NiSource Reports Second Quarter 2011 Results

MERRILLVILLE, Ind., Aug. 2, 2011 /PRNewswire/ –

— Earnings in line with 2011 guidance
— Settlement filed in Indiana electric rate case
— Infrastructure enhancements, growth investments on track

NiSource Inc. (NYSE: NI) today announced net operating earnings from continuing
operations (non-GAAP) of $45.6 million, or $0.17 per share for the three months
ended June 30, 2011, compared to $37.0 million, or $0.13 per share for the
second quarter of 2010. Operating earnings for the quarter (non-GAAP) were
$162.2 million compared to $154.0 million for the same period in 2010.

On a GAAP basis, NiSource reported income from continuing operations for the
three months ended June 30, 2011, of $39.5 million, or $0.14 per share, compared
with $28.0 million, or $0.10 per share in the same period a year ago. Operating
income was $163.3 million for the second quarter of 2011 compared with $139.2
million in the year-ago period. Schedules 1 and 2 of this news release contain a
reconciliation of net operating earnings and operating earnings to GAAP.

“NiSource delivered another quarter of solid financial and operational
performance, punctuated by significant accomplishments involving nearly all
aspects of our business plan,” NiSource President and Chief Executive Officer
Robert C. Skaggs Jr. said. “From the settlement of our electric rate case in
Indiana, to the achievement of key regulatory, commercial and infrastructure
milestones across each of our businesses, our team continues to create
innovative energy solutions for our customers and sustainable value for
shareholders.”

Skaggs noted that NiSource remains on track to deliver net operating earnings
from continuing operations in line with its 2011 outlook of $1.25 to $1.35 per
share (non-GAAP). He also highlighted a series of recent business
accomplishments across the company, including:

Indiana electric rate case settlement

On July 18, NiSource’s Northern Indiana Public Service Company (NIPSCO) filed a
broad-based settlement agreement which, if approved by the Indiana Utility
Regulatory Commission (IURC), would resolve the company’s Nov. 2010 electric
base rate case. A product of months of extensive discussions with its customers
and key regulatory stakeholders, the settlement provides NIPSCO with the
foundation to make ongoing investments in northern Indiana’s energy
infrastructure to help fuel job creation and economic growth and to earn a
reasonable return on its investment for shareholders on a sustainable basis.

“Working collaboratively with stakeholders, the settlement represents a balanced
agreement that supports NIPSCO’s ability to provide Indiana families, businesses
and industries with the affordable, reliable and environmentally sustainable
power they need now and for the future,” Skaggs said.

Pending IURC approval, NIPSCO anticipates that new rates could be effective in
late 2011 or early 2012.

NIPSCO’s electric operations also continue to make progress on a variety of new
customer programs and environmental initiatives.

— On July 13, the company received approval from the IURC to significantly
improve NIPSCO’s ability to purchase customer-generated electricity from
renewable energy projects. The program, supported by consumer and
environmental groups, also allows customers to generate more of their
own electricity using renewable energy to reduce their utility costs.

— On July 27, the IURC also approved NIPSCO’s request for new electric
energy efficiency programs for its electric customers. Programs include
appliance recycling, commercial and industrial efficiency project
incentives and expanded energy education.

— Construction also remains on schedule for a Flue Gas Desulfurization
unit at NIPSCO’s Schahfer generating station. This clean-air project is
part of the company’s significant environmental improvements at its
electric generating stations – an investment of between $570 million and
$840 million planned over the next eight years.

Pipeline and storage growth initiatives

NiSource Gas Transmission & Storage (NGT&S)continues to leverage its strategic
asset base and geographic footprint in the natural gas-rich Marcellus Shale
production area to position itself for ongoing growth.

In the Marcellus region, NGT&S completed its Southern Appalachian and Clendenin
projects during the second quarter, providing more than 180,000 dekatherms per
day of contracted firm transportation capacity for its customers. Other
Marcellus-related projects in progress include the Rimersburg Expansion in
central Pennsylvania, the Smithfield project in West Virginia and the Line WB
Expansion in Virginia and Kentucky. These producer-driven projects, of which a
significant portion are fully subscribed with long-term contracts or binding
precedent agreements, will add up to 525,000 dekatherms per day of firm
transportation.

As part of its ongoing strategy to exploit its Marcellus area pipeline and
storage asset position, NGT&S recently announced the appointment of several key
new leaders. They include veteran energy leader Joe Blount who will serve as
president of NiSource Energy Ventures. Blount’s responsibilities will include
all of NGT&S’ midstream activities, its partnership interests in Millennium
Pipeline and Hardy Storage Company,and a number of other related commercial
activities. Among those reporting to Blount will be John Bonn,recentlyappointed
aspresident of NiSource Midstream Services, which is focused on capitalizing on
the company’s extensive opportunities in the Marcellus supply region.

“We’ve deepened our leadership ranks at NGT&S to continue to meet our aggressive
targets for project origination, execution and earnings growth from investments
across our system and, in particular, in the Marcellus Shale production area,”
Skaggs said. “The team is aggressively developing and pursuing an inventory of
low-risk, accretive infrastructure investments that meet the needs of our
customers and provide long-term value for our shareholders.”

In addition to its supply-driven Marcellus development activities, NGT&S
continues to actively develop infrastructure projects to serve new natural
gas-fueled electric generation markets, involving both new generation facilities
as well as coal conversion opportunities. For example, in May, Columbia Gas
Transmission filed an application with the Federal Energy Regulatory Commission
(FERC) to construct the pipeline infrastructure to serve Virginia Electric and
Power Company’s planned 1,329 megawatt gas-fired generation facility in Warren
County, Va. The project would provide approximately 250,000 dekatherms per day
of long-term, firm transportation with an in-service date of mid-2014.

On the regulatory front, Columbia Gulf Transmission placed new rates into
effect, subject to refund, on May 1, 2011, as part of its Nov. 2010 rate case
filing with the FERC. Columbia Gulf and the parties to the case are actively
engaged in settlement discussions to resolve the case.

