BUILDING

CUSTOMER-FOCUSED ENERGY SOLUTIONS ENVIRONMENTAL STEWARDSHIP STRONG, STABLE COMMUNITIES ENGAGED, ALIGNED AND SAFE TEAMS SUSTAINABLE VALUE

2009 SUSTAINABILITY REPORT FORWARD LOOKING STATEMENT This report 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 report 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; the effectiveness of NiSource's restructured outsourcing agreement; 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 counterparty credit risk, many of which are risks 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.

REPORT PARAMETERS This first annual NiSource sustainability report covers the 2009 calendar year and was developed to address issues that are relevant to NiSource and its stakeholders, subject to data availability. This report is not all-inclusive. It provides a foundation for future reports and covers the three principal businesses of NiSource Inc.: natural gas distribution; natural gas transmission and storage; and electric transmission, generation, and distribution. In this report, we address four stakeholders and the sustainability programs we are building: communities, customers, employees, and environment.

Historical data has been normalized to account for organizational changes from period to period.

For additional information or to provide feedback on the report, please contact Julie Shea, Team Leader, Environmental Health & Safety, NiSource, 801 East 86th Avenue, Merrillville, IN 46410 or by email at [email protected]. NiSource Inc. 1 MESSAGE FROM THE PRESIDENT AND CEO

BUILDING SUSTAINABLE VALUE

On behalf of our Board of Directors and management team, I am pleased to present NiSource’s 2009 Corporate Sustainability Report.

At NiSource, our aspiration is to be the premier company in our industry. We are working hard to achieve that goal by building customer-focused energy solutions, executing on investment-driven growth opportunities, and generating sustainable value for our investors, customers, and employees. Underpinning this effort is our unwavering commitment to top-tier safety and reliability, OUR ASPIRATION employee engagement, collaborative stakeholder relationships, and forward-looking environmental “Our aspiration is to be practices and stewardship. the premier company These commitments are at the heart in our industry.” of our sustainable business approach, and I am pleased that we are able to highlight them in this Robert C. Skaggs, Jr. report. Each aspect of our balanced President and CEO business portfolio is addressed in this document, from natural gas distribution, transmission and storage, to electric generation, transmission and distribution. The report is grouped into sections focusing on key aspects of our sustainability strategy: TABLE OF CONTENTS PG. • Customer-Focused Energy Solutions. • Environmental Stewardship. • Strong, Stable Communities. A MESSAGE FROM OUR CEO 1 • Engaged, Aligned and Safe Teams. SUSTAINABILITY VISION & POLICY STATEMENT 3

As you will see, our charge across all of these areas is to OUR COMPANY: NISOURCE CORPORATE PROFILE 4 deliver positive business results while faithfully adhering to our core values and commitments. We are meeting this CUSTOMER-FOCUSED ENERGY SOLUTIONS 6 challenge – as we have so many others – in a disciplined fashion, with a strong emphasis on planning, collaborative ENVIRONMENTAL STEWARDSHIP 13 stakeholder engagement, solid execution, and transparent measurement and reporting. This balanced, common- STRONG, STABLE COMMUNITIES 24 sense approach has served us well in the past, and it ENGAGED, ALIGNED AND SAFE TEAMS 27 continues to be our hallmark moving forward. REPORT INTEGRITY & GRI CONTENT TABLE 35 Although this is our first formal sustainability report, NiSource’s commitment to sustainability is not new. More 2 NYSE: NI COMMITMENT

than a decade ago, NiSource’s Board of Directors established a standing committee to review and guide our environmental, health and safety performance and recently expanded to incorporate sustainability related matters. That enterprise-level focus – reflected in our NiSource Sustainability Policy on the next page – has driven significant improvements across our organization and continues to guide our efforts today.

We are serious about establishing a legacy of sustained economic growth, social responsibility and environmental stewardship. It is essential to our long-term aspiration, and a core part of our strategy to provide sustainable value for our stakeholders.

Thank you for your interest and continued support of NiSource.

Sincerely,

Robert C. Skaggs, Jr. President and CEO NiSource Inc. NiSource Inc. 3 OUR SUSTAINABILITY POLICY

OUR FOUNDATION NISOURCE’S SUSTAINABILITY POLICY

Our Vision is to establish a legacy of sustained economic growth, social responsibility and environmental stewardship reflective of a Premier Energy Company.

To these ends, NiSource is committed to: • Delivering sustainable economic growth; • Enhancing our stakeholders’ quality of life; and INTEGRITY AND • Serving as responsible stewards of natural and environmental resources. CORPORATE GOVERNANCE

To fulfill this commitment, we will: We are committed to transparency, straightforward communication, contemporary governance approaches, and the highest ethical Promote Strong, Stable Communities standards. • Invest in clean, safe and reliable energy infrastructures in the communities we serve; NiSource’s Board of Directors is elected by the shareholders and is • Actively engage in stakeholder processes; and charged with overseeing and directing management activities to enhance the long-term value of the company. The Board regularly • Be actively involved in communities we serve. monitors the effectiveness of our management policies and decisions, and holds senior management accountable for achieving Implement Customer-Focused Solutions corporate objectives. • Help customers address energy costs, make smarter energy choices, and lower impacts on the environment; Our Board currently consists of 10 independent directors (as defined and by NYSE rules) and one non-independent director • Couple investments with effective regulatory and (Robert C. Skaggs, Jr., our president and CEO). Ian M. Rolland, an commercial actions that promote affordable clean independent board member, serves as Chairman. energy. Our annual proxy statement and the Corporate Governance section of nisource.com include additional detailed information about our Board Steward the Environment makeup, committees and other governance practices. • Reduce our impact on the environment through pollution prevention and reduction programs; and Committees of the Board • Implement innovative conservation approaches. Audit Corporate Governance Assure an Engaged, Aligned and Transparent Officer Nomination Sustainability Approach Compensation • Establish goals, measures, and standards that are Finance Environmental, Safety and Sustainability tracked and evaluated for success; • Govern ourselves in a manner that is responsive to the Stockholders and other interested persons may contact the Board of interests of shareholders and other investors; and Directors by writing to the following address: • Publicly report on our sustainability efforts. NiSource Inc. Attention: [Board of Directors]/[Board Member]/[Non-management NiSource Sustainability Policy Directors]/[Lead Director] Adopted by the NiSource Inc. Board of Directors c/o Gary W. Pottorff, Corporate Secretary March 22, 2010 801 East 86th Avenue Merrillville, 46410 4 NYSE: NI CORPORATE PROFILE

income generated from the rate-regulated businesses. OUR COMPANY NiSource engages stakeholders across our operating NISOURCE CORPORATE area, including employees, shareholders, customers, PROFILE regulatory and public officials, community leaders and partners, landowners and others in the general public Our Aspiration: The Premier Regulated Energy Company who are interested in our company, operations, and in North America services.

