50 percent of general remediation program costs that do not relate exclusively to particular sites. Information regarding preliminary site reviews has been presented to the Illinois Environmental Protection Agency for certain properties. More detailed investigations and remedial activities are complete, in progress or planned at many of these sites. The results of the detailed site-by-site investigations will determine the extent additional remediation is necessary and provide a basis for estimating additional future costs. As of September 30, 2010, the company had recorded a liability in connection with these matters of $28.9 million. In accordance with ICC authorization, the company has been recovering, and expects to continue to recover, these costs from its customers, subject to annual prudence reviews.

In April 2002, Nicor Gas was named as a defendant, together with ComEd, in a lawsuit brought by the Metropolitan Water Reclamation District of Greater Chicago (the “MWRDGC”) under the Federal Comprehensive Environmental Response, Compensation and Liability Act seeking recovery of past and future remediation costs and a declaration of the level of appropriate cleanup for a former manufactured gas plant site in Skokie, Illinois now owned by the MWRDGC. In January 2003, the suit was amended to include a claim under the Federal Resource Conservation and Recovery Act. The suit was filed in the United States District Court for the Northern District of Illinois. Management cannot predict the outcome of this litigation or the company’s potential exposure thereto, if any, and has not recorded a liability associated with this contingency.

Since costs and recoveries relating to the cleanup of manufactured gas plant sites are passed directly through to customers in accordance with ICC regulations, subject to an annual ICC prudence review, the final disposition of manufactured gas plant matters is not expected to have a material impact on the company’s financial condition or results of operations.

Municipal Tax Matters. Many municipalities in Nicor Gas’ service territory have enacted ordinances that impose taxes on gas sales to customers within municipal boundaries. Most of these municipal taxes are imposed on Nicor Gas based on revenues generated by Nicor Gas within the municipality. Other municipal taxes are imposed on natural gas consumers within the municipality but are collected from consumers and remitted to the municipality by Nicor Gas. A number of municipalities have instituted audits of Nicor Gas’ tax remittances. In May 2007, five of those municipalities filed an action against

Table of Contents

Nicor Gas in state court in DuPage County, Illinois relating to these tax audits. Following a dismissal of this action without prejudice by the trial court, the municipalities filed an amended complaint. The amended complaint seeks, among other things, compensation for alleged unpaid taxes. Nicor Gas is contesting the claims in the amended complaint. In December 2007, 25 additional municipalities, all represented by the same audit firm involved in the lawsuit, issued assessments to Nicor Gas claiming that it failed to provide information requested by the audit firm and owed the municipalities back taxes. Nicor Gas believes the assessments are improper and has challenged them. While the company is unable to predict the outcome of these matters or to reasonably estimate its potential exposure related thereto, if any, and has not recorded a liability associated with this contingency, the final disposition of these matters is not expected to have a material adverse impact on the company’s liquidity or financial condition.

Other. In addition to the matters set forth above, the company is involved in legal or administrative proceedings before various courts and agencies with respect to general claims, taxes, environmental, gas cost prudence reviews and other matters. Although unable to determine the ultimate outcome of these other contingencies, management believes that these amounts are appropriately reflected in the financial statements, including the recording of appropriate liabilities when reasonably estimable.

Table of Contents

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

The following discussion should be read in conjunction with the Management’s Discussion and Analysis section of the Nicor Gas 2009 Annual Report on Form 10-K. Results for the interim periods presented are not necessarily indicative of the results to be expected for the full fiscal year due to seasonal and other factors.

RESULTS OF OPERATIONS

Operating income and net income are presented below (in millions):

	Three months ended				Nine months ended
	September 30				September 30
	2010		2009		2010		2009

Operating income	$	16.7	$	15.7	$	99.6	$	73.4

Net income	$	7.7	$	6.9	$	72.6	$	47.9

Net income increased $0.8 million for the three months ended September 30, 2010 compared to the prior year due to higher margin ($12.3 million pretax increase) and a favorable mercury-related reserve adjustment ($1.3 million pretax), partially offset by higher operating and maintenance expense ($11.0 million pretax increase) and higher depreciation expense ($1.5 million pretax increase). Net income increased $24.7 million for the nine months ended September 30, 2010 compared to the prior year due to higher margin ($40.0 million pretax increase), lower operating and maintenance expense ($5.8 million pretax decrease) and a favorable mercury-related reserve adjustment ($1.3 million pretax), partially offset by higher depreciation expense ($4.4 million pretax increase), higher interest expense ($1.4 million pretax increase) and a higher effective income tax rate.