Gas distribution infrastructure, regulatory programs

NiSource Gas Distribution (NGD) continues to advance its strategy of combining
long-term infrastructure replacement and customer programs with complementary
regulatory initiatives.

On July 1, Columbia Gas of Pennsylvania filed a partial settlement in the
company’s base rate case filed on Jan. 14, 2011, with the Pennsylvania Public
Utility Commission. Two items, including rate design for residential customers,
will be resolved through a formal hearing process, and a recommendation is
expected this month. If approved, the settlement will authorize a revenue
increase of $17 million annually. A decision is expected, with new rates in
effect, during the fourth quarter of this year.

NiSource’s gas distribution companies also remain on track with their extensive
infrastructure modernization and replacement programs designed to ensure safe
and reliable service. These include programs at Columbia Gas ofOhio, Columbia
Gas ofPennsylvania,Columbia Gas of Massachusettsand Columbia Gas of Kentucky. In
addition, Columbia Gas of Virginia has filed an application with its state
commission to accelerate recovery of its infrastructure projects. All of these
investments are part of NGDs more than $4 billion replacement program scheduled
over the next 20 to 25 years.

Liquidity and financial management

In June, NiSource issued $400 million in 30-year notes as part of the company’s
ongoing focus on enhancing its long-term financial strength and flexibility. The
issuance takes advantage of the attractive interest rate environment and will be
used to repay short-term bank borrowings under the company’s $1.5 billion
revolving credit facility. Also in June, NiSource introduced a $500 million
commercial paper program, which further diversifies the company’s short-term
funding sources and is fully supported by the revolving credit facility.

“We remain committed to the principle of thoughtful and disciplined financial
management,” Skaggs said. “This strategy has enabled us to strengthen our
financial foundation and increase our ongoing capital expenditure levels to meet
customer needs and deliver value to our shareholders.”

The company’s overall 2011 capital investment program amounts to approximately
$1.1 billion, a level it expects to maintain or increase in the years ahead.

Second Quarter 2011 Operating Earnings — Segment Results (non-GAAP)

NiSource’s consolidated operating earnings (non-GAAP) for the quarter ended June
30, 2011, were $162.2 million, compared to $154.0 million in the second quarter
of 2010. Refer to Schedule 2 for the items included in 2011 and 2010 GAAP
operating income but excluded from operating earnings.

Operating earnings for NiSource’s business segments for the quarter ended June
30, 2011 are discussed below.

NiSource Gas Distributionreported operating earnings for the current quarter of
$48.7 million compared to $35.9 million in the second quarter of 2010. Net
revenues, excluding the impact of trackers, increased by $0.4 million, primarily
attributable to increased residential and commercial margins due to NIPSCO’s
change from a volumetric-based rate design to one with a higher fixed charge.
The new rate design provides a greater proportion of recovery through the
monthly fixed customer charge for certain customer classes. Additionally, there
was an increase in other regulatory and service programs largely due to new
rates under Columbia Gas of Ohio’s approved infrastructure replacement program
and rate cases at various other utilities. These increases in net revenues were
partially offset by a decrease in off-system sales.

Operating expenses, excluding trackers, were $12.4 million lower than the
comparable 2010 period primarily as a result of lower depreciation costs due to
reduced depreciation rates. This decrease was partially offset by increases in
employee and administrative expenses.

NiSource Gas Transmission and Storagereported operating earnings for the current
quarter of $84.7 million compared to $74.9 million in the second quarter of
2010. Net revenues, excluding the impact of trackers, increased by $14.3
million, primarily attributable to an increase in demand margin revenue as a
result of growth projects placed into service in the second half of 2010 and the
impact of new Columbia Gulf rates, subject to refund, put into effect May 1,
2011.

Operating expenses, excluding the impact of trackers, increased $6.4 million
from the comparable 2010 period due to increased employee and administrative
expenses and depreciation.

Equity earnings increased $1.9 million primarily due to non-recurrence of 2010
hedge ineffectiveness charges for Millennium Pipeline, partially offset by
Millennium’s higher current year interest costs resulting from its Aug. 2010
debt refinancing.

NiSource Electricreported operating earnings for the current quarter of $37.3
million compared to $48.3 million in the second quarter of 2010. Net revenues,
excluding the impact of trackers, increased by $0.2 million primarily due to
increased industrial usage and margins as a result of improved economic
conditions partially offset by decreased residential and commercial margins.

Operating expenses, excluding the impact of trackers, increased by $11.2 million
primarily attributable to higher electric generation costs due to an increase in
outage durations and higher employee and administrative expenses.

Corporate and Otherreported an operating earnings loss of $8.5 million for the
current quarter compared to an operating earnings loss of $5.1 million in the
second quarter of 2010.

Other Items

Interest expense decreased by $4.0 million due to the Nov. 2010 long-term debt
maturity and the Dec. 2010 tender offer repurchase of long-term debt. The
benefits were partially offset by incremental interest expense associated with
the swap maturity in Nov. 2010, the issuance of long-term debt in Dec. 2010 and
higher average short-term borrowings and rates.

Other-net reflected income of $0.6 million in 2011 compared to income of $2.6
million in 2010. The effective tax rate of net operating earnings was 33.3
percent compared to 36.4 percent for the same period last year.

Six-Month Period 2011 Operating Earnings – Segment Results (non-GAAP)

NiSource’s consolidated operating earnings (non-GAAP) for the six months ended
June 30, 2011, were $557.1 million, compared to $559.1 million for the same
period in 2010. Refer to Schedule 2 for the items included in 2011 and 2010 GAAP
operating income but excluded from operating earnings.

Operating earnings for NiSource’s business segments for the six months ended
June 30, 2011 are discussed below.

