Welcome to the third quarter 2007 NiSource earnings conferencecall. (Operator Instructions) I will nowturn the call over to Mr. Glen Kettering, Senior Vice President of CorporateAffairs. Please proceed, sir.

Thank you, Tuwanda. Thank you and good morning to everyone.On behalf of NiSource I would like to welcome you to our quarterly analystcall. We appreciate the opportunity to be with you today and thank you fortaking the time to join us. Joining me this morning are Bob Skaggs, President and ChiefExecutive Officer, Mike O'Donnel, Executive Vice President and Chief FinancialOfficer, and Randy Hulen, Director of Investor Relations. As you know, the focus of today's call is to review ourthird quarter 2007 financial performance and provide an update on progress onour four-point business plan. We will then open the call to your questions. I would like to remind all of you that some of thestatements made on this conference call will be forward-looking statementswithin the meaning of the Safe Harbor provisions of the US Federal Securities Law. These forward-looking statements are subject to risks anduncertainties that could cause actual results to differ materially from thoseexpressed in the forward-looking statements. Information concerning factorsthat could cause actual results to differ materially is included in theManagement's Discussion and Analysis section of our Form 10Q quarterly reportfor the second quarter of 2007, which was filed August the 3rd of 2007 with theSEC. Our third quarter Form 10Q will be filed later today. And now, I'll turn the call over to Bob Skaggs.

Good morning and thanks for joining us today. In addition toour third quarter earnings report, I will be sharing an expansive update on anumber of significant business initiatives that are key to NiSource's long-termpath forward business strategy. Based on those initiatives and continued execution on ourfour part business plan, I'll also be reaffirming our 2007 operating earningsguidance and providing a longer-term 2008 through 2010 view of our earningsprofile. As you can see in this morning's news release, NiSourcetoday reported net operating earnings, non-GAAP of $21.5 million or $0.08 pershare for the three months ended September 30, 2007 compared with $29.6 millionor $0.11 per share for the third quarter of 2006. Operating earnings, non-GAAP were $132.4 million for thethird quarter compared to $142.9 million for the same period in 2006. Theoperating earnings reduction is the result of a onetime $16.2 million reserveassociated with the Northern Indiana Public Service Company, NIPSCO regulatorysettlement discussed later in the news release. Looking at the first nine months of the year, NiSource'sconsolidated operating earnings on a non-GAAP basis were $707.8 million adecrease from $714.3 million for the same period in 2006. As we've done inprior calls, we're focusing on net operating earnings and operating earnings,both non-GAAP measures because we believe these measures better represent thefundamental earnings strength and performance of the Company. These measures normalize for weather and certain otheritems, such as restructuring charges and significant reserve changes. Schedulesfor one and two in the news release provide a detailed reconciliation of netoperating earnings and operating earnings to GAAP. From an earnings standpoint, our third quarter performancewas largely in line with expectations and consistent with our earnings outlookfor the year. In a moment, I will speak more to the specifics of the quarterresults. More notable from a long-term standpoint, the NiSource teamhas made significant progress on several…

(Operator Instructions) And your first question comes fromthe line of Faisel Khan with Citigroup. Please proceed.

In terms of the new investments at NIPSCO, how does thataffect your long-term guidance? Is that baked into your long-term guidancealready that these plans will make it into rate base?

Those are baked into the estimates.

Okay. I mean do you think that this -- that theseinvestments kind of offset the last few years of under-investment in thegeneration part of that business?

We feel that the process that we have gone through with, inthe IRP, the thoroughness, the extensive study and the involvement of thestakeholders certainly points to the need for over 1,000 megawatts of capacitynear term, right now. And so we think that process has established it and we areprepared to go through the certificate process to thoroughly vet that, and thenmove on to the rate case process. So we think that we will have that showingand the need will be justified.

So most of the interveners are pretty much on board withthis IRP plan? Are there any potential adverse type of movements from otherinterveners?

