<SUBMISSION>
<ACCESSION-NUMBER>0000950137-08-010113
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>6
<PERIOD>20080630
<FILING-DATE>20080804
<DATE-OF-FILING-DATE-CHANGE>20080804
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>NISOURCE INC/DE
<CIK>0001111711
<ASSIGNED-SIC>4931
<IRS-NUMBER>352108964
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>001-16189
<FILM-NUMBER>08988755
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>801 EAST 86TH AVE
<CITY>MERRILLVILLE
<STATE>IN
<ZIP>46410-6272
<PHONE>2196475200
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>801 EAST 86TH AVE
<CITY>MERRILLVILLE
<STATE>IN
<ZIP>46410-6272
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>NEW NISOURCE INC
<DATE-CHANGED>20000412
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>c34232e10vq.htm
<DESCRIPTION>FORM 10-Q
<TEXT>
<HTML>
<HEAD>
<TITLE>Form 10-Q</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B></DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B></DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 10-Q</B></DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="10%">&nbsp;</TD>
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    <TD width="78%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center">&nbsp;</TD>
    <TD align="right"><FONT face="Wingdings">&#254;</FONT>&nbsp;</TD>
    <TD align="center"><B>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)<BR>
OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
    <TD align="center">&nbsp;</TD>
    <TD align="center">&nbsp;</TD>
</TR>
</TABLE></DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>For the quarterly period ended June&nbsp;30, 2008</B></div>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>or</B></DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center">&nbsp;</TD>
    <TD align="right"><FONT face="Wingdings">&#111;</FONT>&nbsp;</TD>
    <TD align="center"><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)<BR>

OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
    <TD align="center">&nbsp;</TD>
    <TD align="center">&nbsp;</TD>
    <TD align="center">&nbsp;</TD>
    <TD align="center">&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size:6pt">
    <TD>&nbsp;</TD>
</TR>
</TABLE></DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt">
<B>For the transition period from <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> to
</B><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</div>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Commission file number <U>001-16189</U></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT></DIV>

<DIV align="center" style="font-size: 10pt"><DIV style="margin-top: 1px"><FONT style="border-top: 1px solid #000000">(Exact name of registrant as specified in its charter)</FONT></DIV></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="60%">
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<TR valign="bottom">
    <TD align="center" valign="top">Delaware</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">35-2108964</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(State or other jurisdiction of</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(I.R.S. Employer</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">incorporation or organization)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Identification No.)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">801 East 86th Avenue</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Merrillville, Indiana</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">46410</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top" nowrap>(Address of principal executive offices)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Zip Code)</TD>
</TR>
<!-- End Table Body -->
</TABLE></DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(877)&nbsp;647-5990<BR>
<DIV style="margin-top: 1px"><FONT style="border-top: 1px solid #000000">(Registrant&#146;s telephone number, including area code)</FONT></DIV></DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant: (1)&nbsp;has filed all reports required to be filed by
Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or for
such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days.
Yes <FONT face="Wingdings">&#254;</FONT> No <FONT face="Wingdings">&#111;</FONT></DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt">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 the definitions of &#147;large
accelerated filer,&#148; &#147;accelerated filer&#148; and &#147;smaller reporting company&#148; in Rule 12b-2 of the Exchange Act. (Check one):</DIV>



<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="85%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD colspan="3"  align="center" valign="top">Large accelerated filer <FONT face="Wingdings">&#254;</FONT>&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accelerated filer <FONT face="Wingdings">&#111;</FONT>&nbsp;

</td>
</TR>
<TR valign="bottom" style="font-size:10pt">
    <TD>&nbsp;</TD>
</TR>
<TR valign="top">
    <TD colspan="3" align="center">Non-accelerated filer &nbsp; <FONT face="Wingdings">&#111;</FONT>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Smaller reporting company <FONT face="Wingdings">&#111;</FONT>&nbsp;
</TD>

</TR>
<TR valign="top">
<TD nowrap align="left" colspan="3"><div style="margin-left: 27%; text-indent: -1%">(Do not check if a smaller reporting company)</div></TD>
</TR>
</TABLE></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant is a shell company (as defined in Rule&nbsp;12b-2 of the
Exchange Act).
Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Indicate the number of shares outstanding of each of the issuer&#146;s classes of common stock, as of
the latest practicable date: Common Stock, $0.01 Par Value: 274,228,968 shares outstanding at
July&nbsp;31, 2008.</DIV>

<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio --></DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>NISOURCE INC.<BR>
FORM 10-Q QUARTERLY REPORT<BR>
FOR THE QUARTER ENDED JUNE 30, 2008</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Table of Contents</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="95%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Page</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#101">Defined Terms</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102"><U>PART I</U> <U>FINANCIAL INFORMATION</U></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#103">Item&nbsp;1. Financial Statements &#151; unaudited</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#104">Condensed Statements of Consolidated Income (Loss)</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#105">Condensed Consolidated Balance Sheets</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#106">Condensed Statements of Consolidated Cash Flows</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#107">Notes to Condensed Consolidated Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#108">Item&nbsp;2. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#109">Item&nbsp;3. Quantitative and Qualitative Disclosures About Market Risk</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#110">Item&nbsp;4. Controls and Procedures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#111"><U>PART II</U> <U>OTHER INFORMATION</U></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#112">Item&nbsp;1. Legal Proceedings</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#113">Item&nbsp;1A. Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#114">Item&nbsp;2. Unregistered Sales of Equity Securities and Use of Proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#115">Item&nbsp;3. Defaults Upon Senior Securities</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#116">Item&nbsp;4. Submission of Matters to a Vote of Security Holders</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#117">Item&nbsp;5. Other Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#118">Item&nbsp;6. Exhibits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#119">Signature</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c34232exv3w1.htm">Exhibit 3.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c34232exv31w1.htm">Exhibit 31.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c34232exv31w2.htm">Exhibit 31.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c34232exv32w1.htm">Exhibit 32.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c34232exv32w2.htm">Exhibit 32.2</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>




<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>DEFINED TERMS</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following is a list of frequently used abbreviations or acronyms that are found in this report:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>NiSource Subsidiaries and Affiliates</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Bay State
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bay State Gas Company</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Capital Markets
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">NiSource Capital Markets, Inc.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">CER
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Columbia Energy Resources, Inc.</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">CNR
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Columbia Natural Resources, Inc.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Columbia
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Columbia Energy Group</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Columbia Deep Water
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Columbia Deep Water Service Company</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Columbia Energy Services
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Columbia Energy Services Corporation</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Columbia Gulf
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Columbia Gulf Transmission Company</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Columbia of Kentucky
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Columbia Gas of Kentucky, Inc.</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Columbia of Maryland
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Columbia Gas of Maryland, Inc.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Columbia of Ohio
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Columbia Gas of Ohio, Inc.</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Columbia of Pennsylvania
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Columbia Gas of Pennsylvania, Inc.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Columbia of Virginia
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Columbia Gas of Virginia, Inc.</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Columbia Transmission
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Columbia Gas Transmission Corporation</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">CORC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Columbia of Ohio Receivables Corporation</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Crossroads Pipeline
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Crossroads Pipeline Company</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Granite State Gas
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Granite State Gas Transmission, Inc.</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Hardy Storage
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Hardy Storage Company, L.L.C.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Kokomo Gas
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Kokomo Gas and Fuel Company</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Lake Erie Land
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lake Erie Land Company</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Millennium
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Millennium Pipeline Company, L.P.</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NDC Douglas Properties
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">NDC Douglas Properties, Inc.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NiSource
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">NiSource Inc.</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NiSource Corporate Services
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">NiSource Corporate Services Company</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NiSource Development Company
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">NiSource Development Company, Inc.</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NiSource Finance
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">NiSource Finance Corp.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Northern Indiana
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Northern Indiana Public Service Company</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Northern Indiana Fuel and Light
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Northern Indiana Fuel and Light Company</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Northern Utilities
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Northern Utilities, Inc.</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NRC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">NIPSCO Receivables Corporation</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">PEI
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PEI Holdings, Inc.</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">TPC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">EnergyUSA-TPC Corp.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Whiting Clean Energy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Whiting Clean Energy, Inc.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Abbreviations</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">AFUDC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Allowance for funds used during construction</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Algonquin
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Algonquin Gas Transmission Co.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">ANPR
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Advance Notice of Proposed Rulemaking</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">AOC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Administrative Order by Consent</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">ARRs
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Auction Revenue Rights</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">ASM
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ancillary Services Market</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">BBA
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">British Banker Association</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Bcf
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Billion cubic feet</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">BPAE
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">BP Alternative Energy North America Inc</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">CAA
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Clean Air Act</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">CAIR
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Clean Air Interstate Rule</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">CAMR
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Clean Air Mercury Rule</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">CCGT
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Combined Cycle Gas Turbine</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">CERCLA
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Comprehensive Environmental Response Compensation and Liability Act (Also known as Superfund)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">CPCN
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certificate of Public Convenience and Necessity</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">




</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>DEFINED TERMS (continued)</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Day 2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Began April&nbsp;1, 2005 and refers to the operational control of the energy markets by MISO, including the
dispatching of wholesale electricity and generation, managing transmission constraints, and managing the
day-ahead, real-time and financial transmission rights markets</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">DPU
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Massachusetts Department of Public Utilities</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">DSM
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Demand Side Management</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dth
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">dekatherms</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">ECR
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Environmental Cost Recovery</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">ECRM
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Environmental Cost Recovery Mechanism</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">ECT
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Environmental cost tracker</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">EER
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Environmental Expense Recovery</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">EERM
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Environmental Expense Recovery Mechanism</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">EITF Issue No.&nbsp;02-3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">EITF Issue No.&nbsp;02-3, &#147;Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes
and Contracts Involved in Energy Trading and Risk Management Activities&#148;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Empire
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Empire State Pipeline</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">EPA
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">United States Environmental Protection Agency</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">EPS
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Earnings per share</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">FAC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Fuel adjustment clause</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">FASB
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financial Accounting Standards Board</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">FERC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Federal Energy Regulatory Commission</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">FIN 47
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FASB Interpretation No.&nbsp;47, &#147;Accounting for Conditional Asset Retirement Obligations&#148;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">FIN 48
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FASB Interpretation No.&nbsp;48, &#147;Accounting for Uncertainty in Income Taxes,&#148; an interpretation of SFAS No.&nbsp;109</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">FIP
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Federal Implementation Plan</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">FSP
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FASB Staff Position</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">FSP FAS 157-2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FASB Staff Position FAS 157-2: Effective Date of FASB Statement No.&nbsp;157</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">FSP FIN 39-1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FASB Staff Position FIN 39-1: Amendment of FASB Interpretation No.&nbsp;39</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">FTRs
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financial Transmission Rights</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">GAAP
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Generally Accepted Accounting Principles</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">gwh
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Gigawatt hours</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">IBM
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">International Business Machines Corp.</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">IBM Agreement
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Agreement for Business Process &#038; Support Services</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">IDEM
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indiana Department of Environmental Management</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Iroquois
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Iroquois Gas Transmission System LP</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">IRP
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Integrated Resource Plan</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">IURC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indiana Utility Regulatory Commission</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">LDCs
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Local distribution companies</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">LIBOR
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London InterBank Offered Rate</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">LIFO
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Last-in, first out</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">MGP
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Manufactured gas plant</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">MISO
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Midwest Independent Transmission System Operator</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">MMDth
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Million dekatherms</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">mw
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Megawatts</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NAAQS
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">National Ambient Air Quality Standards</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NOV
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notice of Violation</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NOx
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Nitrogen oxides</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NPDES
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">National Pollutant Discharge Elimination System</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NYMEX
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">New York Mercantile Exchange</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">OUCC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indiana Office of Utility Consumer Counselor</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">PCB
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Polychlorinated biphenyls</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Piedmont
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Piedmont Natural Gas Company, Inc.</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">PPS
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Price Protection Service</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">PUCO
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Public Utilities Commission of Ohio</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>DEFINED TERMS (continued)</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">RCRA
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Resource Conservation and Recovery Act</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SAB No.&nbsp;92
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Staff Accounting Bulletin No.&nbsp;92, &#147;Accounting and Disclosures Relating to Loss Contingencies&#148;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SEC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities and Exchange Commission</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SFAS No.&nbsp;5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Statement of Financial Accounting Standards No.&nbsp;5, &#147;Accounting for Contingencies&#148;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SFAS No.&nbsp;71
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Statement of Financial Accounting Standards No.&nbsp;71, &#147;Accounting for the Effects of Certain Types of
Regulation&#148;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SFAS No.&nbsp;123R
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Statement of Financial Accounting Standards No.&nbsp;123R, &#147;Share-Based Payment&#148;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SFAS No.&nbsp;133
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Statement of Financial Accounting Standards No.&nbsp;133, &#147;Accounting for Derivative Instruments and Hedging
Activities,&#148; as amended</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SFAS No.&nbsp;140
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Statement of Financial Accounting Standards No.&nbsp;140, &#147;Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities &#151; a replacement of FASB Statement 125&#148;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SFAS No.&nbsp;141R
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Statement of Financial Accounting Standards No.&nbsp;141R, &#147;Business Combinations&#148;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SFAS No.&nbsp;143
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Statement of Financial Accounting Standards No.&nbsp;143, &#147;Accounting for Asset Retirement Obligations&#148;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SFAS No.&nbsp;157
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Statement of Financial Accounting Standards No.&nbsp;157, &#147;Fair Value Measurements&#148;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SFAS No.&nbsp;158
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Statement of Financial Accounting Standards No.&nbsp;158, &#147;Employers&#146; Accounting for Defined Benefit Pension
and Other Postretirement Plans&#148;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SFAS No.&nbsp;159
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Statement of Financial Accounting Standards No.&nbsp;159, &#147;The Fair Value Option for Financial Assets and
Financial Liabilities &#151; Including an amendment of FASB Statement No.&nbsp;115&#148;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SFAS No.&nbsp;160
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Statement of Financial Accounting Standards No.&nbsp;160, &#147;Noncontrolling Interests in
Consolidated Financial Statements &#151; an amendment of ARB No.&nbsp;51&#148;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SFAS No.&nbsp;161
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Statement of Financial Accounting Standards No.&nbsp;161, &#147;Disclosures about Derivative
Instruments and Hedging &#151; an amendment of SFAS No.&nbsp;133&#148;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SIP
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">State Implementation Plan</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SO2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sulfur dioxide</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SOP 96-1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Statement of Position 96-1, &#147;Environmental Remediation Liabilities&#148;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">VaR
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Value-at-risk and instrument sensitivity to market factors</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">VADEQ
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Virginia Department of Environmental Quality</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->5<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<A name="102"></A>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><u><B>PART I</B></U></DIV>

<A name="103"></A>

<DIV style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS</U></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT></DIV>

<A name="104"></A>

<DIV style="font-size: 10pt"><B>Condensed Statements of Consolidated Income (Loss) (unaudited)</B></DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Three Months</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Six Months</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Ended June 30,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Ended June 30,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap><I>(in millions, except per share amounts)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net Revenues</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gas Distribution</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>923.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">752.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>3,153.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,596.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gas Transportation and Storage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>235.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">228.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>592.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">572.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Electric</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>339.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">333.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>671.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">659.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>292.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">252.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>663.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">582.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,792.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,566.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,081.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,411.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cost of Sales (excluding depreciation and amortization)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,121.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">889.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,370.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,691.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Net Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>670.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">677.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,711.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,720.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating Expenses</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operation and maintenance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>345.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">333.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>755.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">710.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>147.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>283.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">267.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Impairment and (gain)&nbsp;loss on sale of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(0.9</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>63.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>166.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Operating Expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>555.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">537.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,203.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,151.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Equity Earnings in Unconsolidated Affiliates</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating Income</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>116.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>511.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">574.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other Income (Deductions)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expense, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(87.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(98.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(179.2</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(197.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(0.2</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Other Income (Deductions)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(86.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(98.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(179.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(200.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income From Continuing Operations Before Income Taxes</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>30.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>332.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">373.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income Taxes</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>121.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income from Continuing Operations</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>21.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>210.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">235.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (Loss) from Discontinued Operations &#151; net of taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(220.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(214.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain (Loss) on Disposition of Discontinued Operations &#151; net of taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2.8</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(98.9</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net Income (Loss)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(202.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(103.0</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">243.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Basic Earnings Per Share ($)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.08</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.77</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.86</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(0.82</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.01</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(1.15</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.03</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Basic Earnings Per Share</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(0.74</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(0.38</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.89</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Diluted Earnings Per Share ($)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.08</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.77</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.86</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(0.81</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.01</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(1.14</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.03</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Diluted Earnings Per Share</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(0.73</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(0.37</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.89</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Dividends Declared Per Common Share</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.23</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.69</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.69</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Basic Average Common Shares Outstanding (millions)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>274.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">273.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>273.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">273.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Diluted Average Common Shares (millions)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>275.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">274.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>275.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">274.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these
unaudited statements.</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio --></DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT>
</DIV>
<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="left" style="font-size: 10pt"><B>Condensed Consolidated Balance Sheets (unaudited)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Property, Plant and Equipment</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Utility Plant</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>18,040.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17,295.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(7,982.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,787.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net utility plant</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,058.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,508.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other property, at cost, less accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>67.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Property, Plant and Equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,126.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,575.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Investments and Other Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Assets of discontinued operations and assets held for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>299.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">593.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unconsolidated affiliates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>76.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>110.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Investments and Other Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>486.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">783.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>45.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Restricted cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable (less reserve of $43.2 and $37.0, respectively)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>737.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">900.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gas inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>270.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">452.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Underrecovered gas and fuel costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>344.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Materials and supplies, at average cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>82.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Electric production fuel, at average cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>48.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Price risk management assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>248.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exchange gas receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>464.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">210.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Regulatory assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>200.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">215.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Assets of discontinued operations and assets held for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>64.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepayments and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>173.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Current Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,680.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,460.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Price risk management assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>131.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Regulatory assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>885.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">867.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,677.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,677.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>336.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">341.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Postretirement and postemployment benefits assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>178.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">157.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred charges and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>114.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Other Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,323.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,190.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>18,616.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,009.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these
unaudited statements.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->7<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><BR>
Condensed Consolidated Balance Sheets (unaudited) (continued)</B></DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap><I>(in millions, except share amounts)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>CAPITALIZATION AND LIABILITIES</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Capitalization</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common Stockholders&#146; Equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock &#151; $0.01 par value, 400,000,000 shares authorized;
274,216,784</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">and 274,176,752 shares issued and outstanding, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD><B>$</B></TD>
    <TD align="right"><B>2.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD align="right">2.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,015.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,011.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>782.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,074.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>34.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Treasury stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap>&nbsp;</TD>
    <TD align="right"><B>(23.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap>&nbsp;</TD>
    <TD align="right">(23.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Common Stockholders&#146; Equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,810.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,076.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt, excluding amounts due within one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,059.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,594.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Capitalization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,870.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,671.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current Liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current portion of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>43.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>506.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,061.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>665.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">713.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends declared</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>63.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Customer deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>112.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Taxes accrued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>223.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest accrued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>99.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Overrecovered gas and fuel costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Price risk management liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>117.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exchange gas payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>687.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">441.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Regulatory liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>113.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued liability for postretirement and postemployment benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Liabilities of discontinued operations and liabilities held for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>57.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Temporary LIFO liquidation credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>174.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Legal and environmental reserves</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>452.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other accruals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>314.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">393.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Current Liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,648.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,397.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other Liabilities and Deferred Credits</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Price risk management liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>55.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,522.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,466.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred investment tax credits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>49.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred credits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>85.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued liability for postretirement and postemployment benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>553.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">547.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Liabilities of discontinued operations and liabilities held for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>86.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Regulatory liabilities and other removal costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,427.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,337.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Asset retirement obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>128.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other noncurrent liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>187.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Other Liabilities and Deferred Credits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,096.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,941.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">

<TD><DIV style="margin-left:15px; text-indent:-15px"><B>Commitments
and Contingencies (Refer to Note 17)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total Capitalization and Liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD><B>$</B></TD>
    <TD align="right"><B>18,616.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD align="right">18,009.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these
unaudited statements.</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->8<!-- /Folio --></DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT>
</DIV>
<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="left" style="font-size: 10pt"><B>Condensed Statements of Consolidated Cash Flows (unaudited)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Six Months Ended June 30, <I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating Activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(103.0</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">243.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments to reconcile net income to net cash from continuing operations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>283.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">267.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net changes in price risk management assets and liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>19.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred income taxes and investment tax credits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>52.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(24.6</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on sale of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(4.0</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on impairment of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income from unconsolidated affiliates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">(Gain) loss on disposition of discontinued operations &#151; net of taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>98.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5.8</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">(Income) loss from discontinued operations &#151; net of taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>214.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.2</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Amortization of discount/premium on debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">AFUDC Equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(4.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Changes in assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>223.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>361.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">286.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(73.7</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(138.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Customer deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Taxes accrued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Interest accrued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">(Under) Overrecovered gas and fuel costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(195.9</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(59.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Exchange gas receivable/payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(45.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other accruals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(149.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(140.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Prepayments and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Regulatory assets/liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(53.7</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Postretirement and postemployment benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred credits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred charges and other noncurrent assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(13.2</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other noncurrent liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(30.6</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Operating Activities from Continuing Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>640.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">581.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Operating Activities from or (used for) Discontinued Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1.9</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Cash Flows from Operating Activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>638.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">587.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Investing Activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(422.8</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(323.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Sugar Creek purchase</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(329.7</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Proceeds from disposition of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>229.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Restricted cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>136.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(2.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Investing Activities used for Continuing Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(388.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(257.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Investing Activities from or (used for)
Discontinued Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Cash Flows used for Investing Activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(387.6</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(262.8</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Financing Activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Issuance of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>706.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Retirement of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(12.0</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(45.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Repurchase of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(254.0</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Change in short-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(555.0</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(171.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Issuance of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Acquisition of treasury stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.2</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Dividends paid &#151; common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(126.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(126.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Cash Flows used for Financing Activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(240.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(335.2</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase (decrease)&nbsp;in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash inflows from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>34.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash and cash equivalents at end of period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>45.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Supplemental Disclosures of Cash Flow Information</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Cash paid for interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>188.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">219.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Interest capitalized</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Cash paid for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>38.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86.8</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these
unaudited statements.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->9<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT></DIV>

<A name="107"></A>

<DIV style="font-size: 10pt"><B>Notes to Condensed Consolidated Financial Statements (unaudited)</B></DIV>

<DIV style="font-size: 10pt; margin-top: 12pt"><B>1. Basis of Accounting Presentation</B></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">The accompanying unaudited condensed consolidated financial statements for NiSource reflect all
normal recurring adjustments that are necessary, in the opinion of management, to present fairly
the results of operations in accordance with GAAP in the United States of America.</DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">The accompanying financial statements should be read in conjunction with the consolidated financial
statements and notes thereto included in NiSource&#146;s Annual Report on Form 10-K for the fiscal year
ended December&nbsp;31, 2007. Income for interim periods may not be indicative of results for the
calendar year due to weather variations and other factors.</DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">The following unaudited condensed consolidated financial statements have been prepared pursuant to
the rules and regulations of the SEC. Certain information and note disclosures normally included
in annual financial statements prepared in accordance with GAAP have been condensed or omitted
pursuant to those rules and regulations, although NiSource believes that the disclosures made are
adequate to make the information not misleading.</DIV>

<DIV style="font-size: 10pt; margin-top: 12pt"><B>2. Recent Accounting Pronouncements</B></DIV>


<DIV style="font-size: 10pt; margin-top: 6pt"><U>Recently Adopted Accounting Pronouncements</U></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt"><B><I>SFAS No.&nbsp;157 &#151; Fair Value Measurements. </I></B>In September&nbsp;2006, the FASB issued SFAS No.&nbsp;157 to define
fair value, establish a framework for measuring fair value and to expand disclosures about fair
value measurements. SFAS No.&nbsp;157 defines fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. SFAS No.&nbsp;157 does not change the requirements to apply
fair value in existing accounting standards.</DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">Under SFAS No.&nbsp;157, fair value refers to the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants in the market in
which the reporting entity transacts. The standard clarifies that fair value should be based on
the assumptions market participants would use when pricing the asset or liability.</DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">To increase consistency and comparability in fair value measurements, SFAS No.&nbsp;157 establishes a
fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value
into three levels. The level in the fair value hierarchy disclosed is based on the lowest level of
input that is significant to the fair value measurement. The three levels of the fair value
hierarchy defined by SFAS No.&nbsp;157 are as follows:</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Level 1 inputs are quoted prices (unadjusted)&nbsp;in active markets for identical asset or
liabilities that the company has the ability to access as of the reporting date.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Level 2 inputs are inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly through corroboration
with observable market data.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Level 3 inputs are unobservable inputs, such as internally developed pricing models for
the asset or liability due to little or no market activity for the asset or liability.</TD>
</TR>

</TABLE></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">SFAS No.&nbsp;157 became effective for NiSource as of January&nbsp;1, 2008. The provisions of SFAS No.&nbsp;157
are to be applied prospectively, except for the initial impact on the following three items, which
are required to be recorded as an adjustment to the opening balance of retained earnings in the
year of adoption: (1)&nbsp;changes in fair value measurements of existing derivative financial
instruments measured initially using the transaction price under EITF Issue No.&nbsp;02-3, (2)&nbsp;existing
hybrid financial instruments measured initially at fair value using the transaction price and (3)
blockage factor discounts. The adoption of SFAS No.&nbsp;157 did not have an impact on NiSource&#146;s
January&nbsp;1, 2008 balance of retained earnings and is not anticipated to have a material impact
prospectively.</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->10<!-- /Folio --></DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><BR>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2008, the FASB issued FSP FAS 157-2, which delays the effective date of SFAS No.&nbsp;157
for all nonrecurring fair value measurements of non-financial assets and liabilities until fiscal
years beginning after November&nbsp;15, 2008. NiSource has elected to defer the adoption of the
nonrecurring fair value measurement disclosures of non-financial assets and liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">See Note 11, &#147;Fair Value of Financial Assets and Liabilities,&#148; in the Notes to Condensed
Consolidated Financial Statements for additional information regarding the adoption of SFAS No.
157.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>SFAS No.&nbsp;158 &#151; Employers&#146; Accounting for Defined Benefit Pension and Other Postretirement Plans.</I></B>
In September&nbsp;2006, the FASB issued SFAS No.&nbsp;158 to improve existing reporting for defined benefit
postretirement plans by requiring employers to recognize in the statement of financial position the
overfunded or underfunded status of a defined benefit postretirement plan, among other changes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the fourth quarter of 2006, NiSource adopted the provisions of SFAS No.&nbsp;158. Based on the
measurement of the various defined benefit pension and other postretirement plans&#146; assets and
benefit obligations at September&nbsp;30, 2006, the pretax impact of adopting SFAS No.&nbsp;158 decreased
intangible assets by $46.5&nbsp;million, decreased deferred charges and other assets by $1.1&nbsp;million,
increased regulatory assets by $538.8&nbsp;million, increased accumulated other comprehensive income by
$239.8&nbsp;million and increased accrued liabilities for postretirement and postemployment benefits by
$251.4&nbsp;million. In addition, NiSource recorded a reduction in deferred income taxes of
approximately $96&nbsp;million. With the adoption of SFAS No.&nbsp;158 NiSource determined that for certain
rate-regulated subsidiaries the future recovery of pension and other postretirement plans costs is
probable in accordance with the requirements of SFAS No.&nbsp;71. These rate-regulated subsidiaries
recorded regulatory assets and liabilities that would otherwise have been recorded to accumulated
other comprehensive income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;1, 2007, NiSource adopted the SFAS No.&nbsp;158 measurement date provisions requiring
employers to measure plan assets and benefit obligations as of the fiscal year-end. The pre-tax
impact of adopting the SFAS No.&nbsp;158 measurement date provisions increased deferred charges and
other assets by $9.4&nbsp;million, decreased regulatory assets by $89.6&nbsp;million, decreased retained
earnings by $11.3&nbsp;million, increased accumulated other comprehensive income by $5.3&nbsp;million and
decreased accrued liabilities for postretirement and postemployment benefits by $74.2&nbsp;million.
NiSource also recorded a reduction in deferred income taxes of approximately $2.6&nbsp;million. In
addition, 2007 expense for pension and postretirement benefits reflects the updated measurement
date valuations. Refer to Note 14, &#147;Pension and Other Postretirement Benefits,&#148; in the Notes to
Condensed Consolidated Financial Statements for additional information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>SFAS No.&nbsp;159 &#151; The Fair Value Option for Financial Assets and Financial Liabilities &#151; Including an
amendment of FASB Statement No.&nbsp;115. </I></B>In February&nbsp;2007, the FASB issued SFAS No.&nbsp;159 which permits
entities to choose to measure certain financial instruments at fair value that are not currently
required to be measured at fair value. Upon adoption, a cumulative adjustment would be made to
beginning retained earnings for the initial fair value option remeasurement. Subsequent unrealized
gains and losses for fair value option items will be reported in earnings. SFAS No.&nbsp;159 is
effective for fiscal years beginning after November&nbsp;15, 2007 and should not be applied
retrospectively, except as permitted for certain conditions for early adoption. NiSource has
chosen not to elect to measure any applicable financial assets or liabilities at fair value
pursuant to this standard when SFAS No.&nbsp;159 was adopted on January&nbsp;1, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>FSP FIN 39-1 &#151; FASB Staff Position Amendment of FASB Interpretation No.&nbsp;39. </I></B>In April&nbsp;2007, the
FASB posted FSP FIN 39-1 to amend paragraph 3 of FIN 39 to replace the terms <I>conditional contracts</I>
and e<I>xchange contracts </I>with the term <I>derivative instruments </I>as defined in SFAS No.&nbsp;133. This FSP
also amends paragraph 10 of FIN 39 to permit a reporting entity to offset fair value amounts
recognized for the right to reclaim cash collateral or the obligation to return cash collateral
against fair value amounts recognized for derivative instruments executed with the same
counterparty under a master netting arrangement. This FSP became effective for NiSource as of
January&nbsp;1, 2008. NiSource has not elected to net fair value amounts for its derivative instruments
or the fair value amounts recognized for its right to receive cash collateral or obligation to pay
cash collateral arising from those derivative instruments recognized at fair value, which are
executed with the same counterparty under a master netting arrangement. This is consistent with
NiSource&#146;s current accounting policy prior to the adoption of this amended standard. NiSource
discloses amounts recognized for the right to reclaim cash collateral within &#147;Restricted
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->11<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><BR>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">cash&#148; and amounts recognized for the right to return cash collateral within current liabilities on
the Consolidated Balance Sheets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>FIN 48 &#151; Accounting for Uncertainty in Income Taxes. </I></B>In June&nbsp;2006, the FASB issued FIN 48 to
reduce the diversity in practice associated with certain aspects of the recognition and measurement
requirements related to accounting for income taxes. Specifically, this interpretation requires
that a tax position meet a &#147;more-likely-than-not recognition threshold&#148; for the benefit of an
uncertain tax position to be recognized in the financial statements and requires that benefit to be
measured at the largest amount of benefit that is greater than 50% likely of being realized upon
ultimate settlement. The determination of whether a tax position meets the more-likely-than-not
recognition threshold is based on whether it is probable of being sustained on audit by the
appropriate taxing authorities, based solely on the technical merits of the position.
Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years
beginning after December&nbsp;15, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;1, 2007, NiSource adopted the provisions of FIN 48. As a result of the implementation
of FIN 48, NiSource recognized a charge of $0.8&nbsp;million to the opening balance of retained
earnings. Refer to Note 13, &#147;Income Taxes,&#148; in the Notes to Condensed Consolidated Financial
Statements for additional information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Recently Issued Accounting Pronouncements</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>SFAS No.&nbsp;161 &#151; Disclosures about Derivative Instruments and Hedging &#151; an amendment of SFAS No.&nbsp;133.</I></B>
In March&nbsp;2008, the FASB issued SFAS No.&nbsp;161 to amend and expand the disclosure requirements of
SFAS No.&nbsp;133 with the intent to provide users of the financial statement with an enhanced
understanding of how and why an entity uses derivative instruments, how these derivatives are
accounted for and how the respective reporting entity&#146;s financial statements are affected. SFAS
No.&nbsp;161 is effective for fiscal years and interim periods beginning after November&nbsp;15, 2008, and
earlier application is encouraged. NiSource is currently reviewing the provisions of SFAS No.&nbsp;161
to determine the impact it may have on its disclosures within the Notes to Condensed Consolidated
Financial Statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>SFAS No.&nbsp;160 &#151; Noncontrolling Interests in Consolidated Financial Statements &#151; an amendment of ARB
No.&nbsp;51. </I></B>In December&nbsp;2007, the FASB issued SFAS No.&nbsp;160 to improve the relevance, comparability,
and transparency of the financial information that a reporting entity provides in its consolidated
financial statements regarding non-controlling ownership interests in a business and for the
deconsolidation of a subsidiary. SFAS No.&nbsp;160 is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December&nbsp;15, 2008 and earlier adoption is
prohibited. NiSource is currently reviewing the provisions of SFAS No.&nbsp;160 to determine the impact
it may have on the Condensed Consolidated Financial Statements and Notes to Condensed Consolidated
Financial Statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>SFAS No.&nbsp;141R &#151; Business Combinations. </I></B>In December&nbsp;2007, the FASB issued SFAS No.&nbsp;141R to improve
the relevance, representational faithfulness, and comparability of information that a reporting
entity provides in its financial reports regarding business combinations and its effects, including
recognition of assets and liabilities, the measurement of goodwill and required disclosures. SFAS
No.&nbsp;141R is effective for fiscal years, and interim periods within those fiscal years, beginning on
or after December&nbsp;15, 2008 and earlier adoption is prohibited. NiSource is currently reviewing the
provisions of SFAS No.&nbsp;141R to determine the impact on future business combinations.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->12<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><BR>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3. Earnings Per Share</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Basic EPS is computed by dividing income available to common stockholders by the weighted-average
number of shares of common stock outstanding for the period. The weighted average shares
outstanding for diluted EPS include the incremental effects of the various long-term incentive
compensation plans. The numerator in calculating both basic and diluted EPS for each period is
reported net income. The computation of diluted average common shares follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Three Months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Six Months</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Ended June 30,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Ended June 30,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(in thousands)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Denominator</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic average common shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>273,973</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">273,817</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>273,947</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">273,706</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dilutive potential common shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Nonqualified stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">337</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Shares contingently issuable under employee
stock plans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,230</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,230</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">626</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Shares restricted under employee stock plans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>192</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>180</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted Average Common Shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>275,395</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">274,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>275,357</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">274,837</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4. Restructuring Activities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the fourth quarter of 2005, NiSource announced a plan to reduce its executive ranks by
approximately 15% to 20% of the top-level executive group. In part, this reduction came through
anticipated attrition and consolidation of certain positions. Fourteen employees were terminated
as a result of the executive initiative.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In previous years, NiSource implemented restructuring initiatives to streamline its operations and
realize efficiencies as a result of the acquisition of Columbia. As of June&nbsp;30, 2008, 1,567
employees were terminated. Of the $0.8&nbsp;million remaining restructuring liability from the Columbia
merger and related initiatives, $0.6&nbsp;million is related to facility exit costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Restructuring reserve by restructuring initiative:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Balance at</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Balance at</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 31, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Benefits Paid</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Adjustments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">June 30, 2008</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Executive initiative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Columbia merger and
related initiatives</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5. Gas in Storage</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Gas Distribution Operations price storage injections at the average of the costs of natural gas
supply purchased during the year. For interim periods, the difference between current projected
replacement cost and the LIFO cost for quantities of gas temporarily withdrawn from storage is
recorded as a temporary LIFO liquidation credit within the Condensed Consolidated Balance Sheets.
Due to seasonality requirements, NiSource expects interim reductions in LIFO layers to be
replenished by year-end. Changes between the temporary LIFO liquidation credit and gas inventory
in the amounts of $174.8&nbsp;million and $11.8&nbsp;million during the first six months of 2008 and 2007,
respectively, are considered non-cash activity for the Condensed Statements of Consolidated Cash
Flow.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->13<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="font-size: 10pt; margin-top: 6pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><BR>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B></DIV>