NiSource Gas Distributionreported operating earnings of $285.8 million compared
to $270.6 million reported for the first six months of 2010. Net revenues,
excluding the impact of regulatory trackers, decreased $8.0 million primarily
attributable to a decrease in off-system sales and lower residential and
commercial margins due to NIPSCO’s change from a volumetric-based rate design to
one with a higher fixed charge. The new rate design provides a greater
proportion of recovery through the monthly fixed customer charge for certain
customer classes. These decreases were partially offset by an increase in other
regulatory and service programs largely due to new rates under Columbia Gas of
Ohio’s approved infrastructure replacement program and rate cases at various
other utilities.

Operating expenses, excluding the impact of trackers, were $23.2 million lower
than the comparable period in the prior year primarily due to lower depreciation
costs as a result of reduced depreciation rates at NIPSCO and decreased
uncollectible accounts. These decreases were partially offset by an increase in
employee and administrative costs.

NiSource Gas Transmission and Storagereported operating earnings of $203.2
million versus operating earnings of $200.8 million in the first six months of
2010. Net revenues, excluding trackers, increased $14.0 million primarily
attributable to an increase in demand margin revenue as a result of growth
projects placed into service in the second half of 2010 and the impact of new
Columbia Gulf rates put into effect, subject to refund, on May 1, 2011. These
increases were partially offset by the recognition of revenue in the prior year
related to a previously deferred gain for native gas and fees received from a
contract buyout.

Operating expenses, excluding trackers, increased by $9.1 million primarily due
to higher employee and administration expense, increased maintenance and outside
service costs and higher depreciation.

Equity earnings decreased by $2.5 million primarily from Millennium Pipeline’s
higher interest costs resulting from the Aug. 2010 debt refinancing partially
offset by the non-recurrence of 2010 hedge ineffectiveness charges at
Millennium.

NiSource Electricreported operating earnings of $79.2 million for the first six
months of 2011, compared with operating earnings of $94.5 million for the prior
year period. Net revenues, excluding trackers, increased by $9.1 million
primarily due to increased industrial usage and margins as a result of improved
economic conditions partially offset by decreased residential and commercial
margins.

Operating expenses, excluding trackers, increased by $24.4 million due primarily
to higher electric generation costs as a result of an increase in outage
duration, a regulatory adjustment and higher employee and administrative
expenses.

Corporate and Otherreported an operating earnings loss of $11.1 million in the
first six months of 2011, compared to an operating earnings loss of $6.8 million
in the first six months of 2010.

Other Items

Interest expense decreased by $13.0 million due to the Nov. 2010 long-term debt
maturity and the Dec. 2010 tender offer repurchase of long-term debt. The
benefits were partially offset by incremental interest expense associated with
the swap maturity in Nov. 2010, the issuance of long-term debt in Dec. 2010 and
higher average short-term borrowings and rates.

The effective tax rate of net operating earnings was 34.2 percent compared to
35.9 percent for the same period last year.

Income from Continuing Operations (GAAP)

As noted above, on a GAAP basis, NiSource reported net income from continuing
operations for the three months ended June 30, 2011, of $39.5 million, or $0.14
per share, compared with $28.0 million, or $0.10 per share, in the same period a
year ago. Operating income was $163.3 million for the second quarter of 2011,
compared with $139.2 million in the year-ago period.

On a GAAP basis, NiSource reported net income from continuing operations for the
six months ended June 30, 2011, of $244.3 million, or $0.87 per share, compared
with $225.4 million, or $0.81 per share last year. Operating income was $562.5
million for the first six months of 2011 versus $542.6 million in the year-ago
period.

Refer to Schedule 1 for a complete list of the items included in 2011 and 2010
GAAP income from Continuing Operations but excluded from net operating earnings.

About NiSource

NiSource Inc. (NYSE: NI), based in Merrillville, Ind., is a Fortune 500 company
engaged in natural gas transmission, storage and distribution, as well as
electric generation, transmission and distribution. NiSource operating companies
deliver energy to 3.8 million customers located within the high-demand energy
corridor stretching from the Gulf Coast through the Midwest to New England.
Information about NiSource and its subsidiaries is available via the Internet at
www.nisource.com. NI-F

Forward-Looking Statements

This news release includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Those statements include statements
regarding the intent, belief or current expectations of NiSource and its
management. Although NiSource believes that its expectations are based on
reasonable assumptions, it can give no assurance that its goals will be
achieved. Readers are cautioned that the forward-looking statements in this news
release are not guarantees of future performance and involve a number of risks
and uncertainties, and that actual results could differ materially from those
indicated by such forward-looking statements. Important factors that could cause
actual results to differ materially from those indicated by such forward-looking
statements include, but are not limited to, the following: weather; fluctuations
in supply and demand for energy commodities; growth opportunities for NiSource’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; actual operating experience of NiSource’s assets; the
regulatory process; regulatory and legislative changes; the impact of potential
new environmental laws or regulations; the results of material litigation;
changes in pension funding requirements; changes in general economic, capital
and commodity market conditions; and counter-party credit risk, and the matters
set forth in the “Risk Factors” section in NiSource’s 2010 Form 10-K and
subsequent reports on Form 10-Q, many of which risks are beyond the control of
NiSource. NiSource expressly disclaims a duty to update any of the
forward-looking statements contained in this release.