It has been an open process; we've tried to be inclusive.We've tried to keep folks current on the studies and the process. And we doexpect a consensus to develop around this solution. Having said that, as youknow, in regulatory proceedings, different points of view surface and issuesare vigorously debated. We are prepared for that and again, we feel like that ourwork with stakeholders and the process that we have followed position us for agood decision.

What does -- in your guidance then, what does it assume interms of any sort of rate -- any sort of impact from a NIPSCO rate case? Do youbelieve that post of this investment that you will be earning a fair return onequity as a business?

Yes. That's right. We are expecting a fair return on ratebase in NIPSCO proceeding and for that matter, all the rate proceedings that wehave teed up in 2008.

Okay.

Again, the basis of the strategy is good, qualityinvestments in infrastructure, reliability, safety, good strong organic growthand to that, we expect fair returns.

But if I add up all -- if I add up kind of a fair return atNIPSCO with this recent investment you are talking about, and I look at yourother gas utilities and their rate cases you filed there, including the returnin Massachusetts. Shouldn't that help drive earnings growth kind of past 2009,2010 above kind of your guidance? Or is there -- are you seeing larger costpressures in your business overall that are eroding some of that rate release?

Again, I believe that the guidance we're giving between nowand 2010 is consistent with fair returns, a well-managed cost structure.

Okay. How would you pay for these plants at NIPSCO? How willthey be capitalized?

This is Mike. The Whiting plan, of course, is alreadyfinanced.

Right.

On NiSource's balance sheet, the other plan we would startby borrowing the money for that. But then eventually, it would be funded alongthe lines of NIPSCO's capital structure for rate-making purposes.

But there's no reason to go to the outside markets then?

We don't think so. Not for that, no.

So then would this be like a complete equity contribution toNIPSCO?

Not sure about that. That gets into some internal capitalstructure issues, which really are kind of internal. I think for the way youthink about it is NiSource would probably finance it with debt, but on NIPSCO'sbooks, it would be a blend of debt and equity.

Okay. And how would be the BP contract be affected by thisas a purchase by NIPSCO at Whiting?

We see NIPSCO stepping in the shoes of Whiting and honoring,upholding our agreement with BP. So NIPSCO effectively would be providing anysteam demand that BP has.

Okay. And the gas utility, the $6 million rate increase inMassachusetts, is that -- you said that's a base rate increase but it's relatedto the PBR? I was trying to connect the two.

No. You're right. The adjustment was under the terms of ourPBR mechanism and it does adjust base rates.

Okay.

It's not a rider. It goes into base rates and treated thatway.

And how does the PBR work on that? It raises base ratesbased on new investment and new plant? Is that how it works or theconservation?

It's an index and a series of measures and a fairly involvedformula that we follow to adjust the rates. We can give you the details on howthat mechanism works.

Okay. And you said on the -- have you identified assets toput into the MLP? I know you said you are constrained in terms of what you cantalk about but I'm just wondering if you have actually identified the assets.

We feel like we are limited on what we can say and we'rejust not going to be able to go much further than what we've already done.

Okay. Is there -- on the pipeline system, is there anyexcess capacity or any uncontracted capacity on the pipelines?

Effectively, the pipelines are sold out.

Okay. And that --?

Now again, we optimize on a daily, hourly basis to ensurethat we are optimizing the system. But effectively, Columbia Gas Transmissionis sold out; effectively, mainline gulf is sold out.

Okay. And on your expansion projects, is there room toincrease volumes or increase potential earnings on the existing projects youhave in place or that are going in place, meaning --? Or are they fully 100%contracted and to expand earnings on those systems you would have to investmore capital?

It's more the latter. Certainly, adding facilities alsoprovides opportunities for additional optimization but these are fullycertificated, fully contracted facilities when we put them in service.

Okay. Great. Thanks for the time, guys.

Thank you.

Your next question comes from the line of Shneur Gershuniwith UBS. Please proceed.