NiSource Inc. (NYSE: NI) is an energy holding company Natural Gas Distribution with headquarters in Merrillville, Ind., approximately Our natural gas distribution operations serve more than 40 miles outside of Chicago. Our companies provide 3.3 million customers in seven states via approximately natural gas, electricity and other products and services to 58,000 miles of pipeline and related facilities. Our gas approximately 3.8 million customers located within the distribution subsidiaries provide natural gas to residential, high-demand energy corridor that runs from the Gulf commercial and industrial customers in , Coast through the Midwest to New England. Our business , , , , Indiana and strategy is focused on our core, rate-regulated, asset- . based businesses with substantially all of our operating

ELECTRIC OPERATIONS

GAS DISTRIBUTION

A Balanced 100% Regulated Portfolio

GAS TRANSMISSION & STORAGE NiSource Inc. 5 CORPORATE PROFILE

Gas Transmission & Storage sources, including natural gas, hydroelectric, and coal- Our gas transmission and storage subsidiaries own and generated supplies, providing for a total system operating operate about 15,000 miles of interstate pipelines that net capability of 3,322 MW. transport gas supplies from production and storage regions to markets across 16 states and the District of Columbia. We also operate one of the nation’s largest underground natural gas storage systems, capable of storing more than 600 billion cubic feet of natural gas for

7,981 our customers. 7,616 7,607

Electric Operations Our electric business generates, transmits and distributes electricity to more than 450,000 customers in 20 counties in , and engages in wholesale and transmission transactions. Our electric supply portfolio ‘07 ‘08 ‘09 includes both traditional and renewable generation EMPLOYEES

TOTAL NET REVENUES TOTAL TOTAL TOTAL YEAR (GROSS REVENUES LESS OPERATING CAPITALIZATION - CAPITALIZATION - COST OF SALES, EXCL. DEPR. EXPENSES EQUITY DEBT AND AMORTIZATION) ‘09 $3,331.4 $2,545.5 $4,854.1 $5,965.1

‘08 $3,245.7 $2,339.3 $4,728.8 $5,943.9

‘07 $3,186.4 $2,279.2 $5,076.6 $5,594.4

IN MILLIONS NISOURCE SUBSIDIARIES BAY STATE GAS COLUMBIA GULF TRANSMISSION COLUMBIA GAS OF KENTUCKY NISOURCE RETAIL SERVICES COLUMBIA GAS OF MARYLAND CROSSROADS PIPELINE COLUMBIA GAS OF OHIO KOKOMO GAS AND FUEL COLUMBIA GAS OF PENNSYLVANIA NORTHERN INDIANA FUEL AND LIGHT COLUMBIA GAS OF VIRGINIA NORTHERN INDIANA PUBLIC SERVICE CO. COLUMBIA GAS TRANSMISSION NISOURCE ENERGY TECHNOLOGIES 6 NYSE: NI BUILDING SUSTAINABLE VALUE

BUILDING SUSTAINABLE VALUE THROUGH CUSTOMER- FOCUSED ENERGY SOLUTIONS

As one of the nation’s leading regulated energy companies, our sustainability commitment extends beyond just the safe, reliable and environmentally friendly operation of our natural gas and electric facilities. It also includes the delivery of customer-focused energy We will be defined by our services and programs that recognize – and are responsive to – the needs ability to provide safe and of our customers.

reliable service, to comply Across our business, NiSource team with all regulatory members are working with customers, regulators and a broad requirements, and to range of other stakeholders to find operate transparently. new ways to deliver value to our wide array of residential, business, and industrial customers. These efforts have resulted in new programs to support low-income consumers, new incentives and rate structures that promote conservation and energy efficiency, and new infrastructure investments that ensure and enhance our customers’ access to affordable and clean energy.

These efforts became especially important during the economic recession, as many of our customers faced tough financial challenges. In close collaboration with regulatory, governmental and community partners, we redoubled our efforts to assist customers affected by the downturn, with NiSource customers receiving almost $40 million more in home energy assistance in 2009.

Here are some of the ways we are working to build sustainable value for our customers:

Enhancing the Customer Experience Enhancing the customer experience is a key goal across each of our NiSource companies. From a customer’s first contact with our company, to the ongoing delivery of services, we want the process to be efficient, responsive and respectful of the needs and desires of our broad range of energy customers. NiSource Inc. 7 EXCEEDING CUSTOMER EXPECTATIONS

Monitoring our progress on this goal is critical to our success. We track our progress through a variety of ongoing customer satisfaction surveys and analysis within each of our customer-facing companies. These initiatives support a broad array of management systems data within each of our business units, with certain key metrics rolling up to NiSource’s Corporate Balanced Scorecard, one way in which we measure our company performance.

This disciplined approach to measurement has helped us target areas for improvement as we design and implement new customer programs, services or technology improvements. Our goal is to meet and exceed customer Leveraging New Technology Our customers expect online tools expectations with solutions and technology to be available to that are thoughtful, meet their everyday needs, and we have taken concrete steps to better responsive and innovative. deliver on those expectations. During the last 12 months, each of our local gas and electric distribution companies introduced new, more customer-focused Web site designs. The new sites have more self-service options, improved site navigation, and targeted tools to meet the needs of our customers. Our customers’ interest in online or other self-service options has driven tremendous growth in the use of electronic billing and payment services, with $1.2 million more payments paid electronically in 2009 over 2008. Looking ahead, social media, mobile technology and other enhancements are part of our customer engagement strategy.

Leveraging Technology, Supporting the Environment In 2010, the NiSource distribution companies and the NI CORPORATE BALANCED 2009 2009 2010 NiSource Foundation launched a partnership with the SCORECARD TARGET ACTUAL TARGET Nature Conservancy’s Plant-a-Billion Trees program. For CUSTOMER SERVICE every distribution customer who signs up for Direct e-Bill, OVERALL SATISFACTION our paper-reducing online billing service, NiSource is % of natural gas and electric distribution contributing $10 to The Nature Conservancy. This covers customers who say the cost of planting 10 trees as part of the Plant-a-Billion NiSource company 88% 86% 88% Trees program for the Atlantic Forest. We’ve pledged up met or exceeded their expectations in recent to $200,000 for the campaign – a total of 200,000 trees interaction representing contributions on behalf of 20,000 customers. The reforestation effort will remove 10 million tons of 8 NYSE: NI OPERATING SAFELY AND RELIABLY

OUR PARTNERS carbon dioxide from the atmosphere every year. That’s equivalent to taking two million cars off the road.

“We have had a long partnership with NiSource and its subsidiaries across Indiana and the eastern United States. This new program Investing in Safety and Reliability helps us protect vital areas in South America. It will enable us to To continue to meet our customers’ needs for safe and dramatically increase the number of trees in the Atlantic Coast forest in Brazil, enhancing the ‘lungs’ of the world and their ability to absorb reliable energy now and in the future, infrastructure carbon and release oxygen.” improvement and replacement programs are being ramped up to assure a safe and reliable flow of energy. Mary McConnell, State Director In 2009, a program to replace aging natural gas delivery The Nature Conservancy in Indiana systems continued, replacing approximately 200 miles of bare steel pipeline to date. We spend millions of dollars each year in pipeline replacements and upgrades across our companies.

Columbia Gas of Pennsylvania’s Pipeline to the Future project consists of replacing about 2,400 miles of aging natural gas pipelines with the latest in pipeline technology. The project will last decades and we will make very large capital investments each year in connection with this project. The new pipeline will continue to deliver safe, reliable natural gas to our customers across Pennsylvania for many generations to come.

Building Efficiency, Affordability There are many ways in which we can collectively address energy costs; we help customers make smarter energy choices, reduce bills, and lower our impact on the environment. At NiSource, we are partnering with our customers – homeowners at all income levels and businesses – by providing technical and financial assistance to help them identify and implement energy efficiency measures and pursuing various strategies throughout our service territories to encourage wise and efficient energy use.

Several of the NiSource gas distribution companies also have obtained regulatory approval for natural gas conservation trackers as well as rate incentives to encourage clean-burning, high-efficiency natural gas power generation such as distributed generation and cogeneration applications. We’ve also extended and initiated energy efficiency programs, including:

• Columbia Gas of Virginia’s new 3-year $8.5 million program expected to save participants $90 to $350 annually. NiSource Inc. 9 MANAGING CUSTOMERS’ ENERGY NEEDS

• Bay State Gas plans to spend $56 million over the next three years on energy efficiency programs, yielding a savings exceeding 9.8 million therms, more than double what is currently in place. The new programs will install energy improvements that will achieve savings for many NIPSCO: years, enabling Bay State customers to realize savings equivalent to heating approximately 178,797 homes for LOWEST COST PROVIDER one year. According to the Indiana Utility Regulatory Commission, NIPSCO • Columbia Gas of Ohio’s $24.9 million commitment on new natural gas customers in Northwest Indiana paid the lowest conservation programs over the next three years and the residential gas prices among 22 companies during 2009––as much continuation of the WarmChoice Program, now in its 23rd as 40 percent less than other major metropolitan customers. year, which helps customers with attic and wall insulation, high efficiency furnaces, air leakage sealing, and other energy conservation measures.