<DIV style="font-size: 10pt; margin-top: 12pt"><B>6. Discontinued Operations and Assets Held for Sale</B></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">The assets and liabilities of discontinued operations and held for sale on the Condensed
Consolidated Balance Sheet at June&nbsp;30, 2008 were:</DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">(in millions)</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Property, plant</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Materials and</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap><B>Assets of discontinued</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">and equipment,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Accounts</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">supplies, at</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Regulatory</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Intangible</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Other</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap><B>operations and held for sale:</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">net</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">receivable, net</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">average cost</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">assets</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">assets</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">assets</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="29" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Northern Utilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">174.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">27.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">16.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">41.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>284.4</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Granite State Gas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>26.1</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Bay State</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>20.1</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Lake Erie Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12.5</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:30px; text-indent:-15px">NiSource Corporate
Services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7.9</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">NDC Douglas Properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6.0</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Columbia Transmission</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.2</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Columbia of Ohio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.2</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Northern Indiana</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.2</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">241.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">27.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">16.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">41.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">34.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>363.6</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE></DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap><B>Liabilities of discontinued</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Accounts</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Deferred</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Deferred</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Regulatory</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Other</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap><B>operations and held for sale:</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Debt</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">payable</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">income taxes</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">credits</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">liabilities</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">liabilities</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="29" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Northern Utilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">58.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">27.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>121.8</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Granite State Gas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>16.0</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">NDC Douglas Properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6.3</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">63.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">38.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>144.1</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE></DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->14<!-- /Folio --></DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="font-size: 10pt; margin-top: 6pt"><U>ITEM 1. FINANCIAL
STATEMENTS (continued)</U></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT><br>
<b>Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The assets and liabilities of discontinued operations and held for sale on the Consolidated Balance
Sheet at December&nbsp;31, 2007 including reclassifications of balances for entities discontinued during
2008, were:</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(in millions)</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Property, plant</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Materials and</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Assets of discontinued operations</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">and equipment,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Accounts</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">supplies, at</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Regulatory</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Intangible</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Other</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>and held for sale:</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">net</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">receivable, net</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">average cost</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">assets</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">assets</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">assets</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Northern Utilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">168.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">27.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">16.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">72.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>307.9</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Whiting Clean Energy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">269.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>303.3</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Granite State Gas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>25.8</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Lake Erie Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12.6</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:30px; text-indent:-15px">NiSource Corporate
Services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9.5</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Columbia Transmission</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8.0</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">NDC Douglas Properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6.1</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap><DIV style="margin-left:30px; text-indent:-15px">Columbia Gulf
Transmission</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.8</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Northern Indiana</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.2</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>496.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>40.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>10.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>16.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>80.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>34.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>678.2</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE></DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Liabilities of discontinued</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Accounts</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Deferred</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Deferred</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Regulatory</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Other</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>operations and held for sale:</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Debt</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">payable</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">income taxes</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">credits</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">liabilities</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">liabilities</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Northern Utilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">56.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">17.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>93.5</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Whiting Clean Energy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>56.0</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">NDC Douglas Properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6.3</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Granite State Gas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5.6</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">97.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">17.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">17.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>161.4</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Assets classified as discontinued operations and held for sale are no longer depreciated.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource reached an agreement on April&nbsp;18, 2008 with BPAE for the sale of Whiting Clean Energy. On
June&nbsp;30, 2008, NiSource sold Whiting Clean Energy to BPAE for $217.2&nbsp;million which included $16.3
million in working capital. During the first quarter of 2008 an estimated loss of $32.5&nbsp;million was
recorded to Gain (Loss) on Disposition of Discontinued Operation in the Condensed Statements of
Consolidated Income (Loss). During the second quarter of 2008, a $0.6&nbsp;million adjustment was made
to the estimated loss on the disposition of the asset.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On February&nbsp;15, 2008, NiSource reached a definitive agreement under which Unitil Corporation will
acquire NiSource subsidiaries Northern Utilities and Granite State Gas. Under the terms of the
transaction, Unitil Corporation will acquire Northern Utilities, a local gas distribution company
serving 52 thousand customers in 44 communities in Maine and New Hampshire and Granite State Gas,
an 86-mile FERC regulated gas transmission pipeline primarily located in Maine and New Hampshire.
In the first quarter of 2008, net assets for Northern Utilities and Granite State Gas were
reclassified to assets and liabilities of discontinued operations and held for sale on the
Consolidated Balance Sheets. For the second quarter and six months ended June&nbsp;30, 2008, estimated
losses of $3.4&nbsp;million and $66.9&nbsp;million were included in Gain (Loss) on Disposition of
Discontinued Operation in the Condensed Statements of Consolidated Income (Loss).</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On June&nbsp;27, 2008, Columbia Gulf sold a portion of Columbia Gulf&#146;s offshore assets to Tennessee Gas
Pipeline Company for $7.5&nbsp;million. A receivable was recorded in June&nbsp;2008 and the payment was
received on July&nbsp;1, 2008. A gain of $2.9&nbsp;million was recorded on the sale during the second quarter
of 2008.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NDC Douglas Properties, a subsidiary of NiSource Development Company, is in the process of exiting
some of its low income housing investments. One of these investments was disposed of during 2007
and two other investments are expected to be sold or disposed of during 2009. NiSource has
accounted for the investments to be sold as assets and liabilities of discontinued operations and
held for sale.</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->15<!-- /Folio --></DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><BR>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource Corporate Services is continuing to work with several potential buyers to sell its Marble
Cliff facility. In late February&nbsp;2008 an offer was accepted but the parties have failed to reach a
definitive agreement. As a result of the initial offer, an impairment loss of $1.6&nbsp;million was
recognized during the first quarter of 2008. During the first quarter of 2007 an impairment loss
of $3.2&nbsp;million was recognized due to the current book value exceeding the estimated fair value of
the facility. NiSource has accounted for this facility as assets held for sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Lake Erie Land, which is wholly-owned by NiSource, is in the process of selling real estate over a
10-year period as a part of an agreement reached in June, 2006 with a private real estate
development group. Part of the sale transaction included the assets of the Sand Creek Golf Club,
and NiSource began accounting for the operations of the Sand Creek Golf Club as discontinued
operations at that time. NiSource estimates the property to be sold to the private developer
during the next twelve months and classifies these assets as assets of discontinued operations and
held for sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Columbia Transmission is in the process of selling certain facilities that are non-core to the
operation of the pipeline system. In the first quarter of 2008, certain assets in Ohio were sold,
which resulted in a $3.8&nbsp;million decrease to the balance of assets held for sale. Northern Indiana
and Columbia of Ohio are also in the process of selling non-core assets. NiSource has accounted
for these assets as assets held for sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the second quarter of 2008 Bay State signed a letter of intent to sell certain assets.
During the second quarter of 2008, these assets were classified as assets held for sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Results from discontinued operations from Whiting Clean Energy, Granite State Gas, Northern
Utilities, NDC Douglas Properties low income housing investments, the golf course assets of Lake
Erie Land and reserve changes for NiSource&#146;s former exploration and production subsidiary, CER, are
provided in the following table:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Three Months</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Six Months</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Ended June 30,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Ended June 30,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Revenues from Discontinued Operations</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>54.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">48.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>155.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">137.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(338.0</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(327.8</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax expense (benefit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(117.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(113.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income (Loss) from Discontinued Operations -
net of taxes</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(220.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(214.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Gain (Loss) on Disposition of Discontinued
Operations -
net of taxes</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(2.8</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(98.9</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Losses from Discontinued Operations for the quarter and first six months of 2008 are primarily
attributable to an increase to the reserve for the Tawney litigation associated with CER. Refer to
Note 17-B, &#147;Other Legal Proceedings,&#148; in the Notes to Condensed Consolidated Financial Statements
for further discussion on the Tawney litigation. The results from Discontinued Operations for the
first six months of 2008 also include the after tax loss on disposition related to the sale of
Whiting Clean Energy and pending sales of Northern Utilities and Granite State Gas of $31.9
million, $52.0&nbsp;million and $14.9&nbsp;million, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>7. Purchase of Sugar Creek Plant</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On May&nbsp;30, 2008, Northern Indiana purchased Sugar Creek for $329.7&nbsp;million. This purchase was in
response to Northern Indiana&#146;s need to add approximately 1,000 mw of new capacity. Refer to Note
9, &#147;Regulatory Matters,&#148; in the Notes to Condensed Consolidated Financial Statements for further
discussion. The Sugar Creek facility is a CCGT located in West Terre Haute, Indiana. Sugar Creek
has a plant capacity rating of 535 mw. Sugar Creek has transmission access to and is able to
participate in both the MISO and PJM Interconnection wholesale electricity markets. The plant is
currently committed to the PJM Interconnection market until May&nbsp;31, 2010. At acquisition, Northern
Indiana recorded at fair value $328.1&nbsp;million related to utility plant. No goodwill was recorded
in
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->16<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><BR>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">conjunction with the purchase. The preliminary allocation of the purchase price was assigned to
the assets and liabilities of Sugar Creek, based on their estimated fair value in accordance with
GAAP. This allocation is subject to completion of certain analyses and allocation of property,
plant and equipment unit of accounts. Northern Indiana has up to one year from the date of
purchase to complete its final purchase price allocation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>8. Asset Retirement Obligations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource accounts for its asset retirement obligations in accordance with SFAS No.&nbsp;143 and FIN 47.
Certain costs of removal that have been, and continue to be, included in depreciation rates and
collected in the service rates of the rate-regulated subsidiaries are classified as regulatory
liabilities and other removal costs on the Condensed Consolidated Balance Sheets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource activity for asset retirement obligations:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Three Months</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Six Months</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Ended June 30,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Ended June 30,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accretion expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accretion recorded as a regulatory asset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Settlements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(3.2</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(3.2</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Increase (Decrease) in Asset Retirement
Obligation Liability</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(1.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>1.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>3.5</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Northern Indiana performed retirement activities associated with a landfill resulting in
settlements of $3.2&nbsp;million for the second quarter of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>9. Regulatory Matters</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Gas Distribution Operations Regulatory Matters</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Significant Rate Developments. </B>Columbia of Ohio filed a base rate case with PUCO on March&nbsp;3, 2008,
requesting an increase in base rates in excess of $80&nbsp;million annually. Columbia of Ohio is
seeking recovery of increased infrastructure rehabilitation costs, as well as the stabilization of
revenues and cost recovery through rate design. The case is currently pending, and is expected to
be resolved by the fourth quarter of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;28, 2008, Columbia of Pennsylvania filed a base rate case with the Pennsylvania
Public Utility Commission, seeking an increase of approximately $60&nbsp;million annually,
effective October&nbsp;28, 2008. Through this filing, Columbia of Pennsylvania sought to recover
costs associated with its significant infrastructure rehabilitation program, as well as
stabilize revenues and cost recovery through modifications to rate design. On July&nbsp;2, 2008,
Columbia of Pennsylvania and all interested parties filed a unanimous settlement with the
Pennsylvania Public Utilities Commission. If approved, the settlement authorizes Columbia to
increase revenues by $41.5&nbsp;million annually, and make certain other accounting, tariff and
service changes. The Pennsylvania Public Utilities Commission is expected to issue an order
in this case by the third quarter of 2008, with new rates expected to take effect during the
fourth quarter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On October&nbsp;17, 2007, Bay State petitioned the DPU to allow the company to collect an additional
$7.5&nbsp;million in annual revenue related to usage reductions occurring since its last rate case. Bay
State also requested approval of a steel infrastructure tracker that would allow for recovery of
ongoing infrastructure replacement program investments. The DPU held hearings on this matter in
the first quarter of 2008 and issued an order denying Bay State&#146;s petition on April&nbsp;30, 2008.
NiSource has decided not to appeal this case, and is weighing other options at this time. On July
16, 2008, the DPU issued an order in its generic decoupling proceeding for gas utilities. NiSource
is still reviewing the order, but considers the DPU&#146;s action favorable and will evaluate the order
in light of the order in Bay State&#146;s recent case.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->17<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><BR>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Cost Recovery and Trackers. </B>A significant portion of the distribution companies&#146; revenue is
related to the recovery of gas costs, the review and recovery of which occurs via standard
regulatory proceedings. All states require periodic review of actual gas procurement activity to
determine prudence and to permit the recovery of prudently incurred costs related to the supply of
gas for customers. NiSource distribution companies have historically been found prudent in the
procurement of gas supplies to serve customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain operating costs of the NiSource distribution companies are significant, recurring in
nature, and generally outside the control of the distribution companies. Some states allow the
recovery of such costs via cost tracking mechanisms. Such tracking mechanisms allow for
abbreviated regulatory proceedings in order for the distribution companies to implement charges and
recover appropriate costs. Tracking mechanisms allow for more timely recovery of such costs as
compared with more traditional cost recovery mechanisms. Examples of such mechanisms include gas
cost recovery adjustment mechanisms, tax riders, and bad debt recovery mechanisms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Comparability of Gas Distribution Operations line item operating results is impacted by these
regulatory trackers that allow for the recovery in rates of certain costs such as bad debt
expenses. Increases in the expenses that are the subject of trackers result in a corresponding
increase in net revenues and therefore have essentially no impact on total operating income
results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On April&nbsp;9, 2008, the PUCO issued an order approving, in all material respects, a joint Stipulation
submitted on behalf of Columbia of Ohio. This Stipulation is a result of a process that began on
April&nbsp;13, 2005 with a Commission ordered investigation into the type of gas risers installed in the
state, the conditions of installation and overall performance. The Stipulation provides for
establishment of accounting for and recovery of costs resulting from the Staff&#146;s investigation;
Columbia&#146;s performance of a survey to identify those customer-owned risers on its system prone to
failure; and related customer education and other program related expenses. In addition this
Stipulation provides for: Columbia&#146;s assumption of financial responsibility for the replacement of
all risers identified as prone to failure; repair or replacement of hazardous customer owned
service lines; and capitalization of this investment with recovery to be addressed in future rate
proceedings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On December&nbsp;28, 2007, Columbia of Ohio entered into a Stipulation with the Ohio Consumers&#146; Counsel
and PUCO Staff and other stakeholders resolving litigation concerning a pending Gas Cost Recovery
audit of Columbia of Ohio. The Stipulation calls for an accelerated pass back to customers of
$36.6&nbsp;million that will occur from January&nbsp;31, 2008 through January&nbsp;31, 2009, generated through
off-system sales and capacity release programs, the development of new energy efficiency programs
for introduction in 2009, and the development of a wholesale auction process for customer supply to
take effect in 2010. Approximately $19.2&nbsp;million was passed back through June&nbsp;2008. The
Stipulation also resolves issues related to pending and future Gas Cost Recovery Management
Performance audits through 2008. The PUCO approved this agreement on January&nbsp;23, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Gas Transmission and Storage Operations Regulatory Matters</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Significant FERC Developments. </B>Columbia Gulf and Columbia Transmission are cooperating with the
FERC on an informal, non-public investigation of certain operating practices regarding tariff
services offered by those companies. Although the companies are continuing to cooperate with the
FERC in an effort to reach a consensual settlement, it is likely that any settlement will require
the payment of fines or refunds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Eastern Market Expansion Project. </B>On May&nbsp;3, 2007, Columbia Transmission filed a certificate
application before the FERC for approval to expand its facilities to provide additional storage and
transportation services and to replace certain existing facilities. This Eastern Market Expansion
project is projected to add 97,000 Dth per day of storage and transportation deliverability and is
fully subscribed on a 15-year contracted firm basis. On January&nbsp;14, 2008, the FERC issued a
favorable order which granted a certificate to construct the project and the project is expected to
be in service by spring 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Appalachian Expansion Project. </B>On February&nbsp;29, 2008, Columbia Transmission filed an application
before the FERC for approval to build a new 9,470 horsepower compressor station in West Virginia.
The Appalachian Expansion Project will add 100,000 Dth per day of transportation capacity and is
fully subscribed on a 15-year contracted firm basis. The project is expected to be in service in
the fourth quarter of 2009.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->18<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><BR>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Ohio Storage Project. </B>On June&nbsp;24, 2008, Columbia Transmission filed an application before the FERC
for approval to expand two of its Ohio storage fields for additional capacity of 6,900,000 Dth and
103,400 Dth per day of daily deliverability. If required approvals are granted as requested,
construction would begin in 2009 and the expanded facilities would be placed in service by the end
of 2009. The expansion capacity is 58% contracted on a long-term, firm basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Electric Operations Regulatory Matters </U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Significant Rate Developments. </B>Northern Indiana filed a petition for new electric base rates and
charges on June&nbsp;27, 2008 and will file its detailed case on or before August&nbsp;29, 2008. The
prehearing conference to establish the procedural schedule for the electric rate case was held on
July&nbsp;29, 2008. Initial hearings are anticipated in January&nbsp;2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2002, Northern Indiana settled certain regulatory matters related to an electric rate
review. On September&nbsp;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&nbsp;million each year. The credits will continue at
approximately the same annual level and per the same methodology, until the IURC enters a base rate
order that approves revised Northern Indiana electric rates. The order included a rate moratorium
that expired on July&nbsp;31, 2006. The order also provides that 60% of any future earnings beyond a
specified earnings level will be retained by Northern Indiana. The revenue credit is calculated
based on electric usage; therefore, in times of high usage the credit may be more than $55.1
million. Credits amounting to $25.1&nbsp;million and $27.7&nbsp;million were recognized for electric
customers for the first half of 2008 and 2007, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>MISO. </B>As part of Northern Indiana&#146;s participation in the MISO transmission service and wholesale
energy market, certain administrative fees and non-fuel costs have been incurred. IURC orders have
been issued authorizing the deferral for consideration in a future rate case proceeding of the
administrative fees and certain non-fuel related costs incurred after Northern Indiana&#146;s rate
moratorium, which expired on July&nbsp;31, 2006. During the first half of 2008 non-fuel cost of $1.5
million were deferred in accordance with the aforementioned orders. In addition, administrative,
FERC and other fees of $3.4&nbsp;million were deferred. In the first half of 2008 and 2007, MISO costs
of $4.9&nbsp;million and $6.3&nbsp;million, respectively, were deferred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On April&nbsp;25, 2006, the FERC issued an order on the MISO&#146;s Transmission and Energy Markets Tariff,
stating that MISO had violated the tariff on several issues including not assessing revenue
sufficiency guarantee charges on virtual bids and offers and for charging revenue sufficiency
guarantee charges on imports. The FERC ordered MISO to perform a resettlement of these charges
back to the start of the Day 2 Market. The resettlement began on June&nbsp;9, 2007 and ended in January
2008. Certain charge types included in the resettlement were originally considered to be non-fuel
and were recorded as regulatory assets, in accordance with previous IURC orders allowing deferral
of certain non-fuel MISO costs. During the fourth quarter 2007, based on precedent set by an IURC
ruling for another Indiana utility, Northern Indiana reclassified these charges, totaling $16.7
million, as fuel and included them in the fuel cost recovery mechanism in its latest FAC filing.
Prior to the hearing for FAC-78 on April&nbsp;17, 2008, several intervenors objected to a portion of the
$16.7&nbsp;million and Northern Indiana agreed to remove $7.6&nbsp;million from the FAC filing. This amount
represents the portion of the resettlement costs related to periods prior to December&nbsp;9, 2005. The
$7.6&nbsp;million was recorded as a reduction to net revenues in the first quarter of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Northern Indiana is an active stakeholder in the process used in designing, testing and
implementing the ASM and in developing the surrounding business practices. On January&nbsp;18, 2008,
Northern Indiana as part of a Joint Petition among several other Indiana utilities, filed a request
to the IURC to participate in ASM and seek approval of timely cost recovery for the associated
costs of participating. The evidentiary hearing is planned for September&nbsp;4, 2008. At this time,
Northern Indiana is unable to determine what impact the ASM will have on its operations or cash
flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Cost Recovery and Trackers. </B>A significant portion of the Northern Indiana&#146;s revenue is related to
the recovery of fuel costs to generate power and the fuel costs related to purchased power. These
costs are recovered through a FAC, a standard, quarterly, &#147;summary&#148; regulatory proceeding in
Indiana.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><BR>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On May&nbsp;30, 2008, Northern Indiana purchased the Sugar Creek facility for $329.7&nbsp;million. The Sugar
Creek facility is a CCGT located in West Terre Haute, Indiana. Sugar Creek has a plant capacity
rating of 535 mw. Sugar Creek has transmission access to and is able to participate in both the
MISO and PJM Interconnection wholesale electricity markets. The plant is currently committed to
the PJM Interconnection market until May&nbsp;31, 2010. The purchase was in response to Northern
Indiana&#146;s need to add approximately 1,000 mw of new capacity, as filed in its bi-annual IRP with
the IURC on November&nbsp;1, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The IRP included a commitment to using renewable energy, and a subsequent filing was made with the
IURC, requesting approval for Northern Indiana to enter into power purchase contracts for
wind-generated power in Iowa and South Dakota, and requesting full recovery of all associated
costs. On July&nbsp;24, 2008, the IURC issued an order approving Northern Indiana&#146;s proposed purchase
power agreement with Iberdrola Renewables. The agreement provides Northern Indiana the opportunity
to purchase 100 mw of wind power commencing in early 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The IURC had issued an order on May&nbsp;28, 2008 approving the purchase of Sugar Creek, but denied
Northern Indiana&#146;s request for deferral of depreciation expense and carrying costs related to the
plant, beginning with the acquisition date, on the basis that the facility would not be used and
useful property under traditional regulation until the facility was operating inside of MISO. The
order also denied Northern Indiana&#146;s request for alternative regulatory treatment of the plant,
based on incomplete presentation of evidence, but allowed for the establishment of a subdocket to
allow for the proper presentation and consideration of alternative regulatory treatment. On June
6, 2008, Northern Indiana filed its (A)&nbsp;Verified Petition for Rehearing; (B)&nbsp;Request for
Establishment of a Subdocket for Presentation and Consideration of an Alternative Regulatory Plan;
and (C)&nbsp;Motion for Consolidation (a single document) in Cause No.&nbsp;43396. The subdocket requests
the same deferral accounting treatment that was requested for depreciation expense and carrying
costs associated with the Sugar Creek facility. An order in the subdocket proceeding is expected in
the third quarter of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;30, 2008, the IURC approved a settlement agreement which was reached in October&nbsp;2007
with the OUCC, LaPorte County and a group of Northern Indiana industrial customers to resolve
questions relating to purchased power costs in the period from January&nbsp;1, 2006 through September
30, 2007. The terms of the settlement called for Northern Indiana to make a one-time payment of
$33.5&nbsp;million. A reserve for the entire amount was recorded in the third quarter of 2007 and the
refund was made to customers via the FAC in the periods of February through July&nbsp;2008. As part of
this agreement, Northern Indiana implemented a new &#147;benchmarking standard,&#148; that became effective
in October&nbsp;2007, which defines the price above which purchased power costs must be absorbed by
Northern Indiana and are not permitted to be passed on to customers. The benchmark is based upon
the costs of power generated by a hypothetical natural gas fired CCGT using gas purchased and
delivered to Northern Indiana. During the first half of 2008, the amount of purchased power costs
exceeding the benchmark amounted to $6.5&nbsp;million, which was recognized as a net reduction of
revenues. The agreement also contemplated Northern Indiana adding generating capacity to its
existing portfolio and that the benchmark would be adjusted as new capacity is added. It was
anticipated that the addition of the Sugar Creek capacity would trigger a change in the benchmark
beginning in June&nbsp;2008. However, based on the IURC order in the CPCN as described above, the Sugar
Creek capacity will not be considered until the plant is operating inside of MISO and therefore the
benchmark is unchanged.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On November&nbsp;26, 2002, Northern Indiana received approval from the IURC for an ECT. Under the ECT,
Northern Indiana is permitted to recover (1)&nbsp;AFUDC and a return on the capital investment expended
by Northern Indiana to implement IDEM&#146;s NOx 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&#146;s November&nbsp;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. In December&nbsp;2006, Northern Indiana filed a petition with the IURC for appropriate cost
treatment and recovery of emission control construction needed to address the Phase I CAIR
requirements of the Indiana Air Pollution Control Board&#146;s CAIR rules that became effective on
February&nbsp;25, 2007. On July&nbsp;3, 2007, Northern Indiana received an IURC order issuing a CPCN for the
CAIR and CAMR Phase I Compliance Plan Projects, estimated to cost approximately $23&nbsp;million.
Northern Indiana will include the CAIR and CAMR Phase I Compliance Plan costs to be recovered in
the semi-annual and annual ECRM and EERM filing six months after construction costs begin. On
December&nbsp;19, 2007, the IURC approved Northern Indiana&#146;s latest compliance plan with the estimate of
$338.5&nbsp;million. On April&nbsp;2, 2008, the IURC approved ECR-11 for $252.6&nbsp;million in capital
expenditures (net of accumulated depreciation) and EER-5 for $14.1&nbsp;million in expenses, for
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->20<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><BR>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">which billing began in May&nbsp;2008. In July&nbsp;2008, Northern Indiana filed ECR-12 for $265.2&nbsp;million
in capital expenditures (net of accumulated depreciation), requesting approval for new billing
factors beginning November&nbsp;2008.</DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">On October&nbsp;27, 2006, Indiana Gasification, LLC, Vectren Energy Delivery of Indiana, Citizens Gas &#038;
Coke Utility and Northern Indiana filed a joint petition at the IURC seeking approval for Indiana
Gasification, LLC to construct a coal gasification facility and the respective utilities to enter
into long-term contracts to purchase the energy output of the plant, both gas and electricity.
This filing was based upon a Letter of Intent that was entered into by the parties, but subject to
finalization of a contract and regulatory approval. On December&nbsp;12, 2007, Citizens Gas &#038; Coke
Utility filed a Motion with the IURC to withdraw from the petition. The parties have had frequent
negotiations during the two year period, but have not reached a definitive agreement. Northern
Indiana anticipates filing a notice with the IURC on the status of the project in the third quarter
of 2008.</DIV>

<DIV style="font-size: 10pt; margin-top: 12pt"><B>10. Risk Management and Energy Marketing Activities</B></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">NiSource uses commodity-based derivative financial instruments primarily to manage commodity price
risk and interest rate risk exposure in its business as well as for commercial and industrial
sales. NiSource is not involved in speculative energy trading activity. NiSource accounts for its
derivatives in accordance with SFAS No.&nbsp;133. Under SFAS No.&nbsp;133, if certain conditions are met, a
derivative may be specifically designated as (a)&nbsp;a hedge of the exposure to changes in the fair
value of a recognized asset or liability or an unrecognized firm commitment, or (b)&nbsp;a hedge of the
exposure to variable cash flows of a forecasted transaction. Additionally, certain NiSource
subsidiaries enter into forward physical contracts with various third parties to procure natural
gas or power for its operational needs. These forward physical contracts are derivatives which
qualify for the normal purchase normal sales exception under SFAS No.&nbsp;133 and do not require
mark-to-market accounting.</DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">NiSource&#146;s derivatives on the Condensed Consolidated Balance Sheets at June&nbsp;30, 2008 were:</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap><I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Hedge</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Non-Hedge</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Total</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Price risk management assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">161.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">87.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">248.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total price risk management assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">275.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">104.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">380.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Price risk management liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">111.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">117.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total price risk management liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">167.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">173.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">NiSource&#146;s derivatives on the Consolidated Balance Sheets at December&nbsp;31, 2007 were:</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap><I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Hedge</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Non-Hedge</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Total</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Price risk management assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">88.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">102.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total price risk management assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">113.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">127.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px"><!-- Blank Space -->
    <TD colspan="13" style="border-top: 1px solid #000000">&nbsp;
&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size:10pt">
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Price risk management liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">53.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">79.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total price risk management liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">55.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">81.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE></DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->21<!-- /Folio --></DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="font-size: 10pt; margin-top: 6pt"><u>ITEM 1. FINANCIAL
STATEMENTS (continued)</u></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT><br>
<b>Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">The hedging activity for the second quarter and six months ended June&nbsp;30, 2008 and 2007 affecting
accumulated other comprehensive income, with respect to cash flow hedges included the following:</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Three Months</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Six Months</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Ended June 30,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Ended June 30,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap><I>(in millions, net of taxes)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net unrealized gains on derivatives qualifying as cash flow
hedges at the beginning of the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>24.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">59.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>7.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">31.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized hedging gains (losses)&nbsp;arising during the period on
derivatives qualifying as cash flow hedges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>26.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>52.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size:10pt">
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reclassification adjustment for net loss (gain)&nbsp;included in net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(16.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(25.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net unrealized gains on derivatives qualifying as cash flow
hedges at the end of the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>34.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">34.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>34.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">34.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">During the second quarter of 2008 and 2007, a loss of $0.2&nbsp;million and zero, net of taxes
respectively, were recognized in earnings due to the ineffectiveness of derivative instruments
being accounted for as hedges. All derivatives classified as a hedge are assessed for hedge
effectiveness, with any components determined to be ineffective charged to earnings or classified
as a regulatory asset or liability per SFAS No.&nbsp;71 as appropriate. During the second quarter of
2008 and 2007, NiSource did not reclassify any amounts related to its cash flow hedges from
accumulated other comprehensive income to earnings due to the probability that the underlying
forecasted transactions would not occur. It is anticipated that during the next twelve months the
expiration and settlement of cash flow hedge contracts will result in income statement recognition
of amounts currently classified in accumulated other comprehensive income of approximately $16.9
million of income, net of taxes.</DIV>