NiSource Inc.
Consolidated Net Operating Earnings (Non-GAAP)
(unaudited)

Three Months Six Months
Ended June Ended June
30, 30,
———– ———–
(in millions,
except per share
amounts) 2011 2010 2011 2010
—————– —- —- —- —-
Net Revenues
Gas Distribution $502.7 $471.7 $1,870.3 $1,812.0
Gas
Transportation
and Storage 307.3 264.3 710.3 634.8
Electric 346.6 339.3 692.4 657.6
Other 24.4 19.8 48.2 41.7
—– —- —- —- —-
Gross Revenues 1,181.0 1,095.1 3,321.2 3,146.1
Cost of Sales
(excluding
depreciation and
amortization) 417.7 349.8 1,503.5 1,330.8
—————– —– —– ——- ——-
Total Net
Revenues 763.3 745.3 1,817.7 1,815.3
——— —– —– ——- ——-
Operating
Expenses
Operation and
maintenance 366.5 338.9 712.1 668.7
Operation and
maintenance -
trackers 34.9 37.2 120.3 144.2
Depreciation and
amortization 131.0 148.5 266.5 295.9
Depreciation and
amortization -
trackers 3.5 3.1 6.9 5.5
Other taxes 51.3 51.3 108.4 106.1
Other taxes -
trackers 16.2 12.7 51.7 43.6
————- —- —- —- —-
Total Operating
Expenses 603.4 591.7 1,265.9 1,264.0
————— —– —– ——- ——-
Equity Earnings
in
Unconsolidated
Affiliates 2.3 0.4 5.3 7.8
————— — — — —
Operating
Earnings 162.2 154.0 557.1 559.1
——— —– —– —– —–
Other Income
(Deductions)
Interest expense,
net (94.4) (98.4) (184.2) (197.2)
Other, net 0.6 2.6 3.9 5.2
———- — — — —
Total Other
Deductions (93.8) (95.8) (180.3) (192.0)
——————- —– —– —— ——
Operating
Earnings From
Continuing
Operations
Before Income
Taxes 68.4 58.2 376.8 367.1
Income Taxes 22.8 21.2 128.9 131.7
———— —- —- —– —–
Net Operating
Earnings from
Continuing
Operations 45.6 37.0 247.9 235.4
————— —- —- —– —–
GAAP Adjustment (6.1) (9.0) (3.6) (10.0)
————— —- —- —- —–
GAAP Income from
Continuing
Operations $39.5 $28.0 $244.3 $225.4
================ ===== ===== ====== ======

Basic Net
Operating
Earnings Per
Share from
Continuing
Operations 0.17 0.13 0.89 0.85
————- —- —- —- —-

GAAP Basic
Earnings Per
Share from
Continuing
Operations 0.14 0.10 0.87 0.81
————- —- —- —- —-

Basic Average
Common Shares
Outstanding 280.2 277.6 279.8 277.3
————– —– —– —– —–

NiSource Inc.
Segment Operating Earnings (Non-GAAP)
(unaudited)

Three Months Six Months
Gas Distribution
Operations Ended June 30, Ended June 30,
————– ————–
(in millions) 2011 2010 2011 2010
————- —- —- —- —-
Net Revenues
Sales Revenues $632.2 $572.1 $2,213.3 $2,122.5
Less: Cost of gas sold 316.9 255.5 1,314.8 1,197.5
———————- —– —– ——- ——-
Net Revenues 315.3 316.6 898.5 925.0
———— —– —– —– —–
Operating Expenses
Operation and
maintenance 170.7 163.0 344.1 330.6
Operation and
maintenance -trackers 16.7 21.8 85.5 112.0
Depreciation and
amortization 43.6 63.4 86.6 125.9
Other taxes 19.4 19.7 44.8 42.2
Other taxes -trackers 16.2 12.8 51.7 43.7
——————— —- —- —- —-
Total Operating
Expenses 266.6 280.7 612.7 654.4
————— —– —– —– —–
Operating Earnings $48.7 $35.9 $285.8 $270.6
================== ===== ===== ====== ======
GAAP Adjustment (2.3) (17.4) 2.2 (17.0)
————— —- —– — —–
GAAP Operating Income $46.4 $18.5 $288.0 $253.6
===================== ===== ===== ====== ======

Three Months Six Months
Gas Transmission and
Storage Operations Ended June 30, Ended June 30,
————– ————–
(in millions) 2011 2010 2011 2010
————- —- —- —- —-
Net Revenues
Transportation revenues $174.7 $161.7 $374.4 $358.9
Storage revenues 49.4 49.7 99.9 99.1
Other revenues 9.4 5.9 14.6 15.9
————– — — —- —-
Net Operating Revenues 233.5 217.3 488.9 473.9
———————- —– —– —– —–
Operating Expenses
Operation and
maintenance 88.1 83.2 168.5 159.9
Operation and
maintenance -trackers 15.1 13.2 29.2 28.2
Depreciation and
amortization 32.8 31.5 65.5 63.0
Other taxes 15.1 14.9 27.8 29.8
———– —- —- —- —-
Total Operating
Expenses 151.1 142.8 291.0 280.9
————— —– —– —– —–
Equity Earnings in
Unconsolidated
Affiliates 2.3 0.4 5.3 7.8
—————— — — — —
Operating Earnings $84.7 $74.9 $203.2 $200.8
================== ===== ===== ====== ======
GAAP Adjustment – – – -
————— — — — —
GAAP Operating Income $84.7 $74.9 $203.2 $200.8
===================== ===== ===== ====== ======

NiSource Inc.
Segment Operating Earnings (Non-GAAP)
(unaudited)

Three Months Six Months
Electric Operations Ended June 30, Ended June 30,
————– ————–
(in millions) 2011 2010 2011 2010
————- —- —- —- —-
Net Revenues
Sales revenues $348.6 $341.3 $696.2 $661.7
Less: Cost of sales 136.7 130.9 269.9 247.5
——————- —– —– —– —–
Net Revenues 211.9 210.4 426.3 414.2
———— —– —– —– —–
Operating Expenses
Operation and
maintenance 105.0 92.6 199.7 181.4
Operation and
maintenance -
trackers 3.1 2.2 5.6 4.0
Depreciation and
amortization 49.9 49.8 105.5 99.7
Depreciation and
amortization -
trackers 3.5 3.1 6.9 5.5
Other taxes 13.1 14.4 29.4 29.1
———– —- —- —- —-
Total Operating
Expenses 174.6 162.1 347.1 319.7
————— —– —– —– —–
Operating Earnings $37.3 $48.3 $79.2 $94.5
================== ===== ===== ===== =====
GAAP Adjustment 2.5 1.3 3.8 0.2
————— — — — —
GAAP Operating Income $39.8 $49.6 $83.0 $94.7
===================== ===== ===== ===== =====