We also have a variety of programs to help manage our customers’ energy needs and increase the energy efficiency of homes, businesses and appliances, including:

• Residential Low Income Programs target hundreds of customers, encouraging them to directly install weatherization, refrigeration, and lighting applications to help reduce consumption.

• Residential Energy Harvest Rebate Programs offer rebates for qualifying energy efficient furnaces, boilers, water heaters, and thermostats.

• Residential and Non-Residential Energy Efficiency Rebate Programs encourage customer adoption of higher than standard efficiency appliances.

• Residential Home Performance Retrofit Incentive Programs offer incentives for customers replacing their furnaces who may need additional insulation and instrumented air sealing.

• Residential New Construction Programs offer incentives to homebuilders to continue to build homes that are 50 percent more efficient than previous levels.

• Energy Star Certifications offer incentive rebates to builders that meet home energy rating standards in the installation of furnaces, boilers, and water heaters.

• Multi-Family Direct Install Programs provide energy efficient showerheads and aerators in apartments and mobile-home parks. 10 NYSE: NI PROVIDING ASSISTANCE

• Small Business Energy Efficiency Incentive Programs offer rebates for standard and specialty energy conservation measures, including high-efficiency heating system and air sealing, and water heating saving measures.

• CFL Promotion Campaigns provide free compact fluorescent light bulbs in bulk for customers at targeted events and through multiple distribution methods.

Supporting Those in Need We have enhanced or launched a number of initiatives to help customers who are facing tough times – especially challenges caused by the economic recession.

The NiSource local distribution companies are actively supporting and implementing the Low-Income Home Energy Assistance Program (LIHEAP), the federally funded, state-administered social services program that offers financial assistance to qualifying low-income households who require support in paying their home heating or cooling bills.

Applicants must have an income less than 150 percent of federal poverty level or 60 percent of state median poverty level to be eligible. In fact, about three out of four households that are helped by LIHEAP earn less than $15,000 a year and half earn less than $10,000 a year. Our Web site and customer service representatives provide payment-troubled customers with information on LIHEAP and other local energy assistance programs.

NiSource customers received more than $100 million in LIHEAP funds in fiscal year 2009, an increase of nearly $40 million over the prior year.

2007/2008 2008/2009 % CHANGE

TOTAL $61,706,815 $101,577,296 64.61%

We have an array of other initiatives to help address energy costs. For example, NIPSCO has extended to 2012 its popular Natural Gas Choice Program, which offers customers an opportunity to choose among 12 alternative natural gas suppliers. Another key initiative is Winter NiSource Inc. 11 SUPPORTING THOSE IN NEED

Warmth. This program has assisted approximately 45,000 qualifying low-income NIPSCO gas customers with the payment of delinquent utility bills and natural gas deposits. Since its inception in 2004, the program has provided approximately $25.4 million in assistance to more than 70,000 customers across Northern Indiana. OUR APPROACH In response to the economic challenges our customers and communities face, we also increased our commitment "These are unprecedented economic times. This multi-faceted to our NiSource-wide initiative, Supporting Those In Need, approach to corporate philanthropy is important in responding to the which brings together the company, our employees and realities of our economy and the impact it has had on our customers the NiSource Charitable Foundation to contribute to local and communities." organizations. Glen Kettering, NiSource Senior Vice President of Corporate Affairs NiSource’s local operating companies and employees and NiSource Charitable Foundation Trustee have long been a strong, positive force in the communities where we operate and provide service. During these difficult times, we felt it was more important than ever to provide strong corporate-wide support. Through the Supporting Those In Need campaign, we are focusing and pportin leveraging our various giving channels to have an even Su g greater impact in the community.

Among more than 120 programs across six states, we support shelters and transitional housing efforts in Central Ohio and Maryland, food banks in Lexington and Pittsburgh, low-income child care programs in Springfield, Massachusetts, and efforts to supply food, clothing, Th ed shelter and other basic needs to individuals and families ose In Ne across our service areas. In 2009, NiSource pledged more than $2 million to these efforts and contributions of more than $3.5 million are expected in 2010.

Ready to Respond Our energy delivery systems are occasionally tested by natural events – blizzards, ice storms, tornadoes, floods – or other operating incidents. When events of that type occur, our highly-trained teams are ready to respond.

NiSource maintains an enterprise-wide Business Continuity Plan to mitigate interruptions of service to customers, operations and mission critical business functions. The plan addresses a broad range of response plans and capabilities related to crisis and incident management, health threats, emergency response, evacuations, technology recovery, and physical security. 12 NYSE: NI RISING TO THE CHALLENGE

In support of this effort, NiSource periodically conducts business impact analyses, which identify critical business processes, resources and infrastructure to assist us in evaluating the operating, financial, legal, and reputation risks if business processes, resources and infrastructure are unavailable for a given period of time.

How successful is our planning structure? Consider what unfolded in Macon County, Tennessee in February 2008. As the result of a direct hit of a tornado, an entire mainline compressor station on our Columbia Gulf Transmission system was destroyed, and with it almost one-third of our peak winter gas delivery capacity.

Thankfully, members of our Hartsville Compressor Station team were safe, as they and other trained team members across our company quickly moved into action to execute our emergency response plans. Through close coordination within our company and with the community, customers and industry peers, we were able to restore service on the Columbia Gulf System (although at reduced capacity) within 72 hours.

Within less than five months, our Hartsville Station had been restored to full capacity. The rebuild effort involved a $100 million investment, and included the installation of more environmentally friendly turbine equipment.

Losing a mainline station could have been a major blow to the company and our customers, but with planning, preparation, commitment, and perseverance, our team rose to the challenge.

Columbia Gulf Transmission’s Hartsville Station Macon County, Tenn. NiSource Inc. 13 BUILDING SUSTAINABLE VALUE

BUILDING SUSTAINABLE VALUE THROUGH ENVIRONMENTAL STEWARDSHIP

Building a cleaner, more efficient and affordable energy future is core to NiSource’s environmental goals and our overall sustainability approach. We operate one of the nation’s largest transportation and delivery systems for natural gas and continue to grow our system. We must balance this growth with reducing environmental impacts and implementing energy-efficiency Our goal is simple: measures for our customers. to build a cleaner, In our electric operations, we continue to invest in technology to more efficient and reduce impacts from our generation affordable energy future. fleet. We have been able to move toward cleaner energy delivery, enhancing biodiversity, preserving habitat, restoring impaired properties, and revitalizing urban and natural areas.

Our environmental stewardship goal is simple: to build a cleaner, more efficient and affordable energy future.

A History of Ensuring Environmental Stewardship In the early 1990s, NiSource established a Board-level committee to review performance and address environmental, health and safety and more recently, sustainability matters. As a result NiSource has established Board-level policies that guide overall management of environmental, health and safety, climate, and sustainability. Photo by Ron Trigg, Shirley Heinze Land Trust

In 1997, we began to employ environmental management systems certified to the ISO 14001 International Standards. And in October 1998, NIPSCO became the first North American utility to certify all of its facilities under this system. By the end of 2005, this management system model was implemented and certified in all of our business segments. Today, our management systems have transitioned from the formal ISO framework, placing an increased emphasis on current/best practices and supporting continual improvement. 14 NYSE: NI TACKLING CLIMATE CHANGE

As a result of these, and many additional efforts, in 2009, NiSource was recognized by Newsweek magazine for our strong environmental practices and management systems. In Newsweek’s “Green Rankings” of the nation’s largest corporations, NiSource was ranked fourth overall Newsweek ranked out of the 37 largest U.S. utilities and first for its environmental policies and NiSource first among performance. utilities for our environmental policies Tackling Climate Change with Commitment and performance. NiSource is committed to meeting current and future environmental obligations. We have, and will continue to, aggressively engage in activities to reduce potential risks and pursue opportunities associated with policies STEWARDSHIP HIGHLIGHTS enacted to address the climate change issue.