<DIV style="font-size: 10pt; margin-top: 6pt"><B>Commodity Price Risk Programs. </B>Northern Indiana, Northern Indiana Fuel and Light, Kokomo Gas,
Columbia of Pennsylvania, Columbia of Kentucky, Columbia of Maryland and Columbia of Virginia use
NYMEX derivative contracts to minimize risk associated with gas price volatility. These derivative
hedging programs must be marked to fair value, but because these derivatives are used within the
framework of the companies&#146; gas cost recovery mechanism, regulatory assets or liabilities are
recorded to offset the change in the fair value of these derivatives.</DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">Northern Indiana offers a PPS as an alternative to the standard gas cost recovery mechanism. This
service provides Northern Indiana customers with the opportunity to either lock in their gas cost
or place a cap on the gas costs that could be charged in future months. In order to hedge the
anticipated physical purchases associated with these obligations, Northern Indiana has purchased
NYMEX futures, NYMEX options and basis contracts that correspond to a fixed or capped price in the
associated future delivery months and currently enters into forward physical purchase contracts to
secure forward gas prices. Columbia of Virginia started a program in April&nbsp;2005 similar to the
Northern Indiana PPS, which allows non-jurisdictional customers the opportunity to lock in their
future gas costs. The NYMEX futures and option contracts associated with these programs are
generally designated and accounted for as cash flow hedges and Northern Indiana elects the normal
purchase normal sale exemption under SFAS No.&nbsp;133 for its forward physical contracts associated
with this program.</DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">Northern Indiana also offers a DependaBill program to its customers as an alternative to the
standard tariff rate that is charged to residential customers. The program allows Northern Indiana
customers to fix their total monthly bill in future months at a flat rate regardless of gas usage
or commodity cost. In order to hedge the anticipated physical purchases associated with these
obligations, Northern Indiana has purchased NYMEX futures, NYMEX options and basis contracts that
match the anticipated future delivery needs of the program to secure forward gas prices and
currently enters into forward physical purchase contracts to secure forward gas prices. The NYMEX
futures contracts associated with this program are generally designated and accounted for as cash
flow hedges and Northern Indiana elects the normal purchase normal sale exemption under SFAS No.
133 for its forward physical contracts associated with this program.</DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">As part of the MISO Day 2 initiative, Northern Indiana was allocated and has purchased FTRs. These
FTRs help Northern Indiana offset congestion costs due to the MISO Day 2 activity. The FTRs do not
qualify for hedge</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->22<!-- /Folio --></DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><BR>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">accounting treatment, but since congestion costs are recoverable through the fuel
cost recovery mechanism, the related gains and losses
associated with marking these derivatives to market are recorded as a regulatory asset or
liability, in accordance with SFAS No.&nbsp;71. In the second quarter of 2008, MISO changed its
allocation procedures from an allocation of FTRs to an allocation of ARRs, whereby Northern Indiana
was allocated ARRs based on its historical use of the MISO administered transmission system. ARRs
entitle the holder to a stream of revenues or charges based on the price of the associated FTR in
the FTR auction. Northern Indiana converted the ARRs that were received in the second quarter of
2008 into FTRs. Additionally, Northern Indiana also uses derivative contracts to minimize risk
associated with power price volatility. These derivative programs must be marked to fair value,
but because these derivatives are used within the framework of their cost recovery mechanism,
regulatory assets or liabilities are recorded to offset the change in the fair value of these
derivatives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For regulatory incentive purposes, Northern Indiana enters into gas purchase contracts at first of
the month prices that give counterparties the daily option to either sell an additional package of
gas at first of the month prices or recall the original volume to be delivered. Northern Indiana
charges a fee for this option. The changes in the fair value of these options are primarily due to
the changing expectations of the future intra-month volatility of gas prices. These written
options are derivative instruments, must be marked to fair value and do not meet the requirement
for hedge accounting treatment. However, in accordance with SFAS No.&nbsp;71, Northern Indiana records
the related gains and losses associated with these transactions as a regulatory asset or liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For regulatory incentive purposes, Columbia of Kentucky, Columbia of Ohio, Columbia of
Pennsylvania, and Columbia of Maryland (collectively, the &#147;Columbia LDCs&#148;) enter into contracts
that allow counterparties the option to sell gas to Columbia LDCs at first of the month prices for
a particular month of delivery. Columbia LDCs charge the counterparties a fee for this option.
The changes in the fair value of the options are primarily due to the changing expectations of the
future intra-month volatility of gas prices. These Columbia LDCs defer a portion of the change in
the fair value of the options as either a regulatory asset or liability in accordance with SFAS No.
71 based on the regulatory customer sharing mechanisms in place, with the remaining changes in fair
value recognized currently in earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of June&nbsp;30, 2008, Columbia Energy Services has fixed price gas delivery commitments to two
municipalities in the United States, one of which expired in July&nbsp;2008 and the other will expire in
December&nbsp;2008. Columbia Energy Services entered into a forward purchase agreement with a gas
supplier, wherein the supplier will fulfill the delivery obligation requirements at a slight
premium to index. In order to hedge this anticipated future purchase of gas from the gas supplier,
Columbia Energy Services entered into commodity swaps priced at the locations designated for
physical delivery. These commodity swap derivatives are accounted for as cash flow hedges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Commodity price risk programs included in price risk assets and liabilities:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">June 30, 2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">December 31, 2007</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Assets</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Liabilities</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Assets</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Liabilities</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gas price volatility program derivatives</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">98.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">PPS program derivatives</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">DependaBill program derivatives</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Electric energy program derivatives</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Regulatory incentive program derivatives</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forward purchase agreements derivatives</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total commodity price risk programs included</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">133.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">55.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Interest Rate Risk Activities. </B>Contemporaneously with the pricing of the 5.25% and 5.45% notes
issued September&nbsp;16, 2005, NiSource Finance settled $900&nbsp;million of forward starting interest rate
swap agreements with six counterparties. NiSource paid an aggregate settlement payment of $35.5
million which is being amortized as an
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->23<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><BR>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">increase to interest expense over the term of the underlying debt, resulting in an effective
interest rate of 5.67% and 5.88%, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource has entered into interest rate swap agreements to modify the interest rate characteristics
of its outstanding long-term debt from fixed to variable. On May&nbsp;12, 2004, NiSource Finance
entered into fixed-to-variable interest rate swap agreements in a notional amount of $660&nbsp;million
with six counterparties having a 6 1/2-year term. NiSource Finance will receive payments based
upon a fixed 7.875% interest rate and pay a floating interest amount based on U.S. 6-month BBA
LIBOR plus an average of 3.08% per annum. There was no exchange of premium at the initial date of
the swaps. In addition, each party has the right to cancel the swaps on May&nbsp;15, 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On July&nbsp;22, 2003, NiSource Finance entered into fixed-to-variable interest rate swap agreements in
a notional amount of $500&nbsp;million with four counterparties with an 11-year term. NiSource Finance
will receive payments based upon a fixed 5.40% interest rate and pay a floating interest amount
based on U.S. 6-month BBA LIBOR plus an average of 0.78% per annum. There was no exchange of
premium at the initial date of the swaps. In addition, each party has the right to cancel the
swaps on July&nbsp;15, 2013.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result of the fixed-to-variable interest rate swap transactions referenced above, $1,160
million of NiSource Finance&#146;s existing long-term debt is now subject to fluctuations in interest
rates. These interest rate swaps are designated as fair value hedges. The effectiveness of the
interest rate swaps in offsetting the exposure to changes in the debt&#146;s fair value is measured
pursuant to SFAS No.&nbsp;133. NiSource had no net gain or loss recognized in earnings due to hedging
ineffectiveness from prior years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest rate risk activities programs included in price risk management assets and liabilities:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">June 30, 2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">December 31, 2007</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Assets</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Liabilities</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Assets</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Liabilities</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest rate swap derivatives</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">18.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Marketing and Other Activities. </B>The operations of TPC primarily involve commercial and industrial
gas sales, whereby TPC utilizes gas derivatives to hedge its expected future gas purchases. These
derivatives associated with commercial and industrial gas sales are accounted for as cash flow
hedges. In addition, TPC, on behalf of Whiting Clean Energy, has also entered into power and gas
derivative contracts to manage commodity price risk associated with operating Whiting Clean Energy
prior to its sale in the second quarter of 2008 to BPAE.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Marketing and power programs included in price risk management assets and liabilities:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">June 30, 2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">December 31, 2007</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Assets</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Liabilities</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Assets</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Liabilities</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gas marketing derivatives</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">222.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">167.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">53.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">52.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Power forward derivatives</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total marketing and power programs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">222.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">167.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">53.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">52.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>11. Fair Value of Financial Assets and Liabilities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource adopted the provisions of SFAS No.&nbsp;157 on January&nbsp;1, 2008. There was no impact on
retained earnings as a result of the adoption.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->24<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><BR>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Recurring Fair Value Measurements. </B>The following table presents assets and liabilities measured
and recorded at fair value on NiSource&#146;s Condensed Consolidated Balance Sheet on a recurring basis
and their level within the fair value hierarchy as of June&nbsp;30, 2008:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Quoted Prices in</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Significant</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Active Markets</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Other</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Significant</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">for Identical</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Observable</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unobservable</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Recurring Fair Value Measurements</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Assets</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Inputs</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Inputs</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Balance as of</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Level 1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Level 2)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Level 3)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">June 30, 2008</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Price risk management assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">345.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">380.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Available-for-sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">372.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">58.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">436.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Price risk management liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">161.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">173.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">161.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">19.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">185.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Price risk management assets and liabilities include commodity exchange-traded and
non-exchange-based derivative contracts. Exchange-traded derivative contracts are generally based
on unadjusted quoted prices in active markets and are classified within Level 1. Certain
non-exchange-traded derivatives are valued using broker or over-the-counter, on-line exchanges. In
such cases, these non-exchange-traded derivatives are classified within Level 2. Non-exchange-based
derivative instruments include swaps, forwards, and options. In certain instances, these
instruments may utilize models to measure fair value. The company uses a similar model to value
similar instruments. Valuation models utilize various inputs that include quoted prices for similar
assets or liabilities in active markets, quoted prices for identical or similar assets or
liabilities in markets that are not active, other observable inputs for the asset or liability, and
market-corroborated inputs, i.e., inputs derived principally from or corroborated by observable
market data by correlation or other means. Where observable inputs are available for substantially
the full term of the asset or liability, the instrument is categorized in Level 2. Certain
derivatives trade in less active markets with a lower availability of pricing information and
models may be utilized in the valuation. When such inputs have a significant impact on the
measurement of fair value, the instrument is categorized in Level 3.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Price risk management assets also include fixed-to-floating interest-rate swaps, which are
designated as fair-value hedges, as a means to achieve its targeted level of variable-rate debt as
a percent of total debt. NiSource uses a calculation of future cash inflows and estimated future
outflows related to the swap agreements, which are discounted and netted to determine the current
fair value. Additional inputs to the present value calculation include the contract terms, as well
as market parameters such as current and projected interest rates and volatility. As they are
based on observable data and valuations of similar instruments, the interest-rate swaps are
categorized in Level 2 in the fair value hierarchy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Available-for-sale securities include assets in NiSource&#146;s deferred compensation trust and
investments pledged as collateral for trust accounts related to NiSource&#146;s wholly-owned insurance
company. Available-for-sale securities are included within Investments and other in the Condensed
Consolidated Balance Sheets. Securities classified within Level 1 include U.S. Treasury debt
securities which are highly liquid and are actively traded in over-the-counter markets. NiSource
values corporate and mortgage-backed debt securities using a matrix pricing model that incorporates
market-based information. These securities trade less frequently and are classified within Level
2. Unrealized gains and losses from our available-for-sale securities are included in OCI.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource&#146;s deferred compensation plan allows participants to defer certain cash compensation into a
notional investment account. NiSource includes the plan in other noncurrent liabilities in the
Condensed Consolidated Balance Sheets. The value of the deferred compensation obligation is based
on the market value of the participants&#146; notional investment accounts. The notional investments
include balances which are credited based upon published interest and bond yield indices and
investments in mutual funds. NiSource uses the lowest level of input significant
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->25<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><BR>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">to the valuation
to determine the fair value hierarchy classification, and therefore the liability is categorized in
Level 2.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following tables present the fair value reconciliation of Level 3 assets and liabilities
measured at fair value on a recurring basis during the three and six months ended June&nbsp;30, 2008:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Financial</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Three Months Ended June 30, 2008 <I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Transmission Rights</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Other Derivatives</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Total</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of March&nbsp;31, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total gains or losses (unrealized/realized)
Included in regulatory assets/liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchases, issuances and settlements (net)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of June&nbsp;30, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(5.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in unrealized gains/(losses) relating
to instruments still held as of June&nbsp;30, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Financial</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Six Months Ended June 30, 2008 <I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Transmission Rights</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Other Derivatives</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Total</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of January&nbsp;1, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(3.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total gains or losses (unrealized/realized)
Included in regulatory assets/liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchases, issuances and settlements (net)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of June&nbsp;30, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(5.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in unrealized gains/(losses)
relating to instruments still held as of
June&nbsp;30, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Realized gains and losses for Level 3 recurring items are included in income within Cost of Sales
on the Condensed Statements of Consolidated Income (Loss). Unrealized gains and losses from Level 3
recurring items are included within regulatory assets and liabilities on the Condensed Consolidated
Balance Sheets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As part of the MISO Day 2 initiative, Northern Indiana was allocated and has purchased FTRs. These
rights help Northern Indiana offset congestion costs due to the MISO Day 2 activity. These
instruments are considered derivatives and are valued utilizing forecasted congestion source and
sink prices in the Day Ahead market. They are classified as Level 3 and reflected in the table
above. The FTRs do not qualify for hedge accounting treatment, but since congestion costs are
recoverable through the fuel cost recovery mechanism, the related gains and losses associated with
these transactions are recorded as a regulatory asset or liability, in accordance with SFAS No.&nbsp;71.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>12. Goodwill Assets</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource&#146;s goodwill assets at June&nbsp;30, 2008 were $3,677.3&nbsp;million pertaining primarily to the
acquisition of Columbia on November&nbsp;1, 2000. The goodwill balances at June&nbsp;30, 2008 for Northern
Indiana Fuel and Light and Kokomo Gas were $13.3&nbsp;million and $5.5&nbsp;million, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the quarters ended June&nbsp;30, 2008 and June&nbsp;30, 2007, NiSource performed its annual impairment
test of goodwill associated with the purchases of Columbia, Northern Indiana Fuel and Light and
Kokomo Gas. The results of the June&nbsp;30, 2008 and June&nbsp;30, 2007 impairment tests indicated that no
impairment charge was required. For the purpose of testing impairment
of the goodwill recorded in
the acquisition of Columbia, the related subsidiaries were
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->26<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><BR>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">aggregated into two distinct reporting units, one within the Gas Distribution Operations segment
and one within the Gas Transmission and Storage Operations segment. NiSource uses the discounted
cash flow method to estimate the fair value of its reporting units for the purposes of this test.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>13. Income Taxes</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource&#146;s interim effective tax rates reflect the estimated annual effective tax rate for 2008 and
2007, respectively, adjusted for tax expense associated with certain discrete items. The effective
tax rates for the quarters ended June&nbsp;30, 2008 and June&nbsp;30, 2007 were 31.1% and 36.3%,
respectively. The effective tax rates for the six months ended June&nbsp;30, 2008 and June&nbsp;30, 2007
were 36.6% and 37.0%, respectively. These effective tax rates differ from the federal tax rate of
35% primarily due to the effects of tax credits, state income taxes, utility rate-making, and other
permanent book-to-tax differences such as the electric production tax deduction provided under
Internal Revenue Code Section&nbsp;199.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The 5.2% decrease in the second quarter of 2008 effective tax rate versus the second quarter of
2007 effective tax rate is primarily due to a change in the estimated annual 2008 effective tax
rate recognized in the second quarter as a result of an increase in projected AFUDC-Equity. For
the six months ended June&nbsp;30, 2008 versus the six months ended June&nbsp;30, 2007, the 0.4% decrease in
the effective tax rate is primarily attributable to the tax impact of additional estimated
AFUDC-Equity for 2008 versus 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Both the six months ended June&nbsp;30, 2008 and six months ended June&nbsp;30, 2007 include increases to tax
expense for discrete items. On March&nbsp;31, 2008, the governor of West Virginia signed legislation
that phases in a reduction in income tax rates from the current rate of 8.75% to 6.5% over the
years 2009 through 2014, provided certain state budgetary targets are met. NiSource has West
Virginia deferred income tax benefits recorded on its Consolidated Balance Sheets that, because of
the rate decrease, were required to be written down in the first quarter of 2008. The impact of
the write-down on six months ended June&nbsp;30, 2008 net income is a reduction of $2.7&nbsp;million. This
reduced benefit was offset by a $0.5&nbsp;million decrease in income tax expense due primarily to the
discontinuance of filing consolidated Kentucky state income tax returns in 2008. The six months
ended June&nbsp;30, 2007 period includes an increase in income tax expense of $1.5&nbsp;million, due mostly
to state income tax issues. There were no adjustments to tax expense for discrete items in the
second quarter of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource adopted the provisions of FIN 48 on January&nbsp;1, 2007, recognizing a charge of $0.8&nbsp;million
to the opening balance of retained earnings. As of December&nbsp;31, 2007, the total liability for
unrecognized tax benefits, which is included in &#147;Other noncurrent liabilities&#148; on the Consolidated
Balance Sheets, was $3.7&nbsp;million ($4.0&nbsp;million including interest). There have been no material
changes in NiSource&#146;s FIN 48 liabilities from the December&nbsp;31, 2007 amounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective January&nbsp;1, 2007, NiSource records interest and penalties (if any) on prior year tax
liabilities as a component of income tax expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>14. Pension and Other Postretirement Benefits</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource provides defined contribution plans and noncontributory defined benefit retirement plans
that cover its employees. Benefits under the defined benefit retirement plans reflect the
employees&#146; compensation, years of service and age at retirement. Additionally, NiSource provides
health care and life insurance benefits for certain retired employees. The majority of employees
may become eligible for these benefits if they reach retirement age while working for NiSource.
The expected cost of such benefits is accrued during the employees&#146; years of service. Current
rates of rate-regulated companies include postretirement benefit costs, including amortization of
the regulatory assets that arose prior to inclusion of these costs in rates. For most plans, cash
contributions are remitted to grantor trusts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;1, 2007, NiSource adopted the SFAS No.&nbsp;158 measurement date provisions requiring
employers to measure plan assets and benefit obligations as of the fiscal year-end. The pre-tax
impact of adopting the SFAS No.&nbsp;158 measurement date provisions increased deferred charges and
other assets by $9.4&nbsp;million, decreased regulatory
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->27<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><BR>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">assets by $89.6&nbsp;million, decreased retained
earnings by $11.3&nbsp;million, increased accumulated other comprehensive income by $5.3&nbsp;million and
decreased accrued liabilities for postretirement and postemployment benefits by $74.2
million. NiSource also recorded a reduction in deferred income taxes of approximately $2.6
million. In addition, 2007 expense for pension and postretirement benefits reflects the updated
measurement date valuations. In the fourth quarter of 2006, NiSource adopted the provisions of
SFAS No.&nbsp;158 requiring employers to recognize in the statement of financial position the overfunded
or underfunded status of a defined benefit postretirement plan, measured as the difference between
the fair value of the plan assets and the benefit obligation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The key assumptions used to measure NiSource&#146;s various postretirement benefits plans&#146; funded status
at December&nbsp;31, 2007 were the same as those used for the previous January&nbsp;1, 2007 measurement date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource expects to make contributions of $6.4&nbsp;million to its pension plans and $38.3&nbsp;million to
its other postretirement benefit plans during 2008. Through June&nbsp;30, 2008, NiSource has
contributed $3.3&nbsp;million to its pension plans and $18.5&nbsp;million to its other postretirement benefit
plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following tables provide the components of the plans&#146; net periodic benefits cost for the second
quarter and six months ended June&nbsp;30, 2008 and 2007:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Pension Benefits</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Other Postretirement Benefits</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Three Months Ended June 30, <I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Components of Net Periodic Benefit Cost</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>9.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>2.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>33.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Expected return on assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(48.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(46.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(6.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization of transitional obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization of prior service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Recognized actuarial loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total Net Periodic Benefits Cost</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(4.7</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>11.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Pension Benefits</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Other Postretirement Benefits</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Six Months Ended June 30, <I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Components of Net Periodic Benefit Cost</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>18.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>4.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>66.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>23.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Expected return on assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(97.0</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(93.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(12.6</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization of transitional obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization of prior service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Recognized actuarial loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total Net Periodic Benefits Cost</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(9.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>22.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>15. Long-Term Debt</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On May&nbsp;15, 2008, NiSource Finance issued $500.0&nbsp;million of 6.80% unsecured notes that mature
January&nbsp;15, 2019 and $200.0&nbsp;million of 6.15% unsecured notes that mature on March&nbsp;1, 2013. The
notes due in 2013 constitute a further issuance of the $345.0&nbsp;million 6.15% notes issued February
19, 2003, and will form a single series having an aggregate principal amount outstanding of $545.0
million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Jasper County Pollution Control Bonds. </I></B>Northern Indiana has seven series of Jasper County
Pollution Control Bonds with a total principal value of $254&nbsp;million currently outstanding. Prior
to March&nbsp;25, 2008, each of the series bore interest at rates established through auctions that took
place at either 7, 28, or 35&nbsp;day intervals. Between February&nbsp;13, 2008 and March&nbsp;5, 2008, Northern
Indiana received notice that six separate market auctions of four
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->28<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><BR>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">series of the Jasper County Pollution Control Bonds had failed. As a result, those series
representing an aggregate principal amount of $112&nbsp;million of the Jasper County Pollution Control
Bonds bore interest at default rates equal to 15% or 18% per annum. Subsequent auctions were
successful, but resulted in interest rates between 5.13% and 11.0%, which are in excess of
historical rates. These auction failures were attributable to the recent lack of liquidity in the
auction rate securities market, largely driven by the recent turmoil in the bond insurance market.
The Jasper County Pollution Control Bonds are insured by either Ambac Assurance Corporation or MBIA
Insurance Corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Northern Indiana converted all seven series of Jasper County Pollution Control Bonds from the
auction rate mode to a variable rate demand bond mode between March&nbsp;25, 2008 and April&nbsp;11, 2008 and
repurchased the bonds as part of the conversion process. As of April&nbsp;11, 2008, all of the Jasper
County Pollution Control Bonds were purchased and are held in Northern Indiana&#146;s treasury.
Northern Indiana is currently evaluating its options for reoffering the debt to the public.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Northern Indiana has recorded the repurchased bonds as an offset to long-term debt in the Condensed
Consolidated Balance Sheet as the debt is considered extinguished per SFAS No.&nbsp;140. Unamortized
debt expense previously recorded under deferred charges and other qualifies for regulatory
treatment and has been reclassified as a regulatory asset. The repurchase of the bonds is included
in the financing activities section in the Condensed Statement of Consolidated Cash Flow.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>16. Share-Based Compensation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource currently issues long-term incentive grants to key management employees under a long-term
incentive plan approved by stockholders on April&nbsp;13, 1994 (1994 Plan). The 1994 Plan, as amended
and restated, permits the following types of grants, separately or in combination: nonqualified
stock options, incentive stock options, restricted stock awards, stock appreciation rights,
restricted stock units, contingent stock units and dividend equivalents payable on grants of
options, performance units and contingent stock awards. At June&nbsp;30, 2008, there were 27,915,592
shares reserved for future awards under the amended and restated 1994 Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource recognized stock-based employee compensation expense of $4.5&nbsp;million and $1.3&nbsp;million
during the first six months of 2008 and 2007, respectively, as well as related tax benefits of $1.7
million and $0.5&nbsp;million, respectively. There were no modifications to awards as a result of the
adoption of SFAS No.&nbsp;123R.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of June&nbsp;30, 2008, the total remaining unrecognized compensation cost related to nonvested awards
amounted to $15.3&nbsp;million, which will be amortized over the weighted-average remaining requisite
service period of 2.1&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Stock Options. </I></B>As of June&nbsp;30, 2008, approximately 5.2&nbsp;million options were outstanding and
exercisable with a weighted average option price of $22.91.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Restricted and Contingent Stock Unit Awards. </I></B>In March&nbsp;2008, 197,311 restricted stock units subject
to service conditions were granted. The grant date fair-value of the restricted units was $3.5
million, based on the average market price of NiSource&#146;s common stock at the date of grant of
$17.49, which will be expensed net of forfeitures over the vesting period of approximately 3&nbsp;years.
The service conditions lapse on January&nbsp;31, 2011. If before January&nbsp;31, 2011, the employee
terminates employment (1)&nbsp;due to retirement, having attained age 55 and completed ten years of
service, or (2)&nbsp;due to death or disability, the employment conditions will lapse with respect to a
pro rata portion of the restricted units on the date of termination. Termination due to any other
reason will result in all restricted units awarded being forfeited effective the employee&#146;s date of
termination. Employees will be entitled to receive dividends upon vesting. As of June&nbsp;30, 2008,
200,273 nonvested restricted stock units were granted and remaining.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In March&nbsp;2008, 394,604 contingent stock units subject to performance conditions were granted. The
grant date fair-value of the award was $6.9&nbsp;million, which will be expensed net of forfeitures over
the vesting period of approximately 3&nbsp;years. The average market price of NiSource&#146;s common stock
at the date of grant was $17.49. The performance conditions are based on achievement of a non-GAAP
financial measure, cumulative net operating earnings, that NiSource defines as income from
continuing operations adjusted for certain items and cumulative
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->29<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>FINANCIAL STATEMENTS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><BR>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">funds from operations that NiSource
defines as net operating cash flows provided by continuing operations. Per the agreement, to the
extent base performance conditions are exceeded during the 3&nbsp;year performance period, the award
will be increased in increments of 10% up to 50%. If prior to the lapse of the performance
conditions, the employee terminates employment (1)&nbsp;due to retirement, having attained age 55 and
completed ten years of service, (2)&nbsp;due to disability, or (3)&nbsp;due to death with less than or equal
to 12&nbsp;months remaining in the performance period, the employee will receive a pro rata portion of
the contingent shares if the performance conditions have been met. If prior to the lapse of the
performance conditions, the employee terminates employment due to death with more than 12&nbsp;months
remaining in the performance period, the employee will receive a pro rata portion of the contingent
shares as if the performance conditions had been met. Termination due to any other reason will
result in all contingent shares awarded being forfeited effective the employee&#146;s date of
termination. Employees will be entitled to receive dividends upon vesting. As of June&nbsp;30, 2008,
400,527 nonvested contingent stock units were granted and remaining.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In March&nbsp;2007, 320,330 contingent stock units were granted. The grant date fair-value of the award
was $7.5&nbsp;million, based on the average market price of NiSource&#146;s common stock at the date of grant
of $23.46, which will be expensed net of forfeitures over the vesting period of approximately 3
years. The shares are subject to both performance and service conditions. The performance
conditions were based on achievement of a non-GAAP financial measure (net operating earnings) as
described above. Per the agreement, to the extent base performance conditions were exceeded, the
award would be increased in increments of 10% up to 50%. If the performance conditions were not
met, the grants would be cancelled and the shares would be forfeited. Subsequent to meeting the
performance conditions, an additional two year service period will then be required before the
shares vest on December&nbsp;31, 2009. If after completing the performance conditions but prior to
completing the service conditions the employee terminates employment (1)&nbsp;due to retirement, having
attained age 55 and completed ten years of service, or (2)&nbsp;due to death or disability, the
employment conditions will lapse with respect to a pro rata portion of the contingent shares on the
date of termination. Termination due to any other reason will result in all contingent shares
awarded being forfeited effective the employee&#146;s date of termination. During 2007, base
performance conditions were exceeded, resulting in an increase of the number of shares to be issued
upon vesting by 20%. Accordingly, 62,319 additional shares were granted in January&nbsp;2008. As of
June&nbsp;30, 2008, 357,799 nonvested contingent shares were remaining. Employees will be entitled to
receive dividends upon vesting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Time-accelerated Awards. </I></B>NiSource awarded restricted shares and restricted stock units that
contain provisions for time-accelerated vesting to key executives under the 1994 Plan. Most of
these awards were issued in January&nbsp;2003 and January&nbsp;2004. The total shareholder return measures
established were not met; therefore these grants do not have an accelerated vesting period. At
June&nbsp;30, 2008, NiSource had 504,633 awards outstanding which contained the time-accelerated
provisions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Non-employee Director Awards. </I></B>The Amended and Restated Non-employee Director Stock Incentive Plan
provides for awards of restricted stock, stock options and restricted stock units, which vest in
20% increments per year, with full vesting after five years. Effective March&nbsp;25, 2008, the board
approved to amend the vesting provisions of the plan such that all outstanding grants and future
grants of restricted stock units will vest immediately. As of June&nbsp;30, 2008, 89,860 restricted
shares and 187,334 restricted stock units had been issued under the Plan.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->30<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><U>ITEM 1.</U></TD>
    <TD>&nbsp;</TD>
    <TD><U>FINANCIAL STATEMENTS (continued)</U></TD>
</TR>
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT><BR>
<B>Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>17. Other Commitments and Contingencies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>A. Guarantees and Indemnities. </B>As a part of normal business, NiSource and certain subsidiaries
enter into various agreements providing financial or performance assurance to third parties on
behalf of certain subsidiaries. Such agreements include guarantees and stand-by letters of credit.
These agreements are entered into primarily to support or enhance the creditworthiness otherwise
attributed to a subsidiary on a stand-alone basis, thereby facilitating the extension of sufficient
credit to accomplish the subsidiaries&#146; intended commercial purposes. The total commercial
commitments in existence at June&nbsp;30, 2008 and the years in which they expire were:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">After</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Guarantees of subsidiaries debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,814.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">460.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,000.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">315.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,039.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Guarantees supporting commodity
transactions of subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">549.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">292.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Lines of credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">506.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">506.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Letters of credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other guarantees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">464.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">380.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total commercial commitments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,427.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">871.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">775.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,000.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">331.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,434.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Guarantees of Subsidiaries Debt. </B>NiSource has guaranteed the payment of $5.8&nbsp;billion of debt for
various wholly-owned subsidiaries including NiSource Finance, and through a support agreement,
Capital Markets, which is reflected on NiSource&#146;s Condensed Consolidated Balance Sheet as of June
30, 2008. The subsidiaries are required to comply with certain financial covenants under the debt
instruments and in the event of default, NiSource would be obligated to pay the debt&#146;s principal
and related interest. NiSource does not anticipate its subsidiaries will have any difficulty
maintaining compliance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Guarantees Supporting Commodity Transactions of Subsidiaries. </B>NiSource has issued guarantees,
which support up to approximately $549.1&nbsp;million of commodity-related payments for its current
subsidiaries involved in energy marketing to satisfy requirements under forward gas sales. These
guarantees were provided to counterparties in order to facilitate physical and financial
transactions involving natural gas and electricity. To the extent liabilities exist under the
commodity-related contracts subject to these guarantees, such liabilities are included in the
Condensed Consolidated Balance Sheets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Lines and Letters of Credit. </B>NiSource Finance maintains a five-year revolving line of credit with
a syndicate of financial institutions which can be used either for borrowings or the issuance of
letters of credit. On July&nbsp;7, 2006, NiSource Finance amended the $1.25&nbsp;billion five-year revolving
credit facility, increasing the aggregate commitment level to $1.5&nbsp;billion and extending the
termination date by one year to July&nbsp;2011. At June&nbsp;30, 2008, NiSource had $506.0&nbsp;million in
short-term borrowings outstanding under the credit facility. Through the five-year revolver and
through other letter of credit facilities, NiSource has issued stand-by letters of credit of
approximately $94.3&nbsp;million for the benefit of third parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Other Guarantees or Obligations. </B>NiSource reached an agreement on April&nbsp;18, 2008 with BPAE for the
sale of Whiting Clean Energy. On June&nbsp;30, 2008, NiSource sold Whiting Clean Energy to BPAE for
$217.2&nbsp;million which included $16.3&nbsp;million in working capital. The agreement with BPAE contains
customary representations, warranties, covenants and closing conditions. NiSource has executed
purchase and sales agreement guarantees totaling $220&nbsp;million which guarantee performance of PEI&#146;s
covenants, agreements, obligations, liabilities, representations and warranties under the agreement
with BPAE. No amounts related to the purchase and sales agreement guarantees are reflected in the
Condensed Consolidated Balance Sheet as of June&nbsp;30, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On August&nbsp;29, 2007, Millennium entered into a bank credit agreement to finance the construction of
the Millennium Pipeline project. As a condition precedent to the credit agreement, NiSource issued
a guarantee securing payment for 47.5%, its indirect ownership interest percentage, of amounts
borrowed under the credit agreement up until such time as the amounts payable under the agreement
are paid in full. The permanent financing is expected to be completed in the first quarter of
2009. As of June&nbsp;30, 2008, Millennium borrowed $458.0&nbsp;million under the financing agreements, of
which NiSource guaranteed $217.6&nbsp;million. NiSource recorded an accrued liability of approximately
$6.5&nbsp;million related to the fair value of this guarantee.<BR>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->31<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1. FINANCIAL STATEMENTS (continued)</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><br>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On June&nbsp;29, 2006, Columbia Transmission, Piedmont, and Hardy Storage entered into multiple
agreements to finance the construction of the Hardy Storage project, which is accounted for by
NiSource as an equity investment. Under the financing agreement, Columbia Transmission issued
guarantees securing payment for 50% of any amounts issued in connection with Hardy Storage up until
such time as the project is placed in service and operated within certain specified parameters. As
of June&nbsp;30, 2008, Hardy Storage borrowed $123.4&nbsp;million under the financing agreement, for which
Columbia Transmission recorded an accrued liability of approximately $1.2&nbsp;million related to the
fair value of its guarantee securing payment for $61.7&nbsp;million, which is 50% of the amount
borrowed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource has purchase and sales agreement guarantees totaling $77.5&nbsp;million, which guarantee
performance of the seller&#146;s covenants, agreements, obligations, liabilities, representations and
warranties under the agreements. No amounts related to the purchase and sales agreement guarantees
are reflected in the Condensed Consolidated Balance Sheets. Management believes that the
likelihood NiSource would be required to perform or otherwise incur any significant losses
associated with any of the aforementioned guarantees is remote.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource has issued other guarantees supporting derivative related payments associated with
interest rate swap agreements issued by NiSource Finance, operating leases for many of its
subsidiaries and for other agreements entered into by its current and former subsidiaries.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>B. Other Legal Proceedings. </B>In the normal course of its business, NiSource and its subsidiaries
have been named as defendants in various legal proceedings. NiSource assesses liabilities and
contingencies in connection with asserted or potential legal matters on a regular basis, and
establishes reserves when appropriate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the case of Tawney, et al. v. Columbia Natural Resources, Inc., the Plaintiffs, who are West
Virginia landowners, filed a lawsuit in early 2003 against CNR alleging that CNR underpaid
royalties on gas produced on their land by improperly deducting post-production costs and not
paying a fair value for the gas. In December&nbsp;2004, the court granted plaintiffs&#146; motion to
add NiSource and Columbia as defendants. Plaintiffs also claimed that the defendants
fraudulently concealed the deduction of post-production charges. The court certified the case
as a class action that includes any person who, after July&nbsp;31, 1990, received or is due
royalties from CNR (and its predecessors or successors) on lands lying within the boundary of
the state of West Virginia. All claims by the government of the United States are excluded
from the class. Although NiSource sold CNR in 2003, NiSource remains obligated to manage this
litigation and for the majority of any damages ultimately awarded to the plaintiffs. On
January&nbsp;27, 2007, the jury hearing the case returned a verdict against all defendants in the
amount of $404.3&nbsp;million; this is comprised of $134.3&nbsp;million in compensatory damages and $270
million in punitive damages. In January&nbsp;2008, the Defendants filed their petition for appeal,
and on March&nbsp;24, 2008, the Defendants filed their amended petition for appeal with the West
Virginia Supreme Court of Appeals. On May&nbsp;22, 2008, the West Virginia Supreme Court of
Appeals refused the Defendants petition for appeal. The Defendants are preparing a petition
to the United States Supreme Court for a writ of certiorari; the petition to the United States
Supreme Court is due August&nbsp;20, 2008. Given the West Virginia Court&#146;s refusal of the appeal,
NiSource has adjusted its reserve in the second quarter of 2008 to reflect the portion of the
trial court judgment for which NiSource would be responsible, inclusive of interest. This
amount is included in &#147;Legal and environmental reserves,&#148; on the Condensed Consolidated
Balance Sheet as of June&nbsp;30, 2008.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>C. Environmental Matters.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>General. </B>The operations of NiSource are subject to extensive and evolving federal, state and local
environmental laws and regulations intended to protect the public health and the environment. Such
environmental laws and regulations affect operations as they relate to impacts on air, water and
land.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A reserve of $80.4&nbsp;million and $77.2&nbsp;million has been recorded as of June&nbsp;30, 2008 and December&nbsp;31,
2007, respectively, to cover probable corrective actions at sites where NiSource has environmental
remediation liability. Regulatory assets have been recorded to the extent environmental
expenditures are expected to be recovered in rates. NiSource accrues for costs associated with
environmental remediation obligations when the incurrence of such costs is probable and the amounts
can be reasonably estimated, regardless of when the expenditures are actually made. The
undiscounted estimated future expenditures are based on many factors including currently enacted
laws and regulations, existing technology and estimated site-specific costs whereby assumptions may
be made about the nature and extent of site contamination, the extent of cleanup efforts, costs of
alternative cleanup methods and other
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->32<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1. FINANCIAL STATEMENTS (continued)</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><br>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">variables. NiSource&#146;s estimated environmental remediation liability will be refined as events in
the remediation process occur. Actual remediation costs may differ materially from NiSource&#146;s
estimates due to the dependence on the factors listed above.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Proposals for voluntary initiatives and mandatory controls are being discussed both in the United
States and worldwide to reduce so-called &#147;greenhouse gases&#148; such as carbon dioxide, a by-product of
burning fossil fuels, and methane, a component of natural gas. Certain NiSource affiliates engage
in efforts to voluntarily report and reduce their greenhouse gas emissions. NiSource is currently
a participant in the EPA&#146;s Climate Leaders program. On April&nbsp;2, 2007, in Massachusetts v. EPA, the
Supreme Court ruled that the EPA does have authority under the CAA to regulate emissions of
greenhouse gases if it is determined that greenhouse gases have a negative impact on human health
or the environment. On July&nbsp;11, 2008, in response to the April&nbsp;2, 2007, U.S. Supreme Court
decision in <I>Massachusetts v. EPA</I>, the EPA released an ANPR soliciting public input on the effects
of climate change and the potential ramifications of the CAA in relation to greenhouse gas
emissions. In the ANPR, the EPA presents and requests comment on the best-available science,
requests relevant data, and poses questions about the advantages and disadvantages of using the CAA
to potentially regulate stationary and mobile sources of greenhouse gases. The ANPR also reviews
various petitions, lawsuits and court deadlines before the agency, and the profound effect
regulating under the CAA could have on the economy. NiSource will continue to monitor and
participate in developments related to efforts to register and potentially regulate greenhouse gas
emissions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On March&nbsp;12, 2008, the EPA announced the tightening of the 8-hour ozone NAAQS from 0.08 parts per
million to 0.075 parts per million. The number of areas that do not meet the new standards could
significantly increase across the country. Over the next several years, states will be required to
develop ozone attainment plans to implement the standards and improve air quality in these areas.
This could lead to additional emission reductions of NOx, an ozone precursor, from facilities owned
by NiSource. NiSource will closely monitor developments in these matters and cannot at this time
accurately estimate the timing or cost of emission controls that may eventually be required.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas Distribution Operations. </B>Several Gas Distribution Operations subsidiaries are potentially
responsible parties at waste disposal sites under the CERCLA (commonly known as Superfund) and
similar state laws, as well as at MGP sites, which such subsidiaries, or their corporate
predecessors, own or previously owned or operated. Gas Distribution Operations subsidiaries may be
required to share in the cost of cleanup of such sites. In addition, some Gas Distribution
Operations subsidiaries have responsibility for corrective action under the RCRA for closure and
cleanup costs associated with underground storage tanks and under the Toxic Substances Control Act
for cleanup of PCBs. The final costs of cleanup have not yet been determined. As site
investigations and cleanup proceed and as additional information becomes available reserves are
adjusted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A program has been instituted to identify and investigate former MGP sites where Gas Distribution
Operations subsidiaries or predecessors are the current or former owner. The program has
identified up to 86 such sites and initial investigations have been conducted at 54 sites.
Additional investigation activities have been completed or are in progress at 50 sites and remedial
measures have been implemented or completed at 37 sites. This effort includes the sites contained
in the January&nbsp;2004 agreement entered into with the IDEM, Northern Indiana, Kokomo Gas, and other
Indiana utilities under the Indiana Voluntary Remediation Program. Only those site investigation,
characterization and remediation costs currently known and determinable can be considered &#147;probable
and reasonably estimable&#148; under SFAS No.&nbsp;5. As costs become probable and reasonably estimable,
reserves will be adjusted. As reserves are recorded, regulatory assets are recorded to the extent
environmental expenditures are expected to be recovered through rates. NiSource is unable, at this
time, to accurately estimate the time frame and potential costs of the entire program. Management
expects that, as characterization is completed, additional remediation work is performed and more
facts become available, NiSource will be able to develop a probable and reasonable estimate for the
entire program or a major portion thereof consistent with the SEC&#146;s SAB No.&nbsp;92, SFAS No.&nbsp;5 and SOP
96-1.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas Transmission and Storage Operations. </B>Columbia Transmission continues to conduct
characterization and remediation activities at specific sites under a 1995 EPA AOC. The program
pursuant to the AOC covers approximately 245 facilities, approximately 13,000 liquid removal
points, approximately 2,200 mercury measurement stations and about 3,700 storage well locations.
Field characterization has been performed at all sites. Site characterization reports and
remediation plans, which must be submitted to the EPA for approval, are in various stages of
development and completion. Remediation has been completed at the mercury measurement stations,
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->33<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1. FINANCIAL STATEMENTS (continued)</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><br>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">liquid removal point sites and storage well locations and at all but 8 of the 245 facilities. The
AOC was amended in 2007 to facilitate payment of EPA oversight costs and to remove remediated sites
from the AOC.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Columbia Transmission and Columbia Gulf are potentially responsible parties at several waste
disposal sites under CERCLA and similar state laws. The potential liability is believed to be de
minimis. However, the final allocation of cleanup costs has yet to be determined. As site
investigations and cleanups proceed and as additional information becomes available reserves will
be adjusted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On February&nbsp;21, 2007, Pennsylvania Department of Environmental Protection provided representatives
of Columbia Transmission with a proposed Consent Order and Agreement covering an unmanned equipment
storage site located in rural southwest Pennsylvania. The proposed order alleges that Columbia
Transmission has violated the state&#146;s Clean Streams Act and Solid Waste Management Act by
discharging petroleum products onto the property and into the waters of the state. In addition to
requiring remediation and monitoring activities at the site, the state has proposed penalties for
these violations. Columbia Transmission plans to engage in further discussions with the agency
regarding the proposed order, including the rationale for the proposed penalty. The site is
currently undergoing remediation via an EPA approved Remedial Action Work Plan. The Pennsylvania
Department of Environmental Protection has provided written notification that it will not attempt
to stop the EPA approved work and will seek the aforementioned Order after the remedy is completed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On September&nbsp;26, 2007, Columbia Transmission received an NOV related to bentonite discharge
associated with a horizontal directional drill operation for the Hardy Storage project. On
November&nbsp;29, 2007, Columbia Transmission received an NOV related to the collapse of Swift Run
stream bed associated with the same horizontal directional drill operation. Columbia Transmission
received the Draft Consent Special Order from the VADEQ on March&nbsp;3, 2008. NiSource has provided
comments to the VADEQ on the Draft Consent Special Order and continues to work with the VADEQ on
the content of the Draft Consent Special Order. The VADEQ issued a proposed penalty of $38,000
subject to public comment and final approval by VADEQ. Stream restoration activities are
continuing. Continued monitoring of the stream will occur for the next six months to two years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Electric Operations.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Remediation. </B>Northern Indiana is a potentially responsible party under the CERCLA and similar
state laws at two waste disposal sites and shares in the cost of their cleanup with other
potentially responsible parties. At one site, the Remedial Investigation and Feasibility Study was
submitted to the EPA in 2007. The EPA has issued a proposed plan to remediate the site which is
in the public comment period. At the second site, Northern Indiana has agreed to conduct a
Remedial Investigation and Feasibility Study in the vicinity of the third party, state-permitted
landfill where Northern Indiana contracted for fly ash disposal. In addition, Northern Indiana has
corrective action liability under the RCRA for three facilities that historically stored hazardous
waste.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of June&nbsp;30, 2008 and December&nbsp;31, 2007, reserves of $3.3&nbsp;million and $3.1&nbsp;million, respectively,
have been recorded to cover probable environmental response actions for Electric Operations. The
ultimate liability in connection with these sites cannot be estimated at this time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Air. </B>In December&nbsp;2001, the EPA approved regulations developed by the State of Indiana to comply
with the EPA&#146;s NOx SIP call. The NOx SIP call requires certain states, including Indiana, to
reduce NOx levels from several sources, including industrial and utility boilers, to lower regional
transport of ozone. Compliance with the NOx limits contained in these rules was required by May
31, 2004. To comply with the rule, Northern Indiana developed a NOx compliance plan, which
included the installation of Selective Catalytic Reduction NOx reduction technology at each of its
active generating stations and is currently in compliance with the NOx limits. In implementing the
NOx compliance plan, Northern Indiana has expended approximately $310.9&nbsp;million as of June&nbsp;30,
2008. Actual costs may vary depending on a number of factors including market demand and resource
constraints, uncertainty of future equipment and construction costs, and the potential need for
additional control technology.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On March&nbsp;10, 2005, the EPA issued the CAIR final regulations. The rule establishes phased
reductions of NOx and SO2 from 28 Eastern states, including electric utilities in Indiana, by
establishing an annual emissions cap for NOx and SO2 and an additional cap on NOx emissions during
the ozone control season. On March&nbsp;15, 2006, the EPA signed three related rulemakings providing
final regulatory decisions on implementing the CAIR. The EPA, in one
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1. FINANCIAL STATEMENTS (continued)</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><br>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">of the rulings, denied several petitions for reconsideration of various aspects of the CAIR,
including requests by Northern Indiana to reconsider SO2 and NOx allocations. On March&nbsp;25, 2008,
the U. S. Court of Appeals for the D. C. Circuit held oral arguments in litigation challenging the
CAIR. Northern Indiana, along with other utilities, directly participated in one of the arguments
addressing the legality of using the allowance allocations of the Acid Rain program for the purpose
of complying with the CAIR SO2 reduction requirements. On July&nbsp;11, 2008, the court vacated the
CAIR and the CAIR FIP in their entirety, and remanded them back to the EPA to promulgate a rule
consistent with the court&#146;s opinion. Per the Court&#146;s rules, the mandate will be deferred during
the 45-day period allowed for the filing of any petitions for rehearing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On October&nbsp;3, 2007, the Indiana Air Pollution Control Board adopted, with minor changes from the
EPA Clean Air Mercury Rule, the state rule to implement EPA&#146;s CAMR. The rule became effective on
February&nbsp;3, 2008, with compliance required in 2010. On February&nbsp;8, 2008, the United States Court
of Appeals for the District of Columbia Circuit vacated two EPA rules addressing utility mercury
emissions that are the stimulus for the Indiana Air Pollution Control Board&#146;s CAMR. The first is
the EPA&#146;s rule delisting coal and oil-fired electric generating units from the list of sources
whose emissions are regulated under section 112 of the CAA, 42 U.S.C. &#167; 7412. <I>Revision of December
2000 Regulatory Finding </I>(&#147;Delisting Rule&#148;), 70 Fed. Reg. 15,994 (March&nbsp;29, 2005). The second is
the EPA&#146;s rule that set performance standards for new coal-fired electric generating units and
established total mercury emission limits for states along with a cap-and-trade program for new and
existing coal-fired electric generating units. <I>Standards of Performance for New and Existing
Stationary Sources: Electric Utility Steam Generating Units </I>(&#147;CAMR&#148;), 70 Fed. Reg. 28,606 (May&nbsp;18,
2005). On March&nbsp;24, 2008, the EPA and industry filed petitions with the court for rehearing of
these decisions and on May&nbsp;20, 2008, the D.C. Circuit denied the rehearing requests. Any party
wanting to appeal the decision has until August&nbsp;16, 2008, to file a petition for certiorari with
the U. S. Supreme Court. The resolution of this legal action and the EPA&#146;s response will affect
the implementation and timing of the installation of controls to address potential mercury
reduction obligations. Northern Indiana will closely monitor developments regarding any further
action by the EPA and subsequent regulatory developments from the EPA and/or the Indiana Air
Pollution Control Board in this matter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Local air quality has improved in three counties in which Northern Indiana generating assets are
located. In recognition of this improvement the IDEM submitted petitions to the EPA seeking
redesignation of the Indiana counties of Lake, Porter, and LaPorte to attainment of the eight-hour
ozone NAAQS. Final EPA rulemaking approving the LaPorte County redesignation became effective on
July&nbsp;19, 2007. The EPA approval for Lake and Porter counties is undergoing further evaluation and
may be delayed until after the 2008 ozone season due to monitored values in 2007 at one site that
put the design value just above the NAAQS. On October&nbsp;3, 2007, the Air Pollution Control Board
adopted the redesignation of LaPorte County to attainment as part of a reformatting of the state
attainment designation rule. The rule became effective January&nbsp;28, 2008. Upon promulgation of the
EPA and subsequent IDEM regulations to implement the redesignations to attainment, new source
review rules are expected to change from nonattainment new source review rules to prevention of
significant deterioration while measures responsible for existing emission reductions would
continue. The March&nbsp;12, 2008 EPA tightening of the 8-hour ozone NAAQS may preclude the approval of
the redesignation requests and may result in these counties remaining and/or again being designated
as nonattainment of the ozone NAAQS. As discussed above under &#147;General,&#148; the EPA ozone NAAQS
revision could lead to additional emission reductions of NOx, an ozone precursor, from facilities
owned by Northern Indiana. Northern Indiana will closely monitor developments in these matters and
cannot at this time accurately estimate the timing or cost of emission controls that may eventually
be required.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The U. S. Court of Appeals for the D. C. Circuit, in late 2006, ruled a requirement to impose CAA
&#167;185 fees on emissions sources located in counties that failed to timely attain the previous
(one-hour) ozone standard, which had been rescinded by the EPA in May&nbsp;2005, remained applicable
retroactive to November&nbsp;2005. The court remanded the issue to the EPA for reconsideration. In
January&nbsp;2008, the U. S. Supreme Court denied a petition to hear an appeal on this matter. The EPA
has announced that it intends to propose regulations in fall 2008 to specify how CAA &#167;185 fees will
be imposed and calculated. One of Northern Indiana&#146;s operating generating assets is located in
Porter County where this fee could potentially be applied. On July&nbsp;7, 2008, the EPA proposed a
finding of attainment of the one-hour ozone NAAQS for the Illinois and Indiana one-hour ozone
nonattainment area which includes Porter County. Included in the proposed rule is a finding that
the area, including Porter County, is not subject to the imposition of the CAA &#167;185 penalty fees.
Northern Indiana will closely monitor developments in this matter.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1. FINANCIAL STATEMENTS (continued)</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><br>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In late 1999, the EPA initiated a New Source Review enforcement action against several industries,
including the electric utility industry, concerning rule interpretations that have been the subject
of recent (prospective)&nbsp;reform regulations. Northern Indiana has received and responded to the EPA
information requests on this subject, most recently in June&nbsp;2002. The EPA issued an NOV to
Northern Indiana on September&nbsp;29, 2004, for alleged violations of the CAA and the SIP.
Specifically, the NOV alleges that modifications were made to certain boiler units at the Michigan
City, Schahfer, and Bailly Generating Stations between the years of 1985 and 1995 without obtaining
appropriate air permits for the modifications. An adverse outcome in this matter could require
capital expenditures beyond the EPA requirements that cannot be determined at this time and could
require payment of substantial penalties. Northern Indiana is unable, at this time, to predict the
timing or outcome of this EPA action.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Water. </B>The Great Lakes Water Quality Initiative program is expected to add new water quality
standards for facilities that discharge into the Great Lakes watershed and the State of Indiana has
promulgated its regulations for this water discharge permit program and has received final EPA
approval. The permit for the Bailly Generating Station was issued on June&nbsp;26, 2006, and became
effective on August&nbsp;1, 2006. Northern Indiana appealed the Bailly Generating Station NPDES permit,
due to an unacceptable internal outfall monitoring permit condition. On February&nbsp;18, 2008, the
Bailly Generating Station NPDES permit was modified to resolve the monitoring issue and to address
the 316(b) rule status due to the remand mentioned below. Due to additional pending studies, the
cost of complying with the permit requirements cannot be estimated at this time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On February&nbsp;16, 2004, the EPA Administrator signed the Phase II Rule of the Clean Water Act Section
316(b) which requires all large existing steam electric generating stations meet certain
performance standards to reduce the effects on aquatic organisms at their cooling water intake
structures. The rule became effective on September&nbsp;7, 2004. Under this rule, stations will either
have to demonstrate that the performance of their existing fish protection systems meet the new
standards or develop new systems, such as a closed-cycle cooling tower. On January&nbsp;25, 2007, the
Second Circuit in a court decision on the Phase II 316(b) rule, remanded for EPA reconsideration
the options providing flexibility for meeting the requirements of the rule. On March&nbsp;20, 2007, the
EPA issued a guidance memo advising its Regional Administrators that the Agency considers the
316(b), Phase II Rule governing cooling water withdrawals suspended and will be issuing a Federal
Register notice to that effect. On July&nbsp;9, 2007, the EPA published a notice in the Federal
Register suspending the Phase II rule. The notice explained that the EPA is not accepting comments
on the suspension and notes that &#147;best professional judgment&#148; is to be used in making 316(b)
decisions. The EPA will need to propose a revised 316(b) rule and/or provide guidance to address
the impact of the court decision. Northern Indiana will closely monitor the EPA rule developments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On July&nbsp;5, 2007, the Second Circuit Court of Appeals denied the petitions for rehearing asking the
court to reconsider its remand of the Phase II 316(b) ruling. Various parties submitted petitions
for a <I>writ of certiorari </I>to the U. S. Supreme Court in early November seeking to reverse the Second
Circuit Court&#146;s decision. The U.S. Supreme Court has agreed to hear the appeal which is based on
the role of cost-benefit analysis in establishing standards for compliance with the rule. The case
is scheduled to be heard during the fall of 2008. Northern Indiana will continue to closely
monitor this activity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Coal Combustion Products. </B>The Federal government has recently shown an increased interest in
evaluating the advisability of Federal regulation of coal combustion waste products because of
concern over potential health and environmental risks. A House subcommittee has begun to study
this issue building on the EPA&#146;s ongoing activities in this matter. Northern Indiana will continue
to monitor this activity for any future regulatory actions and cannot predict the potential
financial impact at this time.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="font-size: 10pt; margin-top: 6pt"><U>ITEM 1. FINANCIAL STATEMENTS (continued)</U></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT><br>
<b>Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B></DIV>