Table of Contents

Health Care Reform Legislation. The Health Care Act contains a provision that eliminates the tax deduction related to Medicare Part D subsidies received after 2012. Federal subsidies are provided to sponsors of retiree health benefit plans, such as Nicor Gas, that provide a benefit that is at least actuarially equivalent to the benefits under Medicare Part D. Such subsidies have reduced the company’s actuarially determined projected benefit obligation and annual net periodic benefit costs. Due to the change in taxation, in the first quarter of 2010 Nicor Gas reduced deferred tax assets by $17.5 million, reversed an existing regulatory income tax liability of $10.0 million, established a regulatory income tax asset of $7.0 million and recognized a $0.5 million charge to income tax expense. Beginning in 2010, the change in taxation will also reduce earnings by an estimated $1.6 million annually for periods subsequent to the enactment date.

The company is evaluating the other provisions of the Health Care Act and will evaluate future interpretations to determine the impact it may have on the company’s future results of operations, cash flows and financial condition.

Capital market environment. The volatility in the capital markets over the past two years has caused general concern over the valuations of investments, exposure to increased credit risk and pressures on liquidity. The company continues to review its investments, exposure to credit risk and sources of liquidity and does not currently expect any future material adverse impacts relating to this past volatility.

Operating revenues. Operating revenues are impacted by changes in natural gas costs, which are passed directly through to customers without markup, subject to ICC review. Operating revenues increased $18.5 million for the three months ended September 30, 2010 compared to the prior year due primarily to higher natural gas costs (approximately $15 million increase) and revenue from the bad debt rider ($9.7 million), partially offset by lower deliveries to sales customers (approximately $10 million decrease). Operating revenues increased $76.5 million for the nine months ended September 30, 2010 compared to the prior year due to higher natural gas costs (approximately $130 million increase), revenue from the bad debt and energy efficiency riders ($22.8 million and $10.2 million, respectively) and the impact of the increase in base rates (approximately $19 million increase), partially offset by the impact of warmer weather (approximately $85 million decrease).

Margin. Nicor Gas utilizes a measure it refers to as “margin” to evaluate the operating income impact of revenues. Revenues include natural gas costs, which are passed directly through to customers without markup, subject to ICC review, and revenue taxes, for which Nicor Gas earns a small administrative fee. These items often cause significant fluctuations in revenues, with equal and offsetting fluctuations in cost of gas and revenue tax expense, with no direct impact on margin. The 2009 rate orders included a franchise gas cost recovery rider and a rider to recover the costs associated with energy efficiency programs. Additionally, in February 2010 the ICC approved the company’s bad debt rider. As a result, changes in revenue included in margin attributable to these items are expected to generally be offset by changes within operating and maintenance expense.

Table of Contents

A reconciliation of revenues and margin follows (in millions):

	Three months ended						Nine months ended
	September 30						September 30
	2010			2009			2010			2009

Revenues	$	233.5		$	215.0		$	1,601.8		$	1,525.3
Cost of gas		(75.5	)		(70.2	)		(982.3	)		(943.2	)
Revenue tax expense		(13.8	)		(12.9	)		(110.2	)		(112.8	)
Margin	$	144.2		$	131.9		$	509.3		$	469.3

Margin increased $12.3 million for the three months ended September 30, 2010 compared to the prior year due to revenue from the bad debt rider ($9.7 million) and the impact of the increase in base rates (approximately $3 million increase). Margin increased $40.0 million for the nine months ended September 30, 2010 compared to the prior year due primarily to revenue from the bad debt and energy efficiency riders ($22.8 million and $10.2 million, respectively) and the impact of the increase in base rates (approximately $19 million increase), partially offset by the impact of warmer weather (approximately $9 million decrease) and lower interest on customer balances ($5.1 million decrease).