• Enterprise-level focus and management We are committed to further reducing the carbon intensity of our operations and will meet the energy needs of our • A common-sense approach to carbon reduction customers through business activities that promote sustained economic growth in a manner compatible with • Customer efficiency improvements and usage reductions our environmental obligations. • Environmental improvements and initiatives in power generation NiSource will: • Greenhouse gas emissions reductions • Remain an industry leader in accurately accounting for • Successful remediation initiatives greenhouse gas emissions, and providing timely reporting and transparency in climate related activities. • Biodiversity and habitat protection • Increase the efficiency and reduce the carbon intensity with which NiSource companies provide energy to our customers by taking steps to produce and obtain electricity from sources with lower carbon intensity, increase natural gas transportation efficiency, and reduce methane losses from natural gas transmission and distribution pipeline systems.

• Encourage our customers to use energy wisely by working with them to develop demand-side management and energy conservation programs, along with ensuring that the revenue models under which NiSource companies recover their costs are aligned with energy efficiency goals.

Photo by Ron Trigg, Shirley Heinze Land Trust NiSource Inc. 15 PURSUING CONTINUOUS IMPROVEMENT

• Promote adoption of reasonable policies addressing Pursuing Continuous Environmental Improvement climate change. We will support federal legislation on climate change that: Carbon Dioxide Emission Reductions As a charter member of the U.S. Department of Energy’s • Recognizes that greenhouse gas reduction targets Climate Challenge program, we have reduced carbon must be applicable to all sources of greenhouse gas dioxide (CO2) emissions by more than 34 million equivalent and be realistically achievable and consistent with tonnes since 1990. projected availability of commercial technology. We also made a long-term commitment to Natural Gas • Protects against undue increases in energy costs to STAR, a U.S. Environmental Protection Agency (EPA) any particular geographic regions or groups of program that encourages voluntary reductions in consumers. methane emissions. Our participation in Natural Gas STAR saves customers money, reduces our methane emissions • Recognizes the environmental benefits of natural gas footprint and conserves natural gas. NiSource companies and promotes policies and practices that result in the have implemented many of the recommended best continued efficient use of natural gas by all practices as well as developed new innovative customers. approaches endorsed by the EPA and other partners.

25.1

24.9

24.7

22.7

20.4

16.9

12.8

CO2 e tonnes

8.2

6.0

2.5

4.5

3.9

1.7

1.1 3.2

0.5 ‘93 ‘94‘95 ‘96 ‘97 ‘98 ‘99‘00 ‘01‘02 ‘03‘04 ‘05 ‘06 ‘07 ‘08

CUMULATIVE METHANE EMISSION REDUCTIONS (in millions) 16 NYSE: NI SURPASSING TARGETS

Since 1993, NiSource companies have reported a savings of more than 56 billion cubic feet of methane or 25 million tonnes of CO2 equivalent emissions from this program. These reductions have the same environmental benefit as planting more than 5 million acres of forest or Since 2003, our sulfur taking more than 4.7 million cars off hexafluoride emissions the road for one year. have remained less Sulfur Hexafluoride Emission Reductions than 50 percent of Working in partnership with the EPA, NiSource has significantly reduced our 1997 baseline, far the release of sulfur hexafluoride surpassing our original (SF6), a greenhouse gas, from its electric transmission and distribution 25 percent reduction target. system. NiSource’s subsidiary NIPSCO has implemented a SF6 Handling Policy that provides operating personnel with handling procedures to minimize the release of SF6. Since 2003, our SF6 emissions have remained less than 50 percent of our 1997 baseline, far surpassing our original 25 percent reduction target.

As we continue to expand and update our natural gas tonnes CO 2 e per MWH system, our regulatory and commercial initiatives will promote the concepts of sustainability and greenhouse gas (GHG) reduction, assuring that natural gas can meet our customer needs and serve the market and is available for reducing the nation’s carbon footprint.

Our growth strategies demonstrate our commitment to sustainability identified in the NiSource Environmental Health and Safety and Climate Change Policies that collectively pledge to “…provide products that are a solution to reducing our nation’s greenhouse gas

1.094 1.032 emissions…and address global climate change

1.015 1.026 1.047 1.046 1.021 1.015 1.010 challenges with business activity compatible with ‘01‘02 ‘03‘04 ‘05 ‘06 ‘07 ‘08 ‘09 sustained economic growth.”

Advancing a Sustainable Electric Generation Fleet REDUCTION OF Over the last decade NiSource has transitioned its GREENHOUSE GAS electric generation assets toward a more sustainable profile. The bulk of capital investment for GHG reduction EMISSIONS opportunities has been, and will continue to be, in the electric business. We initially proposed to reduce GHG intensity by 7 percent between 2001 and 2012. Through 2009, we have reduced our GHG intensity by 5.6 percent and are continuing efforts to achieve our goal. NiSource Inc. 17 PREVENTION PROGRAMS

The most significant changes since 2001 are related to our continuing effort to secure cleaner external power commitments and reductions in emissions associated with internal generation. This includes:

• Ceasing operations of one of our four coal-fired generating stations in 2001.

• Purchasing Sugar Creek power plant in 2008 – a highly efficient 535 MW natural gas-fired combined cycle facility located in Terre Haute, Ind. Sugar Creek can produce power at approximately half the carbon intensity of a coal-fired power plant.

• Investing more than $50 million in capital projects designed to improve the electric generation efficiency of our existing assets. Projects included electric steam turbine replacements, turbine control system upgrades, and neural network artificial intelligence system installations.

• Adding 100 MW of wind generation capacity.

Select Pollution Prevention Programs NIPSCO has made significant air emission reductions in advance of others in the industry. A 70 percent reduction in nitrogen oxides (NO ), a precursor to ground x NIPSCO’s Sugar Creek Station level ozone, occurred between 1990 Between 2008 and 2009, West Terre Haute, Ind. and 2009 as a result of significant investments characterized in three NIPSCO’s nitrogen oxide phases and an investment of more emissions were reduced by than $316 million. In Phase 1, as a participant in U.S. EPA's "NOx Early half and sulfur dioxide Election" program, NIPSCO emissions were reduced accelerated the installation of low NOx burners in its wall and from 7.93 to 6.08 pounds tangentially fired pulverized coal per megawatt hour. generating units. These units comprise approximately 55 percent of our generating capacity. In addition, over-fire air systems were added to further reduce NOx emissions at all of our coal-fired generating stations.

In Phases 2 and 3, additional NOx emission reduction measures were implemented. Phase 2 measures include the installation of Selective Catalytic Reduction (SCR) on the highest NOx emitting units and combustion control 18 NYSE: NI A RECORD OF EXECUTION

NOx reduction technology at each of our active Additionally, NIPSCO has been a leader in reducing generating stations. Phase 3 measures include the emissions of sulfur dioxide (SO2), a precursor to acid rain. annual operation of our SCRs and the installation of low In meeting the requirements set forth by the Clean Air NOx burners on Schahfer Generating Station’s Unit 15. Act, NIPSCO became the first utility in the U.S. to meet Additional upgrades of existing emission controls are the Phase 1 SO2 standards. planned in Phase 4 to further reduce emissions. The bulk of our SO2 reductions occurred in Phase 1 and Between 2008 and 2009, the actual NOx emission rate was Phase 2 of the control program (1990 to 1995). NIPSCO reduced by half, from 4.14 to 2.04 pounds per megawatt achieved a nearly 70 percent decrease in emissions as a hour. Factors contributing to this significant reduction result of installation of scrubber technology and include the initiation of year-round operation of the conversion to low sulfur coal. To date, almost half of control equipment on the SCR equipped coal-fired NIPSCO’s coal-fired generation capacity is equipped with generating units and use of advanced combustion control SO2 scrubbers, exceeding the national average. Phase 3 technology on Unit 15. Increased use of the natural gas- of the ongoing SO2 control program includes the upgrade fired Sugar Creek Generating Station also contributed to of existing scrubbers to achieve a control efficiency of the reductions. In 2010, a NOx control optimization 97 percent. NIPSCO has plans in Phase 4 to make program is underway that will further improve operation additional investment toward further reducing SO2 of existing NOx controls.