<DIV style="font-size: 10pt; margin-top: 12pt"><B>18. Changes in Common Stockholders&#146; Equity and Comprehensive Income (Loss)</B></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">The following table displays the changes in Common Stockholders&#146; Equity and Comprehensive Income
(Loss) for the six months ended June&nbsp;30, 2008 and 2007.</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Additional</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Accum</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Comp</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Common</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Treasury</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Paid-In</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Retained</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Other Comp</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Income</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap><I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Stock</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Stock</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Capital</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Earnings</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Income/(Loss)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Total</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Loss)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="29" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance January&nbsp;1,
2008</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>2.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(23.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>4,011.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>1,074.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>11.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>5,076.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive Income (Loss):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net Income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(103.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(103.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(103.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other comprehensive income (loss), net of tax:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gain/loss on available for sale securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Unrealized (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net unrealized losses on derivatives
qualifying as cash flow hedges (b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD nowrap><DIV style="margin-left:30px; text-indent:-15px">Unrecognized Pension<BR>Benefit and OPEB cost (c)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total comprehensive income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(80.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(189.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(189.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Treasury stock acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issued:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Employee stock purchase plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term incentive plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of Long-term
incentive Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance June&nbsp;30, 2008</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>2.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(23.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>4,015.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>782.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>34.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>4,810.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE></DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Additional</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Accum</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Common</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Treasury</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Paid-In</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Retained</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Other Comp</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Comp</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap><I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Stock</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Stock</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Capital</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Earnings</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Income/(Loss)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Total</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Income</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="29" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance January&nbsp;1, 2007</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>2.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(21.2</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>3,998.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>1,012.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>20.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>5,013.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustment to initially apply new measurement
date pursuant to SFAS No.&nbsp;158, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustment to initially apply
FIN 48, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Beginning balance, as adjusted</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>2.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(21.2</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>3,998.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>1,005.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>20.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>5,006.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive Income:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net Income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other comprehensive income, net of tax:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gain/loss on available for sale securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Unrealized (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net unrealized gains on derivatives
qualifying as cash flow hedges (b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:30px; text-indent:-15px">Unrecognized Pension<BR>
Benefit and OPEB cost (c)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total
comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">250.4</TD>
    <TD nowrap>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(189.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(189.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Treasury stock acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issued:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Employee stock purchase plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term incentive plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of Long-term
incentive Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance June&nbsp;30, 2007</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>2.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(23.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>4,007.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>1,059.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>27.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>5,074.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE></DIV>