Operating and maintenance expense. Operating and maintenance expense increased $11.0 million for the three months ended September 30, 2010 compared to the prior year due to higher bad debt expense ($13.7 million increase), partially offset by lower pension expense ($1.1 million decrease, net of capitalization). Bad debt expense for the three months ended September 30, 2010 was $18.5 million compared to $4.8 million in the prior year. Bad debt expense in 2010 includes $8.8 million, based on revenue recognized in the quarter, of the approximately $63 million annual expense assumed to be collected through base rates; and $9.7 million of expense which is equal to the revenue recognized under the bad debt rider.

Operating and maintenance expense decreased $5.8 million for the nine months ended September 30, 2010 compared to the prior year reflecting lower company use and storage-related gas costs ($7.1 million decrease), lower pension expense ($3.4 million decrease, net of capitalization) and lower bad debt expense ($2.1 million decrease), partially offset by higher costs associated with the energy efficiency program ($10.2 million increase). Bad debt expense for the nine months ended September 30, 2010 was $37.2 million compared to $39.3 million in the prior year. Bad debt expense in 2010 includes the recognition of the $31.7 million benefit associated with the net under recovery of bad debt expense from 2008 and 2009; $46.1 million, based on revenue recognized in the period, of the approximately $63 million annual expense assumed to be collected through base rates; and $22.8 million of expense which is equal to the revenue recognized under the bad debt rider.

Other operating expenses. The three and nine months ended September 30, 2010 reflect a favorable $1.3 million reserve adjustment associated with the company’s mercury inspection and repair program. Additional information about the company’s mercury inspection and repair program is presented in Item 1 – Notes to the Consolidated Financial Statements – Note 12 – Contingencies – Mercury.

Table of Contents

Income tax expense. The effective income tax rate for the three months ended September 30, 2010 decreased to 36.1 percent from 37.8 percent for the prior year. Both periods reflect changes to forecasted annual pretax income identified in the respective quarters. The year-to-date adjustment to income taxes recognized in the quarter resulting from these changes to forecasted annual pretax income has a larger impact in quarters with lower income. The effective income tax rate for the nine months ended September 30, 2010 increased to 37.2 percent from 35.5 percent for the prior year. The higher effective income tax rate for the nine months ended September 30, 2010 was due primarily to higher forecasted annual pretax income (which causes a higher effective income tax rate since permanent differences and tax credits are a smaller share of pretax income) and the unfavorable impact of the tax law change with respect to Medicare Part D subsidies.

Interest expense. Interest expense increased $1.4 million for the nine months ended September 30, 2010 compared to the prior year due to higher average borrowing levels and higher bank commitment fees.

Table of Contents

Nicor Gas Company
Gas Distribution Statistics

	Three months ended				Nine months ended
	September 30				September 30
	2010		2009		2010		2009
Operating revenues (millions)
Sales
Residential	$	141.2	$	126.1	$	1,036.6	$	969.8
Commercial		32.6		28.9		258.6		245.9
Industrial		3.3		2.8		29.4		27.8
		177.1		157.8		1,324.6		1,243.5
Transportation
Residential		9.5		9.7		33.8		34.1
Commercial		14.3		14.0		54.1		56.9
Industrial		11.2		10.7		30.8		30.0
Other		-		.1		1.4		4.0
		35.0		34.5		120.1		125.0
Other revenues
Revenue taxes		14.0		13.1		111.8		114.5
Environmental cost recovery		.9		1.3		9.0		9.2
Chicago Hub		.9		1.8		3.0		5.6
Other		5.6		6.5		33.3		27.5
		21.4		22.7		157.1		156.8
	$	233.5	$	215.0	$	1,601.8	$	1,525.3
Deliveries (Bcf)
Sales
Residential		11.6		12.7		122.5		134.9
Commercial		3.3		3.5		32.7		35.5
Industrial		.5		.5		4.1		4.4
		15.4		16.7		159.3		174.8
Transportation
Residential		1.4		1.6		15.0		17.1
Commercial		9.5		9.4		57.0		60.6
Industrial		25.7		23.0		77.5		76.6
		36.6		34.0		149.5		154.3
		52.0		50.7		308.8		329.1
Customers at end of period (thousands)
Sales
Residential		1,769		1,743
Commercial		129		128
Industrial		8		7
		1,906		1,878
Transportation
Residential		207		221
Commercial		47		51
Industrial		5		5
		259		277
		2,165		2,155