Good morning guys. Busy quarter. I'm going to try and keepmy questions short to give other people an opportunity. Just with respect tothe NIPSCO filing and so forth, you basically, you've, taken this charge for$33.5 million on an operating income basis to reflect the short power issuesand some of the issues the interveners had with respect to Mitchell. That said, with the filing that you've done with NIPSCO nowand the fact that you are going to add Whiting and so forth, does this addressthese issues so that these interveners that have created those challenges inthe past will basically bless this deal and not -- I guess file friendly briefswith respect to the rate case?

We've certainly entered into that settlement. We've beenworking with the stakeholders through that process, the IRP process,discussions with Mitchell to build a consensus, develop support for addressingthe capacity needs, and for that matter, the ongoing rate structure. So it's avery integrated, sequential, global process and repositioning NIPSCO to be oneof the best utilities in the country, and that's what we're working on andthat's what the process is designed to lead us through. I emphasize it's a process and we're going to do this in theopen with the stakeholders and reach the best answers as quickly as we can.

Okay. Two other short, quick questions. With respect toWhiting in the RFP process, did you use the current book value or did you usean estimated book value?

Well. To determine the selection of Whiting and Sugar Creek,we, as you may recall, had a competitive RFP that went out in the summer andwas a very, very competitive process. The bids were submitted and evaluated ina very competitive dynamic environment. So it was a market-driven process.

Okay. I guess my final question is just with respect to theIBM contract. What exactly has changed with -- what has IBM agreed to make thiscontract work a little better than it has in the past?

Again, you're going to have to bear with me. I'm a bitlimited on the details that I can share at this point with regard to the IBMagreement. We've entered into an MoU. It is contingent on a definitiveagreement that we intend to reach prior to the end of the year. I can say this that the focus of the restructured agreementis going to be on information technology services. That was the largest pieceof this outsourcing arrangement. We think it is certainly IBM's strongest areaof competency expertise and that's going to be the focus of the agreement. Other areas, day-to-day operations of F&A, HR, supplychain, metered cash, things like that, NiSource will be focusing on. So thatgives you the essence of where the relationship is headed. And we think it willprovide better services, particularly better IT services and allow us to focuson what we need to focus on as NiSource.

Okay. I have some more questions but I'm going to jump backin the queue. Thank you, Bob.

Okay. Thanks.

Your next question comes from the line of Carl Kirst withCredit Suisse. Please proceed.

Hey, good morning everybody.

Hey Carl.

Just a few cleanups. Bob, is the MLP specifically baked intothe guidance? I just wanted to clarify that since I know it doesn't technicallyhave board approval and so I'm just trying to…

The answer is effectively it is baked into the guidance.

Okay. Fair enough. Can you just give us a sense for what ifChris is there, this refresh my memory what the maintenance cap is for thepipelines? And also on the pipes, I was hoping, and I know it's not materialbut if we could actually, if you can disclose it both a sale amount to GDP andwhat the associated EBITDA is?

Just on the ongoing capital maintenance levels, this is aballpark, Carl. It's between $100 million and $120 million.

And that's for the entire system?

Yes. What we call GT&S, Gas Transmission and Storage;and that is a ballpark number. Chris and team are working hard on coststructure issues and the like. And again, that's a ballpark number that willcontinue to be focused on rigorously by the team. Your next question was aboutthe Tennessee transaction?

Correct.

And I'm sorry, you're asking about the value of thefacilities?

Well I was just wondering what the sale price was and whatany associated EBITDA?

Give or take book value, $8.5 million of the assets and interms of EBITDA, very little.

All right. Okay. And this basically goes back to the FERCinterconnect issue, what this clears?

Yes. It does and we made the point about the strategicnature of the assets from our perspective, nonstrategic. And we think thisrepresents a win-win and albeit very small, nominally accretive to us.

Fair enough. And last question and I want to be cognizant ofwhat you can say and what you can't say about the MLP but as you look at itfrom a NiSource standpoint, is there -- previously we were looking at becauseof some of the tax issues, getting over that hump would be a challenge. Didsomething change there to allow you to be able to better digest whatever taxhurdle might be out there?

Carl, I'm going to have to just drop back to the party linethat we continue to believe it's a valuable tool. It's going to be a goodcomplement and we intend to proceed.

