WPS Resources Corporation and Peoples Energy Corporation to Combine to Create a Diversified Energy Company Serving the Midwest, Northeast U.S., and Canada

-- The combined company will have approximately $9.2 billion in assets

-- The combined company's regulated operations will comprise four natural gas utilities, one electric utility, and one integrated electric and natural gas utility in Wisconsin, Illinois, Michigan, and Minnesota

-- Transaction combines WPS Resources and Peoples Energy's complementary, non-regulated energy marketing businesses to create a stronger and more competitive business

-- Dividend paid by the combined company will provide a 16.8 percent increase to current WPS Resources shareholders and will effectively maintain Peoples Energy shareholders' dividend income stream

WPS Resources Corporation (NYSE:WPS) and Peoples EnergyCorporation (NYSE:PGL) announced they have signed a definitive mergeragreement that will create a leading, diversified energy company withregulated utilities serving four Midwest states and non-regulatedbusinesses serving customers in the Northeast U.S. and Canada.

Under the definitive merger agreement, which was unanimouslyapproved by both companies' boards of directors, each common share ofPeoples Energy outstanding immediately prior to the merger will beconverted into 0.825 shares of WPS Resources' common stock. As ofWednesday, July 5, 2006, closing prices (prior to the publication ofan article in The Wall Street Journal), this would result in anapproximate value of $41.39 per share for Peoples Energy stock. Thisrepresents a premium to Peoples Energy's shareholders of approximately14.2 percent, based on the 20 trading day average closing prices forPeoples Energy ending July 5, 2006, and approximately 15.0 percent,based on the closing price for Peoples Energy on July 5, 2006.

Upon consummation of the merger, WPS Resources' shareholders willown approximately 57.6 percent of the combined company, and PeoplesEnergy shareholders will own approximately 42.4 percent. Afterclosing, it is intended that the dividend of the combined company willbe $0.66 per quarter.

The combined company will be led by Larry L. Weyers, 61, chairman,president, and CEO of WPS Resources, who will serve as its presidentand CEO. James R. Boris, 61, the current lead director for PeoplesEnergy, will serve as non-executive chairman of the board. Thomas M.Patrick, 60, chairman, president and CEO of Peoples Energy, announcedhis intention to retire earlier this year. The combined company'sboard will have 16 members, nine selected by WPS Resources and sevenby Peoples Energy.

The combined holding company headquarters will be located inChicago, and a new name for the combined company will be jointlyselected by management from both companies. Each of the regulatedutility businesses of the combined company will maintain its currentname and headquarters. The non-regulated energy marketing businessesof the combined company will be headquartered in Green Bay, Wis.

"This combination creates a diversified regulated utility businessthat will be better positioned to compete in a consolidating industryin which size and scale matter. Our regulated businesses have goodoperational fit and will benefit from our constructive regulatoryapproach and greater market and regulatory diversity when they arecombined," Weyers said.

"The combination will benefit the customers, employees andshareholders of both companies," Patrick said. "Both companies haveoutstanding utility franchises at the core and our complementary,non-regulated businesses that provide additional growth opportunities.In addition, we have a shared commitment to a lower-risk operatingapproach, financial strength, fiscal discipline, and a strongdividend."

The strategic focus for the combined company will be its coreregulated electric and natural gas operations, which will serve about1.6 million natural gas customers and 477,000 electric customers. Whenconsidered with WPS Resources' investment in American TransmissionCompany, a significant portion of the combined company's operationswill continue to be regulated. This business profile should helpensure that the combined company maintains strong credit ratings,which is a key financial and strategic objective.

The combined company will also comprise the complementary energymarketing businesses of WPS Resources and Peoples Energy.

Weyers added, "By combining our non-regulated energy marketingbusinesses, we will create a stronger, more competitive, and betterbalanced growth platform. In addition, through sharing best practicesand eliminating redundancies, we expect to generate operatingimprovements and capture efficiencies that will use our employees'creativity and benefit the combined company's shareholders."

The transaction is subject to receipt of all necessary regulatoryand shareholder approvals. The companies will be requesting expeditedregulatory approval, and if granted, the transaction is expected to becompleted by the end of the first calendar quarter of 2007.