<DIV>
<DIV style="font-size: 3pt; margin-top: 3pt; width: 18%; border-top: 0px solid #000000">&nbsp;</DIV></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap>(a)</TD>
    <TD>&nbsp;</TD>
    <TD>Net unrealized losses on available for sale securities, net of $1.3&nbsp;million
tax benefit and $0.5&nbsp;million tax expense in the first half of 2008 and 2007,
respectively.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap>(b)</TD>
    <TD>&nbsp;</TD>
    <TD>Net unrealized gains (losses)&nbsp;on derivatives qualifying as cash flow
hedges, net of $18.7&nbsp;million and $4.7&nbsp;million tax expense in the first half of
2008 and 2007, respectively.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap>(c)</TD>
    <TD>&nbsp;</TD>
    <TD>Unrecognized pension benefit and OPEB costs, net of $1.8&nbsp;million tax
benefit and $2.1&nbsp;million tax expense in the first half of 2008 and 2007,
respectively.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->37<!-- /Folio --></DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1. FINANCIAL STATEMENTS (continued)</U></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><br>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>19. Accumulated Other Comprehensive Income</B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table displays the components of Accumulated Other Comprehensive Income, which is
included in &#147;Common Stockholders&#146; Equity,&#148; on the Condensed Consolidated Balance Sheets.</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="9">Other comprehensive income (loss), before taxes:</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-15px">Unrealized gains on securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>3.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax (expense)&nbsp;on unrealized gains on securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1.6</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.8</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-15px">Unrealized gains on cash flow hedges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>56.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax (expense)&nbsp;on unrealized gains on cash flow hedges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(21.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-15px">Unrecognized pension benefit and OPEB costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(5.2</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax benefit on unrecognized pension benefit and OPEB costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total Accumulated Other Comprehensive Income, net of taxes</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>34.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>20. Business Segment Information</B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Operating segments are components of an enterprise for which separate financial information is
available that is evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. The NiSource Chief Executive Officer is the chief
operating decision maker.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource&#146;s operations are divided into four primary business segments. The Gas Distribution
Operations segment provides natural gas service and transportation for residential, commercial and
industrial customers in Ohio, Pennsylvania, Virginia, Kentucky, Maryland, Indiana and
Massachusetts. The Gas Transmission and Storage Operations segment offers gas transportation and
storage services for LDCs, marketers and industrial and commercial customers located in
northeastern, mid-Atlantic, midwestern and southern states and the District of Columbia. The
Electric Operations segment provides electric service in 20 counties in the northern part of
Indiana. The Other Operations segment primarily includes gas and power marketing, and ventures
focused on distributed power generation technologies, including fuel cells and storage systems.</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->38<!-- /Folio --></DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>ITEM 1.
FINANCIAL STATEMENTS (continued)</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><br>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table provides information about business segments. NiSource uses operating income
as its primary measurement for each of the reported segments and makes decisions on finance,
dividends and taxes at the corporate level on a consolidated basis. Segment revenues include
intersegment sales to affiliated subsidiaries, which are eliminated in consolidation. Affiliated
sales are recognized on the basis of prevailing market, regulated prices or at levels provided for
under contractual agreements. Operating income is derived from revenues and expenses directly
associated with each segment. Electric Operations operating income
was negatively impacted by an $8.3&nbsp;million depreciation expense
adjustment recorded by Northern Indiana during the second quarter of 2008. The non-cash adjustment to depreciation expense was not
material to the results of operations and consolidated financial statements and will not materially
impact depreciation charges in future periods.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Three Months</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Six Months</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Ended June 30,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Ended June 30,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>REVENUES</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Gas Distribution Operations</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unaffiliated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>1,025.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">854.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>3,465.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,903.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intersegment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,029.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">858.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,476.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,913.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Gas Transmission and Storage Operations</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unaffiliated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>151.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>319.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">305.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intersegment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>44.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>107.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>196.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>427.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">418.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Electric Operations</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unaffiliated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>341.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">334.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>673.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">661.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intersegment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>341.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">334.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>674.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">661.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other Operations</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unaffiliated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>272.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">233.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>618.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">537.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intersegment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>26.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>285.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>644.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">564.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments and eliminations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(59.9</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(59.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(141.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(147.2</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Consolidated Revenues</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>1,792.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,566.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>5,081.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,411.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating Income (Loss)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gas Distribution Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(10.0</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>244.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">267.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gas Transmission and Storage Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>77.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>182.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Electric Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>50.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>89.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">137.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.2</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2.7</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(5.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Consolidated Operating Income</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>116.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">143.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>511.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">574.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>21. Hartsville and Delhi Compressor Stations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On February&nbsp;5, 2008, tornados struck Columbia Gulf&#146;s Hartsville Compressor Station in Macon County,
Tennessee. The damage to the facility forced Columbia Gulf to declare force majeure because no gas
was flowing through this portion of the pipeline system while a facility assessment was being
performed and the current contractual transportation agreements of 2.156 Bcf per day could not be
met. Since that time Columbia Gulf has constructed both temporary and permanent facilities at
Hartsville and has restored gas flow to 2.156 Bcf per day. During the next 12 to 18&nbsp;months the
temporary facilities that were constructed to restore system capabilities will be replaced with a
permanent solution. This capacity would remain in place while the permanent solution is
implemented.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->39<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1. FINANCIAL STATEMENTS (continued)</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><FONT style="font-variant: SMALL-CAPS">NiSource Inc.</FONT><br>
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource expects the majority of the reconstruction costs during the 18 to 24&nbsp;month
period for the compressor
station and ancillary facilities plus business interruption losses during the twelve month period
from the event will be recoverable through insurance.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On December&nbsp;14, 2007, Columbia Gulf&#146;s Line 100 ruptured approximately two miles north of its Delhi
Compressor Station in Louisiana. The damage to the pipeline forced Columbia Gulf to declare force
majeure because no gas was flowing through this portion of the pipeline system on Lines 100, 200
and 300 while a facility assessment was performed. As a result the current contractual
transportation agreements of 2.156 Bcf per day could not be met. By December&nbsp;15, 2007 Lines 200
and 300 were returned to service and gas flow was restored to 2.0 Bcf per day on December&nbsp;16, 2007.
On December&nbsp;19, 2007, the U.S. Department of Transportation issued a Corrective Action Order which
was applicable to Line 100 from the Rayne, LA Compressor Station to Leach, KY. The Order required
Columbia Gulf to develop a remedial work plan, which included assessments on Line 100 using in-line
inspection tools. The Order also required a 20% reduction in pressure on Line 100 from the Rayne
Compressor Station to the Corinth Compressor Station which resulted in a reduction in gas flow on
December&nbsp;21, 2007 to 1.6 Bcf per day. The next day the capacity was increased to 1.75 Bcf per day.
Between December&nbsp;22, 2007 and February&nbsp;5, 2008 the capacity varied between 1.6 and 1.75 Bcf per
day as a result of remediation work on Line 100. On July&nbsp;1, 2008, Columbia Gulf received
permission from the U.S. Department of Transportation to restore full pressure on Line 100
pipeline. NiSource expects to recover a portion of the pipeline replacement costs plus business
interruption losses through insurance.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->40<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="108"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><u>ITEM 2</u>. <u>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS</u>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Note regarding forward-looking statements</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Management&#146;s Discussion and Analysis, including statements regarding market risk sensitive
instruments, contains &#147;forward-looking statements,&#148; within the meaning of Section&nbsp;27A of the
Securities Act of 1933, as amended, and Section&nbsp;21E of the Securities Exchange Act of 1934, as
amended. Investors and prospective investors should understand that many factors govern whether
any forward-looking statement contained herein will be or can be realized. Any one of those
factors could cause actual results to differ materially from those projected. These
forward-looking statements include, but are not limited to, statements concerning NiSource&#146;s plans,
objectives, expected performance, expenditures and recovery of expenditures through rates, stated
on either a consolidated or segment basis, and any and all underlying assumptions and other
statements that are other than statements of historical fact. From time to time, NiSource may
publish or otherwise make available forward-looking statements of this nature. All such subsequent
forward-looking statements, whether written or oral and whether made by or on behalf of NiSource,
are also expressly qualified by these cautionary statements. All forward-looking statements are
based on assumptions that management believes to be reasonable; however, there can be no assurance
that actual results will not differ materially.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Realization of NiSource&#146;s objectives and expected performance is subject to a wide range of risks
and can be adversely affected by, among other things, weather, fluctuations in supply and demand
for energy commodities, growth opportunities for NiSource&#146;s businesses, increased competition in
deregulated energy markets, the success of regulatory and commercial initiatives, dealings with
third parties over whom NiSource has no control, the effectiveness of NiSource&#146;s outsourcing
initiative, actual operating experience of NiSource&#146;s assets, the regulatory process, regulatory
and legislative changes, changes in general economic, capital and commodity market conditions, and
counterparty credit risk, many of which risks are beyond the control of NiSource. In addition, the
relative contributions to profitability by each segment, and the assumptions underlying the
forward-looking statements relating thereto, may change over time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following Management&#146;s Discussion and Analysis should be read in conjunction with NiSource&#146;s
Annual Report on Form 10-K for the fiscal year ended December&nbsp;31, 2007.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CONSOLIDATED REVIEW</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Executive Summary</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource is an energy holding company whose subsidiaries are engaged in the transmission, storage
and distribution of natural gas in the high-demand energy corridor stretching from the Gulf Coast
through the Midwest to New England and the generation, transmission and distribution of electricity
in Indiana. NiSource generates virtually 100% of its operating income through these rate-regulated
businesses. A significant portion of NiSource&#146;s operations is subject to seasonal fluctuations in
sales. During the heating season, which is primarily from November through March, net revenues
from gas are more significant, and during the cooling season, which is primarily from June through
September, net revenues from electric sales and transportation services are more significant than
in other months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource is a holding company under the Public Utility Holding Company Act of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the six months ended June&nbsp;30, 2008, NiSource reported income from continuing operations of
$210.4&nbsp;million, or $0.77 per basic share, compared to $235.4&nbsp;million, or $0.86 per basic share in
2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Decreases in income from continuing operations were due primarily to the following items:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Operating expenses increased by $52.5&nbsp;million primarily due to higher employee and
administrative expenses of $28.7&nbsp;million across NiSource&#146;s business segments, a $15.5&nbsp;million
increase in depreciation which includes an $8.3&nbsp;million
depreciation expense adjustment recorded by Northern
Indiana during the second quarter of 2008 and
higher electric generation and maintenance costs of $6.2&nbsp;million. The increased electric
generation and maintenance costs resulted primarily from planned turbine and boiler
maintenance and a generator overhaul.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->41<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><u>ITEM
2</u>. <u>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS (continued)</u>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Electric Operations net revenues were negatively impacted by $14.1&nbsp;million due to
non-recoverable power purchased and non-recoverable MISO charges. Additionally, lower
residential and commercial margins contributed to lower net revenues partially offset by higher
industrial usage and margins.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Increases impacting income from continuing operations that partially offset the decreases described
above included:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Interest expense decreased $18.3&nbsp;million due to lower short-term interest rates and the
retirement late in 2007 of high cost debt associated with the Whiting Clean Energy facility.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Gas Transmission and Storage Operations&#146; net revenues increased by $8.4&nbsp;million due
primarily to greater subscriptions for firm transportation services related to new
interconnects along the Columbia Gulf pipeline system, deliveries from the Hardy Storage field
and incremental demand revenues on the Columbia Transmission system.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Lower income taxes of $16.8&nbsp;million due to lower income from continuing operations and a
lower effective tax rate.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These factors and other impacts to the financial results are discussed in more detail within the
following discussions of &#147;Results of Operations&#148; and &#147;Results and Discussion of Segment
Operations.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Four-Point Platform for Growth</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource has established four key initiatives to build a platform for long-term, sustainable
growth: commercial and regulatory initiatives; commercial growth and expansion of the gas
transmission and storage business; financial management of the balance sheet; and process and
expense management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Commercial and Regulatory Initiatives</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Rate Development and Other Regulatory Matters. </I></B>NiSource is moving forward on regulatory
initiatives across several distribution company markets. Whether through full rate case filings or
other approaches, NiSource&#146;s goal is to develop strategies that benefit all stakeholders as it
addresses changing customer conservation patterns, develops more contemporary pricing structures,
and embarks on long-term investment programs to enhance its infrastructure.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Northern Indiana filed a petition for new electric base rates and charges on June&nbsp;27, 2008 and will
file its detailed case on or before August&nbsp;29, 2008. The prehearing conference to establish the
procedural schedule for the electric rate case was held on July&nbsp;29, 2008. Initial hearings are
anticipated in January&nbsp;2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Columbia of Ohio filed a base rate case with PUCO on March&nbsp;3, 2008, requesting an increase in base
rates in excess of $80&nbsp;million annually. Columbia of Ohio is seeking recovery of increased
infrastructure rehabilitation costs, as well as the stabilization of revenues and cost recovery
through rate design. The case is currently pending, and is expected to be resolved by the fourth
quarter of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;28, 2008, Columbia of Pennsylvania filed a base rate case with the Pennsylvania Public
Utility Commission, seeking an increase of approximately $60&nbsp;million annually, effective October
28, 2008. Through this filing, Columbia of Pennsylvania sought to recover costs associated with
its significant infrastructure rehabilitation program, as well as stabilize revenues and cost
recovery through modifications to rate design. On July&nbsp;2, 2008, Columbia of Pennsylvania and all
interested parties filed a unanimous settlement with the Pennsylvania Public Utilities Commission.
If approved, the settlement authorizes Columbia to increase revenues by $41.5&nbsp;million annually, and
make certain other accounting, tariff and service changes. The Pennsylvania Public Utilities
Commission is expected to issue an order in this case by the third quarter of 2008, with new rates
expected to take effect during the fourth quarter.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->42<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><u>ITEM 2</u>. <u>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS&nbsp;(continued)</u>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On April&nbsp;9, 2008, the PUCO issued an order approving, in all material respects, a joint Stipulation
submitted on behalf of Columbia of Ohio. This Stipulation is a result of a process that began on
April&nbsp;13, 2005 with a Commission ordered investigation into the type of gas risers installed in the
state, the conditions of installation and overall performance. The Stipulation provides for
establishment of accounting for and recovery of costs resulting from the Staff&#146;s investigation;
Columbia&#146;s performance of a survey to identify those customer-owned risers on its system prone to
failure; and related customer education and other program related expenses. In addition this
Stipulation provides for: Columbia&#146;s assumption of financial responsibility for the replacement of
all risers identified as prone to failure; repair or replacement of hazardous customer owned
service lines; and capitalization of this investment with recovery to be addressed in future rate
proceedings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In July&nbsp;2008, Columbia of Ohio filed an application with the PUCO for permission to create a new
comprehensive energy conservation program. If approved by the PUCO, Columbia of Ohio&#146;s DSM program
would offer a wide range of services to residential and small commercial customers. Columbia of
Ohio proposes to recover the three-year, $24.9&nbsp;million cost of the DSM conservation program through
a rider that would be added to residential and small commercial customer bills beginning in May
2010. On July&nbsp;23, 2008, the PUCO issued an order approving Columbia of Ohio&#146;s proposal subject to
the approval of the DSM cost recovery rider proposed in the currently pending rate case, and any
other conditions that may be imposed in the rate case.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On May&nbsp;30, 2008, Northern Indiana purchased Sugar Creek for $329.7&nbsp;million. This purchase was in
response to Northern Indiana&#146;s need to add approximately 1,000 mw of new capacity. Refer to Note 9,
&#147;Regulatory Matters,&#148; in the Notes to Condensed Consolidated Financial Statements for further
discussion. The Sugar Creek facility is a CCGT located in West Terre Haute, Indiana. Sugar Creek
has a plant capacity rating of 535 mw. Sugar Creek has transmission access to and is able to
participate in both the MISO and PJM Interconnection wholesale electricity markets. The plant is
currently committed to the PJM Interconnection market until May&nbsp;31, 2010. At acquisition, Northern
Indiana recorded at fair value $328.1&nbsp;million related to utility plant. No goodwill was recorded in
conjunction with the purchase. The preliminary allocation of the purchase price was assigned to the
assets and liabilities of Sugar Creek, based on their estimated fair value in accordance with GAAP.
This allocation is subject to completion of certain analyses and allocation of property, plant and
equipment unit of accounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Refer to the &#147;Results and Discussion of Segment Operations&#148; for a complete discussion of regulatory
matters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Sale of Whiting Clean Energy. </I></B>On June&nbsp;30, 2008, NiSource sold Whiting Clean Energy to BPAE for
$217.2&nbsp;million which included $16.3&nbsp;million in working capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Sale of Northern Utilities and Granite State Gas. </I></B>On February&nbsp;15, 2008, NiSource reached a
definitive agreement under which Unitil Corporation will acquire NiSource subsidiaries Northern
Utilities and Granite State Gas. Under the terms of the transaction, Unitil Corporation will
acquire Northern Utilities, a local gas distribution company serving 52 thousand customers in 44
communities in Maine and New Hampshire and Granite State Gas, an 86-mile FERC regulated gas
transmission pipeline primarily located in Maine and New Hampshire. In the first quarter of 2008,
net assets for Northern Utilities and Granite State Gas were reclassified to assets and liabilities
of discontinued operations and held for sale on the Consolidated Balance Sheets. During the second
quarter and six months ended June&nbsp;30, 2008, estimated losses of $3.4&nbsp;million and $66.9&nbsp;million were
recorded to Gain (Loss) on Disposition of Discontinued Operation in the Condensed Statements of
Consolidated Income (Loss).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource acquired Northern Utilities and Granite State Gas in 1999 as part of the company&#146;s larger
acquisition of Bay State. NiSource is retaining its ownership of Bay State as a core component of
the company&#146;s long-term, investment-driven growth strategy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Sale of Columbia Gulf&#146;s Offshore Assets. </I></B>On June&nbsp;27, 2008, Columbia Gulf sold a portion of
Columbia Gulf&#146;s offshore assets to Tennessee Gas Pipeline Company for $7.5&nbsp;million. A gain of $2.9
million was recorded on the sale during the second quarter of 2008.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->43<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><u>ITEM 2</u>. <u>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS&nbsp;(continued)</u>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Commercial Growth and Expansion of the Gas Transmission and Storage Business</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Master Limited Partnership. </I></B>On December&nbsp;21, 2007, NiSource Energy Partners, L.P., an MLP and
subsidiary of NiSource, filed a Form S-1 registration statement with the SEC in which it proposed
making an initial public offering of common units in the MLP and NiSource proposed contributing its
interest in Columbia Gulf to the MLP. NiSource management believes the formation of an MLP is a
natural complement to NiSource&#146;s gas transmission and storage growth strategy, and should provide
NiSource access to competitively priced capital to support future growth investment. Due to the
damage sustained at Columbia Gulf&#146;s Hartsville, Tennessee, compressor station, following the
tornados at the facility as described previously, as well as overall financial market conditions,
the timing of the initial public offering is not likely to occur during 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Millennium Pipeline Project</I></B><B>. </B>In June&nbsp;2007, construction began on the Millennium Pipeline, a
182-mile-long, 30-inch-diameter pipeline across New York&#146;s Southern Tier and lower Hudson Valley.
The project is expected to be completed in the fourth quarter of 2008 and will transport up to
525,400 Dth per day of natural gas to markets along its route, as well as to the New York City
markets through its pipeline interconnections. Millennium is jointly owned by affiliates of
NiSource, KeySpan Corporation, and DTE Energy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Hardy Storage Project. </I></B>Hardy Storage completed its first full year of operations, receiving
customer injections and withdrawing natural gas from its new underground natural gas storage
facility in West Virginia. Injections this year will allow the field to deliver up to 150,000 Dth
of natural gas per day during the 2008-2009 winter heating season. Customers withdrew over 5.44
Bcf from the storage field during the 2007-2008 winter heating season. When fully operational in
2009, the field will have a working storage capacity of 12&nbsp;billion cubic feet, delivering more than
176,000 Dth of natural gas per day. Hardy Storage is a joint venture of subsidiaries of Columbia
Transmission and Piedmont.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Columbia Transmission, the operator of Hardy Storage, is expanding its natural gas transmission
system by 176,000 Dth per day to provide the capacity needed to deliver Hardy Storage supplies to
customer markets. Construction of these transmission facilities has been completed with the
facilities being placed into service during the first half of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Florida Gas Transmission Expansion Project. </I></B>An open season to solicit interest and contracts for
expanded capacity on Columbia Gulf&#146;s system for delivery to Florida Gas Transmission was held in
late 2007 and contracts for 100,000 Dth per day of capacity were executed. The remaining 80,000
Dth per day of capacity is expected to be sold under firm contracts during the fourth quarter of
2008. This project was placed into service in May&nbsp;2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Eastern Market Expansion Project</I></B><B>. </B>On May&nbsp;3, 2007, Columbia Transmission filed a certificate
application before the FERC for approval to expand its facilities to provide additional storage and
transportation services and to replace certain existing facilities. This Eastern Market Expansion
project is projected to add 97,000 Dth per day of storage and transportation deliverability and is
fully subscribed on a 15-year contracted firm basis. On January&nbsp;14, 2008, the FERC issued a
favorable order which granted a certificate to construct the project and the project is expected to
be in service by spring 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Appalachian Expansion Project. </I></B>On February&nbsp;29, 2008, Columbia Transmission filed an application
before the FERC for approval to build a new 9,470 horsepower compressor station in West Virginia.
The Appalachian Expansion Project will add 100,000 Dth per day of transportation capacity and is
fully subscribed on a 15-year contracted firm basis. The project is expected to be in service in
the fourth quarter of 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Ohio Storage Project</I></B><B>. </B>On June&nbsp;24, 2008, Columbia Transmission filed an application before the FERC
for approval to expand two of its Ohio storage fields for additional capacity of 6,900,000 Dth and
103,400 Dth per day of daily deliverability. If required approvals are granted as requested,
construction would begin in 2009 and the expanded facilities would be placed in service by the end
of 2009. The expansion capacity is 58% contracted on a long-term, firm basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>New Penn Transmission Project. </I></B>During the first quarter of 2008, Columbia Transmission concluded a
successful open season to gauge customer interest in a new pipeline system to provide 500,000 Dth
per day of firm service
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->44<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><u>ITEM 2</u>. <u>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS&nbsp;(continued)</u>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">from storage facilities near Leidy, PA to a new interconnection with Millennium Pipeline in Steuben
County, New York in 2010.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Centerville Expansion Project. </I></B>An open season to solicit interest and contracts for expanded
capacity on Columbia Gulf&#146;s system for delivery to Southern Natural Gas and the Louisiana
intrastate pipeline market was held during the first quarter of 2008, and contracts for 60,000 Dth
per day of capacity were executed. The remaining 175,000 Dth per day of capacity is expected to be
sold under firm contracts prior to the facilities being placed into service. The project is
expected to be placed into service in late 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Financial Management of the Balance Sheet</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource&#146;s interest expense decreased $18.3&nbsp;million for the first six months of 2008 compared to
the first six months of last year. This decrease was due primarily to lower short-term interest
rates and the retirement late in 2007 of high cost debt associated with the Whiting Clean Energy
facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the second quarter of 2008 NiSource issued long-term debt of $700&nbsp;million to fund future capital
expenditures. While the capital markets have recently been adversely impacted by a variety of
negative economic events, NiSource believes these events will not impact its continued access to
the traditional capital markets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Process and Expense Management</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>IBM Agreement. </I></B>In December&nbsp;2007, NiSource and IBM finalized a restructuring of their business
services agreement. Under the restructured agreement, IBM will primarily provide information
technology services, with a number of other business service functions to be transitioned back to
the NiSource organization. Through the second quarter of 2008, certain Meter to Cash, Human
Resources, Sales Center, and Supply Chain Management support services transitioned back to the
company. Transition of the remaining business support services returning to NiSource will continue
through the third quarter of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In January&nbsp;2008, NiSource and IBM also agreed to move forward with the Indiana Deployment of a Work
Management System and its associated transformation initiatives. The Work Management System
project will provide technologies that standardize, integrate and support transformation of
processes and eliminate costly and inefficient manual work processes while meeting
regulatory/compliance standards. Implementation is planned for late 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Results of Operations</B><BR><B>
Quarter Ended June&nbsp;30, 2008</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Net Income</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource reported a net loss of $202.3&nbsp;million, or $0.74 loss per basic share, for the three months
ended June&nbsp;30, 2008, compared to net income of $26.7&nbsp;million, or $0.10 per basic share, for the
second quarter 2007. The loss was due to $223.3&nbsp;million of losses related to discontinued
operations (discussed below). Income from continuing operations was $21.0&nbsp;million, or $0.08 per
basic share, for the three months ended June&nbsp;30, 2008, compared to $28.9&nbsp;million, or $0.11 per
basic share, for the second quarter 2007. Operating income was $116.6&nbsp;million, a decrease of $27.3
million from the same period in 2007. All per share amounts are basic earnings per share. Basic
average shares of common stock outstanding at June&nbsp;30, 2008 were 274.0&nbsp;million compared to 273.8
million at June&nbsp;30, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Net Revenues</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Total consolidated net revenues (gross revenues less cost of sales) for the three months ended June
30, 2008, were $670.3&nbsp;million, a $7.4&nbsp;million decrease from the same period last year. This
decrease in net revenues was primarily due to lower Gas Distribution Operations net revenues of
$11.2&nbsp;million primarily attributable to warmer weather of approximately $8&nbsp;million and decreased
net revenues from the implementation of the Columbia of Ohio Stipulation entered into with the Ohio
Consumers&#146; Counsel and PUCO at the end of 2007, partially offset by regulatory increases from rate
proceedings and other service programs. Net revenues from Electric Operations also accounted
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->45<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><u>ITEM 2</u>. <u>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS&nbsp;(continued)</u>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">for a portion of the overall decrease in net revenues by declining $3.3&nbsp;million from the comparable
2007 period primarily due to the impact of cooler weather of approximately $4&nbsp;million and $2.7
million of non-recoverable purchased power, partially offset by higher industrial volumes of $1.6
million, the timing of revenue credits of $1.5&nbsp;million and incremental revenues from the new Sugar
Creek plant of $1.3&nbsp;million. The non-recoverable purchased power costs are due to the settlement
reached in 2007 by Northern Indiana with regulatory stakeholders and large customers as noted
previously. These decreases in net revenues from Gas Distribution Operations and Electric
Operations were partially offset by higher net revenues from Gas Transmission and Storage
Operations of $6.4&nbsp;million which primarily resulted from increased subscriptions for firm
transportation services of $6.3&nbsp;million related to new interconnects along the Columbia Gulf
pipeline system, deliveries from the Hardy Storage field and incremental demand revenues on the
Columbia Transmission system.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Expenses</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Operating expenses for the second quarter 2008 were $555.3&nbsp;million, an increase of $17.8&nbsp;million
from the 2007 period. This increase was primarily due to higher employee and administrative
expenses of $11.8&nbsp;million across NiSource&#146;s business segments, a $14.2&nbsp;million increase in
depreciation which includes an $8.3&nbsp;million depreciation expense
adjustment recorded by Northern Indiana during
the second quarter of 2008, and a $2.8&nbsp;million reversal
of a reserve in the comparable 2007 period for a legal matter. The non-cash adjustment to
depreciation expense was not material to the results of operations and consolidated financial
statements and will not materially impact depreciation charges in future periods. These increases
in operating expenses were partially offset by a $6.6&nbsp;million impairment charge recognized in the
comparable 2007 period related to base gas at a storage field and a $2.9&nbsp;million gain recognized on
the sale of certain Columbia Gulf offshore assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Other Income (Deductions)</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest expense, net was $87.4&nbsp;million for the quarter, a decrease of $11.0&nbsp;million compared to
the second quarter of 2007. This decrease was due primarily to lower short-term interest rates and
the retirement late in 2007 of high cost debt associated with the Whiting Clean Energy facility.
Other, net was income of $1.3&nbsp;million for the current quarter compared to a loss of $0.1&nbsp;million
for the comparable 2007 period due primarily to lower costs associated with the sale of accounts
receivable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Income Taxes</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Income tax for the second quarter of 2008 was $9.5&nbsp;million, a decrease of $7.0&nbsp;million compared to
the second quarter of 2007 due primarily to lower pretax income and a lower effective tax rate.
The effective tax rate for the quarter ended June&nbsp;30, 2008 was 31.1% compared to 36.3% for the
comparable period. The 5.2% decrease in the second quarter of 2008 effective tax rate versus the
second quarter of 2007 effective tax rate is primarily due to a change in the estimated annual 2008
effective tax rate recognized in the second quarter as a result of an increase in projected
AFUDC-Equity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Discontinued Operations</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the three months ended June&nbsp;30, 2008, NiSource recognized a $220.5&nbsp;million loss from
discontinued operations compared to a loss from discontinued operations of $1.4&nbsp;million in the
comparable 2007 period. This loss is primarily attributable to an adjustment to the reserve for
the Tawney litigation mentioned previously. Additionally, in the first quarter of 2008, NiSource
began accounting for the operations of Northern Utilities, Granite State Gas and Whiting Clean
Energy as discontinued operations. As such, a net loss of $1.4&nbsp;million from continuing operations
was classified to net income (loss)&nbsp;from discontinued operations for the three months ended June
30, 2008, and a net loss of $0.8&nbsp;million was reclassified for the three months ended June&nbsp;30, 2007.
In the second quarter of 2008, NiSource recorded an estimated after-tax loss adjustment of $2.8
million for the disposition of Northern Utilities, Granite State Gas and Whiting Clean Energy.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->46<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><u>ITEM 2</u>. <u>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS&nbsp;(continued)</u>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Results of Operations</B><BR><B>
Six Months Ended June&nbsp;30, 2008</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Net Income</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource reported a net loss of $103.0&nbsp;million, or $0.38 loss per basic share, for the six months
ended June&nbsp;30, 2008, compared to net income of $243.4&nbsp;million, or $0.89 per basic share, for the
first six months 2007. Income from continuing operations was $210.4&nbsp;million, or $0.77 per basic
share, for the six months ended June&nbsp;30, 2008, compared to $235.4&nbsp;million, or $0.86 per basic
share, for the comparable 2007 period. Operating income was $511.4&nbsp;million, a decrease of $62.9
million from the same period in 2007. All per share amounts are basic earnings per share. Basic
average shares of common stock outstanding at June&nbsp;30, 2008 were 273.9&nbsp;million compared to 273.7
million at June&nbsp;30, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Net Revenues</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Total consolidated net revenues (gross revenues less cost of sales) for the six months ended June
30, 2008, were $1,711.5&nbsp;million, an $8.8&nbsp;million decrease from the same period last year. Net
revenues decreased primarily due to lower Electric Operations net revenues of $18.3&nbsp;million from
the comparable 2007 period. This decrease in Electric Operations net revenues was primarily due to
$14.1&nbsp;million of non-recoverable purchased power and non-recoverable MISO charges. This decrease
in Electric Operations net revenues was partially offset by higher net revenues within Gas
Transmission and Storage Operations of $8.4&nbsp;million. Gas Transmission and Storage Operations net
revenues increased due to higher subscriptions for firm transportation services of $11.3&nbsp;million
related to new interconnects along the Columbia Gulf pipeline system, deliveries from the Hardy
Storage field and incremental demand revenues on the Columbia Transmission system. These increases
were partially offset by insurance proceeds from a business interruption claim that improved last
year&#146;s results by $2.6&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Expenses</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Operating expenses for the first six months of 2008 were $1,203.7&nbsp;million, an increase of $52.5
million from the comparable 2007 period. This increase was primarily due to higher employee and
administrative expenses of $28.7&nbsp;million, due in part to adjustments that reduced benefit expense
by $8.3&nbsp;million during 2007, a $15.5&nbsp;million increase in
depreciation which includes an $8.3&nbsp;million
depreciation expense adjustment recorded by Northern Indiana during the second quarter of 2008, higher electric generation and maintenance expenses of $6.2
million and a $2.8&nbsp;million reversal of a reserve in the comparable 2007 period for a legal matter.
Operating expenses increases were partially offset by a $6.6&nbsp;million impairment charge recognized
in the comparable 2007 period related to base gas at a storage field and a $2.9&nbsp;million gain
recognized on the sale of certain Columbia Gulf offshore assets. The higher generation and
maintenance expenses were primarily attributable to a planned turbine and boiler maintenance and a
generator overhaul.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Other Income (Deductions)</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest expense, net was $179.2&nbsp;million for the first six months of 2008 compared to $197.5
million for the first six months of last year. This decrease of $18.3&nbsp;million was mainly due to
lower short-term interest rates and the retirement late in 2007 of high cost debt associated with
the Whiting Clean Energy facility. Other, net was a loss of $0.2&nbsp;million for the first half of
2008 compared to a loss of $3.0&nbsp;million for the comparable 2007 period due to lower costs
associated with the sale of accounts receivable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Income Taxes</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Income tax for the first six months of 2008 was $121.6&nbsp;million, a decrease of $16.8&nbsp;million
compared to the first six months of 2007 due primarily to lower pretax income. The effective tax
rate for the first six months of 2008 was 36.6% compared to 37.0% for the comparable period last
year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Discontinued Operations</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the six months ended June&nbsp;30, 2008, NiSource recognized a $214.5&nbsp;million loss from discontinued
operations compared to income from discontinued operations of $2.2&nbsp;million in the comparable 2007
period. This loss is primarily attributable to an adjustment to the reserve for the Tawney
litigation discussed previously. In addition, in the first quarter of 2008, NiSource began
accounting for the operations of Northern Utilities, Granite State Gas and Whiting Clean Energy as
discontinued operations. As such, net income of $4.6&nbsp;million from continuing operations was
classified to net income (loss)&nbsp;from discontinued operations for the six months ended June&nbsp;30,
2008, and net
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->47<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><u>ITEM
2</u>. <u>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS (continued)</u>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">income of $1.9&nbsp;million was reclassified for the six months ended June&nbsp;30, 2007, respectively. For
the six months ended June&nbsp;30, 2008, NiSource recorded an estimated after-tax loss of $98.9&nbsp;million
for the dispositions of Northern Utilities, Granite State Gas and Whiting Clean Energy.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Liquidity and Capital Resources</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A significant portion of NiSource&#146;s operations, most notably in the gas distribution, gas
transportation and electric businesses, is subject to seasonal fluctuations in cash flow. During
the heating season, which is primarily from November through March, cash receipts from gas sales
and transportation services typically exceed cash requirements. During the summer months, cash on
hand, together with the seasonal increase in cash flows from the electric business during the
summer cooling season and external short-term and long-term financing, is used to purchase gas to
place in storage for heating season deliveries, perform necessary maintenance of facilities, make
capital improvements in plant and expand service into new areas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Increased costs for natural gas placed in storage during the first half of 2008 and the increase in
unrecovered gas costs have required larger amounts of working capital than in previous years. While
we believe the credit facilities currently in place to finance our operating and capital
requirements are adequate, we will continue to monitor our liquidity position over the next few
months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Operating Activities</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net cash flows from operating activities for the six months ended June&nbsp;30, 2008 were $638.4
million, an increase of $50.5&nbsp;million from the first six months
of 2007. A $69.8&nbsp;million increase in deferred taxes was offset
by net changes in assets and liabilities. The weather and gas prices
significantly impact working capital. There were sources of cash generated from favorable weather
in certain jurisdictions and pricing impacts on inventory and
accounts payable. These
sources of cash were mostly offset by increases in unrecovered gas cost also driven by gas price increases.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Investing Activities</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cash capital expenditures of $422.8&nbsp;million during the first six months of 2008 were $98.9&nbsp;million
higher than the comparable 2007 period. The spending for the first six months primarily reflected
on-going system improvements and upgrades to maintain service and reliability. Capital spending is
expected to continue to increase in 2008 compared to last year, mainly for increased
integrity-management improvements in the Gas Transmission and Storage Operations segment and
expenditures to replace key components within the Electric Operations segment. Additionally,
growth projects in the Gas Transmission and Storage Operations segment as well as bare steel
replacement programs in the Gas Distribution Operations segment will contribute to higher capital
expenditures in 2008 relative to 2007 expenditures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Capital spending, including ongoing infrastructure investments, is projected to be more than $1
billion annually, beginning in 2008 and for the foreseeable future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On May&nbsp;30, 2008, Northern Indiana purchased the Sugar Creek generating facility for $329.7&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Proceeds from disposition of assets primarily included the Whiting Clean Energy sale proceeds of
$217.2&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Restricted cash activity was $136.5&nbsp;million and $73.5&nbsp;million for the first six months of 2008 and
2007, respectively, due to volatility in forward gas contracts, which resulted in decreased margin
deposits on open derivative contracts at June&nbsp;30, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Financing Activities</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Long-Term Debt. </I></B>On May&nbsp;15, 2008, NiSource Finance issued $500.0&nbsp;million of 6.80% unsecured notes
that mature January&nbsp;15, 2019 and $200.0&nbsp;million of 6.15% unsecured notes that mature on March&nbsp;1,
2013. The notes due in 2013 constitute a further issuance of the $345.0&nbsp;million 6.15% notes issued
February&nbsp;19, 2003, and will form a single series having an aggregate principal amount outstanding
of $545.0&nbsp;million.<BR>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->48<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><u>ITEM 2</u>. <u>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS&nbsp;(continued)</u>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Jasper County Pollution Control Bonds</I><B><I>. </I></B>Northern Indiana has seven series of Jasper County
Pollution Control Bonds with a total principal value of $254&nbsp;million currently outstanding. Prior
to March&nbsp;25, 2008, each of the series bore interest at rates established through auctions that took
place at either 7, 28, or 35&nbsp;day intervals. Between February&nbsp;13, 2008 and March&nbsp;5, 2008, Northern
Indiana received notice that six separate market auctions of four series of the Jasper County
Pollution Control Bonds had failed. As a result, those series representing an aggregate principal
amount of $112&nbsp;million of the Jasper County Pollution Control Bonds bore interest at default rates
equal to 15% or 18% per annum. Subsequent auctions were successful, but resulted in interest rates
between 5.13% and 11.0%, which are in excess of historical rates. These auction failures were
attributable to the recent lack of liquidity in the auction rate securities market, largely driven
by the recent turmoil in the bond insurance market. The Jasper County Pollution Control Bonds are
insured by either Ambac Assurance Corporation or MBIA Insurance Corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Northern Indiana converted all seven series of Jasper County Pollution Control Bonds from the
auction rate mode to a variable rate demand bond mode between March&nbsp;25, 2008 and April&nbsp;11, 2008 and
repurchased the bonds as part of the conversion process. As of April&nbsp;11, 2008, all of the Jasper
County Pollution Control Bonds were purchased and are held in Northern Indiana&#146;s treasury.
Northern Indiana is currently evaluating its options for reoffering the debt to the public.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Northern Indiana has recorded the repurchased bonds as an offset to long-term debt in the
Consolidated Balance Sheet as the debt is considered extinguished per SFAS No.&nbsp;140. Unamortized
debt expense previously recorded under deferred charges and other qualifies for regulatory
treatment and has been reclassified as a regulatory asset. The repurchase of the bonds will be
included in the financing activities section in the Condensed Statements of Consolidated Cash Flow.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Credit Facilities. </I></B>During July&nbsp;2006, NiSource Finance amended its $1.25&nbsp;billion five-year
revolving credit facility increasing the aggregate commitment level to $1.5&nbsp;billion, extending the
termination date by one year to July&nbsp;2011, and reduced the cost of borrowing. The amended facility
will help maintain a reasonable cushion of short-term liquidity in anticipation of continuing
volatile natural gas prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource Finance had outstanding credit facility borrowings of $506.0&nbsp;million at June&nbsp;30, 2008, at
a weighted average interest rate of 2.90%, and borrowings of $1,061.0&nbsp;million at December&nbsp;31, 2007,
at a weighted average interest rate of 5.43%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of June&nbsp;30, 2008 and December&nbsp;31, 2007, NiSource Finance had $94.3&nbsp;million and $110.4&nbsp;million of
stand-by letters of credit outstanding, respectively. At June&nbsp;30, 2008, $8.0&nbsp;million of the $94.3
million total outstanding letters of credit resided within a separate bi-lateral letter of credit
arrangement with Barclays Bank that NiSource Finance obtained during February&nbsp;2004. Of the
remaining $86.3&nbsp;million of stand-by letters of credit outstanding at June&nbsp;30, 2008, $83.0&nbsp;million
resided under NiSource Finance&#146;s five-year credit facility and $3.3&nbsp;million resided under an
uncommitted arrangement with another financial institution.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of June&nbsp;30, 2008, $911.0&nbsp;million of credit was available under the credit facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Sale of Trade Accounts Receivables. </I></B>On May&nbsp;14, 2004, Columbia of Ohio entered into an agreement to
sell, without recourse, substantially all of its trade receivables, as they originate, to CORC, a
wholly-owned subsidiary of Columbia of Ohio. CORC, in turn, is party to an agreement with Dresdner
Bank AG, also dated May&nbsp;14, 2004, under the terms of which it sells an undivided percentage
ownership interest in the accounts receivable to a commercial paper conduit. On July&nbsp;1, 2006, the
agreement was amended to increase the program limit from $300&nbsp;million to $350&nbsp;million. The
agreement currently expires on June&nbsp;26, 2009. As of June&nbsp;30, 2008, $100&nbsp;million of accounts
receivable had been sold by CORC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under the agreement, Columbia of Ohio acts as administrative agent, by performing record keeping
and cash collection functions for the accounts receivable sold by CORC. Columbia of Ohio receives
a fee, which provides adequate compensation, for such services.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->49<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><u>ITEM 2</u>. <u>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS&nbsp;(continued)</u>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On December&nbsp;30, 2003, Northern Indiana entered into an agreement to sell, without recourse, all of
its trade receivables, as they originate, to NRC, a wholly-owned subsidiary of Northern Indiana.
NRC, in turn, is party to an agreement with Citibank, N.A. under the terms of which it sells an
undivided percentage ownership interest in the accounts receivable to a commercial paper conduit.
The conduit can purchase up to $200&nbsp;million of accounts receivable under the agreement. NRC&#146;s
agreement with the commercial paper conduit has a scheduled expiration date of December&nbsp;19, 2008,
and can be renewed if mutually agreed to by both parties. As of June&nbsp;30, 2008, NRC had sold $156.5
million of accounts receivable. Under the arrangement, Northern Indiana may not sell any new
receivables if Northern Indiana&#146;s debt rating falls below BBB- or Baa3 at Standard and Poor&#146;s or
Moody&#146;s, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under the agreement, Northern Indiana acts as administrative agent, performing record keeping and
cash collection functions for the accounts receivable sold. Northern Indiana receives a fee, which
provides adequate compensation, for such services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Contractual Obligations. </I></B>As of June&nbsp;30, 2008, NiSource has $4.2&nbsp;million of estimated federal and
state income tax liabilities, including interest, recorded on its books in accordance with FIN 48.
If or when such amounts may be settled is uncertain and cannot be estimated at this time. NiSource
does not anticipate any significant changes to its liability for unrecognized tax benefits over the
next twelve months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Market Risk Disclosures</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Risk is an inherent part of NiSource&#146;s energy businesses. The extent to which NiSource properly
and effectively identifies, assesses, monitors and manages each of the various types of risk
involved in its businesses is critical to its profitability. NiSource seeks to identify, assess,
monitor and manage, in accordance with defined policies and procedures, the following principal
risks that are involved in NiSource&#146;s energy businesses: commodity market risk, interest rate risk
and credit risk. Risk management at NiSource is a multi-faceted process with oversight by the Risk
Management Committee that requires constant communication, judgment and knowledge of specialized
products and markets. NiSource&#146;s senior management takes an active role in the risk management
process and has developed policies and procedures that require specific administrative and business
functions to assist in the identification, assessment and control of various risks. In recognition
of the increasingly varied and complex nature of the energy business, NiSource&#146;s risk management
policies and procedures continue to evolve and are subject to ongoing review and modification.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Various analytical techniques are employed to measure and monitor NiSource&#146;s market and credit
risks, including VaR. VaR represents the potential loss or gain for an instrument or portfolio from
changes in market factors, for a specified time period and at a specified confidence level.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Commodity Price Risk</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource is exposed to commodity price risk as a result of its subsidiaries&#146; operations involving
natural gas and power. To manage this market risk, NiSource&#146;s subsidiaries use derivatives,
including commodity futures contracts, swaps and options. NiSource is not involved in speculative
energy trading activity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Commodity price risk resulting from derivative activities at NiSource&#146;s rate-regulated subsidiaries
is limited, since regulations allow recovery of prudently incurred purchased power, fuel and gas
costs through the rate-making process, including gains or losses on these derivative instruments.
If states should explore additional regulatory reform, these subsidiaries may begin providing
services without the benefit of the traditional rate-making process and may be more exposed to
commodity price risk. Some of NiSource&#146;s rate-regulated utility subsidiaries offer commodity price
risk products to its customers for which derivatives are used to hedge forecasted customer usage
under such products. These subsidiaries do not have regulatory recovery orders for these products
and are subject to gains and losses recognized in earnings due to hedge ineffectiveness.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Prior to the sale of the Whiting Clean Energy facility to BPAE, TPC entered in to power and gas
derivative contracts on behalf of WCE in order to manage the commodity price risk associated with
the WCE operations. As of June&nbsp;30, 2008, there were no derivative contracts outstanding associated
with managing price risk for Whiting Clean Energy.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->50<!-- /Folio -->
</DIV>




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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 2.</U> <U>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Interest Rate Risk</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource is exposed to interest rate risk as a result of changes in interest rates on borrowings
under revolving credit agreements, variable rate pollution control bonds and floating rate notes,
which have interest rates that are indexed to short-term market interest rates. NiSource is also
exposed to interest rate risk due to changes in interest rates on fixed-to-variable interest rate
swaps that hedge the fair value of long-term debt. Based upon average borrowings and debt
obligations subject to fluctuations in short-term market interest rates, an increase (or decrease)
in short-term interest rates of 100 basis points (1%) would have increased (or decreased) interest
expense by $5.2&nbsp;million and $11.6&nbsp;million for the quarter and six months ended June&nbsp;30, 2008,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Credit Risk</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Due to the nature of the industry, credit risk is a factor in many of NiSource&#146;s business
activities. NiSource&#146;s extension of credit is governed by a Corporate Credit Risk Policy. Written
guidelines approved by NiSource&#146;s Risk Management Committee document the management approval levels
for credit limits, evaluation of creditworthiness, and credit risk mitigation procedures.
Exposures to credit risks are monitored by the Corporate Credit Risk function which is independent
of commercial operations. Credit risk arises due to the possibility that a customer, supplier or
counterparty will not be able or willing to fulfill its obligations on a transaction on or before
the settlement date. For derivative contracts such as interest rate swaps, credit risk arises when
counterparties are obligated to pay NiSource the positive fair value or receivable resulting from
the execution of contract terms. Exposure to credit risk is measured in terms of both current
obligations and the market value of forward positions. Current credit exposure is generally
measured by the notional or principal value of obligations and direct credit substitutes, such as
commitments, stand-by letters of credit and guarantees. In determining exposure, NiSource
considers collateral that it holds to reduce individual counterparty credit risk.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Market Risk Measurement</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Market risk refers to the risk that a change in the level of one or more market prices, rates,
indices, volatilities, correlations or other market factors, such as liquidity, will result in
losses for a specified position or portfolio. NiSource calculates a one-day VaR at a 95%
confidence level for the gas marketing group that utilize a variance/covariance methodology. The
daily market exposure for the gas marketing portfolio on an average, high and low basis was $0.1
million, $0.2&nbsp;million and $0.1&nbsp;million during the second quarter of 2008, respectively.
Prospectively, management has set the VaR limit at $0.8&nbsp;million for gas marketing. Exceeding this
limit would result in management actions to reduce portfolio risk. Power and gas derivative
contracts entered into to manage price risk associated with Whiting Clean Energy are limited to
quantities surrounding the physical generation capacity of Whiting Clean Energy and the gas
requirements to operate the facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Refer to Note 10, &#147;Risk Management and Energy Marketing Activities,&#148; in the Notes to Condensed
Consolidated Financial Statements for further discussion of NiSource&#146;s risk management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Off Balance Sheet Arrangements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a part of normal business, NiSource and certain subsidiaries enter into various agreements
providing financial or performance assurance to third parties on behalf of certain subsidiaries.
Such agreements include guarantees and stand-by letters of credit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource has issued guarantees that support up to approximately $549.1&nbsp;million of commodity-related
payments for its current subsidiaries involved in energy marketing to satisfy requirements under
forward gas sales. These guarantees were provided to counterparties in order to facilitate
physical and financial transactions involving natural gas and electricity. To the extent
liabilities exist under the commodity-related contracts subject to these guarantees, such
liabilities are included in the Condensed Consolidated Balance Sheets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource has purchase and sales agreement guarantees totaling $77.5&nbsp;million, which guarantee
performance of the seller&#146;s covenants, agreements, obligations, liabilities, representations and
warranties under the agreements. No amounts related to the purchase and sales agreement guarantees
are reflected in the Condensed Consolidated Balance Sheets. Management believes that the
likelihood NiSource would be required to perform or otherwise incur any significant losses
associated with any of the aforementioned guarantees is remote.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->51<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 2.</U> <U>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource has other guarantees outstanding. Refer to Note 17-A, &#147;Guarantees and Indemnities,&#148; in
the Notes to Condensed Consolidated Financial Statements for additional information about
NiSource&#146;s off balance sheet arrangements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Recently Adopted Accounting Pronouncements</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>SFAS No.&nbsp;157 &#150; Fair Value Measurements. </I></B>In September&nbsp;2006, the FASB issued SFAS No.&nbsp;157 to define
fair value, establish a framework for measuring fair value and to expand disclosures about fair
value measurements. SFAS No.&nbsp;157 defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements. SFAS No.&nbsp;157 does not change the
requirements to apply fair value in existing accounting standards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under SFAS No.&nbsp;157, fair value refers to the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants in the market in
which the reporting entity transacts. The standard clarifies that fair value should be based on
the assumptions market participants would use when pricing the asset or liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To increase consistency and comparability in fair value measurements, SFAS No.&nbsp;157 establishes a
fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value
into three levels. The level in the fair value hierarchy disclosed is based on the lowest level of
input that is significant to the fair value measurement. The three levels of the fair value
hierarchy defined by SFAS No.&nbsp;157 are as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Level 1 inputs are quoted prices (unadjusted)&nbsp;in active markets for identical asset or
liabilities that the company has the ability to access as of the reporting date.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Level 2 inputs are inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly through corroboration
with observable market data.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Level 3 inputs are unobservable inputs, such as internally developed pricing models for
the asset or liability due to little or no market activity for the asset or liability.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SFAS No.&nbsp;157 became effective for NiSource as of January&nbsp;1, 2008. The provisions of SFAS No.&nbsp;157
are to be applied prospectively, except for the initial impact on the following three items, which
are required to be recorded as an adjustment to the opening balance of retained earnings in the
year of adoption: (1)&nbsp;changes in fair value measurements of existing derivative financial
instruments measured initially using the transaction price under EITF Issue No.&nbsp;02-3, (2)&nbsp;existing
hybrid financial instruments measured initially at fair value using the transaction price and (3)
blockage factor discounts. The adoption of SFAS No.&nbsp;157 did not have an impact on NiSource&#146;s
January&nbsp;1, 2008 balance of retained earnings and is not anticipated to have a material impact
prospectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2008, the FASB issued FSP FAS 157-2, which delays the effective date of SFAS No.&nbsp;157
for all nonrecurring fair value measurements of non-financial assets and liabilities until fiscal
years beginning after November&nbsp;15, 2008. NiSource has elected to defer the adoption of the
nonrecurring fair value measurement disclosures of non-financial assets and liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">See Note 11, &#147;Fair Value of Financial Assets and Liabilities,&#148; in the Notes to Condensed
Consolidated Financial Statements for additional information regarding the adoption of SFAS No.
157.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>SFAS No.&nbsp;158 &#150; Employers&#146; Accounting for Defined Benefit Pension and Other Postretirement Plans.</I></B>
In September&nbsp;2006, the FASB issued SFAS No.&nbsp;158 to improve existing reporting for defined benefit
postretirement
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->52<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 2.</U> <U>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">plans by requiring employers to recognize in the statement of financial position the overfunded or
underfunded status of a defined benefit postretirement plan, among other changes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the fourth quarter of 2006, NiSource adopted the provisions of SFAS No.&nbsp;158. Based on the
measurement of the various defined benefit pension and other postretirement plans&#146; assets and
benefit obligations at September&nbsp;30, 2006, the pretax impact of adopting SFAS No.&nbsp;158 decreased
intangible assets by $46.5&nbsp;million, decreased deferred charges and other assets by $1.1&nbsp;million,
increased regulatory assets by $538.8&nbsp;million, increased accumulated other comprehensive income by
$239.8&nbsp;million and increased accrued liabilities for postretirement and postemployment benefits by
$251.4&nbsp;million. In addition, NiSource recorded a reduction in deferred income taxes of
approximately $96&nbsp;million. With the adoption of SFAS No.&nbsp;158 NiSource determined that for certain
rate-regulated subsidiaries the future recovery of pension and other postretirement plans costs is
probable in accordance with the requirements of SFAS No.&nbsp;71. These rate-regulated subsidiaries
recorded regulatory assets and liabilities that would otherwise have been recorded to accumulated
other comprehensive income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;1, 2007, NiSource adopted the SFAS No.&nbsp;158 measurement date provisions requiring
employers to measure plan assets and benefit obligations as of the fiscal year-end. The pre-tax
impact of adopting the SFAS No.&nbsp;158 measurement date provisions increased deferred charges and
other assets by $9.4&nbsp;million, decreased regulatory assets by $89.6&nbsp;million, decreased retained
earnings by $11.3&nbsp;million, increased accumulated other comprehensive income by $5.3&nbsp;million and
decreased accrued liabilities for postretirement and postemployment benefits by $74.2&nbsp;million.
NiSource also recorded a reduction in deferred income taxes of approximately $2.6&nbsp;million. In
addition, 2007 expense for pension and postretirement benefits reflects the updated measurement
date valuations. Refer to Note 14, &#147;Pension and Other Postretirement Benefits,&#148; in the Notes to
Condensed Consolidated Financial Statements for additional information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>SFAS No.&nbsp;159 &#150; The Fair Value Option for Financial Assets and Financial Liabilities &#150; Including an
amendment of FASB Statement No.&nbsp;115. </I></B>In February&nbsp;2007, the FASB issued SFAS No.&nbsp;159 which permits
entities to choose to measure certain financial instruments at fair value that are not currently
required to be measured at fair value. Upon adoption, a cumulative adjustment would be made to
beginning retained earnings for the initial fair value option remeasurement. Subsequent unrealized
gains and losses for fair value option items will be reported in earnings. SFAS No.&nbsp;159 is
effective for fiscal years beginning after November&nbsp;15, 2007 and should not be applied
retrospectively, except as permitted for certain conditions for early adoption. NiSource has
chosen not to elect to measure any applicable financial assets or liabilities at fair value
pursuant to this standard when SFAS No.&nbsp;159 was adopted on January&nbsp;1, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>FSP FIN 39-1 &#151; FASB Staff Position Amendment of FASB Interpretation No.&nbsp;39. </I></B>In April&nbsp;2007, the
FASB posted FSP FIN 39-1 to amend paragraph 3 of FIN 39 to replace the terms <I>conditional contracts</I>
and e<I>xchange contracts </I>with the term <I>derivative instruments </I>as defined in SFAS No.&nbsp;133. This FSP
also amends paragraph 10 of FIN 39 to permit a reporting entity to offset fair value amounts
recognized for the right to reclaim cash collateral or the obligation to return cash collateral
against fair value amounts recognized for derivative instruments executed with the same
counterparty under a master netting arrangement. This FSP became effective for NiSource as of
January&nbsp;1, 2008. NiSource has not elected to net fair value amounts for its derivative instruments
or the fair value amounts recognized for its right to receive cash collateral or obligation to pay
cash collateral arising from those derivative instruments recognized at fair value, which are
executed with the same counterparty under a master netting arrangement. This is consistent with
NiSource&#146;s current accounting policy prior to the adoption of this amended standard. NiSource
discloses amounts recognized for the right to reclaim cash collateral within &#147;Restricted cash&#148; and
amounts recognized for the right to return cash collateral within current liabilities on the
Consolidated Balance Sheets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>FIN 48 &#150; Accounting for Uncertainty in Income Taxes. </I></B>In June&nbsp;2006, the FASB issued FIN 48 to
reduce the diversity in practice associated with certain aspects of the recognition and measurement
requirements related to accounting for income taxes. Specifically, this interpretation requires
that a tax position meet a &#147;more-likely-than-not recognition threshold&#148; for the benefit of an
uncertain tax position to be recognized in the financial statements and requires that benefit to be
measured at the largest amount of benefit that is greater than 50% likely of being realized upon
ultimate settlement. The determination of whether a tax position meets the more-likely-than-not
recognition threshold is based on whether it is probable of being sustained on audit by the
appropriate taxing
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->53<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 2.</U> <U>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">authorities, based solely on the technical merits of the position. Additionally, FIN 48 provides
guidance on derecognition, classification, interest and penalties, accounting in interim periods,
disclosure and transition. FIN 48 is effective for fiscal years beginning after December&nbsp;15, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;1, 2007, NiSource adopted the provisions of FIN 48. As a result of the implementation
of FIN 48, NiSource recognized a charge of $0.8&nbsp;million to the opening balance of retained
earnings. Refer to Note 13, &#147;Income Taxes,&#148; in the Notes to Condensed Consolidated Financial
Statements for additional information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Recently Issued Accounting Pronouncements</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>SFAS No.&nbsp;161 &#150; Disclosures about Derivative Instruments and Hedging &#151; an amendment of SFAS No.&nbsp;133.</I></B>
In March&nbsp;2008, the FASB issued SFAS No.&nbsp;161 to amend and expand the disclosure requirements of
SFAS No.&nbsp;133 with the intent to provide users of the financial statement with an enhanced
understanding of how and why an entity uses derivative instruments, how these derivatives are
accounted for and how the respective reporting entity&#146;s financial statements are affected. SFAS
No.&nbsp;161 is effective for fiscal years and interim periods beginning after November&nbsp;15, 2008, and
earlier application is encouraged. NiSource is currently reviewing the provisions of SFAS No.&nbsp;161
to determine the impact it may have on its disclosures within the Notes to Condensed Consolidated
Financial Statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>SFAS No.&nbsp;160 &#151; Noncontrolling Interests in Consolidated Financial Statements &#151; an amendment of ARB
No.&nbsp;51. </I></B>In December&nbsp;2007, the FASB issued SFAS No.&nbsp;160 to improve the relevance, comparability,
and transparency of the financial information that a reporting entity provides in its consolidated
financial statements regarding non-controlling ownership interests in a business and for the
deconsolidation of a subsidiary. SFAS No.&nbsp;160 is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December&nbsp;15, 2008 and earlier adoption is
prohibited. NiSource is currently reviewing the provisions of SFAS No.&nbsp;160 to determine the impact
it may have on the Condensed Consolidated Financial Statements and Notes to Condensed Consolidated
Financial Statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>SFAS No.&nbsp;141R &#150; Business Combinations. </I></B>In December&nbsp;2007, the FASB issued SFAS No.&nbsp;141R to improve
the relevance, representational faithfulness, and comparability of information that a reporting
entity provides in its financial reports regarding business combinations and its effects, including
recognition of assets and liabilities, the measurement of goodwill and required disclosures. SFAS
No.&nbsp;141R is effective for fiscal years, and interim periods within those fiscal years, beginning on
or after December&nbsp;15, 2008 and earlier adoption is prohibited. NiSource is currently reviewing the
provisions of SFAS No.&nbsp;141R to determine the impact on future business combinations.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->54<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 2.</U> <U>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT>

