Peoples Energy Completes Sale of its Interest in the Southeast Chicago Energy Project.

CHICAGO -- Peoples Energy (NYSE:PGL) today announced that it has completed the sale of its approximate thirty percent interest in the Southeast Chicago Energy Project (SCEP) to Exelon Generation (NYSE:EXC). The Federal Energy Regulatory Commission issued an order approving the sale on May 15, 2006. As a result of the sale, a $2 million gain will be recognized in the Company's fiscal third quarter. Cash proceeds of approximately $50 million, less final closing adjustments, will be used to reduce short-term borrowing at Peoples Energy Corp.

The sale of SCEP follows the Company's announcement in February of its intent to divest its power assets. The Company expects to sell its remaining power assets, Elwood Energy -- a 50% partnership with Dominion Energy, located in Elwood, Illinois and a development site in Oregon -- later this year.

Peoples Energy, a member of the S&P 500, is a diversified energy company comprised of three primary business segments: Gas Delivery, Oil and Gas Production and Energy Marketing. The Gas Delivery business serves about one million retail customers in Chicago and northeastern Illinois. Visit the Peoples Energy web site at www.PeoplesEnergy.com.

Forward-Looking Information

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, such as the company's plans to sell its interest in its remaining power plant assets. Generally, the words "may", "could", "project", "believe", "anticipate", "estimate", "plan", "forecast", "will be", and similar words identify forward-looking statements. Actual results could differ materially from such expectations because of many uncertainties, including, but not limited to, the timing of the closing of the sales transactions, approval of the transactions by governmental agencies, effectiveness of the Company's risk management policies and the creditworthiness of customers and counterparties; regulatory developments in the United States, Illinois and other states where the Company does business; changes in the nature of the Company's competition resulting from industry consolidation, legislative change, regulatory change and other factors, as well as action taken by particular competitors; operational factors affecting the Company's gas distribution, power generation and oil and gas production segments; Aquila Inc.'s financial ability to perform under its power sales agreements with Elwood Energy LLC; weather related energy demand; and terrorist activities. Some of the uncertainties that may affect future results are discussed in more detail in Peoples Energy's most recent Form 10-K filed with the SEC under Item 1 - Business and Item 7 - Management's Discussion and Analysis, as such information may be updated by subsequent filings under the Securities Exchange Act of 1934. All forward-looking statements included in this press release are based upon information presently available, and Peoples Energy assumes no obligation to update any forward-looking statements.