Phase 1 – Installation of Combustion Controls

1.12

1.93 Phase 2 – Installation of SCRs Phase 1 – Bailly (Ozone Season Operation) Scrubber Installation

Phase 2 – Unit 12 & 14 Phase 3 – Annual SCR Conversion to Lower Unit 17 & 18 Operation and Unit 15 Sulfur Coal Low Nox Project FGD Upgrade

Phase 4 – Phase 4 – Potential Potential FGD Unit 15 SNCR

lb NOx/mmBtu lb SOx/mmBtu

0.375

0.133

‘90 ‘95 ‘00 ‘05 ‘10 ‘15 ‘90 ‘95 ‘00 ‘05 ‘10 ‘15 NITROGEN OXIDE REDUCTION SULFUR DIOXIDE REDUCTION HISTORICAL & PROJECTED – ELECTRIC OPERATIONS HISTORICAL & PROJECTED – ELECTRIC OPERATIONS NiSource Inc. 19 REDEVELOPMENT PROGRAMS

emissions and providing customers with cleaner 80 percent of ash and gypsum from our electric affordable electricity. generation reused or recycled. Efforts are ongoing to identify new recycling opportunities across the company. From 2008 to 2009, the SO2 emission rate dropped from 7.93 to 6.72 pounds per megawatt hour. Further Select Brownfield Redevelopment Programs reductions are anticipated in 2010 based on the first full In an effort to redevelop under and non-used areas, year of operation of the upgraded Unit 18 scrubber and NiSource actively manages real estate holdings in each completion of the performance upgrade of the scrubber service and operating area with a commitment to on Unit 17 at Schahfer Generating Station. sustainable development. We have implemented rigorous standards for buying and selling real estate assets, with To reduce its solid wastes, NiSource has multiple all transactions undergoing some level of environmental recycling programs in place, including cardboard, wood review. pallets and reels, paper, aluminum and copper wire, scrap steel, used oil, wood poles, plastic pipe, scrap NiSource has been involved in brownfield redevelopment transformers and light bulbs. We also recycle byproducts initiatives intended to enhance the economic, social and from the energy process into usable products, with over environmental value for the community. Brownfields are

lbs. NOx /Horsepower Hours

0.0169

0.0137

Gas Transmission & Storage engines continue to be slated for NOx reductions. Reduction efforts have been ongoing since the mid-1990’s with recent reductions being achieved both through control installations and lower- emission, higher efficiency engine replacements. ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 NITROGEN OXIDE REDUCTION GAS TRANSMISSION & STORAGE 20 NYSE: NI PARTNERING WITH STAKEHOLDERS

abandoned, inactive or underutilized industrial and commercial properties whose redevelopment may be affected by environmental contamination, either real or perceived, or other barriers such as back taxes or liens. We are contributing to this effort by proactively managing and remediating our own properties and facilitating redevelopment of others in our service territories. The program follows a stakeholder outreach process involving community relations at each site. This allows us to address site risks, where they exist, in a manner that is protective and consistent with current and future uses at a site.

Recent developments include:

• Columbia Gas of Ohio assisted the City of Marion, Ohio, to secure $2 million in Clean Ohio Revitalization Funding (CORF) to remediate and prepare for redevelopment a parcel of land in the city.

• Bay State Gas was a partner in the development of the Brockton Brightfield Project which included installation of 425 kW of photovoltaic solar power, converting an idle brownfield site into a productive generating asset. This Top: Bay State Gas’ Brockton Brightfield Project solar array is the largest in New England, generating Lower: Columbia Gas of Virginia’s Portsmouth Project over 535 megawatt hours of electricity per year – carbon free – enough to power more than 70 homes.

• In Portsmouth, Va., Columbia Gas of Virginia recently completed a multi-year remediation effort that converted a former manufactured gas plant (MGP) into a park. The Fort Nelson Park, operated by the City of Portsmouth, will be the last link in a Historic Trail developed by the city to celebrate the naval history of the region. OUR PARTNERS Select Biodiversity Programs Our role as an environmental steward is vital in all of our “NiSource’s multi-species, multi-state habitat conservation plan businesses, especially as it relates to the environment illustrates how an energy company can meet the growing needs of surrounding our facilities. We’re engaged in partnerships its customers and at the same time achieve landscape-level and other innovative means to protect the ecosystem and conservation goals. We applaud NiSource’s forward thinking and are promote biodiversity where we operate. proud to partner with them on this pioneering plan that blends economics and the environment.” Habitat Conservation Plan Larry Selzer, President and CEO NiSource is taking a leadership role in protecting The Conservation Fund biodiversity by developing a Habitat Conservation Plan (HCP) for our entire interstate natural gas pipeline system. NiSource Inc. 21 COOPERATIVE SOLUTIONS

The HCP is landscape-level conservation and is being In mid-2009, NIPSCO signed a memorandum of developed together with the U.S. Fish & Wildlife Service. understanding to be a cooperating partner with the It covers 43 federally threatened or endangered species Indiana Coastal Cooperative Weed Management Area over almost 16,000 miles of pipeline rights of way in (ICCWMA). The mission of the ICCWMA is to strategically 14 states. A comprehensive communication strategy protect biodiversity and natural communities from the included outreach to more than 500 federal and state threats presented by invasive plants within the Lake agencies, environmental organizations and interested Michigan Coastal Zone in Lake, Porter, and LaPorte individuals to solicit their input in the development of Counties in Indiana. the HCP. In the future, our plans are to work with the ICCWMA Cooperative Weed Management partners to cooperatively manage the natural areas under NIPSCO manages areas adjacent to its right-of-ways their purview as well as NIPSCO ROWs adjacent to the (ROWs) in partnership with five organizations: The Nature properties. Conservancy, the Shirley Heinze Land Trust, The National Park Service, the Indiana Department of Natural Resources, and Save the Dunes.

5,923

4,723

2,763

2,083

Acres

738

503 ‘04 ‘05‘06 ‘07 ‘08 ‘09 SENSITIVE LAND MANAGED OR PRESERVED CUMULATIVE 22 NYSE: NI A RECORD OF EXECUTION

Additional NiSource Environmental Performance Metrics

Key Performance 2005 2006 2007 2008 2009 Indicator

Ash & Gypsum 83.02% 82.70% 77.38% 79.68% 80.33% Reused/Recycled (%)

SO2 Emission Rate 7.80 7.50 7.80 7.93 6.72 (Lbs/MWhr)

CO2 Emission Rate 2,306 2,251 2,238 2,227 2,275 (Lbs/MWhr)

NOx Emission Rate 4.32 4.27 4.33 4.14 2.04 (Lbs/MWhr)

Waste Reused/ 4,820 5,539 6,224 6,866 Not Available Recycled (Tons)

# of Agency Actions 10 14 19 7 7 (NOVs, Citations)

*Total Water 118.1 92.2 88.5 100.6 105.3 Withdrawal (Bil/Gal)

*According to the Electric Power Research Institute, only half of the U.S. utility-owned steam electric generating capacity is cooled with once-through cooling systems. 73 percent of NiSource electric operations have once-through cooling systems, much better than the industry average, thereby greatly reducing water consumption and impacts on the environment. The increase in 2008 was the result of the acquisition of Sugar Creek.