Fair enough. I appreciate the color and good luck.

Thanks.

Your next question comes from the line Jonathan Arnold withMerrill Lynch. Please proceed.

Good morning.

Good morning Jonathan.

Just a kind of conceptual question, Bob. In terms of thegrowth rate and absence of growth over this period. From listening to what yousaid, my sense is that this is largely around the electric utility and thecosts of funding the acquisitions as you move into the rate case and thenobviously the rate case itself. If you were to look at the company ex-NIPSCO, do you have asense of what we might be seeing in terms of underlying growth just trying tohit a focus on the pieces that are outside of the electric utility and is thatsomething you could do?

Look. Well, I can just give you a point of view that theseare regulated stable of assets growth is going to be investment driven. Wethink we have a healthy stream of growth projects at all segments. And giventhat, we think the inherent growth of 3% to 5% is what we think is thereinherently and I'm now talking conceptually and at 50,000 feet. Near-term, you identified we do need to deal with the NIPSCOsituation but I just always add and we are talking about NIPSCO. We're on thethreshold of a series of bellwether rate cases and these are significant casesagain, infrastructure driven, rate design, certainly a big issue but that'sOhio, Pennsylvania and Bay State. So that's a bit of I guess a macro view of the earningspower of the company, as well as, what we need to navigate through over thenext 12 months.

Okay. Thank you.

Your next question comes from the lien of Sam Brothwell withWachovia. Please proceed.

Hi. Good morning.

Hi, Sam.

Bob, I know you haven't disclosed numbers around the powerplant purchase and obviously, the contemplated transfer of Whiting. But in yoursettlement discussions, did you kind of give these guys an idea of what thenumbers would look like?

I can't answer that specifically, but I would say that thestakeholders are knowledgeable folks and they know generally speaking, the costlevels, directionally what the cost levels are for facilities of this size inthe Midwest.

Okay.

And again, we've indicated that this is $0.5 billion of ratebase investment, $0.5 billion plus.

Okay.

For NIPSCO.

Okay.

So that won't be a surprise if that's really what you aredriving at. I think folks certainly expect dollars of that magnitude,investment levels of that magnitude.

Okay. And as you contemplate that, I mean, your guidancethrough ‘10 is flat and you're looking at $0.5 billion rate base investment inthat kind of neighborhood. I think you alluded to seeing an optic post 2010, is thatthe time period in which you think this rate base investment will start to bearfruit in your earnings?

Yes. Again, I think that's an accurate way to say it. I didmention in the prepared remarks, in my closing effectively what I said was that2008 is a significant year because of the NIPSCO rate case, Ohio Pennsylvania.There are scenarios where we work through all of those cases to closure in 2008and you see a trajectory beginning in 2009. That's effectively what I said. But to be candid,straightforward open as possible we all know that traversing that many caseseffectively, favorable outcomes in 12 months or less is a tall order, one thatthe teams are poised to tackle. They are after it and it's an all out effort toreach closure by the end of '09.

Okay. Thank you very much.

And your next question comes from the line of Mark Carusowith Millennium. Please proceed.

Good morning, Bob.

Good morning, Mark.

So, I guess just a few clarifications here. As far as, theMLP goes I imagine throughout this whole process, the board has kind of beengetting steady updates and involved with what's going on and it's just a matterof you guys getting together and finalizing what you guys think are the rightthings. Is that the right way to think about it?

Yes. The board and in particular our finance committee hasbeen engaged from day one in and around this consideration, much like they werein the strategic review.

Got it.

Totally engaged.

And then as far as, the guidance of 2010 goes and withwhat's going on with NIPSCO, is it right to assume that as you move along allthese different rate cases, you guys will be updating us once you find out theoutcomes, as far as, the guidance and reassessing the guidance based on theoutcomes there? Because I guess one of the things I'm confused about and itsounds like others is we've got flat, but you also do have big things on thehorizon. I know it's very sensitive and there's a lot going on there as far astrying to make a prediction there would be very tough and you don't want to beheld to that. But at the same time I would think that as you work your waythrough it, we will get updates on that and this is just kind of a matter oftrying not to step in front of all of what's coming?