Other statistics
Degree days		58		66		3,547		3,937
Colder (warmer) than normal (1)		(5)%		8%		(1)%		10%
Average gas cost per Mcf sold	$	4.70	$	3.91	$	6.03	$	5.24

(1) Normal weather for Nicor Gas' service territory, for purposes of this report, is considered to be 5,600 degree days.

Table of Contents

FINANCIAL CONDITION AND LIQUIDITY

The company believes it has access to adequate resources to meet its needs for capital expenditures, debt redemptions, dividend payments and working capital. These resources include net cash flow from operating activities, access to capital markets, lines of credit and short-term investments. Capital market conditions are not currently expected to have a material adverse impact on the company’s ability to access capital.

Operating cash flows. The company’s business is highly seasonal and operating cash flow may fluctuate significantly during the year and from year-to-year due to factors such as weather, natural gas prices, the timing of collections from customers, natural gas purchasing, and storage and hedging practices. The company relies on short-term borrowings, backed by bank lines of credit, to meet seasonal increases in working capital needs. Cash requirements generally increase over the last half of the year due to increases in natural gas purchases, gas in storage and accounts receivable. During the first half of the year, positive cash flow generally results from the sale of gas in storage and the collection of accounts receivable. This cash is typically used to substantially reduce, or eliminate, short-term debt during the first half of the year.

Net cash flow provided from operating activities decreased $225.7 million for the nine months ended September 30, 2010 compared to the prior year. The significant factors contributing to changes in cash flow are primarily a result of lower natural gas prices at the beginning of the 2009/2010 heating season compared to the 2008/2009 heating season and include:

·	a decrease of $157 million from changes in receivables due to higher receivable balances at the end of 2008 versus 2009;

·	a decrease of $97 million from changes in margin accounts related to derivative instruments due to the decline in gas prices;

·	an increase of $55 million from accounts payable balances due to the higher gas cost related payables in 2008;

In addition, the Company had higher volumes of gas in storage at the end of September 2010 when compared to 2009.

Nicor Gas maintains margin accounts related to financial derivative transactions. These margin accounts may cause large fluctuations in cash needs or sources in a relatively short period of time due to daily settlements resulting from changes in natural gas futures prices. The company manages these fluctuations with short-term borrowings and investments.

Investing activities. Net cash flow used for investing activities decreased $21.1 million for the nine months ended September 30, 2010 compared to the prior year.

Financing activities. The current credit ratings for Nicor Gas have not changed since the filing of the 2009 Annual Report on Form 10-K. Nicor Gas’ access to financing at competitive rates is, in part, dependent on its credit ratings.

Long-term debt. In February 2009, the $50 million 5.37 percent First Mortgage Bond series matured and was retired. In July 2009, Nicor Gas issued $50 million First Mortgage Bonds at 4.70 percent, due in 2019 through a private placement. In determining that these bonds qualified for exemption from registration under Section 4(2) of the Securities Act of 1933, Nicor Gas relied on the facts that the bonds were offered only to a limited number of large institutional investors and each institutional investor that purchased the bonds represented that it was purchasing the bonds for its own account and not with a view to distribute them.

The company believes it is in compliance with all debt covenants. Nicor Gas’s long-term debt agreements do not include default provisions that are triggered by rating downgrades or material adverse changes.

Table of Contents

Short-term debt. In April 2010, Nicor Gas established a $400 million, 364-day revolver, expiring April 2011 to replace the $550 million, 364-day revolver, which was set to expire in May 2010 and Nicor and Nicor Gas established a $600 million, three-year revolver, expiring April 2013 to replace the $600 million, five-year revolver, which was set to expire in September 2010. These facilities were established with major domestic and foreign banks and serve as backup for the issuance of commercial paper. The company had $373.3 million, $494.0 million and $365.0 million of commercial paper borrowings outstanding at September 30, 2010, December 31, 2009 and September 30, 2009, respectively. The company expects that funding from commercial paper and related backup line-of-credit agreements will continue to be available in the foreseeable future.