Three Months Six Months
Corporate and Other
Operations Ended June 30, Ended June 30,
————– ————–
(in millions) 2011 2010 2011 2010
————- —- —- —- —-
Operating Loss $(8.5) $(5.1) $(11.1) $(6.8)
============== ===== ===== ====== =====
GAAP Adjustment 0.9 1.3 (0.6) 0.3
————— — — —- —
GAAP Operating Loss $(7.6) $(3.8) $(11.7) $(6.5)
=================== ===== ===== ====== =====

NiSource Inc.
Segment Volumes and Statistical Data

Three Months Six Months
Gas Distribution Operations Ended June 30, Ended June 30,
————– ————–
2011 2010 2011 2010
—- —- —- —-
Sales and Transportation
(MMDth)
Residential 33.6 25.9 168.1 155.2
Commercial 26.7 23.2 104.3 96.0
Industrial 100.8 85.1 219.7 186.0
Off System 20.4 27.2 37.9 43.1
Other 0.2 0.2 0.5 0.7
—– — — — —
Total 181.7 161.6 530.5 481.0
—– —– —– —– —–
Weather Adjustment 2.3 13.2 (5.0) 13.5
—————— — —- —- —-
Sales and Transportation
Volumes -Excluding Weather 184.0 174.8 525.5 494.5
=========================== ===== ===== ===== =====

Heating Degree Days 566 408 3,580 3,298
Normal Heating Degree Days 608 608 3,508 3,508
% Colder (Warmer) than Normal (7%) (33%) 2% (6%)

Customers
Residential 3,005,423 3,003,035
Commercial 277,508 275,246
Industrial 7,648 7,707
Other 64 81
—– — —
Total 3,290,643 3,286,069
—– ——— ———

Three Months Six Months
Gas Transmission and Storage
Operations Ended June 30, Ended June 30,
————– ————–
2011 2010 2011 2010
—- —- —- —-
Throughput (MMDth)
Columbia Transmission 204.9 171.5 631.5 559.0
Columbia Gulf 263.1 197.1 507.1 400.0
Crossroads Gas Pipeline 5.6 5.6 10.7 13.7
Intrasegment eliminations (147.7) (142.6) (300.3) (281.6)
————————- —— —— —— ——
Total 325.9 231.6 849.0 691.1
—– —– —– —– —–

NiSource Inc.
Segment Volumes and Statistical Data (continued)

Three Months Six Months
Electric Operations Ended June 30, Ended June 30,
————– ————–
2011 2010 2011 2010
—- —- —- —-
Sales (Gigawatt Hours)
Residential 784.4 810.5 1,640.2 1,657.5
Commercial 946.6 952.0 1,871.5 1,887.3
Industrial 2,325.7 2,111.0 4,768.1 4,141.8
Wholesale 200.2 172.3 267.3 305.7
Other 37.1 39.8 81.6 81.2
—– —- —- —- —-
Total 4,294.0 4,085.6 8,628.7 8,073.5
—– ——- ——- ——- ——-
Weather Adjustment (33.5) (19.8) (51.0) (14.3)
—————— —– —– —– —–
Sales Volumes -Excluding
Weather impacts 4,260.5 4,065.8 8,577.7 8,059.2
======================== ======= ======= ======= =======

Cooling Degree Days 258 277 258 277
Normal Cooling Degree Days 230 230 230 230
% Warmer (Colder) than Normal 12% 20% 12% 20%

Electric Customers
Residential 399,473 399,856
Commercial 53,861 53,656
Industrial 2,425 2,426
Wholesale 15 15
Other 737 742
—– — —
Total 456,511 456,695
—– ——- ——-

NiSource Inc.
Schedule 1 – Reconciliation of Net Operating Earnings to GAAP
(unaudited)

Three Months
Ended June
30,
———–
(in millions, except per share amounts) 2011 2010
————————————— —- —-
Net Operating Earnings from Continuing
Operations (Non-GAAP) $45.6 $37.0
————————————– —– —–
Items excluded from operating earnings:
Net Revenues:
Weather – compared to normal 0.2 (10.5)
Revenue adjustment – (5.7)
Unregulated natural gas marketing business 2.3 2.9

Operating Expenses:
Restructuring – 0.1
Unregulated natural gas marketing business (1.4) (1.6)
Gain/Loss on sale of assets and asset
impairments – -
————————————- — —
Total items excluded from operating earnings 1.1 (14.8)
——————————————– — —–

Tax effect of above items (0.4) 5.8
————————- —- —
Other income tax adjustments -Indiana House
Bill 1004 (6.8) -
——————————————- —- —

Total items excluded from net operating
earnings (6.1) (9.0)
————————————— —- —-

Reported Income from Continuing Operations -
GAAP $39.5 $28.0
============================================ ===== =====

Basic Average Common Shares Outstanding 280.2 277.6
————————————— —– —–

Basic Net Operating Earnings Per Share from
Continuing Operations $0.17 $0.13
——————————————- —– —–
Items excluded from net operating earnings
(after-tax) (0.03) (0.03)
—————————————— —– —–
GAAP Basic Earnings Per Share from
Continuing Operations $0.14 $0.10
———————————- —– —–

Six Months
Ended June
30,
———–
(in millions, except per share amounts) 2011 2010
————————————— —- —-
Net Operating Earnings from Continuing
Operations (Non-GAAP) $247.9 $235.4
————————————– —— ——
Items excluded from operating earnings:
Net Revenues:
Weather – compared to normal 6.0 (10.1)
Revenue adjustment – (5.7)
Unregulated natural gas marketing business 3.4 4.9

Operating Expenses:
Restructuring – (0.9)
Unregulated natural gas marketing business (3.4) (4.6)
Gain/Loss on sale of assets and asset
impairments (0.6) (0.1)
————————————- —- —-
Total items excluded from operating earnings 5.4 (16.5)
——————————————– — —–