"We believe the merger will be financially attractive for bothcompanies' shareholders. We expect the transaction to be earningsaccretive to shareholders in calendar year 2008, excluding residualtransition costs, once the companies have been integrated andregulatory plans have been executed. We already have $80 million inidentified potential annual synergies, about $72 million in ourregulated businesses and another $8 million in our non-regulatedbusinesses. These synergies will be achieved over time and it isexpected that the one-time costs to obtain these synergies will beapproximately $200 million. In addition, the combined company willmaintain its commitment to a strong balance sheet and credit ratings.It will also have a larger equity market capitalization with increasedliquidity, financial flexibility, and ready access to capitalmarkets," Weyers said.

After closing, it is intended that the dividend of the combinedcompany will be $0.66 per quarter. This expected combined companydividend will represent a 16.8 percent increase to the currentquarterly dividend rate for WPS Resources' current shareholders, andafter taking into account the exchange ratio, effectively continuingthe dividend at the current level for Peoples Energy's shareholders.

Stronger and Better-Diversified Regulated Businesses

"Regulated natural gas and electric utility operations willprovide a majority of the earnings of the combined company. Theseregulated businesses in contiguous states will create market andregulatory diversity," Weyers said.

The combined company will have substantial capital investmentopportunities in its regulated operations. WPS Resources' Weston 4 lowsulfur coal-fired base-load generation facility in Wisconsin is lessthan two years away from planned commercial operation. In Illinois,the combined company is prepared to accelerate Peoples Energy'sinfrastructure modernization capital expenditures in the City ofChicago. The combined company also has significant investmentopportunities through WPS Resources' current 33 percent interest inthe regulated American Transmission Company.

The companies have identified approximately $72 million inpotential annual synergies across the spread of the combined company'sregulated businesses through the efficiencies achieved by eliminatingredundant and overlapping functions and systems, and may achieveadditional benefits through sharing best practices.

Expansion Opportunities for Non-Regulated Energy MarketingBusinesses

WPS Resources and Peoples Energy's complementary, non-regulatedwholesale and retail energy marketing businesses share a strongcustomer service focus and will be combined to create a larger andgeographically diverse business. The combined business will leveragethe expertise, reputation, and assets of both companies. It will bewell-positioned to compete when Illinois' electric market opens in2007 and to expand WPS Resources' presence in the Northeast quadrantof the U.S., adjacent portions of Canada, and Texas. In addition toasset and market synergies, potential cost synergies of approximately$8 million per year have been identified in the combined energymarketing business.

In addition to their energy marketing businesses, WPS Resourcesowns various unregulated power plants and Peoples Energy has asubstantial oil and natural gas production business that has been asignificant source of earnings growth for that company. Recently, WPSResources has announced the divestiture of the Sunbury powergeneration facility and its interest in the Guardian pipeline, andPeoples Energy has announced the planned sale of its power generationinterests. The combined company will continue the implementation ofboth companies' rigorous asset management strategy.

Prior to closing, a transition team consisting of members fromboth WPS Resources and Peoples Energy will carefully evaluatestrategic options for the combined board to consider regarding thesebusinesses to maximize shareholder value and maintain a strong creditprofile for the combined company.

Combination Benefits Employees and Public Stakeholders

The combined company combines WPS Resources, which was namedFortune's "Most Admired Company" in the energy industry and Forbes'"Best Managed Utility Company in America" earlier this year, andPeoples Energy, which has a 150-year tradition of reliable customerservice.

"The combined company will emphasize strong employee relations,"Weyers said, pointing out that the larger company will offer moreopportunity for employees across different industry segments in abroader service area. "Union agreements will be honored, and thecombined company will be committed to working closely with itsemployees to grow the company."

"While we certainly anticipate gaining efficiencies will lead tosome reductions in staff, in the past we've been able to accomplishthat largely by normal attrition," Weyers added. "We expect toemphasize that same approach in this combination."

Weyers and Patrick affirmed that the combined company willcontinue each company's strong civic, community, and philanthropicpresence in its respective markets.

Approvals and Timing

The combination is conditioned upon approval by the shareholdersof both companies, expiration or early termination of the applicableHart-Scott-Rodino waiting period, and the approval of various stateand federal regulatory authorities, including Federal EnergyRegulatory Commission and Illinois Commerce Commission. WPS Resourceswill also seek Public Service Commission of Wisconsin approval of anamendment to its affiliated interest agreement, and WPS Resources andPeoples Energy will seek a license change with the FederalCommunications Commission. The merger agreement contains othercustomary closing conditions. The companies currently intend to seekshareholder approval in the fourth calendar quarter of 2006.