OTHER MATTERS

Application for Approval of Energy Efficiency Plan. On September 29, 2010, Nicor Gas filed an application with the ICC seeking approval of an energy efficiency plan. The filing was made pursuant to an Illinois law enacted in 2009 that requires local gas utilities to establish plans to achieve specified energy savings goals beginning in June 2011 and provides utilities with a rider to collect the costs of the plan from customers. Under its proposed plan, the company would bill nearly $100 million to customers under the rider, over a three year period commencing June 1, 2011, to fund the costs of various energy savings programs identified in the company’s filing.

Petition for Re-approval of Operating Agreement. On July 1, 2009, Nicor Gas filed a petition seeking re-approval from the ICC of the operating agreement that governs many inter-company transactions between Nicor Gas and its affiliates. The petition was filed pursuant to a requirement contained in the ICC order approving the company’s most recent general rate increase and requested that the operating agreement be re-approved without change. A number of parties have intervened in the proceeding and are seeking modifications on a prospective basis to the operating agreement. Among the proposals are several by the ICC Staff and intervenors that would preclude Nicor Gas from continuing to provide certain services to support warranty products that are sold by Nicor Services. Specifically, Nicor Services currently uses Nicor Gas personnel to assist in some sales solicitation for these warranty products and to provide repair services for some of these products. Nicor Gas does not believe these proposed modifications are appropriate and is opposing them. This proceeding is not expected to have a material impact on Nicor Gas’ results of operations, cash flows and financial condition.

Financial Reform Legislation. Financial Reform Legislation was enacted into law on July 21, 2010, and includes a provision that requires certain over the counter derivative transactions to be executed through an exchange or centrally cleared and also includes provisions under which the Commodity Futures Trading Commission may impose collateral requirements. Final rules on major provisions in the legislation will be established through rulemakings. While the company does not currently believe the legislation will have a material impact on its results of operations, cash flows and financial condition, the company will continue to evaluate the legislation and future rulemakings.

CONTINGENCIES

PBR plan. Nicor Gas’ PBR plan for natural gas costs went into effect in 2000 and was terminated by the company effective January 1, 2003. Under the PBR plan, Nicor Gas’ total gas supply costs were

Table of Contents

compared to a market-sensitive benchmark. Savings and losses relative to the benchmark were determined annually and shared equally with sales customers. The PBR plan is currently under ICC review. There are allegations that the company acted improperly in connection with the PBR plan, and the ICC and others are reviewing these allegations. On June 27, 2002, the Citizens Utility Board (“CUB”) filed a motion to reopen the record in the ICC’s proceedings to review the PBR plan (the “ICC Proceedings”). As a result of the motion to reopen, Nicor Gas, the staff of the ICC and CUB entered into a stipulation providing for additional discovery. The Illinois Attorney General’s Office (“IAGO”) has also intervened in this matter. In addition, the IAGO issued Civil Investigation Demands (“CIDs”) to CUB and the ICC staff. The CIDs ordered that CUB and the ICC staff produce all documents relating to any claims that Nicor Gas may have presented, or caused to be presented, false information related to its PBR plan. The company has committed to cooperate fully in the reviews of the PBR plan.

Table of Contents

Mercury. Information about mercury contingencies is presented in Item 1 – Notes to the Condensed Consolidated Financial Statements – Note 12 – Contingencies – Mercury.

Manufactured gas plant sites. The company is conducting environmental investigations and remedial activities at former manufactured gas plant sites. Additional information about these sites is presented in Item 1 – Notes to the Condensed Consolidated Financial Statements – Note 12 – Contingencies – Manufactured Gas Plant Sites.

Municipal tax matters. Information about municipal tax contingencies is presented in Item 1 – Notes to the Condensed Consolidated Financial Statements – Note 12 – Contingencies – Municipal Tax Matters.