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RESULTS AND DISCUSSION OF SEGMENT OPERATIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Presentation of Segment Information</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource&#146;s operations are divided into four primary business segments; Gas Distribution Operations,
Gas Transmission and Storage Operations, Electric Operations, and Other Operations.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->55<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM
2.</U>&nbsp;<U>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)</U></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT><BR>
<B>Gas Distribution Operations</B></DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Three Months</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Six Months</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Ended June 30,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Ended June 30,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net Revenues</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Sales Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>1,029.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">858.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>3,476.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,913.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less: Cost of gas sold
(excluding depreciation and amortization)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>765.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">583.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,593.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,032.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>264.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">275.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>883.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">881.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating Expenses</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operation and maintenance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>182.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>422.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">405.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>57.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>114.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">(Gain) loss on sale of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>31.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>101.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Operating Expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>274.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">262.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>638.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">614.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating Income (Loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>$</B></TD>
    <TD align="right"><B>(10.0</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>244.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">267.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Revenues ($ in Millions)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Residential</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>490.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">433.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,919.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,716.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Commercial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>173.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">154.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>670.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">594.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Industrial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>69.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>171.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">160.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Off System</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>275.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>609.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">307.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>20.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>106.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,029.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">858.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,476.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,913.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Sales and Transportation (MMDth)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Residential</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>33.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>171.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Commercial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>26.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>104.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Industrial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>89.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>192.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">187.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Off System</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>23.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>60.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>172.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>529.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">506.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Heating Degree Days</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>451</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,130</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,124</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Normal Heating Degree Days</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>475</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,140</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,111</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>% Colder (Warmer) than Normal</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(5</B></TD>
    <TD nowrap><B>%)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>0</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Customers</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Residential</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,990,223</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,999,874</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Commercial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>275,937</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">275,484</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Industrial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,019</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,047</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>72</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,274,251</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,283,478</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource&#146;s natural gas distribution operations serve approximately 3.3&nbsp;million customers in seven
states: Ohio, Indiana, Pennsylvania, Massachusetts, Virginia, Kentucky and Maryland. The
regulated subsidiaries offer both traditional bundled services as well as transportation only for
customers that purchase gas from alternative suppliers. The operating results reflect the
temperature-sensitive nature of customer demand with 73% of annual residential and commercial
throughput affected by seasonality. As a result, segment operating income is higher in the first
and fourth quarters reflecting the heating demand during the winter season.</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->56<!-- /Folio --></DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 2.</U> <U>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS</U>
<U>OF OPERATIONS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT><BR>
<B>Gas Distribution Operations(continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Regulatory Matters</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Significant Rate Developments. </B>Columbia of Ohio filed a base rate case with PUCO on March&nbsp;3, 2008,
requesting an increase in base rates in excess of $80&nbsp;million annually. Columbia of Ohio is
seeking recovery of increased infrastructure rehabilitation costs, as well as the stabilization of
revenues and cost recovery through rate design. The case is currently pending, and is expected to
be resolved by the fourth quarter of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;28, 2008, Columbia of Pennsylvania filed a base rate case with the Pennsylvania Public
Utility Commission, seeking an increase of approximately $60&nbsp;million annually, effective October
28, 2008. Through this filing, Columbia of Pennsylvania sought to recover costs associated with
its significant infrastructure rehabilitation program, as well as stabilize revenues and cost
recovery through modifications to rate design. On July&nbsp;2, 2008, Columbia of Pennsylvania and all
interested parties filed a unanimous settlement with the Pennsylvania Public Utilities Commission.
If approved, the settlement authorizes Columbia to increase revenues by $41.5&nbsp;million annually, and
make certain other accounting, tariff and service changes. The Pennsylvania Public Utilities
Commission is expected to issue an order in this case by the third quarter of 2008, with new rates
expected to take effect during the fourth quarter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On October&nbsp;17, 2007, Bay State petitioned the DPU to allow the company to collect an additional
$7.5&nbsp;million in annual revenue related to usage reductions occurring since its last rate case. Bay
State also requested approval of a steel infrastructure tracker that would allow for recovery of
ongoing infrastructure replacement program investments. The DPU held hearings on this matter in
the first quarter of 2008 and issued an order denying Bay State&#146;s petition on April&nbsp;30, 2008.
NiSource has decided not to appeal this case, and is weighing other options at this time. On July
16, 2008, the DPU issued an order in its generic decoupling proceeding for gas utilities. NiSource
is still reviewing the order, but considers the DPU&#146;s action favorable and will evaluate the order
in light of the order in Bay State&#146;s recent case.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Cost Recovery and Trackers. </B>A significant portion of the distribution companies&#146; revenue is
related to the recovery of gas costs, the review and recovery of which occurs via standard
regulatory proceedings. All states require periodic review of actual gas procurement activity to
determine prudence and to permit the recovery of prudently incurred costs related to the supply of
gas for customers. NiSource distribution companies have historically been found prudent in the
procurement of gas supplies to serve customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain operating costs of the NiSource distribution companies are significant, recurring in
nature, and generally outside the control of the distribution companies. Some states allow the
recovery of such costs via cost tracking mechanisms. Such tracking mechanisms allow for
abbreviated regulatory proceedings in order for the distribution companies to implement charges and
recover appropriate costs. Tracking mechanisms allow for more timely recovery of such costs as
compared with more traditional cost recovery mechanisms. Examples of such mechanisms include gas
cost recovery adjustment mechanisms, tax riders, and bad debt recovery mechanisms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Comparability of Gas Distribution Operations line item operating results is impacted by these
regulatory trackers that allow for the recovery in rates of certain costs such as bad debt
expenses. Increases in the expenses that are the subject of trackers result in a corresponding
increase in net revenues and therefore have essentially no impact on total operating income
results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain of the NiSource distribution companies are embarking upon plans to replace significant
portions of their operating systems that are nearing the end of their useful lives. Those
companies are currently evaluating requests for increases in rates in order to allow recovery of
the additional capital expenditures required for such plans. Each LDC&#146;s approach to cost recovery
may be unique, given the different laws, regulations and precedent that exist in each jurisdiction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On April&nbsp;9, 2008, the PUCO issued an order approving, in all material respects, a joint Stipulation
submitted on behalf of Columbia of Ohio. This Stipulation is a result of a process that began on
April&nbsp;13, 2005 with a Commission ordered investigation into the type of gas risers installed in the
state, the conditions of installation and overall performance. The Stipulation provides for
establishment of accounting for and recovery of costs resulting
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->57<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 2.</U> <U>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS</U>
<U>OF OPERATIONS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT><BR>
<B>Gas Distribution Operations(continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">from the Staff&#146;s investigation; Columbia&#146;s performance of a survey to identify those customer-owned
risers on its system prone to failure; and related customer education and other program related
expenses. In addition this Stipulation provides for: Columbia&#146;s assumption of financial
responsibility for the replacement of all risers identified as prone to failure; repair or
replacement of hazardous customer owned service lines; and capitalization of this investment with
recovery to be addressed in future rate proceedings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On December&nbsp;28, 2007, Columbia of Ohio entered into a Stipulation with the Ohio Consumers&#146; Counsel
and PUCO Staff and other stakeholders resolving litigation concerning a pending Gas Cost Recovery
audit of Columbia of Ohio. The Stipulation calls for an accelerated pass back to customers of
$36.6&nbsp;million that will occur from January&nbsp;31, 2008 through January&nbsp;31, 2009, generated through
off-system sales and capacity release programs, the development of new energy efficiency programs
for introduction in 2009, and the development of a wholesale auction process for customer supply to
take effect in 2010. Approximately $19.2&nbsp;million was passed back through June&nbsp;2008. The
Stipulation also resolves issues related to pending and future Gas Cost Recovery Management
Performance audits through 2008. The PUCO approved this agreement on January&nbsp;23, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In July&nbsp;2008, Columbia of Ohio filed an application with the PUCO for permission to create a new
comprehensive energy conservation program. If approved by the PUCO, Columbia of Ohio&#146;s DSM program
would offer a wide range of services to residential and small commercial customers. Columbia of
Ohio proposes to recover the three-year, $24.9&nbsp;million cost of the DSM conservation program through
a rider that would be added to residential and small commercial customer bills beginning in May
2010. On July&nbsp;23, 2008, the PUCO issued an order approving Columbia of Ohio&#146;s proposal subject to
the approval of the DSM cost recovery rider proposed in the currently pending rate case, and any
other conditions that may be imposed in the rate case.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Customer Usage. </B>The NiSource distribution companies have experienced declining usage by customers,
due in large part to the sensitivity of sales to increases in commodity prices. A significant
portion of the LDCs&#146; operating costs are fixed in nature. Historically, rate design at the
distribution level has been structured such that a large portion of cost recovery is based upon
throughput, rather than in a fixed charge. Many of NiSource&#146;s LDCs are evaluating mechanisms that
would &#147;de-couple&#148; the recovery of fixed costs from throughput, and implement recovery mechanisms
that more closely link the recovery of fixed costs with fixed charges. Each of the states in which
the NiSource LDCs operate has different requirements regarding the procedure for establishing such
changes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Environmental Matters</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Currently, various environmental matters impact the Gas Distribution Operations segment. As of
June&nbsp;30, 2008, a reserve has been recorded to cover probable environmental response actions. Refer
to Note 17-C, &#147;Environmental Matters,&#148; in the Notes to Condensed Consolidated Financial Statements
for additional information regarding environmental matters for the Gas Distribution Operations
segment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Restructuring</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Payments made for all restructuring initiatives within Gas Distribution Operations amounted to $0.9
million for the second quarter and first six months of 2008, respectively, and the restructuring
liability remaining at June&nbsp;30, 2008 was zero. Refer to Note 4, &#147;Restructuring Activities,&#148; in the
Notes to Condensed Consolidated Financial Statements for additional information regarding
restructuring initiatives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Sale of Northern Utilities </U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On February&nbsp;15, 2008, NiSource reached a definitive agreement under which Unitil Corporation will
acquire NiSource subsidiaries Northern Utilities and Granite State Gas for $160&nbsp;million plus net
working capital at the time of closing. Northern Utilities is a local gas distribution company
serving 52 thousand customers in 44 communities in Maine and New Hampshire. In the first quarter
of 2008, NiSource began accounting for the operations of Northern Utilities as discontinued
operations. As such, net income of $0.6&nbsp;million and $6.3&nbsp;million from continuing operations for
Northern Utilities, which affected the Gas Distribution Operations segment, was classified to net
income from discontinued operations for the three months and six months ended June&nbsp;30, 2008,
respectively, and there was no income and $4.6&nbsp;million reclassified for the three months and six
months ended June&nbsp;30, 2007, respectively. Refer to Note 6, &#147;Discontinued Operations and Assets
Held for Sale,&#148; in the Notes to Condensed Consolidated Financial Statements for additional
information.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->58<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 2.</U> <U>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS</U>
<U>OF OPERATIONS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT><BR>
<B>Gas Distribution Operations(continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Weather</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In general, NiSource calculates the weather related revenue variance based on changing customer
demand driven by weather variance from normal heating degree-days. Normal is evaluated using
heating degree days across the NiSource distribution region. While the temperature base for
measuring heating degree-days (i.e. the estimated average daily temperature at which heating load
begins) varies slightly across the region, the NiSource composite measurement is based on 62
degrees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Weather in the Gas Distribution Operation&#146;s territories for the second quarter of 2008 was 5%
warmer than normal and 10% warmer than the comparable quarter in 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Weather in the Gas Distribution Operation&#146;s territories for the first six months of 2008 was normal
and comparable to the same period in 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Throughput</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Total volumes sold and transported of 172.7 MMDth for the second quarter of 2008 decreased slightly
by 0.7 MMDth from the same period last year. Decreases in residential and commercial volumes
resulting primarily from warmer weather were mostly offset by increased industrial usage in the
current period compared to the same period last year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Total volumes sold and transported of 529.2 MMDth for the first six months of 2008 increased 23.1
MMDth from the same period last year. This increase in volume was primarily due to higher
off-system sales and increased industrial usage in the first six months of 2008 compared to the
same period last year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Net Revenues</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net revenues for the three months ended June&nbsp;30, 2008 were $264.1&nbsp;million, a decrease of $11.2
million from the same period in 2007, due primarily to warmer weather of approximately $8&nbsp;million
and decreased revenues from the implementation of the Columbia of Ohio Stipulation entered into
with the Ohio Consumers&#146; Counsel and PUCO at the end of 2007, partially offset by regulatory
increases from rate proceedings and other service programs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net revenues for the six months ended June&nbsp;30, 2008 were $883.0&nbsp;million, an increase of $1.4
million from the same period in 2007, due primarily to increased residential usage of $8.6&nbsp;million,
increased net revenues of $5.2&nbsp;million from regulatory and service programs and a $2.8&nbsp;million gas
cost adjustment, mostly offset by warmer weather of approximately $14&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Operating Income</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the second quarter of 2008, Gas Distribution Operations reported an operating loss of $10.0
million compared to operating income of $13.3&nbsp;million for the same period in 2007. The decrease in
operating income was attributable to higher operating expenses of $12.1&nbsp;million and lower net
revenues described above. Operating expense increases were primarily due to higher employee and
administrative expenses of $6.0&nbsp;million, higher uncollectible accounts of $2.5&nbsp;million, a $2.1
million loss on the disposition of a building and $2.0&nbsp;million in increased depreciation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the first six months of 2008, Gas Distribution Operations reported operating income of $244.9
million compared to operating income of $267.4&nbsp;million for the same period in 2007. The decrease
in operating income was primarily attributable to increased operating expenses of $23.9&nbsp;million.
Operating expense increases were primarily due to higher employee and administrative expenses of
$9.0&nbsp;million, increased property and other taxes of $2.1&nbsp;million, higher depreciation expense of
$2.8&nbsp;million and increased rent and lease expense of $2.1&nbsp;million.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->59<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 2.</U> <U>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS</U>
<U>OF OPERATIONS (continued)</U></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT><BR>
<B>Gas Transmission and Storage Operations</B></DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Three Months</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Six Months</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Ended June 30,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Ended June 30,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating Revenues</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Transportation revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>150.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">144.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>335.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">326.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Storage revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>44.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>90.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Operating Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>196.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>427.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">418.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Cost of gas
sold (excluding
depreciation and
amortization)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>196.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>427.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">418.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating Expenses</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operation and maintenance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>78.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>163.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">156.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>58.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Impairment
and gain on sale of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center"><B>(3.0)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(4.0</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Operating Expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>119.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>248.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">249.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity Earnings in Unconsolidated Affiliates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating Income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>77.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">67.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>182.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">174.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Throughput (MMDth)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="17">Columbia Transmission</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Market Area</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>166.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">186.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>553.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">572.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="17">Columbia Gulf</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Mainline</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>166.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>326.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">326.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-haul</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>70.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>145.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Columbia Pipeline Deep Water</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Crossroads Gas Pipeline</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>19.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intrasegment eliminations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(137.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(161.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(269.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(290.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>275.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">264.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>775.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">720.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource&#146;s Gas Transmission and Storage Operations segment consists of the operations of Columbia
Transmission, Columbia Gulf, Columbia Deep Water, Crossroads Pipeline, and Central Kentucky
Transmission. In total NiSource owns a pipeline network of approximately 16 thousand miles
extending from offshore in the Gulf of Mexico to New York and the eastern seaboard. The pipeline
network serves customers in 16 northeastern, mid-Atlantic, midwestern and southern states, as well
as the District of Columbia. In addition, the NiSource Gas Transmission and Storage Operations
segment operates one of the nation&#146;s largest underground natural gas storage systems.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>NiSource Energy Partners, L.P.</U></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On December&nbsp;21, 2007, NiSource Energy Partners, L.P., an MLP and subsidiary of NiSource, filed a
Form S-1 registration statement with the SEC in which it proposed making an initial public offering
of common units in the MLP and NiSource proposed contributing its interest in Columbia Gulf to the
MLP. NiSource management believes the formation of an MLP is a natural complement to NiSource&#146;s
gas transmission and storage growth strategy, and should provide NiSource access to competitively
priced capital to support future growth investment. Due to the damage sustained at Columbia Gulf&#146;s
Hartsville, Tennessee, compressor station, following the tornados at the facility as described
previously, as well as overall financial market conditions, the timing of the initial public
offering is not likely to occur during 2008.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Millennium Pipeline Project</U></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Millennium received FERC approval for a pipeline project, in which Columbia Transmission is
participating, which will provide access to a number of supply and storage basins and the Dawn,
Ontario trading hub. The reconfigured project, which was approved by the FERC in a certificate
order issued December&nbsp;21, 2006, will begin at an</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->60<!-- /Folio --></DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 2.</U> <U>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS</U>
<U>OF OPERATIONS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT><BR>
<B>Gas Transmission and Storage Operations(continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">interconnect with Empire, an existing pipeline that originates at the Canadian border and extends
easterly towards Syracuse, New York. Empire will construct a lateral pipeline southward to connect
with Millennium near Corning, New York. Millennium will extend eastward to an interconnect with
Algonquin at Ramapo, New York. The Millennium partnership is currently made up of the following
companies: Columbia Transmission (47.5%), DTE Millennium (26.25%), and KeySpan Millennium (26.25%).
Columbia Transmission is the operator.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The reconfigured Millennium project relies on completion of some or all of several other related
pipeline projects proposed by Empire, Algonquin, and Iroquois collectively referred to as the
&#147;Companion Pipelines.&#148; The December&nbsp;21, 2006 certificate order also granted the necessary project
approvals to the Companion Pipelines. Construction began on June&nbsp;22, 2007 with a projected
in-service date in the fourth quarter of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On August&nbsp;29, 2007, Millennium entered into a bank credit agreement to finance the construction of
the Millennium Pipeline project. As a condition precedent to the credit agreement, NiSource issued
a guarantee securing payment for its indirect ownership interest percentage of amounts borrowed
under the financing agreement up until such time as the amounts payable under the agreement are
paid in full. The permanent financing is expected to be completed in the first quarter of 2009.
Additional information on this guarantee is provided in Note 16-A, &#147;Guarantees and Indemnities,&#148; in
the Notes to Condensed Consolidated Financial Statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Hardy Storage Project</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Hardy Storage completed its first full year of operations, receiving customer injections and
withdrawing natural gas from its new underground natural gas storage facility in West Virginia.
Injections this year will allow the field to deliver up to 150,000 Dth of natural gas per day
during the 2008-2009 winter heating season. Customers withdrew over 5.44 Bcf from the storage
field during the 2007-2008 winter heating season. When fully operational in 2009, the field will
have a working storage capacity of 12&nbsp;billion cubic feet, delivering more than 176,000 Dth of
natural gas per day. Hardy Storage is a joint venture of subsidiaries of Columbia Transmission and
Piedmont.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Columbia Transmission, the operator of Hardy Storage, is expanding its natural gas transmission
system by 176,000 Dth per day to provide the capacity needed to deliver Hardy Storage supplies to
customer markets. Construction of these transmission facilities has been completed with the
facilities being placed into service during the first half of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Florida Gas Transmission Expansion Project</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">An open season to solicit interest and contracts for expanded capacity on Columbia Gulf&#146;s system
for delivery to Florida Gas Transmission was held in late 2007 and contracts for 100,000 Dth per
day of capacity were executed. The remaining 80,000 Dth per day of capacity is expected to be sold
under firm contracts during the fourth quarter of 2008. This project was placed into service in
May&nbsp;2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Eastern Market Expansion Project</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On May&nbsp;3, 2007, Columbia Transmission filed a certificate application before the FERC for approval
to expand its facilities to provide additional storage and transportation services and to replace
certain existing facilities. This Eastern Market Expansion project is projected to add 97,000 Dth
per day of storage and transportation deliverability and is fully subscribed on a 15-year
contracted firm basis. On January&nbsp;14, 2008, the FERC issued a favorable order which granted a
certificate to construct the project and the project is expected to be in service by spring 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Appalachian Expansion Project</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On February&nbsp;29, 2008, Columbia Transmission filed an application before the FERC for approval to
build a new 9,470 horsepower compressor station in West Virginia. The Appalachian Expansion
Project will add 100,000 Dth per day of transportation capacity and is fully subscribed on a
15-year contracted firm basis. The project is expected to be in service in the fourth quarter of
2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Ohio Storage Project</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On June&nbsp;24, 2008, Columbia Transmission filed an application before the FERC for approval to expand
two of its Ohio storage fields for additional capacity of 6,900,000 Dth and 103,400 Dth per day of
daily deliverability. If
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->61<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 2.</U> <U>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS</U>
<U>OF OPERATIONS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT><BR>
<B>Gas Transmission and Storage Operations(continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">required approvals are granted as requested, construction would begin in 2009 and the expanded
facilities would be placed in service by the end of 2009. The expansion capacity is 58% contracted
on a long-term, firm basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>New Penn Transmission Project</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the first quarter of 2008, Columbia Transmission concluded a successful open season to gauge
customer interest in a new pipeline system to provide 500,000 Dth per day of firm service from
storage facilities near Leidy, PA to a new interconnection with Millennium Pipeline in Steuben
County, New York in 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Centerville Expansion Project </U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">An open season to solicit interest and contracts for expanded capacity on Columbia Gulf&#146;s system
for delivery to Southern Natural Gas and the Louisiana intrastate pipeline market was held during
the first quarter of 2008, and contracts for 60,000 Dth per day of capacity were executed. The
remaining 175,000 Dth per day of capacity is expected to be sold under firm contracts prior to the
facilities being placed into service. The project is expected to be placed into service in late
2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Sales and Percentage of Physical Capacity Sold</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Columbia Transmission and Columbia Gulf compete for transportation customers based on the type of
service a customer needs, operating flexibility, available capacity and price. Columbia Gulf and
Columbia Transmission provide a significant portion of total transportation services under firm
contracts and derive a smaller portion of revenues through interruptible contracts, with management
seeking to maximize the portion of physical capacity sold under firm contracts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Firm service contracts require pipeline capacity to be reserved for a given customer between
certain receipt and delivery points. Firm customers generally pay a &#147;capacity reservation&#148; fee
based on the amount of capacity being reserved regardless of whether the capacity is used, plus an
incremental usage fee when the capacity is used. Annual capacity reservation revenues derived from
firm service contracts generally remain constant over the life of the contract because the revenues
are based upon capacity reserved and not whether the capacity is actually used. The high
percentage of revenue derived from capacity reservation fees mitigates the risk of revenue
fluctuations within the Gas Transmission and Storage Operations segment due to changes in near-term
supply and demand conditions. For the six months ended June&nbsp;30, 2008 approximately 90.4% of the
transportation revenues were derived from capacity reservation fees paid under firm contracts and
5.5% of the transportation revenues were derived from usage fees under firm contracts. This is
compared to approximately 89.0% of the transportation revenues derived from capacity reservation
fees paid under firm contracts and 5.5% of transportation revenues derived from usage fees under
firm contracts for the six months ended June&nbsp;30, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interruptible transportation service is typically short term in nature and is generally used by
customers that either do not need firm service or have been unable to contract for firm service.
These customers pay a usage fee only for the volume of gas actually transported. The ability to
provide this service is limited to available capacity not otherwise used by firm customers, and
customers receiving services under interruptible contracts are not assured capacity in the pipeline
facilities. Gas Transmission and Storage Operations provides interruptible service at competitive
prices in order to capture short term market opportunities as they occur and interruptible service
is viewed by management as an important strategy to optimize revenues from the gas transmission
assets. For the six months ended June&nbsp;30, 2008 and 2007, approximately 4.1% and 5.5% of the
transportation revenues were derived from interruptible contracts, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Significant FERC Developments</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Columbia Gulf and Columbia Transmission are cooperating with the FERC on an informal, non-public
investigation of certain operating practices regarding tariff services offered by those companies.
Although the companies are continuing to cooperate with the FERC in an effort to reach a
consensual settlement, it is likely that any settlement will require the payment of fines or
refunds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Hartsville and Delhi Compressor Stations</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On February&nbsp;5, 2008, tornados struck Columbia Gulf&#146;s Hartsville Compressor Station in Macon County,
Tennessee. The damage to the facility forced Columbia Gulf to declare force majeure because no gas
was flowing through this portion of the pipeline system while a facility assessment was being
performed and the current contractual
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->62<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 2.</U> <U>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS</U>
<U>OF OPERATIONS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT><BR>
<B>Gas Transmission and Storage Operations(continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">transportation agreements of 2.156 Bcf per day could not be met. Since that time Columbia Gulf has
constructed both temporary and permanent facilities at Hartsville and has restored gas flow to
2.156 Bcf per day. During the next 12 to 18&nbsp;months the temporary facilities that were constructed
to restore system capabilities will be replaced with a permanent solution. This capacity would
remain in place while the permanent solution is implemented. NiSource expects the majority of the
reconstruction costs during the 18 to 24&nbsp;month period for the compressor station and ancillary
facilities plus business interruption losses during the twelve month period from the event will be
recoverable through insurance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On December&nbsp;14, 2007, Columbia Gulf&#146;s Line 100 ruptured approximately two miles north of its Delhi
Compressor Station in Louisiana. The damage to the pipeline forced Columbia Gulf to declare force
majeure because no gas was flowing through this portion of the pipeline system on Lines 100, 200
and 300 while a facility assessment was performed. As a result the current contractual
transportation agreements of 2.156 Bcf per day could not be met. By December&nbsp;15, 2007 Lines 200
and 300 were returned to service and gas flow was restored to 2.0 Bcf per day on December&nbsp;16, 2007.
On December&nbsp;19, 2007, the U.S. Department of Transportation issued a Corrective Action Order which
was applicable to Line 100 from the Rayne, LA Compressor Station to Leach, KY. The Order required
Columbia Gulf to develop a remedial work plan, which included assessments on Line 100 using in-line
inspection tools. The Order also required a 20% reduction in pressure on Line 100 from the Rayne
Compressor Station to the Corinth Compressor Station which resulted in a reduction in gas flow on
December&nbsp;21, 2007 to 1.6 Bcf per day. The next day the capacity was increased to 1.75 Bcf per day.
Between December&nbsp;22, 2007 and February&nbsp;5, 2008 the capacity varied between 1.6 and 1.75 Bcf per
day as a result of remediation work on Line 100. On July&nbsp;1, 2008, Columbia Gulf received
permission from the U.S. Department of Transportation to restore full pressure on Line 100
pipeline. NiSource expects to recover a portion of the pipeline replacement costs plus business
interruption losses through insurance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Sale of Columbia Gulf&#146;s Offshore Assets</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On June&nbsp;27, 2008, Columbia Gulf sold a portion of Columbia Gulf&#146;s offshore assets to Tennessee Gas
Pipeline Company for $7.5&nbsp;million. A receivable was recorded in June&nbsp;2008 and the payment was
received on July&nbsp;1, 2008. A gain of $2.9&nbsp;million was recorded on the sale during the second quarter
of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Sale of Granite State Gas</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On February&nbsp;15, 2008, NiSource reached a definitive agreement under which Unitil Corporation will
acquire NiSource subsidiaries Northern Utilities and Granite State Gas for $160&nbsp;million plus net
working capital at the time of closing. Granite State Gas is an 86-mile FERC regulated gas
transmission pipeline primarily located in Maine and New Hampshire. In the first quarter of 2008,
NiSource began accounting for the operations of Granite State Gas as discontinued operations. As
such, net income of $0.3&nbsp;million and $0.5&nbsp;million from continuing operations for Granite State Gas,
which affected the Gas Transmission and Storage Operations segment, was classified to net income
from discontinued operations for the three months and six months ended June&nbsp;30, 2008, respectively,
and a net loss of $0.3&nbsp;million and zero was reclassified for the three months and six months ended
June&nbsp;30, 2007, respectively. Refer to Note 6, &#147;Discontinued Operations and Assets Held for Sale,&#148;
in the Notes to Condensed Consolidated Financial Statements for additional information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Environmental Matters</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Currently, various environmental matters impact the Gas Transmission and Storage Operations
segment. As of June&nbsp;30, 2008, a reserve has been recorded to cover probable environmental response
actions. Refer to Note 17-C, &#147;Environmental Matters,&#148; in the Notes to Condensed Consolidated
Financial Statements for additional information regarding environmental matters for the Gas
Transmission and Storage Operations segment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Restructuring</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Payments made for all restructuring initiatives within Gas Transmission and Storage Operations
amounted to $0.2&nbsp;million and $0.5&nbsp;million for the second quarter and first six months of 2008,
respectively, and the restructuring liability remaining at June&nbsp;30, 2008 was $0.8&nbsp;million. Refer
to Note 4, &#147;Restructuring Activities,&#148; in the Notes to Condensed Consolidated Financial Statements
for additional information regarding restructuring initiatives.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->63<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 2.</U> <U>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS</U>
<U>OF OPERATIONS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT><BR>
<B>Gas Transmission and Storage Operations(continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Throughput</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Throughput for the Gas Transmission and Storage Operations segment totaled 275.7 MMDth for the
second quarter of 2008, compared to 264.5 MMDth for the same period in 2007. The increase of 11.2
MMDth is due primarily to incremental volumes transported from new interconnects along the Columbia
Gulf pipeline system.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Throughput for the Gas Transmission and Storage Operations segment totaled 775.1 MMDth for the
first six months of 2008, compared to 720.1 MMDth for the same period in 2007. The increase of
55.0 MMDth is due primarily to incremental volumes transported from new interconnects along the
Columbia Gulf pipeline system.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Net Revenues</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net revenues were $196.0&nbsp;million for the second quarter of 2008, an increase of $6.4&nbsp;million from
the same period in 2007, primarily due to increased subscriptions for firm transportation services
of $6.3&nbsp;million related to new interconnects along the Columbia Gulf pipeline system, deliveries
from the Hardy Storage field and incremental demand revenues on the Columbia Transmission system.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net revenues were $427.3&nbsp;million for the first six months of 2008, an increase of $8.4&nbsp;million from
the same period in 2007, primarily due to increased subscriptions for firm transportation services
of $11.3&nbsp;million related to new interconnects along the Columbia Gulf pipeline system, deliveries
from the Hardy Storage field and incremental demand revenues on the Columbia Transmission system.
These increases in net revenues were partially offset by insurance proceeds from a business
interruption claim that improved last year&#146;s results by $2.6&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Operating Income</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Operating income was $77.9&nbsp;million for the second quarter of 2008 compared to $67.8&nbsp;million in the
second quarter of 2007. Operating income increased $10.1&nbsp;million as a result of higher net
revenues described above and a decrease in operating expenses of $5.8&nbsp;million. Operating expenses
decreased as a result of a $6.6&nbsp;million impairment charge recognized in the comparable 2007 period
related to base gas at a storage field, a $2.9&nbsp;million gain recognized on the sale of certain
Columbia Gulf offshore assets, $1.3&nbsp;million in lower uncollectible accounts and lower outside
service cost. These decreases in operating expenses were partially offset by higher employee and
administrative costs of $3.4&nbsp;million and a $2.8&nbsp;million reversal of a reserve in the comparable
2007 period for a legal matter. Equity earnings decreased by
$2.1&nbsp;million due to lower AFUDC and operating earnings
from Hardy Storage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Operating income was $182.7&nbsp;million for the first six months of 2008 compared to $174.4&nbsp;million in
the first quarter of 2007. Operating income increased $8.3&nbsp;million as a result of higher net
revenues described above and a decrease in operating expenses of $1.5&nbsp;million, partially offset by
a decrease in equity earnings of $1.6&nbsp;million. Operating expenses decreased as a result of a $6.6
million impairment charge recognized in the comparable 2007 period related to base gas at a storage
field, a $2.9&nbsp;million gain recognized on the sale of certain Columbia Gulf offshore assets, $1.3
million in lower uncollectible accounts and lower insurance cost. These decreases in operating
expenses were partially offset by higher employee and administrative costs of $5.2&nbsp;million and a
$2.8&nbsp;million reversal of a reserve in the comparable 2007 period for a legal matter. Equity
earnings decreased by $1.6&nbsp;million due to higher interest
expense associated with Millennium.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->64<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 2.</U> <U>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)</U></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT><BR>
<B>Electric Operations</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Three Months</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Six Months</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Ended June, 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Ended June 30,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net Revenues</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Sales revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>341.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">334.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>674.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">661.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less: Cost of sales (excluding depreciation and amortization)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>139.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>289.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">258.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>201.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>384.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">403.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating Expenses</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operation and maintenance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>78.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>161.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>58.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>105.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>28.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Operating Expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>150.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>295.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">265.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating Income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>50.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">64.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>89.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">137.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Revenues ($ in millions)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Residential</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>80.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>167.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Commercial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>88.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>167.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Industrial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>126.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>269.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">256.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Wholesale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>26.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>27.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>43.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>341.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">334.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>674.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">661.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Sales (Gigawatt Hours)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Residential</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>745.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">793.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,552.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,639.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Commercial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>952.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,005.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,896.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,933.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Industrial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,376.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,331.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,890.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,673.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Wholesale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>185.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">207.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>329.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">345.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>64.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,289.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,371.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,733.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,650.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cooling Degree Days</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>201</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>201</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Normal Cooling Degree Days</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>230</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>230</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">232</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>% Warmer (Colder) than Normal</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(13</B></TD>
    <TD nowrap><B>%)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">35</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(13</B></TD>
    <TD nowrap><B>%)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">35</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Electric Customers</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Residential</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>399,276</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">398,073</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Commercial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>53,095</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,299</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Industrial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,498</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,516</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Wholesale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>754</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">757</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>455,629</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">453,649</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource generates and distributes electricity, through its subsidiary Northern Indiana, to
approximately 456 thousand customers in 20 counties in the northern part of Indiana. The operating
results reflect the temperature-sensitive nature of customer demand with annual sales affected by
temperatures in the northern part of Indiana. As a result, segment operating income is generally
higher in the second and third quarters, reflecting cooling demand during the summer season.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Electric Supply</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On November&nbsp;1, 2007, Northern Indiana filed its bi-annual IRP with the IURC. The plan showed the
need to add approximately 1,000 mw of new capacity. Additionally, during November&nbsp;2007, Northern
Indiana filed a CPCN as
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->65<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 2.</U> <U>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS</U>
<U>OF OPERATIONS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT><BR>
<B>Electric Operations(continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">well as contracts to purchase power generated with renewable energy, specifically with wind. The
CPCN requested approval to purchase two CCGT power plants &#151; the Whiting Clean Energy facility owned
by PEI, a wholly-owned subsidiary of NiSource, and the Sugar Creek facility located in west central
Indiana and owned by LS Power Group. On December&nbsp;22, 2007, BPAE indicated it would exercise a
contractual right of first refusal to purchase the Whiting Clean Energy facility and subsequently
purchased the facility on June&nbsp;30, 2008. As a result, on January&nbsp;25, 2008, Northern Indiana filed
an amended CPCN to address just the Sugar Creek CCGT facility. On May&nbsp;30, 2008, Northern Indiana
purchased the facility for $329.7&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Regulatory Matters</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Significant Rate Developments. </B>Northern Indiana filed a petition for new electric base rates and
charges on June&nbsp;27, 2008 and will file its detailed case on or before August&nbsp;29, 2008. The
prehearing conference to establish the procedural schedule for the electric rate case was held on
July&nbsp;29, 2008. Initial hearings are anticipated in January&nbsp;2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2002, Northern Indiana settled certain regulatory matters related to an electric rate
review. On September&nbsp;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&nbsp;million each year. The credits will continue at
approximately the same annual level and per the same methodology, until the IURC enters a base rate
order that approves revised Northern Indiana electric rates. The order included a rate moratorium
that expired on July&nbsp;31, 2006. The order also provides that 60% of any future earnings beyond a
specified earnings level will be retained by Northern Indiana. The revenue credit is calculated
based on electric usage; therefore, in times of high usage the credit may be more than $55.1
million. Credits amounting to $25.1&nbsp;million and $27.7&nbsp;million were recognized for electric
customers for the first half of 2008 and 2007, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>MISO. </B>As part of Northern Indiana&#146;s participation in the MISO transmission service and wholesale
energy market, certain administrative fees and non-fuel costs have been incurred. IURC orders have
been issued authorizing the deferral for consideration in a future rate case proceeding of the
administrative fees and certain non-fuel related costs incurred after Northern Indiana&#146;s rate
moratorium, which expired on July&nbsp;31, 2006. During the first half of 2008 non-fuel cost of $1.5
million were deferred in accordance with the aforementioned orders. In addition, administrative,
FERC and other fees of $3.4&nbsp;million were deferred. In the first half of 2008 and 2007, MISO costs
of $4.9&nbsp;million and $6.3&nbsp;million, respectively, were deferred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On April&nbsp;25, 2006, the FERC issued an order on the MISO&#146;s Transmission and Energy Markets Tariff,
stating that MISO had violated the tariff on several issues including not assessing revenue
sufficiency guarantee charges on virtual bids and offers and for charging revenue sufficiency
guarantee charges on imports. The FERC ordered MISO to perform a resettlement of these charges
back to the start of the Day 2 Market. The resettlement began on June&nbsp;9, 2007 and ended in January
2008. Certain charge types included in the resettlement were originally considered to be non-fuel
and were recorded as regulatory assets, in accordance with previous IURC orders allowing deferral
of certain non-fuel MISO costs. During the fourth quarter 2007, based on precedent set by an IURC
ruling for another Indiana utility, Northern Indiana reclassified these charges, totaling $16.7
million, as fuel and included them in the fuel cost recovery mechanism in its latest FAC filing.
Prior to the hearing for FAC-78 on April&nbsp;17, 2008, several intervenors objected to a portion of the
$16.7&nbsp;million and Northern Indiana agreed to remove $7.6&nbsp;million from the FAC filing. This amount
represents the portion of the resettlement costs related to periods prior to December&nbsp;9, 2005. The
$7.6&nbsp;million was recorded as a reduction to net revenues in the first quarter of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Northern Indiana is an active stakeholder in the process used in designing, testing and
implementing the ASM and in developing the surrounding business practices. On January&nbsp;18, 2008,
Northern Indiana as part of a Joint Petition among several other Indiana utilities, filed a request
to the IURC to participate in ASM and seek approval of timely cost recovery for the associated
costs of participating. The evidentiary hearing is planned for September&nbsp;4, 2008. At this time,
Northern Indiana is unable to determine what impact the ASM will have on its operations or cash
flows.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->66<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 2.</U> <U>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS</U>
<U>OF OPERATIONS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT><BR>
<B>Electric Operations(continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Cost Recovery and Trackers. </B>A significant portion of the Northern Indiana&#146;s revenue is related to
the recovery of fuel costs to generate power and the fuel costs related to purchased power. These
costs are recovered through a FAC, a standard, quarterly, &#147;summary&#148; regulatory proceeding in
Indiana.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On May&nbsp;30, 2008, Northern Indiana purchased the Sugar Creek facility for $329.7&nbsp;million. The Sugar
Creek facility is a CCGT located in West Terre Haute, Indiana. Sugar Creek has a plant capacity
rating of 535 mw. Sugar Creek has transmission access to and is able to participate in both the
MISO and PJM Interconnection wholesale electricity markets. The plant is currently committed to
the PJM Interconnection market until May&nbsp;31, 2010. The purchase was in response to Northern
Indiana&#146;s need to add approximately 1,000 mw of new capacity, as filed in its bi-annual IRP with
the IURC on November&nbsp;1, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The IRP included a commitment to using renewable energy, and a subsequent filing was made with the
IURC, requesting approval for Northern Indiana to enter into power purchase contracts for
wind-generated power in Iowa and South Dakota, and requesting full recovery of all associated
costs. On July&nbsp;24, 2008, the IURC issued an order approving Northern Indiana&#146;s proposed purchase
power agreement with Iberdrola Renewables. The agreement provides Northern Indiana the opportunity
to purchase 100 mw of wind power commencing in early 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The IURC had issued an order on May&nbsp;28, 2008 approving the purchase of Sugar Creek, but denied
Northern Indiana&#146;s request for deferral of depreciation expense and carrying costs related to the
plant, beginning with the acquisition date, on the basis that the facility would not be used and
useful property under traditional regulation until the facility was operating inside of MISO. The
order also denied Northern Indiana&#146;s request for alternative regulatory treatment of the plant,
based on incomplete presentation of evidence, but allowed for the establishment of a subdocket to
allow for the proper presentation and consideration of alternative regulatory treatment. On June
6, 2008, Northern Indiana filed its (A)&nbsp;Verified Petition for Rehearing; (B)&nbsp;Request for
Establishment of a Subdocket for Presentation and Consideration of an Alternative Regulatory Plan;
and (C)&nbsp;Motion for Consolidation (a single document) in Cause No.&nbsp;43396. The subdocket requests
the same deferral accounting treatment that was requested for depreciation expense and carrying
costs associated with the Sugar Creek facility. An order in the subdocket proceeding is expected in
the third quarter of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;30, 2008, the IURC approved a settlement agreement which was reached in October&nbsp;2007
with the OUCC, LaPorte County and a group of Northern Indiana industrial customers to resolve
questions relating to purchased power costs in the period from January&nbsp;1, 2006 through September
30, 2007. The terms of the settlement called for Northern Indiana to make a one-time payment of
$33.5&nbsp;million. A reserve for the entire amount was recorded in the third quarter of 2007 and the
refund was made to customers via the FAC in the periods of February through July&nbsp;2008. As part of
this agreement, Northern Indiana implemented a new &#147;benchmarking standard,&#148; that became effective
in October&nbsp;2007, which defines the price above which purchased power costs must be absorbed by
Northern Indiana and are not permitted to be passed on to customers. The benchmark is based upon
the costs of power generated by a hypothetical natural gas fired CCGT using gas purchased and
delivered to Northern Indiana. During the first half of 2008, the amount of purchased power costs
exceeding the benchmark amounted to $6.5&nbsp;million, which was recognized as a net reduction of
revenues. The agreement also contemplated Northern Indiana adding generating capacity to its
existing portfolio and that the benchmark would be adjusted as new capacity is added. It was
anticipated that the addition of the Sugar Creek capacity would trigger a change in the benchmark
beginning in June&nbsp;2008. However, based on the IURC order in the CPCN as described above, the Sugar
Creek capacity will not be considered until the plant is operating inside of MISO and therefore the
benchmark is unchanged.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On November&nbsp;26, 2002, Northern Indiana received approval from the IURC for an ECT. Under the ECT,
Northern Indiana is permitted to recover (1)&nbsp;AFUDC and a return on the capital investment expended
by Northern Indiana to implement IDEM&#146;s NOx 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&#146;s November&nbsp;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. In December&nbsp;2006, Northern Indiana filed a petition with the IURC for appropriate cost
treatment and recovery of emission control construction needed to address the Phase I CAIR
requirements of the Indiana Air Pollution Control Board&#146;s CAIR rules that became effective on
February&nbsp;25, 2007. On July&nbsp;3, 2007, Northern Indiana received an IURC order issuing a CPCN for the
CAIR and CAMR Phase I
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->67<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 2.</U> <U>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS</U>
<U>OF OPERATIONS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT><BR>
<B>Electric Operations(continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Compliance Plan Projects, estimated to cost approximately $23&nbsp;million. Northern Indiana will
include the CAIR and CAMR Phase I Compliance Plan costs to be recovered in the semi-annual and
annual ECRM and EERM filing six months after construction costs begin. On December&nbsp;19, 2007, the
IURC approved Northern Indiana&#146;s latest compliance plan with the estimate of $338.5&nbsp;million. On
April&nbsp;2, 2008, the IURC approved ECR-11 for $252.6&nbsp;million in capital expenditures (net of
accumulated depreciation) and EER-5 for $14.1&nbsp;million in expenses, for which billing began in May
2008. In July&nbsp;2008, Northern Indiana filed ECR-12 for $265.2&nbsp;million in capital expenditures (net
of accumulated depreciation), requesting approval for new billing factors beginning November&nbsp;2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On October&nbsp;27, 2006, Indiana Gasification, LLC, Vectren Energy Delivery of Indiana, Citizens Gas &#038;
Coke Utility and Northern Indiana filed a joint petition at the IURC seeking approval for Indiana
Gasification, LLC to construct a coal gasification facility and the respective utilities to enter
into long-term contracts to purchase the energy output of the plant, both gas and electricity.
This filing was based upon a Letter of Intent that was entered into by the parties, but subject to
finalization of a contract and regulatory approval. On December&nbsp;12, 2007, Citizens Gas &#038; Coke
Utility filed a Motion with the IURC to withdraw from the petition. The parties have had frequent
negotiations during the two year period, but have not reached a definitive agreement. Northern
Indiana anticipates filing a notice with the IURC on the status of the project in the third quarter
of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Environmental Matters</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Currently, various environmental matters impact the Electric Operations segment. As of June&nbsp;30,
2008, a reserve has been recorded to cover probable environmental response actions. Refer to Note
17-C, &#147;Environmental Matters,&#148; in the Notes to Condensed Consolidated Financial Statements for
additional information regarding environmental matters for the Electric Operations segment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Sales</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Electric Operations sales quantities for the second quarter of 2008 were 4,289.5 gwh, compared to
4,371.2 gwh in the second quarter of 2007. The decrease was primarily due to lower residential,
commercial and wholesale volumes partially offset by higher industrial volumes for the second
quarter of 2008 compared to the same period last year. The lower volumes were partially the result
of cooler weather compared to last year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Electric Operations sales quantities for the first half of 2008 were 8,733.8 gwh, compared to
8,650.2 gwh in the first half of 2007. The increase was primarily due to higher industrial volumes
for the first six months of 2008 compared to the same period last year partially offset by lower
residential, commercial and wholesale volumes. The lower volumes were partially the result of
cooler weather compared to last year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Net Revenues</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the second quarter of 2008, Electric Operations net revenues of $201.4&nbsp;million decreased by $3.3
million from the comparable 2007 period. This decrease was primarily due to the impact of cooler
weather of approximately $4&nbsp;million, $2.7&nbsp;million of non-recoverable purchased power and lower
emission allowance sales, partially offset by higher industrial margins of $1.6&nbsp;million, the timing
of revenue credits of $1.5&nbsp;million and incremental revenues from the new Sugar Creek plant of $1.3
million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the first half of 2008, Electric Operations net revenues of $384.8&nbsp;million decreased by $18.3
million from the comparable 2007 period. This decrease was due to $14.1&nbsp;million of non-recoverable
purchased power and non-recoverable MISO charges, lower residential and commercial margins of
approximately $13&nbsp;million and the impact of cooler weather of approximately $4&nbsp;million. These
decreases in net revenues were partially offset by higher industrial usage and margins of
approximately $8&nbsp;million and the timing of revenue credits of $2.7&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Operating Income</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Operating income for the first quarter of 2008 was $50.7&nbsp;million, a decrease of $14.1&nbsp;million from
the same period in 2007. The decrease in operating income was due to lower net revenues described
above and increased operating expenses of $10.8&nbsp;million. Operating expenses increased primarily
due to an $11.8&nbsp;million increase in depreciation which includes
an $8.3&nbsp;million depreciation expense adjustment recorded by Northern Indiana during the second quarter of 2008 and higher employee and administrative costs of $3.8&nbsp;million. The depreciation expense
non-cash adjustment will not materially impact depreciation charges in future periods.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->68<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 2.</U> <U>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS</U>
<U>OF OPERATIONS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT><BR>
<B>Electric Operations(continued)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Operating income for the first half of 2008 was $89.1&nbsp;million, a decrease of $48.7&nbsp;million from the
same period in 2007. The decrease in operating income was due to lower net revenues described
above and increased operating expenses of $30.4&nbsp;million. Operating expenses increased primarily
due to higher employee and administrative costs of $17.2&nbsp;million, an $11.8&nbsp;million increase in
depreciation which includes an $8.3&nbsp;million depreciation expense adjustment recorded by Northern Indiana during
the second quarter of 2008 and higher electric
generation and maintenance expenses of $6.2&nbsp;million. Part of the increase in employee and
administrative costs were due to adjustments that reduced benefit expenses by $5.7&nbsp;million during
2007. The higher generation and maintenance expenses were primarily attributable to a planned
turbine and boiler maintenance and a generator overhaul.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->69<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 2.</U> <U>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS</U>
<U>OF OPERATIONS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT><BR>
<B>Other Operations</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Three Months</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Six Months</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Ended June, 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Ended June, 30</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(in millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net Revenues</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Products and services revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>285.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">242.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>644.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">564.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less: Cost of products purchased (excluding
depreciation and amortization)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>277.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">235.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>629.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">549.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating Expenses</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operation and maintenance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss on sale of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Operating Expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating Income (Loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.2</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Other Operations segment participates in energy-related services including gas marketing, power
and gas risk management and ventures focused on distributed power generation technologies,
including fuel cells and storage systems. Additionally, the Other Operations segment is involved
in real estate and other businesses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Lake Erie Land Company, Inc.</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Lake Erie Land, which is wholly-owned by NiSource, is in the process of selling real estate over a
10-year period as a part of an agreement reached in June, 2006 with a private real estate
development group. Part of the sale transaction included the assets of the Sand Creek Golf Club,
and NiSource began accounting for the operations of the Sand Creek Golf Club as discontinued
operations at that time. NiSource estimates the property to be sold to the private developer
during the next twelve months and classifies these assets as assets of discontinued operations and
held for sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>NDC Douglas Properties</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NDC Douglas Properties, a subsidiary of NiSource Development Company, is in the process of exiting
some of its low income housing investments. One of these investments was disposed of during 2007
and two other investments are expected to be sold or disposed of during 2009. NiSource has
accounted for the investments to be sold as assets and liabilities of discontinued operations and
held for sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Net Revenues</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net revenues of $8.1&nbsp;million for the second quarter of 2008 increased by $1.3&nbsp;million from the
second quarter of 2007, as a result of higher commercial and industrial gas marketing revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net revenues of $15.3&nbsp;million for the first half of 2008 increased by $0.3&nbsp;million from the first
half of 2007, as a result of increased commercial and industrial gas marketing revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Operating Income (Loss)</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other Operations reported operating income of $0.7&nbsp;million for the second quarter of 2008, versus
an operating loss of $0.4&nbsp;million for the comparable 2007 period. The increase in operating income
resulted from higher net revenues described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other Operations reported operating income of $0.2&nbsp;million for the first half of 2008, versus an
operating loss of $0.2&nbsp;million for the comparable 2007 period. The increase in operating income
resulted primarily from increased net revenues described above.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->70<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 3.</U> <U>QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For a discussion regarding quantitative and qualitative disclosures about market risk see
&#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations &#151; Market
Risk Disclosures.&#148;
</DIV>
<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 4.</U> <U>CONTROLS AND PROCEDURES</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Evaluation of Disclosure Controls and Procedures</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NiSource&#146;s chief executive officer and its principal financial officer, after evaluating the
effectiveness of NiSource&#146;s disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)), have concluded based on the evaluation required by paragraph (b)&nbsp;of
Exchange Act Rules&nbsp;13a-15 and 15d-15 that, as of the end of the period covered by this report,
NiSource&#146;s disclosure controls and procedures are considered effective.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Changes in Internal Controls</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the fourth quarter of 2007, Northern Indiana detected an error in its unbilled revenue
calculation and revised its estimate for unbilled electric and gas revenues. Over a period of
several years, Northern Indiana used incorrect customer usage data to calculate its unbilled
revenue and effective controls from both a design and operating effectiveness perspective were not
in place to ensure the appropriate calculation and recording of unbilled revenues. As a result,
this correction reduced net revenues by $25.5&nbsp;million in the fourth quarter of 2007. The unbilled
revenue estimates were never billed to customers. This error resulted in a material weakness and
internal controls were determined to be ineffective for the fourth quarter of 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the first quarter of 2008, management designed and implemented internal controls to ensure
the adequate calculation and recording of Northern Indiana&#146;s unbilled revenues. Management tested
the operating effectiveness of these controls during the second quarter and found them to be
effective in preventing a material error going forward. Management has concluded that the material
weakness has been remediated as of the second quarter, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other than the internal control changes referenced above, there have been no other changes in
NiSource&#146;s internal control over financial reporting during the fiscal period covered by this
report that has materially affected, or is reasonably likely to affect, NiSource&#146;s internal control
over financial reporting.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->71<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>PART II</B></U>
</DIV>