Advisors

JP Morgan Securities Inc. is serving as exclusive financialadvisor to WPS Resources and Morgan Stanley is serving as exclusivefinancial advisor to Peoples Energy. Cravath, Swaine & Moore LLP andFoley & Lardner LLP served as counsel to WPS Resources and LeBoeuf,Lamb, Greene & MacRae LLP is serving as transaction counsel to PeoplesEnergy.

Conference Call

WPS Resources and Peoples Energy will hold a conference call todiscuss this announcement on Monday, July 10, 2006, at 9:00 a.m.Central Time (10:00 a.m. Eastern Time). To listen to the call, pleasedial 888-690-9634, 15 minutes before the start time; the pass code forthe call is "WPS PGL." A presentation will accompany the discussionand is available on both companies' websites at www.wpsr.com andwww.peoplesenergy.com. A replay of the call can also be accessed bydialing 800-677-0363, pass code "WPS PGL." The telephone replay willbe available through July 24, 2006.

To listen to the call via web cast or to replay it, visit the"Investor Information" section of the WPS Resources Web site atwww.wpsr.com or the "Investor" section of the Peoples Energy Web siteat www.peoplesenergy.com and the live webcast icon on the CorporateOverview page. The conference code for the web cast is 9385883 and thepass code is "WPS PGL." The webcast replay will be available throughAugust 9, 2006.

Press Conference

WPS Resources and Peoples Energy will hold a press conferenceregarding this announcement on Monday, July 10, 2006, at 10:30 a.m.Central Time (11:30 a.m. Eastern Time) at the Hyatt Regency Chicago at151 East Wacker Drive, Chicago. To listen to the audio of the pressconference, please dial 800-579-2560, 15 minutes before the starttime.

About WPS Resources Corporation

WPS Resources (NYSE:WPS), based in Green Bay, Wisconsin, is aholding company with five major subsidiaries providing electric andnatural gas energy and related services in both regulated andnon-regulated energy markets. Its largest subsidiary is WisconsinPublic Service Corporation, a regulated electric and natural gasutility serving northeastern Wisconsin and a portion of Michigan'sUpper Peninsula. Wisconsin Public Service serves more than 425,000electric customers and 308,000 natural gas customers. Anothersubsidiary, Upper Peninsula Power Company, is a regulated electricutility that serves approximately 52,000 electric customers inMichigan's Upper Peninsula. Michigan Gas Utilities Corporation is aregulated natural gas utility serving 161,000 customers in lowerMichigan. Minnesota Energy Services Corporation is a regulated naturalgas utility serving more than 200,000 customers throughout Minnesota.

WPS Resources' major non-regulated subsidiary consists of WPSEnergy Services, Inc., a diversified non-regulated energy supply andservices company serving commercial, industrial and wholesalecustomers and aggregated groups of residential customers. Itsprincipal market is the northeast quadrant of the United States andadjacent portions of Canada. Its principal operations are in Illinois,Maine, Michigan, Ohio, Texas, Virginia, and Wisconsin in the UnitedStates and Alberta, Ontario, and Quebec in Canada. WPS Energy Servicesalso owns and/or operates non-regulated electric generation facilitiesin Wisconsin, Maine, Pennsylvania, New York, and New Brunswick,Canada; steam production facilities in Arkansas and Oregon; and apartial interest in a synthetic fuel processing facility in Kentucky.

Visit the WPS Resources Web site at www.wpsr.com for additionalinformation.

About Peoples Energy

Peoples Energy (NYSE:PGL), a member of the S&P 500, is adiversified energy company consisting of four primary businesssegments: Gas Distribution, Oil and Gas Production, Energy Assets andEnergy Marketing. Peoples Gas and North Shore Gas, regulatedutilities, deliver natural gas to about one million customers in theCity of Chicago and 54 communities in northeastern Illinois. Thecompany's non-utility businesses include Peoples Energy Services(PESC) and Peoples Energy Production (PEP). PESC, launched in 1996,serves more than 25,000 customers. PESC provides a portfolio ofproducts to manage energy needs of business, institutional andresidential consumers in today's volatile and complex energy market.The company recently won approval to offer services in Michigan, Ohioand New York. PEP, founded in 1998, is primarily focused on acquiringproven, onshore reserves with upside potential in a limited number ofstrategic supply basins. Value is then added through drillingprograms, production enhancements and reservoir optimization. Thecompany's acquisition and drilling efforts are primarily focused onnatural gas. Visit our website at www.peoplesenergy.com.