Well said. And hopefully we've built a track record that ourcommunication, it's an ongoing process. We try to be as expansive, complete aswe possibly can and hopefully this morning is a prime example of beingexpansive and complete in providing the sorts of updates you have noted.

That’s it. Thanks.

Your next question comes from the line of Carrie Saint Louiswith Fidelity. Please proceed.

Hi. Good morning.

Good morning, Carrie.

I have two questions. First, I was curious what the use ofproceeds from the MLP offering would be? How would you take those proceeds andhow would you apply them?

We see using those to support growth and investment, theinfrastructure that we are investing in.

So keeping it all with NGT&S business or would it go upto the parent at all?

Well, not necessarily. I don't think we've engineered itthat precisely at this point.

Okay.

But certainly, again, we're teeing up an aggressiveinfrastructure investment program and we think equity-like financing, notcommon, but equity-like financing that could be provided by a vehicle like anMLP is going to support that sort of investment.

Okay. And then you mentioned the funding for the IRP. Iguess you said it would be through debt markets and I was curious if you hadfigured out if that would be just straight debt or if you are still examiningthe hybrid option?

Carrie, this is Mike. We have not figured out the exactfinancing plan yet. Keep in mind that the purchases will take place probablyMay, June of next year. The cash will flow and we probably won't need to do anyfinancing until sometime after May or June of next year. So we haven't reallynoted down the specifics yet.

Okay. But it would look like you would be financing in theback half of next year in debt financing?

I think that's a good assumption, yes.

Okay. Great. Thank you.

Thank you.

Your next question comes from the line of Paul Ridzon withKeyBanc. Please proceed.

Good morning. In the spring, you talked about a flattishearning trajectory and in the interim you seem to have found a good number ofvalue-enhancing opportunities. But it seems as other trajectory has perhapseven worsened because it's now flat to down. What are the offsets you're seeingto these opportunities that you've discovered?

Well, just to clarify. We did suggest that in '08 we haveissue to deal with in and around the NIPSCO capacity situation and the FACsettlement; indicated that that puts pressure in particular on 2008. We also suggested looking beyond 2008, assuming favorableoutcomes NIPSCO rate case, Ohio, Pennsylvania, Bay State, GT&S growthprojects, we see the trajectory going to the Northeast and growing. So that's the way we look at that range and again, it'sgoing to be driven by the investments and successfully working through theserate cases. Those are the near-term variables.

Aside from the Gulf assets, are you reviewing any otherpotential assets for monetization or was that pretty well vetted out in yourstrategic review process?

Pretty well vetted out in the strategic review process. Wecontinue to look at the portfolio, but we love the assets and as I said in theprepared remarks, we're focused on this core portfolio of assets.

Okay. Thank you very much.

Your next comes from the line of Josh Golden with JP Morgan.Please proceed.

Yes. Good morning.

Good morning, Josh.

I'm curious if the creation of the MLP changes yourcommitment to investment grade ratings and also just curious given the tax baseon some of these assets will the assets that are moved to the MLP be relativelynew assets that are coming on stream or will you work to transition olderassets into the MLP?

Yes. Josh, I apologize. Again on the last part of yourquestion, the latter part of your question around specifics on the MLP. I'mgoing to have to pass on that because of the SEC restrictions and I just can'tget that detailed, so I apologize for that. On the first part of your question we are committed tomaintaining investment grade credit and that's with or without the MLP.

Okay. So there's been no change there.

No change.

Thank you.

Your next question comes from the line of Ashar Khan withSAC Capital. Please proceed.

My questions have been answered. Thank you.

Okay. Thanks.

(Operator Instructions) At this time, there are noadditional questions. I would now like to turn the call over to Mr. Bob Skaggsfor the closing remarks.

Well again, we appreciate your participation, your support,your ongoing interest. We will continue to keep you posted. Thanks. Have a goodweekend.

Ladies and gentlemen, that concludes the presentation. Youmay now disconnect and have a wonderful day.