<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>LEGAL PROCEEDINGS </U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>1.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Stand Energy Corporation, et al. v. Columbia Gas Transmission Corporation, et al., Kanawha
County Court, West Virginia</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On July&nbsp;14, 2004, Stand Energy Corporation filed a complaint in Kanawha County Court in West
Virginia. The complaint contains allegations against various NiSource companies, including
Columbia Transmission and Columbia Gulf, and asserts that those companies and certain &#147;select
shippers&#148; engaged in an &#147;illegal gas scheme&#148; that constituted a breach of contract and
violated state law. The &#147;illegal gas scheme&#148; complained of by the plaintiffs relates to the
Columbia Transmission and Columbia Gulf gas imbalance transactions that were the subject of
the FERC enforcement staff investigation and subsequent settlement approved in October&nbsp;2000.
Columbia Transmission and Columbia Gulf filed a Motion to Dismiss on September&nbsp;10, 2004. In
October&nbsp;2004, however, the plaintiffs filed their Second Amended Complaint, which clarified
the identity of some of the &#147;select shipper&#148; defendants and added a federal antitrust cause of
action. To address the issues raised in the Second Amended Complaint, the Columbia companies
revised their briefs in support of the previously filed motions to dismiss. In June&nbsp;2005, the
Court granted in part and denied in part the Columbia companies&#146; motion to dismiss the Second
Amended Complaint. The Columbia companies have filed an answer to the Second Amended
Complaint. On December&nbsp;1, 2005, Plaintiffs filed a motion to certify this case as a class
action. The Columbia companies filed their opposition to this motion in March&nbsp;2008. All
briefing has been completed. Oral argument was heard on June&nbsp;3, 2008, and the parties are
awaiting a decision by the Court. Discovery continues on the merits.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>United States of America ex rel. Jack J. Grynberg v. Columbia Gas Transmission Corporation,
et al., U.S. District Court, E.D. Louisiana</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The plaintiff filed a complaint in 1995, under the False Claims Act, on behalf of the United
States of America, against approximately seventy pipelines, including Columbia Gulf and
Columbia Transmission. The plaintiff claimed that the defendants had submitted false royalty
reports to the government by mismeasuring natural gas produced on Federal land and Indian
lands. The Plaintiff&#146;s original complaint was dismissed without prejudice for misjoinder of
parties and for failing to plead fraud with specificity. In 1997, the plaintiff filed over
sixty-five new False Claims Act complaints against over 330 defendants in numerous Federal
courts. One of those complaints was filed in the Federal District Court for the Eastern
District of Louisiana against Columbia and thirteen affiliated entities (collectively, the
&#147;Columbia defendants&#148;). This complaint repeats the mismeasurement claims previously made and
adds valuation claims alleging that the defendants undervalued natural gas for royalty
purposes in various ways, including sales to affiliated entities at artificially low prices.
This case was transferred, along with most of the other new Grynberg cases, to Federal court
in Wyoming in 1999.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On October&nbsp;20, 2006, the Federal District Court issued an Order granting the Columbia
defendants&#146; motion to dismiss for lack of subject matter jurisdiction. The Plaintiff has
appealed the dismissal of the Columbia defendants to the United States Court of Appeals for
the Tenth Circuit. All briefing has been completed and oral argument is scheduled for
September of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>3.&nbsp;Tawney, et al. v. Columbia Natural Resources, Inc., Roane County, WV Circuit Court</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Plaintiffs, who are West Virginia landowners, filed a lawsuit in early 2003 against CNR
alleging that CNR underpaid royalties on gas produced on their land by improperly deducting
post-production costs and not paying a fair value for the gas. In December&nbsp;2004, the court
granted plaintiffs&#146; motion to add NiSource and Columbia as defendants. Plaintiffs also
claimed that the defendants fraudulently concealed the deduction of post-production charges.
The court certified the case as a class action that includes any person who, after July&nbsp;31,
1990, received or is due royalties from CNR (and its predecessors or successors) on lands
lying within the boundary of the state of West Virginia. All claims by the government of the
United States are excluded from the class. Although NiSource sold CNR in 2003, NiSource
remains obligated to manage this litigation and for the majority of any damages ultimately
awarded to the plaintiffs. On January&nbsp;27, 2007, the jury hearing the case returned a verdict
against all defendants in the amount of $404.3&nbsp;million; this is comprised of $134.3&nbsp;million in
compensatory damages and $270
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->72<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1.</U> <U>LEGAL PROCEEDINGS (continued)</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">million in punitive damages. In January&nbsp;2008, the Defendants filed their petition for appeal, and
on March&nbsp;24, 2008, the Defendants filed their amended petition for appeal with the West Virginia
Supreme Court of Appeals. On May&nbsp;22, 2008, the West Virginia Supreme Court of Appeals refused the
Defendants petition for appeal. The Defendants are preparing a petition to the United States
Supreme Court for a writ of certiorari; the petition to the United States Supreme Court is due
August&nbsp;20, 2008. Given the West Virginia Court&#146;s refusal of the appeal, NiSource has adjusted its
reserve in the second quarter of 2008 to reflect the portion of the trial court judgment for which
NiSource would be responsible, inclusive of interest. This amount is included in &#147;Legal and
environmental reserves,&#148; on the Condensed Consolidated Balance Sheet as of June&nbsp;30, 2008.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>4.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>John Thacker, et al. v. Chesapeake Appalachia, L.L.C., U.S. District Court, E.D. Kentucky</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On February&nbsp;8, 2007, Plaintiff filed this purported class action, alleging that Chesapeake
Appalachia, L.L.C. (&#147;Chesapeake&#148;) has failed to pay royalty owners the correct amounts
pursuant to the provisions of their oil and gas leases covering real property located within
the state of Kentucky. Columbia has assumed the defense of Chesapeake in this matter pursuant
to the provisions of the Stock Purchase Agreement dated July&nbsp;3, 2003, among Columbia,
NiSource, and Triana Energy Holding, Inc., Chesapeake&#146;s predecessor in interest. Plaintiffs
filed an amended complaint on March&nbsp;19, 2007, which, among other things, added NiSource and
Columbia as defendants. On March&nbsp;31, 2008, the Court denied the Defendants&#146; Motions to
Dismiss; the Defendants filed their answers to the complaint on April&nbsp;25, 2008. On June&nbsp;3,
2008, the Plaintiffs moved to certify a class consisting of all persons entitled to payment of
royalty by Chesapeake under leases operated by Chesapeake at any point after February&nbsp;5, 1992,
on real property in Kentucky. Defendants&#146; response was filed on July&nbsp;18, 2008. The court has
scheduled oral argument on class certification for August&nbsp;14, 2008.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>5.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Environmental Protection Agency Notice of Violation</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On September&nbsp;29, 2004, the EPA issued an NOV to Northern Indiana for alleged violations of the
CAA and the Indiana SIP. The NOV alleges that modifications were made to certain boiler units
at three of Northern Indiana&#146;s generating stations between the years of 1985 and 1995 without
obtaining appropriate air permits for the modifications. Northern Indiana is currently in
discussions with the EPA regarding possible resolutions to this NOV.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>6.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Pennsylvania Department of Environmental Protection Proposed Consent Order and Agreement</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On February&nbsp;21, 2007, Pennsylvania Department of Environmental Protection provided
representatives of Columbia Transmission with a proposed Consent Order and Agreement covering
an unmanned equipment storage site located in rural southwest Pennsylvania. The site in
question is also subject to the EPA&#146;s AOC (Refer to Note 17-C, &#147;Environmental Matters,&#148; in the
Notes to Condensed Consolidated Financial Statements for additional information regarding the
AOC). Pennsylvania Department of Environmental Protection&#146;s proposed order alleges that
Columbia Transmission has violated the state&#146;s Clean Streams Act and Solid Waste Management
Act by discharging petroleum products onto the property and into the waters of the state. In
addition to requiring remediation and monitoring activities at the site, the state has
proposed penalties for these violations. Columbia Transmission plans to engage in further
discussions with the agency regarding the proposed order, including the rationale for the
proposed penalty. The site is currently undergoing remediation via an EPA approved Remedial
Action Work Plan. The Pennsylvania Department of Environmental Protection has provided
written notification that it will not attempt to stop the EPA approved work and will seek the
aforementioned Order after the remedy is completed.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->73<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<A name="113"></A>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 1A.</U> <U> RISK FACTORS</U></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There were no material changes from the risk factors disclosed in NiSource&#146;s 2007 Form 10-K filed
on March&nbsp;5, 2008.</DIV>

<A name="114"></A>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 2.</U> <U>UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS</U></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">None</DIV>

<A name="115"></A>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 3.</U> <U>DEFAULTS UPON SENIOR SECURITIES</U></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">None</DIV>

<A name="116"></A>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 4.</U> <U>SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</U></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On May&nbsp;13, 2008, NiSource held its annual meeting of stockholders. On March&nbsp;17, 2008, there were
274,177,301 shares of common stock outstanding and entitled to vote in person or by proxy at the
meeting.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The number and percentage of votes received for, and the number of votes withheld, from each
nominee for director are set forth below:</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="36%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Votes FOR as a</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Votes AGAINST</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>votes</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>percent of Votes</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Number of votes</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>as a percent of</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>FOR</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Cast</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>AGAINST</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Votes Cast</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Richard A. Abdoo</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">227,457,226</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">97.72</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,310,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.28</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Steven C. Beering</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">225,880,296</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">97.04</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,887,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.96</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deborah S. Coleman</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">227,393,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">97.69</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,373,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.31</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dennis E. Foster</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220,517,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">94.74</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,249,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.26</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Michael E. Jesanis</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">222,175,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">95.45</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,591,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.55</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Marty R. Kittrell</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220,430,113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">94.70</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,337,203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.30</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">W. Lee Nutter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">222,486,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">95.58</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,280,926</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.42</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ian M. Rolland</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">213,602,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">91.77</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,164,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.23</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Robert C. Skaggs, Jr.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">222,143,560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">95.44</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,623,756</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.56</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Richard L. Thompson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220,611,428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">94.78</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,155,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.22</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Carolyn Y. Woo</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">215,061,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">92.39</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,705,426</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.61</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Accordingly, each of the nominees for director were elected to serve as director for a term of
one year until 2009.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following votes were cast at the Annual Meeting on Proposal II to ratify the appointment
of Deloitte &#038; Touche LLP as the Company&#146;s independent registered public accountants for the year
2008.</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->74<!-- /Folio --></DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><u>ITEM 4.</u> <u> SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (continued)</u></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT></DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="34%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Votes FOR as a percentage of Votes</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Number of votes FOR</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>present at the meeting</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Votes AGAINST</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Votes ABSTAIN</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">229,485,620 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">98.59</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">876,747</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,405,349</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Accordingly, the ratification to appoint Deloitte &#038; Touche LLP as the Company&#146;s independent public
accountants for the year 2008 was approved.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following votes were cast at the Annual Meeting on Proposal III to consider the board of
director&#146;s proposal to amend the Company&#146;s Certificate of Incorporation to eliminate all
supermajority voting requirements</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="31%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Votes FOR as a percentage of shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>entitled to vote at the</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Number of votes FOR</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Meeting</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Votes AGAINST</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Votes ABSTAIN</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">226,058,315</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">82.45</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3,563,307</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3,146,094</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Accordingly, the proposal to amend the Company&#146;s Certificate of Incorporation to eliminate all
supermajority voting requirements was approved.</DIV>
<DIV align="left">
<A name="117"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 5.</U> <U>OTHER INFORMATION</U></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">None</DIV>
<DIV align="left">
<A name="118"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ITEM 6.</U> <U>EXHIBITS</U></DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(3.1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amended and Restated Certificate of Incorporation, as amended.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(3.2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Bylaws of NiSource Inc., as amended and restated through May&nbsp;20, 2008 (incorporated by
reference to Exhibit&nbsp;3 to the NiSource Inc. Current Report on Form 8-K filed on May&nbsp;22,
2008).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(31.1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certification of Robert C. Skaggs, Jr., Chief Executive Officer, pursuant to Section&nbsp;302
of the Sarbanes-Oxley Act of 2002. *</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(31.2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certification of Michael W. O&#146;Donnell, Chief Financial Officer, pursuant to Section&nbsp;302
of the Sarbanes-Oxley Act of 2002. *</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(32.1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certification of Robert C. Skaggs, Jr., Chief Executive Officer, pursuant to Section&nbsp;906
of the Sarbanes-Oxley Act of 2002 (furnished herewith). *</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(32.2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certification of Michael W. O&#146;Donnell, Chief Financial Officer, pursuant to Section&nbsp;906
of the Sarbanes-Oxley Act of 2002 (furnished herewith). *</TD>
</TR>
</table>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>
<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent"></TD>
    <TD width="3%" nowrap align="left">*</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Exhibit filed herewith.</TD>
</TR>

</TABLE></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to Item&nbsp;601(b)(4)(iii) of Regulation&nbsp;S-K, NiSource hereby agrees to furnish the SEC, upon
request, any instrument defining the rights of holders of long-term debt of NiSource not filed as
an exhibit herein. No such instrument authorizes long-term debt securities in excess of 10% of the
total assets of NiSource and its subsidiaries on a consolidated basis.</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->75<!-- /Folio --></DIV>

</div>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">
<A name="119"></A>

<DIV style="font-size: 10pt; margin-top: 12pt"><U>SIGNATURE</U></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>NiSource Inc.</B></FONT></DIV>

<DIV style="font-size: 10pt; margin-top: 6pt">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.</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top">&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="center">    NiSource Inc.
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">(Registrant)&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top">&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD> Date:  August 4, 2008&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000">/s/ Jeffrey W. Grossman
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Jeffrey W. Grossman&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap>Vice President and Controller<BR>(Principal Accounting Officer<BR>
and Duly Authorized Officer)&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->76<!-- /Folio --></DIV>



</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.1
<SEQUENCE>2
<FILENAME>c34232exv3w1.htm
<DESCRIPTION>EXHIBIT 3.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 3.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 18pt"><B>Exhibit 3.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>AMENDED AND RESTATED</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CERTIFICATE OF INCORPORATION</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>OF</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>NISOURCE INC.</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>As Amended Through</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>May&nbsp;20, 2008</B>

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">AMENDED AND RESTATED
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">CERTIFICATE OF INCORPORATION

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">OF

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">NISOURCE INC.