Forward-Looking Statements

This press release contains forward-looking statements within themeaning of Section 21E of the Securities Exchange Act of 1934. You canidentify these statements by the fact that they do not relate strictlyto historical or current facts and often include words such as"anticipate," "expect," "intend," "may," "could," "project," "believe"and other similar words. Forward-looking statements are beyond theability of WPS Resources and Peoples Energy to control and, in manycases, neither WPS Resources nor Peoples Energy can predict whatfactors would cause actual results to differ materially from thoseindicated by forward-looking statements. Please see WPS Resources' andPeoples Energy's periodic reports filed with the Securities andExchange Commission (including their 10-Ks and 10-Qs) for listings ofcertain factors that could cause actual results to differ materiallyfrom those contained in forward-looking statements. Allforward-looking statements included in this press release are basedupon information presently available, and neither WPS Resources norPeoples Energy assume any obligation to update any forward-lookingstatements.

Additional Information

This communication is not a solicitation of a proxy from anysecurity holder of WPS Resources Corporation or Peoples EnergyCorporation. WPS Resources Corporation intends to file a registrationstatement on Form S-4 with the Securities and Exchange Commission (the"SEC") in connection with the proposed transaction. The registrationstatement will include a joint proxy statement of WPS ResourcesCorporation and Peoples Energy Corporation that also constitutes aprospectus of WPS Resources Corporation, which will be sent to theshareholders of WPS Resources Corporation and Peoples EnergyCorporation. Shareholders are urged to read the joint proxystatement/prospectus and any other relevant document when they becomeavailable, because they will contain important information about WPSResources Corporation, Peoples Energy Corporation and the proposedtransaction. A definitive proxy statement will be sent to shareholdersof WPS Resources Corporation and Peoples Energy Corporation seekingapproval of the proposed transaction. The joint proxystatement/prospectus and other documents relating to the proposedtransaction (when they are available) can be obtained free of chargefrom the SEC's website at www.sec.gov. These documents (when they areavailable) can also be obtained free of charge from WPS ResourcesCorporation upon written request to WPS Resources Corporation,Attention: Barth J. Wolf, Secretary and Manager - Legal Services, P.O.Box 19001, Green Bay, Wisconsin 54307-9001, or by calling (920)433-1727, or from Peoples Energy Corporation, upon written request toPeoples Energy Corporation, Attention: Secretary, 130 East RandolphDrive, 24th Floor, Chicago, Illinois 60601, or by calling (312)240-4366.

Participants in the Proposed Transaction

WPS Resources Corporation, Peoples Energy Corporation and certainof their respective directors and executive officers may be deemed tobe participants in the solicitation of proxies from shareholders inconnection with the proposed transaction under the rules of the SEC.Information about the directors and executive officers of WPSResources Corporation may be found in its 2005 Annual Report on Form10-K filed with the SEC on February 28, 2006 and definitive proxystatement relating to its 2006 Annual Meeting of Shareholders filedwith the SEC on April 7, 2006. Information about the directors andexecutive officers of Peoples Energy Corporation may be found in itsAmendment No. 1 to its 2005 Annual Report on Form 10-K filed with theSEC on December 14, 2005 and definitive proxy statement relating toits 2006 Annual Meeting of Shareholders filed with the SEC on January1, 2006. These documents can be obtained free of charge from thesources indicated above. Additional information regarding theinterests of these participants will also be included in the jointproxy statement/prospectus regarding the proposed transaction when itbecomes available.

Non-Solicitation

This communication shall not constitute an offer to sell or thesolicitation of an offer to sell or the solicitation of an offer tobuy any securities, nor shall there be any sale of securities in anyjurisdiction in which such offer, solicitation or sale would beunlawful prior to registration or qualification under the securitieslaws of any such jurisdiction. No offer of securities shall be madeexcept by means of a prospectus meeting the requirements of Section 10of the Securities Act of 1933, as amended.