Other. The company is involved in legal or administrative proceedings before various courts and agencies with respect to general claims, taxes, environmental, gas cost prudence reviews and other matters. See Item 1 – Notes to the Condensed Consolidated Financial Statements – Note 12.

CRITICAL ACCOUNTING ESTIMATES

See Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates in the 2009 Annual Report on Form 10-K for a discussion of the company’s critical accounting estimates.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

This document includes certain forward-looking statements about the expectations of Nicor Gas. Although Nicor Gas believes these statements are based on reasonable assumptions, actual results may vary materially from stated expectations. Such forward-looking statements may be identified by the use of forward-looking words or phrases such as “anticipate,” “believe,” “expect,” “intend,” “may,” “planned,” “potential,” “should,” “will,” “would,” “project,” “estimate,” “ultimate,” or similar phrases. Actual results may differ materially from those indicated in the company’s forward-looking statements due to the direct or indirect effects of legal contingencies (including litigation) and the resolution of those issues, including the effects of an ICC review, and undue reliance should not be placed on such statements.

Other factors that could cause materially different results include, but are not limited to, weather conditions; natural disasters; natural gas prices; fair value accounting adjustments; inventory valuation; health care costs; insurance costs or recoveries; legal costs; borrowing needs; interest rates; credit conditions; economic and market conditions; accidents, leaks, equipment failures, service interruptions, environmental pollution, and other operating risks; energy conservation; legislative and regulatory actions; tax rulings or audit results; asset sales; significant unplanned capital needs; future mercury-related charges or credits; changes in accounting principles, interpretations, methods, judgments or

Table of Contents

estimates; performance of major customers, transporters, suppliers and contractors; labor relations; and acts of terrorism.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this filing. Nicor Gas undertakes no obligation to publicly release any revision to these forward-looking statements to reflect events or circumstances after the date of this filing.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Nicor Gas is exposed to market risk in the normal course of its business operations, including the risk of loss arising from adverse changes in natural gas commodity prices and interest rates. Nicor Gas’ practice is to manage these risks utilizing derivative instruments and other methods, as deemed appropriate.

There has been no material change in the company's exposure to market risk since the filing of the 2009 Annual Report on Form 10-K.

Item 4. Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by the company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to the registrant’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

The company carried out an evaluation under the supervision and with the participation of the company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation”). Based on the Evaluation, the company’s Chief Executive Officer and Chief Financial Officer concluded, at the reasonable assurance level, as of the end of the period covered by this Quarterly Report on Form 10-Q, that the company’s disclosure controls and procedures, were effective.

There has been no change in the company’s internal controls over financial reporting during the company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.

Table of Contents

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

See Part I, Item 1 – Notes to the Condensed Consolidated Financial Statements – Note 10 – Regulatory Proceedings and Note 12 – Contingencies, which are incorporated herein by reference.

Item 6. Exhibits

Exhibit
Number		Description of Document

3.01	*	Restated Articles of Incorporation of the company as filed with the Illinois Secretary of State on July 21, 2006. (File No. 1-7296, Form 10-Q for June 30, 2006, Nicor Gas Company, Exhibit 3.01.)

3.02	*	Nicor Gas Company Amended and Restated By-laws effective as of December 1, 2007. (File No. 1-7296, Form 8-K for November 29, 2007, Nicor Gas Company, Exhibit 3.1.)

12.01		Computation of Consolidated Ratio of Earnings to Fixed Charges.

31.01		Rule 13a-14(a)/15d-14(a) Certification.

31.02		Rule 13a-14(a)/15d-14(a) Certification.

32.01		Section 1350 Certification.

32.02		Section 1350 Certification.

These exhibits have been previously filed with the SEC as exhibits to registration statements or to other filings with the SEC and are incorporated herein as exhibits by reference. The file number and exhibit number of each such exhibit, where applicable, are stated, in parentheses, in the description of such exhibit.

Table of Contents

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Nicor Gas Company

November 2, 2010		/s/ KAREN K. PEPPING
(Date)		Karen K. Pepping
		Vice President and Controller
		(Principal Accounting Officer and
		Duly Authorized Officer)

Attached files

NORTHERN ILLINOIS GAS CO /IL/ /NEW/ Reports

Also read