Tax effect of above items (2.2) 6.5
————————- —- —
Other income tax adjustments -Indiana House
Bill 1004 (6.8) -
——————————————- —- —

Total items excluded from net operating
earnings (3.6) (10.0)
————————————— —- —–

Reported Income from Continuing Operations -
GAAP $244.3 $225.4
============================================ ====== ======

Basic Average Common Shares Outstanding 279.8 277.3
————————————— —– —–

Basic Net Operating Earnings Per Share from
Continuing Operations $0.89 $0.85
——————————————- —– —–
Items excluded from net operating earnings
(after-tax) (0.02) (0.04)
—————————————— —– —–
GAAP Basic Earnings Per Share from
Continuing Operations $0.87 $0.81
———————————- —– —–

NiSource Inc.
Schedule 2 – Adjustments by Segment from Operating Earnings to GAAP
For Quarter ended June 30,
(unaudited)

2011 (in
millions)
———-
Gas Gas Electric Corporate Total
Distribution Transmission ——– & Other —–
and
———— Storage ——-
—

Operating
Earnings
(Loss) $48.7 $84.7 $37.3 $(8.5) $162.2

Net Revenues:
Weather
(compared to
normal) (2.3) – 2.5 – 0.2
Unregulated
natural gas
marketing
business – – – 2.3 2.3
— — — — —
Total Impact -
Net Revenues (2.3) – 2.5 2.3 2.5

Operating
Expenses
Unregulated
natural gas
marketing
business – – – (1.4) (1.4)
— — — —- —-
Total Impact -
Operating
Expenses – – – (1.4) (1.4)

Total Impact -
Operating
Income (Loss) $(2.3) $- $2.5 $0.9 $1.1
—– — —- —- —

Operating
Income (Loss)
-GAAP $46.4 $84.7 $39.8 $(7.6) $163.3
—– —– —– —– ——

2010 (in
millions)
———-
Gas Gas Electric Corporate Total
Distribution Transmission ——– ——— —–
and
———— Storage
——–

Operating
Earnings
(Loss) $35.9 $74.9 $48.3 $(5.1) $154.0

Net Revenues:
Weather
(compared to
normal) (11.7) – 1.2 – (10.5)
Revenue
adjustment (5.7) – – – (5.7)
Unregulated
natural gas
marketing
business – – – 2.9 2.9
— — — — —
Total Impact -
Net Revenues (17.4) – 1.2 2.9 (13.3)

Operating
Expenses
Restructuring – – 0.1 – 0.1
Unregulated
natural gas
marketing
business – – – (1.6) (1.6)
— — — —- —-
Total Impact -
Operating
Income (Loss) – – 0.1 (1.6) (1.5)
— — — —- —-

Total Impact -
Operating
Income (Loss) $(17.4) $- $1.3 $1.3 $(14.8)
—— — —- —- ——

Operating
Income (Loss)
-GAAP $18.5 $74.9 $49.6 $(3.8) $139.2

NiSource Inc.
Schedule 2 – Adjustments by Segment from Operating Earnings to GAAP
For Six Months ended June 30,
(unaudited)

2011 (in
millions)
———-
Gas
Gas Transmission Corporate
and and
Distribution Storage Electric Other Total
———— ——– ——– —— —–

Operating
Earnings
(Loss) $285.8 $203.2 $79.2 $(11.1) $557.1

Net Revenues:
Weather
(compared to
normal) 2.2 – 3.8 – 6.0
Unregulated
natural gas
marketing
business – – – 3.4 3.4
— — — — —
Total Impact -
Net Revenues 2.2 – 3.8 3.4 9.4

Operating
Expenses
Unregulated
natural gas
marketing
business – – – (3.4) (3.4)
Gain/(Loss) on
sale of assets
and asset
impairments – – – (0.6) (0.6)
— — — —- —-
Total Impact -
Operating
Expenses – – – (4.0) (4.0)

Total Impact -
Operating
Income (Loss) $2.2 $- $3.8 $(0.6) $5.4
—- — —- —– —-

Operating
Income (Loss)
-GAAP $288.0 $203.2 $83.0 $(11.7) $562.5
—— —— —– —— ——

2010 (in
millions)
———-
Gas
Gas Transmission
and
Distribution Storage Electric Corporate Total
———— ——– ——– ——— —–

Operating
Earnings
(Loss) $270.6 $200.8 $94.5 $(6.8) $559.1

Net Revenues:
Weather
(compared to
normal) (10.9) – 0.8 – (10.1)
Revenue
adjustment (5.7) – – – (5.7)
Unregulated
natural gas
marketing
business – – – 4.9 4.9
— — — — —
Total Impact -
Net Revenues (16.6) – 0.8 4.9 (10.9)

Operating
Expenses
Restructuring (0.3) – (0.6) – (0.9)
Unregulated
natural gas
marketing
business – – – (4.6) (4.6)
Gain/(Loss) on
sale of assets
and asset
impairments (0.1) – – – (0.1)
—- — — — —-
Total Impact -
Operating
Expenses (0.4) – (0.6) (4.6) (5.6)

Total Impact -
Operating
Income (Loss) $(17.0) $- $0.2 $0.3 $(16.5)
—— — —- —- ——

Operating
Income (Loss)
-GAAP $253.6 $200.8 $94.7 $(6.5) $542.6

NiSource Inc.
Consolidated Income Statement (GAAP)
(unaudited)