NiSource’s Direct and Indirect GHG Emission Improvements

CO2eq Tonnes 2001 Baseline 2006 2007 2008 NGT&S Combustion 2,032,649 1,435,743 1,707,341 1,672,086

NGT&S Fugitive & Vented 3,954,557 3,993,863 3,434,945 3,881,965

Gas Distribution 1,498,862 1,603,220 1,616,464 1,582,589

Electric Generation 17,599,959 16,745,745 16,919,229 16,763,056

Purchased Power 362,773 1,722,590* 2,992,073 2,459,491

SF6 Emissions 125,593 68,925 55,485 82,311 Mobile Emissions 24,071 23,350 22,372 47,773 Indirect 130,564 122,250 121,206 112,713

Total 25,729,028 25,715,686 26,799,115 26,601,985

* In 2001, NIPSCO ceased operations at one its coal-fired generating stations, resulting in increased power purchase. NiSource Inc. 23 RECOGNIZING ENVIRONMENTAL COMMITMENT

NiSource Companies’ Direct Greenhouse Gas Emissions

Direct GHG Emissions by Category 2001 Baseline 2006 2007 2008

Tonnes/MWhr – Electric Generation 1.10 1.058 1.055 1.051 Tonnes/Mile of Pipe – Gas Transmission (Fugitive & Vented) 255.74 257.17 225.24 241.37 Tonnes/Mile of Pipe – Gas Distribution 27.70 28.41 28.61 28.10 Tonnes/MMBHP–Hr – Gas Transmission (Combustion) 588.83 590.96 518.95 572.82

Awards for NiSource’s Environmental Commitment • 2009 – Newsweek magazine ranked NiSource in its “Green Rankings” of the nation’s largest corporations – fourth overall out of 37 of the largest U.S. utilities and first for environmental policies and performance

• 2008 – Portsmouth MGP – 2008 Governor’s Environmental Excellence Award – Silver Medal for the Fort Nelson Park – Swimming Point Conservancy

• 2007 – Transmission Natural Gas STAR Partner of the Year, Columbia Gas Transmission

• 2007 – The "James D.P. Farrell Brownfields Project of the Year" award received by the City of Brockton from the Environmental Business Council of New England

• 2006 – American Council of Engineering Companies Grand Conceptor award received by MACTEC for engineering the Lewiston Phase II project. 24 NYSE: NI BUILDING SUSTAINABLE VALUE

BUILDING SUSTAINABLE VALUE THROUGH STRONG, STABLE COMMUNITIES OUR APPROACH We have a shared interest in the future strength and "We want to have a long-term impact. Natural gas can play a stability of the communities we serve, and we are proud significant role in powering a healthy economy and meeting our of our role in helping improve the communities and national environmental goals far into the future. Our future is really environment where our customers and employees live bright, but only if we can develop the new technologies that will and work. From our employee volunteers and result in new generations of highly efficient and cleaner end-use philanthropic programs to the environmental integrity and products, and the end use always comes back to appliances— reliability of our services and operations, we are technology—how to ensure the most efficient and environmentally committed to focusing on collaborative solutions while friendly use of energy in the home and business." addressing critical needs and building resources for the future. Robert C. Skaggs, Jr., NiSource President and CEO, and 2010 Chairman of the American Gas Association Partnering in the Community NiSource is engaged with communities and stakeholders across our operating region through many different efforts. The Community Advisory Panels (CAP) at NIPSCO involve a cross section of community groups working together to improve communication and develop an ongoing dialogue on issues ranging from environmental concerns to employment. We launched the first CAP at NIPSCO in 1990 and now have five advisory panels across Indiana. These panels help us better understand our communities and build stronger relationships with community leaders. These partnerships also have resulted in changes in our operations and policies.

We also have formalized outreach processes in place to OUR PARTNERS engage local communities and stakeholders on expansion and improvement projects. Before we start a project, and “The Community Advisory Panel is like a sounding board. As a at other developmental stages in the process, we reach representative, I can tell NIPSCO how the people in my community out to stakeholders through different activities including feel. If I wasn’t attending these meetings, NIPSCO wouldn’t get our meetings and open houses, mailings, and informational perspective. The puzzle wouldn’t be complete. The city wouldn’t be Web sites to build awareness of the project and begin a complete. After a meeting, I go back and share information about dialogue. We also educate our customers and our energy-related issues with members of the clergy, my congregation communities served about the steps we are taking to and my community – all customers of NIPSCO. It is very helpful for assure continued safe and reliable energy delivery. them to have this connection. If I can help one person, I’ve accomplished quite a bit. NIPSCO makes it possible for me to help a lot of people.” Through our daily work with businesses and individuals to install, maintain, and improve infrastructure, we are Pastor Hue Guy building employment growth and local business revenues. Fort Wayne, Ind. We partner with state and local officials to attract future residential, commercial and industrial opportunities to our communities. Additionally, NiSource companies pay more NiSource Inc. 25 PARTNERING IN THE COMMUNITY

than $400 million annually in taxes that directly benefit our local schools and communities. Columbia Gas Transmission’s Working together with our Appalachian Expansion Project was a stakeholders, we are building strong $40 million investment in West community partnerships – Virginia’s energy infrastructure and addressing human services, employed about 70 people during educational, public safety, and construction, boosting the local environmental conservation needs. economy and bringing locally Building Supplier Diversity produced natural gas to market. In 2009 NiSource implemented a supplier diversity program that seeks out businesses owned by women, minorities, and veterans, as well as those located in areas considered to be disadvantaged. Supplier diversity is about business process improvements. By opening up competition in the bidding process, suppliers expand their range of ideas to meet our needs, which improves overall service levels. We are currently developing new partnerships and strengthening existing relationships with national, regional, government, and utility advisory councils to expand the program.

Assuring Pipeline Safety and Reliability A stable community is one that is safe, and we are committed to our employees and communities to provide the highest standards of safety within and around our facilities and operations. CALL 811

Gas control and monitoring center facilities across our Homeowners, excavators and contractors throughout the nation businesses operate 24 hours a day, seven days a week. can dial 811 to have underground facilities marked. Placing a We regularly patrol and inspect our systems. Our call gets your underground utility lines marked for free. Knowing operations employees receive regular training, and a team where lines are buried before digging protects you from injury, focused on integrity management of our facilities works to expense and possible penalties. ensure pipeline safety and compliance. We also work with emergency responders and agencies to build awareness of our facilities and on how to respond and what actions EMERGENCY RESPONDERS to take in an emergency. Our outreach to community emergency responders takes many To raise awareness about public safety, we partner with forms, including training, educational pieces, and charitable communities through mailings, meetings and trainings, contributions. In 2009, NiSource’s Gas Transmission & Storage and our participation in state One Call programs. Our companies donated nearly $100,000 to support local fire outreach in the community takes many forms, including departments. safety awareness programs. It’s part of our regulatory mandate but also our responsibility as an operator and a neighbor in the community. 26 NYSE: NI STRENGTHENING COMMUNITIES

Engaged Employees Strengthening their Community The NiSource Dollars for Doers program supports employee volunteers and the organizations to which they donate their time. For each hour volunteered by a NiSource employee, the organization receives $20, up to $500 per employee annually. In 2009 NiSource contributed more than $61,000 to organizations through this program. From fundraising events to The Dollars for Doers food drives, to serving on nonprofit program helps ensure boards and tutoring, and to countless other efforts, our team members the company is supporting devote their time and talents to help the organizations build their communities. our employees care Stronger Communities through Charitable Giving about most. The mission of the NiSource Charitable Foundation is to help create strong and sustainable communities where our employees and customers live and work. Working with employees and community partners, the Foundation provides funding and encourages volunteer Dollars support for nonprofit organizations in four primary areas: community vitality and development; environmental and energy sustainability; learning and science education; and public safety and human services.