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;I<BR>
Name</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The name of this Corporation is NiSource Inc.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;II<BR>
Registered Office</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registered office of the Corporation in the State of Delaware is located at Corporation
Service Company, 2711 Centerville Road, Suite&nbsp;400, in the City of Wilmington, County of New Castle.
The name of its registered agent is Corporation Service Company, and the address of said
registered agent is 2711 Centerville Road, Suite&nbsp;400, in said city.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;III<BR>
Statement of Purpose</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The nature of the business to be conducted and the purposes of the Corporation are to engage
in any lawful act or activity for which corporations may be organized under the Delaware General
Corporation Law, as amended.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;IV<BR>
Classes of Capital Stock</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The total number of shares of all classes of stock which the Corporation shall have authority
to issue is Four hundred twenty million (420,000,000), of which Twenty million (20,000,000) shares
of the par value $.01 each are to be of a class designated Preferred Stock and Four hundred million
(400,000,000) shares of the par value of $.01 each are to be of a class designated Common Stock.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>A. Common Stock</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;Subject to the powers, preferences and other special rights afforded Preferred Stock by the
provisions of this Article&nbsp;IV or resolutions adopted pursuant hereto, the holders of the Common
Stock shall be entitled to receive, to the extent permitted by Delaware law, such
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">dividends as may from time to time be declared by the Board of Directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;Except as otherwise required by Delaware law and as otherwise provided in this Article&nbsp;IV
and resolutions adopted pursuant hereto with respect to Preferred Stock, and subject to the
provisions of the Bylaws of the Corporation, as from time to time amended, with respect to the
closing of the transfer books and the fixing of a record date for the determination of stockholders
entitled to vote, the holders of the Common Stock shall exclusively possess voting power for the
election of directors and for all other purposes, and the holders of the Preferred Stock shall have
no voting power and shall not be entitled to any notice of any meeting of stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;Except as may otherwise be required by law, this Amended and Restated Certificate of
Incorporation or the provisions of the resolution or resolutions as may be adopted by the Board of
Directors pursuant to this Article&nbsp;IV with respect to Preferred Stock, each holder of Common Stock,
and each holder of Preferred Stock, if entitled to vote on such matter, shall be entitled to one
vote in respect of each share of Common Stock or Preferred Stock, as the case may be, held by such
holder on each matter voted upon by stockholders, and any such right to vote shall not be
cumulative.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;Any action required or permitted to be taken by the stockholders of the Corporation must be
effected at an annual or special meeting of stockholders of the Corporation and may not be effected
by any consent in writing by such stockholders. Except as otherwise required by law and subject to
the rights of the holders of any class or any series of Preferred Stock, special meetings of
stockholders of the Corporation may be called only by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of authorized directors (whether or not there
exist any vacancies in previously authorized directorships at the time any such resolution is
presented to the Board for adoption).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;In the event of the voluntary or involuntary liquidation, dissolution, distribution of
assets or winding-up of the Corporation, after distribution in full of the preferential amounts, if
any, to be distributed to the holders of Preferred Stock, as set forth in this Article&nbsp;IV or the
resolutions adopted with respect to such series under this Article&nbsp;IV, holders of Common Stock
shall be entitled to receive all of the remaining assets of the Corporation of whatever kind
available for distribution to the stockholders ratably and in proportion to the number of shares of
Common Stock held by them respectively. The Board of Directors may distribute in kind to the
holders of Common Stock such remaining assets of the Corporation or may sell, transfer, otherwise
dispose of all or any part of such remaining assets to any other corporation, trust or other entity
and receive payment therefor in cash, stock or obligations of such other corporation, trust or
other entity, or a combination thereof, and may set all or make any part of the consideration so
received and distributed or any balance thereof in kind to holders of Common Stock. The merger or
consolidation of the Corporation into or with any other corporation, or the merger of any other
corporation into it, or any purchase or redemption of shares of stock of the Corporation of any
class, shall not be deemed to be a dissolution, liquidation, or winding-up of the Corporation for
the purposes of this Article&nbsp;IV.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>B. Preferred Stock</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The express grant of authority to the Board of Directors of the Corporation to fix by
resolution or resolutions the designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, of the shares of Preferred Stock that are not
fixed by this Amended and Restated Certificate of Incorporation is as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;The Preferred Stock may be issued from time to time in any amount, not exceeding in the
aggregate the total number of shares of Preferred Stock herein above authorized, reduced by the
number of shares of Preferred Stock designated under Section&nbsp;C of this Article&nbsp;IV, as Preferred
Stock of one or more series, as hereinafter provided. All shares of any one series of Preferred
Stock shall be alike in every particular, each series thereof shall be distinctively designated by
letter or descriptive words, and all series of Preferred Stock shall rank equally and be identical
in all respects except as permitted by the provisions of Subsection B.2 of this Article&nbsp;IV.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;Authority is hereby expressly granted to and vested in the Board of Directors from time to
time to issue the Preferred Stock as Preferred Stock of any series and in connection with the
creation of each such series to fix, by the resolution or resolutions providing for the issue of
shares thereof, the voting powers, designations, preferences and relative, participating, optional
or other special rights, and the qualifications, limitations or restrictions thereof, if any, of
such series, to the full extent now or hereafter permitted by the laws of the State of Delaware.
Pursuant to the foregoing general authority vested in the Board of Directors, but not in limitation
of the powers conferred on the Board of Directors thereby and by the laws of the State of Delaware,
the Board of Directors is expressly authorized to determine with respect to each series of
Preferred Stock other than the series designated under Section&nbsp;C of this Article&nbsp;IV:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the designation of such series and number of shares constituting such series;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the dividend rate or amount of such series, the payment dates
for dividends on shares of such series, the status of such dividends as cumulative or non-cumulative,
the date from which dividends on shares of such series, if cumulative, shall be
cumulative, and the status of such as participating or non-participating after the
payment of dividends as to which such shares are entitled to any preference;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the price or prices (which amount may vary under different conditions or at
different dates) at which, and the times, terms and conditions on which, the shares of
such series may be redeemed at the option of the Corporation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>whether or not the shares of such series shall be made optionally or
mandatorily convertible into, or exchangeable for, shares of any other class or classes
or of any other series of the same or any other class or classes of stock of the
Corporation or other securities and, if made so convertible or exchangeable, the
conversion price or prices, or the rates of exchange, and the adjustments thereof, if
any, at which such conversion or exchange may be made and any other terms and
conditions of such conversion or exchange;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>whether or not the shares of such series shall be entitled to the benefit of a
retirement or sinking fund to be applied to the purchase or redemption of shares of
such series, and if so entitled, the amount of such fund and the manner of its
application, including the price or prices at which shares of such series may be
redeemed or purchased through the application of such fund;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>whether or not the issue of any additional shares of such series or any future
series in addition to such series or of any shares of any other class of stock of the
Corporation shall be subject to restrictions and, if so, the nature thereof;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(g)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the rights and preferences, if any, of the holders of such series of Preferred
Stock upon the voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation, and the status of the shares of such series as participating or
non-participating after the satisfaction of any such rights and preferences;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(h)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the full or limited voting rights, if any, to be provided for shares of such
series, in addition to the voting rights provided by law; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any other relative powers, preferences and participating, optional or other
special rights and the qualifications, limitations or restrictions thereof, of shares
of such series;</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">in each case, so far as not inconsistent with the provisions of this Amended and Restated
Certificate of Incorporation or the Delaware General Corporation Law then in effect.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>C. Series&nbsp;A Junior Participating Preferred Stock.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The designation and number of shares, and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, of a series of Preferred Stock are fixed by
this Section&nbsp;C of ARTICLE IV as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;<U>Designation and Amount</U>. The shares of such series shall be designated as &#147;Series&nbsp;A
Junior Participating Preferred Stock&#148; (the &#147;Series&nbsp;A Preferred Stock&#148;) and the number of shares
constituting the Series&nbsp;A Preferred Stock shall be 4,000,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;<U>Dividends and Distributions</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Subject to the rights of the holders of any shares of any series of Preferred Stock
(or any similar shares) ranking prior and superior to the Series&nbsp;A Preferred Stock with
respect to dividends, the holders of Series&nbsp;A Preferred Stock, in preference to the holders
of Common Stock and of any other junior shares, shall be entitled to receive, when, as and
if declared by the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the 20th day of February, May, August and November in
each year (each such date being referred to herein as a &#147;Quarterly Dividend Payment Date&#148;),
commencing on the first Quarterly Dividend Payment Date after the first issuance of a share
or fraction of a share of Series&nbsp;A Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (i) $26 or (ii)&nbsp;subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">share amount of all cash dividends, and 100 times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions, other than a dividend
payable in Common Stock or a subdivision of the outstanding Common Stock (by
reclassification or otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share of Series&nbsp;A Preferred Stock or fraction of a
share of Series&nbsp;A Preferred Stock. In the event the Corporation shall at any time declare
or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding Common Stock (by
reclassification or otherwise than by payment of a dividend in Common Stock) into a greater
or lesser number of shares of Common Stock, then in each such case the amount to which
holders of Series&nbsp;A Preferred Stock were entitled immediately prior to such event under
clause (b)&nbsp;of the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Corporation shall declare a dividend or distribution on the Series&nbsp;A Preferred
Stock as provided in paragraph 2(a) of this Section&nbsp;C immediately after it declares a
dividend or distribution on the Common Stock (other than a dividend payable in shares of
Common Stock); provided that, in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any Quarterly Dividend Payment Date
and the next subsequent Quarterly Dividend Payment Date, a dividend of $26 per share on the
Series&nbsp;A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Dividends shall begin to accrue and be cumulative on outstanding shares of Series&nbsp;A
Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of
such shares, unless the date of issue of such shares is prior to the record date for the
first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination of holders of
Series&nbsp;A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the Series&nbsp;A Preferred Stock in an amount less than the
total amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of holders of Series&nbsp;A
Preferred Stock entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be not more than 60&nbsp;days prior to the date fixed for the payment
thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;<U>Voting Rights</U>. The holders of Series&nbsp;A Preferred Stock will have the following
voting rights:
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Subject to the provision for adjustment hereinafter set forth, each share of Series
A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to
a vote of the stockholders of the Corporation. In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each such case the
number of votes per share to which holders of Series&nbsp;A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number by a fraction,
the numerator of which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Except as otherwise provided in this Amended and Restated Certificate of
Incorporation, in any resolution creating a series of Preferred Stock or by law, the holders
of Series&nbsp;A Preferred Stock and the holders of Common Stock and any other capital stock of
the Corporation having general voting rights shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) If at the time of any annual meeting of stockholders for the election of directors
a &#147;default in preference dividends&#148; on the Series&nbsp;A Preferred Stock shall exist, the number
of directors constituting the Board of Directors of the Corporation shall be increased by
two (2), and the holders of the Preferred Stock of all series (whether or not the holders of
such series of Preferred Stock would be entitled to vote for the election of directors if
such default in preference dividends did not exist) shall have the right at such meeting,
voting together as a single class without regard to series, to the exclusion of the holders
of Common Stock, to elect two (2)&nbsp;directors of the Corporation to fill such newly created
directorships. Such right shall continue until there are no dividends in arrears upon the
Preferred Stock. Each director elected by the holders of Preferred Stock (a &#147;Preferred
Director&#148;) shall continue to serve as such director for the full term for which he shall
have been elected, notwithstanding that prior to the end of such term a default in
preference dividends shall cease to exist. Any Preferred Director may be removed by, and
shall not be removed except by, the vote of the holders of record of the outstanding
Preferred Stock voting together as a single class without regard to series, at a meeting of
the stockholders or of the holders of Preferred Stock called for the purpose. So long as a
default in any preference dividends on the Preferred Stock shall exist, (i)&nbsp;any vacancy in
the office of a Preferred Director may be filled (except as provided in the following clause
(ii)) by an instrument in writing signed by the remaining Preferred Director and filed with
the Corporation and (ii)&nbsp;in the case of the removal of any Preferred Director, the vacancy
may be filled by the vote of the holders of the outstanding Preferred Stock voting together
as a single class without regard to series, at the same meeting at which such removal shall
be voted. Each director appointed as aforesaid by the remaining Preferred Director shall be
deemed, for all purposes hereof, to be a Preferred Director. Whenever the term of office of
the Preferred Directors shall end and a default in preference dividends shall no longer
exist, the number of directors constituting the Board of Directors of the Corporation shall
be reduced by two (2). For the purposes hereof, a
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;default in preference dividends&#148; on the Preferred Stock shall be deemed to have
occurred whenever the amount of accrued dividends upon any series of the Preferred Stock
shall be equivalent to six (6)&nbsp;full quarterly dividends or more, and, having so occurred,
such default shall be deemed to exist thereafter until, but only until, all accrued
dividends on all Preferred Stock of each and every series then outstanding shall have been
paid to the end of the last preceding quarterly dividend period.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Except as set forth herein, or as otherwise provided by law, holders of Series&nbsp;A
Preferred Stock shall have no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">4. <U>Certain Restrictions</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Whenever quarterly dividends or other dividends or distributions payable on the
Series&nbsp;A Preferred Stock, as provided in paragraph 2 of this Section&nbsp;C, are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether or not
declared, on Series&nbsp;A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) declare or pay dividends, or make any other distributions, on any shares
ranking junior (either as to dividends or upon liquidation, dissolution or winding
up) to the Series&nbsp;A Preferred Stock;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) declare or pay dividends, or make any other distributions, on any shares
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series&nbsp;A Preferred Stock, except dividends paid ratably on the
Series&nbsp;A Preferred Stock and all such parity shares on which dividends are payable
or in arrears in proportion to the total amounts to which the holders of all such
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares are then entitled;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) redeem or purchase or otherwise acquire for consideration any shares
ranking junior (either as to dividends or upon liquidation, dissolution or winding
up) to the Series&nbsp;A Preferred Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such junior shares in exchange
for any shares of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series&nbsp;A Preferred Stock; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) redeem or purchase or otherwise acquire for consideration any Series&nbsp;A
Preferred Stock, or any shares ranking on a parity with the Series&nbsp;A Preferred
Stock, except in accordance with a purchase offer made in writing or by publication
(as determined by the Board of Directors) to all holders of such stock upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective series
and classes, shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Corporation shall not permit any subsidiary of the Corporation to purchase or
otherwise acquire for consideration any shares of the Corporation unless the Corporation
could, under paragraph 4(a) of this Section&nbsp;C, purchase or otherwise acquire such shares at
such time and in such manner.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;<U>Reacquired Shares</U>. Any Series&nbsp;A Preferred Stock purchased or otherwise acquired by
the Corporation in any manner whatsoever shall be retired and, upon the filing of any certificate
that may be required by Delaware law, canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued Preferred Stock and may be
reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on
issuance set forth in this Article&nbsp;IV or any resolution providing for the creation of any series of
Preferred Stock adopted pursuant thereto or as otherwise required by law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;<U>Liquidation, Dissolution or Winding Up</U>. Upon any liquidation, dissolution or
winding up of the Corporation, no distribution shall be made (a)&nbsp;to the holders of shares ranking
junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series&nbsp;A
Preferred Stock unless, prior thereto, the holders of Series&nbsp;A Preferred Stock shall have received
$6,000 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment, provided that the holders of Series&nbsp;A
Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of Common Stock, or (b)&nbsp;to the holders of shares ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series&nbsp;A
Preferred Stock, except distributions made ratably on the Series&nbsp;A Preferred Stock and all such
parity shares in proportion to the total amounts to which the holders of all such shares are
entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to
which holders of Series&nbsp;A Preferred Stock were entitled immediately prior to such event under the
proviso in clause (a)&nbsp;of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of Common Stock that were outstanding
immediately prior to such event.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;<U>Consolidation, Merger, etc.</U> In case the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other shares or securities, cash and/or any other property, then in
any such case each share of Series&nbsp;A Preferred Stock shall at the same time be similarly exchanged
or changed into an amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount of shares, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of Common Stock is
changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend
on the Common Shares payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the amount set forth in
the preceding sentence with respect to the exchange or change of shares of Series&nbsp;A Preferred Stock
shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such event.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;<U>No Redemption</U>. The Series&nbsp;A Preferred Stock shall not be redeemable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;<U>Conversion</U>. The Series&nbsp;A Preferred Stock shall not be convertible into Common
Stock or shares of any other series of any other class of Preferred Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;<U>Rank</U>. The Series&nbsp;A Preferred Stock shall rank, with respect to the payment of
dividends and the distribution of assets, junior to all series of any other class of Preferred
Stock, unless the terms of any such series shall provide otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;<U>Amendment</U>. This Amended and Restated Certificate of Incorporation shall not be
amended in any manner which would materially alter or change the powers, preferences or special
rights of the Series&nbsp;A Preferred Stock so as to affect them adversely without the affirmative vote
of the holders of at least two-thirds of the outstanding Series&nbsp;A Preferred Stock, voting together
as a single class.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;V<BR>
Board of Directors</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>A. Election and Removal of Directors</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;The Board of Directors shall consist of not less than nine (9)&nbsp;or more than twelve (12)
persons, the exact number to be fixed from time to time exclusively by the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized directors (whether
or not there exist any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board for adoption), provided, however, this provision shall not act
to limit Board size in the event the holders of one or more series of Preferred Stock are entitled
to elect directors to the exclusion of holders of Common Stock. Each director who is serving as a
director on the date of this Amended and Restated Certificate of Incorporation shall hold office
until the next annual meeting of stockholders following such date and until his or her successor
has been duly elected and qualified, notwithstanding that such director may have been elected for a
term that extended beyond the date of such next annual meeting of stockholders. At each annual
meeting of the stockholders of the Corporation after the date of this Amended and Restated
Certificate of Incorporation, directors elected at such annual meeting shall hold office until the
next annual meeting of stockholders and until their successors have been duly elected and
qualified.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;Notwithstanding the foregoing and except as otherwise provided by law, whenever the holders
of any series of Preferred Stock shall have the right (to the exclusion of holders of Common Stock)
to elect directors of the Corporation pursuant to the provisions of Article&nbsp;IV or any resolution
adopted pursuant thereto, the election of such directors of the
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Corporation shall be governed by the terms and provisions of Article&nbsp;IV or said resolutions
and such directors shall be elected to hold office for a term expiring at the annual meeting of
stockholders held in the first year following their election or, if such right of the holders of
the Preferred Stock is terminated, for a term expiring in accordance with the provisions of Article
IV or such resolutions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;Newly-created directorships resulting from any increase in the authorized number of
directors or any vacancies in the Board of Directors resulting from death, resignation, retirement,
disqualification, removal from office or other cause may be filled only by a majority vote of the
directors then in office, even though less than a quorum of the Board of Directors, acting at a
regular or special meeting. If any applicable provision of the Delaware General Corporation Law,
Article&nbsp;IV or any resolution adopted pursuant to Article&nbsp;IV expressly confers power on stockholders
to fill such a directorship at a special meeting of stockholders, such a directorship may be filled
at such a meeting only by the affirmative vote of a majority of the combined voting powers of the
outstanding shares of stock of the Corporation entitled to vote generally; provided, however, that
when (a)&nbsp;pursuant to the provisions of Article&nbsp;IV or any resolutions adopted pursuant thereto, the
holders of any series of Preferred Stock have the right (to the exclusion of holders of the Common
Stock), and have exercised such right, to elect directors and (b)&nbsp;Delaware General Corporation Law,
Article&nbsp;IV or any such resolution expressly confers on stockholders voting rights as aforesaid, if
the directorship to be filled had been occupied by a director elected by the holders of Common
Stock, then such directorship shall be filled by a majority vote as aforesaid, but if such
directorship to be filled had been elected by holders of Preferred Stock, then such directorship
shall be filled in accordance with Article&nbsp;IV or the applicable resolutions adopted under Article
IV. Any director elected in accordance with the two preceding sentences shall hold office until
such director&#146;s successor shall have been elected and qualified unless such director was elected by
holders of Preferred Stock (acting to the exclusion of the holders of Common Stock), in which case
such director&#146;s term shall expire in accordance with Article&nbsp;IV or the applicable resolutions
adopted pursuant to Article&nbsp;IV. No decrease in the number of authorized directors constituting the
entire Board of Directors shall shorten the term of any incumbent director, except as otherwise
provided in Article&nbsp;IV or the applicable resolutions adopted pursuant to Article&nbsp;IV with respect to
directorships created pursuant to one or more series of Preferred Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;Subject to the rights of the holders of any series of Preferred Stock to elect directors
under specified circumstances, any director or directors may be removed from office at any time,
but only for cause and only by the affirmative vote of a majority of the combined voting power of
all of the then-outstanding shares of stock of the Corporation entitled to vote generally, voting
together as a single class (it being understood that for all purposes of this Article&nbsp;V, each share
of Preferred Stock shall have the number of votes, if any, granted to it pursuant to this Amended
and Restated Certificate of Incorporation or any resolution adopted pursuant to Article&nbsp;IV).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;Notwithstanding any other provision of this Amended and Restated Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any affirmative vote of the holders of any particular class or series of the stock of
the Corporation required by law, this Amended and Restated Certificate of Incorporation or any
resolution adopted pursuant to Article&nbsp;IV, the affirmative vote of a majority of the total number
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">of authorized directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such alteration, amendment or repeal is presented to the Board for
adoption), shall be required to alter, amend or repeal this Article&nbsp;V, or any provision hereof.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>B. Liability, Indemnification and Insurance</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;<U>Limitation on Liability</U>. To the fullest extent that the Delaware General
Corporation Law as it exists on the date hereof or as it may hereafter be amended permits the
limitation or elimination of the personal liability of directors, no director of the Corporation
shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. No amendment to or repeal of this Section&nbsp;B.1 shall apply to or have any
effect on the liability or alleged liability of any director of the Corporation for or with respect
to any acts or omissions of such director occurring prior to such amendment or repeal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;<U>Right to Indemnification</U>. The Corporation shall to the fullest extent permitted by
applicable law as then in effect indemnify any person (the Indemnitee) who was or is involved in
any manner (including, without limitation, as a party or a witness) or is threatened to be made so
involved in any threatened, pending or completed investigation, claim, action, suit or proceeding,
whether civil, criminal, administrative or investigative (including, without limitation, any
action, suit or proceeding by or in the right of the Corporation to procure a judgment in its
favor) (a &#147;Proceeding&#148;) by reason of the fact that such person is or was a director, officer,
employee or agent of the Corporation, or of NiSource Corporate Services Company or is or was
serving at the request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise (including, without limitation,
any employee benefit plan) against all expenses including attorneys&#146; fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in connection with such
Proceeding. Such indemnification shall be a contract right and shall include the right to receive
payment of any expenses incurred by the Indemnitee in connection with such Proceeding in advance of
its final disposition, consistent with the provisions of applicable law as then in effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;<U>Insurance, Contracts and Funding</U>. The Corporation may purchase and maintain
insurance to protect itself and any Indemnitee against any expenses, judgments, fines and amounts
paid in settlement as specified in Subsection B.2 of this Section&nbsp;B or incurred by any Indemnitee
in connection with any Proceeding referred to in Subsection B.2 of this Section&nbsp;B, to the fullest
extent permitted by applicable law as then in effect. The Corporation may enter into contracts
with any director, officer, employee or agent of the Corporation in furtherance of the provisions
of this Section&nbsp;B and may create a trust fund, grant a security interest or use other means
(including, without limitation, a letter of credit) to ensure the payment of such amounts as may be
necessary to effect indemnification as provided in this Section&nbsp;B.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;<U>Indemnification; No Exclusive Right</U>. The right of indemnification provided in this
Section&nbsp;B shall not be exclusive of any other rights to which those seeking indemnification may
otherwise be entitled, and the provisions of this Section&nbsp;B shall inure to the benefit of the heirs
and legal representatives of any person entitled to indemnity under this Section&nbsp;B and shall be
applicable to Proceedings commenced or continuing after the adoption of this Section&nbsp;B, whether
arising from acts or omissions occurring before or after such adoption.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;<U>Advancement of Expenses; Procedures; Presumptions and Effect of Certain Proceedings;
Remedies</U>. In furtherance, but not in limitation of the foregoing provisions, the following
procedures, presumptions and remedies shall apply with respect to advancement of expenses and the
right to indemnification under this Section&nbsp;B:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Advancement of Expenses</U>. All reasonable expenses incurred by or on behalf
of the Indemnitee in connection with any Proceeding shall be advanced to the Indemnitee by
the Corporation within twenty (20)&nbsp;days after the receipt by the Corporation of a statement
or statements from the Indemnitee requesting such advance or advances from time to time,
whether prior to or after final disposition of such Proceeding. Such statement or statements
shall reasonably evidence the expenses incurred by the Indemnitee and, if required by law at
the time of such advance, shall include or be accompanied by an undertaking by or on behalf
of the Indemnitee to repay the amounts advanced if it should ultimately be determined that
the Indemnitee is not entitled to be indemnified against such expenses pursuant to this
Section&nbsp;B.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Procedure for Determination of Entitlement to Indemnification.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) To obtain indemnification under this Section&nbsp;B, an Indemnitee shall submit
to the Secretary of the Corporation a written request, including such documentation
and information as is reasonably available to the Indemnitee and reasonably
necessary to determine whether and to what extent the Indemnitee is entitled to
indemnification (the &#147;Supporting Documentation&#148;). The determination of the
Indemnitee&#146;s entitlement to indemnification shall be made not later than sixty (60)
days after receipt by the Corporation of the written request for indemnification
together with the Supporting Documentation. The Secretary of the Corporation shall,
promptly upon receipt of such a request for indemnification, advise the Board of
Directors in writing that the Indemnitee has requested indemnification.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The Indemnitee&#146;s entitlement to indemnification under this Section&nbsp;B shall
be determined in one of the following ways: (A)&nbsp;by a majority vote of the
Disinterested Directors (as hereinafter defined), even if they constitute less than
a quorum of the Board; (B)&nbsp;by a written opinion of Independent Counsel (as
hereinafter defined) if (x)&nbsp;a Change of Control (as hereinafter defined) shall have
occurred and the Indemnitee so requests or (y)&nbsp;there are no Disinterested Directors
or a majority of such Disinterested Directors so directs; (C)&nbsp;by the stockholders of
the Corporation (but only if a majority of the Disinterested Directors presents the
issue of entitlement to indemnification to the stockholders for their
determination); or (D)&nbsp;as provided in Section&nbsp;B.5(c).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) In the event the determination of entitlement to indemnification is to be
made by Independent Counsel pursuant to Section&nbsp;B.5(b)(ii), a majority of the
Disinterested Directors shall select the Independent Counsel (except that if there
are no Disinterested Directors, the Corporation&#146;s General Counsel shall select the
Independent Counsel), but only an Independent Counsel to which the Indemnitee does
not reasonably object; provided, however, that if a Change of
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Control shall have occurred, the Indemnitee shall select such Independent
Counsel, but only an Independent Counsel to which the Board of Directors does not
reasonably object.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) The only basis upon which a finding of no entitlement to indemnification
may be made is that indemnification is prohibited by law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;<U>Presumptions and Effect of Certain Proceedings</U>. Except as otherwise
expressly provided in this Section&nbsp;B, if a Change of Control shall have occurred, the
Indemnitee shall be presumed to be entitled to indemnification under this Section&nbsp;B upon
submission of a request for indemnification together with the Supporting Documentation in
accordance with Section&nbsp;B.5(b)(i), and thereafter the Corporation shall have the burden of
proof to overcome that presumption in reaching a contrary determination. In any event, if
the person or persons empowered under Section&nbsp;B.5(b) to determine entitlement to
indemnification shall not have been appointed or shall not have made a determination within
sixty (60)&nbsp;days after receipt by the Corporation of the request therefor together with the
Supporting Documentation, the Indemnitee shall be deemed to be entitled to indemnification
and the Indemnitee shall be entitled to such indemnification unless (A)&nbsp;the Indemnitee
misrepresented or failed to disclose a material fact in making the request for
indemnification or in the Supporting Documentation or (B)&nbsp;such indemnification is prohibited
by law. The termination of any Proceeding described in Section&nbsp;B.2, or of any claim, issue
or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, adversely affect the right of the
Indemnitee to indemnification or create a presumption that the Indemnitee did not act in
good faith and in a manner which the Indemnitee reasonably believed to be in or not opposed
to the best interests of the Corporation or, with respect to any criminal Proceeding, that
the Indemnitee had reasonable cause to believe that the Indemnitee&#146;s conduct was unlawful.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;<U>Remedies of Indemnitee</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) In the event that a determination is made, pursuant to Section&nbsp;B.5(b) that
the Indemnitee is not entitled to indemnification under this Section&nbsp;B, (A)&nbsp;the
Indemnitee shall be entitled to seek an adjudication of his entitlement to such
indemnification either, at the Indemnitee&#146;s sole option, in (x)&nbsp;an appropriate court
of the State of Delaware or any other court of competent jurisdiction or (y)&nbsp;an
arbitration to be conducted by a single arbitrator pursuant to the rules of the
American Arbitration Association; (B)&nbsp;any such judicial Proceeding or arbitration
shall be de novo and the Indemnitee shall not be prejudiced by reason of such
adverse determination; and (C)&nbsp;in any such judicial Proceeding or arbitration the
Corporation shall have the burden of proving that the Indemnitee is not entitled to
indemnification under this Section&nbsp;B.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) If a determination shall have been made or deemed to have been made,
pursuant to Section&nbsp;B.5(b) or (c), that the Indemnitee is entitled to
indemnification, the Corporation shall be obligated to pay the amounts constituting
such indemnification within five (5)&nbsp;days after such determination
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">has been made or deemed to have been made and shall be conclusively bound by
such determination unless (A)&nbsp;the Indemnitee misrepresented or failed to disclose a
material fact in making the request for indemnification or in the Supporting
Documentation or (B)&nbsp;such indemnification is prohibited by law. In the event that
(x)&nbsp;advancement of expenses is not timely made pursuant to Section&nbsp;B.5(a) or (y)
payment of indemnification is not made within five (5)&nbsp;days after a determination of
entitlement to indemnification has been made or deemed to have been made pursuant to
Section&nbsp;B.5(b) or (c), the Indemnitee shall be entitled to seek judicial enforcement
of the Corporation&#146;s obligation to pay to the Indemnitee such advancement of
expenses or indemnification. Notwithstanding the foregoing, the Corporation may
bring an action, in an appropriate court in the State of Delaware or any other court
of competent jurisdiction, contesting the right of the Indemnitee to receive
indemnification hereunder due to the occurrence of an event described in subclause
(A)&nbsp;or (B)&nbsp;of this clause (ii) (a &#147;Disqualifying Event&#148;); provided, however, that in
any such action the Corporation shall have the burden of proving the occurrence of
such Disqualifying Event.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) The Corporation shall be precluded from asserting in any judicial
Proceeding or arbitration commenced pursuant to this Section&nbsp;B.5(d) that the
procedures and preemptions of this Section&nbsp;B are not valid, binding and enforceable
and shall stipulate in any such court or before any such arbitrator that the
Corporation is bound by all the provisions of this Section&nbsp;B.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) In the event that the Indemnitee, pursuant to this Section&nbsp;B.5(d), seeks a
judicial adjudication of or an award in arbitration to enforce his rights under, or
to recover damages for breach of, this Section&nbsp;B, the Indemnitee shall be entitled
to recover from the Corporation, and shall be indemnified by the Corporation
against, any expenses actually and reasonably incurred by the Indemnitee if the
Indemnitee prevails in such judicial adjudication or arbitration. If it shall be
determined in such judicial adjudication or arbitration that the Indemnitee is
entitled to receive part but not all of the indemnification or advancement of
expenses sought, the expenses incurred by the Indemnitee in connection with such
judicial adjudication or arbitration shall be prorated accordingly.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <U>Definitions</U>. For purposes of this Section&nbsp;B.5:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) &#147;Change in Control&#148; means (A)&nbsp;so long as the Public Utility Holding Company
Act of 1935 is in effect, any &#147;company&#148; becoming a &#147;holding company in respect to
the Corporation or any determination by the Securities and Exchange Commission that
any &#147;person&#148; should be subject to the obligations, duties, and liabilities if
imposed by said Act by virtue of his, hers or its influence over the management or
policies of the Corporation, or (B)&nbsp;whether or not said Act is in effect a change in
control of the Corporation of a nature that would be required to be reported in
response to Item 6(e) of Schedule&nbsp;14A of Regulation&nbsp;14A promulgated under the
Securities Exchange Act of 1934 (the &#147;Exchange Act&#148;), whether or not the Corporation
is then subject to such reporting
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">requirement; provided that, without limitation, such a change in control shall
be deemed to have occurred if (i)&nbsp;any &#147;person&#148; (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the &#147;beneficial owner&#148; (as
defined in Rule&nbsp;13d-3 under the Exchange Act), directly or indirectly, of securities
of the Corporation representing ten percent or more of the combined voting power of
the Corporation&#146;s then outstanding securities without the prior approval of at least
two-thirds of the members of the Board of Directors in office immediately prior to
such acquisition; (ii)&nbsp;the Corporation is a party to a merger, consolidation, sale
of assets or other reorganization, or a proxy contest, as a consequence of which
members of the Board of Directors in office immediately prior to such transaction or
event constitute less than a majority of the Board of Directors thereafter; or (iii)
during any period of two consecutive years, individuals who at the beginning of such
period constituted the Board of Directors (including for this purpose any new
director whose election or nomination for election by the Corporation&#146;s stockholders
was approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of such period) cease for any reason to
constitute at least a majority of the Board of Directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) &#147;Disinterested Director&#148; means a director of the Corporation who is not or
was not a party to the Proceeding in respect of which indemnification is sought by
the Indemnitee.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) &#147;Independent Counsel&#148; means a law firm or a member of a law firm that
neither presently is, nor in the past five years has been, retained to represent:
(A)&nbsp;the Corporation or the Indemnitee in any matter material to either such party or
(B)&nbsp;any other party to the Proceeding giving rise to a claim for indemnification
under this Section&nbsp;B. Notwithstanding the foregoing, the term &#147;Independent Counsel&#148;
shall not include any person who, under the applicable standards of professional
conduct then prevailing under Delaware law, would have a conflict of interest in
representing either the Corporation or the Indemnitee in an action to determine the
Indemnitee&#146;s rights under this Section&nbsp;B.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;<U>Severability</U>. If any provision or provisions of this Section&nbsp;B shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (i)&nbsp;the validity, legality and
enforceability of the remaining provision of this Section&nbsp;B (including, without limitation, all
portions of any paragraph of this Section&nbsp;B containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in
any way be affected or impaired thereby; and (ii)&nbsp;to the fullest extent possible, the provisions of
this Section&nbsp;B (including, without limitation, all portions of any paragraph of this Section&nbsp;B
containing any such provision held to be invalid, illegal or unenforceable, that are not themselves
invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;<U>Successor Laws, Regulations and Agencies</U>. Reference herein to laws, regulations or
agencies shall be deemed to include all amendments thereof, substitutions therefor and successors
thereto.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->15<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;VI<BR>
General Powers of the Board of Directors</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>A. Bylaws</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors shall have the power to make, alter, amend and repeal the Bylaws of the
Corporation in such form and with such terms as the Board may determine, subject to the power
granted to stockholders to alter or repeal the Bylaws provided under Delaware law; provided,
however, that, notwithstanding any other provision of this Amended and Restated Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, the
affirmative vote of a majority of the total number of authorized directors (whether or not there
exist any vacancies in previously authorized directorships at the time any such alteration,
amendment or repeal is presented to the Board for adoption), shall be required to alter, amend or
repeal any provision of the Bylaws which is to the same effect as any one or more sections of this
Article&nbsp;VI.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">B. Charter Amendments
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the provisions hereof, the Corporation, through its Board of Directors, reserves
the right at any time, and from time to time, to amend, alter, repeal or rescind any provision
contained in this Amended and Restated Certificate of Incorporation in the manner now or
hereinafter prescribed by law, and any other provisions authorized by Delaware law at the time
enforced may be added or inserted, in the manner now or hereinafter prescribed by law, and any and
all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors
or any other persons whomsoever by and pursuant to this Amended and Restated Certificate of
Incorporation in its present form or as hereinafter amended are granted subject to the rights
reserved in this Article.
</DIV>

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</DIV>

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<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>3
<FILENAME>c34232exv31w1.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
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<HEAD>
<TITLE>Exhibit 31.1</TITLE>
</HEAD>
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;31.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Certification Pursuant to<BR>
Section&nbsp;302 of the Sarbanes-Oxley Act of 2002</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">I, Robert C. Skaggs, Jr., certify that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this Quarterly Report of NiSource Inc. on Form 10-Q for the quarter
ended June&nbsp;30, 2008;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules&nbsp;13a-15(f) and 15d-15(f)) for the registrant and have:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this report is being prepared;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Evaluated the effectiveness of the registrant&#146;s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disclosed in this report any change in the registrant&#146;s internal control over
financial reporting that occurred during the registrant&#146;s most recent fiscal quarter
(the registrant&#146;s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant&#146;s
internal control over financial reporting; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrant&#146;s
auditors and the audit committee of the registrant&#146;s board of directors (or persons
performing the equivalent functions):</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely
affect the registrant&#146;s ability to record, process, summarize and report financial
information; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant&#146;s internal control over financial
reporting.</TD>
</TR>

</TABLE>
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date:  August 4, 2008&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; /s/ Robert C. Skaggs, Jr.
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Robert C. Skaggs, Jr.&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

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<TYPE>EX-31.2
<SEQUENCE>4
<FILENAME>c34232exv31w2.htm
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
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<HEAD>
<TITLE>Exhibit 31.2</TITLE>
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<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 18pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>
<DIV align="right" style="font-size: 10pt; margin-top: 0pt"><B>Exhibit&nbsp;31.2</B></DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Certification Pursuant to<BR>
Section&nbsp;302 of the Sarbanes-Oxley Act of 2002</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">I, Michael W. O&#146;Donnell, certify that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this Quarterly Report of NiSource Inc. on Form 10-Q for the quarter
ended June&nbsp;30, 2008;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules&nbsp;13a-15(f) and 15d-15(f)) for the registrant and have:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this report is being prepared;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Evaluated the effectiveness of the registrant&#146;s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disclosed in this report any change in the registrant&#146;s internal control over
financial reporting that occurred during the registrant&#146;s most recent fiscal quarter
(the registrant&#146;s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant&#146;s
internal control over financial reporting; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrant&#146;s
auditors and the audit committee of the registrant&#146;s board of directors (or persons
performing the equivalent functions):</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely
affect the registrant&#146;s ability to record, process, summarize and report financial
information; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant&#146;s internal control over financial
reporting.</TD>
</TR>

</TABLE>
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date:  August 4, 2008&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;    /s/ Michael W. O&#146;Donnell
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Michael W. O&#146;Donnell&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left"><FONT style="white-space: nowrap">Executive Vice President and Chief Financial Officer</FONT>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>5
<FILENAME>c34232exv32w1.htm
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 32.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="right" style="font-size: 10pt; margin-top: 18pt"><B>Exhibit 32.1</B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Certification Pursuant to<BR>
Section&nbsp;906 of the Sarbanes-Oxley Act of 2002</B></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the Quarterly Report of NiSource Inc. (the &#147;Company&#148;) on Form 10-Q for the
quarter ending June&nbsp;30, 2008 as filed with the Securities and Exchange Commission on the date
hereof (the &#147;Report&#148;), I, Robert C. Skaggs, Jr., Chief Executive Officer of the Company, certify,
pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002, that:</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The information contained in the Report fairly presents, in all material respects, the
financial condition and result of operations of the Company.</TD>
</TR>

</TABLE></DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Robert C. Skaggs, Jr.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top" style="border-top: 1px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Robert C. Skaggs, Jr.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Chief Executive Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Date: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;August&nbsp;4, 2008</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio --></DIV>

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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>6
<FILENAME>c34232exv32w2.htm
<DESCRIPTION>EXHIBIT 32.2
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 32.2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="right" style="font-size: 10pt; margin-top: 18pt"><B>Exhibit&nbsp;32.2</B></DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Certification Pursuant to<BR>
Section&nbsp;906 of the Sarbanes-Oxley Act of 2002</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the Quarterly Report of NiSource Inc. (the &#147;Company&#148;) on Form 10-Q for the
quarter ending June&nbsp;30, 2008 as filed with the Securities and Exchange Commission on the date
hereof (the &#147;Report&#148;), I, Michael W. O&#146;Donnell, Executive Vice President and Chief Financial
Officer of the Company, certify, pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002, that:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The information contained in the Report fairly presents, in all material respects, the
financial condition and result of operations of the Company.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Michael W. O&#146;Donnell
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Michael W. O&#146;Donnell
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="white-space: nowrap">Executive Vice President and Chief Financial Officer</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Date:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; August&nbsp;4, 2008
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>



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