Three Months
Ended
June 30,
——–
(in millions, except per share
amounts) 2011 2010
—————————— —- —-
Net Revenues
Gas Distribution $500.4 $454.3
Gas Transportation and Storage 307.3 264.3
Electric 349.2 340.5
Other 71.4 112.0
—– —- —–
Gross Revenues 1,228.3 1,171.1
Cost of Sales (excluding depreciation
and amortization) 462.5 439.1
————————————- —– —–
Total Net Revenues 765.8 732.0
—————— —– —–
Operating Expenses
Operation and maintenance 402.5 377.1
Depreciation and amortization 134.5 151.6
Impairment and loss on sale of assets,
net – -
Other taxes 67.8 64.5
———– —- —-
Total Operating Expenses 604.8 593.2
———————— —– —–
Equity Earnings in Unconsolidated
Affiliates 2.3 0.4
——————————— — —
Operating Income 163.3 139.2
—————- —– —–
Other Income (Deductions)
Interest expense, net (94.4) (98.4)
Other, net 0.6 2.6
———- — —
Total Other Deductions (93.8) (95.8)
———————- —– —–
Income from Continuing Operations
before Income Taxes 69.5 43.4
Income Tax Expense 30.0 15.4
——————- —- —-
Income from Continuing Operations 39.5 28.0
——————————— —- —-
(Loss)/Income from Discontinued
Operations -net of taxes (0.6) 0.1
Gain on Disposition of Discontinued
Operations -net of taxes – -
———————————– — —
Net Income $38.9 $28.1
========== ===== =====

Basic Earnings Per Share
Continuing operations $0.14 $0.10
Discontinued operations – -
———————– — —
Basic Earnings Per Share $0.14 $0.10
======================== ===== =====

Diluted Earnings Per Share
Continuing operations $0.14 $0.10
Discontinued operations – -
———————– — —
Diluted Earnings Per Share $0.14 $0.10
========================== ===== =====

Dividends Declared Per Common Share $0.23 $0.23
———————————– —– —–

Basic Average Common Shares
Outstanding 280.2 277.6
Diluted Average Common Shares 287.1 278.4
—————————– —– —–

Six Months
Ended
June 30,
——–
(in millions, except per share
amounts) 2011 2010
—————————— —- —-
Net Revenues
Gas Distribution $1,872.4 $1,795.4
Gas Transportation and Storage 710.3 634.8
Electric 696.3 658.4
Other 181.5 441.2
—– —– —–
Gross Revenues 3,460.5 3,529.8
Cost of Sales (excluding depreciation
and amortization) 1,633.4 1,725.4
————————————- ——- ——-
Total Net Revenues 1,827.1 1,804.4
—————— ——- ——-
Operating Expenses
Operation and maintenance 835.0 816.7
Depreciation and amortization 273.4 301.4
Impairment and loss on sale of assets,
net 0.7 0.1
Other taxes 160.8 151.4
———– —– —–
Total Operating Expenses 1,269.9 1,269.6
———————— ——- ——-
Equity Earnings in Unconsolidated
Affiliates 5.3 7.8
——————————— — —
Operating Income 562.5 542.6
—————- —– —–
Other Income (Deductions)
Interest expense, net (184.2) (197.2)
Other, net 3.9 5.2
———- — —
Total Other Deductions (180.3) (192.0)
———————- —— ——
Income from Continuing Operations
before Income Taxes 382.2 350.6
Income Tax Expense 137.9 125.2
——————- —– —–
Income from Continuing Operations 244.3 225.4
——————————— —– —–
(Loss)/Income from Discontinued
Operations -net of taxes (0.2) (0.1)
Gain on Disposition of Discontinued
Operations -net of taxes – 0.1
———————————– — —
Net Income $244.1 $225.4
========== ====== ======

Basic Earnings Per Share
Continuing operations $0.87 $0.81
Discontinued operations – -
———————– — —
Basic Earnings Per Share $0.87 $0.81
======================== ===== =====

Diluted Earnings Per Share
Continuing operations $0.85 $0.81
Discontinued operations – -
———————– — —
Diluted Earnings Per Share $0.85 $0.81
========================== ===== =====

Dividends Declared Per Common Share $0.69 $0.69
———————————– —– —–

Basic Average Common Shares
Outstanding 279.8 277.3
Diluted Average Common Shares 286.2 278.0
—————————– —– —–

NiSource Inc.
Consolidated Balance Sheets (GAAP)
(unaudited)

June 30, December 31,
(in millions) 2011 2010
————- —- —-

ASSETS
Property, Plant and Equipment
Utility Plant $19,783.8 $19,494.9
Accumulated depreciation and amortization (8,602.9) (8,492.6)
——– ——–
Net utility plant 11,180.9 11,002.3
—————– ——– ——–
Other property, at cost, less accumulated
depreciation 114.1 94.7
—————————————– —– —-
Net Property, Plant and Equipment 11,295.0 11,097.0
——————————— ——– ——–

Investments and Other Assets
Assets of discontinued operations and assets
held for sale 2.3 7.9
Unconsolidated affiliates 197.2 200.9
Total Investments and Other Assets 150.8 139.7
———————————- —– —–
Total Investments and Other Assets 350.3 348.5
———————————- —– —–

Current Assets
Cash and cash equivalents 59.9 9.2
Restricted cash 154.6 202.9
Accounts receivable (less reserve of $42 and
$37.4, respectively) 638.3 1,079.3
Income tax receivable 1.2 99.0
Gas inventory 278.0 298.2
Underrecovered gas and fuel costs 24.7 135.7
Materials and supplies, at average cost 87.0 83.8
Electric production fuel, at average cost 44.9 46.0
Price risk management assets 116.0 159.5
Exchange gas receivable 118.2 62.7
Regulatory assets 121.9 151.8
Prepayments and other 100.4 120.8
——————— —– —–
Total Current Assets 1,745.1 2,448.9
——————– ——- ——-

Other Assets
Price risk management assets 190.6 240.3
Regulatory assets 1,622.2 1,650.4
Goodwill 3,677.3 3,677.3
Intangible assets 303.1 308.6
Postretirement and postemployment benefits
assets 42.0 35.1
Deferred charges and other 120.7 132.7
————————– —– —–
Total Other Assets 5,955.9 6,044.4
—————— ——- ——-
Total Assets $19,346.3 $19,938.8
============ ========= =========