In 2009, in addition to the contributions of our operating companies, the NiSource Foundation contributed over for Doers $1 million to community organizations. We also support our employees through the NiSource Employee Scholarship Program. The program awards scholarships of $1,000 per year for up to four years of full- time, undergraduate college and recognizes student accomplishments in academics and in contributions made to their school and community. In 2009, 15 students were newly awarded scholarships. NiSource Inc. 27 BUILDING SUSTAINABLE VALUE

BUILDING SUSTAINABLE VALUE THROUGH ENGAGED, ALIGNED AND SAFE TEAMS

Core to our business is the ability to attract, retain and maintain an engaged and safe workforce. NiSource’s more than 7,500 employees working in 13 states are engaged in challenging and rewarding careers across nearly all facets of the energy industry. From a wide range of engineering and other professional fields, to operations, technical, commercial, financial, and administrative roles, the NiSource team is among the nation’s leaders in delivering safe, reliable energy to the customers and communities we serve. Engaged, safe and aligned teams are part of the foundation of a sustainable business. It starts with our core values and business ethics.

Good Ethics. Good Business. At NiSource, we believe that good, ethical business conduct is the foundation of our workplace. Our reputation ultimately rests on the good judgment and personal integrity of each of our employees, officers, directors, and Our work environment and culture those with whom we do business. We are grounded in values that will believe that our core values – fairness, honesty, integrity and trust – continue to help us achieve our must at all times guide our decisions, vision: teamwork, pride, actions and conduct. empowerment, accountability, safety, growth and development, The NiSource Code of Business and reward. Conduct is the foundation of our compliance program and is designed to provide guidance on how we apply our values to our business. It helps us ask the right questions and make the right decisions. Annual training on our ethics program is required of all employees.

Safety First Our primary responsibility is to ensure personal and public safety, and our top objective is to send our employees home safe and healthy every day. We are focused on continual improvement and are working to become a top performer compared to our industry peers with regards to safety. Our managers and employees set consistently high standards and expectations for safety performance. 28 NYSE: NI BUILDING A SAFETY CULTURE

Efforts to improve employee health and safety have resulted in record numbers of hours worked without a day-away injury at several of our facilities. In addition, SAFETY AWARDS we’ve received recognition from industry/government associations for achieving incident rates below the 2009 industry average for several of our businesses. These and American Gas Association (AGA) Safety Achievement Award other benchmarking opportunities provide valuable insight Columbia Gas of Ohio into the practices that are working well within our DART Rate organization, but more importantly, they provide opportunities to identify best practices that can further AGA Safety Achievement Award improve our safety performance. Columbia Gas of Maryland Vehicle Safety Some of the steps we’ve taken to improve safety performance include: AGA Accident Prevention Certificates Crossroads Pipeline, Columbia Gulf Transmission, Columbia Gas of Pennsylvania, Columbia Gas of Kentucky, Columbia Gas of • Bi-weekly discussions with management to identify and Virginia, Northern Indiana Fuel and Light communicate results of root cause analysis investigations

2008 • Increased engagement of front-line leaders with AGA Safety Achievement Award employees through worksite safety inspections and Crossroads Pipeline and Northern Indiana Fuel & Light training Vehicle Safety

AGA Safety Achievement Award • Development of reference manuals for field use in Columbia Gas of Maryland identifying task-specific hazards DART Rate • Implementation of company-wide “Supervisor Safety” AGA Industry Leader Accident Prevention Certificates days Columbia Gulf Transmission, Northern Indiana Fuel & Light, Columbia Gas of Ohio, Columbia Gas of Kentucky, • Development of specific “Life Saving Rules” for Columbia Gas of Virginia, Bay State Gas personal accountability

2007 • Continuation of the “Best Practice” program to evaluate AGA Safety Achievement Award tools, equipment, operational processes, and vehicles. Granite State Transmission Company Vehicle Safety – Transmission In 2009, management, supervisory and employee leadership in safety programs resulted in a 14 percent AGA Accident Prevention Certificates overall improvement from 2008 and the fourth consecutive Columbia Gas of Pennsylvania, Columbia Gas of Virginia, year of reductions in employee injuries. Common industry Kokomo Gas and Fuel, Northern Indiana Fuel and Light, Granite benchmarks used to measure performance are the State Transmission Company, Crossroads Pipeline Occupational Safety and Health Administration's (OSHA) Incident Rate, which includes all work-related injuries 2006 and illnesses, and the OSHA Days Away, Restricted or AGA Accident Prevention Certificates Transferred (DART) rate, which includes days away from Columbia Gas of Virginia, Columbia Gas of Maryland, work cases in which employees are on restricted job Columbia Gulf Transmission duties and cases in which employees are transferred out of their current position because they are physically unable to perform their job duties due to an injury. NiSource Inc. 29 FOCUSING ON EMPLOYEES

Compared with the latest Bureau of Labor statistics for Incident rates and DART rates in our sector, NiSource is approximately 12 percent below the industry median for OSHA Incident rate and 31 percent below the industry median for DART rate. We have not reached top performer in our industry.

Our goal for incidents will always be zero. As part of our disciplined approach to measurement, we have set milestones that continue to focus on improving the health and safety of our employees and improving in these areas.

To achieve the 2010 goals, our companies are focusing on several key program areas including improving ergonomic focus in several areas, root-cause investigation training, safe driving, fleet vehicle safety improvements, as well as several pilots on operating equipment design.

Focused on Employee Engagement In addition to safety, engagement of our employees is essential to our business. Our annual employee engagement survey is one of the key tools we use to help ensure a strong foundation of engaged, aligned and safe employees. The results are used to learn more about how we can meet the needs of our diverse workplace and improve our business performance. We measure our results at the corporate level and then work across the organization to improve performance. We did not reach our target in 2009, receiving a 67 percent favorable overall rating.

2009 2009 2010 SAFETY MILESTONE ACTUAL MILESTONE

OSHA INCIDENT RATE 2.87 3.32 2.86

DAYS AWAY RESTRICTED OR 1.57 1.76 1.42 TRANSFERRED RATE (DART)

Note: Incident rates are one method of showing the relative level of injuries and illnesses among different industries or operations within a single firm. Because a common base and specific time period is involved, these rates can help determine both potential problem areas and progress in preventing work related events. The incident rates are derived from the following formula: (Number of Injuries and illnesses x 200,000) / Employee hours worked = Incident Rate. 30 NYSE: NI EXECUTING ON OUR PLAN

There were several key findings in the 2009 survey.

• We have excellent participation, with 89 percent of employees responding.

• We have a strong foundation of engaged, aligned and safe employees. Research indicates that organizations with engagement scores above 65 percent consistently deliver better business results. Through a continued focus on follow-up and action planning, we hope to see our overall rating reach 70 percent agreement in this measure in 2010. To measure overall employee engagement, we include categories of communication and coaching; involvement and commitment; recognition and rewards; personal development and growth; and execution and business results.

• Our highest rated item continues to be "People in my work group take personal responsibility for safe work From front line supervisors practices." We also continue to see to senior management, higher levels of agreement in this area and will continue to work to strong leaders are the key reach 100 percent agreement. Safety of our employees, customers, and to engaging employees, communities is our top priority. executing on our plan • We improved in areas including and delivering results "People in my work group are for our customers accountable for delivering results," and, "My co-workers routinely and shareholders. demonstrate a high level of energy and effort on the job."

• We identified areas where we need to continue to improve:

• "I have the opportunity for personal development and growth."

• "I receive appreciation when I do a good job."

Building Capabilities for Now and the Future As we aim to improve engagement, we also offer a number of work/life and career-related programs. Our success depends on the best efforts of every member of our team, and we offer support and resources to help our employees achieve goals at work and in life. Our benefits package helps our employees achieve a sustainable NiSource Inc. 31 BUILDING CAPABILITIES

balance between their home and work life; protect their health and well-being; secure a future for their family; and maximize their potential through continuous learning opportunities.