NiSource Inc.
Consolidated Balance Sheets (continued) (GAAP)
(unaudited)

June 30, December 31,
(in millions, except share amounts) 2011 2010
———————————– —- —-

CAPITALIZATION AND LIABILITIES
Capitalization
Common Stockholders’ Equity
Common stock -$0.01 par value, 400,000,000
shares authorized; 280,472,662 and
278,855,291 shares issued and outstanding,
respectively $2.8 $2.8
Additional paid-in capital 4,132.9 4,103.9
Retained earnings 952.6 901.8
Accumulated other comprehensive loss (54.5) (57.9)
Treasury stock (30.4) (27.4)
————– —– —–
Total Common Stockholders’ Equity 5,003.4 4,923.2
Long-term debt, excluding amounts due
within one year 6,340.0 5,936.1
——- ——-
Total Capitalization 11,343.4 10,859.3
——————– ——– ——–

Current Liabilities
Current portion of long-term debt 30.0 34.2
Short-term borrowings 870.4 1,382.5
Accounts payable 316.2 581.8
Dividends payable 64.6 0.1
Customer deposits and credits 183.1 318.1
Taxes accrued 179.5 221.1
Interest accrued 114.4 114.4
Overrecovered gas and fuel costs 121.4 11.8
Price risk management liabilities 135.0 173.9
Exchange gas payable 155.4 266.1
Deferred revenue 5.0 6.8
Regulatory liabilities 83.5 92.9
Accrued liability for postretirement and
postemployment benefits 23.3 23.3
Temporary LIFO liquidation credit 0.3 -
Legal and environmental reserves 46.0 86.0
Other accruals 230.0 336.4
————– —– —–
Total Current Liabilities 2,558.1 3,649.4
————————- ——- ——-

Other Liabilities and Deferred Credits
Price risk management liabilities 127.8 181.6
Deferred income taxes 2,369.1 2,209.7
Deferred investment tax credits 31.3 33.7
Deferred credits 75.5 68.6
Deferred revenue – 0.3
Accrued liability for postretirement and
postemployment benefits 919.6 1,039.6
Regulatory liabilities and other removal
costs 1,624.8 1,595.8
Asset retirement obligations 138.9 138.8
Other noncurrent liabilities 157.8 162.0
—————————- —– —–
Total Other Liabilities and Deferred Credits 5,444.8 5,430.1
——————————————– ——- ——-
Total Capitalization and Liabilities $19,346.3 $19,938.8
==================================== ========= =========

NiSource Inc.
Statements of Consolidated Cash Flows (GAAP)
(unaudited)

Six Months Ended June 30, (in millions) 2011 2010
————————————— —- —-
Operating Activities
Net Income $244.1 $225.4
Adjustments to Reconcile Net Income to Net Cash
from Continuing Operations:
Depreciation and amortization 273.4 301.4
Net changes in price risk management assets and
liabilities 15.3 4.4
Deferred income taxes and investment tax credits 132.1 38.6
Deferred revenue (2.6) (17.2)
Stock compensation expense and 401(k) profit
sharing contribution 17.2 6.0
Loss on sale of assets – 0.1
Loss on impairment of assets 0.7 -
Income from unconsolidated affiliates (4.4) (7.8)
Gain on disposition of discontinued operations -
net of taxes – (0.1)
Loss from discontinued operations -net of taxes 0.2 0.1
Amortization of debt related costs 4.2 5.4
AFUDC equity (1.9) (3.7)
Distributions of earnings received from equity
investee 9.9 7.9
Changes in Assets and Liabilities:
Accounts receivable 434.6 245.1
Income tax receivable 97.8 24.8
Inventories 13.7 147.6
Accounts payable (250.4) (235.4)
Customer deposits and credits (134.9) (104.7)
Taxes accrued (40.7) 6.2
Interest accrued – 5.3
Over (Under) recovered gas and fuel costs 220.7 (252.3)
Exchange gas receivable/payable (166.2) (51.3)
Other accruals (26.3) (30.5)
Prepayments and other current assets 20.6 28.1
Regulatory assets/liabilities 28.3 98.3
Postretirement and postemployment benefits (118.9) 1.7
Deferred credits 6.3 (3.6)
Deferred charges and other non-current assets 12.1 4.6
Other non-current liabilities (4.84) 2.9
—————————– —– —
Net Operating Activities from Continuing
Operations 780.1 447.3
Net Operating Activities used for Discontinued
Operations (44.1) (44.8)
———————————————- —– —–
Net Cash Flows from Operating Activities 736.0 402.5
—————————————- —– —–

Investing Activities
Capital expenditures (445.0) (336.9)
Insurance recoveries – 0.5
Proceeds from disposition of assets 9.4 0.3
Restricted cash withdrawals (deposits) 48.3 (38.0)
Contributions to equity investees (0.1) (0.3)
Other investing activities (36.0) (19.9)
————————– —– —–
Net Investing Activities used for Continuing
Operations (423.4) (394.3)
Net Investing Activities from Discontinued
Operations – 0.4
—————————————— — —
Net Cash Flow used for Investing Activities (423.4) (393.9)
——————————————- —— ——

Financing Activities
Issuance of long-term debt 395.3 -
Retirement of long-term debt (13.0) (5.2)
Premiums and other debt related costs (8.2) -
Change in short-term borrowings, net (512.2) 109.8
Issuance of common stock 7.9 6.8
Acquisition of treasury stock (3.0) (1.4)
Dividends paid – common stock (128.7) (127.6)
—————————– —— ——
Net Cash Flow used for Financing Activities (261.9) (17.6)
——————————————- —— —–
Change in cash and cash equivalents from
continuing operations 94.8 35.4
Cash contributions to discontinued operations (44.1) (44.4)
Cash and cash equivalents at beginning of period 9.2 16.4
— —-
Cash and Cash Equivalents at End of Period $59.9 $7.4

SOURCE NiSource Inc.