We offer employees a variety of programs to help manage the complexities of life including:

• Dependent Care Flexible Spending Accounts, that allow pre-tax contributions up to IRS limits to help cover the cost of child care

• Employee Assistance Programs that provide valuable resources and referral information to help manage difficult issues that may affect work and personal life

• Paid vacation and holidays

• Flexible work schedules, where the type of work allows

• Work-at-home options for specific positions

• Discounts from community businesses

• Adoption assistance. In 2009, we launched a new NiSource also provides employees a flexible range of plans and options career site, providing that enables our employees to take charge of healthcare decisions and applicants with detailed choose the level of coverage, information about our deductible, and contributions that are best for their needs. In addition careers, companies, culture to medical and prescription drug and benefits. coverage options, we offer dental care and vision plans, healthcare flexible spending accounts, and short-term and long-term disability coverage.

Our retirement and financial programs include an employer match of contributions to 401(k) and annual profit participation program. We also provide company- paid life, accidental death and dismemberment, and travel-accident insurance. 32 NYSE: NI BUILDING CAREERS

Building Careers and Leaders Employee and leadership development and succession planning are keys to the future success of our company. To help employees maximize their potential and grow their careers, many different tools are available. Performance management is an ongoing process through which we share annual goals, identify and build employee skills necessary to execute our plans, and proactively manage our progress.

All employees receive company- 100 percent of employees provided training needed to perform their jobs. One of our training tools is at all levels of management a performance-based instructional and specialists groups delivery system that meets the standards and guidelines established receive regular by the International Association for performance and career Continuing Education and Training. An electronic Learning Management development reviews. System (LMS) is another key component in our training program. It is our online system used to facilitate and track completion of all required training courses to ensure compliance with applicable regulations and also houses WORKSHOPS many other developmental training courses and provides opportunities for professional and skills development. The First introduced in 2007, “The Business of Supervising” LMS shows an employee’s learning history as well as a workshop is a popular training designed to create a strong catalog of training topics that are available in categories foundation of core knowledge and skills for all leaders, from including performance management, business education, front-line to senior executives. More than 200 employees have computer skills, customer service, environmental, health participated in the workshop. and safety, employee development, leadership, regulatory compliance, and wellness.

We also provide extensive training opportunities – both on-the-job and classroom experiences – for many BOOT CAMP industry-specific positions.

Our New Leader Boot Camp is a 16-week training program • Online training courses provide information targeted at designed to meet the needs of new front-line leaders. The new leaders and include simulations allowing program is designed to ensure that new leaders have the skills participants to choose responses and progress through and tools they need to quickly get started in their new roles. the course based upon their answers. The program includes 4 weeks of training in the field and 12 weeks of classroom instruction. Over 85 leaders have • Additional online development modules provide participated in the program. resources on 43 different areas of interest to leaders and includes checklists, guidelines, forms, templates, and agenda examples that leaders can use. NiSource Inc. 33 OUR LEADERSHIP MODEL

• Our trade association partners produce and deliver recorded educational broadcasts, web conferences and webcasts to aid in the development of our employees working in our natural gas businesses.

Competency guides and skills assessments to help aspiring and current leaders identify areas for development focus also are available online for use LEADERSHIP MODEL across the corporation and with guides tailored to specific business unit needs and roles. Leadership In 2009, a newly developed NiSource Leadership Model was support tools, tips, and checklists on topics ranging from created, focusing on 12 development areas that are critical to coaching and mentoring to developing a team, moving being an effective leader: into new leadership roles, and much more also are available. All of these different programs are available to 1. Coaching & Mentoring employees, and each year, working with their managers, 2. Building Relationships employees determine personal development areas. 3. Making Decisions 4. Communications & Conflict Management Every year NiSource leaders have the opportunity to 5. Customer Relationships 6. Managing Change strengthen leadership ranks by participating in a 7. Visionary Leadership formalized talent review process, which utilizes a common 8. Business Acumen approach and method to: 9. Supervisory Skills 10. Valuing Diversity • Assemble a NiSource-wide view of the succession plans 11. Safety Awareness for key leadership positions, as well as direct reports 12. Ethics & Compliance and other key leadership positions.

• Assess bench strength by identifying high-potential LEADERSHIP NISOURCE leadership candidates who are ready to move into key roles now, or could be ready within three years with In 2009, NiSource introduced Leadership NiSource as part of continued development. our ongoing strategy to develop leaders. Leadership NiSource is a unique learning experience that will build critical leadership • Establish a framework for looking across NiSource to capabilities for 15 rising leaders across NiSource during 2010. align potential leader candidates with opportunities This year and in future program years, participants will meet on beyond their current organization or function. a quarterly basis to practice and hone new skills as they participate as team members, coaches and leaders in situations • Provide focus and direction for ongoing leadership where they will help generate improved business results in their development or recruitment efforts to target specific own and other parts of the business. needs or opportunities within our organizations.

NiSource's Talent Review Process Guide offers information about the process, the time line, forms and instructions, talking points, next steps, and a competency library. This talent review process is one of the tools we regularly use to help deliver business results through disciplined performance-management and leadership- development processes. 34 NYSE: NI DIVERSITY MATTERS

Diversity Matters Diversity and inclusion are essential parts of who we are at NiSource. Our working environment is one in which an employee’s unique talents, ideas, and perspectives are encouraged and respected. It helps us meet our DIVERSITY commitment to customers, and creates richer, more rewarding careers for everyone on our team. In 2009, we partnered with the Women’s International Network of Utility Professionals in Columbus, Ohio, to provide networking For example, in our NIPSCO operations, a diversity team and mentoring opportunities for our employees, further focuses on strengthening environments that recognize, complementing our internal efforts. value, and celebrate differences among employees, customers and communities while strengthening diversity A 2009 study conducted by The Chicago Network, an within our workforce. Priorities of the team include organization of metropolitan Chicago area professional women, continuing to integrate diversity into the candidate highlighted NiSource for its commitment to gender diversity in selection process; measuring diversity across the leadership. At NiSource, 19 percent of directors or senior level companies; training employees on the values of diversity; executives are women. and celebrating diversity in our organization.

Our participation in associations like the American Association of Blacks in Energy (AABE) offers leaders the opportunity to develop personally and professionally. As an organization dedicated to ensuring African Americans and other minorities have a voice in the development of energy policies and regulations, research and development technologies and in the discussion of environmental issues, we’re proud to be a part of their work. Our membership in AABE is just one of the ways we promote growth and professional networking among our employees. NiSource Inc. 35 REPORT INTEGRITY

Preparing and publishing this first annual Sustainability Assurance Report has allowed us to share with our stakeholders the To help guide the process, a Sustainability Task Force was challenges we face and the steps we are taking to build established to lay the report foundation and coordinate sustainable value at NiSource. the process of developing the report. The Task Force engaged senior management as well as employee We made an executive level-decision to improve our advisory teams from across our organization. We worked environmental and social performance by with our Executive Council and Board of Directors for comprehensively reviewing what we do and how we do it. review, guidance and approval. This enhanced sustainability report grew out of our long- term commitment to our stakeholders. Going forward, we are considering expanding the discovery process by using third party verification and The information included is drawn from our established audits, as well as utilizing external advisors from our performance tracking and reporting, as well as new various stakeholder groups to review and comment on the systems of review and engagement designed specifically report in advance of publication. for this analysis.

GRI Content Table

This report was produced using the Global Reporting Initiative (GRI) Reporting Guidelines. NiSource self declares that this report meets the requirements of GRI Application Level C.

Continued 36 NYSE: NI REPORT INTEGRITY Corporate Headquarters NiSource Inc. 801 East 86th Avenue Merrillville, IN 46410 www.nisource.com